Eldorado Gold: The One Positive Emanating From Greece

| About: Eldorado Gold (EGO)

Eldorado Gold (NYSE:EGO) recently completed its purchase of European Goldfields creating a mid-major gold stock focused on the Romania/Greece/Turkey region with production for 2012 expected to be in the range of 730,000 to 775,000 ounces and a goal of 1.5 million ounces by 2015 and 1.7 million ounces by 2016.

The purchase of European Goldfields added a number of development projects and one producing mine to the roster. The three medium sized, low cost projects, Olympias, Skouries and Certej, are expected to be contributing to production in the next three years. Of the three, Olympias, holds the most potential with potential production from the reprocessing of tailings and additional drilling to raise estimates.

The Olympias project in Greece received approval for the Technical Study on March 22nd moving the project forward providing an example of the Greek government moving forward with projects despite the extreme circumstances. Mining and reprocessing of tailings at Olympias are expected to begin in July of 2012 with the hope that full scale production can begin in 2015 at a total capital cost estimated at $207 million.

The Technical Study at Skouries was approved during the first quarter of 2012 as well. Skouries is expected to produce 130,000 ounces of gold and 28,500 tonnes of copper at a negative operating cost of $700 per ounce in 2015. Capital costs are expected to run approximately $345 million dollars for the phase one.

Perama Hill continues to move forward with the approval of the Preliminary Environmental Impact Study. Despite the problems in Greece, the Perama Hill project has been given a special Fast Track status from the government. The full Environmental Impact Assessment was submitted to the government at the end of March with final approvals expected by the end of the year. Capital costs are estimated at $188.5 million and when fully operational will add 110,000 ounces to annual gold production at an estimated cash operating cost of $278 per ounce.

A recent deal with Hunt Mining (OTC:HMXZF) expands Eldorado's reach into Argentina. The deal covers 2,013 square kilometers over 20 exploration and six discovery concessions in the Santa Cruz province.

Eldorado Gold was unfairly punished for its purchase of European Goldfields as the markets fretted over Greek election results and uncertainty surrounding the ability to get the projects approved on schedule given the more than difficult climate.

One point investors should remember is that Eldorado has jumped on the gold price linked dividend with its own version offering up a nine Canadian cent semiannual dividend paid in February giving the stock a yield of more than 1.5%.

Eldorado Gold is an interesting stock from two perspectives. First you have the gold stock play as a mid-major growing production with a gold price linked dividend. This puts a floor under the stock creating a value play based on the increasing production from new mines and rising gold prices. The second play is on Greece itself. The government is fully behind the company as evidenced by its granting of Fast Track status for Olympias. Any improvement in the economic climate in Greece would trigger a positive re-rating for the stock.

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