Please ensure Javascript is enabled for purposes of website accessibility

Here's Why Shares of Eldorado Gold Rose as Much as 26% This Morning

By Tyler Crowe - Updated Apr 24, 2019 at 11:39PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The company gave an operational update that had Wall Street cheering for this downtrodden miner.

What happened

Shares of junior gold miner Eldorado Gold (EGO 2.03%) are up roughly 22% as of 11:45 a.m. EDT today. The surge in stock price comes after the company announced it is restarting operations at a gold mine in Turkey and updated guidance for 2019 through 2021. 

So what

In the first quarter of 2018, Eldorado shuttered operations at its Kisladag gold mine in Turkey because of poor gold recovery rates. Since then, the company has conducted several tests to find the best path forward. Today, it announced it would recommence operations at Kisladag using a process known as heap leaching. Using this process versus other milling techniques will save the company about $500 million in capital spending. 

Gold parts and stock charts.

Image source: Getty Images.

The company also announced revised guidance for 2019 and beyond. It now expects to produce between 390,000 and 420,000 ounces of gold equivalent with all-in sustaining costs of between $900 and $1,000 per ounce. Even more encouraging are its 2020 estimates, which call for 520,000 to 550,000 ounces of gold equivalent at an all-in sustaining cost of $800 to $900 per ounce. With gold prices currently north of $1,300 per ounce, it would appear that Eldorado is well positioned to earn some hefty operating profits in the coming years.

Now what

Before getting too excited about these announcements, keep in mind that Eldorado seems to consistently be dealing with issues at its mines. Not only has Kislasdag been underperforming over the past year, but it has been trying to negotiate the development of its Skouries mine for years without much to show for it. Also, even when Kisladag was operational in 2016 and 2017, the company was still incurring heavy losses. 

EGO Chart

EGO data by YCharts.

Eldorado Gold's stock has always been a wild, wild ride, and investing in it at any point since its IPO more than a decade ago has been a loss. Investing in gold is hard enough because of the cyclical nature of the commodity; it hardly seems worth the risk to buy shares in this junior miner that struggles to generate long-term returns for shareholders.

Check out the latest Eldorado Gold earnings call transcript.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Eldorado Gold Corporation Stock Quote
Eldorado Gold Corporation
EGO
$6.52 (2.03%) $0.13

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
316%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/03/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.