Iamgold (IAG): A Strategic Buy Amid Mining Sector Headwinds?

The mining sector has been a tough place to navigate in 2025, with rising input costs, geopolitical tensions, and a slowdown in capital expenditures dragging down investor sentiment. Yet, amid the gloom, one name stands out: Iamgold (IAG). This mid-tier gold producer is defying the industry's malaise, trading at a significant discount to its peers while quietly building a case for long-term outperformance. Let's break down why IAG's valuation dislocation and earnings growth potential make it a compelling strategic buy, even in a downbeat environment.

Valuation: A Discount to the Industry, With Growth to Match

IAG's Forward P/E ratio of 9.46 is a stark contrast to the Mining - Gold sector's average of 12.14, suggesting the stock is undervalued relative to its peers. This discount isn't just a function of sector-wide weakness—it's a reflection of IAG's strong fundamentals. The company's PEG ratio of 0.36, versus the industry's 0.57, further underscores its appeal. A PEG ratio below 1 indicates that a stock is undervalued relative to its earnings growth potential, and IAG's metric suggests it's even more attractively priced when accounting for its projected earnings expansion.

The Zacks Rank system, a trusted barometer for earnings revisions, has upgraded IAG to #1 (Strong Buy). This rating is backed by a 1.72% increase in the Zacks Consensus EPS estimate over the past 30 days. Analysts are clearly becoming more bullish on IAG's near-term outlook, driven by its operational progress and cost discipline. Historically, #1-ranked stocks have delivered an average annual return of +25%, making this upgrade a critical signal for investors.

Operational Momentum: A Catalyst for Growth

IAG's operational execution is the backbone of its growth story. In 2025, the company is targeting 735,000 to 820,000 attributable ounces of gold, driven by the ramp-up of its Côté Gold Mine and steady output from Essakane and Westwood. Côté Gold, in particular, is a game-changer. The mine is on track to reach its 36,000 tonnes-per-day nameplate capacity by Q4 2025, with throughput expected to rise sequentially throughout the year. By the end of 2025, Côté Gold could double its production compared to 2024, a rare feat in a sector struggling with stagnant output.

Cost efficiency is another area where IAG is outperforming. While the industry grapples with rising All-In Sustaining Costs (AISC), IAG's 2025 guidance of $1,625 to $1,800 per ounce is in line with its 2024 performance and reflects disciplined cost management. At Côté Gold, cash costs are projected to fall to $950 to $1,100 per ounce in the second half of the year as the mine matures. This is a critical differentiator: as throughput increases and fixed costs are spread over more ounces, IAG's margins will expand, amplifying its earnings potential.

Sector Headwinds and the Path Forward

The gold mining sector is no stranger to volatility. Rising energy prices, labor costs, and regulatory pressures have pushed industry AISC up by 9.2% year-over-year in Q1 2025. For context, IAG's AISC of $1,908 per ounce in Q1 2025 is higher than its 2024 average but still below the industry's average AISC of $2,150. The company's ability to maintain cost discipline in a challenging environment is a testament to its operational rigor.

However, IAG isn't resting on its laurels. Strategic investments, such as the installation of a second cone crusher at Côté Gold, are already in the works to boost throughput and reliability. Meanwhile, Essakane's grade is expected to improve in the second half of 2025, further reducing per-ounce costs. These initiatives position IAG to outperform peers that lack the capital or execution capability to scale their operations.

Investment Thesis: A Long-Term Play With Near-Term Catalysts

For investors with a long-term horizon, IAG offers a rare combination of attractive valuation, earnings growth, and operational momentum. The company's Zacks Rank upgrade and improving EPS estimates provide a near-term catalyst, while its production ramp at Côté Gold and cost efficiency gains offer durable long-term upside.

Yes, the stock is volatile—gold miners are inherently cyclical—but IAG's fundamentals are too strong to ignore. At a Forward P/E of 9.46 and a PEG ratio of 0.36, the stock is priced for a worst-case scenario, not a best-case one. With gold prices averaging $2,500 per ounce in 2025 and IAG's production guidance pointing to higher margins, the company is well-positioned to deliver outsized returns as the sector recovers.

Final Verdict: Buy and Hold, With Caution

IAG isn't for the faint of heart. The mining sector's volatility and macroeconomic headwinds mean the stock could experience short-term turbulence. But for investors who can stomach the noise, IAG represents a strategic buy. Its undervalued shares, improving operational metrics, and disciplined cost structure make it a compelling candidate to outperform in a sector that's struggling to find its footing.

In a market where “cheap” is a relative term, IAG's valuation dislocation and earnings growth potential make it a standout. As the old adage goes: buy when there's blood in the streets. IAG's time may have come.