What happened

Shares of gold miner Eldorado Gold (NYSE:EGO) jumped 12.5% in early trading on Feb. 5. The big news was an agreement the company signed with Greece. Here's a high-level view of why investors were so positive about the news.  

So what

The new deal updates one signed in 2004 so that it "provides a modernised legal and financial framework to allow for the advancement of Eldorado's investment in the Kassandra Mines," according to Eldorado. Notably, the new agreement creates a permitting system that is similar to what is being used in the country for other large investment projects. In exchange, Greece will basically get more money out of Eldorado Gold (a 10% increase in royalty rates), as well as increased environmental and community development efforts (3,000 jobs and $80 million in local spending programs).  

A man standing in mouth of mine with the sun in the background.

Image source: Getty Images.

The key for Eldorado is that it paves the way for the completion of construction at its Skouries project, expands production at the Olympias mine to 650,000 tons per annum, allows for upgrades to the port facilities at Stratoni, and clears the way for additional spending on exploration at Mavres Petres-Stratoni. There's always some give and take, but clearly Wall Street gave the deal a positive review in early trading.  

Now what

Obviously there's a lot of details involved in the agreement between Eldorado and Greece, but the outcome is that, after a year or so of negotiations, the miner has a clearer path forward on several initiatives it is pursuing. That's a good thing, even if it had to agree to an increase in royalty rates and other spending. That said, Eldorado gold has rallied along with gold and is up nearly 90% over the past year. Although this agreement is good news, unless you have a very strong feeling about gold's future, this news alone probably isn't enough to make Eldorado a buy.  

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.