Eldorado Gold: Costs Up on Rising Oil Prices

High oil prices are responsible for yet another gold miner announcing increased cash costs.

Eldorado Gold Corp. (EGO) released on Friday updated estimates for its Efemcukuru project in Turkey and as widely expected, increased its average life of mine [LOM] cash operating costs by 25.5% from $285 per ounce, due to input and consumable costs, including a revised oil price of $116 per barrel from $60 per barrel previously.

Eldorado also said it was pushing back the mine start-up by a quarter and now expects a Q1 2010 start date.

Shares in Eldorado fell 2% or C$0.20 on Tuesday. The stock continued to fall Wednesday morning, when it dropped another 2% or C$0.16 to C$8.07  

Scotia Capital analyst David Christie stayed pat with his Efemcukuru estimates, noting his cost forecasts already anticipated higher input and consumable costs.

In a note to clients, he said:

Higher capital costs were expected and therefore any weakness in the share price could present a buying opportunity in our view.

He maintained his "sector perform" rating on the stock and left unchanged his $10 one-year target.

Blackmont analyst Richard Gray also anticipated the cost escalation and only slightly raised his net asset value from C$6 to C$6.10.

Based on the company's "relatively high political risk profile" and his target price, left unchanged at C$8.75, that provides limited potential return, Mr. Gray maintained his "hold" rating on the stock.