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Eldorado Gold: The Positive Arbitration Ruling Is Just The Beginning

Apr. 05, 2018 12:27 PM ETEldorado Gold Corporation (EGO), ELD:CA54 Comments


  • Eldorado Gold won the arbitration against the Greek government.
  • The remaining Skouries mine permits should be received sooner or later.
  • Eldorado Gold should focus on Lamaque and Kisladag and leave Skouries at care and maintenance at least by 2022.
  • EGO is a great buy at a share price below $1.

Eldorado Gold (NYSE:EGO) announced a positive ruling of the arbitration panel regarding its Greek Skouries mine. According to the news release:

The Panel's ruling rejects the Greek State's motion that the technical study for the Madem Lakkos metallurgy plant for treating Olympias and Skouries concentrates, as submitted by the Company's Greek subsidiary Hellas Gold S.A. ("Hellas Gold") in December 2014, was in breach of the provisions of the Transfer Contract.

Due to the positive ruling, Eldorado's management expects that the remaining permits for its Skouries mine will be issued:

We look to the Greek State to fulfil its obligations under the Transfer Contract including issuing the outstanding permits for the Skouries project.

Despite the positive ruling of the panel, it is yet unknown when the Skouries permits will be issued. However, last week, Eldorado filed a new Skouries technical report that envisions a significantly reduced environmental footprint of the mine. Together with the positive arbitration ruling, the decreased environmental footprint should help with the permitting process.

ChartEGO Price data by YCharts

Although the positive ruling of the arbitration is a very good news, the initial market optimism has faded quite quickly. Although the stock opened almost 10% up, the majority of the gains was wiped out quite quickly. The explanation that the main reason is that the stock market is down can hardly hold, as gold (GLD) and the gold miners (GDX) (GDXJ) were slightly up. The main reason for the relatively cold reaction is the uncertainty regarding Eldorado's ability to finance the development of its projects.

According to the March 21 news release that sent Eldorado's shares 20% lower, the company will need $490 million for construction of the Kisladag mill, $99 million to take the Lamaque mine into production, $689 million to build the Skouries mine, and $600 million to repay the December 2020 senior

This article was written by

Peter Arendas profile picture
An in-depth analysis of the royalty and streaming industry

I am an associate professor at the University of Economics in Bratislava, Department of Banking and International Finance. My dissertation was focused on commodity markets and my habilitation was focused on the calendar anomalies. I have more than 15 years of investing experience. My investments mostly focus on small- and mid-cap companies in the resource sector. Since May 2019, I have been preparing regular monthly reports focused on the precious metals royalty & streaming industry. Based on positive feedbacks and numerous inquiries, I decided to launch a Marketplace Service named "Royalty & Streaming Corner", which provides an in-depth analysis of this exciting market segment, as well as investment ideas from the mining industry.

Analyst’s Disclosure: I am/we are long EGO. 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.

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