Why Eldorado Gold Stock Can Make a Comeback

Eldorado Gold [stock_market_widget type="inline" template="generic" color="default" assets="ELD.TO" markup="(TSX: {symbol} {currency_symbol}{price} ({change_pct}))" api="yf"] got off to a solid start in 2019, but its stock price momentum has eventually fizzled out despite some positive developments over the past few months. However, the company’s weak results have proved to be a damper.

Eldorado Gold Gets Hammered

Eldorado sold just 43,000 ounces of gold during the quarter, which was half of the ounces it sold a year ago.

Eldorado Gold’s first-quarter results turned out to be weak and were below Wall Street’s expectations. The company’s revenue slumped a massive 39% year over year during the quarter to just $80 million, missing the consensus estimate by a whopping margin of $32 million.

Eldorado also delivered an adjusted loss of $0.11 per share, which was wider than the analyst forecast for a loss of $0.04 per share.

Eldorado’s revenue in the year-ago period stood at nearly $132 million, while it had reported a profit of $0.09 per share. So, Eldorado’s year over year performance has taken a massive hit, and that could be attributed to a variety of factors.

The biggest problem for Eldorado was that it managed to sell just 43,000 ounces of gold during the quarter, which was half the ounces it sold a year ago. The company’s gold sales were impacted by a contract dispute with a customer at Efemcukuru, as well as shipment delays on account of inclement weather.

In all, Eldorado saw delayed shipments to the tune of roughly 20,000 ounces during the quarter. But this wasn’t the only fallout of the lower shipments, as Eldorado’s costs increased during the quarter.

The company reported operating cash costs of $625 an ounce for the first quarter, which was a massive increase over the year-ago period’s figure of $571 an ounce. Similarly, all-in sustaining costs increased to $1,132 an ounce as compared to $878 an ounce a year ago.

Meanwhile, gold prices weren’t favourable either. Eldorado’s average realized gold price fell to $1,265 an ounce during the first quarter as compared to $1,333 an ounce a year ago. So the company’s financial performance was hammered on all fronts, and this has eventually hurt its stock price.

Is There Potential Upside Ahead?

Investors can expect Eldorado Gold to recover once its delivery problems are sorted out. According to the company’s press release:

Delayed shipments of concentrate (totaling approximately 20,000 ounces) in the first quarter have been partially completed in April, with the remainder expected to be completed throughout Q2 and Q3 of 2019.

The problems at Eldorado should not last beyond the short run, and its new asset should eventually help it stage a comeback in the future. The company recently started commercial production from the Lamaque mine, which is expected to produce 100,000 ounces to 110,000 ounces of gold production in 2019.

The mine has a life of seven years and its production is expected to increase to a range of 125,000 ounces to 135,000 ounces in 2020 and 2021. On the other hand, the Kisladag mine will be another tailwind for Eldorado Gold.

In all, Eldorado Gold’s production is all set to increase in the future, which will help it make a comeback after its recent drop. So investors shouldn’t be discouraged by Eldorado’s performance and buy the dip in anticipation of long-term gains.

Harsh Singh Chauhan has a wealth of experience evaluating publicly-traded companies across several verticals, including technology, oil and gas, retail, and consumer goods. His financial writing has been published across platforms such as The Motley Fool, TheStreet, and Seeking Alpha. Harsh's philosophy is to find great businesses for the long run based on company fundamentals and industry prospects. Address: 682 Indian Road, Toronto, Ontario, M6P 2C9. Phone: 416-721-8257.


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