Osisko’s disappointing guidance raises questions

Peter Koven | Jan 24, 2013 11:50 AM ET | Last Updated: Jan 24, 2013 11:52 AM ET
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Analysts agree that Osisko Mining Corp.’s 2013 guidance is disappointing. On Thursday, the company said it expects to produce 485,000 to 510,000 ounces of gold at cash costs of US$780 to US$825 an ounce. Analyst forecasts called for both higher production and lower costs.

Osisko shares fell 9% in the two days before the announcement, so the weak numbers may have been anticipated by the street. But analysts have concerns about the limited details they got from the Montreal-based company.

“We would not recommend stepping into the story,” Anita Soni of Credit Suisse wrote in a note. “There are still unanswered questions, as the company did not disclose grade, tonnage or recovery assumptions.”

She lowered her target price to $8 a share (from $9.50) as a result of the guidance. Production is 10% lower than she was anticipating, while cash costs are 5% higher.

BMO Capital Markets analyst John Hayes also raised concern about the lack of detail in Osisko’s plan, noting that there is a significant gap between this guidance and the 2011 mine plan (which called for 2013 production of more than 630,000 ounces).

“Osisko is a single-mine company with a production profile that is very grade sensitive,” he wrote.