Eldorado Gold Provides Update on Greece

By Letta Kalamara

Eldorado Gold provides an update on Greece. Τhe Greek Ministry of Energy and Environment issued a press release stating their intention to have arbitration underway by the end of the month. This release also stated that all permits outstanding for Olympias are underway, while the permits for Skouries remain unissued. George Burns commented, "While the press release did not result in any additional clarity regarding the details of the intended arbitration by the Greek government, the Ministry stated that this is the best path forward in resolving all outstanding issues with the Company's projects. To be clear, we have not yet received formal notice of arbitration and permits applied for remain unissued. We continue to evaluate all capital spending and development timelines at our projects in Greece. At this time, commissioning at Olympias and reduced development works at Skouries are continuing".

Unfortunatelly all analyst reports suggest a negative reaction to the news of continued delays in Greece – even though Q2 2017 was generally in-line with estimates and consensus. 

According to Scotiabank, "We are downgrading ELD to SP from SO after ELD announced delays at its Greek development assets.  Although we still believe this is possible in the long-term, we think the announced project delays make realization of this scenario too distant for investors to be interested at present. In the near-term, the poor relationship with the Greek government casts significant doubt on the company’s ability to successfully develop the key Greek assets (~45% of NAV) in a timely, cost-efficient and ultimately value-added manner". 

Olympias expects commercial production in Q4 vs. Q3 2017. At Olympias Phase II, a bottleneck in the tailings filtration stage is limiting capacity to about 60% of design throughput. An engineering solution is expected to be implemented during Q3/17 and as a result commercial production has been pushed from Q3 to the end of 2017. Production guidance has been reduced by 20 koz. ELD is required to apply for an operating permit (instead of the installation permit which it is currently operating under) once the operation is commercial, which presents a further significant risk. This asset represents ~20% NAV. Skouries sees production start-up slip into 2020 from 2019. ELD announced delayed capital spending at this asset due to the slower start to the year combined with ongoing delays receiving required permits in order to ramp-up construction activities (several minor permits and the electro-mechanical permit for the processing facility). Production is now targeted for 2020 from 2019. This asset represents ~25% NAV. According to Credit Suisse "Eldorado Gold -Downgrade to Underperform on more Greek challenges".