Medusa Mining (MML) is poised to slide over the next 12 months given management's poor track record with guidance as well as a slew of other factors, says Macquarie Private Wealth.
The investment bank initiated coverage on the gold miner with an "underperform" rating and a price target of $1.70 – 21% below Medusa's $2.24 share price this morning.
Management's inability to deliver on earnings and product guidance was the main reason for the downcast outlook. Macquarie pointed to the fact Medusa hasn't met annual production guidance since 2010-2011 and has downgraded production in six of the last seven quarters.
"We will need to see the company deliver on stated production guidance for several quarters to change our investment view and recommendation," Macquarie said.
Other concerns included low cash holdings down to $4.7 million from $100 million in June 2011, negative operating cash flow over the same period and head grade dilution down to 5.7 grams per tonne from 8 grams per tonne.
Macquarie is the most bearish of all brokers covering Medusa. The majority rate the stock a "buy" with an average price target of $3.20.