AXMIN Inc (TSXV: AXM)
AXMIN Inc. (TSXV:AXM) is a Canadian-based exploration and development company with a strong focus on central and West Africa.
Shares of Canadian junior gold miner Iamgold Corp (TSX: IMG) soared 15.1% on Tuesday, rebounding significantly from its low point in October 2022, and the current market value is 1.7 billion Canadian dollars. Iamgold operates in Canada and West Africa, with two operating mines in Burkina Faso’s Essakane and Quebec’s Westwood, as well as several development projects.
The company recently released a major piece of good news: its flagship development project, the Côté Gold gold project located in Ontario, Canada, is expected to start commercial production in March 2024.
But just how important is Côté Gold for IAMGOLD? Well, the project will become a key value driver for this Canadian gold stock over the next 5 years, and is set to fundamentally change the company’s financial position over the next 18 years; a history of slow revenue growth will be rewritten in 2024.
IAMGOLD currently owns 60% of Côté Gold, and this may increase to 70% next year. By the end of 2024, the project will become the third largest gold mine in Canada, with a mine life of up to 18 years. Based on current estimates, Côté Gold’s average annual gold production in the first 6 years will reach 495,000 ounces, compared to the company’s production of 465,000 ounces in 2023. This means the project will double the annual production of this junior miner.
In addition to production increases, this low-cost production project is expected to significantly reduce IAMGOLD’s operating costs and help achieve sustainable profitability. The company’s current all-in sustaining costs (AISC) for gold production range from $1750 to $1825 per ounce, compared to Côté Gold’s AISC of only $851 per ounce.
Furthermore, based on current resource estimates, unless new exploration activities extend the mine life, the Essakane mine may deplete by 2028. The mine produced 372,000 ounces of gold in 2023, accounting for 80% of the company’s total annual production. The start of the new project will help offset production losses from the retirement of the old mine.
IAMGOLD is expected to achieve profitability and positive cash flow soon.
In 2023, production declined, political instability in West Africa, rising costs, and poor economic performance of the Westwood mine in Canada led to a significant drop in the company’s revenue and profits. However, this situation is expected to be reversed in 2024, based on the growth in production in the West African region, the reduction in the total AISC of the Westwood mine (which rose to $2486 per ounce last year), and the low-cost production of the Côté Gold gold project, which will significantly reduce the company’s production costs.
According to analysts’ forecasts, with the help of rising gold prices, IAMGOLD’s profit growth over the next 5 years could reach as high as 139%. At the same time, IAMGOLD’s current dynamic price-earnings ratio is around 7.7, lower than the industry average of 13.8.
If the new project goes online as scheduled in March, IAMGOLD’s stock price could surpass the trading range of 2.75-4.42 Canadian dollars over the past year. Based on the average target price of 4.08 Canadian dollars given by analysts, the stock price is expected to rise by 20% in the next 12 months. But there are also risks, such as the need for ongoing successful exploration activities, and the uncertain rise in gold prices, not to mention the inherently higher risks of junior miners compared to mature miners.
