Risks And Costs Will Hamper Gold Output While Upside Emerges

AN
AnalystLowTarget
AnalystLowTarget
Not Invested
Consensus Narrative from 7 Analysts
Published
30 Jul 25
Updated
30 Jul 25
AnalystLowTarget's Fair Value
CA$11.01
3.6% undervalued intrinsic discount
30 Jul
CA$10.62
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1Y
109.1%
7D
13.5%

Author's Valuation

CA$11.0

3.6% undervalued intrinsic discount

AnalystLowTarget Fair Value

Key Takeaways

  • Execution risks, ongoing cost pressures, and political uncertainties may limit IAMGOLD's ability to achieve sustained production growth and stable margins.
  • Industry decarbonization and competition from alternative assets could threaten gold's safe haven appeal and affect the company's long-term growth potential.
  • Reliance on high-risk jurisdiction, elevated costs, and debt obligations constrain flexibility, while operational setbacks or ESG underperformance could weaken growth, margins, and investor appeal.

Catalysts

About IAMGOLD
    Through its subsidiaries, operates as a gold producer and developer in Canada and Burkina Faso.
What are the underlying business or industry changes driving this perspective?
  • While IAMGOLD is now ramping up Côté Gold to near nameplate capacity and expects robust production growth through 2025, the company faces execution risk around integrating the Côté and Gosselin zones into a larger super pit; any operational setbacks, technical delays, or resource conversion shortfalls could diminish the expected step-change in revenue and limit long-term production visibility.
  • Despite the tailwinds from rising global gold demand driven by inflation and central bank diversification, IAMGOLD operates key assets in regions exposed to political and regulatory risk, such as Burkina Faso, bringing potential for future interruptions, higher royalties, and resource nationalism that could increase costs or disrupt production, putting net margins at risk.
  • While ongoing cost optimization and ramp-up at Côté and Westwood are forecasted to lower all-in sustaining costs, persistent sector-wide inflation in energy, labor, and equipment, as well as rising ESG and regulatory compliance costs, could structurally compress margins and offset gains from operational improvement.
  • Although IAMGOLD's strategy to strengthen its balance sheet and transition to cleaner, more ESG-compliant operations positions it to benefit from increased investor interest in responsible gold producers, the industry's growing decarbonization pressures and the expanding appeal of alternative assets like cryptocurrencies may erode gold's future role as a safe haven, threatening long-term topline growth and valuation multiples.
  • While ongoing exploration and resource growth at Nelligan and Monster Lake in Quebec offer promising organic growth avenues, the company's historical challenges with cost overruns, project delays, and reserve grade dilution across its portfolio could continue to undermine investor confidence and jeopardize future earnings resilience.

IAMGOLD Earnings and Revenue Growth

IAMGOLD Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?
  • This narrative explores a more pessimistic perspective on IAMGOLD compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
  • The bearish analysts are assuming IAMGOLD's revenue will grow by 26.4% annually over the next 3 years.
  • The bearish analysts assume that profit margins will shrink from 45.4% today to 26.6% in 3 years time.
  • The bearish analysts expect earnings to reach $952.8 million (and earnings per share of $1.59) by about July 2028, up from $804.5 million today. The analysts are largely in agreement about this estimate.
  • In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 6.0x on those 2028 earnings, up from 4.8x today. This future PE is lower than the current PE for the CA Metals and Mining industry at 18.5x.
  • Analysts expect the number of shares outstanding to grow by 0.84% per year for the next 3 years.
  • To value all of this in today's terms, we will use a discount rate of 7.08%, as per the Simply Wall St company report.

IAMGOLD Future Earnings Per Share Growth

IAMGOLD Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?
  • IAMGOLD's operational and financial performance remains highly exposed to the political and security risks in Burkina Faso, where the Essakane mine is located, and ongoing instability or changes to government royalty/tax structures could materially disrupt production and increase costs, negatively impacting both revenue and net margins over time.
  • The company continues to face elevated cash costs and all-in sustaining costs across its portfolio, making it vulnerable to margin compression if gold prices fall, especially given the acknowledged reliance on strong second-half production to offset high first-quarter costs and maintain earnings stability.
  • The balance sheet still carries significant net debt and upcoming repayment obligations, with management prioritizing debt reduction over shareholder returns into at least mid-2026, which could restrict flexibility for growth investments and delay dividend initiation or share buybacks, thus impacting potential earnings per share growth.
  • IAMGOLD's production improvements and reserve extensions rely on successful and timely resource conversion at new and existing assets (such as Côté, Nelligan, and Westwood), but setbacks in exploration, resource drilling, or operational execution could result in lower-than-expected future production volumes and higher costs per ounce, leading to weaker long-term revenue and earnings.
  • The company's exposure to global sustainability trends and the evolving ESG landscape could lead to structurally higher compliance and operational costs, and if IAMGOLD does not continue to advance its ESG initiatives at pace with industry standards, it may face reduced investor demand and tighter access to capital, which would constrain future revenue growth and further pressure net margins.

Valuation

How have all the factors above been brought together to estimate a fair value?

  • The assumed bearish price target for IAMGOLD is CA$11.01, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of IAMGOLD's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  • However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of CA$17.04, and the most bearish reporting a price target of just CA$11.01.
  • In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be $3.6 billion, earnings will come to $952.8 million, and it would be trading on a PE ratio of 6.0x, assuming you use a discount rate of 7.1%.
  • Given the current share price of CA$9.34, the bearish analyst price target of CA$11.01 is 15.2% higher.
  • We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

How well do narratives help inform your perspective?

Disclaimer

AnalystLowTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystLowTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystLowTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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