Equatorial Resources Plummets 5% Amid Strategic Shift: What’s Fueling the Selloff?

Summary
• Equatorial Resources (EQX) plunges 4.99% to $13.97, erasing $780M in market value
• $1.01B Brazil portfolio sale to CMOC Group triggers immediate strategic reallocation
• 52W high of $15.10 now 7.5% below current price amid $14.80 intraday peak
• Options chain surges with 12.5-strike call/put volume spiking 320% and 45.83% respectively
• CEO Darren Hall outlines North American-focused growth, but market reacts cautiously to asset divestiture. The stock’s sharp decline reflects investor skepticism over short-term liquidity and operational focus, despite long-term production targets of 700K–800K oz gold by 2026.

Strategic Divestiture Sparks Immediate Shareholder Uncertainty
Equatorial Resources’ 5% intraday selloff stems directly from its $1.01B Brazil portfolio sale to CMOC Group, a transaction expected to close in Q1 2026. While CEO Darren Hall emphasizes enhanced financial flexibility and North American growth, the market’s reaction underscores concerns over near-term operational complexity. The $900M upfront cash and $115M contingent payment hinge on 2027 production thresholds, creating a liquidity gap that amplifies short-term risk. Additionally, the divestiture reduces immediate revenue streams from Brazil’s Aurizona and RDM mines, which contributed 15% of 2024 production. Analysts note the transaction’s lack of financing contingency may deter aggressive short-term buyers, while the $500M term loan repayment and $300M Sprott loan payoff—though beneficial for leverage—delay capital deployment for organic growth until 2026.

Options Playbook: Capitalizing on Volatility Amid Strategic Uncertainty
• MACD: 0.688 (bullish divergence), Signal Line: 0.619, Histogram: 0.069 (narrowing momentum)
• RSI: 82.00 (overbought territory), Bollinger Bands: 15.09 (upper), 13.42 (middle), 11.74 (lower)
• 200D MA: $8.48 (far below current price), 30D MA: $12.83 (resistance near $13.73)
• Key Support: $12.71–$12.79 (30D), Key Resistance: $6.76–$6.94 (200D)
• Gamma: 0.126–0.164 (high sensitivity to price swings), Theta: -0.0066–-0.0200 (moderate time decay)
• IV Range: 45.64%–63.94% (elevated but not extreme)
• Top Options:
- EQX20260116C12.5 (Call): $12.5 strike, 1/16/2026 expiry, IV 45.64%, leverage 8.20%, turnover $1.1M. Ideal for bullish bets on post-announcement rebound, with 32% price drop potential if gold prices stabilize.
- EQX20260417C12.5 (Call): $12.5 strike, 4/17/2026 expiry, IV 51.22%, leverage 5.58%, turnover $28.8K. Offers longer-term exposure to 2026 production ramp, with 21.88% downside cushion.
• Payoff Analysis: A 5% downside to $13.27 would yield 3.6% profit on the 1/16/2026 call (max gain: $1.23/share) and 2.9% on the 4/17/2026 call (max gain: $1.23/share). Aggressive bulls may consider EQX20260116C12.5 into a bounce above $14.80, while risk-averse traders should monitor $13.73 support.

Backtest Equatorial Resources Stock Performance
The EQX ETF has demonstrated resilience following a -5% intraday plunge, with recovery occurring within 30 days in 59% of instances. The 3-Day win rate is 52.48%, the 10-Day win rate is 58.02%, and the 30-Day win rate is 59.77%, indicating a higher probability of positive returns in the short term after a sharp decline.

Positioning for 2026: Strategic Clarity or Short-Term Pain?
Equatorial Resources’ 5% drop reflects near-term uncertainty around its Brazil divestiture, but the long-term North American growth thesis remains intact. With 2026 production targets and a $1.01B liquidity injection, the stock’s 52W high of $15.10 is likely within reach if gold prices stabilize. However, the $13.73 support level (30D MA) and $12.71 (30D support) will be critical for bulls. Investors should watch the Gold.com (GOLD) ETF, which fell 1.8% today, for sector sentiment. For now, the EQX20260116C12.5 call offers a high-leverage play on a potential rebound, while the EQX20260417C12.5 provides a longer-term hedge. Action Step: Buy the 1/16/2026 $12.5 call if $14.80 retests; exit if $13.73 breaks.