Shares of Eldorado Gold (NYSE:EGO), a mid-tier gold-mining company with operations throughout South America and Europe, plunged as much as 11% during Thursday's trading session after Reuters reported that Greek authorities will seek arbitration after many years of differences.
According to the Reuters report, Greek regulators have questioned whether Eldorado's Greek subsidiary, Hellas Gold, has been abiding by its contractual obligations in the development of "a mine in northern Greece." Though the Reuters report doesn't specifically name the mine, the one in question is the Skouries mine, the development of which has been delayed many times.
Per the Greek ministry, "The aim is to safeguard public interest by developing the region's mineral resources in line with existing environmental terms and standards." The arbitration panel will consist of three judges, including one selected by Eldorado, one from the Greek government, and a third from the president of Greece's Supreme Court.
What does this mean for Eldorado Gold? Essentially, more uncertainty, which is why its share price is taking a hit today. The Skouries mine is estimated to begin commercial production in 2019, but it's clear that some investors are concerned that this date and the mine's development could be pushed out further.
Eldorado Gold is in the midst of a pretty sizable transformation that's designed to set it up for longer-term, low-cost growth, and Skouries should play a big role in that.
Recently, Eldorado announced the sale of its assets in China, which included an 82% interest in the Jinfeng mine and its full interests in White Mountain and Tanjianshan. The move bolstered its balance sheet and allowed the company to focus on its core mines in Greece and Turkey. And earlier this year, the company announced an expected $170 million to $200 million in capital spending for Skouries in 2017, but this figure could be fluid depending on the outcome of its arbitration.
When brought online, Skouries is expected to contribute 3 million ounces of gold and 1.5 billion ounces of copper over a 25-year lifespan. In fact, the copper production alone is expected to push the mine's sustaining and operating cash costs into the negative over its first nine years of operations. The big question is: When will it be online?
The good news here is Eldorado has flipped its net debt position to a net cash position on a year-over-year basis, and it has among the lowest all-in sustaining cost forecasts among gold miners in 2017. While there continues to be disappointment surrounding Skouries, Eldorado is executing well elsewhere, which could make today's dip an intriguing buying opportunity.