IAMGOLD Corp (USA) (NYSE:IAG) has announce plans to issue a $400 million corporate loan in terms of senior notes. The notes are expected to mature in 2025. Each note will attract an annual interest rate of 7%.
The company will use the proceeds to pay a previous corporate loan of $489 million which consist of 6.75% notes expected to mature in 2020.
The payment date of the loan is somewhere around April 2 with the closing date for the new offer set for March 16.
Bearing in mind that the company has a liquidity of $763 million out of which $652 million is cash and cash equivalents as well as $110.7 million is restricted cash, it has a lot of money to enable it service the loan even if fully withdrawn.
In addition, the company has a solid and strong balance sheet without short-term debt. IAMGOLD Corp has a long term debt to equity ratio of 21%. This is way below the industry average. The company has an average interest ratio of 12.87 times which makes it be in a comfortable position to cover all interest expenses on the debt.
IamGold Corp’s move to replace its corporate loan is a smart one because it will be able to its financial resources by investing in mine development.
Iamgold executive vice president and chief financial officer Carol Banducci said the company’s four year strategic plan is meant to increase the production of gold and cut on costs.
Iamgold is targeting an annual gold production capacity of one million ounces by the start of 2020. This will be achieved mainly through organic growth which accounts for 23% growth.
The mining company closed 2016 with 813 thousand ounces of gold produced. This represents a 0.9% increase from the previous year.
The company is also targeting to cut on costs by 10% to 15%, from $1,057 on every ounce of gold in 2015 to around $900 and $950 per ounce of gold in 2020.
The old corporate loan comes with higher interest rates which are meant to influence the value of the stock.