2Q16 results a turnaround?
IAMGOLD Corp. (IAG) released its results on August 3, 2016, after the Market closed. IAG held a conference call the next day to discuss its results.
IAG’s adjusted earnings per share (or EPS) of $0.01 was ahead of the Market expectations of -$0.02. Lower cash costs were the main reason behind the beat. Rosebel mine saw reduced costs due to lower fuel prices and exchange rates. The company maintained its guidance for production and costs for 2016.
Plus, 2Q16 was a turnaround quarter as it was a turning point for the company from losses to profitability.
High relative leverage
IAMGOLD’s stock was up by 9% following its 2Q16 results, which was an outperformance compared to its peers. The VanEck Vectors Gold Miners ETF (GDX) gained just 1%, while the SPDR Gold Shares ETF (GLD) rose by 0.2% on the same day. Strong results beat as well as upbeat management commentary led to this robust stock performance.
Year-to-date (or YTD), IAMGOLD’s stock price has risen 260% through August 5, 2016. Even on a relative basis, it has outperformed most if its peers. Eldorado Gold (EGO), New Gold (NGD), Agnico Eagle Mines (AEM), and Yamana Gold (AUY) have risen by 30%, 140%, 115%, and 195%, respectively.
IAG has higher costs compared to most of its peers, which makes it relatively highly leveraged to gold prices. Gold’s price rise since the start of 2016 has helped IAG’s operational leverage to work in its favor. The company mentioned during its call that a $100 per ounce increase in the price of gold increases its pretax cash flow by ~$80 million.
In this series, we’ll see how IAMGOLD’s future prospects look based on its recent 2Q16 earnings and its management’s comments. We’ll look at the company’s production and cost performances. We’ll do this in an effort to interpret how the company’s management is trying to position itself within the context of this volatile gold price environment.
In the next part of this series, we’ll take a look at IAMGOLD’s result highlights for 2Q16.