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Eldorado Gold: Digging Into The Updated Reserve Estimate

Mar. 09, 2021 3:43 AM ETEldorado Gold Corporation (EGO), ELD:CA18 Comments
Taylor Dart profile picture
Taylor Dart


  • Eldorado Gold released its updated Reserves & Resources statement, and recently announced an inferred resource at Ormaque in Quebec.
  • Based on strictly operating assets, Eldorado Gold has an industry-leading mine life of more than 14 years, and managed to increase its reserves year-over-year.
  • While Lamaque's mine life is below 10 years, the company's large resource base at Lamaque combined with Ormaque should easily push this mine life out further.
  • Currently, I see better value in the sector with Eldorado Gold at more than 12x FY2021 earnings estimates, but the wild card continues to be Skouries, which would be a game-changer for the company.

It's been a busy month for earnings for the Gold Miners Index (GDX), and at the same time, several producers are busy reporting their updated Reserves & Resources for FY2020. One of the first names to report its mineral statement is Eldorado Gold (NYSE:EGO), an intermediate producer that just came off an exceptional year with production up 34% year-over-year. Based on strictly operating assets, Eldorado Gold has an industry-leading mine life of more than 14 years and managed to increase reserves year-over-year.

Meanwhile, the maiden resource at Ormaque should help push Lamaque's mine life into the 2030s, assuming positive conversion. At 12x FY2021 earnings estimates, Eldorado is reasonably valued, but I see better value elsewhere in the sector.

(Source: Company Presentation)

Eldorado Gold was one of the first companies to release its updated Reserves & Resources for FY2020, with the company reporting mineral reserves of ~17.73 million ounces, up 1% year-over-year. This reserve base is made up of a more than 16-year mine life at Eldorado's cornerstone Kisladag asset and a more than 20-year mine life at Olympias, assuming a production rate of ~80,000 ounces per year (FY2024 run rate).

Combined with Lamaque's 7.5-year mine life based on current reserves, this forms a solid base for more than 10 years of gold production at above ~400,000 ounces per year. Even though Lamaque doesn't have a 10-year mine life currently, Eldorado should easily be able to add mineable material with a maiden resource at Ormaque and a significant land package locked up next door to Lamaque with the QMX Gold acquisition. Let's take a closer look at the Reserves & Resources update below:

(Source: Company News Release)

As shown in the table above, Eldorado Gold has its reserves spread across eight assets, with four of those assets currently in production (Efemcukuru, Kisladag, Lamaque, and Olympias). This reserve base

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Taylor Dart profile picture
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Comments (18)

xtamg profile picture
18 Mar. 2021
Greek Parliament 17/03/2021
+180 votes
-119 votes
The agreement is approved by Greek Parliament
16 Mar. 2021
The bill was accepted by a majority, with ND voting in favor of it in principle and all opposition parties voting against it, except for KINAL, which reserved its position during its debate, tomorrow in plenary.

Parliament: The agreement between the State and Greek Gold is accepted by a majority - It will be voted tomorrow in the Plenary
This is because Skouries has been projected to produce ~140,000 ounces of gold per year at all-in sustaining costs of $215/oz, representing 80% plus margins at the current gold price...isnt this 140K oz of GOLD AND 67 million pounds of copper?
@Mike12369 yeah Mike .... Skouries copper production is huge and copper was well above $4 last I checked while Eldorado uses $2 or 2.50 in their economics. Huge value in that copper production at today's prices.
v.c profile picture
@Taylor Dart If EGO got skouries mines what do you think is fair value?
Good detailed analysis on the reserves position, thank you. Not currently holding but positive developments on Skouries will likely bring this name from my watch list to holding list.
09 Mar. 2021
Taylor, you mentioned for those willing to gamble on Skouries getting fully permitted?

the draft agreement was signed by the Greek Energy Minister Kostas Skrekas. They have the majority in Parliament.

It will be submitted to a parliament committee tomorrow, and Burns expect ratification no later then end of March.

I would not call it gamble.
Taylor Dart profile picture

"Take risky action in the hope of a desired result".

Nothing is guaranteed in markets. If I'm going to speculate I prefer other names at better valuations paying yields, but a positive outcome would help the investment thesis.
Commodities-Bull profile picture

I’m long EGO but there is still the issue of funding the project and the two years it will take to build it. At the earliest construction will start next year because the company is putting out a new economic study of the project later in the year.

Skouries is a 2024-2025 story, and being so far out it does carry risks. That said, Lamaque shows lots of potential, and a project like Perama Hill could be a stop gap if they decide to push Skouries further back.
edinvest123 profile picture
@Taylor Dart

second half is in English, Page: 679

the Parliament will Vote soon on Skouries
Jeremy Robson profile picture
One of my long term holds due to it's discount to asset value. If Skouries can be built out of present cash and future cash flow the company will trade at the mid tier industry average of 1.2 times book. Still lots of upside here for the patient investor.
v.c profile picture
Nice article with good information though as a shareholder I would like a bullish one :)
@Jeremy Robson as per EGO tangible book value is $20. Can you explain how you got 1.2 P/BV. One of the reasons I am staying in EGO is its book value which may include skouries
Jeremy Robson profile picture
@v.c The average price to book for mid tier miners is 1.2 so using that metric EGO would be at market value for mid tiers at that level. I think that it may be a 1.5-2 year wait but it ought to be a reasonable target.
v.c profile picture
@Jeremy Robson got it. I thought you are saying current P/B is 1.2. I got it wrong.
EGO is tricky. Their P/B is around 0.6 which is undervalued (compared to any one) but Foward P/E is 12 (where KGC is 6 and other miners less than 10). I am hoping the market is pricing skouries and assuming P/E will shot.
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