Top 5 to watch.https://seekingalpha.com/article/4134395-top-5-mining-stocks-watch-2018 4. Eldorado Gold (EGO)
Eldorado Gold is a senior gold miner with an annual gold production of around 300,000 toz gold, at an AISC of $900/toz (according to the 2017 production guidance). Its gold reserves equal 19.3 million toz, and its gold equivalent reserves equal 27.4 million toz. The company held $546 million in cash, and it had a $250 million revolver at its disposal as of the end of Q3. The debt stood at $593 million, which means that the net debt was at less than $50 million. Despite the above-mentioned facts, the market capitalization of Eldorado Gold is only $1.13 billion. The reason is simple. Eldorado was hit by several pieces of negative news during 2017, and the market panicked. The share price tanked, and it hasn't recovered yet.
The valuation is probably right, taking into account only the currently producing mines. However, Eldorado has some very promising development stage projects. The problem is that the most advanced of them are being negatively affected by various administrative obstacles. The Greek bureaucrats have been delaying the issuance of permits needed for the development of the Skouries mine and the second phase of the Olympias mine. The Olympias permits have been already granted, but the Skouries ones not. The Skouries project is important for Eldorado, as it should produce almost 130,000 toz gold per year at an AISC of only $150/toz due to the significant copper credits over its 21-year mine life. Eldorado is in an arbitration with the Greek Ministry of Finance and Ministry of Environment and Energy and the development of the Skouries mine was put on hold. However, the next election should take place in 2019, and it is expected that the current Syriza government will be replaced by a more business-friendly one.
More bad news came from Turkey. In June, Eldorado announced some metallurgical issues at its Kisladaq mine. As a result, the 2017 guidance was lowered from 230,000-245,000 toz gold to 180,000-210,000 toz gold and later even to 170,000-180,000 toz gold. The 2018 production guidance has yet to be announced, however, it will be probably lower than originally expected.
The issues in Greece and Turkey have overshadowed some other positive developments. In July, Eldorado Gold acquired Integra Gold and its highly prospective Lamaque project. The resources at the Lamaque property contain 3.2 million toz gold. However, over 80,000 meters were drilled in 2017, and the resources are poised to keep on growing. It is important to note that the CAPEX to take Lamaque into production is only $136 million, which can be easily funded from Eldorado's cash on hand. The mine should produce 123,000 toz gold at an AISC of $634 over the 10-year initial mine life. Lamaque is a brownfield operation, a fully permitted mill. Some infrastructure is in place, and it is situated in Quebec, a mining friendly jurisdiction. As a result, production may start as soon as in 2019.
In Q1, a PFS for the Lamaque project is expected. In early Q2, arbitration with the Greek government should be finished. Eldorado is also conducting various metallurgy tests that should help to solve the Kisladaq issues. Right now, all of these problems are already reflected in Eldorado's share price. It is possible to expect that its share price will keep on recovering little by little. If some positive catalysts (i.e., a positive result of the arbitration, a positive Lamaque PFS, positive growth in Lamaque resources, an improvement of the recoveries at Kisladaq, etc.) occur, the recovery may be quite quick.