Skip to main content
The Globe and Mail
Support Quality Journalism.
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
Just$1.99
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to globeandmail.com
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); } //

Iamgold’s Essakane operations in Burkina Faso.

Iamgold Corp. shares sagged nearly $3 or more than 19 per cent in active trading, after the gold producer reported weaker-than-expected third-quarter earnings and announced a major reduction in its production outlook for next year.

The stock tumble follows the recent pattern in the gold-mining industry, where companies that disappoint investors have seen their stocks get crushed as skittish owners rush for the exits.

Operating profit in the quarter fell to 16 cents (U.S.) a share, down almost half from 30 cents earned in the same period a year ago. The consensus estimate among analysts had been 24 cents.

Story continues below advertisement

"Execution in the gold space is very important and when you mis-execute, investors shoot first and ask questions later," said Pawel Rajszel, an analyst at Veritas Investment Research Corp. who slapped a sell recommendation on Iamgold Wednesday.

Iamgold, which has mines in Suriname in South America and in West Africa, said gold output this year will be "at the lower end" of its guidance of 840,000 to 910,000 ounces; for next year the company is expecting between 875,000 to 950,000 ounces, a major reduction from previous forecasts that ranged up to 1.1 million ounces.

In a conference call, Iamgold president Steve Letwin attributed the poor results to output shortfalls and high costs at two mines where the company has an ownership interest, but doesn't operate the projects.

"So, I'm not happy about that. Not a lot right now we can do about it," Mr. Letwin said.

But analysts say the company appears to be also struggling at sites where it is the owner-operator. "They're blaming their joint-venture partner for the troubles, but when we look at the numbers ... we see operating issues at the mines that they operate as well, albeit not to the same extent," Mr. Rajszel said.

Another investor worry with Iamgold is that the company also owns a niobium mine in the Saguenay region of Quebec. Niobium is used as an alloy in specialty steels. The company is in the midst of a costly expansion; Mr. Rajszel said the $1-billion estimated cost is a concern, particularly as most precious-metals investors prefer pure-play companies, rather than those that generate a significant portion of revenue from other materials.

"I don't think gold investors care or want that black hole," he said of the niobium operation.

Story continues below advertisement

Mr. Rajszel has a $13 (Canadian) price target on the company, and recommended clients take profits. Earlier this year he placed a "buy" call when the stock was trading around $10.

Among mid-sized gold producers, Iamgold has one of the better pipelines of new projects and expansions. On the conference call, Mr. Letwin played up that positive attribute, and said the company would "nearly double our current level of production" to reach 1.4 million to 1.6 million ounces within five years. He predicted that the gold price would remain strong and average $1,700 (U.S.) an ounce next year.

Earlier this year, Iamgold bought promising junior Trelawney Mining for about $600-million, a key part of its expansion strategy. Trelawney's prime asset is a gold discovery in Ontario, but Maison Placements Canada president John Ing contends Iamgold paid a "very rich price" for this property.

He said Iamgold paid cash for Trelawney, but then turned around and borrowed $650-million through a bond issue, stretching its balance sheet.

Many investors want gold miners to show more discipline in their use of capital by minimizing amounts raised through bond issues or dilutive equity offerings. Mr. Ing said Iamgold management has "over-promised and undelivered," disappointing investors.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies