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Can IAMGOLD Hold On to Positive Wall Street Sentiment in 2019?

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Analysts’ ratings for IAG

IAMGOLD (IAG) comes third, after Wheaton Precious Metals (WPM) and Agnico Eagle Mines (AEM), as far as the most “buy” ratings for gold stocks are concerned. Of the 12 analysts currently covering IAG, 83% rate it a “buy” while the remaining 17% give a “hold” rating.

Like Agnico Eagle Mines stock, IAG has seen a significant turnaround in analyst sentiment. Until about a year ago, only 62% of analysts were recommending “buys” on the stock. Its target price of $7.5 implies a potential upside of 100%.

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Recent developments

While IAG’s operating results for the first three quarters of 2019 were strong, during the release of its year-end production results and 2019 guidance on January 16, the company stated that it was expecting reduced production and higher all-in sustaining costs in 2019. It also reported a larger-than-expected loss in its Q4 2018 results. Analysts, however, have stood pat on their ratings so far.

Lately, IAG announced its plans to lay off 32% of its workers at its Westwood mine as a stabilizing cost control measure. Previously, the company had decided to defer its Cote Gold project.

Maximizing shareholder value

Currently, investors and analysts are more concerned about companies focusing on maximizing shareholder returns than increasing production at any cost. Moreover, many of the projects undertaken are turning out to be risky and return-negative. So IAMGOLD’s decision came as a relief for investors and analysts alike. IAG climbed more than 9% on January 28 after the announcement of the deferment.

IAMGOLD’s reserve updates and other organic growth opportunities have also remained quite bright, which should support its long-term production growth.

Year-to-date, IAG has gained 1.1% as of March 25, compared to a 10.3% gain in the VanEck Vectors Gold Miners ETF (GDX). It’s underperforming most of its peers. Among its peers (JNUG)(GDXJ), Agnico Eagle Mines (AEM), Barrick Gold (GOLD), Eldorado Gold (EGO), and New Gold (NGD) have seen price action of 11.7%, 5.4%, 70.8%, and 12.9%, respectively, so far this year.

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