Eldorado Gold: Update On The Skouries Processing Plant In Greece

Feb.27.16 | About: Eldorado Gold (EGO)

Summary

Eldorado has received the building permit for the Skouries processing plant from the Council of State, Greece's Supreme Court on administrative and environmental matters.

Eldorado is now waiting that the Greek government will timely follow up the decision of the Greek administrative Supreme Court.

Otherwise Eldorado may be forced to reconsider its investment plans for Greece.

VANCOUVER, Feb. 25, 2016 /CNW/ - Eldorado Gold Corporation ("Eldorado" or the "Company") confirms that as a result of ruling #219/2016 from the Council of State, Greece's Supreme Court on administrative and environmental matters, Hellas Gold, a Greek subsidiary of Eldorado, has received the building permit for the Skouries processing plant (see Eldorado news release dated March 2, 2015). This permit was issued by the Planning Office of the Aristotle Municipality in Halkidiki, Northern Greece. The Skouries Project, however, remains on care and maintenance as the Company awaits the timely issuance of pending routine permits and licenses, which are necessary for the project to recommence. (here).

On February 25, 2016 Eldorado Gold Corp (NYSE:USA) (NYSE:EGO) closed at 2.97 in the New York Stock Exchange, up $0.13 (4.6%) from the previous close price, with 3,570,884 shares traded. Intraday share price ranged between $3.01 (high price) and $2.81 (low price).

If the decision of the Ministry of Energy is not reversed in a timely manner - it may force Eldorado to reconsider its investment plans for Greece.

On February 27, 2015, its Greek subsidiary, Hellas Gold S.A., received a formal notice from the Greek Ministry of Productive Reconstruction, Energy and Environment revoking the approval required to complete final construction of the processing plant at the Skouries Project.

The notice from the Ministry indicates, however, that the Ministry may reverse its decision once it completes an internal review process.

The company projects in Greece include Perama Hill (100%), Olympias (95%) and Skouries (95%).

Because of the inaction of the Greek government in releasing the necessary building permits, the company decided to suspend the Skourie project and lay off about 600 people.

Another 500 people are at risk of lay off at Olympias if Eldorado won't receive the permits required by the first quarter of 2016.

However, the company rightly remains committed to its portfolio of Greek assets and the realizable benefits to all of the stakeholders involved, workers and the country as well:

Since 2012 Eldorado invested in excess of US$450 million on the construction and development of the two mines in Greece. Once these two mines reach commercial production, Hellas Gold will become one of Greece's top exporters. The funds invested in Greece to date have been used primarily for payments to Greek stakeholders, such as the company's employees, suppliers of goods and services, contractors and government.

In the beginning of 2015 the company announced to plan to invest US$310 million on the development of Skouries and Olympias in 2015, which will generate additional jobs for the Greek people and taxes for the Greek government.

The situation is uncertain and Eldorado's stakeholders hope a fast resolution of this issue between the company and the Greek government.

Some figures about Olympias project (Figures released June 2015 - update expected to reflect new project timing):

Eldorado Gold Corp owns and operates mines around the world. The Company's activities involve various facets of the mining industry, including exploration, development, production and reclamation. Its operating gold mines include Kisladag in Turkey (100%), Efemcukuru in Turkey (100%), Tanjianshan in China (90%), White Mountain in China (95%) and Jinfeng in China (82%). Its gold projects include Perama Hill in Greece (100%), Olympias in Greece (95%), Skouries in Greece (95%), Certej in Romania (81%), Eastern Dragon in China (75%) and Tocantinzinho in Brazil (100%). Its other operating mines include Stratoni Lead and Zinc Concentrates in Greece (95%) and Vila Nova Iron Ore in Brazil (100%). The Company has completed an exploration program in Romania at the Bocsa, Magura, Muncel, Brad and Deva projects, which are situated in the Apuseni district near the Certej deposit.

Company's 2015 operating results highlights:

  • Gold production of 723,532 ounces (including production from tailings retreatment at Olympias), exceeding 2015 guidance of 640,000-700,000 ounces of gold.
  • 2015 all-in sustaining cash costs averaged $841 per ounce; cash operating costs averaged $552 per ounce; lower than original 2015 guidance of $570-615 per ounce.
  • Closed the year with total liquidity of approximately $665 million, including $290 million in cash, cash equivalents and term deposits, and $375 million in undrawn lines of credit.
  • 2016 forecast gold production estimated to be 565,000-630,000 ounces of gold at an average cash cost ranging between $585-620 per ounce, and an all-in sustaining cash cost between $940-980 per ounce.

On February 26, 2016, Eldorado closed at $2.91 per share, down 0.06 (-2.02%) from the previous close price, with 3,281,359 shares traded on the NYSE. The intraday price ranged between $ 2.88 (NYSE:LOW) and $3.08 (High).

The share price fell by 0.34% over the last 5 trading days.

Final Point:

This is just the Council of State, Greece's Supreme Court on administrative and environmental matters. Eldorado is now waiting the decision of the Ministry of Energy to timely reverse the formal notice received by the Greek Government which revoked the approval required to complete the final construction of the processing plant at the Skouries Project.

If the Greek Government won't follow up the decision from the supreme grade of the Greek administrative justice, Eldorado may be forced to reconsider its investment plans for Greece with bad consequences for a lot of people that will remain unemployed and the economy of the country will miss a big opportunity to recover.

Some figures about building opportunities in Greece and development in spite of the "noise":

Eldorado's stakeholders hope for a fast resolution of this issue between the company and the Greek government.

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.