IAMGOLD Report 1Q19 Results
On 6 May 2019, mid-tier gold mining company, IAMGOLD Corporation (IMG), released its 1Q19 results for the period ending 31 March 2019. Overall, results were reasonably mediocre, IMG reported revenues of USD251m, down 20% on 1Q18 and cost of sales of USD251.9m, up 6% on the prior corresponding period (pcp). Gold production was also down 20% compared to the pcp following seismic issues at the company’s Westwood mine which negatively impacted production levels. As a direct consequence of the lower production levels, in 1Q19, total cash costs and all-in sustaining costs increased to USD884/oz and USD1,086/oz, up 20% and 14%, respectively.
IMG’s gold margin remains good at USD424/oz, however this again compares poorly with 1Q18 which was 40% higher despite the average realised gold price being only approximately 2% higher at the time. As at 31 March 2019, IMG held USD589m of cash and equivalents, we continue to believe the company will maintain this strong liquidity position. IMG maintained its full year FY19 production and cost guidance.
Virgin Australia earnings guidance
On 17 May 2019, Virgin Australia provided earnings guidance for the 2019 financial year. While the group expects revenue growth of 6% for the year, underlying earnings are expected to be at least AUD100m lower than AUD64.4m in FY18. The company highlighted that subdued conditions in the domestic market coupled with annual fuel and foreign currency headwinds in excess of AUD160 have contributed to the revenue uncertainty. Management noted that demand has weakened in both the corporate and leisure sectors, primarily driven by weaker consumer and business confidence, reduced consumer spending and the impact of Federal Election. We believe that these comments from the company are consistent with general market conditions and note that Qantas reported similar themes in their third quarter earnings update in early May.
Ausdrill update
Earlier in May, Ausdrill Limited announced it intended to come to market with an offering of USD senior notes with the proceeds flagged to call the outstanding USD350m of 6.625% notes due 2022 issued by subsidiary Barminco Finance Pty Ltd. On 17 May 2019, Ausdrill announced that the issuance of the USD notes and subsequent call of Barminco’s outstanding notes had been cancelled. Increased market volatility, prompted by an escalation in the US/China trade war meant that the company no longer felt it an attractive time to come to market with a new issuance.
We note that, while Barminco’s notes are callable at any time with 30 days’ notice, Ausdrill is limited to issuing new debt within 135 days of its results releases. As such, the new issuance was restricted to being completed this week. We note that Ausdrill’s full year results are due in August, at which time the 135 day restriction period will reset.