IME -- Industry Analysis

Metals & Mining - Gold, Silver & Other Precious Metals Industry

Submitted to: Dan Kazakoff

Submitted by: Group Four Spring 2003

Table of Contents

Executive Summary ..............................................................................................3 Industry Analysis...................................................................................................4 Sector................................................................................................................4 Industry .............................................................................................................4 Porter’s Five Forces Model ...............................................................................6 Top Competitors ...................................................................................................7 Newmont Mining Corporation ............................................................................7 Barrick Gold Corporation...................................................................................8 AngloGold Limited .............................................................................................8 Industry Trends .................................................................................................9 Hedging .........................................................................................................9 Social and Environmental Responsibility.........................................................10 The Economy......................................................................................................11 Turmoil ............................................................................................................11 Central Banks..................................................................................................12 Supply and Demand........................................................................................13 Currency..........................................................................................................14 Management Capabilities ...................................................................................15 Mission Statement...........................................................................................15 Company Strategies........................................................................................16 Organizational Structure and Culture ..............................................................17 Organizational Chart .......................................................................................18 Stock Performance .............................................................................................18 Financial Analysis ...............................................................................................20 Liquidity Analysis.............................................................................................20 Long-Term Solvency .......................................................................................21 Profitability Evaluation .....................................................................................22 Conclusion ..........................................................................................................24 Works Cited ........................................................................................................25 Appendix.............................................................................................................27 Appendix 1 ......................................................................................................27 Appendix 2 ......................................................................................................27 Appendix 3 ......................................................................................................28 Appendix 4 - Organizational Chart ..................................................................28 Appendix 5 – IAMGOLD TSX Stock Price History...........................................29

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Executive Summary Purpose The purpose of this report is to analyze an industry, and from that analysis select a company within that industry to make a substantial investment in. Stock will be purchased from that company in the amount of $100,000. The stock will be monitored for increases and decreases of the stock price over a seven week period. Six groups will compete during this seven week period with the victor collecting $500 for the company with largest increase in stock price. The company chosen must meet the criteria of, performance in the industry, management capabilities, economic conditions and a ratio analysis. Analysis The industry chosen to analyze is the Metals & Mining - Gold, Silver & Other Precious Metals industry. The analysis begins with an examination of the sector and industry the company is involved in as well as an examination of the top competitors within this industry. The next section analyzes the economy and the economies the company is involved in and other factors that affect the economic stability of the company. The following section examines the management capabilities of the company to decide the company’s effectiveness as a whole and evaluate their strategy. The final section analyzes the stock performance monitoring the performance of the stock over time.

Recommendation From the analysis of this industry the company chosen is IAMGOLD Corporation. This company is a sound investment and is expected to create a substantial return on investment (ROI).

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Industry Analysis Sector The metals and mining sector consists of companies involved in the mining and production of copper, silver, gold, coal, bauxite, iron, lead, and nickel. This sector also includes companies that mine and produce diamonds and other precious stones. Companies that are involved in metal processing and metal distribution, such as steel and aluminum, are also included in this sector.

Industry The Metals & Mining – Gold, Silver & Other Precious Metals industry consists of companies involved in the process of extracting precious ores from the earth. This process involves the exploration of land, the mining of that land leading to the processing and smelting of the precious ores. The precious metals industry demands extensive amounts of capital to construct mines and build production facilities. For companies to survive in the long-term, they require immense expenditures to finance exploration and production. In the past twenty years the price of gold has been decreasing, forcing producers to cut cost by tying to increase efficiency. Due to the fact that gold is a commodity, the Internet has revolutionized the price of gold by enabling gold to be traded on a wider more frequent basis. The price of gold is strongly related to supply and demand patterns. Typically low prices of gold mean low production of gold and high prices mean high production of gold. Gold prices fluctuate due to many variables such as the central bank demand, expected inflation, and the demand from producers all of which will be discussed to a greater extent further on. Companies must control costs to be effective in this 4

industry. The metals industry is not a vertically integrated industry such as oil and energy. Companies that conduct exploration seldom refine the metal and the companies that refine metal seldom sell the metal to the public. The metals industry involves three types of firms; exploration firms, development firms and production companies. Exploration firms drill into the earth to prove that there are precious metals in existence there. Drilling companies typically have very little assets. Development firms develop the land when there is a proven gold find. Production companies are involved in the extraction and production of gold from existing mines. The production levels can range from several hundred thousand ounces of gold to several million ounces of gold. Each different type of company has its own strengths and weaknesses along the supply chain. Some companies do well at the extraction of the metals while others specialize in the refining and the smelting to create the final product. Companies in the mining industry come in all shapes and sizes. The majority of production comes from large blue chip companies, but there are junior companies who specialize in exploration in hopes of discovering a large gold deposit. There is also room for speculators and income investors in the mining industry. IAMGOLD Corp. is classified as a junior natural resource company specializing in mining. The most common use for gold is the crafting of jewelry. Other uses include tooth fillings and electronic components manufacturing.

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Porter’s Five Forces Model The following section will analyze the mining industry applied to the Porter’s Five Forces Model

Threat of New Entrants • • •

High cost of financing a barrier to new entrants Exploration and building of mines requires large amounts of capital Capital required to set mine into production

Power of Suppliers • •

Government regulations and rules Gaining permits to mine can be difficult

Power of Buyers • • •

A companies quality of gold is hard to measure Commodity based business Buyers seek lower prices and better contract terms

Availability of Substitutes • • •

Substitutes are available like silver and diamonds, but gold is valued more highly worldwide If other precious metals gain in popularity gold may be threatened Gold has the power of being a standard for currency

Competitive Rivalry • • • •

Companies do not compete on price because it is set by the market Companies do compete for land Discovery is on a first-come-first server basis The more reserves the company has the more power they hold

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Top Competitors Newmont Mining Corporation Newmont is the largest gold producer in the world with operations conducted from Denver, Colorado controlling 22 mines on five continents. The Company also produces zinc, lead and copper concentrates at its property in Western Australia. In 2001 Newmont produced over 8 million ounces of gold and has reserves of around 86 million ounces of gold. Operations in North America and Australia account for 70% of Newmont’s gold production the rest comes from mining overseas. The size of Newmont has been achieved by the acquisition of smaller mining operations such as Battle Mountain Gold and Normandy Mining, which is Australia’s largest gold mining operation. Most of Newmont’s revenue comes from the sale of refined gold internationally. The end product Newmont produces are dore bars which are not pure gold bullion. These bars contain other precious metals like silver and the further refining is outsourced to refining companies. A key strategy for Newmont is their e-business development. This strategy is to reduce barriers along the value chain through an e-business portal. This means less time spent on the exchange of information with suppliers and increased efficiency of operations. Using technology as a tool Newmont expects to be more efficient and build stronger relationships with suppliers.

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Barrick Gold Corporation Barrick Gold Corporation is North America’s second largest gold producer with their operations based out of Toronto, Ontario. Barrick’s has a substantial amount of gold in reserves, which at last count amounted to 82 million ounces of gold in proven and probable reserves. In 2001, Barrick’s produced 6.1 million ounces of gold with a total cash production value of $162 per ounce. The largest mining operation for Barrick’s is a 7000-acre Goldstrike property in Nevada amounting to about 65% of Barrick’s gold production. Barrick’s other mines include the Pierina Mine in Peru, the Bulyanhulu Mine in Tanzania, and the HoltMcDonald Mine in Canada. In late 2001 Barrick’s merged with Homestake Mining a US based operation. The philosophy of Barrick’s is to be a business first and a mining operation second. They try to achieve a low-cost of production with efficient utilization of processes along the value chain. The outlook for 2003 is bold for Barrick’s with an estimated gold production to reach a record 5.7 million ounces. Barrick’s holds a long-term growth strategy that tries to expand existing operations rather than obtain new acquisitions. Barrick’s does not want to be the largest gold producer, rather they want to be the most profitable.

AngloGold Limited AngloGold Ltd. is the third largest gold producer in the world. Each year they produce more than 7 million ounces and have reserves of close to 59 million ounces. AngloGold’s major mining operations are in Asia, Africa, and North and South America. These operations consist of 20 mines in eight countries with 8

exploration activities in twelve counties. The largest mining operations come from South Africa, which are high-overhead deep-level mines. South Africa is also where the head office for AngloGold resides. In 2002, AngloGold pulled out of a fierce bidding war with Newmont for the Australian Normandy mine. The majority (53%) of AngloGold is owned by Anglo America who is far from being an American company. Anglo America is a UK based company that has interests in diamonds with a large ownership in De Beers Consolidated. The strategy of AngloGold is to grow mining operations into a leader of gold production. AngloGold hopes to drive costs down by creating an efficient workforce. Strategies include increasing literacy in South African operations and adding value to the employees and community. Future plans include modernizing downstream directions to ensure a healthy customer base in the future. AngloGold plans to continue growth by means of further exploration and expansion of mining operations.

Industry Trends Hedging Hedging is a way for gold producers to make money by not selling their gold directly into the market. How it works is instead of selling an ounce of gold directly into the market the gold producer will enter into a futures contract with a bullion dealer promising to repay the ounce of gold in a certain time period. In turn, the bullion dealer borrows an ounce of gold from a central bank, leveraging the contract with the gold producer. The bullion dealer sells the ounce of gold on the market for the spot price of gold. The spot price of gold is the current market 9

value of gold as a commodity. From there the cash is then deposited to collect interest. When the contract expires the gold producer receives the spot price of the gold at the time of the contract, plus the deposit interest earned, less the ‘gold lease rate’ to borrow gold from the central bank. The difference between the deposit interest and ‘gold lease rate’ is called the contango. Therefore, the idea is gold producers can gain revenue from gold that does not come from their reserves. Hedging is a trend that has become less popular for gold producers. With interest rates low, the ability to make money from hedging has become difficult. The price of gold bullion has been increasing at unexpected rates creating losses for gold producers who lock in at a low price, and thus forgo the ability to capitalize on the currently high spot price of gold. Investors are opposed to companies who use hedging techniques and gold producers with a no-hedging policy have become sound investments. Many gold companies have bought back their hedge contracts promising to sell all of their gold production into the spot market.

Social and Environmental Responsibility Mining is a process that can create damaging effects on the environment. Gold producers must implement policies that support sustainable development of land claims and ensure land restoration following mining completion. Strict governmental policies ensure a plan is in place before the approval of a mine site is granted, therefore all environmental precautions can be taken. Chemicals used in the mining of gold must be disposed of properly to prevent any possible environmental contamination. The building of water pipelines and other

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structures is also done with caution so as to prevent any major alteration in habit or obstruction of animal movement. Environmentally friendly corporate images are favored by investors and consumers, therefore, in order to be successful companies strive to comply with these images. Companies that do not live up to their environmental obligations subsequently tarnish their image and create an adverse relationship with environmentalists.

The Economy The economic health of the countries in which IAMGOLD operates, and as well the economic health of the world as a whole, plays a vital role in the determination of their company success. Stock prices are directly tied with the world price of gold. According to professional equity advisor Jean-Marie Eviellard, if gold rises 10% in a month stocks are likely to rise 30% (Markman, 2003). Therefore, the economic effect on gold can instantaneously faultier or strengthen the gold company stock prices. Due to this fact, a forecast of the economy and past economic trends becomes vital in judging the outlook of a gold stock. Turmoil, supply and demand, the actions of the central banks, and fluctuations in currency all hold consequences for the price of gold on the world market and stem from the economy.

Turmoil Global economic conditions are closely linked to the performance of the G8 countries, and in particular to the United States. With the United States being such a significant force on the world stage, any global actions they take hold ramifications worldwide. This is especially apparent as the threat of pending war 11

escalates; in effect the price of gold has been steadily rising over the past two months (Refer to Appendix 1). The justification behind the rising gold price during the rising threat of war relates to a variety of causes. All throughout history any world disaster or threat has caused the price of gold to escalate. Investors steer away from the purchase of publicly traded companies during times of turmoil as they have no tangible credibility to back up their stock. The price of a publicly traded company could fall dramatically due to the effect the turmoil may have on it. Gold is the only independent measure and store of value, therefore in times of trouble investors seek to possess as it is a tangible item. With less and less investors seeking publicly traded companies and rather investing in gold, the result becomes a boost in the price of gold and a drop in stock prices (Refer to Appendix 2). According to John Hathaway, “Gold is investment defense,” which leads to our reasoning behind our choice in the gold industry as the threat of war culminates.

Central Banks In the past, each country backed their currency with gold stored with the central banks. This practice has long since become the way of the past and the majority of countries now feel they have sufficient assets to hold confidence in their currency without holding gold. Thus, countries started to sell their supplies of gold causing the price of gold to drop due to the increased supply available. Since then the price of gold has stabilized and now is on an incline. The buying and selling of gold from the central banks, as seen, can have major impact on the price of gold. In times of economic downturn many times the central bank will slow its selling of gold. With a slow down in selling many investors view this with 12

alarm as it must be a sign of a pending threat on the company. Through this, investors then aggressively seek gold stocks in “investment defense,” in turn causing a rise in the world gold price. Apart from the change of supply and demand, “gold is the only form of currency which is ultimately not susceptible to government and central bank controls and it thus constitutes the only independent measure and store of value.”(IAMGOLD, 2003) Therefore, once again with the threat of war encroaching gold becomes the most stable investment.

Supply and Demand A change in either the supply or demand of gold can cause repercussion across the world as to the price of gold. Supply holds a wealth of power in regards to the world price of gold. As previously stated, the World Bank can affect the price of gold through its restriction or outflow of supplies. This remains only a small part of the effects due to supply though, as gold producers hold the brunt of the power. Each year new mines are opened and existing ones closed, therefore causing a fluctuation in the amount of gold available from year to year. Economic theory shows that decreased supply creates a scarcity and causes the demand for gold to intensify. According to analysts, due to the fact that gold is a limited resource, within the next 20 years the exploration and production of gold will decrease dramatically. This prediction can be view in Appendix 3 where the peak in exploration exists around 1998 and the peak in production resides around 2002. This, in turn, is another justification for investment in the gold industry to ensure some stake in the limited resource.

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Demand, on the other hand, does not hold as much pull on the price of gold as supply. Consumer demand of gold products usually stays fairly steady from one year to the next. India is a large consumer purchaser of gold so many times jewelry companies target that market in hope of increasing the demand for their product. Jewelry producers in other counties as well strive to inflate gold sales in hopes of creating a scarcity of gold, and thus advance the world gold price.

Currency “Corporate debt totaled $4.9 trillion as of 9/30/01 versus $2.4 trillion at year- end 1989. During the same period, consumer debt reached $7.9 trillion versus $3.5 trillion. The 100% plus increases in both cases far outpaced the 80% cumulative increase in GDP” (Hathaway, 2002). All these figures indicate that the economy of the world constitutes an extensive amount of debt. National debts the world over have been doubling from year to year leading to the question of when it will stop. As well, consumer debt and corporate debt has been increasing exponentially across the world. With increased debt comes increase inflation, therefore causing a decrease in consumer spending due to heightened prices. In an effort to eliminate debt many individuals and corporations will shed assets and in turn purchase gold as it is the perfect credit (IAM Gold, 2003). For in times of credit risks the attractiveness of gold boost substantially. Directly linked to each countries economy is their currency. The United States dollar stands strong, whereas the Canadian dollar sits at a lower level. Currently, the United States is battling an economic recession and is striving to implement a policy that will boost the economy and maintain their strong dollar. 14

For according to Former Treasury Secretary Rubin, “modifying our strong dollar policy could adversely affect inflation, interest rates, and capital inflows and would lessen the favorability of our terms of exchange with the rest of the world” (Hathaway, 2002). Economic recessions tend to cause the currency of that country to decrease as investors have diminished confidence. Just as the previous factors, the economic recession causes a domino effect by curtailing currency value, which causes a rise in the price of gold. According to Hathaway, the price of gold will rise as the dollar based system of credit and commerce falters under an overload of bad debt, weakening financial institutions, and a stagnant economy (Hathaway, 2002). Therefore, with all these factors present the investment in gold seems ever more logical.

Management Capabilities Mission Statement There is a vast array of gold companies spanning the gold industry. IAMGOLD was the one that we felt had the best chance of expansion and market growth. IAMGOLD’s mission statement is: “IAMGOLD Corporation intends to maximize shareholders value by focusing on quality opportunities which bring the greatest growth potential, including early identification and assessment of prospective ground, the development of relationships with the world’s best mine operators and the pursuit of acquisitions consistent with our strategic objectives. The company will continue to maintain a strong financial position in order to 15

take advantage of all appropriate growth opportunities” (IAMGOLD Website, 2003).

Company Strategies IAMGOLD will abide by their mission statement through pursuing their objectives and purpose statement. The company strategy to achieve their goals is extensive but clear. First, they want to pursue exploration and growth prospects at and around the world-class Sadiola gold mine. As well, they will seek high quality growth through aggressive exploration of existing sights, acquisitions of new sights and joint ventures with other companies. A good example of this happened on September 2, 1999 when IAMGOLD signed a joint venture with AngloGold. This agreement allowed for the two companies to both explore within a 300 km by 100 km project area in Ecuador. The two companies feel that this area has great potential for epithermal or porphyry-type gold deposits. Although the country is under explored in comparison with Chile and Peru, its geological framework and mineral potential are a close comparison. Consequently, both companies are optimistic on finding similar extensive gold deposits. In all operations they plan to adhere to the best possible standards in operation excellence by planning well, having high technical expertise, strong and capable management and using financial discretion. IAMGOLD will sustain and improve its company image through ethical, responsible and transparent business practices that will acknowledge the interest of all of its stakeholders. Strong relationships with governments and the citizens of all the host countries are a priority for the company. All projects will have the highest environmental 16

standards and practices. As well, IAMGOLD does not execute any hedging with their gold to ensure fairness of price. By abiding by the strategy laid out and adhering to their mission statement, IAMGOLD should be a top company of the future in the gold industry.

Organizational Structure and Culture IAMGOLD is a Canadian based mining corporation occupied in gold mining, exploration and expansion in West Africa and South Africa. The company’s principle asset is a 38% stake in the Sadiola gold mine in Mali. In 1997, IAMGOLD surfaced as a gold producer with the Sadiola gold mine, which produced 367,729 ounces of gold in March to December. The whole mine produced an average of 542,955 ounces, which could then be sold at $102 US dollars an ounce. This average is expected to rise over the next few years. “The Sadiola is a profitable, low-cost operation with a current resource base of 9.1 million ounces. Resources at and around Sadiola have been increased through exploration and acquisition (IAMGOLD, 2003). Besides the Sadiola mine, IAMGOLD holds a 40% stake in Yaleta deposit in Mali, West Africa. Yatela’s resources currently stand at 2.6 million ounces of gold. The feasibility study of the deposit was completed in November 1999, and the project commenced in April 2000 (IAMGOLD, 2003). The company also has a portfolio containing various exploration properties in Senegal and is conducting exploration programs in Ecuador, Argentina, and Brazil. In May 23, 2002 IAMGOLD was pleased to have announced its recognition as one of the fastest growing companies in Canada in Profit Magazines 14th annual growth survey. Out of 100 companies rated by Profit Magazine IAMGOLD ranked 11th overall. IAMGOLD also received 17

another award for being Canada’s largest exporter in 2002. It was recognized for this award because of the enormous success it has gathered by investing its entrepreneurship and capital outside of Canada.

Organizational Chart IAMGOLD is broken into two different companies, AGEM Ltd. and IAMGOLD South America. AGEM was the original company established in May of 1988, and from there it became a subsidiary when IAMGOLD was established as its parent company in March of 1990. AGEM is made up of SADEX, which holds the mining permits for the area surrounding Sadiola, and SEMOS that has the permits for the actual Sadiola mine. There is an agreement between AGEM and Anglo American Corporation of South America for 50% interest in the Sadoila area. A master agreement is also held by AGEM with Ashanti Goldfields Ltd. for exploration and development. The republic of Mali and International Finance Corporation have minor financial holdings in SEMOS apart from AGEM. IAMGOLD South America has offices in Argentina, Brazil, and ten mining concessions in Ecuador. There is a joint venture agreement with Altoro Gold Corporation for the Aucapata property in Bolivia. Appendix 4 illustrates how the overall operations are broken down.

Stock Performance IAMGOLD has issued unlimited first preference shares, issuable in series, unlimited second preference shares, issuable in series, and unlimited common shares. Issued and outstanding common shares are as follows: 73,739,357 outstanding shares, and 79,663,859 fully diluted shares (IAMGOLD, 2003). On 18

the Toronto Stock Exchange (TSX), IAMGOLD is listed as IMG.TO. On the American Stock Exchange (AMEX) the stock is listed as IAG. IMGOLD has been trading on the TSX since March 8, 1996, and on the AMEX since December 2, 2002. The issue price on the TSX was $5.75 and the 52 week range was $4.01$8.75 Canadian dollars. IAMGOLD has adopted two share option plans which came into action in 2002. The first is for their full-time employees, directors and officers and selfemployed consultants. The options last a minimum of three years and a maximum of ten years from the date of the grant. The second plan is a purchase plan for employees and management. For this plan IAMGOLD will match the participants’ contribution to purchase a maximum of 750,000 common shares and have a bonus plan for employees and management to a maximum of 600,000 common shares. Mr. William Pugliese, Co-Chairman of the Board of IAMGOLD, and Joseph Conway, President and Chief Executive Officer, jointly stated that, “Since we have begun trading on the AMEX exchange in early December of 2002, IAMGOLD’s stock has traded an average of 120,000 shares per day. We are very pleased with the enhanced liquidity in IAMGOLD shares and expect it to continue to increase in the future. This listing was undertaken in response to strong demand for IAMGOLD shares from the U.S. retail market” (Sedar, 2003). In 2001, IAMGOLD adopted CICA Handbook Section 3500 ‘Earnings per Share’. Basic earnings per share are computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the year. Diluted earnings per share are similar to basic earnings per share, except that the denominator is increased to include the number of 19

additional common shares that would have been outstanding if the diluted potential common shares had been issued (IAMGOLD Annual Report, 2001). IAMGOLD announced on January 24, 2003 an issuance of $0.05 dividend per share (Yahoo Finance, 2003). Currently, IAMGOLD is considering the implementation of a policy giving the option of gold or cash in future dividends. IAMGOLD’s stock price history can be viewed in Appendix 5.

Financial Analysis Liquidity Analysis Liquidity indicates the short-term ability of the enterprise to pay its maturing obligations and to meet unexpected needs for cash flow (Kieso et. El, 2001). According to IAMGOLD’s current ratio they have a very high debt-paying ability. The ratio stands at 4.3 for 2002 and 1.7 for 2001, therefore their ratio of assets to liabilities has changed substantially from 2001 to 2002. The 2002 ratio of 4.3 indicates that for every dollar in liabilities IAMGOLD has $4.30 in current assets. A desirable current ratio is 2:1 and in 2002 IAMGOLD greatly exceeded that with a 4.3:1 ratio. Such a high ratio indicates that IAMGOLD holds an abundant amount of current assets and a lesser amount of liabilities. According to the balance sheet there was a substantially larger amount of cash available in 2001 to 2002, but in 2002 there was a US $30,519 inventory of gold bullion. The large holding of gold bullion stems from the issuance of the Gold Money Policy in January 2002. In this policy the company decided to no long use cash to hold its value, but to use gold as its premium asset.

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Todd Bruce, President and COO said, "IAMGOLD's new Gold Money Policy distinguishes IAMGOLD from the bulk of its peers who are currently divided into two groups: Those companies which, through hedging programs, convert their gold to paper before it is produced, and those which convert their gold to paper the moment it is produced. Therefore, our Gold Money Policy establishes IAMGOLD as the only Company that is truly backed by gold." (IAMGOLD Website, 2003) Having a store of gold backing up a company makes it very appealing to investors. In times of economic downturn or decreased production there is still a backup supply to rely upon. As of yet, IAMGOLD is the only company who currently executes 100% gold backing. According the other beneficial measure of IAMGOLD’s liquidity, the quick ratio, they have a very promising immediate short-term liquidity. In 2001 the ratio was 1.2:1, while in 2002 the ratio was 1.8:1. This indicates that in 2002 for every dollar in liabilities there is $1.80 available for immediate use. Overall, through looking at all the factors of liquidity IAMGOLD stands as a strong investment choice.

Long-Term Solvency Long-term solvency indicates the ability of a company to survive over a long period of time and their degree of financial leverage (Kieso, et.el, 2001). The debt to total assets ratio measures the ability of a company to withstand losses without causing any harm to creditors. Thus, the higher the percentage of debt to equity the increased risk that the company will not be able to meet its obligations

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in the future. IAMGOLD’s debt to total assets ratio in 2002 revealed a low 20% and therefore a very solid degree of financial leveraging. Another beneficial measure of solvency is the debt to equity ratio, which reveals the relative use of debt issue compared to resources invested by the owner. According to IAMGOLD’s Balance Sheet in 2002 they held a debt to equity ratio of 0.25:1 and in 2001 the ratio was 0.39:1. This means that IAMGOLD holds $0.25 of debt for every $1 of assets. Financing, is thus done for the most part through equity rather than debt, which is very reassuring for stakeholders.

Profitability Evaluation Profitability ratios can be of foremost concern as it indicates the operating and earnings success of a corporation for a certain period of time. A corporations earnings can affect the issue of debt, financing and liquidity. A mining companies gross profit is the difference between production cost and the future price of gold. Therefore, costs associated with production such as location, ore quality and mine type are closely monitored by investors. In 2002, IAMGOLD had US$48,040 in mining expenses, and US$65,085 in revenues, thus leaving US$17,045 in earning from mining operations in the nine month prior to September 30,2002 (IAMGOLD Quarterly Report, 2002). Profit margin ratio measures the percentage of each dollar of sales that results in net earnings. According to the 2002 quarterly reports, IAMGOLD had net earnings of US $7,947 in the nine months prior to September 30, 2002 (IAMGOLD Quarterly Report, 2002). Therefore, the profit margin ratio for IAMGOLD sits very high at 12%, indicating strong profitability. Overall, IAMGOLD has positive figures 22

stemming from earnings, operating activity, financing activity and the balance sheet, thus making it a sound investment.

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Conclusion Gold is an ever expanding area within the precious metals industry that is striving to evolve in a changing world. Within the gold sector IAMGOLD stands as a catalyst for change and expansion. Their ultimate objective, according to their mission statement, is increasing value for their shareholders, which meets investor interests. According to industry standards, profitability measures and stock analysis, IAMGOLD remains strong throughout. As well, through analysis of insecure economic and world conditions IAMGOLDs new Gold Money Policy ensures its survival. Overall, IAMGOLD is a growing company who demonstrates extensive growth through their increasing stock value.

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Works Cited Advice for Investors. (2003). IAMGOLD Corporation Profile. Retrieved on January 27,2003 from the World Wide Web: http://www.adviceforinvestors.com/ AngloGold Limited. (2003). Retrieved on January 28, 2003 from the World Wide Web: http://www.anglogold.com Barrick Gold Corporation. (2003). Retrieved on January 28, 2003 from the World Wide Web: http://www.barrick.com Cambell, H. (2002). Hypertextual Finance Glossary. Retrieved on January 25, 2003 from the World Wide Web: http://www.duke.edu/~charvey/Classes/wpg/call_option Hathaway J. (2003). The Investment Case for Gold. Retrieved on January 28, 2003 from the World Wide Web: http://www.tocquevillefunds.com/press/archives.php?id=24 Hoover’s Online (2003). Retrieved on January 26, 2003 from the World Wide Web: http://www.hoovers.com/sector/description/0,2176,23,00.html IAMGOLD Website. (2003). Retrieved on February 1, 2003 from the World Wide Web: http://www.iamgold.com/reports/annual/2001report/imgar01.pdf Kieso D, Kimmel P, Weygandt J, Trenholm B. (2001). Financial Accounting. Canadian Edition. Ontario: John Wiley & Sons Inc. MSN Money. (2003). IAMGOLD Corporation Profile. Retrieved on January 28, 2003 from the World Wide Web: http://moneycentral.msn.com/scripts/webquote.dll?ipage=qd&Symbol=IAG Newmont Mining Corporation. (2003). Retrieved on January 28, 2003 from the World Wide Web: http://www.newmont.com

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Sedar. Associated Documents. Retrieved on February 1, 2003 from the World Wide Web: http://www.sedar.com/csfsprod%2Fdata35%2Ffilings%2F00508403%2F0000000 1%2FC%3A%5CBAPRA%5CINPUT%5CC1722E.PDF Volker, M. (2003). Futures Contracts...and Other Hedging Instruments. Retrieved on January 28, 2003 from the World Wide Web: http://www.sfu.ca/~mvolker/biz/futures.htm Yahoo Finance. IAMGOLD and Reparde Complete Merger. Retrieved on February 1, 2003 from the World Wide Web: http://biz.yahoo.com/cnw/030108/iamgold_repadre_deal_1.html

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Appendix Appendix 1

Reference: Kitco. Retrieved on January 31, 2003. http://www.kitco.com/charts/livegold.html

Appendix 2

Reference: Hathaway, John. January 23, 2002. The Investment Case for Gold. http://www.tocquevillefunds.com/press/archives.php?id=24

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Appendix 3

Reference: Hathaway, John. January 23, 2002. The Investment Case for Gold. http://www.tocquevillefunds.com/press/archives.php?id=24

Appendix 4 - Organizational Chart

Reference: IAMGOLD Website. Retrieved on January 27,2003. http://www.iamgold.com/index.html

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Appendix 5 – IAMGOLD TSX Stock Price History

Reference: Advice for Investors. Retrieved on February 1, 2003 from the World Wide Web: http://www.adviceforinvestors.com/$main$nobody,,17404024$3fd2928b47c9/prgraph.ph tml?Line1=IMG&Period=4&Style=1&Avg5=0

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