TORONTO (miningweekly.com) – Following Canadian gold producer Iamgold’s announcement on Friday that it had agreed to sell its Quebec niobium mine to a group of companies led by Magris Resources, the investment company founded by former Barrick Gold CEO Aaron Regent, for $500-million in cash, Moody’s Investors Service on Monday downgraded Iamgold’s corporate family rating (CFR) to B1 from Ba3.

The ratings agency also downgraded Iamgold's probability of default rating to B1-PD from Ba3-PD and senior subordinate notes rating to B2 (LGD5) from B1 (LGD4). The company's speculative grade liquidity rating was affirmed at SGL-2.

Moody’s said in a statement that Iamgold’s ratings outlook remained negative.

"We downgraded Iamgold’s rating to B1 to reflect the company's expected increase in exposure to gold price volatility and greater concentration of its cash flows from countries that have relatively high geopolitical risks,” Moody's VP and senior credit officer Darren Kirk said.

He noted that while the sale of Niobec would temporarily boost the company's liquidity, there was uncertainty associated with its plans to redeploy those funds in yet-to-be identified gold assets at a time when the price of gold was relatively weak.

Iamgold’s B1 CFR rating was driven by the company's significant exposure to gold price volatility, concentration of production from three key gold mines, relatively short overall reserve life and the elevated political risk in the regions where the majority of its cash flows were generated, mainly Burkina Faso and Suriname.

The rating also reflected Iamgold’s high cost position, which ore hardness issues might further exacerbate over the next couple of years, and Moody's belief that the company would remain cash consumptive despite limited investments in growth opportunities at a gold price below $1 250/oz.

The rating is supported by the company's good liquidity, improvements to its cost position and business profile driven by attaining commercial production at its Westwood gold mine, in Quebec, on July 1, and Moody's expectation that the company would manage its adjusted leverage to a maximum of four times in 2015.

Absent attractive investment opportunities in cash generating assets, this might require the company to use a portion of its surplus cash to reduce indebtedness, particularly in the event that the gold price weakened to $1 100/oz .

The negative outlook reflected pressure on the company's rating given its narrow business profile, uncertainties associated with its plans to redeploy proceeds from the sale of Niobec and the potential that its cash costs might continue to increase while the price of gold remained relatively weak.

Moody’s explained that the rating could be upgraded if Iamgold achieved greater mine diversity and reduced its reliance on countries that had elevated political/economic risks. Its leverage would also need to be maintained below 2.5x.

The rating could be downgraded if the company's overall cash costs continued to escalate without a higher gold price, if Moody's expected the company's adjusted debt/earnings before interest, taxes, depreciation and amortisation to be sustained above 4x, or should Moody's believe the company's liquidity position would materially contract.

Headquartered in Toronto, Iamgold owned gold mines in Suriname (95%), Burkina Faso (90%) and Quebec, Canada. The company also owned about 41% of a gold mine in Mali. The company sold about 928 000 oz of  gold equivalent ounces last year.