) reported second quarter adjusted earnings per share (EPS) of 20
cents, ahead of the year-ago level by a couple of cents and beating
the Zacks Consensus Estimate by a penny. Including impairment of
marketable securities and foreign exchange translation, EPS in the
quarter stood at 14 cents, down 30% from the year-ago quarter EPS
of 20 cents.
Higher gold sales and gold prices helped revenues increase by 19%
to $410.6 million in the quarter and outperform the Zacks Consensus
Estimate of $369 million. Gold sales increased by 33,000 ounces or
17% to 226,000 ounces and average realized gold price increased 5%
to $1,593 per ounce in the quarter.
Mining costs escalated 25% to $250 million in the quarter,
reflecting higher operating costs, inventory movements mostly from
sales exceeding production and higher depreciation, depletion and
Gross earnings from mining operations improved 10% to $160
million in the quarter, helped by higher revenues that offset
increased mining costs. The gold margin upped 5% to $856 per ounce
as the increase in the average realized gold price offset higher
Gold production during the quarter increased 9% year over year to
204,000 ounces. At the Rosebel Mine in Suriname, gold production
was 94,000 ounces, up 8% from the prior-year quarter, mainly due to
higher throughput and higher recoveries.
The Essakane Mine in Burkina Faso produced 81,000 ounces of
gold, 30% higher than the second quarter 2011, aided by the removal
of the technical issues that limited production in 2011, partially
offset by lower grades in 2012.
The Sadiola mine in Mali produced 22,000 ounces of gold, down 33%
from the prior-year period, due to lower throughput resulting from
low mill availability, lower grades mined and lower recoveries on
graphitic ore. Production at the Yatela mine in Mali was 5,000
ounces for the quarter, lower than the prior-year period, due to
comparably lower ore tonnage being fed to the heap leach pads.
At the Niobec Mine, niobium production was 1.2 million kilograms,
up 9% from 1.1 million kilograms in the prior-ear quarter. The
increase was attributed to higher conversion of niobium pentoxide
and higher recoveries, offset to some extent by lower grades mined.
As of June 30, 2012, cash, cash equivalents and gold bullion
reduced to $614.9 million from $1.3 billion as of March 31, 2012,
manly due to the $480.4 million payment for the Trelawney
acquisition. Operating cash flow increased to $52.7 million from
$12.2 million in the prior-year quarter.
In the second quarter, IAMGOLD completed the acquisition of
Trelawney Mining and Exploration Inc. The acquisition gives IAMGOLD
control over Trelawney's Côté Lake Project located near the Swayze
Greenstone Belt in northern Ontario, Canada.
Following the acquisition, approximately 3,600 meters of
drilling has been completed, and a NI 43-101 technical report will
be filed in October 2012. A pre-feasibility study is expected to
begin in the fourth quarter 2012.
During the quarter, IAMGOLD filed the resource study for the
Westwood project and start-up date for production is early 2013. At
the Essakane mine in Burkina Faso, more than 41,600 meters of
drilling was completed, including approximately 15,600 meters
targeting the Essakane Main Zone on the northern extensions of the
current life of mine pit as well as within or immediately below the
expansion feasibility study pit design. Furthermore, the
construction of the expanded plant commenced last month and is
expected to be completed by the end of 2013.
At the Rosebel mine in Suriname, approximately 36,000 meters of
diamond drilling was completed during the quarter, mainly at the
Mayo, Koolhoven and Pay Caro deposits, to increase the confidence
in the existing resource inventory and focus on resource
expansions. The installation of a temporary pre-crusher, a larger
pebble crusher and an expanded gravity recovery circuit have been
completed and are expected to have a positive impact in the second
half of 2012.
A third ball mill is under construction and will be completed
early in the first quarter 2013. A feasibility study is in progress
and expected to be completed by the first quarter 2013, which will
provide more detail around various aspects of the expansion
IAMGOLD is also making progress on the feasibility study on the
Niobec mine based on block-caving and the establishment of the
financing framework for the expansion. The completion of the study
is expected by the third quarter 2013 and the permitting process
should be finalized by 2014.
IAMGOLD continues to look for options for exploiting the large
Rare Earth Elements resource near its Niobec mine operation and the
completion of a scoping study is expected by September-end.
For fiscal 2012, total attributable gold production is expected to
range between 840,000 and 910,000 ounces. Cash cost per ounce is
expected in the range of $670 to $695. Average gold price is
expected to be $1700.
Niobium production for the year is expected to be between 4.6
million and 5.1 million kilograms. IAMGOLD estimates capital
expenditure to be within $800 to $840 million.
The Côté Lake Project will add to IAMGOLD's mineral resources by
approximately 30%. The acquisition will significantly expand
IAMGOLD's operating footprint in Canada, considered a stable
jurisdiction. Canada will now account for 35% of the company's
It is expected that the Côté Lake deposit has the potential to
become a mine in five years. The deposit will produce between
400,000 ounces and 500,000 ounces a year and will catapult
IAMGOLD's production to 1.5 million ounces to 1.6 million ounces.
The targeted production of 1.6 million ounces doubles IAMGOLD's
current production of 850,000 ounces a year. This is expected to be
realized within the next five years.
IAMGOLD has a pipeline of development and exploration projects and
continues to tap accretive acquisition opportunities. The
company's growth plans are strategically limited to certain regions
in Canada, and select countries in South America and Africa.
The Trelawney acquisition will lower IAMGOLD's geographic risk
profile. However, the Côté Lake Project is currently at an early
stage, and runs the risk of high operating costs, and technical and
Toronto-based IAMGOLD is a leading mid-tier gold mining company
with an annual production of approximately one million ounces from
five gold mines across three continents. In the Canadian province
of Québec, the company also operates Niobec Inc., which produces
more than 4.5 million kilograms of niobium annually, and owns a
rare earth element resource close to its niobium mine.
It competes with the likes of
Barrick Gold Corporation
Newmont Mining Corp.
Randgold Resources Limited
). The stock retains a quantitative Zacks #5 Rank (short term
Strong Sell rating) over the near term.
BARRICK GOLD CP (ABX): Free Stock Analysis
RANDGOLD RSRCS (GOLD): Free Stock Analysis
IAMGOLD CORP (IAG): Free Stock Analysis Report
NEWMONT MINING (NEM): Free Stock Analysis
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