IAMGOLD Corp. Slowly Heading Towards Profitability

IAMGOLD Corp. (TSX:IMG)(NYSE:IAG) is recovering from an unprofitable beginning to the fiscal year with a second half that has seen gold prices rise.

| More on:
The Motley Fool

IAMGOLD Corp. (TSX:IMG)(NYSE:IAG) is dusting itself off from the underwhelming first half of its fiscal year with a strong showing in its third quarter that will only feed to an even stronger fourth quarter.

The Toronto-based miner ended the calendar year 2016 with a bang as it agreed to acquire Merrex Gold for $40 million in an all-stock deal. The deal is slated to close in February, giving IAMGOLD all 199.2 million outstanding Merrex shares at 20 cents apiece for approximately 6.9 million newly issued IMG shares at a price of $4.60 each. IAMGOLD owns 23% of Merrex already.

The move is slated to add an exploration pipeline to IAMGOLD in the form of the Diakha-Siribaya project in Mali. The asset has about 1.2 million ounces of gold. The company is acquiring its West Mali gold properties as well as 50% interest in the Siribaya gold project. Additionally, it will have access to its Guinea asset in Karita and a 100% stake in a Nova Scotia zinc mine. The February date when the deal will be completed will be around the company’s next earnings report.

IAMGOLD last reported earnings on November 7 for its third quarter, when it revealed that it earned five cents per share over those three months. The figure topped the zero cents per share estimate that Wall Street was calling for. Revenue came in at $282.4 million for the quarter, topping the $262.4 million that analysts had projected.

The earnings beat was welcome step up from the barely profitable second quarter of one cent per share. The figure still topped the loss of two cents cents per share Wall Street expected, while marking a turning point following a first quarter in which the company lost two cents per share. IAMGOLD’s recent results and the company’s management’s view on the stock suggest better times to come.

CEO Stephen Letwin said late last year that the company was headed towards a profitable second half that would pave the way for a fiscal year 2017 that could be big. Letwin said that bullion prices — one of the company’s key elements — are key to the company’s success. If prices stay above $1,300 an ounce, there is no telling how far IAMGOLD will go. Bullion prices are currently around $1,355 an ounce and growing.

The calendar year 2017 has been positive for the company so far, which rose nearly 140% in 2016. IAMGOLD is already up 12.3% year-to-date, and we’re only halfway through January. The company had an especially strong beginning of the year thanks to a surge in gold prices, which reached a one-month high due to slumping dollar prices. January is often a strong month for gold, and this year may be no different, potentially setting the tone for the rest of the year.

IAMGOLD has a price target of $5.18 with a Zacks Investment Research recommendation of $2.33, which is approaching “Buy” status. Most analysts have rated it a “Buy,” while a large number consider it a “Hold.” In the last three months alone, IMG shares have risen more than 31%.

It is still unclear what 2017 has to offer IAMGOLD, but rising bullion and gold prices are good signs for the miner. Additionally, its recent acquisition adds several core assets to the company, helping to bolster and expand its portfolio.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Karl Utermohlen has no position in any stocks mentioned.

More on Metals and Mining Stocks

nugget gold
Metals and Mining Stocks

Kinross Gold: Buy, Sell, or Hold in 2025?

Kinross Gold (TSX:K) stock: Buy the dip as gold nears $3k? 2025 investment opportunities outlook and analysis

Read more »

construction workers talk on the job site
Metals and Mining Stocks

3 Top Materials Sector Stocks for Canadian Investors in 2025

These three materials stocks can be excellent bets to consider for long-term investors.

Read more »

Investor wonders if it's safe to buy stocks now
Metals and Mining Stocks

Billionaires Are Selling D-Wave Quantum and Picking Up This TSX Stock Instead

TSX mining stock Lundin Mining (TSX:LUN) is attracting billionaire-backed confidence.

Read more »

Safety helmets and gloves hang from a rack on a mining site.
Metals and Mining Stocks

What to Know About Canadian Mining Stocks for 2025

Several factors, including global economic stability and trade policies, could play an important role in driving Canadian mining stocks in…

Read more »

top TSX stocks to buy
Metals and Mining Stocks

Trump’s Tariffs: 2 Canadian Stocks That Could Explode in 2025

These two Canadian stocks may not just do well; they could explode under Trump's tariffs.

Read more »

todder holds a gold bar
Metals and Mining Stocks

2 Ways to Bet on Gold if Precious Metals Surge

Agnico Eagle Mines (TSX:AEM) and another shining gold stock to buy for the year.

Read more »

Rocket lift off through the clouds
Stocks for Beginners

1 Canadian Stock Set to Skyrocket as Trump’s Trade War Heats Up

This one Canadian stock is set to skyrocket, even amidst US tariffs.

Read more »

Pile of Canadian dollar bills in various denominations
Metals and Mining Stocks

How Investors Should Think About the Drop in the Canadian Dollar

The Canadian dollar has dropped to a 21-year low against the U.S. dollar. Is there an investment opportunity?  

Read more »