Eldorado Gold Stock’s Terrific Rise Won’t Be Stopping Soon

Shares of Eldorado Gold [stock_market_widget type="inline" template="generic" color="default" assets="ELD.TO" markup="(TSX: {symbol} {currency_symbol}{price} ({change_pct}))" api="yf"] have taken off this year, gaining more than 120% thanks to the recent rally in gold prices. The stock was recently upgraded by JP Morgan to Neutral from Underweight, with the investment bank citing that the breakout in the price of gold could prove to be a big tailwind for Eldorado.

Now, Eldorado has just released its preliminary second-quarter results, and it won’t be surprising to see the company sustain its momentum for the rest of the year. Let’s take a closer look at the company’s performance in the second quarter and see why it is on track to soar higher going forward.

Eldorado Is on Track to Meet Its Annual Target

Eldorado Gold has revealed that it produced 91,903 ounces of gold for the second quarter of 2019, bringing its total production for the first half of the year to 174,780 ounces. More importantly, the company confirmed that it is on track to meet its full-year production target of 390,000 ounces to 420,000 ounces of gold.

This makes it clear that Eldorado expects a massive jump in its output during the second half of the year, which is not surprising as the Lamaque and Kisladag mines will prove to be a tailwind for the company.

The Lamaque mine clocked production of 33,140 ounces during the quarter, up from the 3,134 ounces it produced during the same period last year. The mine’s year-to-date production stands at just over 52,000 ounces, indicating that production picked up in the second quarter.

Meanwhile, Kisladag’s production came in at more than 26,000 ounces. However, this was way below the year-ago period’s output of nearly 56,000 ounces. The lower production at this mine caused Eldorado’s total production for the quarter to fall year over year to 91,803 ounces as compared to 99,105 ounces in the prior-year period.

The company had announced earlier this year that it will resume mining at Kisladag after operations at the mine were suspended last year. Now that it has resumed operations at the mine, Eldorado’s production profile should get better as the year progresses.

That’s probably the reason why analysts expect the company’s revenue to jump nearly 35% this year. But the more important thing to note is that the momentum is expected to continue into 2020, when the top line is expected to jump 32%.

The Long-term Forecast Seems Solid

The resumption of operations at Kisladag and the ramp-up in the output of Lamaque is expected to help Eldorado clock production of 520,000 ounces to 550,000 ounces of gold in 2020. This increase in production will be achieved at a lower cost base, as the company anticipates all-in sustaining costs in the range of $867 an ounce to $967 an ounce through 2021.

This is lower than the all-in sustaining cost of $994 an ounce that the company clocked last year. So there’s good reason to expect that Eldorado Gold’s top and bottom lines will be supercharged thanks to the company’s impressive operational profile and lower costs.

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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