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(Reuters) - Canadian gold miner Rubicon Minerals Corp cut the gold reserve estimate for its Phoenix mine in Ontario by 86 percent and said it was considering selling itself among other options, sending its shares down 60 percent.
Rubicon said on Monday the inferred gold reserves at the mine was now 0.3 million ounces, compared with the 2.2 million ounces it estimated in 2013.
"Not only is this a huge negative development for RMX, but is it also a huge black-eye for the industry," Mackie Research Capital analysts wrote in a note.
"We are totally shocked ... particularly after so many engineering firms have reviewed the data," the analysts wrote.
Rubicon mainly raised funds for the mine through issuing shares and through so-called "streaming agreements", which provided upfront funds in exchange for a portion of a mine's future output.
Royal Gold Inc signed a $75 million gold "streaming agreement" on the mine in January 2014.
The Canada Pension Plan Investment Board (CPPIB) provided a $50 million loan facility last May for developing the mine.
The miner said the drop in resources was due to new drilling information and changes in modeling.
The company suspended operations at the mine in November and said it had temporarily laid off about 200 employees and 110 contractors, accounting for 87 percent of the total workforce.
Rubicon said it had hired BMO Capital Markets and TD Securities to assist in evaluating strategic alternatives. Those discussions will include talks with CPPIB, according to a source familiar with the matter.
Royal Gold was not immediately available for comments.
Rubicon shares, which had lost about 90 percent of their value in the last 12 months, were down 60 percent at 5 Canadian cents.
Reporting by Amrutha Gayathri in Bengaluru and Matt Scuffham in Toronto; Editing by Don Sebastian and Saumyadeb Chakrabarty