Eldorado Gold: New mines on Track for Later This Year

May.18.11 | About: Eldorado Gold (EGO)

Eldorado Gold (NYSE:EGO) is a Canadian based gold and iron ore producer with five operating mines and two under construction in Turkey, Greece, and China. EGO trades in Canada on the TSX and the New York Stock Exchange, and reports in U.S. Dollars.

First quarter gold production totaled 148,577 ounces at a cash operating cost of $410 per ounce.

EGO sold 148,530 ounces of gold at an average price of $1,397 per ounce during the first quarter of 2011 and 85,421 dry tonnes of iron ore at an average price of $124 per dry tonne.

Revenues for the first quarter rose to $218 million from $181 million a year ago. Earnings per share were flat from a year ago at $0.10 per share, while operating cash flow jumped to $110.4 million from $62.4 million a year ago. Cash, restricted cash, and marketable securities totaled $355.8 million dollars at the end of the first quarter of 2011.

The Kisladag mine located in the Usak Province in Turkey holds Proven and Probable (P&P) reserves totaling 10.2 million ounces and Measured, Indicated, and Inferred (MII) resources of 16.57 million ounces of gold. First quarter gold production totaled 50,833 ounces of gold at a cash operating cost of $386 per ounce.

The Jinfeng mine in China holds 1.903 million P&P and 3.6 million MII ounces of gold. EGO holds 82% of the Jinfeng mine, with local partner Guizhou Lannigou Gold Mine Limited holding the remaining 18%. 48,564 ounces of gold were mined during the first quarter at a cash operating cost of $430 per ounce.

Tanjianshan in China reported production of 28,493 ounces at a cash operating cost of $402 per ounce in the first quarter of 2011.

Production at the Efemcukuru mine in Turkey will start in the second quarter of 2011. Efemcukuru holds an estimated 1.506 million P&P and 2.05 million MII ounces of gold. Estimated gold production for 2011 will range from 70 to 80 thousand ounces of gold at an estimated operating cost of $285-300 per ounce.

The Eastern Dragon mine is on track to begin production during the fourth quarter of 2011. Eastern Dragon holds 764,000 P&P ounces and 1.04 million MII ounces of gold with 7 million P&P ounces and 8.3 million MII ounces of silver. Estimated capital spending of $62.5 million will be required to complete the project with production expected to begin in the fourth quarter of 2011.

The Perama Hill project in Greece holds an estimated 975,000 P&P ounces of gold and 1.93 million MII ounces of silver. Construction is expected to begin in mid-2012 at a cost of $159 million dollars. Due to the economic problems in Greece, the Perama project and accompanying FDI are being welcomed at all levels. Overall total P&P reserves rose to 18.7 million ounces and 22.9 million ounces of MII resources.

The Eastern Dragon and Efemcukuru projects remain on track to start production later this year, replacing falling production and contributing to future growth. Production at the operating gold mines is strong and EGO appears to be avoiding any problems faced by other firms in China.

Good news is coming for investors worried about decreasing production from existing mines. Efemcukuru and Eastern Dragon will begin contributing to future growth in the coming quarters, fueling growth and driving revenues and profits.

Technically, EGO is getting beaten up with all the other gold and silver stocks. We have been trending downward and appear headed to retest the $14.50 level. The area between $15.25 and $14.50 would be an attractive point to begin accumulating a position for long-term investors.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in EGO over the next 72 hours.