Eldorado Posts Solid Quarter Despite Gold Price Drop


Eldorado Gold reported impressive second-quarter results, with healthy production expansion combined with a small decline in cash costs. In a quarter when gold miners have been struggling to adjust operations in the new price environment, Eldorado increased revenue by 9% to $267 million despite a 14% decline in realized gold prices.

Gross profit declined 12%, primarily driven by an increase in total production costs due to increased production levels. Despite increased production, the firm maintained its position at the lower end of the industry curve, which should help Eldorado continue to generate returns despite the world of lower gold prices.

Eldorado produced 183,971 ounces of gold during the quarter, a 31% increase over the prior year. Cash costs declined from $480 to $478 per ounce from a year ago. The company’s flagship Turkish mine, Kisladag, continued to contribute meaningful production growth of 25% at a cash cost 2% lower than the prior year.

The Efemcukuru mine continues to ramp up nicely, increasing production by 37% and reducing cash cost per ounce by 11% over the first quarter of this year. As a result of lower gold prices, Eldorado reduced exploration spending for the full year to $51.0 million from $98.5 million, focusing on mine site and brownfield exploration.

Full-year capital expenditures are expected at $430 million, down from previous guidance of $670 million. The meaningful reduction in capital expenditure is due to the deferral of the full expansion at Kisladag and the delay of initial production from Skouries, Perama Hill, and Certej by at least one year. 2013 gold production is expected to be 745,000 ounces at a cash cost of $520 per ounce, in line with previous guidance of 705,000-760,000 ounces at cash costs of $515-$530 per ounce.

The company also announced an adjusted dividend policy (which is based on average realized gold price) in light of lower gold prices.


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