In a Nov. 13 research note, analyst Andrew Kaip reported highlights from a site tour to IAMGOLD Corp.'s (IMG:TSX; IAG:NYSE) Rosebel gold mine, which was limited due to a wildcat strike at the time.
Kaip reviewed the recent and future improvements at the project, which has current reserves of 5.5 million ounces and a projected mine life through 2033. For instance, IAMGOLD increased ex-pit production 23% since 2017 without expanding its fleet.
The company intends to boost hard rock capacity by 10–15% by "eliminating the pebble production circuit constraint, decreasing the high power draw constraint and decreasing mill instability," Kaip explained. Design and installation of those should occur in 2019.
Kaip commented on the current strike, noting it was happening less than two months after the parties signed a new two-year contributor license agreement. "It was unclear what demands were being made, the duration and whether there will be a material impact to Q4/18 production," he wrote. Negotiations did hinder Q3/18 production and led management lower guidance to 280–295 Koz.
The analyst outlined upcoming work to be done at Saramacca and the potential for underground mining there. The next steps at that project include a pit slope optimization study, slated to begin this month, followed by an environmental and social impact analysis in late November/early December. Recovery optimization test work and study are slated for February 2019. The haul road should be ready to connect Saramacca and Rosebel in April 2019 and be finished in July.
It is too early to tell whether Saramacca could be an underground operation, Kaip noted. However, ongoing preliminary assessment and pit optimization show a significant lowering of the strip ratio. "Capital and pit phasing are structured for optionality," he indicated. "Drilling is targeting about 100 meters below the current pit shell."
Kaip concluded that 2019 "stands as a year that IAMGOLD is looking to not only start up Saramacca but also continue to explore the consolidated land package."
BMO has an Outperform rating on IAMGOLD. Its target price is CA$6.50 per share; the company's stock is trading at around CA$3.34 per share.[NLINSERT]
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Disclosures from BMO Capital Markets, IAMGOLD, November 13, 2018
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 9B: BMO Capital Markets makes a market in IAMGOLD in United States.
Disclosure 16: A research analyst has extensively viewed the material operations of IAMGOLD.
Disclosure 17: IAMGOLD has paid or reimbursed some or all of the research analyst's travel expenses.
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