Eldorado Gold Announces Preliminary 2015 Operational Results And A Writedown Of $1.2 To $1.6 Billion Of Its Greek Assets

| About: Eldorado Gold (EGO)

Summary

Eldorado announces its preliminary 2015 operational results and 2016 guidance. Total production in gold was 723,532 Oz.

Eldorado Gold will writedown its Greek assets by between $1.2 to $1.6 billion after tax. However, EGO close 2015 with a liquidity of $665 million which is good.

EGO could present soon a good trading opportunity between $1.75 to $1.90 assuming an agreement with the Greek leftist government in 2Q'15.

The Skouries mine in Greece. Placed in care & maintenance in January.

Eldorado Gold Corporation (NYSE:EGO)

This article follows my preceding article on Eldorado Gold published on Nov. 2, 2015 about the Third-quarter results.

Eldorado Gold is producing gold mainly from two mines in Turkey (96,795 Oz in Q3'15) and three mine in China (91,641 Oz in Q3'15). The company has three projects in Greece: Skouries, Olympias and Stratoni ("zinc").

Balance sheet snapshot:

2015 Q4 2015 Q3 2015

Q2 2015

Q1 2015
Production in Oz 723,532 169,732 183,226 181,160 189,414
Gold Revenue in $ Million 832~ estimated 192~ estimated 211.52 204.2 224.0
Total cash cost $/oz 552 567 552 569 578
AISC in $/Oz 841 911 835 900 729
Net Earnings to shareholders $ Million - - (96.1) 17.0 (8.2)
Shares Outstanding million 716.587 716.587 716.587 716.587 716.583
Adj. EPS - - (0.01) 0.02 (0.01)
EPS - - (0.13) (0.28) (0.01)

Impairment net

in $ million

1,200 to 1,600 1,200 to 1,600 - 214.1 -
Average realized gold price 1,168 1,105 1,132 1,201 1,232
Total Debt $ Million 588.85 588.85 588.85 588.3 587.8
Cash generated from operation $ Million - - 43.4 61.9 58.9
Cash and Cash equivalent $ Million 290~ 290~ 389.8 449.8 494.3
Dividend per share 0.04C$ 0.01C$ 0.01C$ 0.01C$ 0.01C$
Click to enlarge

TB1 - Production of Gold per mine:

Country Mine 2015

4Q'15

Oz

3Q'15

Oz

2Q'15

Oz

1Q'15

Oz

Total cash cost
Turkey Kisladag 281,280 64,574 69,672 67,778 79,256 558/611
Efemcukuru 100,482 24,434 27,123 27,705 21,220 487/494
China Jinfeng Mine 149,655 36,707 37,254 25,074 50,620 612/626
Tanjianshan 97,563 16,808 38,028 38,234 4,493 719/632
White mountain 78,156 22,231 16,359 18,683 20,883 799/796
Greece Olympias 16,396 4,978 2,989 3,686 4,743 -
TOTAL 723,532 169,732 183,226 181,160 189,414
Click to enlarge

Eldorado gold produced also 11,734 Tonnes/4Q'15 and 40,232 Tonnes/2015 of Lead/Zinc concentrate.

AISC for gold is expected to be $911/ Oz for 4Q'15 and $841/ Oz for 2015, which is a good value.

Graphs snapshot:

The company indicated 2016 guidance.

Guidance in K Oz Cash Cost in $ Sust. CapEx in $ million Capex in $ million
Kisladag 225 to 240 550-600 50 0
Efemcukuru 90 to 100 550-600 20 0
Jinfeng 95 to 105 700-750 15 0
Tanjianshian 70 to 80 675-725 5 0
White mountain 75 to 85 625-675 15 0
Eastern Dragon 10 to 20 125-175 0 35
Tocantinzinho project - - 0 10
Olympias Care & maintenance waiting permit 0 155
Skouries Care & maintenance - 0 15
Certej project - - 0 20
Vila Nova (Iron) Care & maintenance - - -
TOTAL 565 to 630 585-620 105 235
Click to enlarge

Production guidance for 2016 is estimated well below the 2015 production of 723,532 Oz.

On a final note: The Greek assets.

On January13, 2016, I commented on the situation.

EGO decided to suspend the Skourie project, because of the obvious inaction of the new government, and unprecedented delays in receiving building permits. This decision pushed the company to lay off about 600 people -- mostly contractors -- at the Skouries site, and place it on care & maintenance. Olympias may be next, if the company doesn't receive the permit necessitated to advance the project by the end of the 1Q'16?

Basically, EGO decided to suspend the Skourie project, because of the obvious inaction of the new government, and unprecedented delays in receiving building permits.

This decision pushed the company to lay off about 600 people -- mostly contractors -- at the Skouries site, and placed it on care & maintenance.

Furthermore, another 500 people may be laid off at the Olympias, if the company doesn't receive the permits required by March 2016.
Mr. Paul Wright, indicated that the company remains committed to its Greek assets, but the fundamental issue is that EGO needs to see a commitment from the leftist government, and a more friendly and responsible attitude toward this sector.

It goes well beyond the issue of the building permit indicated above, and receiving them now, will not trigger an automatic restart of the projects. The company is no longer willing to operate in these conditions, where progress has been slowed to a halt. Basically, the leftist government must look at this investment as it is and not as an insignificant political toy.

Eldorado Gold has already invested about $300 million in Skouries and it is another setback for the company.

The new development is that Eldorado decided to impair its Greek's assets for an amount of $1.2-$1.6 billion, which is very significant and shows that the company is not expecting a quick and positive ending of this unfortunate status quo. M. Paul Wright said:

Looking at Eldorado's long-term plan, the Company remains committed to its portfolio of Greek assets and the realizable benefits to all of the stakeholders involved...

However, it is hard to be very optimistic at the moment. The stock did respond negatively at the news and a lower production of gold for 2016.

Conclusion:

EGO is fighting the perfect storm, as we speak. On the one hand, gold price is now depressed, despite showing some signs of a support between $1,050 and $1,100/ Oz, the past few weeks; and on the other hand, the future gold production is obviously affected by the Greek problem that seems to worsen.

I will not advise anyone to invest in Eldorado Gold. I will not do that because the future is too uncertain and risky. But as a trader, this is precisely here that I find a good opportunity assuming a good timing.

If the stock continues to drop in the $1.75-$1.90 area, after the next earning results, I believe EGO could be used as a trading tool, and I see a good opportunity for a rebound in a few months.

The Greek problem is more likely to be resolved, down the road, and I think, it is quite obvious when we listen to both parties' commentary.

The Greek government is playing a dangerous game here, but knows fairly well that it is of a paramount importance for the Country to find a solution of this political impasse, and let EGO work its way to profit despite a fierce opposition. It will be negotiations and finally a definitive agreement will be signed.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Trading opportunity soon?