Missed guidance and lower gold grades at its Rice Lake mine near Bissett may have pushed San Gold's share price down almost in half over the past six days, but company officials are adamant its fortunes are not all bad.
And to prove it, the company announced Thursday it had lined up $50 million in a convertible debenture offering.
Late last week, the company announced its highest-ever annual gold production of 86,506 ounces in 2012, which was an increase of 17 per cent over 2011. But it was below the company's guidance projections for 2012 of 95,000 to 105,000 ounces.
The company is also forecasting annual capital development costs in the range of $45 million to $55 million for the years 2013 and 2014, more than what it had previously anticipated.
On top of that, it was mining ore with a lower grade of gold than in the past.
Dale Ginn, San Gold's executive vice-chairman, said, "Our results were not quite as rosy as our guidance was but this is a market where every miss is compounded."
He said the speed with which it was able to put together the $50-million financing package at eight per cent interest is a testament to the company's continuing status in the capital markets.
But the company's stock price fell 46 per cent over the past five days of very heavy trading to close at 32 cents Friday.
Analysts have dramatically lowered their target price on the stock.
Christos Doulis of Stonecap Securities issued his second downgrade in three days, from $1.05 down to 55 cents, then down to 30 cents.
In a report to his customers released Thursday, he said, "With no free cash flow expected until 2017, the addition of $50 million of debt (due in 2018) could jeopardize the firm's ability to remain a going concern."
Ginn said that analysis was at the extreme end of the spectrum and comes from a firm that did not take part in the latest underwriting.
"These are not normal times," Ginn said. "It is a risk-averse environment where single-asset small producers like San Gold are considered high-risk."
Ginn said the company missed its 2012 guidance partly because of machinery problems that kept its mill down for a month last summer.
He said the low ore grade recorded recently will not be a permanent condition.