Through a news release published on its website, Eldorado Gold Corp. (EGO, Financial) informed the market that it “received multiple tenders for significantly better concentrate sales terms for material produced beyond 2017” at the Olympias mine, from the second of a three-phase approach that the Canadian miner is following to develop the Greek asset.
Having received better sales conditions for the metal that will be produced during the 2018-2022 period at Olympias, Eldorado has revised the payability rates of gold that will be extracted through underground techniques because the Canadian gold producer can also economically mine the gold from those veins characterized by a lower grade, which normally involves more operating costs to process the precious metal. In fact, Eldorado expects the crushing circuit to be loaded with low grade ore already next week.
Therefore, the payability rate of gold, initially estimated at 58%, has been increased to an estimated 71%. If Eldorado initially expected gold production to be of 68,000 to 76,000 ounces over the 2018-2022 period at Olympias, from phase II, now it expects a gold production of 85,000 ounces “plus approximately 55,000 ounces of gold equivalent production,” the company says.
Eldorado also says that it has practically concluded the development of the second phase of the Olympias mine and commissioning has begun.
For 2017, the Canadian miner has already budgeted approximately 267,000 tonnes of ore to be processed at Olympias mine, according to the following concentrations of metal in the ore: 9.6 grams of gold per tonne of mineral; 105 grams of silver per tonne of mineral and 3.4% of zinc.
Eldorado Gold CEO Paul Skayman observed, "After a lot of hard work by our team in Greece, we are all very excited to now be at this juncture with commissioning and we expect to declare commercial production from Olympias Phase II in the third quarter."
Thus, Canaccord Genuity Wednesday upgraded Eldorado Gold from hold to buy and set a new price target of $5.25, as reported by the Financial Post, which represents a 10.5% increase from its previous price target per share of $4.75 and a 50.9% upside from the current share price of $3.48. Eldorado is trading up with a price-sales (P/S) ratio of 5.86 and a price-book (P/B) ratio of 0.72. The EV-EBITDA ratio is 12.91.
Besides the increase in the payability rates of gold due to “significantly better concentrate sales terms,” the reason the company raised the rating and the target price per share for Eldorado Gold is that it now “expects cash operating costs to come in below the company’s current guidance range of $230 to $370 per ounce from 2018 to 2022,” also as a result of the improved current zinc prices, Tony Lesiak, analyst at Canaccord Genuity, said (Financial Post).
In addition, as reported by StreetInsider.com, Eldorado has also been upgraded by Credit Suisse. The Swiss company set a new target price of $5.25 per share, a 10.5% increase from the previous target price per share of $4.75, but Credit Suisse maintains an Outperform rating on the gold stock.
Anita Soni, analyst at Credit Suisse, says on StreetInsider.com that her estimate of Olympias’ net asset value is now $751 million or 18 cents, a 20.5% increase from the previous estimate of $623 million.
Disclosure: I have no position in Eldorado Gold.
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