AuRico Gold Inc AUQ.TO cut its full-year production forecast for the second time in as many months and said costs would exceed earlier plans as the gold miner focuses on developing its biggest mine in Mexico.
The company's shares fell 25 percent to their lowest in more than three years.
"It appears it will take two years to get Ocampo (mine) where it should be, and ... it is too large an opportunity cost for investors to bear," Scotiabank analyst Trevor Turnbull wrote in a note to clients.
Development of the underground mine at Ocampo in Chihuahua state was delayed by labor problems, reducing production in the second quarter.
AuRico now expects to produce 115,000 to 125,000 gold equivalent ounces at the Ocampo mine in 2012, down from earlier estimates of 155,000 to 170,000 ounces.
TD Securities analyst Brian Christie said the company's production target cut was much deeper than expected.
AuRico said production at Young-Davidson in Ontario was affected by a 10-day power outage due to forest fires in the Kirkland Lake area and said it now expects production of 55,000 to 65,000 ounces from the mine in 2012.
The company, which started commercial production at the Young-Davidson mine last week, had earlier expected it to produce 65,000 to 75,000 ounces.
AuRico raised its cash cost forecast as it steps up more expensive open-pit production at Ocampo during the development of the underground mine.
"The cost of catching up on underground development with contractors will be detrimental to cash costs, which are forecast to double this year and jump 30 percent next year from previous guidance," Turnbull said.
AuRico now expects cash costs of $775 to $875 per gold equivalent ounce for 2012, up from $540 to $570 per gold equivalent ounce.
Turnbull cut his rating on AuRico's stock to "sector perform" from "sector outperform," saying the company's forecast cut was "by nearly half for the remainder of 2012 and by 26 percent in 2013."
AuRico cut its overall output forecast to 248,000 to 278,000 gold equivalent ounces from 298,000 to 333,000 gold equivalent ounces.
The company slashed its 2013 production forecast to 335,000 to 395,000 ounces from 390,000 to 445,000 ounces.
AuRico shares, which were among the top percentage losers on the Toronto Stock Exchange, were down 19 percent at C$5.56 on Wednesday. They fell to C$5.20 in early trading.
(Reporting by Maneesha Tiwari in Bangalore; Editing by Don Sebastian)