Skouries And Olympias Expansions Will Increase Future Gold And Copper Output

Key Takeaways

• Expansion efforts and operational optimizations at Olympias and Kisladag aim to boost production capacity and recovery rates for future revenue growth.
  
• Strategic projects and labor agreements position Eldorado Gold for potential margin expansion and consistent operational efficiency, enhancing future earnings.
  
• Rising labor and royalty costs, project delays, and high capital investments may strain earnings, cash flow, and operational efficiency amid inflationary pressures.

Catalysts

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

• The planned expansion at Olympias to increase processing capacity from 500,000 to 650,000 tonnes per annum could enhance long-term profitability, positively impacting future revenues and earnings.
  
• Construction progress at Skouries, with first production expected in Q3 2025, is a significant growth project that could drive substantial future revenue increases and earnings from gold and copper output.
  
• Eldorado Gold's guidance adjustment and cost control measures, amidst record high gold prices, suggest potential margin expansion, which could improve net margins and free cash flow.
  
• The signing of a new 3-year CBA agreement at Olympias, without work stoppages, secures labor stability, aiding consistent production and potentially boosting operating efficiencies, which may improve net earnings.
  
• Optimization of operations at Kisladag through advancements like the new ADR plant and ongoing geometallurgical studies could lead to enhanced recovery rates, driving future revenue and earnings growth.

Eldorado Gold Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Eldorado Gold's revenue will grow by 21.2% annually over the next 3 years.
• Analysts assume that profit margins will increase from 24.1% today to 24.3% in 3 years time.
• Analysts expect earnings to reach $516.9 million (and earnings per share of $2.5) by about February 2028, up from $287.4 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $621.5 million in earnings, and the most bearish expecting $444 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 9.2x on those 2028 earnings, down from 9.9x today. This future PE is lower than the current PE for the US Metals and Mining industry at 13.4x.
• Analysts expect the number of shares outstanding to grow by 1.06% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.35%, as per the Simply Wall St company report.

Eldorado Gold Future Earnings Per Share Growth

Risks

• Increased labor costs and higher royalties due to rising gold prices have increased production expenses, which could impact net margins.
  
• The slower progress in underground development at the Skouries project and delays due to archeological assessments could affect the timeline for future earnings growth.
  
• High capital investment requirements, especially for projects like Skouries, could strain cash flow and limit flexibility before completion, affecting earnings stability.
  
• Extended leach cycles and maintenance issues at Kisladag could lead to production inefficiencies, potentially impacting revenue targets and cost projections.
  
• Inflationary pressures, particularly labor costs, could further increase operational expenses, squeezing net margins if gold prices do not rise proportionately.

Valuation

• The analysts have a consensus price target of CA$26.241 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$33.24, and the most bearish reporting a price target of just CA$23.3.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $2.1 billion, earnings will come to $516.9 million, and it would be trading on a PE ratio of 9.2x, assuming you use a discount rate of 7.4%.
  
• Given the current share price of CA$19.88, the analyst price target of CA$26.24 is 24.2% higher.
  
• 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.