Pacific Trader: “Undervalued” Eldorado Gold surprises on the upside

Vancouver-headquartered Eldorado Gold released 2021 output numbers and five-year forward guidance that pleasantly surprised analysts and investors.

Credit: Eldorado Gold

Eldorado Gold forecasts rising output through 2024 at its mines in Greece, Turkey and Quebec

Amid broad market jitters, nerdy, beaten-down gold miners look like a safe haven again

The stock: Since the acquisition of Goldcorp by Denver-based Newmont Mining Corp. (TSX:NGT, NYSE:NEM) in 2019, B.C. has lacked an obvious standard bearer in the gold mining space. But mid-tier producer Eldorado Gold (TSX:ELD, NYSE:EGO) certainly deserves a look. Over the past week, the Vancouver-headquartered company, with operating mines and exploration properties in Greece, Romania, Turkey and Quebec, released 2021 output numbers and five-year forward guidance that pleasantly surprised analysts and investors.

The drivers: Nerdy outsiders among the markets’ cool kids, gold miners endured a miserable 2021. Eldorado was no exception, sliding 29 percent on the Toronto Stock Exchange (where it closed Tuesday at $11.54). But more than a few market watchers are wondering how long the sector can keep lagging while gold itself remains within striking distance of its 2020 high of US$2,069—and could take off should recent market shudders over rising interest rates devolve into a full-on correction.

Eldorado outstripped projections by unearthing 475,912 ounces of gold in 2021, and it expects to increase that to between 535,000 and 565,000 by 2024, after which it will settle back into the 510,000- to 540,000-ounce range. (That doesn’t factor in possible production from its Skouries project in Greece, which is in the late stages of development.) And with cash operating costs of US$640 to US$690 an ounce and all-in sustaining costs of US$1,075 to US$1,175—and the yellow metal selling for upward of US$1,800—it’s reasonable to assume that production will be profitable.

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Word on the street: Eldorado Gold remains undervalued, currently trading at 5.1 times EV/consensus 2022 cash flow versus peers at 6.1x, and there is good upside from current levels now that the Investment Agreement with the Greek Government has become law, providing Eldorado a path forward for its Skouries project,” wrote analyst Kerry Smith of Haywood Capital Markets, who has a “buy” rating and $19.75 target on the stock.

Coming and going: B.C. led all provinces with 90 of Canada’s 171 initial public offerings in 2021, according to Toronto-based financial data provider CPE Analytics. When it came to money raised, the province finished second to Ontario, with $2.2 billion of the record national total of $10.18 billion. Among the larger market debuts were Telus International (Cda) (TSX:TIXT), Thinkific Labs (TSX:THNC) and Copperleaf Technologies (TSX:CPLF).