IAMGOLD Continues to Be a Risky Gold Stock


Even though gold prices have been rising strongly this year, IAMGOLD (IMG.TO) has failed to deliver gains on the stock market as it has been struggling with operational issues. The company’s shares are down nearly 7% in 2019, and things might not get better in the coming days because the operational bottlenecks faced by the company still persist.

Let’s see what’s ailing IAMGOLD and if investors should continue to avoid this stock.

Suriname is a problem for IAMGOLD

At the beginning of October, it was reported that IAMGOLD has been forced to halt its operations at the Rosebel mine in Suriname after an intrusion of illegal miners led to a blockade. This was the second time in two months that IAMGOLD faced problems at the Suriname mine.

In August, the death of an illegal miner at Rosebel had led to a suspension of work. Not surprisingly, IAMGOLD is treading a cautious path when it comes to guidance. The company is already struggling on account of weak grades, which forced the company to lower its guidance from a range of 810,000 ounces to 870,000 ounces to a range of 765,000 ounces to 810,000 ounces.

Considering that the problems have continued to persist at Rosebel, don’t be surprised to see IAMGOLD further reduce its full-year guidance. Moreover, the bottleneck seems to have affected the potential sale of IAMGOLD as well.

Bloomberg recently reported that IAMGOLD was put on sale but the deal didn’t go through with the Chinese consortium that was supposed to buy the miner. The report cites that the tensions between Canada and China, as well as the price IAMGOLD was demanding put a spanner in the works.

Such an event is bound to dent investor confidence.

What next for IAMGOLD?

IAMGOLD will release its next set of quarterly results on Nov. 7. Wall Street anticipates a double-digit increase in revenue from the company, along with a profit of $0.02 per share as compared to a loss of $0.01 per share in the year-ago period.

Now, IAMGOLD could miss these targets given the recent disruptions. What’s more, analysts expect that the company’s performance is on track to deteriorate in the December quarter, with revenue growth slowing down to the mid-single digits.

For the entire year, IAMGOLD is expected to deliver lower revenue as compared to 2018 levels, while EPS is expected to shrink to $0.01 from $0.06 a year ago. So, IAMGOLD doesn’t look like a good bet to take advantage of an increase in gold prices as things stand.

What’s more, the stock is expensive with a price-to-earnings ratio of nearly 73. At this valuation, buying IAMGOLD does not make sense given the operational issues that plague the company. As such, investors looking for a gold miner should consider other stocks that are capable of taking advantage of higher gold prices, something that IAMGOLD does not seem adept at.

Harsh Singh Chauhan has a wealth of experience evaluating publicly-traded companies across several verticals, including technology, oil and gas, retail, and consumer goods. His financial writing has been published across platforms such as The Motley Fool, TheStreet, and Seeking Alpha. Harsh's philosophy is to find great businesses for the long run based on company fundamentals and industry prospects. Address: 682 Indian Road, Toronto, Ontario, M6P 2C9. Phone: 416-721-8257.


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