VANCOUVER — Eldorado Gold (TSX: ELD; NYSE: EGO) has been at loggerheads with the Greek government over permits, and the firm’s sociopolitical troubles in the country were a major contributor to a US$1.5-billion impairment it booked in 2015.
In January, Eldorado indicated it would curtail its investment in Greece until it received various “routine permits” and licence approvals. The courts have tended to rule in favour of the company, but the Ministry of Energy has reportedly frustrated the permit process — especially in regards to Eldorado developing its Skouries gold-copper porphyry deposit on the Halkidiki Peninsula.
The company has had problems with the ministry since around 2012, and has described the Greek regulators as having failed to “entirely fulfill their permitting and licensing obligations” due to the “lobbying efforts of anti-development interest groups.”
There is some positive news, however, as Eldorado recently received an installation permit for mill refurbishment and underground development at its Olympias gold-silver-lead-zinc mine. The company estimates it will spend US$155 million on the expansion this year, assuming everything goes according to plan.
“We need to see a way forward at both Skouries and Olympias. That requires not only receiving our permits, but also having an overall better relationship with the government,” president and CEO Paul Wright said during a conference call.
“We are seeing a more constructive relationship being manifested through the recent project approvals, and our expectation is that this will continue across both projects,” he added.
Eldorado’s political troubles and related impairments overshadowed a relatively strong 2015 on the production front. The company exceeded its guidance estimate by over 20,000 oz. gold by cranking out 723,532 oz. at all-in sustaining costs of US$842 per oz.
Setting aside the impairments, Eldorado reported an adjusted loss of US$19.3 million, or 2¢ per share.
The production boost followed better-than-expected performances at the company’s mines in Turkey. The standout Kisladag heap-leach operation produced 280,000 oz. gold in 2015.
“Kisladag and Efemcukuru performed well, beating budget on both gold production and operating costs,” chief operating officer Paul Skayman said. “Kisladag was well ahead of our earlier predictions largely due to increased solution addition and drawdowns on the inventory at the leach pad.”
Meanwhile, Eldorado is rethinking what to do with its gold mines in in China. The company’s Tanjianshan, Jinfeng and White Mountain operations are expected to crank out 255,000 oz. this year at cash costs ranging from US$625 to US$750 per oz.
Eldorado had contemplated listing the China assets on the Hong Kong Stock Exchange, but it has subsequently been approached by “a number of China-based mining companies with an interest in acquiring some, or all” of the company’s in-country portfolio. Canaccord Genuity analyst Tony Lesiak pegs the package’s net asset value at US$725 million.
“We are clearly open to interesting ideas moving forward. In the event we did divest the Chinese assets, we would look for a way to replace that production both internally and externally,” Wright said. “I’d suggest we’re probably a little bit more interested in external opportunities now than we were, say, a year or two ago. But I’d point out there aren’t a lot of gems just waiting on the curb to be picked up.”
Canaccord has a “hold” rating on Eldorado with a $4.75-per-share price target, and Lesiak noted on March 24 that “a divesture of the [China] assets would provide a sizable war chest to diversify the geographic risk profile. [Eldorado] has already shown an interest in Canada with an investment in Integra Gold (TSXV: ICG; US-OTC: ICGQF), and owns 15.3% of the company.”
Eldorado finished 2015 with US$293 million in cash and equivalents and US$475 million in undrawn lines of credit. Shares have traded in a 52-week range of $2.67 to $6.68 per share, and closed at $4.04 at press time.
Eldorado has 717 million shares outstanding for a $2.8-billion market capitalization.