Iamgold Corp. IAG sold a 95% stake Rosebel Gold Mines NV to Zijin mining of China at a price “well above” book value of $177 million.
According to Bank of America Securities, the transaction represents a significant step in closing the funding gap for the development of the Côté gold mine.
The Analyst: Lawson Winder upgraded Iamgold’s rating to Buy from Underperform while increasing the price target to $1.65 from $1.20.
The thesis: The sale adds $360 million to the company’s liquidity with $453 million in cash and $349 million available as a credit facility, Winder said in the upgrade note.
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“As of July 1, 22, Côté’s remaining spending was $1.2 to $1.3 billion. Taking into account seed capital ($50m BofAe) and a minimum cash balance ($200m BofAe), we estimate the remaining funding gap to be between $288m and $388m,” the analyst wrote.
“IAG could divest its Boto project in Senegal (BofAe $173m), sell its West African exploration projects (BofAe $50m), or sell a creek on Côté,” he said.
“We see limited risk that the transaction will receive regulatory approvals as China and Suriname have good bilateral cooperation,” Winder added.
IAG Price Action: Shares of Iamgold were down 0.79% to $1.26 in premarket trading on Wednesday.
