Toronto - Iamgold’s CEO says his bullion producer will return to profitability in the second half of this year, provided prices stay above $1 300 an ounce.
“Not a huge amount, but yeah, we move into a net profit area,” Stephen Letwin said Thursday in an interview with Bloomberg TV Canada. Every $100 an ounce rise in gold prices generates $80 million in cash flow that goes “right to the bottom line,” he said.
The Toronto-based gold miner posted a profit excluding one-time items of 1 cent a share in the second quarter, but a net loss of 3 cents, the company said in a statement after the markets closed on Wednesday. The net loss was Iamgold’s fourth in five quarters even after gold prices rose and costs were cut.
Letwin sees room for its all-in-sustaining costs to drop further as production ramps up at its Westwood gold mine in Canada, and if it goes ahead with a plant expansion at its Sadiola mine in Mali. Management believes the latter expansion is essential to process hard rock as soft-rock gold resources are rapidly depleted.
‘Serious repercussions’
But the expansion requires the support of its joint venture partner at Sadiola, AngloGold Ashanti. Asked what would happen if AngloGold doesn’t approve the expansion, Letwin said the impact would be felt within a year.
“I don’t in my heart of hearts believe that we want to go down that road, neither do they,” Letwin said. “I would say that in a year at most that, well, we would be depleting our oxides to a point that there would be some serious repercussions for people in terms of labor, and equipment, and so on.”
Stewart Bailey, an AngloGold spokesman, didn’t immediately respond to a request for comment after regular business hours in Johannesburg.
In the meantime, Letwin believes higher gold prices, fuelled by a low or negative interest rate environment around the world and political uncertainty in the US will continue to help the company.
“I think you could see easily $1 400 by the end of the year and $1 500 in 2017 and for us, that’s another $120 million a year in cash flow,” he said. “It’s huge for us.”
Gold futures for December delivery rose 0.3 percent to $1 369.10 an ounce at 12:43. p.m. on the Comex in New York, after touching $1 371.40. The price has jumped 29 percent this year.
BLOOMBERG