July 22 (Reuters) - Shares of Lake Shore Gold recovered some of its recent losses on Friday, as a brokerage said the Canadian junior miner’s recent production cut will not affect its long-term output goal of over 500,000 ounces of gold per year.
Lake Shore’s shares, which have shed about 40 percent in value since Tuesday when it cut its full-year production forecast, prompting a bout of rating downgrades, were one of the top ten percentage gainers on the Toronto Stock Exchange.
“Lake Shore has been unfairly punished by the market as lower production guidance owing to a lower head grade at Timmins will only have a minor impact on the big picture,” M Partners analyst Marc Johnson wrote in a note on Friday.
Analysts at RBC Capital Markets, Haywood Securities, CIBC World Markets, Raymond James and many more cut their ratings on Lake Shore stock and lowered their share price targets in the past three days.
The company cut its outlook as it found lower-grade gold zones at its Timmins mine in northern Ontario, in addition to the planned high-grade zones, Johnson told Reuters.
He has retained his “buy” rating on the company’s stock and said the decline in Lake Shore’s share price represents a “major buying opportunity”.
“I believe this is a good problem. They have discovered more gold, and the possibility of increasing their mining rate has not been ruled out longer-term, which means the previous expected production can be restored or surpassed,” he said.
Despite producing less in the short-term, due to the lower average grade coming out of the mine, Johnson believes with the wider area, Lake Shore has added several years to Timmins’ mine life.
The miner’s shares were trading up 21 Canadian cents at C$2.29. (Reporting by Gowri Jayakumar in Bangalore)