Eldorado Gold - 1st-Quarter 2016 Earnings Review

| About: Eldorado Gold (EGO)

Summary

Eldorado Gold released its 1Q'16 results on May 11, 2016. Total Revenue was $ 140.989 million, down 16.9% quarter over quarter.

Skouries got some good news on May 9 and the company will resume the development of the Skouries mine.

Technically, EGO is now overbought with an RSI >70 and should probably retrace around $3.85.

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Image: Skouries mine.

Eldorado Gold Corporation (NYSE:EGO)

This article follows my preceding article on Eldorado Gold published on March 25, 2016 about the third-quarter results.

Eldorado Gold is producing gold mainly from two mines in Turkey (79,892 Oz in Q1'16) and three mine in China (58,323 Oz in Q1'16). The company has three projects in Greece: Skouries, Olympias and Stratoni ("zinc").

Balance sheet snapshot:

Q1 2016 Q4 2015 Q3 2015

Q2 2015

Q1 2015 Q4 2014 Q3 2014
Production in Oz 140,989 169,732 183,226 181,160 189,414 199,572 192,578

Gold Revenues

Total Revenues

in $ Million

160.0

164.132

189.4

199.3

206.2

211.5

204.2

214.2

224.0

283.3

244.5

259.0

263.51

Total cash cost

$/oz

603 567 552 569 521 505 488

AISC

in $/Oz

886 914 835 900 729 761 735
Net Earnings to shareholders $ Million 0.7 (1,238.0) (96.1) 17.0 (8.2) 30.6 19.8
Shares Outstanding million 716.59 716.59 716.59 716.59 716.58 716.217 716.284
Adj. EPS 0.00 0.01 (0.01) 0.02 (0.01) 0.04 0.05
EPS 0.00 (1.73) (0.13) (0.28) (0.01) - 0.03
Average realized gold price $/Oz 1,198 1,105 1,132 1,201 1,232 1,199 1,274

Total Debt

$ Million

589.944 589.40 588.85 588.3 587.8 587.2 587.2

Cash generated from operation

$ Million

25.1 28.9 43.4 61.9 58.9 103.3 78.7

Cash and Cash equivalent

$ Million

230.958 288.2 389.8 449.8 494.3 498.5 501.3
Dividend per share 0 Suspended 0.01C$ 0.01C$ 0.01C$ 0.01C$ 0.01C$
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1Q'16 highlight:
  1. Liquidity of $611.3 million , including $236.3 million in cash, cash equivalents and term deposits, and $375.0 million in unused lines of credit.
  2. Receipt of the Skouries building permit and the Olympias Phase II installation permit.

TB1 - Production of Gold per mine per Quarter (6):

Country Mine

1Q'16

Oz

4Q'15

Oz

3Q'15

Oz

2Q'15

Oz

1Q'15

Oz

4Q'14

Oz

Turkey Kisladag 52,376 64,574 69,672 67,778 79,256 -
Efemcukuru 27,516 24,434 27,123 27,705 21,220 -
China Tanjianshan 14,053 16,808 29,055 25,074 26,626 -
Jinfeng Mine 25,935 36,707 38,028 38,234 36,686 -
White mountain 18,335 22,231 16,359 18,683 20,883 -
Greece Olympias 2,774 4,978 2,989 3,686 4,743 -
TOTAL 140,989 169,732 183,226 181,160 181,215 199,572
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Guidance for 2016 confirmed at the conference call 1Q'16.

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 1Q'16 results on May 11, 2016. Total Revenue was $ 140.989 million, down 16.9% quarter over quarter.

Two important topics this quarter.

1 - The company is in the process of selling its Chinese assets.

M. Paul Wright, CEO, said in the conference call the following:

We announced a few weeks ago that we reached an agreement with China National Gold Group to sell our 82% interest in the Jinfeng mine for US$300 million. This transaction is expected to close in three to four months. As we had previously disclosed, the company actively continues to advance the process of monetizing its remaining Chinese assets, and we'll update all stakeholders as appropriate.

On April 27, 2016, Eldorado Gold announced the following:

It has reached an agreement to sell its 82 percent interest in the Company's Jinfeng mine to a wholly-owned subsidiary of China National Gold Group ("China National Gold") for US$300 million in cash, subject to certain closing adjustments.

The transaction is expected to close in the third quarter 2016 and is subject to obtaining various regulatory and other approvals and other customary closing conditions.

A little bit about the Jinfeng mine:

In 2016, Jinfeng is expected to process 930,000 tonnes of ore at a grade of 3.89 grams per tonne gold. The ore will be strictly sourced from the underground operations and a small amount of stockpile, as the open pit operations were successfully completed in April 2015. As underground development opens additional working faces, underground ore mining will increase to an eventual target of 1.2 million tonnes of ore per year, bringing production back above 130,000 ounces of gold per year. Sustaining capital costs for 2016 are estimated at $15 million.

Production of Gold per mine (China):

Country Mine

1Q'16

Oz

4Q'15

Oz

3Q'15

Oz

2Q'15

Oz

1Q'15

Oz

China Tanjianshan 14,053 16,808 29,055 25,074 26,626
Jinfeng Mine 25,935 36,707 38,028 38,234 36,686
White Mountain 18,335 22,231 16,359 18,683 20,883
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Eastern Dragon was not a producing mine in 2015. However, the Eastern Dragon Project Permit Approval was received from the National Development and Reform Commission.

M. Paul Skayman, said in the conference call:

Eastern Dragon, we continue to work with the government on the conversion of the exploration license to the mining license. In March, we received formal notice of the application has been accepted and we'll continue to update as things progress.

As M. Wright said, we are expecting now more news soon.

2 - Greece...

M. Wright gave us an update regarding Olympias mine and Skouries mine.

Olympias is on schedule:

The installation permit for Olympias Phase 2 was granted on March 22, and Phase 2 construction began early in the second quarter. Our team here is now focused on completing detailed designs for Phase 2, demolition of existing footings and the initial concrete pours are underway. We remain on schedule for commissioning Phase II for early 2017.

Skouries got some good news on May 9 and the company will resume the development of the mine.

I'm pleased to say that on May 9, we also received the approval of the updated technical study. This time, not only the direction of the courts, but through the normal course of permitting. I'm confident that we are now on the right track with the Ministry of Environment and Energy in Greece, as we continue to have more constructive engagement with the Ministry and the technical services group.

Our teams in both Canada and Greece are working together to finalize outstanding engineering design necessary to complete construction of Skouries. That said at this point, I do not have the final updated CapEx numbers for you today, nor do I have he updated timeline.

Conclusion:

This was a mixed quarter, I would say. Production and revenue for the quarter were at a record low -- look at the chart above.

However, Eldorado gold is now in the process of monetizing its Chinese assets and sold already the Jinfeng mine. We are waiting for the news. The company will add $300 million in cash to its liquidity.

Despite ongoing capital spend on growth projects, our balance sheet remains very strong with total liquidity of $611 million, including $236 million in cash and cash equivalents, and $375 million in undrawn lines of credit.

Furthermore, the company received some good news about the Skouries mine and the mine development is now about to resume. This is encouraging because the company already invested a lot of money there.

The cash from the Chinese assets will help reduce debt and provides cash for the completion of several projects such as Certej, which is a gold/silver project in Romania (130K Oz Au and 830K Oz Ag), or the Tocantinzinho gold project in Brazil (165K Oz annual).

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However, the situation is not really about the fundamental here. The company stock has gone from $2.10 to now $4.87 following the gold momentum and nothing else. In fact, without this bullish sentiment in gold, the company should have tumbled with such a weak production.

Technically, EGO is now overbought with an RSI >70 and should probably retrace around $3.85, in my opinion. A partial "sell" is warranted now, because I really do not see this trend going much higher without a major retracement, first.

Long-term the company may be a potential if the different projects can produce some good results.

Note: Do not forget to follow me on EGO and get updated regularly. Thank you.

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.