Eldorado Gold - All You Need To Know About 2015

| About: Eldorado Gold (EGO)

Summary

Eldorado Gold released its 4Q'15 and full year 2015 results on March 24, 2016. For the year, the company reported a loss of $1.54 billion, or a loss of $2.15

The company decided to suspend the dividend due to market condition. A move that will save about $14 million per year.

I recommend a hold for the long investors and I would wait for a retest of the $2.75 to trade the stock.

Click to enlarge

Image: Skouries.

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 (95,483 Oz in Q2'15) and three mine in China (81,991 Oz in Q2'15). The company has three projects in Greece: Skouries, Olympias and Stratoni ("zinc").

Balance sheet snapshot:

Year 2015 Q4 2015 Q3 2015

Q2 2015

Q1 2015 Year 2014 Q4 2014 Q3 2014
Production in Oz 723,532 169,732 183,226 181,160 189,414 789,224 199,572 192,578

Gold Revenues

Total Revenues

in $ Million

823.8

863.3

189.4

199.3

206.2

211.5

204.2

214.2

224.0

283.3

980.9

1,067.9

244.5

259.0

263.51

Total cash cost

$/oz

552 567 552 569 521 500 505 488

AISC

in $/Oz

842 914 835 900 729 779 761 735
Net Earnings to shareholders $ Million (1,540.9) (1,238.0) (96.1) 17.0 (8.2) 102.6 30.6 19.8
Shares Outstanding million 716.59 716.59 716.59 716.59 716.58 716.21 716.217 716.284
Adj. EPS 0.02 (0.01) 0.02 (0.01) 0.19 0.04 0.05
EPS (2.15) (1.73) (0.13) (0.28) (0.01) 0.14 - 0.03

Impairment

in $ million

1525.2 - - - - - -
Average realized gold price $/Oz 1,168 1,105 1,132 1,201 1,232 1,266 1,199 1,274

Total Debt

$ Million

589.40 589.40 588.85 588.3 587.8 587.20 587.2 587.2

Cash generated from operation

$ Million

193.1 28.9 43.4 61.9 58.9 - 103.3 78.7

Cash and Cash equivalent

$ Million

288.2 288.2 389.8 449.8 494.3 498.51 498.5 501.3
Dividend per share - Suspended 0.01C$ 0.01C$ 0.01C$ - 0.01C$ 0.01C$
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2015 Financial and Operational Highlights

  • Gold production of 723,532 ounces (including production from tailings retreatment at Olympias), exceeding original 2015 guidance of 640,000-700,000 ounces of gold.
  • Gold revenues were $823.8 million on sales of 705,310 ounces of gold at an average realized gold price of $1,168 per ounce.
  • Liquidity of $667.6 million, including $292.6 million in cash, cash equivalents and term deposits, and $375.0 million in unused lines of credit.
  • All-in sustaining cash costs averaged $842 per ounce; cash operating costs averaged $552 per ounce.
  • Completed and released two positive Feasibility Studies: Tocantinzinho and Certej.
  • Eastern Dragon Project Permit Approval: received from the National Development and Reform Commission.

During 2015 the Company recorded non-cash impairment charges totaling $1,049.2 million in property, plant and equipment (net of deferred income tax recovery), and $476.0 million in goodwill mainly related to Greece.

The impairment of property, plant and equipment included $739.9 million related to Skouries, $214.1 million related to Certej, $31.2 million related to Stratoni, $35.8 million related to Tanjianshan, and $28.2 million related to Vila Nova.

The Company's balance sheet remains one of the strongest amongst its peers, with approximately $290 million in cash, cash equivalents and term deposits and $375 million in undrawn credit lines.

TB1 - Production of Gold per mine:

Country Mine

4Q'15

Oz

3Q'15

Oz

2Q'15

Oz

1Q'15

Oz

4Q'14

Oz

Turkey Kisladag 64,574 69,672 67,778 79,256 -
Efemcukuru 24,434 27,123 27,705 21,220 -
China Tanjianshan 16,808 29,055 25,074 26,626 -
Jinfeng Mine 36,707 38,028 38,234 36,686 -
White mountain 22,231 16,359 18,683 20,883 -
Greece Olympias 4,978 2,989 3,686 4,743 -
TOTAL 169,732 183,226 181,160 181,215 199,572
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Guidance 2016 Cash Cost Sust. CapEx Capex
Kisladag 225k to 240k 550$-600$ 50 0
Efemcukuru 90k to 100k 550$-600$ 20 0
Jinfeng 95k to 105k 700$-750$ 15 0
Tanjianshian 70k to 80k 675$-725$ 5 0
White mountain 75k to 85k 625$-675$ 15 0
Eastern Dragon 10k to 20k 125$-175$ 0 35
Tocantinzinho project - - 0 10
Olympias - - 0 155
Skouries - - 0 15
Certej project - - 0 20
Vila Nova (Iron) C & M - - -
TOTAL 565k to 630k 585$-620$ 105 235
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Proven and Probable P1+P2 Reserves: in 2014 the company indicated 25.95 Moz and in 2015 it was 24.89 Moz. (27.73 Moz/2013)

Commentary:

Eldorado Gold released its 4Q'15 and full year 2015 results on March 24, 2016. For the year, the company reported a loss of $1.54 billion, or a loss of $2.15 per share, largely due to an impairment charge.

AISC was $842/ Oz which was a very decent number.

Total revenue was reported as $863.3 million, down 19.2% year over year. The results did not meet Wall Street expectations and the street was not impressed at the news of the suspension of the dividend. The price per share tumbled today 4%. However, EGO had a really nice run with the price of gold since early February and is still up over 40% from its low at approximately $2.10.

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Conclusion:

It is hard to be very optimistic about Eldorado Gold right now, and I am afraid the stock may eventually trade in the $2.50's again if gold cannot stay well above $1200/ Oz? Gold is of a paramount importance.

At this point of time, EGO is the perfect proxy for gold and will fluctuate accordingly.

We are experiencing the famous "sell on the news", in my opinion.
However, looking deeper into the fundamentals, the Greece saga is quite worrisome, indeed.

The Greek leftist government is definitely not friendly at all, and has created a very damaging business situation, which has put the entire Greek prospect -- Skouries and Olympias -- in jeopardy.

On February 25, 2016, the company provided a Greece update:

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.

I am confident that the company will finally resume and complete the Skouries and the Olympias projects, but this long battle with the leftist government of Greece, is quite damaging for the balance sheet, and I do not see a quick solution unfortunately. However, Eldorado has still a good liquidity position of $667.6 million and a sufficient production, assuming a gold price above $1,150/Oz minimum in 2016.

If we look at the 2016 guidance and compare to 2015 production, the numbers are not very convincing. Most of the mines will be producing less gold compare to 2015, but it is not dramatic yet -- Please look at the chart above.

I recommend a hold for the long investors and I would wait for a retest of the $2.75 to trade the stock.

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: I trade EGO