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Why Execution on Growth Projects Will Be Key for IAMGOLD Stock

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Organic growth opportunities

IAMGOLD (IAG) is a rather high-cost gold producer. CEO Steve Letwin stated during the company’s third-quarter earnings call that it’s focused on becoming a low-cost producer.

When gold’s price falls, the stocks of gold miners with high costs are more than proportionately impacted.

To achieve low costs, the company is focusing on several projects, which will add to its overall volumes and at the same time reduce its per-unit costs. The chart above presents the timeline for IAG’s expected completion of various stages of its growth and expansion projects. Through these organic growth initiatives, the company expects to improve its annual production to 1.2 million–1.3 million ounces of gold by 2022 at all-in sustaining costs totaling ~$850 per ounce.

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Key short-term projects

Among these projects, one of the most important is the Saramacca, which was the main driver behind the 51% rise in Rosebel’s reserve increase. Along with Saramacca, Rosebel is now enabled for higher production with an improved cost structure. The life expectancy of the project has also increased by five years.

The feasibility study results for Boto Gold are in, and they’ve significantly improved the project’s outlook. The company is expecting it to be a project with a 23% after-tax rate of return.

IAG also announced the results of its feasibility study for the Cote Gold project in November. It presented two scenarios for the project, both of which have a 15% rate of return. In terms of operations, this project is expected to nearly double the company’s operating cash flow.

Other catalysts

There are many other growth opportunities available to IAMGOLD. Here are the keys to these opportunities:

  • The commissioning of the Essakane oxygen plant is expected in the fourth quarter. It’s a development that should help improve recovery at the mine.
  • An initial resource is expected from the Gossey satellite prospect at Essakane in the fourth quarter.
  • Another big catalyst will come in the form of the feasibility study of the heap leach project at Essakane in the first quarter of 2019, with production expected to begin in 2020.
  • The full ramp-up of the Westwood mine is expected by 2020. This development should be a major growth catalyst.

IAG’s peers (JNUG) (GDX) have also increased their exploration efforts after years of underinvesting. Coeur Mining (CDE), Pan American Silver (PAAS), Hecla Mining (HL), and First Majestic Silver (AG) are among the players that have substantially stepped up their exploration efforts.

In the next part of this series, we’ll look at analysts’ sentiments on IAMGOLD.

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