Claim Membership Credit
IAMGOLD (TSX:IMG) stock surged 15.1% in a single trading session on Tuesday. The rally followed the company’s recent release of its fourth quarter 2023 production results and a milestone update on a key gold mining project that may double the junior miner’s annual production. Now that IMG stock price has rebounded strongly from lows seen in October 2022, could shares surge higher and help growth-oriented investors retire millionaires?
IAMGOLD is a $1.7-billion junior gold miner with production operations in Canada and West Africa. It currently operates two mines, Essakane located in Burkina Faso and Westwood, a project in Quebec, and has several development projects. Its star development project is the Côté Gold project located in Ontario, Canada, which is due to commence production in March 2024, and change the company’s financial profile for the next 18 years.
Côté Gold will be a key value driver for the gold stock over the next five years, and Tuesday’s news that first gold production is expected in the next two months excites IAMGOLD stock traders.
IAMGOLD stock’s fortunes tied to Coté Gold project
The company’s history of slow revenue growth could be rewritten from 2024 going forward. IAMGOLD’s 60% stake in Côté Gold (which could grow to 70% by next year) is increasingly valuable. The project could scale up to become the third-largest gold mine in Canada by year-end 2024, with a potential mine life of 18 years.
Côté Gold is both a special and critical asset to IMG. It could double nameplate productivity for the company, and significantly reduce its operating cost profile. Current estimates indicate the project could average annual production of 495,000 gold ounces during its first six years. IAMGOLD produced 465,000 ounces in 2023.
Most noteworthy, the new project could usher IAMGOLD into sustainable profitability due to its low-cost production profile. The company currently produces gold at an all-in sustaining cost (AISC) of between US$1,750 to US$1,825 an ounce. Côté Gold could produce gold at an AISC of US$851 an ounce – nearly half the current corporate cost of production.
That’s not all. The new project will help replace lost production at the Essakame mine in Burkina Faso, which is depleting. The mine produced 372,000 gold ounces in 2023, or 80% of the company’s total annual production. Current resource estimates indicate possible depletion by 2028. The project could go out within the next four years unless further exploration activity extends the mine’s life.
IAMGOLD could turn profitable and cash flow positive soon
Higher production in West Africa and new low-cost production at Côté Gold should significantly reduce the company’s production cost profile in 2024 and propel its cash flow generation upwards going forward.
Declining production, an unfavourable operating environment due to political instability in West Africa, cost inflation, and poor production economics at Westwood (Canada) led to significant revenue and earnings declines in 2023. However, management is working on redesigning Westwood to reduce its AISC, which crept up to $2,486 per ounce last year. Low-cost production from Côté Gold and cooler tempers in West Africa could be favourable developments for the miner’s profitability and cash flow in 2024.
Bay Street analysts project a strong 139% five-year earnings growth rate, which could be helped by firmer gold prices.
Meanwhile, IMG stock trades at an affordable forward price-to-earnings (P/E) multiple of around 7.7, which compares favourably against a peer average multiple of 13.8.
Could IMG stock make one a millionaire?
If the new project comes online as projected in March, IAMGOLD stock has the potential to break out from its current trading range between $2.75 and $4.42 recorded over the past year. The average analyst price target of $4.08 implies a 20% upside over the next 12 months.
The investment is fraught with risks. Success at ongoing exploration projects is needed to augment Côté Gold’s heavy lifting as the Burkina Faso project fizzles out, and as the Westwood mine tries to find a low-production cost strategy before depleting by 2033.
Further, gold prices aren’t guaranteed in the commodities market. And junior gold miners usually have higher operating risk profiles than their mature counterparts.
IAMGOLD stock may produce positive returns over the next five years. Perhaps it’s a big ask to expect glamorous rallies that can print new millionaires.
