Today was a typical day on the stock market. Stocks rallied, then pulled back, then rallied again, etc. The same old same old. That’s why I preach that investing in stocks takes time and patience. Prices move and over time will stabilize. You should never panic into or out of a trade; even when that trade is moving sharply against you and you see losses on your screen. If you are in for the investment, then you’re in a stock for the fundamentals behind the company, not just the reaction to the stock price. Sometimes, things happen to stocks unexpectedly and that is exactly what happened today to Nevsun Resources Ltd.
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The Nevsun Story
A while back, I wrote about Agnico-Eagle Mines and how markets tend to over react. Below is an except of the news that came out today about Nevsun:
Shares of junior miner Nevsun Resources Ltd. (TSE:NSU) fell nearly a third in trading Tuesday after the Vancouver company said its output from a key African gold mine this year will be half of what it originally expected.
Nevsun dropped $1.90 or 30 per cent to $4.4o in trading of nearly 5.2 million shares on the TSX. Before markets opened Tuesday, Nevsun said it expects to produce between 190,000 to 210,000 ounces of gold this year from its Bisha mine in Eritrea – about half of what the company was originally expecting. At the high end of 2012 estimates, that’s 45 per cent less than the 379,000 ounces of gold Nevsun produced from the mine in 2011.
The Vancouver company said original resource estimates used in planning the mine “overestimated gold in portions of the Bisha Main oxide mineralization.”
“Accordingly, the ounces to be produced in 2012 are about half of what Nevsun was previously expecting,” the company said.
Nevsun has called Bisha one of the highest grade open pit deposits in the world, a mine with a life of at least 12 years and which is being developed to produce copper starting next year. “Bisha had an excellent 2011 operating year, achieving its gold and cost per ounce production objectives,” Nevsun chief executive officer Cliff Davis said in a release Tuesday before stock markets opened. “For 2012, Bisha has the team and contractors in place to successfully execute the copper phase expansion project so that copper production can start in mid 2013.” The miner said it hopes to have updated figures on Bisha’s gold and copper resources later this year.
The fact of the matter is, Nevsun is probably still a good company. They are producing minerals and have no debt. In fact, they are once of the only junior mining companies that pays out a regular dividend to it’s shareholders. I believe that the stock was unfairly punished today, but today’s price action is not the end. Overtime, we’ll see where price leads to.
Disclosure: Neither I, nor any of my immediate family own any equity position in Nevsun Resources Ltd.
This article is for informational and educational purposes and should not be construed as a recommendation to buy or sell anything. As usual, you should never invest with money you can’t afford to lose and always speak to a qualified investment/financial adviser before purchasing any stock or other financial instrument. Do your research and always ask for a company prospectus so you can gather as much information as possible. It’s as simple as filling out a form like the one here.