Eldorado Gold’s significant outperformance

Eldorado Gold (EGO) significantly outperformed its peers (JNUG) (GDXJ) as well as gold (GLD) in the first quarter with a gain of 60.8%. Its close peers IAMGOLD (IAG), Yamana Gold (AUY), and New Gold (NGD) lagged substantially compared to its stock performance.

Investors should, however, note that the stock’s gain came after a huge loss of ~60% for it in 2018. The issues at its mines in Greece and Turkey were behind its weak stock price performance in 2018.

EGO Skyrocketed in Q1—Could This Outperformance Continue?


Positive developments

These issues seem to be turning a corner in 2019. In January, Eldorado announced that it would be resuming mining and heap leach operations at its Kışladağ mine in Turkey. With this announcement, the company suspended its previously announced mill project. The development came as a relief for investors, who weren’t keen on the risk the company was taking with the new project.

On April 2, Eldorado announced that it had resumed operations at the Kışladağ mine. With the start of these operations, Eldorado should be able to deliver 145,000–165,000 ounces of gold at cash costs of $570–$620 per ounce.

On April 1, Eldorado announced that it had started commercial production at its Lamaque mine in Quebec. Through production at Lamaque and heap leach operations at Kışladağ, Eldorado should be able to deliver 500,000 ounces of gold equivalent production in 2020, which implies growth of more than 50% by 2020.

During its fourth-quarter earnings results, Eldorado announced encouraging production guidance for the next three years.

A word of caution

The above-mentioned factors have restored some of investors’ confidence in Eldorado stock. Investors should, however, proceed with caution, as the company isn’t completely out of the woods yet. Its Skouries project in Greece has been stuck in limbo since the Greek government’s delay of its permits. The company’s debt position also needs to improve for investors to turn around completely on its stock.

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