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

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

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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.

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