Eldorado Gold: Haywood Reiterates $19.75 Price Target

On December 15th, Eldorado Gold (TSX: ELD) announced the results of the Skouries Project feasibility study. The mine has an IRR of 19% after-tax based on a long-term gold price of $1,500, while the IRR goes up to 24% if you use the current spot price of gold of $1,800. The mine has a life span of roughly 20 years, with 2.9 million ounces and 182,000 ounces per year for the first 5 years.

The company also said that the mine will have a negative cash operating cost of $368 per ounce sold over the lifetime of the mine, and a negative all-in sustaining cost of $17 per ounce over the same time.

Eldorado Gold currently has 12 analysts covering the stock with an average 12-month price target of US$13.77. Out of the 12 analysts, 6 have buy ratings, 5 have hold ratings and 1 analyst has a sell rating on Eldorado. The street high sits at US$17.76 from Cormark Securities while the lowest price target sits at US$9.25

In Haywood Capital Markets’ note, they reiterate their C$19.75 12-month price target and buy rating saying that the feasibility test came in slightly better than their estimates, while capital estimates also came in higher.

For their estimates, they say that the input prices came in roughly 7% above their estimate, while water management impacted the input prices by 5% and an enhanced execution plan increased the prices by 8%.

For the other operating costs, cash operating costs at -$368 per ounce, came in below their -$180 per ounce modeled, while the all-in sustaining cost coming in at -$17 per ounce is higher than their -$168 per ounce estimate.

For the financing portion of the deal, Haywood says that their estimates came in roughly $95 million below the actual initial capital investment but says that since this mine has such a long life span with low costs. The mine will “be a great mine once up and running.” Additionally, just like BMO is anticipating, they expect a joint venture partner to help finance the long-term of the mine.

Information for this briefing was found via Sedar and Refinitiv. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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