Detour Gold Corp. (DGC), a mine developer whose biggest shareholder is Paulson & Co., fell after cutting its annual output forecast from its new Detour Lake project in Ontario.
Detour dropped 7.4 percent to C$11.41 at the close in Toronto, where the company is based, the biggest decline since April 26.
It’s taking longer than expected to increase output levels at the Detour Lake operation, where the first gold bars were poured in February, the company said today in a statement. Detour still expects to reach commercial production levels in the third quarter.
Detour forecast 2013 gold production of 260,000 ounces to 320,000 ounces of gold, compared with a February 11 prediction of 350,000 to 400,000 ounces. The company said April 9 that 350,000 ounces would probably be at the higher end for 2013 production.
The market is over-reacting to the news, which shouldn’t be a surprise after the company said in April it would review its guidance based on the rate of the ramp up, Daniel Earle, a Toronto-based analyst at TD Securities Inc., said in a note today.
“We believe the ramp-up at Detour Lake is progressing very well in comparison to the experience of other mining companies that have attempted to ramp-up large, i.e., over 20,000 tons per day milling projects, in the past five years,” Earle said.
Detour has adequate funds to complete the ramp up, but management may elect to strengthen its financial position with an increase in its credit facility or through a new offering of convertible debentures or high-yield debt, Earle said.
Hedge fund Paulson owned 11.7 percent of Detour as of Jan. 31, 2012, according to data compiled by Bloomberg.
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