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IAMGOLD (IAG) Loses Luster on Sluggish Production

NEW YORK (TheStreet) -- IAMGOLD (IAG) lost its luster in Wednesday trading following preliminary 2013 production numbers and fiscal 2014 guidance issued a day earlier. By mid-morning, shares had tumbled 9.3% to $3.72.

Management announced its preliminary total cash costs for 2014 of approximately $800 an ounce, at the lower end of guidance of $790 to $840 an ounce. For IAMGOLD owner-operator mines, cash costs are expected to be 7% lower at around $740 an ounce compared to guidance of between $750 and $800 an ounce.

"We finished 2013 with cash costs near the bottom of the guidance range, which, midway through the year had been revised downward following excellent traction with our $100 million cost reduction program," said CEO Steve Letwin in a statement.

Over 2013, the gold miner reports gold production of 835,000 ounces, including 195,000 ounces over the fourth quarter ended December. Full-year production was around 5% below the bottom of the guidance range of 875,000 to 950,000 ounces due to grade variation and pit sequencing at the Rosebel mine in the Republic of Suriname.

Production in 2014 is expected within the range of 835,000 to 900,000 ounces. In fiscal 2014, total cash costs are expected between $825 and $875 an ounce, while owner-operator mines will see cash costs in the range of $790 to $830 an ounce.

"We ended the year with approximately $380 million in cash and bullion and $750 million in undrawn credit facilities. Our persistent efforts to preserve cash, cut costs and tighten capital spending are paying off despite our lower production this year as we focus on profitable ounces," said Letwin.

TheStreet Ratings team rates IAMGOLD CORP as a Hold with a ratings score of C. The team has this to say about their recommendation:

"We rate IAMGOLD CORP (IAG) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, feeble growth in the company's earnings per share and deteriorating net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • IAG's debt-to-equity ratio is very low at 0.17 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, IAG has a quick ratio of 2.22, which demonstrates the ability of the company to cover short-term liquidity needs.
  • IAG, with its decline in revenue, underperformed when compared the industry average of 3.9%. Since the same quarter one year prior, revenues fell by 12.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The gross profit margin for IAMGOLD CORP is currently lower than what is desirable, coming in at 27.22%. It has decreased significantly from the same period last year. Along with this, the net profit margin of 8.62% trails that of the industry average.
  • Net operating cash flow has decreased to $64.90 million or 34.24% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.

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