IAMGOLD* (IMG : TSX : $9.22), Net Change: -1.57, % Change: -14.55%, Volume: 5,818,404
IAMFALLING...IAMGOLD was deep in the red after releasing materially higher than expected 2013 cost guidance alongsideQ4/12 results. 2013 production guidance has been maintained at 875,000-950,000 oz (as released in Q3/12 financials).
However, cash costs are expected to be in the range of $850-925/oz; significantly higher than Canaccord Genuity PreciousMetals Analyst Steven Butler’s $706/oz estimate. The increase has been explained by inflation (1/3 of increase), lower oregrades (1/3 of increase), transition to harder ore at the company’s flagship assets and higher operating costs in Westwood’s firstyear of production. Butler believes that inflation and the transition to harder ore will lead to increased LOM operating costs atthe company’s operations. Butler has extrapolated higher costs on a go-forward basis. For the quarter, production was 214,000oz, largely in line with Butler’s estimate of 218,000 oz. Full-year cash costs are estimated to come in at +/- 3% of the high endof previous guidance of $670-695/oz versus his estimate of $699/oz. The variance to his production estimate is largelyexplained by lower than expected production at Essakane and Sadiola, partly offset by better production at Rosebel. On apositive note, IMG provided an updated resource at the Cote Gold project. The project’s indicated resource increased by 114% to 7.61 Moz, due largely to in-fill drilling and conversion of inferred resources. The overall indicated grade increased to 0.88 g/t(from 0.84 g/t), while the inferred grade lowered to 0.74 g/t (from 0.88 g/t). Butler notes that while this represents a positive shift in resource confidence, his valuation of Cote Gold remains unchanged at $550 million on an in-situ basis. However the disappointing cost guidance was the focus of Wednesday’s press release. Butler lowered his rating and target largely due to higher assumed life-of-mine operating cost profile and increase in Sadiola Deeps.