Iamgold Corp., a producer with mines in Canada, West Africa and South America, is considering a share buyback or extra dividend to boost shareholder returns after its stock slumped and it curbed spending on expansion.
Iamgold shares have tumbled 49 percent in the past year to close at C$8.65 on Feb. 6 in Toronto. The stock hit a four-year low on Jan. 31 after the Toronto-based company reported higher output costs and lower grades at its Westwood project in Quebec.
“The current share price is totally unacceptable,” Chief Executive Officer Steve Letwin said today in an interview in Melbourne. “The company is in great financial shape but we’ve got a terrible sentiment out there and my job is to make sure we maximize value for shareholders.”
Iamgold, which had $897 million in cash and cash equivalents on its balance sheet at Sept. 30, is seeking to curb spending on projects to control costs that are increasing at a rate of about 15 percent a year, said Letwin. The company paid a second-half dividend of 12.5 cents a share.
“We can pay extra dividend, we can buy shares back, we can restructure the company,” said Letwin. “We’ll do it when the time is right but I am completely focused at getting the share prices up. When you do the math there should be ways to do that.”
Gold producers are expanding output to cope with rising costs and benefit from prices that have increased for 12 consecutive years. The spot price gained 7 percent last year as Asian demand rose and central banks boosted purchases. It was little changed at $1,679.45 an ounce at 4:09 p.m. in Melbourne.
Prices are likely to stay in the range of $1,600 an ounce to $1,700 an ounce this year, Letwin said. Gold will gain over the longer term as supply becomes tight on falling output, he said.
The company, Canada’s sixth-largest producer, said last month 2013 attributable production will be 875,000 ounces to 950,000 ounces, compared with 830,000 ounces last year. Gold output will grow over the next five years to 1.4 million to 1.6 million ounces, the company said.
AngloGold Ashanti Ltd., Africa’s largest producer said yesterday in a statement that it will hold back on expansion spending for its Sadiola mine joint venture with Iamgold in Mali, where the government is fighting insurgents. Iamgold, which owns a 41 percent stake, is also unlikely to be spending more on the mine, Letwin said
“When juniors can’t finance their projects and when the majors are losing organic production, when people are cutting capital back like crazy, eventually supply starts to get affected and if demand stays constant inevitably you’re going to have to start paying more for gold,” said Letwin.