Stock to watch: Iamgold could be ripe for takeover (RTGAM)
Monday’s close: $8.50, up 50 cents
52-week trading range: $7.94 to $17.71 a share
Annual dividend: .249 cents a share for a yield of 2.9 per cent
Analysts’ ratings: There were eight “buys,” 14 “holds” and two “sells,” according to Bloomberg data. Target prices range from $9.03 a share from Pawel Rajszel of Veritas Investment Research, to $18.72 a share from Alec Kodatsky of CIBC World Markets.
Recent history: Shares of the mid-tier gold miner, which has projects in West Africa, South America and Canada, have taken a nearly 50 per cent haircut over the past year. The latest drubbing came last month after analysts cut their price targets when Iamgold forecast that mining costs would increase to between $850 (U.S.) and $925 an ounce, against expectations closer to the $700- to $730-range. The miner also reduced exploration activity recently in Mali because of political instabilty. Amid these woes, it hasn’t helped that the price of gold has been stuck in $1,600-range over the past year. There is also, perhaps, some lingering skepticism by investors about the leadership of Iamgold’s chief executive officer Steve Letwin, who came from the energy as opposed to mining sector just over two years ago.
Manager insight: Major shareholders are unhappy with Iamgold’s battered share price, and are quietly agitating for change. “People are frustrated,” says John Stephenson, a portfolio manager with First Asset Investment Management Inc., who has owned Iamgold shares for about two years. “The stock price is doing nothing, and getting cheaper and cheaper.... Pressure is coming from the big shareholders in particular, like Royal Bank and BlackRock.”
Iamgold, which is trading at a substantial discount to its peers, could be ripe for a takeover by a large miner, he said. Eldorado Gold Corp., Agnico-Eagle Mines Ltd., Goldcorp Inc. or even Newmont Mining Corp. could be be potential buyers, he suggested. No one foresaw Alamos Gold Corp. making a $780-million hostile bid for Aurizon Mines Ltd., but “you had an investor base that was fed up,” he said. “[Iamgold] is in the same camp.”
Iamgold investors are looking for a way out, and a takeover could stem from them talking to other gold companies or private equity, and asking them to take a look at the miner because “it is dirt cheap,” said Mr. Stephenson. “All of a sudden the company is in play.”
Another possibility is that Iamgold could spin off, or sell some of its assets, similar to a break-up of the company because “it can’t surface any value as a stand-alone entity,” he said. Imagold could even split off part of itself as a royalty streaming company like Franco-Nevada Corp., and create a subsidiary that holds some part of the production, he added. Under either of these scenarios, he could see Iamgold’s share price easily reaching $12 to $12.50 a share.