Iamgold tackles costs, cuts 45 head office jobs

Iamgold (TSX: IMG; NYSE: IAG) is trimming the fat on its balance sheet, with hopes of returning to a cash flow positive position next year. 

The Toronto-based miner recently said it aims to reduce corporate general and administrative expenses by another 10% in 2015, from the US$125 million in cost savings realized in 2013. 

To help reach that target, Iamgold slashed its executive team by 40% and disbanded most of its project development team. 

In an interview with Business News Network, Steve Letwin, president and CEO of Iamgold, said the company dismissed 45 employees in total from its corporate offices in Toronto, Ont., and Longueuil, Que.

“It was an action that was really tough, but we had to do it,” Letwin said. 

Given the lower gold price environment, which is making it harder for miners to turn a profit, Iamgold intends to target ongoing productivity and cost-saving opportunities at its Rosebel gold mine in Suriname and Essakane gold mine in Burkina Faso, and tone down work on major expansion and development projects. It will also reduce the number of its corporate memberships, including withdrawing from the World Gold Council. 

For the three months ended September, Iamgold reported a net loss of US$72.5 million, or US19¢ per share, compared to a profit of US$25.3 million, or US7¢ per share, in the same period last year. 

On an adjusted basis, earnings were US$200,000, or zero per share, missing analyst estimates of US4¢ per share. 

“Higher-than-expected depreciation and a non-cash deferred income tax expense associated with the sale of Niobec contributed to the earnings miss,” BMO analyst David Haughton writes. 

Iamgold agreed to sell the Niobec niobium mine and adjacent rare earth element deposit in Quebec to private equity firm Magris Resources for US$530 million. The transaction, expected to close in early 2015, should provide Iamgold with a stronger cash position to weather the current economic downturn. 

The company exited September with cash, cash equivalents and gold bullion of US$334.4 million, up US$37 million from the end of June. 

Quarterly production totalled 225,000 oz. gold at all-in sustaining costs of US$1,115 per oz., down US$9 from the second quarter, and US$69 below the first quarter.

The company is working to get all-in sustaining costs below US$1,000 per oz. 

Iamgold has narrowed its full-year 2014 production guidance to 835,000 to 850,000 oz. gold, down from 835,000 to 900,000 oz. gold.  

It has lowered its 2014 capital expenditures guidance by 10% to US$360 million.

“The focus on cost reduction and capital conservation is encouraging,” Haughton notes. “However, BMO Research awaits further de-risking to improve confidence, including closing the Niobec sale and appropriate deployment of the proceeds.” 

He has a US$3 target and “market perform” rating on Iamgold. 

The stock closed Nov.14, two days after releasing the quarterly results, up 22% at $2.39.