IAMGOLD Corp's Stock Surges on Explosive Cash Flow Growth

By Markets Fool.com

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What happened

Shares of IAMGOLD (NYSE: IAG) surged on Tuesday, rising more than 10% by 11:00 a.m. EST.

So what

Driving IAMGOLD's stock price rally was its strong third-quarter results. The gold miner reversed a year-ago loss by recording adjusted net earnings of $21.8 million, or $0.05 per share. That trounced analysts' expectations that the company would earn $0.01 per share during the quarter. Meanwhile, the company reported net cash from operating activities of $126.6 million, which was up $116.8 million, or 1,192%, from the year-ago quarter.

Driving those robust financial results was a 7% increase in gold production to 210,000 ounces, led by a 17% output increase at the company's Essakane mine. In addition, the company benefited from an 18.3% increase in the average realized gold price and a 9.7% decrease in total cash costs. Those two factors nearly doubled the company's gold margin, which rose from $330 per ounce in the year-ago quarter to $612 per ounce in the third quarter.

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IAMGOLD used its healthy cash flow and an equity issuance to reduce long-term debt by 23% during the quarter. That significantly improved its balance sheet, resulting in two rating agencies revising the company's credit outlook from negative to positive.

Now what

IAMGOLD took advantage of strong a gold price during the quarter to generate a substantial amount of cash flow as well as sell equity into an active market. That allowed the company to bolster its balance sheet and give it the capacity to fund its major growth projects, which remain on track to come online in 2019. Overall, the company is in a sound financial position right now.

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