Eldorado Misses Gold Rally as Impairments Sour Production Win

  • Early impairment analysis indicates $1.2-$1.6 billion expense
  • Will continue to slowly advance development projects in Brazil

Eldorado Gold Corp. shares slumped after the Vancouver-based miner warned that impairments may exceed its market value, mainly related to Greek assets.

The stock fell 10 percent to C$2.91 at 10:17 a.m. in Toronto, while the BI Global Gold Mining Competitive Peer Group advanced 1.5 percent along with gold price gains. Eldorado disclosed in a statement Monday preliminary analysis that indicates it will need to recognize an after-tax impairment expense this year of $1.2 billion to $1.6 billion. Its market value is about $1.5 billion.

Eldorado’s shares have tumbled 57 percent in the past year, the most among peers tracked by Bloomberg, amid a back-and-forth saga to develop a mine in Greece. Its Hellas Gold unit said earlier this month it was suspending development of the Skouries project, where $300 million had already been spent. Greece’s ruling Syriza party said Skouries is polluting the environment and preventing other business development.

Chief Executive Officer Paul Wright said in today’s statement that the company remains committed to its Greek assets.

Eldorado beat its 2015 forecasts for production and costs, though it expects a decline in output this year and higher costs.

Output Falls

Last year’s gold output of 723,532 ounces exceeded guidance of 640,000 to 700,000 ounces, the miner said in the statement. All-in sustaining cash costs averaged $841 an ounce, while cash operating costs averaged $552.  This year, it expects to produce 565,000 to 630,000 ounces at a cash cost of $585 to $620 and an all-in sustaining cost of $940 to $980.

The company will “continue to slowly advance our development projects in Brazil and Romania, while remaining financially prudent in today’s challenging metal price environment,” Wright said.

Its capital budget for this year is $349 million. The company closed 2015 with liquidity of about $665 million, including $290 million in cash, cash equivalents and term deposits, and $375 million in undrawn lines of credit.

Eldorado’s year-end financial statements are scheduled to be released on March 23.

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