Eldorado Gold Corp. (EGO, Financial) released its third-quarter results after market close on Oct. 27 and reported profit attributable to shareholders of $20.7 million or three cents per share, a 123% increase year over year.
Concerning revenue, for the third quarter, Eldorado Gold reported revenue of $156.0 million on sales of 116,882 ounces of gold, down 26.2% year over year, and missed analysts' estimate by $28 million. The average realized price was $1,335 per ounce of gold sold.
Eldorado Gold also produced a total of 117,782 ounces, down 35.7% year over year, at an average cash cost of $566 per ounce and average AISC of $890 per ounce.
Eldorado Gold had a total liquidity of $652.4 million at quarter-end, which includes undrawn lines of credit of $240 million. The miner will further strengthen its total liquidity with the proceeds that will come from the sale of its Chinese assets, which total US$822.7 million and are reported under “assets held for sale” on its balance sheet.Â
The miner is improving the quality of its asset base, extending the life of mines through development projects in Greece, and is lowering operating costs and its risk profile through the divestment of Chinese assets.
China: On Sept. 6, Eldorado completed the Jinfeng mine transaction to a wholly owned subsidiary of China National Gold Group Corp., as announced on April 26. The sale of the other Chinese assets, including the White Mountain and Tanjianshan mines as well as the Eastern Dragon project, is expected to close in the fourth quarter 2016.
Greece: The miner is developing projects at Olympias and Skouries. At Olympias, Eldorado expects to commence production in the first quarter 2017 and will average approximately 72,000 ounces of gold at cash costs between $180 and $350 for the first five years. At Skouries, production is expected to begin in 2019. It will be from Phase I of operations, which include open pit and underground. The average reserve grade for Skouries is 0.77 grams per tonne (g/t) of gold and for Olympias is 7.87 g/t of gold.
Serbia: on Sept. 6, Eldorado also released the results from the first 11 drill holes completed in the 2016 exploration program at the Karavansalija Mineralized Center (KMC) Project in Serbia:
"Our drilling results to date confirm our view of the outstanding potential of the KMC project. After a systematic analysis of historic exploration data including relogging of all previous drill core, reprocessing geophysical data and geological modeling we have commenced testing extensions to previous high-grade intercepts and have defined new drill targets. Based on initial results, we have budgeted an additional 7,500 meters of drilling for 2016 and have added a fourth drill rig to the program." – Peter Lewis, vice president of exploration at Eldorado (EGO's PR)
Romania and Brazil: on Aug. 22, Eldorado announced new exploration projects in Romania and Brazil, where it has identified high-grade gold deposits.
Eldorado Gold expects to produce approximately 495,000 ounces of gold at an average cash cost of $5,757 per ounce and AISC of $915 per ounce, and forecasts spending $80 million in sustaining capital and $230.0 million in new project development capital.
Nine out of 13 analysts recommend buying Eldorado and the recommendation rating is 2.1. The recommendation rating ranges between 1 (Strong Buy) and 5 (Sell). The average target price is $5.52, the lowest is $4.50 and the highest is $7.
At the moment, Eldorado Gold is trading at $3.38, up 5 cents (1.35%) and has gained 13.47% year to date. The stock has been down trending since the mid-July attempted military coup in Turkey, where Eldorado Gold has two operating gold mines: Kisladag with 49,270 ounces of gold produced in the third quarter, down 29.1% year over year, at cash operating costs of $425 per ounce, and Efemcukuru with 24,229 ounces of gold produced in the third quarter, down 10.7%, at cash operating costs of $554 per ounce.
Lower production at Kisladag was “a result of longer leach cycles caused by higher leach pad lifts and lower grade ore placed on the leach pad earlier in 2016,” the company said in a statement, and at Efemcukur “was due to lower average treated head grade.” For quite the same reasons, operating costs at the Efemcukur were higher when compared to the same quarter of 2015. At Kisladag, Eldorado Gold sustained lower operating costs when compared to Q3 2015, due to higher gold grades and less waste mining.
Eldorado Gold's price-book ratio is 0.69 and its enterprise value/EBITDA is 10.99.
Disclosure: I have no position in Eldorado Gold Corp.
