Centamin Egypt Limited (TSE:CEE) (PINK:CELTF) had the stock price drop by more than 20% after the company admitted to have serious problems with production and said they will not be able to meet their goals for 2011.
CEE initially lost 15% on a gap down, but the price continues to tank supported by unusually strong trading volume. The stock lost another 1.18% during yesterday’s trading session as it broke into new 52-week lows. The closest support is roughly at $1.50 but it’s from mid 2009 and thus should not be trusted.
The stock price got crippled after the company cut production guidance for 2011. Centamin said gold output in Q2 was adversely affected by restrictions imposed on blast products. That affected second quarter production, which was only 48 thousand ounces of gold, and made the company cut production guidance by 25% to 38% as they now expect 200-210 thousand for whole 2011.
The management believes they will be able to deal with these issues in the third quarter, but the damage is already done.
The negative adjustments to share price are likely to stay for a while, but the drop also provides an opportunity for corrections under increased volatility, which should be attractive to short term traders.
