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A Touch of Tarnish at IAMGOLD

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Gold bullion may not be prone to tarnish, but that doesn't stop the producers of the metal from exhibiting a dulled finish from time to time.

Mid-tier miner IAMGOLD (NYSE: IAG  ) had been shining brilliantly in recent months, surging by more than 40% from the time I highlighted the stock's extremely compelling valuation back in August. But in an abrupt reversal of fortune, the market erased those gains this week after the miner's third-quarter earnings came in well below market consensus and forced a downward revision to near-term production expectations.

IAMGOLD's $0.16 per share of adjusted net profit came in a full $0.08 shy of consensus expectations for earnings of $0.24 per share. That wide gap resulted in part from disappointing performance at the Sadiola joint venture in Mali, where mine operator AngloGold Ashanti (NYSE: AU  ) suffered a range of challenges from adverse weather conditions to "processing issues" at the plant that reduced throughput. The processing of lower-grade ore at IAMGOLD's 90%-owned Essakane mine in neighboring Burkina Faso further strained production, contributing to consolidated production of 205,000 ounces of gold at an average cash cost of $710 per ounce.

Meanwhile, IAMGOLD delivered a fairly sobering assessment of near-term challenges; forcing the company to reduce its forecast for production volume in 2013 by about 13%. Preparing investors for a slower-than-anticipated ramp-up at the new Westwood mine, and some delay to the proposed expansion project at Sadiola, the company now expects to produce between 875,000 and 950,000 ounces during 2013.

This latest round of setbacks for IAMGOLD dealt a rather severe blow to shareholders like myself that were anticipating a reversal of fortune from previous interruptions of the company's quest for meaningful production growth. Given the 22% decline in the shares following the earnings release, and the related outlook for a reduced near-term-growth rate, the resulting investment thesis for shares of IAMGOLD is now of the sort that will like send short-term investors and long-term investors in two opposite directions. Those that are mining for a quick buck may rightfully refocus elsewhere; perhaps in favor of rival Eldorado Gold (NYSE: EGO  ) with its own powerful growth outlook. Now back under $40 per share amid renewed weakness in the gold equities, Goldcorp (NYSE: GG  ) is once again demanding consideration as one of the premier growth vehicles in the sector. I recently completed an in-depth review of Goldcorp's awe-inspiring potential, which I encourage investors to access by clicking here.

As a disciplined long-term investor, meanwhile, I have no intention of reducing my own stock position in IAMGOLD. I have maintained my bullish pick on the stock since 2006, and I've already made it clear that I intend to hold for the long haul. If anything, my focus has turned once more to the compelling value proposition presented by this decline. The miner retains a massive treasury of $1.14 billion in cash and equivalents (including a precious trove of gold bullion), and the outlook for reduced capital expenditures in the near term only enhances the company's outstanding financial flexibility. I continue to expect that shareholders will earn considerable value from IAMGOLD's world-class niobium operation and bonanza discovery of rare earth elements, and I perceive powerful long-term upside in the company's portfolio of development and exploration projects.

Goldcorp is one of the leading players in the gold mining market. For the last several years, investors have been the beneficiaries of several successful acquisitions and strong organic growth. Goldcorp's low-cost production of one of the most sought-after metals in the world continues to make it an attractive choice for long-term investors. Click here for our detailed report to discover more about this mining specialist.

Read/Post Comments (5) | Recommend This Article (12)

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  • Report this Comment On November 16, 2012, at 2:46 PM, SN3165 wrote:

    I've personally shifted my focus a little bit more from the miners to the royalty companies following the disappointing earnings of a number of miners. Not disappointing, however, was Brigus Gold's earnings, nor was Claude's.

  • Report this Comment On November 16, 2012, at 9:07 PM, skypilot2005 wrote:

    On November 16, 2012, at 2:46 PM, SN3165 wrote:

    Not disappointing, however, was Brigus Gold's earnings,...


    Brigus Gold's CEO Discusses Q3 2012 Results - Earnings Call Transcript

    “I’m pleased with Brigus’ financial and operational results during the first three quarters of 2012 and I am optimistic and confident about Brigus’ growth potential. At the Black Fox Mine, our team is focused on increasing and optimizing gold production. Gold production is increasing grades in the open pit and underground are in line with reserve grades and cash cost on a per ounce basis are trending lower. Black Fox Mine orebody remains open at depth and the along strike and includes gold reserves to a maximum depth of 500 metres.

    Ore bodies along the depth reported on fall in the Timmins gold camp often extend the depth in excess of 1,000 metres. An underground exploration program at the Black Box mine commenced in June of this year and will continue into 2013. The program is designed to expand the current gold resources through targeted drilling beyond 500 metres. Results received to-date demonstrates excellent potential with very good rates and thicknesses. Brigus Gold will report drill results from this ongoing program at regular interval.

    Four kilometers from Black Fox our ongoing exploration program at Grey Fox has been successful. A 571,000 ounce resource has been defined including 480,850 ounces in the indicated category for the contact and 147 zones. Recently, our exploration team discovered a third zone at Grey Fox and kidded the name the Grey Fox South Zone. All three zones remain open for expansion and continue to provide excellent assays. We currently have four drill rigs working at the Grey Fox property, two rigs are on the contact zone and two are located on the new Grey Fox South Zone. We will continue to report assays as they are received.

    Mining is underway to develop the gold deposits of Grey Fox. Initial engineering studies have been started and will continue through the rest of the year to determine project economics, as well all production timeline. Brigus initially planned to release a preliminary economic assessment on Grey Fox in the fourth quarter of this year. However, we recently decided that it would be more appropriate to release a full feasibility on a larger, more complete gold resource. Therefore, we will release the full feasibility study for Grey Fox during the second half of 2013.

    The company’s production guidance for 2012 is 77,000 to 85,000 gold ounces as previously disclosed. Quarter four 2012 is on track to be our strongest of the year and gold production will continue to increase as we enter 2013. Brigus Gold, has a valuable portfolio of assets including a producing mine at Black Fox, a growing gold discovery and development project at Grey Fox, the fast producing Stock Mine and over a 1 million ounces of reserves at Goldfields property, which is located in the province of Saskatchewan.

    As we conclude 2012 and enter 2013 with the Black Fox mine generating significant profits and cash flows. We will capitalize on its strength by pursuing measured growth through the advancement and developments of our portfolio of gold assets. “


  • Report this Comment On November 16, 2012, at 11:26 PM, SN3165 wrote:

    Add St. Andrew Goldfields as well (SAS). Both went relatively unnoticed in this market.

    CLAUDE - Net profit of $3.0 million, or $0.02 per share, after a $1.3 million non-cash deferred income tax expense. Cash flow from operations before net changes in non-cash operating working capital (1) of $8.6 million, or $0.05 per share.

    SAS - earned net income attributable to shareholders for the third quarter 2012 ("Q3 2012") of $6.3 million or $0.02 per share compared to net income of $8.2 million, or $0.02 per share for the third quarter 2011 ("Q3 2011").

    I own a small amount of claude.

  • Report this Comment On November 18, 2012, at 6:48 AM, skypilot2005 wrote:


    Atna Resources Announces Third Quarter 2012 Earnings and Operation

    The Company expects the gold market to remain robust in 2012 and the foreseeable future. Atna therefore plans to continue executing upon the strategy of developing its portfolio of advanced-stage growth projects using the cash flow from existing mines, supplemented by proceeds from stock issued in Third Quarter 2012. The Company plans to begin shipping ore from Pinson in Fourth Quarter 2012 and to complete primary development and ramp-up the Pinson underground mine to commercial production levels by the end of First Quarter 2013. Once Pinson has achieved positive cash flow, the cash generated from both Briggs and Pinson will be used to strengthen Atna's balance sheet by reducing debt and accumulating cash. This strategy will provide the opportunity for funding the sequential development of the Reward gold project and future projects in a measured and controlled manner. The Company believes that this strategy will build shareholder value, while allowing the Company to grow and prosper even in today's difficult capital markets

  • Report this Comment On January 23, 2013, at 1:00 PM, CloudRango wrote:

    How about now???

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