Small-cap gold stock IAMGOLD (IAG 2.74%) slumped 13% in April, according to data provided by S&P Global Market Intelligence. There's no stopping the decline: The stock's already lost another 22% so far this month, as of this writing. As if low gold prices weren't enough, production challenges hit the gold miner hard last quarter, which hasn't gone down well with the market.
Most gold stocks move in tandem with the price of gold, but a small-cap stock like IAMGOLD tends to be more volatile given how the stock market works. Moreover, a falling gold price hits smaller miners harder because of their high production costs. IAMGOLD's all-in sustaining cost (AISC) of $1,057 per ounce of gold in 2018 was at the higher end of the industry cost curve. With gold losing substantial ground since hitting a multi-month high of $1,340 per ounce on Feb. 19, IAMGOLD's high costs leave little room for margin expansion. The market understands this, which is why the stock didn't get much love last month.
Investors also weren't sure about what to expect from IAMGOLD's upcoming first-quarter earnings report after the miner announced layoffs at its Westwood gold mine in Canada and projected lower 2019 production from key mine Essakane earlier this year. To add fuel to the fire, CEO Steve Letwin recently said at a conference that he doesn't expect a sharp rise in gold prices in the near future given a stronger U.S. economy.
As feared, IAMGOLD's Q1 numbers missed the analysts' already muted estimates on May 6, sending the stock crashing double digits. It was a dismal quarter to say the least: IAMGOLD's revenue declined 20% on lower production and AISC jumped 13% to $1,086 per ounce, resulting in a net loss of $0.09 per share versus a profit of exactly the same amount in Q1 2018.
The only silver lining in IAMGOLD's Q1 report was that the miner reiterated its 2019 guidance, which includes production of 810,000 to 870,000 ounces of gold and AISC of $1,030 to $1,080 an ounce. It remains to be seen whether the company can deliver given an exceptionally weak first quarter, which is why I still wouldn't touch the stock despite its seemingly attractive price of around $2.50 per share when there are better gold stocks to invest in.