Iamgold reports record revenues for Q3

With lots of cash in its coffers after a strong third quarter, Iamgold (IMG-T, IAG-N) president and CEO Joseph Conway says the company aims to take advantage of the deals arising in the hard-hit and volatile mining sector.

Revenues rose 33% in the third quarter to US$227 million in the third quarter but a US$23.4-million impairment charge related to capitalized exploration expenditures resulted in slightly lower profit for the gold company.

Net earnings came in at US$18.8 million, down from US$19.5 million in the third quarter last year.

But the company reported a 141%-jump in operating cash flow in the quarter to US$71.7 million from $29.8 million in the same period in 2007, setting a new record for the company.

In total Iamgold has US$370 million in cash and gold bullion as of Sept. 30, plus a US$140-million five-year revolving credit facility.

“We do have significant financial resources available and we are relatively unique in this industry with that attribute,” Conway said during a conference call.

And with many mining stocks at near-lows as the world financial crisis continues, Conway says Iamgold is in a good spot because of its strong balance sheet.

“We see this market as a concerning one,” Conways says, “but clearly one that we are well positioned as a company … to take advantage of, and we intend to.”

Gold production rose 5% to 253,000 oz. leading the company to expect it will meet its operational target of producing 950,000 oz. this year.

Cash costs increased to US$481 per oz. from US$437 last year. Overall for the year, the company expects the average to be US$480-US$490, noting that the volatility in the market could affect costs for the better or worse through changes in the oil price, gold price in relation to royalty payments and currency exchange rates.

Some of the discussion during the conference call was about the Niobec niobium mine near Chicoutimi, Que., which contributed US$16.2 million in operating cash flow in the third quarter.

Analysts questioned the company about its expectation about the niobium prices, which have remained robust, increasing 15% during the quarter, despite the recent softening in the steel market. The company received an average price of US$22 per kg in the quarter compared to US$14 per kg last year and an average of US$17 per kg for the first three quarters of 2008 combined.

The company says there has been a trend over time showing increased usage of niobium per tonne of steel produced. Conway pointed out that the amount of niobium used in specialty steel alloys is very small so the input cost of niobium against the sales price of steel is a very small portion of the cost. He also said he didn’t know why niobium prices hadn’t fallen despite all of that.

“But we’ve been pleasantly surprised that there’s been limited price pressure on our sales price,” Conway said, pointing out that, “the market has remained strong but we use a prudent long term cost.”

Iamgold discussed its all-cash hostile takeover bid for royalty company Euro Ressources (EUR-T, EUR-E), which has an interest in the Rosebel gold mine in Suriname. The deal is valued around US$95 million and would decrease Rosebel cash costs by US$45 per oz. gold.

The mine produced 82,000 oz. gold in the quarter and is undergoing a US$44.4 million mill expansion that will increase annual life-of-mine production to 300-305,000 oz. from 275,000 oz. gold and is expected to reduce cash costs by US$35 per oz.

Little news was given on the Camp Caimen gold project in French Guiana where last February, the government of France rejected final permit applications needed to start open-pit construction. Little reason was given for the rejection. Since then, the government has been working on developing a new mining framework for French Guiana. Iamgold has participated in meetings with the government to help with the process. Once the framework is in place the company will be able to economically evaluate its idea to relocate the milling and processing facilities for the proposed mine.

“Not much has changed,” said Gordon Stothart, chief operations officer. “We need to see the finished product (of the mining framework) before making any definitive moves.”

In the meantime, Iamgold has taken legal action against the French government for the damages it’s incurred so far.

Over in Ecuador, Iamgold is similarly stalled with its Quimsachocha project, as it waits for the government to complete constitutional reforms, including a new mining policy by the government. The company released prefeasibility study in July that suggested building an operation that would produce 202,000 oz. gold per year over 7.5 years, and has now moved on to a full feasibility study.

“We are ready to resume exploration drilling after a new law is established,” Stothart said.