Eldorado Gold Reports Quarterly Figures

Issues at mine in Turkey weighed on production, income statement's bottom line and operating cash flow

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Operating issues at Kisladag mine (Turkey) – where Eldorado Gold Corp. (EGO, Financial) runs one of two producing mines in Turkey weighed on the Canadian miner’s third-quarter figures Oct. 26.

From the comparable of fiscal 2016, net profit – adjusted to one-time charges decreased by 96.1% to $1.3 million in the third quarter, the quarterly income statement’s bottom line – attributable to Eldorado shareholders switched to a loss of $4.2 million (from a profit of $20.7 million) and revenue went down 18% to $95.35 million.

Eldorado missed expectations on adjusted EPS by 1 cent; the quarterly figure of adjusted EPS was nil while the average analyst expected an adjusted profit of 1 cent per share. On revenue for the third quarter, Eldorado beat expectations by about $5 million.

The cash operating cost per ounce of metal was $508 in the third quarter $8 higher than expected by the miner with its revised guidance versus a figure of $468 per ounce in the third quarter of fiscal 2016.

Operating costs were higher because fixed costs were essentially spread over a lower throughput. Total cash costs also increased. Production of the yellow metal went down 3,446 ounces from the level of one year ago to a total third-quarter volume (ounces) of 70,053.

Due to higher operating costs and an increase in the funds used by Eldorado for sustaining capex, the all-in sustaining cash cost (AISC) per ounce of metal sold increased by 19% to $925 in third-quarter 2017 from $777 in third-quarter 2016.

From the sale of 65,439 ounces of gold in the quarter, Eldorado realized an average price of $1,290: this was $44 per ounce lower than the comparable of fiscal 2016. Gold sales accounted for approximately 88.5% of Eldorado’s third-quarter total revenue.

Because of operating issues Eldorado is experiencing with gold recovery rates at Kisladag, where gold is mined through heap leaching activities that determined a lower production of gold and higher costs, the Canadian miner got a decline in the cash flow generated from its operations: the CFO was before changes in noncash working capital $17.3 million in the quarter in question versus a figure of $40.5 million in the prior-year quarter. The company used funds of approximately $213.41 million in the quarter for investing activities consisting of the acquisition of 100% of Integra Gold Corp. (TSXV:ICG, Financial) for 590 million Canadian dollars ($460.387 million) (25% of total consideration was paid by Eldorado in cash) and other transactions on property, plant and equipment.

Because of issues at Kisladag mine, Eldorado also lowered its expectations on 2017 production; for fiscal 2017, Eldorado projects between 290,000 ounces and 340,000 ounces of gold at a cash cost of $500 per ounce and an AISC of $900 per ounce sold.

Eldorado closed the quarter with $551.26 million in cash on hand and securities, which decreased by 31% from the prior quarter of 2017 and with a line of available credit of $250 million.

News from Greece: from Olympias Phase II, Eldorado expects to reach a saleable level of gold production before Dec. 30, and at Skouries the Canadian miner targets to start producing the yellow metal in 2020.

Eldorado is trading at $1.29 per share with a market capitalization of $1.03 billion, with a price-book (P/B) ratio of 0.26, a price-sales (P/S) ratio of 2.13, a price-earnings (P/E) ratio of 168 and an EV to EBITDA ratio of 8.82.

Disclosure: I have no position in Eldorado.