Great Basin Gold Shares Slumped: What You Need to Know

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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 (ASE: 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.

At the time this article was published 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.

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