Shares of Detour Gold Corp. were pummelled on Monday, for the second consecutive day, after the Canadian miner warned that it would not produce as much gold as previously forecast from its only mine in northern Ontario.
Detour Gold stock fell 7 per cent to close at $5.90 on the Toronto Stock Exchange, adding to the 18 per cent loss it incurred on the previous trading day on Friday.
The slump in its share price comes after Detour Gold reduced its full year production guidance for the year to between 240,000 and 260,000 ounces of gold last week and amid speculation that the company would have to tap public markets once again to raise funds. The company previously said it would produce 270,000 ounces this year.
The company's Detour Lake gold mine in northeastern Ontario is on track to become one of Canada's largest gold mines with production levels of 657,000 ounces of gold per year over a 20 year period once the mine is fully operating. But the giant open-pit mine is in its infancy. The company poured its first gold bar this February and started commercial production in September.
Like other gold miners, Detour Gold is suffering from weaker gold prices. Gold fell $1.70 to $1,283 (U.S.) an ounce on Monday and is well off the high of $1,900 reached in 2011. That, combined with the fact that the company has to spend more money to increase production at the mine, has taken a toll on its stock price. In May, the company had to sell stock to pay for the development of Detour Lake.
"It's challenging to ramp up a mine when you have a declining gold price. We know liquidity is critical and we are looking at our situation on a daily basis," said Laurie Gaborit, Detour Gold's spokeswoman, noting that the company had no further plans to raise funds in equity markets.
For the third quarter ended Sept. 30, the company produced 75,672 ounces of gold and said it cost on average $1,214 to produce one ounce.
The miner said its preliminary production forecast for next year was between 440,000 and 500,000 ounces of gold, and said it could cost between $1,150 and $1,250 to produce an ounce of gold in 2014. But with the price of gold trading just above $1,280 an ounce, that will make it difficult for the company to make a profit.
Kerry Smith, an analyst with Haywood Securities, said Detour Gold is doing all they can to reduce costs and get the plant running at design rates. "The gold price is the wild card," he said.