Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Canada’s Eldorado Gold (TSX: ELD) (NYSE: EGO) left 2022 production guidance of 460,000-490,000 ounces untouched, despite reporting that higher-than-expected absenteeism due to the covid-19 Omicron variant hit output in Q1.
Gold production in the first three months of the year fell to 93,209 ounces, from 111,742 ounces in the same period last year and from 122,582 ounces in the last quarter of 2021, as labour shortages triggered by the onset of Omicron affected all the countries where the company operates.
At Lamaque, Eldorado’s first gold mine in Canada, lack of sufficient workforce delayed the underground development of high-grade stopes, which led to lower-than-planned gold grades and tonnage. The situation was solved by March, prompting the company to keep guidance for the mine unchanged.
Weather and power issues also affected the company’s operations in Turkey and Greece.
BMO Capital Market’s Brian Quast said the production was “well below” BMO’s forecast of 107,500 ounces, but he maintained the bank’s C$18 target price.
Eldorado, which also has operations in Romania, has increased focus on the domestic market in recent years. It bought Quebec explorer QMX Gold in early 2021 and acquired a 11.5% stake in Probe Metals, another local explorer, in July.
The Vancouver-based miner released in December the results of a new feasibility study for Skouries, which calls for an open pit and underground mining operation with average production of 140,000 ounces of gold and 67 million pounds of copper a year over a 20-year mine life.
In the first five years, gold production will come in at 182,000 ounces annually. All-in sustaining costs over the life of mine average negative U$17 per ounce.
The study pegged initial capital costs of $845 million, 23% higher than the $689.2 million estimated calculated in a 2018 prefeasibility study. The higher costs were due to increased input prices and other factors including scope changes related to water management and enhanced execution plan, the company said.
