Hana Mining Ltd. (HMG), an exploration company, fell the most since its listing almost 10 years ago after an update on its Botswana copper and silver project disappointed analysts on operating costs.
Hana plunged 68 percent to close at 42 cents in Toronto. The Vancouver-based company fell 7.2 percent this year before today.
“There’s been a massive re-setting of expectations and most of it was due to operating costs,” Adam Low, a Toronto- based analyst at Raymond James Ltd., said today in a telephone interview.
The company published a preliminary economic assessment and updated mineral resource for the Banana Zone and Zone 5 at its Ghanzi copper and silver project after the close of regular trading yesterday. The operation may cost an initial $300.5 million, including pre-production costs, and produce an average of 66.4 million pounds (30,119 metric tons) of copper and 878,000 ounces of silver a year, Hana said in a statement.
Hana expects average operating costs of $1.96 a pound of copper in the first five years and $1.75 thereafter, the company said in the statement.
Hana said in May 2011 it would delay completion of the study after identifying potential problems with a mineral resource estimate it completed in December 2010.
“The stuff that we were supposed to get a year ago, this is it coming in now finally,” Low said. “There was a lot of anticipation about it.”
Low cut his rating on Hana to market perform, from outperform.
The new resource estimate was “unexpectedly both smaller and lower grade” than the previous estimate Gary Lampard, an analyst at Canaccord Genuity in Toronto, said in a note.
“We do not believe that Hana Mining has the capacity to further develop the Ghanzi project,” he said. “Thus, our valuation is now a takeout valuation.”
Lampard lowered his recommendation to sell, from speculative buy and cut his price target to 60 cents from C$3.70.
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