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Great Basin Gold Shares Slumped: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shareholders of junior gold miner Great Basin Gold (AMEX: GBG  ) are heading back into the hills today as their stock fell as much as 12% following preliminary fourth-quarter and year-end results.

So what: Great Basin announced preliminary fourth-quarter results this morning that showed a 20% decline in gold recoverable ounces, and, even worse, an 18% increase in the cost to recover those precious metals. To add the icing to this bad-news cupcake, Great Basin missed its previous yearly guidance of 100,000 gold equivalent ounces by roughly 3000 ounces. The company blamed the slow implementation of its acid wash and carbon regeneration system for the low recovery and high cost rate. This also factored into its 2012 forecast, which calls for similar production rates.

Now what: That was not exactly what shareholders wanted to hear. That's the trouble with junior miners -- they will surprise you every single quarter, but the surprise isn't always on the upside. Current estimates place Great Basin at just six times forward earnings, but with today's news, results may wind up being a lot closer to breaking even in 2012 than many realize. I'd wait for the company's actual numbers in March before you make up your mind for good, but I think it'd be foolish (small "f") to think of Great Basin as a good value here.

Craving more input? Start by adding Great Basin Gold to your free and personalized watchlist so you can keep up with the latest news from the company.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (2) | Recommend This Article (7)

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  • Report this Comment On February 06, 2012, at 7:43 PM, poconobear wrote:

    actually according to there sec filling the cash cost for 2011 was 674 per ounce vs 740 ounce in 2010 a decrease of 9 % cost per ounce mined at barnstone it decreased by 24 percent an ounce so the report isnt all that bad...see todays sec filling...

  • Report this Comment On February 07, 2012, at 4:57 PM, TimoDOZ wrote:

    The problem is at Burnstone. (barnstone?) GBG is consistently puffing this mine project that has experienced every kind of delay and shortfall in guidance, possible. The CEO Ferdi Depenauer has ZERO credibility left with shareholders and is now scoffed at by the analysts he has continuously fibbed to. GBG has improved it's ore precessed in this latest quarter from 1 to 1.5 Grams per ton. Hey ... BIG DEAL! These ores are garbage dump tailings. With mining costs rising at 10% per annum the ESKom power company basically a third world operation which can not meet the country of South Africa's electricity demand for mining and domestic consumption, and ores that are proven at higher 3 to 5 gms per ton not being accessed and perhaps not even there but just "proved", Burnstone is on the verge of a major collapse. Then you have the Julius Malema character with his spear shaking. Maybe GBG can make 12 cents in profit in 2012 if they can actually find +3 gms/ ton ores that are accessible to mining before the cost of the operation puts this bottomless money pit out of it's misery. Check out what recently happened to the Sleeping Giant Mine in Canada . Obviously "salted" before PAL decided to buy it and thought that it could mine gold there. Ferdi is not shrewd enough to know when it is over for Burnstone.

    All that not with standing if the ballast that is Burnstone can just get some of it's projected ramp ups in production achieved, the Hollister mine is a strong producer and together a $0.12/ sh earnings number for all of 2012 might yet be achieved which may get the share price of a miner with actual earnings back to $2.

    The other strategy would be to swap telefoniques. So if GBG heads towards $0.95 and SDXXF heads for $0.95 in the other direction.....

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