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Eldorado Gold Reports 2016 Results

- By Alberto Abaterusso

Eldorado Gold Corp. (EGO) released its fourth-quarter and full-year 2016 results on Feb. 23.

Eldorado closed the quarter with a net loss of five cents, a 66.7% decrease on a year-over-year basis, and missed analysts' expectations on EPS by seven cents, generating a negative surprise of 350%.

The company attributes the earnings miss to "lower sales volumes partly offset by higher gold prices."

For the next quarter, analysts forecast EPS of one cent, ranging between a low of negative one cent and a high of three cents. For fiscal 2017, analysts forecast EPS of nine cents.

Source: Yahoo Finance

Revenue for the quarter came in at $140.6 million, a 29.5% decrease on a year-over-year basis, and beat expectations by $20.51 million.

Source: Yahoo Finance

Analysts forecasted revenue of $120.09 million, ranging between a low of $68.61 million and a high of $142.47 million.

In 2016, the Canadian gold miner produced 486,025 ounces of gold at an all-in sustaining cost of $900 per ounce.

The gold production and AISC sustained by the miner were lower than the expected guidance given in the third quarter of 2016. Eldorado expected production of 495,000 ounces of gold at an AISC of $940 to $980 per ounce of gold mined.

Revenue for 2016 came in at $605.9 million, a 26.5% decline from 2015 revenue of $823.8 million.

During the year, the miner sold 483,461 ounces of gold at an average price of $1,253 per ounce versus 705,310 ounces of gold sold at an average price of $1,168 per ounce in 2015.

Lower gold production at Kisladag (one of the two mines in Turkey) was mainly due to unexpected decreases in recovery from heap leach pad application rates at the beginning of 2016. The sale of the miner's Chinese assets during the quarter caused a 31.5% decrease - on a year-over-year basis - in the amount of gold sold.

The 7.3% increase in the gold price was not able to fully offset the negative impact of higher unit costs and lower sales volumes on the company's gross profit generated in 2016 from ongoing and discontinued operations.

However, the company said "gross profit from continuing gold mining operations (Kisladag and Efemcukuru) increased slightly year over year on higher realized gold prices and lower unit operating costs."

From ongoing operations, the gold producer generated cash flow of $136.7 million in 2016, a 21.2% decrease on a year-over-year basis.

The company's cash and securities increased to $888.5 million in 2016 from $ 288.2 million in 2015. The company can rely on a total liquidity of $1.139 billion, including a $250 million line of credit.

During the quarter, the miner completed the sale of its Chinese assets for approximately $881.6 million. The company recorded a loss of $351.2 million, net of taxes, on the sale of the assets.

The miner now has plenty of cash to spend on developing its gold projects in Greece, the Balkans and Brazil.

Paul Wright, president and CEO, commented on the company's transitional year and his outlook for the coming year.

"As we move into 2017, I strongly believe that Eldorado is now set for the next phase of the company's growth," Wright said. "We are well positioned to focus on and build our internal pipeline of quality assets. We have the cash balance to internally fund our capital growth plans."

Eldorado announced the distribution of a two-cent quarterly dividend. The dividend will be paid on March 16 to shareholders of record as of March 7.

For 2017, gold production is expected to be of 365,000 to 400,000 ounces at cash costs per ounce of $485 to $535 and AISC of $845 to $875 per ounce.

The company expects to spend approximately $70 million for operational purposes in 2017. Total capital expenditures are projected to be $345 million. Exploration expenditures are budgeted at $35 million.

Eldorado Gold is trading at $3.61 per share, down four cents or -1.10% from the previous trading day. The stock is trading at 0.73 times its book value and 9.87 times its EBITDA.

The analyst average target price is $4.65 per share and ranges between a low of $3.80 per share and a high of $6.75 per share. The majority of analysts recommend to buy Eldorado Gold Corp.

During the fourth quarter of 2016, Joel Greenblatt (Trades, Portfolio) increased his position in Eldorado by 5.71%. Charles Brandes (Trades, Portfolio) sold out, while Mario Gabelli (Trades, Portfolio) reduced his position by 22.97%.

Disclosure: I have no position in Eldorado Gold Corp.

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This article first appeared on GuruFocus.