Iamgold goes for gold

Iamgold (IMG-T) has put its money where its mouth is and converted US$6.5 million in discretionary funds into some 0.7 tonnes of gold bullion at an average price of US$285.20 per oz.

The Markham, Ont.-based company believes gold is fundamentally undervalued relative to paper currency, and is betting that gold prices will continue to recover. In the short term at least the gamble looks to be paying off. The yellow metal hit US$286.85 per oz. at the afternoon fix in London on Jan. 10, and held on to the gains later in the day in New York.

Iamgold’s CEO John Ross says, “If we as an industry don’t demonstrate our belief in the monetary nature of gold, why should we expect anyone else to? We firmly believe that our industry can best promote gold by simply using it as money.”

The company expects to add to its gold holdings during 2002 as cash comes in from its interests in the Sadiola and Yatela gold mines in Mali, West Africa. Under its “Gold Money Policy” Iamgold will retain enough cash to cover about one month of corporate operating expenses.

Also under the plan, Iamgold will offer shareholders the option of accepting dividend payments in Canadian dollars or a gold bullion depository certificate. The option applies to future dividends only, and not to the company’s inaugural dividend payment announced in mid-December. That 5-per-share dividend is payable on Jan. 25 and applies to shareholders of record as of Dec. 24, 2001.

Iamgold and AngloGold (AU-N), the world’s largest gold producer, each hold a 40% interest in Yatela, an open-pit, heap-leach mine, which poured its first bar in early May and began commercial production two months later. The government of Mali has a 20% stake. Reserves stand at 13.4 million tonnes grading 3.7 grams gold per tonne. There are measured and indicated resources of 24.6 million tonnes grading 2.7 grams per tonne and inferred resources of 12.3 million tonnes grading 1 gram. AngloGold expects to produce 136,000 oz. gold in 2001 and 1.4 million oz. over the mine’s 5.5-year life.

The two also have 38% shares each in the nearby Sadiola open pit mine. During the first nine months of 2001, the mine cranked out 390,227 ounces from just over 4 million tonnes of ore, for an average headgrade of 3.3 grams gold per tonne. The government of Mali and a subsidiary of the World Bank hold the remaining interests.