Sandfire slammed by downgrades

The gold and copper miner has been hit by a slew of downgrades after reporting higher capex than expected.

Bad news from Australia's embattled junior miners caused more havoc to their share prices this week, with Sandfire Resources and Perseus Mining slumping as rising costs added further pressure on their operations.

Sandfire Resources sunk 8% to $5.50 at 1220 AEST following downgrades from four brokers today, just two days after Perseus Mining was hammered after reporting higher cash costs than anticipated at its flagship mine.

Three out of the four downgrades from CIMB Securities, JP Morgan, Credit Suisse and Citigroup recommend investors sell Sandfire after it too reported higher capital expenditure yesterday.

The most dramatic change was from Citi as it changed its rating to a "sell" from "buy", while CIMB Securities lowered their recommendation to "neutral".

"Despite the relatively upbeat quarterly report, company guidance on capital costs highlighted that we had previously underestimated life-of-mine capital expenditure," CIMB Securities said.

However, the brokers noted that Sandfire is one of the few resource companies that will generate positive cash flows in 2013-14, with potential for gains from resource growth as its aggressive exploration program continues.

Emerging gold miner Perseus Mining dived by 27.8% to 48.5 cents over Tuesday and Wednesday after reporting higher-than-expected cash costs at $US1,256 an ounce from the Edikan gold mine in Ghana for the half-year to June 30, with several brokers downgrading the stock in response.

Australian junior miners have dropped by 39% in the year to date.

Perseus Mining is part of the Uncapped 100.

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