Tuesday saw BMO Capital Markets adjust its stance on Lundin Gold (OTC:LUGDF) Inc. (LUG:CN) (OTC: FTMNF) stock, shifting from an Outperform to a Market Perform rating. The firm has maintained its price target for the company at C$35.00. This decision follows the release of Lundin Gold's three-year production guidance, which showed a production increase for 2027 but also revealed higher-than-anticipated expenses.
The production forecast for Lundin Gold is now set at 506,000 ounces for the year 2027, marking an improvement from previous estimates of 459,000 ounces. This increase in projected output is due to enhanced mill throughput. Despite this positive development in production, the company's cost guidance has raised concerns, as it surpassed both BMO Capital Markets' and the consensus estimates.
The upward revision in costs is attributed to a combination of factors, including higher sustaining capital and metal prices. These have led to increased royalties and employee profit sharing expenses. The analyst from BMO Capital Markets noted that these additional costs were the primary reasons for the change in the stock's rating.
BMO Capital Markets' analyst provided a statement regarding the adjustment, saying, "In general, the three-year production guidance was roughly in line with our projections, while cost guidance came above both ours and consensus estimates." The analyst elaborated on the reasons for the downgrade, citing the higher costs that have led to the decision to lower the rating to Market Perform while keeping the target price steady at C$35.00.
Investors are now equipped with the latest insights from BMO Capital Markets on Lundin Gold's financial outlook, as the company navigates the challenges of increased production costs in the coming years.
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