Iamgold ready for risks, spinoffs as it eyes growth

Tue May 24, 2011 12:27pm EDT

* CEO eyes quick new growth opportunities for gold miner

* CEO outlines plan to spin-off niobium, rare-earth asset

By Euan Rocha and Julie Gordon

TORONTO, May 24 (Reuters) - Mid-tier miner Iamgold Corp (IMG.TO) is ready for risk and acquisitions as it builds and then spends a cash pile that will soon top $1.5 billion.

New Chief Executive Stephen Letwin, a newcomer to the booming gold sector, told Reuters that he aims to spin off Iamgold's non-gold asset into a new entity and speed up the process of developing new mines.

"I find the time between discovery and actual production to be much longer than I think it needs to be," said Letwin, who took the reins at Iamgold (IMG.TO) last November after a career at the likes of Enbridge (ENB.TO) and TransCanada (TRP.TO).

In an industry filled with colorful characters, but fairly conservative practices, Letwin's views sound refreshing. He wants to challenge his team to take risks and think outside the box, especially when it comes to bringing new ounces online.

"I find that the mining side is not as integrated as I would like it to be," he said from a corner office adorned with West African and Chinese figurines, and a stunning view of the towers of downtown Toronto.

"The exploration team and the production community tend to be too silo-like in structure... One thing I'm going to work on is making it more fluid, so that we work more in unison and bring production onstream sooner."

Since Letwin's arrival about six months ago, Iamgold's shares have risen close to 20 percent, easily outpacing shares of peers like Yamana Gold (YRI.TO), Eldorado Gold (ELD.TO), New Gold (NGD.TO) and Agnico Eagle (AEM.TO).

Iamgold plans to produce roughly a million ounces of gold this year and 1.8 million ounces within five years. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ For Sector Comparison Data: link.reuters.com/peb79r ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

Since Letwin arrived Iamgold has sold its interests in the Tarkwa and Damang gold mines in Ghana. It has begun work on spinning out its niobium mine in Quebec and it plans to expand its Rosebel gold mine in Suriname.

Once those deals are done, Letwin sees Iamgold sitting on a cash horde of over $1.5 billion, which he intends to deploy toward mine expansions and acquisitions. He can expand some existing assets with minimal capital spending, he says.

To prove his point, Letwin picks-up a marker and maps out some promising prospects around Rosebel on a whiteboard.

"It means probably taking more risk," he said. "But I think it's worth it, because you don't have to drill everything to certainty, especially in some of these trends that we're in."

Letwin said any future Iamgold acquisitions will most likely be in Canada or South America. He said Iamgold may look at takeovers in the $300 million to $500 million range.

"We're not really interested in buying a producing mine where the market's given it full value and you're paying another 30 percent to get it," he said.

NIOBEC SPINOUT

With his sight set on transforming Iamgold into a pure-play producer, Letwin wants to spin out Niobec, the company's niobium mine, into a separate, rare metal-focused company.

"Most of our gold investors don't even know how to pronounce niobium and they have no idea what it is," he said.

Iamgold produces about 8 percent of the world's supply of the rare metal, which is used to harden to steel.

With a $1 billion expansion, Niobec could triple production within three to five years, said Letwin, pulling out a resource map and pointing to a large red and orange blob that surrounds the pinpoint dot of the current shaft.

"We're gonna sell 10 percent of this block, or 20 percent, get a marker on value and then look to IPO another 25 to 35 percent," said Letwin, who sees steelmakers as likely suitors.

Letwin thinks the asset, which is being shopped in Asia, North America and Europe, will end up being worth $1.5 to $2 billion. But niobium is just one aspect of the project.

"We have alongside it some rare earths that we drilled in the 1990s," said Letwin, pointing at the orange blob. "We did more drill work and were doing some metallurgy on it to figure out whether or not this is commercial."

Demand is booming for rare earth metals, which are used in smartphones, wind turbines and hybrid cars, even as China, producer of about 95 percent of world's supply of the group of 17 metals, has clamped down on exports.

But rare earths are not gold. Each deposit is different, and separating the rare earths from the host mineral is often prohibitively expensive.

Letwin, an avid hunter and fisherman, is confident that the metallurgical work, due to be completed this summer, will prove a mother lode of valuable rare earths at Niobec.

"All I know is that my gut tells me that this thing is going to be commercial. We're going to go after it," he said. (Editing by Janet Guttsman)

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