Iamgold Corporation: A New Year And A New Mine

Introduction

Canada-based IAMGOLD Corporation (IAG) reported its third quarter of 2023 on November 10, 2023. I have been following IAG quarterly since 2014. This new article is a quarterly update of my article published on August 11, 2023.

The Côté Gold Project, which was 90.6% complete at the end of the third quarter with 92% of the mine construction done, has again dominated this quarter with a total CapEx of $230.3 million.

According to the company, the mine is expected to begin production in the first quarter of 2024, which means the project is nearly complete, and we should hear more about production in the coming weeks. However, full production is expected in the third quarter of 2024.

It has been a long and difficult process, stretching over several years. Côté Gold is about 125 kilometers south of Timmins, Ontario, Canada (please see the map below). The mine’s construction began in 2020 and was expected to take three years and cost approximately $900 million.

However, sharply rising costs and other technical challenges have propelled the opening date to early 2024. The final cost is estimated at $2.965 billion, and the IAMGOLD stake shrank to 60.3%. The company said in the press release:

Since commencement of construction, $2.54 billion ($1.78 billion at 70%) of the planned $2.965 billion ($2.08 billion at 70%) of project expenditures has been incurred. The total expected project expenditures are expected to be in line with the planned $2.965 billion (± 1.5%) and the estimated remaining cost to complete the Côté Gold Project on a 100% basis is $425 million ($298 million at 70%) on an incurred basis assuming a USDCAD rate of 1.35 during the remainder of construction. A portion of the expenditures is expected to be incurred in 2024 during commissioning and ramp up.

Importantly, based on the 60.3% stake, IAG’s remaining funding requirements have been reduced to $325 million. Pre-commissioning and commissioning began in early December and will be completed in March, with commercial production starting in 3Q24. The company is in good shape with total liquidity of about $1 billion and should not suffer with total cash on hand of $548.9 million in 3Q23.

Furthermore, based on the revised 2023 guidance of 410K-470K ounces and a gold price for 4Q23 expected to be above $2,000 per ounce, things will run even more smoothly. The company revised the 2023 AISC to between $1,750 and $1,825 per ounce.

From years 1 to 6, total production will be 495k ounces, with an AISC of $854 per ounce sold. Based on the company’s 60.3% stake, IAMGOLD will receive approximately 75K Au ounces quarterly from 3Q24 until mid-2029. On a 100% basis, the mineral reserves stand at 7.17 million ounces.

In addition, Gosselin will add 3.2 million ounces, which is an extension of the Côté Gold deposit remaining open along the strike to the northeast, and explore only 50% of it compared to the Côté Gold deposit.

All of these numbers show that 2024 will be a watershed moment for IAMGOLD, and it may be the best time to take advantage of market weakness to build a strong position, anticipating a possible stock rally in H2 2024.

It should be noted that Metalla (MTA) has a 1.35% Net Smelter Return royalty on Gosselin and a portion of Côté Gold.

CEO Renaud Adams said in the conference call:

The importance of Cote Gold to IAMGOLD is clear. This is a project that is critical for the repositioning of this company. As once online, IAMGOLD will have a higher production base and lower cost profile, with a strong foundation and long life of cash flow generations and growth opportunities in Canada.

A quick review of the third quarter results

IAMGOLD Corporation reported a net loss of $0.8 million, or $0.00 per share, in 3Q23, beating analysts’ expectations. The company reported revenue of $224.5 million.

The company extracted gold and niobium from two mines – the Essakane mine in north-eastern Burkina Faso, West Africa, and the Westwood complex in Canada.

However, the amount of ore mined from the Essakane mine was reduced to 2 MT in August 2023 due to a decrease in operations by the mining fleet. This was caused by disruptions in the supply chain due to geopolitical issues and security concerns. This risk should be seriously considered when investing in IAG.

CEO Renaud Adams said in the conference call:

We continue to see the resiliencies and professionalism of our Essakane team, with the mine on track for guidance this year despite the complexities within the region. And at Westwood, where our team’s efforts to rebuild the mine underground has begun to show key improvement.

With $548.9 million in total cash and a debt of $835 million, IAMGOLD presents a good debt profile. There is currently $1 billion in liquidity. In the press release, IAG said:

On November 9, 2023, the Company entered into a one year extension of its Credit Facility extending its maturity to January 31, 2026. As part of the extension, the Credit Facility was reduced to $425 million based on the Company’s requirements for a senior revolving facility for its overall business.

As previously explained, IAG’s strong debt profile can finance the remaining $325 million to complete Côté Gold.

Lastly, the company’s cash flow from operations was $37.5 million in 3Q23, down from $117.7 million in 3Q22, while capital expenditures were $230.3 million. This led to a negative free cash flow of $192.8 million. It is not a surprise, and I expect a quarterly negative free cash flow until 2Q24 due to Côté Gold.

Gold equivalent production in the third quarter of 2023

Gold production was 109K ounces in 3Q23, compared to 184K in 3Q22.

Production was significantly lower due to the sale of the Rosebel mine and issues at the Essakane mine.

The company sold 106K ounces in 3Q23 at $1,937 per ounce and elevated AISC of $1,975 per ounce.

Technical Analysis and Commentary

Note: The dividend is taken into account in the chart.

IAG forms an ascending wedge pattern, with resistance at $2.70 and support at $2.48. RSI is 60 and is quickly approaching an overbought situation.

The rising (ascending) wedge pattern is a bearish chart pattern that signals an imminent breakout to the downside. It’s the opposite of the falling (descending) wedge pattern (bullish), as these two constitute a popular wedge pattern.

By utilizing the LIFO trading strategy, you can sell your most recent purchases and profit while holding onto your long-term position until you decide to sell it.

The trading strategy is to sell about 45%-55% of your position between $2.60 and $2.75, with a potential higher resistance at $2.95.

It is safe to accumulate shares of IAG between the price range of $2.58 and $2.43, with a potential support level of $2.20. As I mentioned before, this is a good opportunity to purchase shares at low prices, as the Cote Gold full production is expected to drive a potential rally around 2Q24.

Warning: The TA chart must be updated frequently to be relevant. The chart above has a possible validity of about a week. Remember, the TA chart is a tool only to help you adopt the right strategy. It is not a way to foresee the future. No one and nothing can.