Nevsun Resources Ltd., which mines gold in the African country of Eritrea, plunged the most since September 2004 today after saying production may fall 50 percent this year.
Nevsun, which operates the Bisha mine, tumbled 31 percent in Toronto after the Vancouver-based company forecast production of 190,000 to 210,000 ounces, compared with the 379,000 ounces mined in 2011. The shares dropped C$1.94 to C$4.40, the lowest close since August 2010.
The company said it found its March 2011 estimate of its resources to be too optimistic. It has delayed its revision of the estimates for the entire project, originally scheduled for late this quarter, to the second or third quarter.
“Gold production guidance for 2012 is basically half of what was expected,” Steven Green, an analyst at Toronto-Dominion Bank, wrote in a note to clients. “The reason for the lowered guidance is an apparent overstatement in the reserve estimate of both tonnage and grade -- which is a major negative.”
Nevsun surged 22 percent from Oct. 27, when it reported a copper discovery next to the mine, to yesterday. The Bisha deposit consists of a layer of gold oxide above layers of zinc and copper. The company says it expects to begin mining base metals next year.