Vancouver-based Eldorado Gold (
TSX:ELD,
Forum) stock lost $0.83 Tuesday, shrinking 19% down to $3.53, after revealing a dispute with Greece’s environment ministry would see them suspend work immediately at one of its projects in that country, with another under threat.
The company announced 600 workers would be laid off at Skouries and 500 more jobs were in doubt at another project if the dispute continued.
Seemingly deciding to play hardball after a year of false starts and protests both for and against the mine, CEO Paul Wright said the company’s projects were being used as “a political toy” and warned he expected permits on a second project to be approved by March of this year – or else.
But the Greek Environment Minister Panos Skoutletis vowed his government “would not be blackmailed,” according to a Canadian Press report, telling journalists any decision would be based on the public interest and environmental protection, not Eldorado’s timelines.
The flap comes days after the Greek authorities levied a US$1.8 million fine on a Greek subsidiary of Eldorado for 21 alleged breaches of safety regulations between 2012 and 2014.
The company put out a
press release Monday that stated, “Hellas Gold received approval for its Environmental Impact Study in 2011, yet since 2012, the Ministry and other agencies have not entirely fulfilled their permitting and licensing obligations primarily as a result of the lobbying efforts by anti-development interest groups. In addition, during 2015, the Ministry revoked or suspended certain permits of Hellas Gold […] which has had a negative impact on the Company's schedule and budget to develop its assets.”
Eldorado has invested over $300 million in the Skouries project to date, with the equivalent having been invested in the Olympia project. Maintaining the shuttered Skouries site will reportedly cost the company around $1 million per month.
REACTION:
Stock dropped 19% on the day, climbing back after an intra-day low of $3.30 to a $3.54 close.
Eldorado had closed Monday at $4.36. That drop took half a billion dollars off the T.ELD market cap, which now sits at $2.5 billion market cap.
OUR TAKE:
Greece’s government is infamously bureaucratic and inefficient, making progressing mines in that country a difficult process at the best of times. With a left wing government and vocal protests, both for and against, making things noisy, slow and combative, it’s not surprising the company has decided to play hardball.
The question of whether it makes sense to lose $1m a month to put pressure on the government is easily answered when one considers the company has already sunk $700 million in to the projects in question – but the half billion dollar market cap hit on this news is a rough side effect, especially with the well-diversified company doing business in five countries.
The bigger question is, with unemployment in Greece infamously high, does the government really care if 600 jobs go bye-bye? Both sides are all-in; who’s going to fold first?
--Chris Parry
https://www.twitter.com/chrisparry