Iamgold is optimistic about the long-term prospects for gold, but is concerned about the current weak gold prices. By suspending dividend payments the company can conserve cash that it can put to better use when the gold price environment strengthens.
The company also hopes to cut costs with new initiative that will reduce the operating costs of its mines. It will also try to reduce exploration, mine site, and administrative costs. Before the gold price drop on March 4, 2013, the Iamgold launched a $100 million cost reduction program.
Shares of Iamgold fell by 11% on the news of the suspended dividend payments and concerns over the weak gold market. It isn't the only gold producer that's hurting, though. Market Vectors Gold Miners ETF (GDX), Barrik Gold (ABX), and Newmont Mining (NEM) are all down today.
Spot gold prices have declined 2% Thursday to $,1226.83. Prices of gold have steadily declined over the past year, after reaching a high of $1,723.45 earlier in the year. This decline played a part in Iamgold's decision to halt dividend payments.
TheStreet Ratings team rates IAMGOLD CORP as a Hold with a ratings score of C. TheStreet Ratings 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."