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Steve Letwin, chief executive officer of midtier gold miner Iamgold Corp., practically rubs his hands in glee as he talks about plans to propel the company into the major leagues in as little as five years.
With his Toronto-based company sitting on $1.4-billion in cash and with zero debt on the balance sheets, Mr. Letwin lays out a plan to nearly double production by 2017 from the current 850,000 ounces, with most of that to come from acquisitions, including one in coming months that will likely be worth between $400-million and $500-million.
“If we can’t pull the trigger on something in the next three months that makes sense for our shareholders we haven’t done our job,” said Mr. Letwin, a 30-year resource industry veteran who has broken ground from Canada to Colombia to deepest Africa.
“And if we’re going to buy, we’re going to buy now. These equities are ridiculously cheap, some of them.”
Mr. Letwin said his mantra is to buy in the down cycles, especially when he’s cash-rich while rivals are not, and there is less competition for assets even as equity valuations retreat.
Even with gold prices near record highs, gold company stocks have taken a beating in the past year, hurt by investor concerns that the industry is having a hard time adding value in a world where new deposits are increasingly rare.
The start of a slide in gold equity can be traced to the period shortly after Barrick Gold Corp.’s $7.3-billion takeover of Equinox Minerals Ltd. last summer. Investors say the bid for a copper miner by the world’s largest gold miner sent a scary signal that there might not be much room left for growth in gold. That was compounded by woes at Toronto-based Kinross Gold Corp., which forced to write down $2.94-billion on its flagship Tasiast mine project in Africa just a year after acquiring the asset.
Ballooning costs for everything from raw materials to skilled labour are fuelling investor concerns, leading some to look to other metals or asset classes.
Barrick shares are now trading at around $40 a share, compared with $55 in September, while stock in Kinross has been sliced in half in the same period, to $9 from about $18 in September.
“What I am saying is, what an opportune time to buy equities, to buy companies, and pay cash,” said Mr. Letwin, who is looking to buy undeveloped gold assets in the Americas that can be developed for about $1-billion.
For the rest of this article, please go to the Globe and Mail website: http://www.theglobeandmail.com/globe-investor/iamgold-takes-aim-at-the-gold-mining-big-leagues/article2408114/