Iamgold CorporationIAG has inked an investment agreement to form a joint venture (JV) with Sumitomo Metal Mining Co., Ltd., a global leader in the mining and development of non-ferrous metals.
Per the terms of the agreement, Sumitomo will acquire a 30% undivided participating stake in Iamgold's ownership interest in the Cote Gold Project in Ontario, for roughly $195 million, of which $100 million is payable after completion of the deal. The transaction is expected to close by the end of June.
The remaining $95 million will be paid on the date of public filing of feasibility study with respect to the Cote Gold project or 18 months following the deal closure, whichever is earlier.
After the transaction closes, Iamgold and Sumitomo will form an unincorporated JV, with respect to the project and enter into the proposed definitive JV agreement. Following the closure of the deal, Iamgold will own a 70% and Sumitomo the remaining 30% of the total outstanding participating interests under the agreement.
The JV will have an Oversight Committee monitoring activities of the Cote Gold Project. It will include six representatives, two from Sumitomo and four from Iamgold, taking decision based on the proportionate participating interest.
During the development and operational stages, Iamgold will be operator of the Cote Gold Project and both parties shall be responsible for funding the proportionate share of expenditures, including sustaining and initial capital expenditures.
Sumitomo's profound expertise in operating and building mines will complement Iamgold's established track record as a successful builder and operator in the mining industry. Further, the deal will give Iamgold access to Japanese suppliers operating in the industry that will complement the existing supplier networks within Ontario.
As both companies have robust business development capabilities, the JV will support Iamgold's objective to grow its production pipeline, by seeking opportunities beyond the Cote Gold Project and exploring areas of common interest.
Iamgold's shares have rallied 45.1% in the last three months, outperforming the Zacks categorized Mining-Gold industry's gain of 11%.
Iamgold remains focused on increasing reserves and preventing depletion of resources. The company's JVs in South and Central America, West Africa and Canada have undertaken exploration projects, along with targeting soft rock resources near existing mines.
The company expects gold production in 2017 to be 845,000 to 885,000 ounces. Also, total cash cost is expected to be between $740 and $780 per ounce. All-in sustaining cost is anticipated between $1,000 and $1,080 an ounce. Capital expenditures is expected to be around $250 million.
Iamgold Corporation Price and Consensus
Iamgold currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Some top-ranked companies in the basic materials space include Huntsman Corporation HUN , ArcelorMittal MT and The Chemours Company CC . All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks Rank #1 stocks here .
Huntsman has expected long-term earnings growth rate of 7%.
ArcelorMittal has expected long-term earnings growth rate of 11.6%.
Chemours has expected long-term earnings growth rate of 15.5%.
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