Equinox Gold stock drops on lower production guidance for Greenstone mine

Equinox Gold (TSX: EQX; NYSE: EQX) shares fell on Thursday after it reported output would be almost 37% lower this year amid the ramp-up towards commercial production at its new Greenstone mine in northern Ontario.  

Since its first gold pour in May, the mine has produced approximately 59,000 oz. of the precious metal, including 42,500 oz. during the third quarter, Equinox said in a release on Wednesday. During Q3, the processed grade averaged 1.15 grams gold per tonne at an average recovery rate of approximately 80%, which Equinox says was largely on plan. Greenstone is located just south of Geraldton, about 275 km northeast of Thunder Bay. 

However, the gold miner also noted that the recovery in August was impacted by operational adjustments to the leach circuit and a temporary suspension of the gravity circuit to address certain issues identified during commissioning. These issues have been largely resolved and recovery has increased through September and into October, it said.

Plant throughput in September also suffered a significant drop due to multi-day shutdowns of the crushing and grinding circuits to fix certain wear and other issues identified during the ramp-up process. As a result, the throughput averaged only 14,300 tonnes per day  during Q3, which is just over half of the plant’s 27,000 tonnes-per-day capacity. The company had previously been targeting 90% of this capacity by the end of 2024.

Given those issues and the mine’s production to date, Equinox has now adjusted Greenstone’s 2024 gold production guidance from 175,000-205,000 oz. to 110,000-130,000 oz., representing a near 37% decrease. During the fourth quarter, the company intends to continue the ramp-up of both mining rates and plant throughput towards design capacity.

When at capacity, the operation is expected to produce approximately 400,000 oz. annually over its first five years, and 360,000 oz. per year over its 14-year mine life. This would make Greenstone one of the largest gold mines in Canada.

Equinox shares dropped 8% from their closing price on Wednesday to $7.48 apiece by mid-day on Thursday, valuing the company at $3.2 billion. Its shares traded in a 52-week window of $5.36 and $8.79.