Iamgold slumps on forecast for higher mining costs
NEW YORK (AP) — Shares of Iamgold Corp. continued to fall Thursday after the gold mining company said it expects mining costs to grow in 2012.
THE SPARK: After the market closed on Tuesday, Iamgold said its expenses in 2012 would be slightly above its previous expectations and said those costs would increase significantly in 2013.
The company said production costs will rise because of an increase in harder ore at its older mines. As the proportion of harder ore at a particular mine increases, costs and energy use also increase. Iamgold said it expects greater costs at one mine that will be in its first year of operation.
THE BIG PICTURE: Iamgold had said it expected gold to cost $670 to $695 per ounce in 2012, but now says costs will be about 3 percent greater than that — implying a total of around $716 per ounce. The company says its full-year production totaled about 830,000 ounces of gold, which was less than it previously expected.
In November, Iamgold said production would be at the low end of its estimate because of weak results from mines the company doesn't operate itself.
In 2013 the company expects to produce 875,000 to 950,000 ounces of gold for $850 to $925 per ounce.
THE ANALYSIS: Stifel Nicolaus analyst Michael Scoon downgraded Iamgold shares to "Hold" from "Buy," saying he was disappointing with the company's outlook.
"Management of Iamgold has done an insufficient job managing analyst and investor expectations as we believe many were caught more offside than we were," Scoon wrote.
SHARE ACTION: Iamgold stock dropped 14.4 percent Wednesday and lost 48 cents, or 5.2 percent, to $8.75 on Thursday. Earlier the shares reached fell to $8.71, their lowest price in about 3 1/2 years.