Eldorado Gold Corp (USA)(NYSE:EGO) has announced its updated operating and financial guidance for 2017–2020, covering the Olympias and Skouries projects in Greece. Michael Jalonen, an analyst with Bank of America Merrill Lynch revised the rating on the firm to ‘Buy’ from ‘Underperform’, with a target price of $5. The previous Underperform score was given on account of uncertainties pertaining company’s Greek asset base.
The highlights
Jalonen noted that Eldorado’s operating costs were lower and production levels were higher compared to the projections. The company had guided to gold output of over 900koz by 2020, indicating a 109% jump from the 2017 levels. Jalonen stated that if they sale their Chinese gold mines, it could significantly strengthen Eldorado’s balance sheet, offering ample liquidity to support the assignments.
Eldorado’s revised operating plan demands for a better gold production profile, and AISC, which the firm projects to drop by nearly 30% to less than $650/oz in 2020 from $850/oz in 2017. The company progresses on the two Greek assignments to the production phase that the sizeable discount to the competitor manufacturers will contract. EPS projections for 2016-2018 have been revised for better, led by a combination of higher gold output and lower cash costs.
Eldorado has been on “buy” radar of many analysts since the start of this year. The company has 3 mines in operation, with 2 assignments in construction and 3 projects in the assessment and development stage. It is looking for aggressive organic growth in the coming years.
In addition, it has plans to move forward with Kisladag mine expansion in Turkey. Once closed in 2018, the firm stated that projects to produce 310,000 ounces – 320,000 ounces of gold yearly through 2020, at cash expenses of $490 per ounce. Around, $63 million yet need to be spent on the development, which can be spread across a two-year period.
Eldorado’s Olympias mine in Greece is aimed for initial production in 1Q2017. Average production of gold is expected to come at 72,000 ounces at cash costs of $180-$350 per ounce, following to by-product credits of lead, zinc and silver. Final capital costs are predicted at $101 million.
