Strong liquidity position
IAMGOLD (IAG) has a strong cash flow and balance sheet position. At the end of 3Q16, it had a cash balance of $627 million. It also has a revolving credit facility of ~$168 million as of the end of 3Q16, giving it total liquidity of $795 million.
IAG’s debt position is comfortable
IAMGOLD’s long-term debt also fell 23% to $489 million in 3Q16, compared to $643 million at the end of 2Q16. It repaid debt amounting to $154 million during the quarter. This repayment will save the company $39 million in interest expenses over the remaining term of the debt’s maturity.
IAMGOLD is in a strong position as far as its balance sheet is concerned. On a net debt-to-EBITDA (earnings before interest, tax, depreciation, and amortization) basis, IAMGOLD is less leveraged than its peers Agnico Eagle Mines (AEM), Yamana Gold (AUY), and New Gold (NGD).
Deployment of cash is key
IAG has plenty of cash to invest organically in order to seek growth opportunities. The company’s chief financial officer, Carol Banducci, mentioned during its earnings call, “The remainder of the net proceeds increased our financial capacity to internally fund our organic growth projects including Sadiola as well as you may have noted, move both Moody’s and S&P have revised our outlook to positive.”
IAMGOLD could also use its cash to acquire new mines. In the past, IAG has made a number of acquisitions, with its track record being mixed in terms of converting those acquisitions to value for shareholders.
For example, analysts weren’t happy about IAG’s acquisition of Trelawney’s Cote Lake project in 2015, and some termed it as a missed opportunity. IAG’s deployment of its excess cash reserves and the expected returns from that deployment will be one of the key factors investors look forward to.
The market’s reaction will depend on the deal’s terms, including price paid, grade, cost structure, and exploration potential of acquired assets, among other things.