IAMGOLD Corp (IAG)

[USSilverBug]

Why Iamgold Is A Strong Buy (That Could Double)
Faraz Fathollahi

http://seekingalpha.com/article/1317401-why-iamgold-is-a-strong-buy-that-could-double

Introduction

As a value investor I have learned that Warren Buffett was right when he said "Be fearful when others are greedy and greedy when others are fearful". Iamgold Corp (IAG) is a stock that many people fear and that has made it into a great investment opportunity.

Company Description

Iamgold is a mid-tier gold producing company which is based in Canada and has deposits in West Africa, South America, and Canada. The company is moving more of their productions out of Africa to avoid the unrest and putting more money into its Canadian mines.

Valuation

The undervaluation in Iamgold has come from many things, but it is mostly due to the price of gold pulling back, operational costs going up, and unrest in other mines in Africa. All these factors do not justify a 54% price decrease in just 6 months.

* The management has been increasing its dividend consistently since 2003

* Management has announced a $100 million cost cutting plan and the start up of the Westwood plant which is estimated to produce 140,000 oz of gold in 2013. More details here.

* They have over $200 million in gold reserves that are not being shown on the balance sheet since they are an unrealized gain to the company.

* Insiders have been piling up on the stock ever since it went under $7.00 but most people don't know this because they are based in Canada so they do not have to fill out SEC forms. Check http://insidertracking.com/node/7?ticker=IMG*CA to see their SEDI filings.

Price Target

Iamgold has a P/B value that is under 0.75 and a P/E value of just over 8. This combined with its EV/EBITDA value of just over 3 - I calculated all these numbers from their most recent quarter's filing - clearly show how undervalued it is. I would value the company at $14 to $15 range based on the Graham Value of the stock. This is a strong buy, not because of gold, but because there is an extreme undervaluation of the company.