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WIKI ANALYSIS
Eldorado Gold Corporation (TSX:ELD, NYSE:EGO, ASX:EAU) is a Canada based gold producer that also engages in exploration and development activity related to both gold and iron ore (owns 100% of the Vila Nova Mine in Brazil which has pp reserves of 9.272 mil tonnes-61% iron, and a nine year mine life).[1] It oversees mining activity in Brazil, China, Greece, Turkey (production at Kışladağ, development at the Efemçukuru gold project) and the surrounding areas. As one of the lowest cost gold producers (in the third quarter of 2010 it produced gold at an average cost of $386/oz and sold it an average price of $1231/oz a ratio of 3.2)) with a strong balance sheet and no hedge positions, Eldorado is well positioned for further growth.[1][2] While the 2009 $2 billion acquisition it made of Sino Gold gave it a much needed presence in a country with a rapidly growing gold industry (China leads all nations in gold production and consumption) it also gave it the distinction of largest international gold company in China. As of December 18, 2011 when Eldorado initiated a $2.5B takeover of European Goldfields it also owns the Skouries and Olympias gold projects in Greece as well as other operations in Romania. The takover comes a couple days prior to a key European Goldfields vote on whether to approve the $600M financing package offered by Quatar Holdings Inc (needed for Skouries and Olympias).[3]
As long as benchmark currencies continue to struggle gold prices will continue to rise in the long term even after undergoing seasonal fluctuations and short term record highs.[4] According to Newmont, the highest ranked Forbes 2010 The Global 2000 gold company[5] CEO, upward pressures will push gold prices up to at least $1500 an ounce.[6]
2010 gold production totalled 632,537 ounces 74% higher than the year before (363,509 ounces). Cash costs were $382/oz up slightly (2011 forecast is 770,000 ounces at a cash cost of between $375 and $395) Most of the increase in production expected in 2011 will come from Turkey where the 110,000 ounces/year Efemcukuru gold mine will begin operating. China's Eastern Dragon mine will also start production (expected to be 80,000 ounces per year); China will be the recipient of 44.4% the company's exploration capital expenditure ($24 million). Eldorado also doubled its dividend in 2010 (to 10 cents per share).[7] The company more than exceeded its expectations for 2010 (in March 2010 it forecast gold production in 2010 at between 550 and 600 thousand ounces at a cash cost of between $385 and $400 (ended up being on the very low end of that estimate).[8]
Company Overview
In Greece the Perama Hill mine (966,000 ounces) is scheduled to open in 2013 when it will be capable of producing 110,000 ounces of gold annually.
In total El Dorado produced 484,165 ounces of gold in the first three quarters of 2010 a 60.3% increase when compared to the 302,083 ounces of gold produced in the three quarters prior to that (2nd, 3rd, 4th quarters of 2009).[9][10] Total 2009 production was 363,509 oz 17.7% higher than 2008.[10] 2010 gold production totalled 632,537 ounces 74% higher than the year before (363,509 ounces). Cash costs were $382/oz up slightly (2011 forecast is 770,000 ounces at a cash cost of between $375 and $395) Most of the increase in production expected in 2011 will come from Turkey where the 110,000 ounces/year Efemcukuru gold mine will begin operating. China's Eastern Dragon mine will also start production (expected to be 80,000 ounces per year); China will be the recipient of 44.4% the company's exploration capital expenditure ($24 million).[7]
2011 Gold Production
In total El Dorado produced 490,201 ounces of gold in the first nine months of 2011 which is only 6,036 ounces more than it did the same period the year before (though it sold 490,207 oz down 720 ounces). Cash operationg cost per ounce was $401 up 8.1% (from $371/oz) but because gold prices were higher the company's realized price was up 31.24% to $1571/oz (from 1178/oz) however the realized price was up even more in Q3 of 2011 (38.1% increase to $1700 even). Realized price was $1397, $1510 & $1700 per ounce in the 1st, 2nd and 3rd quarters of 2011 respectively averaging $1546 overall.
1st 9 months 2011: total cash costs per ounce by mine from lowest to highest - Kisladag Mine, Turkey $406 (up from $335), Jinfeng Mine, China $483 (up from $452), White Mountain Mine, China $517 (up from $515), Tanjianshan Mine, China $552 (up from $494).[11] Between the 2nd & 3rd quarters total production costs fell for Kisladag Mine, Turkey ($411-->$401), White Mountain Mine, China ($564-->$519) and Tanjianshan Mine, China ($596-->$541) and increased for Jinfeng Mine, China ($457-->$509).
Integration of European Goldfields assets into Eldorado adds a further 10 million ounces of gold and approximately 80 million ounces of silver to reserves.
Mines, Production and Production costs by mine by year and period
In September 30,2010 operations included
- Kişladağ, in Turkey (100% owned), Tanjianshan (TJS) in China (90%), Jinfeng (acquired when it purchased Sino Gold), in China (82%), White Mountain (acquired when it purchased Sino Gold), in China (95%) and 4 development stage mines (3 100% owned, 1 in China 95% owned) in addition to the iron ore mine Vila Nova in Brazil that's 100% owned.
Business & Financials
El Dorado's 2010 exploration budget was $32.9 million with 36.5% of that going to Turkey, 31.6% to China and 22.8% to Brazil.[2] As of September 30, 2011 long term debt is $19.25m, down 72.16% since the start of 2011 and only 19.8% as much as it was a year earlier ($97.25m).
| Key Financial Metrics $US mil | 2006[12] | 2007[12] | 2008[13] | 2009[13] | 1HFY09[14] | 1HFY10[9] | 9M10[15] | 9M11[16] |
|---|---|---|---|---|---|---|---|---|
| revenue | 84.689 | 188.699 | 288.231 | 360.729 | 132.94 | 389.931 | 578.227 | 795,570 |
| expenses | 80.8 | 131.194 | 174.33 | 215.527 | 79.977 | 225.135 | 350.822 | 425.185 |
| ebit | 3.889 | 57.505 | 181.254 | 146.921 | 54.387 | 162.87 | 238.88 | 451.05 |
| net income | 3.3 | 35.421 | 163.656 | 102.404 | 38.961 | 113.353 | 162.126 | 251.196 |
| comprehensive inc | na | 35.36 | 157.471 | 110.602 | 45.451 | 123.517 | 160.364 | 249.379 |
| current assets | 155.402 | 203.499 | 61.851 | 265.369 | 484.951 | 539.19 | 561.638 | 615.233 |
| total assets | 527.02 | 591.742 | 905.369 | 3436.108 | 977.392 | 3532.29 | 3752.678 | 3871.484 |
| long term debt | 50.499 | 0.139 | 0 | 134.533 | na | 110.556 | 97.247 | 19.25 |
| shareholders equity | 395.905 | 449.179 | 791.82 | 2640.61 | 856.116 | 2775.645 | 2916.544 | 3167.929 |
Trends and Forces
Hedging and Higher Gold Prices
Because the company has no hedge positions (May 2010) it benefits more when the price of gold increases.[17] Higher demand for gold from countries like China and unstable production rates in top producing countries (down 15% in South Africa first quarter 2010) have more recently put positive pressure on the market price of the commodity.[18][19]
As long as benchmark currencies continue to struggle gold prices will continue to rise in the long term even after undergoing seasonal fluctuations and short term record highs.[20] According to Newmont, the highest ranked Forbes 2010 The Global 2000 gold company[21] CEO, upward pressures will push gold prices up to at least $1500 an ounce.[22]
References
- ↑ 1.0 1.1 2010 #3 strongest B.C. company:El Dorado Gold (2010-10-27).
- ↑ 2.0 2.1 Eldorado Gold Third Quarter 2010 Report (2010-10-28).
- ↑ Eldorado Gold Corp. makes $2.5B all-stock bid for European Goldfields Ltd. (December 18, 2011).
- ↑ With Gold Prices Climbing, Is Now A Wise Time To Invest? (2010-10-14).
- ↑ highest ranked gold company
- ↑ CNBC: Gold will hit $1,500 thanks to QE's "upward pressure," Newmont Mining exec says (2010-11-03).
- ↑ 7.0 7.1 Eldorado Gold says 2010 gold production jumped 74% (2011-01-11).
- ↑ Eldorado Gold sees 2010 gold production between 550,000 and 600,000 ounces (2010-03-22).
- ↑ 9.0 9.1 9.2 Eldorado Gold 2009 First Half Results and Report page 24 (2010-06-30).
- ↑ 10.0 10.1 Eldorado Gold 2009 Annual Report (2010).
- ↑
- ↑ 12.0 12.1 Eldorado Gold 2007 Consolidated Financial Statement (2008-03-25).
- ↑ 13.0 13.1 Eldorado Gold 2009 Consolidated Financial Statement (2010-03-18).
- ↑ Eldorado Gold 2009 Half Year Consolidated Financial Statement (2009-06-30).
- ↑ Eldorado Gold 2010 Third Quarter Consolidated Financial Statement (2010-10-28).
- ↑ Eldorado Gold 2011 Third Quarter Report
- ↑ Eldorado Gold Investor Relations (2010-05-20).
- ↑ China's Gold Production Drops in July (2010-09-14).
- ↑ South African gold production drops sharply (2010-06-02).
- ↑ With Gold Prices Climbing, Is Now A Wise Time To Invest? (2010-10-14).
- ↑ highest ranked gold company
- ↑ CNBC: Gold will hit $1,500 thanks to QE's "upward pressure," Newmont Mining exec says (2010-11-03).
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