On Monday it agreed to sell 10% more in the Côté joint venture to partner Sumitomo Metal Mining of Japan for US$340 million following the October sale of its Rosebel gold mine in Suriname to China’s Zijin Mining for US$360 million.
The asset sales almost cover IAMGOLD’s remaining US$1 billion in costs to construct the Côté project about 125 km southwest of Timmins, according to the company’s third-quarter results. The project is about two-thirds complete, it said.
Jackie Przybylowski, a mining analyst at BMO Capital Markets, called the stake sale to Sumitomo a well-timed bailout that increases the bank’s estimate of the project’s net present value to US$3.4 billion from US$875 million with a 5% discount rate.
“The premium that Sumitomo is paying to our Côté net asset value is meaningful and can be explained in part by the fact that the partners have already sunk significant capital into the project and are working to bring it to completion,” Przybylowski said in note on Tuesday.
“This transaction, in addition to the previously announced sale of Rosebel/Saramaca, will provide IAMGOLD with sufficient liquidity to build Côté.”
In the Sumitomo deal, IAMGOLD will hold about 60% and Sumitomo will control 40% of Côté. However, the companies said they intend for IAMGOLD to eventually buy back shares so it will retain its current stake of about 70%.
The agreement with Sumitomo allows IAMGOLD to repurchase the 10% in the project by November 2026. That’s easily done if the mine is running smoothly by then and IAMGOLD isn’t involved in other capital-intensive projects, Przybylowski said.
The mid-tier miner aims to produce 495,000 oz. per year initially from Côté’s proven and probable reserves of 233 million tonnes grading 0.96 gram gold per tonne for 7.17 million oz. gold over an 18-year mine life.
Maryse Bélanger, IAMGOLD chairwoman and interim president and executive officer, said the project remains on track to start production in early 2024.
“The financial support of Sumitomo demonstrates to all of our stakeholders the strong validation of the Côté gold project from our partner,” Bélanger said in a Dec. 19 news release.
“The Côté gold project has the potential to become a world-class, low-cost, long-life gold mine, and is one of the major pillars of Sumitomo Metal Mining’s growth strategy,” Akira Nozaki, president and representative director of Sumitomo, said in the same release.
Still, BMO expressed some concerns.
“Despite the progress towards financing we continue to see significant risks to project construction and execution as well as ramp-up,” Przybylowski said.
“However, reflecting the easing of financing risks and the high value paid by Sumitomo we have raised our one-year target to US$2.00 per share from US$1.75 per share.”
Shares in IAMGOLD jumped more than 25% in Toronto to US$2.29, within a 52-week range of US92¢ to US$3.77, valuing the company at US$1.1 billion.
Shares in Sumitomo Metal Mining slid 1.8% to 4,588 yen ($47.61) on the Tokyo stock exchange, in a 52-week range of 3,767 yen and 6,625 yen, valuing the company at about 1.3 trillion yen.
