San Gold Corp. was downgraded to underperform from outperform by Stonecap Securities analyst Christos Doulis after the junior miner’s disappointing production and guidance update on Friday.

The company’s 2012 gold production of 86,506 ounces came in significantly below management’s guidance and Mr. Doulis’ estimates.

While total reserves rose 21% compared to its previous reserve estimate, the grade decreased 16%.

Its 2013 guidance was also well below both management’s previous guidance and the analyst’s forecast, with 2014 and 2015 guidance also coming up short.

“With production now expected to be much lower and capex much higher than we had previously estimated, we don’t expect San Gold to generate significant positive free cash flow until at least 2017 and there is now a significant funding shortfall,” Mr. Doulis told clients. “We believe San Gold will have to raise additional capital in order to complete its current capital development plans…”

The analyst cut his price target on the stock to 55¢ from $1.50.