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EGO’s Projects Impress: Could They Provide Further Upside?

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Updated

Project update

Eldorado Gold (EGO) provided an update on its growth and exploration projects during its investor day on September 7, 2016. The company now has most of its permits in hand, and it’s restarting its development plans at its high-quality Skouries and Olympias projects.

During Eldorado’s 3Q16 earnings call, its CEO, Paul Wright, mentioned that the final development of Olympias Phase II was moving rapidly, with production on track to start in 1Q17.

In 3Q16, the company also acquired an exploration license for its Bolcana porphyry project in Romania. It has already started drilling in this area.

EGO also has a 100%-owned Brazilian development project, Tocantinzinho, which is pending board approval and could come online in 2019.

With these projects, Eldorado’s production could potentially double by 2020 while its unit costs reduce. Its peers (GDX) (GDXJ) New Gold (NGD), Coeur Mining (CDE), and Agnico Eagle Mines (AEM) are also developing projects to improve their productions and cost profiles.

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Financing projects

Eldorado sold all of its Chinese assets in May 2016, exiting the country. This move will significantly strengthen Eldorado’s balance sheet. It’s expected to use the $600 million in proceeds to grow its business. It may start a project in Brazil, which could improve its geographical profile going forward.

Turning positive

Many analysts have turned positive on Eldorado following its project update. The company’s ability to fund these projects internally through the proceeds from its asset sales could provide an additional layer of confidence to analysts as well as investors.

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