IAMGOLD CEO: Free Cash Flow is What Investors Want

Stephen J.J. Letwin, CEO of IAMGOLD, spoke with INN concerning the present local weather of the gold house at this yr’s Mines and Cash New York.



Stephen J.J. Letwin, CEO of IAMGOLD (TSX:IMG,NYSE:IAG), tackled the gold house in a presentation at Mines and Cash New York final week, talking a few market that’s been plagued for years by low costs and lack of exploration (even with complete exploration rising 19 p.c final yr).

In an interview on the sidelines of the present, he spoke additional about what the longer term could deliver for gold and why he’s a fan of mergers and acquisitions (M&A) inside the gold house.

“The truth that gold costs have kind of stayed within the US$1,250 (per ounce) vary for the final six years doesn’t do loads to excite folks. So I believe there’s investor fatigue, and the underside line is there’s in all probability too many people relative to the truth that the capital pool is shrinking,” he stated.

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Letwin thinks buyers wish to see gold break by means of the US$1,400 mark.

“If that occurred, possibly generalists would come again into the house. The place proper now we actually aren’t seeing any new faces,” Letwin added.

Though gold costs have shifted upwards in 2019, it has solely been a marginal change, and Letwin believes that, as a result of gold is so tightly certain to the US greenback, the dollar must lose way more steam earlier than costs will transfer considerably.

“The US greenback continues to be very sturdy (and) Trump might be going to verify the US financial system stays sturdy earlier than the election, in order a haven for buyers, gold actually hasn’t stood out.”

Take heed to the interview above or learn the transcript beneath for extra of Letwin’s ideas on gold.

INN: What attracted you to Mines and Cash this yr?

Stephen J.J. Letwin: Nicely, Mines and Cash may be very lively around the globe. They throw some excellent conferences (in) Hong Kong, Australia, Canada, New York (and) London, so we typically will attend their conferences and sponsor loads of issues which can be occurring, so it’s actually been a really productive expertise for us right here. As I stated earlier, they’re very properly organized and so they’re properly attended.

INN: How does investor sentiment appear to be across the gold house proper now?

SL: Terribly weak and we have been speaking about that at present, the quantity of capital that has left the enterprise, the business, may be very excessive, little or no capital coming in. Generalists haven’t proven up once more since they left in all probability in 2012, so the truth that gold costs have kind of stayed within the US$1,250 vary for the final six years doesn’t do loads to excite folks. So I believe there’s investor fatigue, and the underside line is there’s in all probability too many people relative to the truth that the capital pool is shrinking, so (it’s) extraordinarily troublesome to get loads of curiosity. You wouldn’t wish to be attempting to boost cash proper now and any (firm) — both main, mid-tier or junior — faces (that).

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INN: And talking of the gold worth, you’ve sort of alluded to it already, however how are you feeling about it? And the place do you see it going?

SL: It’s all tied to the US greenback, so if US greenback weakens because the US financial system weakens we’ll see gold costs in all probability react, however proper now we actually haven’t seen that. The US greenback continues to be very sturdy; Trump might be going to verify the US financial system stays sturdy earlier than the election, in order a haven for buyers, gold actually hasn’t stood out. So we may see a spread round between US$1,250 and US$1,350, and I believe buyers wish to see it break by means of the US$1,400 mark.

Then, if that occurred, possibly generalists would come again into the house, The place proper now we actually aren’t seeing any new faces and loads of the lively managers are being harm by the passive buyers, in order that’s taking place on the identical time. It’s simply considered one of these instances once you want a very sturdy steadiness sheet like we have now and you should maintain the course and anticipate the cycle to show again to raised instances.

INN: In your presentation earlier at present, you talked about that exploration budgets are nonetheless beneath historic numbers, however gold is taking on 50 p.c of that — what does that imply for IAMGOLD as an organization and the house as a complete?

SL: Nicely, during the last three years, we’ve had unbelievable success. We greater than doubled our reserve base and a yr in the past that was acquired extraordinarily properly, so I consider buyers actually like the truth that we went from 6.eight years to virtually 18 years within the span of three years. However, proper now, buyers will not be rewarding any corporations for within the floor reserves. Actually, they’re in search of free money movement, so free money movement actually is what everyone is in search of. So, then, the bottom reserves actually aren’t on the prime of the listing, which means we have to see corporations that produce free money movement, that don’t want to return to the fairness markets. Exploration , sadly, in all probability are going to be beneath strain till there’s a change in that sentiment.

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INN: You latterly had a brand new gold discovery at your asset in Timmins. Are you able to clarify somewhat bit about that and what meaning for the corporate?

SL: We had an outstanding discovery about 1.5 kilometers northeast of our fundamental Côte deposit. Most likely sitting at 12.5 million ounces decrease grade, however bulk tonnage very near floor, very low stripping ratio, 6 kilometers off the freeway. It’s a particularly enticing deposit and mission, however once more the market will not be inquisitive about us shifting in, spending a billion to develop it. They’d a lot reasonably see that placed on the shelf for now, after which, when the cycle will get somewhat more healthy, possibly we are able to transfer forward, nevertheless it’s a disappointment for us as a result of we expect it’s a improbable mission.

INN: What are some issues you’ve coming down the pipe by way of initiatives that offer you a aggressive edge which may get you acknowledged with buyers?

SL: Nicely, we positively have to enhance our free money movement in Saramacca, which is in Suriname, and the Rosebel mine positively is one thing that can deliver us higher … quick cycle economics, in order that’s an enormous plus. Optimization of the mill at Essakane and Burkina Faso is an enormous plus. And ramping up Westwood, which you realize, sadly we had a little bit of a setback within the first a part of the yr, so we have to get that again on observe.

If we are able to get these three issues working, I believe we are able to get extra confidence again within the inventory and see the worth go somewhat increased.

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Securities Disclosure: I, Nicole Rashotte, maintain no direct funding curiosity in any firm talked about on this article.

Editorial Disclosure: The Investing Information Community doesn’t assure the accuracy or thoroughness of the data reported within the interviews it conducts. The opinions expressed in these interviews don’t replicate the opinions of the Investing Information Community and don’t represent funding recommendation. All readers are inspired to carry out their very own due diligence.

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