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Eldorado Gold: The Recovery Is Proceeding Well

May 05, 2020 2:13 PM ETEldorado Gold Corporation (EGO), ELD:CA15 Comments


  • Revenues were higher than I expected this quarter with $204.66 million, up from $80.02 million the same quarter a year earlier, and up 6.6% sequentially.
  • The production for the first quarter of 2020 was 115,949 Au Oz, up 39.7% year over year, and down 2.5% sequentially. The company sold a little over 116K ounces.
  • It is time to look at EGO as a long-term investment again. However, it is crucial to trade short term about 30% of your holding.
  • Looking for a helping hand in the market? Members of The Gold And Oil Corner get exclusive ideas and guidance to navigate any climate. Get started today »

Image: Lamaque Gold Mine. Source: Mining.com

Investment Thesis

The Vancouver-based Eldorado Gold (NYSE:EGO) released its results for the first quarter of 2020 on April 30, 2020. Production for the quarter was 115,949 Au Oz, which was quite impressive. It was not a surprise because the company released the preliminary production results on April 9, 2020, and I have already commented on this part.

Eldorado Gold has changed drastically for the past year and a half. From Kisladag mine unexpected resurrection to the end of the struggle with Greece, the company moved from near bankruptcy to a sturdy gold miner with high production and future potential. A quick look at the two years chart shows the miraculous transformation.

The company has not solved all its ongoing issues, but we can see the light at the end of the tunnel. Kisladag is now producing at a level that was not experienced for many quarters, Lamaque looks strong, and Olympias is starting to deliver what was expected after a long and challenging ramp-up. The last problem is still the company's Greek assets and notably the Skouries mine. It is time to look at EGO as a long-term investment again.

George Burns, the CEO, said in the conference call:

The COVID-19 pandemic has diverted both our own and the Greek government's attention, leaving limited time to discuss advancement of our investment.

Eldorado Gold - 1Q'20 Balance Sheet And Gold Production: The Raw Numbers

Eldorado Gold 4Q'18 1Q'19 2Q'19 3Q'19 4Q'19 1Q'20
Total Revenues in $ Million 92.87 80.02 170.7 172.3 191.9 204.66
Net Income in $ Million −218.2 −27.6 12.2 4.2 91.2 -4.88
EBITDA $ Million 4.13 5.52 70.97 73.91 158.7 80.15
EPS diluted in $/share −1.38 −0.17 0.08 0.03 0.57 -0.03
Cash from Operating Activities

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This article was written by

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I am a former test & measurement doctor engineer (geodetic metrology). I was interested in quantum metrology for a while.

I live mostly in Sweden with my loving wife.

I have also managed an old and broad private family Portfolio successfully -- now officially retired but still active -- and trade personally a medium-size portfolio for over 40 years.

“Logic will get you from A to B. Imagination will take you everywhere.” Einstein.

Note: I am not a financial advisor. All articles are my honest opinion. It is your responsibility to conduct your own due diligence before investing or trading.

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I trade short term EGO now but I may use the next drop to build again a long term position.

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Comments (15)

Watched this for a long time'-Invest money in Greece, which will sap company resources, then watch the gov take it over through various means. Productive mines outside Greece, endless potential loss in country that has no rudder. Sometimes it is just time to sell an asset and move on where capital can become productive. Will hold what I have on off chance company will focus on money making ventures vice a wish and dream...could be wrong, maybe it will all work out, but promises to date haven't been met, and think they never will be.
Fun Trading profile picture

The beauty is that EGO doesn't need Greece to do quite well now. I think it is helping the company in the negotiations. However, Greece will always be Greece no matter what and even is Skouries is completed, I see a stream of issues, problems, disputes, and extra expenses...

Best regards,
Joku_vaan profile picture
Fun Trading: “Philip Yee has been an exceptional CFO and helped much during the recovery.”

To my knowledge, Philip Yee has not achieved anything exceptional for the company. The refinancing of the $600 million 6.125% senior notes due December 2020 was a disappointment, and IMO this is his most significant achievement to date. The refinancing included the new US$300 million 9.5% senior secured second lien notes due 2024 (offered at 98% of par).

On Sep 30, 2019 Philip Yee purchased in the public market 100000 EGO shares at about US$7.87. As a shareholder of EGO I like this kind of activity very much (and even see it as exceptional).
Fun Trading profile picture

I think he put some financial discipline and tamed Georges Burns who is clueless. Refinancing of the debt and cash appropriation along with good accounting has been a support. If you compare with the precedent CFO it has been night and day.
When a job is well done it goes noticed but fundamental.

Best regards,
What’s your take on Greek parliament passing new law to relax environmental restrictions?
Fun Trading profile picture

Thank you for the link. However, the issue is not the law but the Greek government. Yes, it is much better now compared to the Syriza but you can see that the government is not really helping as it was promising.
Yes, they deliver a few permits but after many months of negotiation what have we accomplished? It is the same issue recurring over and over in Greece. It seems that they love shooting themselves in the foot, tries to heal, and shoot again.
Skouries and Eldorado Gold is a great source of revenue for Greece but on the one hand, they want it and on the other hand, they don't. Politic is a disease that has killed this "democratic" country. EGO lost a fortune trusting those guys and almost went bankrupt.

Best regards,
Thank you. So you still don’t believe Skouries problem is solved. Hopefully we will see something more definitive soon.
Fun Trading profile picture

Thank you, yes I will believe it when I see it signed, agreed officially.

It has been so many months of waiting and no progress that I really wonder what is going on.
However, it is not a big deal for EGO now. Perhaps it is better that way because Skouries may need about $600 million in CapEx and I do not see a partner willing to go ahead with EGO.
Tough timing and high CapEx with a Greek government that you can only trust halfway, it is not simple and it may be a negative for EGO all considered.
"if the economy is slowly restarting, the gold price may start weakening"
Gold was 1700 before the CV crisis, it is 1700 now. Why would it weaken? Considering the trillions of money printing and the fact that the economy is much worse now than it was in February, gold should be at 2000 at minimum.
Fun Trading profile picture

What is important is to look at all the spectrum of what could happen and set a Plan A and a Plan B. It is the way you do trade your way to success.
Gold is now bullish and it could go higher, I agree, but it could go lower as well. Also, you have seen it recently, gold can be high and gold miners can sell off all of a sudden.
You have to have an open mind in this market and assume that everything that can happen can happen, good or bad even if it appears illogical to you.

Best regards,
We have a few of the miners reporting earnings tomorrow. A significant amount of mines have been shut down due to the pandemic, but happened later in Q1. I suspect Q2 to be ugly for the miners and most everyone else. Brace for impact. I loaded up on miners in March and will get ready to trim positions once this hopium rally runs out of steam and physical gold has no further momentum pushing northward.
Always enjoy reading your articles.
Fun Trading profile picture
@Richard Clausen

Good thinking and I share it. I do not think we will have huge production in Q2 but the price of gold will compensate somehow. The issue is that gold miners are way overbought right now even including EGO and it means that if the gold momentum is not blowing the big bubble will start to deflate. It is just gravity and the market is well adapted to that. It is call cyclicity.
If you believe in EGO then just use the highs and take some profit off and keep the cash when the day will come to retrace. No need to sell off and no need to keep it to the sky.

Best regards,
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