- By Alberto Abaterusso
Iamgold Corp. (IAG) - the Canadian mid-tier gold producer - released its financial results for the second quarter of fiscal 2017 after market close Aug. 9.
The gold producer reported EPS - adjusted to one-time charges - of 1 cent, in line with expectations, or an adjusted net profit of $4.3 million. This was 27% lower than the net profit of $5.9 million or 1 cent per share Iamgold reported at the end of the comparable quarter of fiscal 2016.
The gross profit increased 47% from $24.4 million in the second quarter of 2016 to $35.9 million in the comparable of the current fiscal, thanks to a 18% year-over-year growth in the revenue that more than offset the increase in costs of sales.
Higher costs of sales were a consequence of "higher operating costs ($19.7 million), higher depreciation ($9.2 million) and higher royalties expense ($1.6 million)," Iamgold reported.
Revenue came in at $274.5 million, beating expectations by $7.43 million. The increase in revenue was exclusively the result of higher sales volumes since the Canadian miner realized a lower average price from the sale of one ounce of gold.
During the second quarter, Iamgold sold 219,000 ounces of gold, a 17.1% increase year over year, for an average price of $1,251 per ounce, $18 per troy ounce lower compared to the second quarter of 2016.
Sales volumes were backed by gold production of 223,000 ounces, up 13.2% year over year.
Higher volumes of gold produced and sold were mainly the result of increased rates of mining and sales activities at the Essakane gold mine in Burkina Faso and Westwood in Quebec.
The all-in sustaining costs (AISC) was $975 per ounce of gold sold in the second quarter, a 12% decrease on a year-over-year basis. The improvement in the AISC per ounce of gold sold was a result of a fewer funds used as sustaining capital expenditures, compared to the same quarter of fiscal 2016.
For the quarter, Iamgold reported higher charges for depreciation and amortization due to increased mining activities at Essakane that, when added back to the income along with other noncash adjustments, derivatives' net settlements and changes in noncash working capital items' movements, led to a net operating cash flow of $88.7 million. This was up 25% on a year-over-year basis. In the calculation for net operating cash flow, outflows for taxes paid by Iamgold during the quarter were also considered.
Iamgold closed the quarter with $800.1 million in cash on hand and securities, a nearly 5% increase from the fourth quarter of fiscal 2016. The improvement in the liquidity available to the company was mainly due to the cash flow from Iamgold's operations and to the proceeds from the sale of the miner's 30% interest stake in the Cote Gold Project.
The miner also reported an increase in the value of its total assets. On June 30, its assets were valued at approximately $3.9 billion, up from $3.4 billion. The long-term debt was reduced to $392.2 million from the previous $485.1 million reported at the end of fiscal 2016. This means Iamgold is deleveraging to have more financial flexibility and be less dependent on the volatility of the gold market. An available line of credit of $247.1 million brings the company's total liquidity to $1.05 billion.
For full fiscal 2017, Iamgold guides production - including joint ventures - ranging between 845,000 and 885,000 ounces at an AISC per ounce of gold sold between $1,000 and $1,080.
Iamgold is currently trading around $5.28 versus the analysts' average target price of $6.56. The gold producer has a market capitalization of $2.45 billion, a price-book (P/B) value of 1.09 and a price-sales (P/S) ratio of 2.38 times.
The company has an enterprise value of $2.34 billion that, considering a total volume of 10.820 million ounces in proven and probable gold reserves, leads to an EVO metric of $216.27, which is near the industry average. The EV/EBITDA ratio is 7.15.
The gold stock has a recommendation rating of 2.4 out of a total of 5.
Disclosure: I have no positions in Iamgold.
This article first appeared on GuruFocus.