Iamgold shares fall sharply on weak Q3 earnings report, revised guidance

Iamgold Corp. shares were hammered Wednesday after the gold miner reported lower than expected earnings and warned that 2012 production will be at the low end of its guidance.

The Toronto-based gold miner’s stock (TSX:IMG) closed down $2.90 or nearly 20 per cent at $11.98 on the Toronto Stock Exchange, wiping out more than $1 billion in market value for the company.

President and chief executive Stephen Letwin said the mines that Iamgold owns and operates are doing well. He said the problem is with joint venture projects.

“The performance at the mines where we are not the owner operator, for example Sadiola and Yatela, have been disappointing,” Letwin told a conference call with analysts Wednesday.

“As a result consolidated production for the year is likely to be at the lower end of our guidance and cash costs are expected to be within plus or minus three per cent of the high end. So I’m not happy about that.”

In its earnings report released after markets closed Tuesday, Iamgold cited lower gold sales and higher exploration expenses for a drop in revenue and adjusted profit in the third quarter.

The gold miner, which reports in U.S. dollars, says revenue came in at US$386.8 million for the quarter, down 10 per cent from US$431.9 million year over year.

Adjusted net earnings, were $60.2 million, or 16 cents per share for the quarter, down from $112.4 million or 30 cents per share year over year.

Analysts polled by Thomson Reuters had called for adjusted earnings per share of 24 cents on $427 million in revenue for the quarter.

Attributable gold production in the quarter totalled 205,000 ounces, down from 222,000 ounces in the third quarter 2011.

Iamgold said the decrease was mainly due to lower production at Essakane due to the processing of lower-grade ore and at Sadiola due to lower throughput and lower grades.

Total cash costs were $710 per ounce, up from $674 per ounce in the third quarter 2011, while the average realized gold price was $ 1,670, down from $1,675 a year ago.

In its guidance, Iamgold said it expected to produce 840,000 to 910,000 ounces of gold at a cash cost between $670 and $695.

The company reduced its 2012 capital expenditure guidance to between $750 million and $780 million from a range of $800 million to $840 million due to timing assumptions at its Sadiola and Essakane expansion projects.

For 2013, Iamgold said it expected to produce 875,000 to 950,000 ounces of gold, down from earlier expectations of one million to 1.1 million ounces.

Scotiabank analyst Tanya Jakusconek expected the stock to come under pressure because of the weak quarter and lower guidance for next year, but maintained a US$18-price target on the stock.

“Adjusted third-quarter earnings per share was lower than our estimate mainly due to a weaker revenue line and slightly higher exploration expense,” Jakusconek wrote in a note to clients.

Iamgold has operations in West Africa, South America and Canada.

The company’s two largest operations are the Rosebel mine in Suriname and the Essakane mine in Burkina Faso.