Commissioning is underway at Olympias Phase II in Greece and Eldorado remain on track for declaring commercial production in the third quarter of this year.
Europe-focused gold producer Eldorado Gold has balanced a slight miss on March quarter production with lower costs as it continues to prove it can make a success of mining in Greece.
Gold production for the quarter from Eldorado’s current operating mines in Turkey, Kisladag and Efemcukuru, came in at 75,172 ounces, slightly below levels from the corresponding period and a little disappointing compared to analyst expectations.
The cost profile, however, was significantly improved. Total cash costs were US$483 per ounce underpinning all-in sustaining cash costs of $791/oz. This was against forecast cash and AISC for 2017 of $484-535/oz and $845-875/oz, respectively. Full-year guidance remained unchanged.
The gold price realised was $1,222/oz, helping Eldorado to a profit for the quarter of $3.8 million, which took cash and equivalents to $873.9 million.
Possibly more importantly in the eyes of investors was the steady progress made at the Greek assets, Olympias and Skouries, which have previously been the source of considerable headaches for Eldorado as management struggled to overcome permitting delays and general bureaucratic impediments.
“We have had a very successful first quarter of the year, with progress made at all of our development projects,” outgoing Eldorado chief executive Paul Wright said.
Olympias is expected to add 79,000oz of gold per annum, 1.7 million ounces of silver, 42 million pounds of lead, and 53Mlb of zinc over 30 years. Sustaining cash costs were expected to average $455/oz on the back of of strong by-product credits.
“At Skouries, work continued during the quarter and we are still aiming for production in 2019,” Wright said. Earthworks, building erection and site clearing all progressed at Skouries despite some weather difficulties on site.
Engineering optimisation projects at pipeline projects Tocantinzinho (Brazil) and Certej (Romania) also moved ahead as planned.
RBC analyst Dan Rollins expected Eldorado shares to “gradually rerate” as long as this progress was maintained.
“We reiterate our Outperform recommendation as we expect Eldorado’s shares will continue to gradually re-rate higher as the market gains confidence in the company’s Greek build-out with the successful ramp-up of Olympias Phase II and unimpeded construction of Skouries,” he said in a note early this week.
“Our positive view is supported by Eldorado’s strong balance sheet, solid free cash flow from producing mines and above average reserve life.”
He said recent performance represented a turnaround in form for Eldorado.
“Since the start of the year, Eldorado’s shares have risen 6.2%, outpacing the broader Gold Miners Index, which is up 3.7% over the same period,” Rollins said.
“The strong start to the year is counter to Eldorado’s performance the [past] two years, which has seen the company’s shares significantly underperform the broader peer group.
“We attribute the outperformance to improved market confidence in Eldorado’s Greek build-out with the ramp-up of Olympias well underway, lack of political interference around the development of Skouries, and guided improvement in payable terms on gold-bearing concentrates at Olympias (potential to boost gold sales by as much as 15,000ozpa without any incremental costs post 2017).”