Advancements In Skouries And Olympias Will Transform Production And Improve Profitability

Key Takeaways

• The Skouries project and Olympias plant expansion are anticipated to transform revenue and profitability through new gold and copper sources and increased capacity.
  
• Strong liquidity and strategic developments at Lamaque and Kisladag support sustainable growth and operational efficiency, bolstering financial stability.
  
• Increased labor costs, project delays, and regulatory scrutiny threaten Eldorado Gold's margins and growth potential amidst rising taxes and safety concerns.

Catalysts

Engages in the mining, exploration, development, and sale of mineral products primarily in Turkey, Canada, and Greece.

• Completion of the Skouries project, expected to begin production in early 2026, is anticipated to be transformational for Eldorado Gold, significantly boosting revenue with a new source of gold and copper.
  
• The 15-year Olympias plant expansion from 500,000 to 650,000 tonnes per annum is intended to enhance the mine's long-term profitability, benefiting overall net margins.
  
• Development advancements at the Lamaque complex, including new reserves at Ormaque, are projected to sustain and potentially grow revenues from this site over the long term.
  
• Steady performance at Kisladag, particularly through technological and process improvements such as the operation of the new North ADR facility, is expected to optimize costs and positively impact earnings.
  
• A robust liquidity position, including $857 million in cash and a flexible credit facility, enables continued strategic investments and operational improvements enhancing future cash flows and financial stability.

Eldorado Gold Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Eldorado Gold's revenue will grow by 21.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from 22.8% today to 24.0% in 3 years time.
• Analysts expect earnings to reach $563.3 million (and earnings per share of $2.74) by about March 2028, up from $300.9 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $681 million in earnings, and the most bearish expecting $490 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 8.4x on those 2028 earnings, down from 11.3x today. This future PE is lower than the current PE for the US Metals and Mining industry at 14.6x.
• Analysts expect the number of shares outstanding to grow by 0.94% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.6%, as per the Simply Wall St company report.

Eldorado Gold Future Earnings Per Share Growth

Risks

• Increased labor costs and higher royalty expenses due to elevated gold prices, along with local cost inflation, may pressure net margins and earnings, especially if gold prices fluctuate or decrease.
  
• A slower-than-anticipated ramp-up in critical projects like Skouries, due to labor market tightness and potential further delays, could elevate capital expenditures and impact future revenue streams.
  
• The removal of the PEA (Preliminary Economic Assessment) for Lamaque Complex, due to regulatory scrutiny, may affect investor confidence and perceived future growth potential, impacting long-term revenue expectations.
  
• Rising safety incidents, as indicated by an increased lost time injury frequency rate (LTIFR), may lead to operational disruptions or additional costs, affecting revenue and net margins.
  
• Increased tax expenses, driven by higher revenues and profits particularly in regions like Türkiye and Quebec, could impact net earnings despite robust operational performance.

Valuation

• The analysts have a consensus price target of CA$25.74 for Eldorado Gold based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of CA$29.98, and the most bearish reporting a price target of just CA$20.78.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $2.3 billion, earnings will come to $563.3 million, and it would be trading on a PE ratio of 8.4x, assuming you use a discount rate of 7.6%.
• Given the current share price of CA$23.7, the analyst price target of CA$25.74 is 7.9% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.