IAMGOLD Corp (USA)(NYSE:IAG) has risen remarkably so far this year but shareholders can anticipate more upside from the shares due to a probable increase in margins. The company’s operating margin per gold ounce is expected to surge nearly 160% in 2H2016 compared to 1H2016, driven by lower costs and higher pricing.
However, a jump in gold prices will enable company to surpass estimates as it can see a higher average realized price, which in turn will complement the drop in costs. At the close of last year, the company appeared like a rewarding bet as it was witnessing a bad time due to hike in the interest rates.
The highlights
In this year, IAMGOLD stock has recorded an impressive comeback and has surged more than 190% as silver and gold prices have rallied enormously. More prominently, the jump in precious metals prices has resulted into a positive impact on the firm’s financials. Last quarter, the company witnessed a terrific improvement in cash flow and margins.
Gross margins had surged 36% on the back of a decline in costs and improved gold pricing, while the increase in its operating cash flow was fantastic at 125%. IAMGOLD’s cash flow and margins can enhance further in 2H2016 as it is on track to attain further cost decline.
In 1H2016, IAMGOLD reported 388,000 ounces in gold production at an ASCC of $1,099 an ounce. For the next half of the year, production is expected to be 397,000 ounces, and the firm stated it is well on track to fulfill this target. Moreover, the miner believes that its production for FY2016 will be attained at an average cost of $1,050 an ounce.
It indicates that production in the coming 2 quarters can be done at a lower cash cost. In fact, the company will have to achieve production of 397,000 ounces of gold for $1,000 an ounce. This suggests that IAMGOLD’s margins will be better in 2H2016 than what they saw in the first half. There is a probability for gold prices to rise and end higher by the close of FY2016.
