A Nov. 7 BMO Capital Markets research note indicated that IAMGOLD Corp. (IMG:TSX; IAG:NYSE) achieved a Q3/17 headline earnings per share (EPS) of $0.07, which was a beat due to costs being lower than estimated, according to analyst Andrew Kaip. BMO and consensus expected an EPS of $0.02.
The Canadian company's operating cash flow of $77 million ($77M) was exactly in line with BMO's estimate, Kaip noted. Free cash flow of $36M was three times the expected $12M, "as capital spending came in below expectations ($41M versus BMO at $65M)." On this result, IAMGOLD lowered capital guidance for 2017 by $25M to $225M (+/-5%).
Production in Q3/17 of 217,000 ounces (217 Koz) was a slight miss, coming in below BMO's estimate for 223 Koz, "on lower-than-expected production from Rosebel," wrote Kaip. Yet, the company reiterated 2017 production guidance of 845–885 Koz gold.
All costs during the quarter were lower than anticipated. Total cash costs were $771 per ounce ($771/oz) versus the $797/oz estimate. All-in sustaining costs (AISCs), excluding royalties, were $969/oz and compared to the projected $1,059/oz. Consequently, "AISC guidance was narrowed to $1,000–1,040/oz (was $1,000–1,080/oz)," relayed Kaip.
As of Sept. 30, 2017, Kaip added, IAMGOLD had "cash and short-term investments of $810M and long-term debt of $389M, for net cash of $422M."
In other news, a near-term catalyst for IAMGOLD—"by H1/18"—is completion of both a preliminary reserve estimate for and permitting work at the Saramucca deposit, Kaip said. The company "is working towards advancing the project toward production in 2019."
BMO Capital has an Outperform rating and a $5.75 per share target price on IAMGOLD, whose stock is currently trading at around $8 per share.
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Disclosures from BMO Capital Markets, IAMGOLD, Nov. 7, 2017
I, Andrew Kaip, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients.
Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Limited are not registered as research analysts with FINRA. These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the FINRA Rule 2241 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.
Company Specific Disclosures
Disclosure 8A: BMO Capital Markets or an affiliate has a financial interest in 1% or more of any class of the equity securities of IAMGOLD.
Disclosure 8C: BMO Capital Markets or an affiliate has a financial interest in 0.5% or more in the issued share capital of IAMGOLD.
Disclosure 9: BMO Capital Markets makes a market in IAMGOLD.
Disclosure 16: A BMO Nesbitt Burns Inc. research analyst has extensively viewed the material operations of IAMGOLD.
Disclosure 17: IAMGOLD has paid or reimbursed some or all of the BMO Nesbitt Burns Inc. analysts travel expenses.
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