Friday, March 19, 2010

Eldorad Gold announces 2009 4th quarter and Year End Results

Eldorado (EGO) reported net income of $33.3 million or $0.08 per share for the fourth quarter and for the year net income of $102.4 million or $0.26 per share. This quarterly EPS was right in line with expectations.

"This was a very successful quarter and year for Eldorado," stated Paul Wright, CEO. "We had record quarterly production with strong performance from both our Kisladag and Tanjianshan gold mines. And with the successful completion of our acquisition of Sino Gold and the continued development of our projects in Turkey, China and Greece, we are solidifying our position as one of the world's lowest cost gold producers. Our gold sales revenue increased by 29% to $358 million as we benefited from increased production and increased gold prices. Looking ahead, we anticipate 2010 production of 550,000 to 600,000 ounces of gold at a cash operating cost of between $385 and $400 per ounce."

Eldorado was actually down 4% to $12.82 in trading today because of a stronger dollar and weaker gold prices. Earnings were in line and the outlook was quite good. One negative was that costs incurred from Sino were higher than expected at first. Expenses as a percent of revenues should decrease in the next couple of years.

Now that Sino Gold is fully merged within Eldorado, I think in the next 12 months EGO will start to see the incremental added value of this acquisition. Sino is expected to give Eldorado at least another 170,000 ounces of production by 2011, which doesn't include two other mines that are in development. Expected production of over 600,000 ounces in 2010 at a cash operating cost less than $400, and gold prices remaining strong are reasons to believe EGO will succeed. Net margin in 2009 was 28% and 2010 shouldn't be much different.

With the increase in reserves that Sino has brought to EGO, EGO now has an EV/Reserve of gold of $370. Paying $370 on an EV basis per ounce of gold is very exciting.

I am maintaining my rating of a BUY and price target of $16 for Eldorado Gold. Things are starting to line up for the company.

No comments: