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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.
“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;
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