Shares of IAMGOLD Sink 11% on Weak 2019 Outlook

Investors reacted poorly to the gold miner's forecast for lower production and higher costs in the coming year.

Tyler Crowe
Tyler Crowe
Jan 16, 2019 at 1:37PM
Energy, Materials, and Utilities

What happened

Gold miner IAMGOLD's (NYSE:IAG) stock price had fallen 11.2% as of 12:45 p.m. EST Wednesday on the heels of management's announcement that 2019's results will likely be weaker than 2018's.

So what

IAMGOLD released its preliminary operating results for 2018 and issued guidance for 2019, and the forecast doesn't look great. Though 2018 production came in at 882,000 ounces of attributable production -- the high end of initial estimates -- it expects 2019 production to be in the 810,000 ounce to 870,000 ounce range. What's more, it's guiding for all-in sustaining costs of between $1,030 and $1,080 per ounce, which is up from 2018 guidance range of $990 to $1,070 per ounce.

Gold nugget.

Image source: Getty Iamges.

Management said that the higher expected costs will be a result of bringing its Saramacca mine online, which should happen in the second half of 2019. Once that happens, they expect costs to decline, and for production levels to pick back up. Until then, though, it is going to be spending more money than usual getting the mine operational while production from its existing mines falls.

Now what

IAMGOLD is targeting annual production of 1.2 million to 1.3 million ounces by 2022, with all-in sustaining costs under $850 per ounce. That would represent an incredible turnaround of its higher-cost structure. With gold prices currently around $1,290 per ounce, IAMGOLD's bottom-line outlook for 2019 doesn't look good. However, if it can achieve its 2022 goals, it will be rather attractive. This is one of those "believe it when you see it" cases, though, so investors should probably hold off until the company demonstrates significant progress toward those aspirational production and cost targets.

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