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IAMGOLD Stock Falls 10% on Burkina Faso Concerns: Time to Buy?
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IAMGOLD (IAG - Free Report) shares moved below its 50-day simple moving average (SMA) yesterday, with the stock closing at $4.54 compared with the 50-day SMA of $4.88. This seems to have been triggered by comments made by Burkina Faso’s president Traoré hinting at the withdrawal of mining permits of companies violating local laws. Even though no company names have been mentioned, this has caused investor anxiety, leading to a 10% dip in IAG shares yesterday.
IAG Moves Below 50-Day Moving Average
Image Source: Zacks Investment Research
Toronto, Canada-based IAMGOLD holds a 90% stake in the Essakane Gold Mine located in north-eastern Burkina Faso, with the remaining 10% held by the government. IAG quickly assured investors that it is unaware of any potential challenge to the withdrawal of any permits for the mine. IAMGOLD emphasized that the mine continues to operate per the permits.
Prior to this drop, the IAG stock has shown a solid upward momentum. It has trended above the 50-day SMA for a major portion of this year. Is the market reaction overdone? Does this recent sell-off in IAMGOLD shares represent a buying opportunity? Let us find out.
Burkina Faso: A Risk That is Factored in IAG’s Valuation
During a radio interview on Oct. 5, 2024, among other topics, president Traoré mentioned the possibility of the government revoking certain mining permits for companies that are not operating in accordance with the laws of Burkina Faso. No details were, however, provided. This statement raised concerns among the companies operating in the country and their investors.
Shares of another Canada-based company Fortuna Mining Corp. (FSM - Free Report) , which operates the Yaramoko mine in Burkina Faso, declined 9% yesterday. FSM clarified the situation with the country’s Ministry of Mines and received confirmation that the government does not intend to withdraw mining permits that comply with Burkina Faso’s laws. Per FSM, the Yaramoko Mine complies with laws and regulations.
The U.K.-based Endeavour Mining, which also has mines in Burkina Faso, stated that it is not currently aware of any government plans to revoke any of its permits for its mines.
IAMGOLD stated that the Essakane mine continues to operate per the laws. The mine recently surpassed a record health and safety achievement of 5 million hours worked without any recordable safety incidents. The company maintains constructive and positive working relationships with the government and also contributes to numerous community programs. Essakane contributed $8.1 million in 2023 to the Mining Fund for Local Development. Last month, the company received its 2024 dividend, which was approved earlier by the government.
The Essakane mine is the sixth-largest gold mine in West Africa, averaging 400,000 ounces per year over the last 5 years. For 2024, the mines’s attributable production guidance is projected at 380,000-410,000 ounces.
The Essakane mine is currently IAG’s largest producing one, with its estimated production accounting for more than 50% of IAG’s total production. Essakane has an estimated mine life till 2028 and is expected to produce 2 million ounces of gold from 2024 to 2028.
However, investors are aware that operations in Burkina Faso are at risk of operational disruption due to the security situation in the country. We believe that this has been discounted in the stock.
IAMGOLD Shares Exhibit Solid YTD Momentum
IAG shares have gained 79.5% year to date against the industry's 30.9% growth. IAG has gained on the back of solid second-quarter results, the Côté Gold mine commencing production earlier this year and the rally in gold prices.
Image Source: Zacks Investment Research
Factors That Make IAG’s Long-Term Prospects Bright
Cote Gold Mine to be Growth Driver for IAMGOLD
The Côté Gold Project delivered its full quarter of production in the second quarter of 2024, contributing 20,000 ounces of gold. It started commercial production on Aug. 2, 2024. The project continues to be well-positioned to achieve the target of 90% throughput by the end of the year.
Côté Gold is operated as a joint venture between IAMGOLD (as the operator) and Sumitomo Metal Mining Co., Ltd., a subsidiary of Sumitomo (SSUMY - Free Report) . IAMGOLD on Sept. 30 announced that it issued Sumitomo Metal Mining Co., Ltd. with a 60-day formal notice to exercise its right to repurchase a 9.7% interest in the Côté Gold mine. This will increase IAG’s stake to 70% in the mine, which is Canada’s third-largest one.
The total gold production from Côté Gold (at 100%) is expected to be 220,000-290,000 ounces as improvements to mill availability are made during the ramp-up of operations.
In the first six years of operation, Côté Gold’s expected gold output will likely be 495,000 ounces. Over the life of the mine, it will average 365,000 ounces per year. In terms of production, the mine is the third top gold mine in Canada.
The Côté Gold mine is expected to lead in terms of technology and will be mined by a fleet of 23 autonomous haul trucks, six autonomous drills and other supporting equipment. This will ensure efficiency, safety and lower costs. The company is also exploring the adjacent Gosselin pit to improve returns from the Côté Gold project.
Rising Estimates Instill Confidence in IAG’s Earnings
The Zacks Consensus Estimate for IAMGOLD’s 2024 and 2025 earnings have moved up over the past 60 days.
Image Source: Zacks Investment Research
Find the latest earnings estimates and surprises on Zacks Earnings Calendar.
Image Source: Zacks Investment Research
Image Source: Zacks Investment Research
The consensus mark for 2024 and 2025 top and bottom lines suggests year-over-year improvements. This reflects analysts' upbeat expectations of the company’s production numbers and gold prices.
Solid Rally in Gold Prices Bodes Well for IAG
Gold prices have increased 28% year to date and are currently at around $2,642 an ounce. The bullion has gained momentum on account of the buying of gold by the global central, interest rate cuts by the U.S. Fed and safe-haven demand, driven by escalating violence in the Middle East.
Analysts expect this momentum to continue and are projecting gold prices to scale to around $3,000 an ounce by 2025, backed by solid demand amid limited supply prospects.
IAG’s Investment in Growth Projects to Create Tailwinds
IAG continues to invest in maximizing production and increasing the life of its existing mines, advancing development and exploration projects. Significant operational projects planned for the next years include the Westwood ramp-up to safely access other mining areas that were affected by the seismic activity in 2020.
Plans also includes mill and plant upgrades, fleet and utilization improvements, tailings and surface water management optimization, and additional pit developments at Essakane. These projects are expected to reduce or control the company’s cost structure and improve efficiency.
The company’s exploration projects, such as Nelligan and Monster Lake in northern Quebec, are also expected to be developed together to make a quality gold mine complex with a low cost structure and a substantial mine life.
IAG’s Valuation Attractive
IAMGOLD is currently trading at a forward price/sales of 1.45X compared with the industry's 3.07X. The company is also less expensive than other major gold miners like Newmont (NEM - Free Report) , Barrick Gold and Agnico Eagle Mines, which are trading at forward price/sales of 3.35, 2.40 and 4.94, respectively.
Image Source: Zacks Investment Research
Final Thoughts on IAMGOLD Stock
We believe that the decline in the IAMGOLD stock reflects investors’ knee-jerk reaction to perceived risk rather than any underlying fundamental weakness. IAMGOLD is poised for growth, supported by an upward trend in gold prices, the ongoing ramp-up at Côté Gold, and the solid portfolio of early-stage and advanced exploration projects within high-potential mining districts. Given its attractive valuation and upbeat prospects, investors can take advantage of the dip in investing in this Zacks Rank #1 (Strong Buy) stock.
Image: Bigstock
IAMGOLD Stock Falls 10% on Burkina Faso Concerns: Time to Buy?
IAMGOLD (IAG - Free Report) shares moved below its 50-day simple moving average (SMA) yesterday, with the stock closing at $4.54 compared with the 50-day SMA of $4.88. This seems to have been triggered by comments made by Burkina Faso’s president Traoré hinting at the withdrawal of mining permits of companies violating local laws. Even though no company names have been mentioned, this has caused investor anxiety, leading to a 10% dip in IAG shares yesterday.
IAG Moves Below 50-Day Moving Average
Image Source: Zacks Investment Research
Toronto, Canada-based IAMGOLD holds a 90% stake in the Essakane Gold Mine located in north-eastern Burkina Faso, with the remaining 10% held by the government. IAG quickly assured investors that it is unaware of any potential challenge to the withdrawal of any permits for the mine. IAMGOLD emphasized that the mine continues to operate per the permits.
Prior to this drop, the IAG stock has shown a solid upward momentum. It has trended above the 50-day SMA for a major portion of this year. Is the market reaction overdone? Does this recent sell-off in IAMGOLD shares represent a buying opportunity? Let us find out.
Burkina Faso: A Risk That is Factored in IAG’s Valuation
During a radio interview on Oct. 5, 2024, among other topics, president Traoré mentioned the possibility of the government revoking certain mining permits for companies that are not operating in accordance with the laws of Burkina Faso. No details were, however, provided. This statement raised concerns among the companies operating in the country and their investors.
Shares of another Canada-based company Fortuna Mining Corp. (FSM - Free Report) , which operates the Yaramoko mine in Burkina Faso, declined 9% yesterday. FSM clarified the situation with the country’s Ministry of Mines and received confirmation that the government does not intend to withdraw mining permits that comply with Burkina Faso’s laws. Per FSM, the Yaramoko Mine complies with laws and regulations.
The U.K.-based Endeavour Mining, which also has mines in Burkina Faso, stated that it is not currently aware of any government plans to revoke any of its permits for its mines.
IAMGOLD stated that the Essakane mine continues to operate per the laws. The mine recently surpassed a record health and safety achievement of 5 million hours worked without any recordable safety incidents. The company maintains constructive and positive working relationships with the government and also contributes to numerous community programs. Essakane contributed $8.1 million in 2023 to the Mining Fund for Local Development. Last month, the company received its 2024 dividend, which was approved earlier by the government.
The Essakane mine is the sixth-largest gold mine in West Africa, averaging 400,000 ounces per year over the last 5 years. For 2024, the mines’s attributable production guidance is projected at 380,000-410,000 ounces.
The Essakane mine is currently IAG’s largest producing one, with its estimated production accounting for more than 50% of IAG’s total production. Essakane has an estimated mine life till 2028 and is expected to produce 2 million ounces of gold from 2024 to 2028.
However, investors are aware that operations in Burkina Faso are at risk of operational disruption due to the security situation in the country. We believe that this has been discounted in the stock.
IAMGOLD Shares Exhibit Solid YTD Momentum
IAG shares have gained 79.5% year to date against the industry's 30.9% growth. IAG has gained on the back of solid second-quarter results, the Côté Gold mine commencing production earlier this year and the rally in gold prices.
Factors That Make IAG’s Long-Term Prospects Bright
Cote Gold Mine to be Growth Driver for IAMGOLD
The Côté Gold Project delivered its full quarter of production in the second quarter of 2024, contributing 20,000 ounces of gold. It started commercial production on Aug. 2, 2024. The project continues to be well-positioned to achieve the target of 90% throughput by the end of the year.
Côté Gold is operated as a joint venture between IAMGOLD (as the operator) and Sumitomo Metal Mining Co., Ltd., a subsidiary of Sumitomo (SSUMY - Free Report) . IAMGOLD on Sept. 30 announced that it issued Sumitomo Metal Mining Co., Ltd. with a 60-day formal notice to exercise its right to repurchase a 9.7% interest in the Côté Gold mine. This will increase IAG’s stake to 70% in the mine, which is Canada’s third-largest one.
The total gold production from Côté Gold (at 100%) is expected to be 220,000-290,000 ounces as improvements to mill availability are made during the ramp-up of operations.
In the first six years of operation, Côté Gold’s expected gold output will likely be 495,000 ounces. Over the life of the mine, it will average 365,000 ounces per year. In terms of production, the mine is the third top gold mine in Canada.
The Côté Gold mine is expected to lead in terms of technology and will be mined by a fleet of 23 autonomous haul trucks, six autonomous drills and other supporting equipment. This will ensure efficiency, safety and lower costs. The company is also exploring the adjacent Gosselin pit to improve returns from the Côté Gold project.
Rising Estimates Instill Confidence in IAG’s Earnings
The Zacks Consensus Estimate for IAMGOLD’s 2024 and 2025 earnings have moved up over the past 60 days.
Image Source: Zacks Investment Research
Find the latest earnings estimates and surprises on Zacks Earnings Calendar.
Image Source: Zacks Investment Research
Image Source: Zacks Investment Research
The consensus mark for 2024 and 2025 top and bottom lines suggests year-over-year improvements. This reflects analysts' upbeat expectations of the company’s production numbers and gold prices.
Solid Rally in Gold Prices Bodes Well for IAG
Gold prices have increased 28% year to date and are currently at around $2,642 an ounce. The bullion has gained momentum on account of the buying of gold by the global central, interest rate cuts by the U.S. Fed and safe-haven demand, driven by escalating violence in the Middle East.
Analysts expect this momentum to continue and are projecting gold prices to scale to around $3,000 an ounce by 2025, backed by solid demand amid limited supply prospects.
IAG’s Investment in Growth Projects to Create Tailwinds
IAG continues to invest in maximizing production and increasing the life of its existing mines, advancing development and exploration projects. Significant operational projects planned for the next years include the Westwood ramp-up to safely access other mining areas that were affected by the seismic activity in 2020.
Plans also includes mill and plant upgrades, fleet and utilization improvements, tailings and surface water management optimization, and additional pit developments at Essakane. These projects are expected to reduce or control the company’s cost structure and improve efficiency.
The company’s exploration projects, such as Nelligan and Monster Lake in northern Quebec, are also expected to be developed together to make a quality gold mine complex with a low cost structure and a substantial mine life.
IAG’s Valuation Attractive
IAMGOLD is currently trading at a forward price/sales of 1.45X compared with the industry's 3.07X. The company is also less expensive than other major gold miners like Newmont (NEM - Free Report) , Barrick Gold and Agnico Eagle Mines, which are trading at forward price/sales of 3.35, 2.40 and 4.94, respectively.
Image Source: Zacks Investment Research
Final Thoughts on IAMGOLD Stock
We believe that the decline in the IAMGOLD stock reflects investors’ knee-jerk reaction to perceived risk rather than any underlying fundamental weakness. IAMGOLD is poised for growth, supported by an upward trend in gold prices, the ongoing ramp-up at Côté Gold, and the solid portfolio of early-stage and advanced exploration projects within high-potential mining districts. Given its attractive valuation and upbeat prospects, investors can take advantage of the dip in investing in this Zacks Rank #1 (Strong Buy) stock.
You can see the complete list of today’s Zacks #1 Rank stocks here.