Eldorado Gold releases feasibility study for Skouries project in Greece

Eldorado Gold (TSX: ELD; NYSE: EGO) has released a feasibility study for its Skouries project, a gold-copper porphyry deposit located on the Halkidiki Peninsula of northern Greece.  

The feasibility study, which envisions an open pit and underground mining operation, forecasts average production of 140,000 oz. of gold and 67 million lb. copper a year over a 20-year mine life. In the first five years, gold production will come in at 182,000 oz. annually. All-in sustaining costs over the life of mine average negative US$17 per ounce.   

The study estimated initial capital costs of US$845 million, 23% higher than the US$689.2 million estimated calculated in a 2018 prefeasibility study. The higher costs are due to increased input prices and other factors including scope changes related to water management and enhanced execution plan, the company said. 

At a 5% discount rate, the project would generate a post-tax net present value (NPV) of US$1.3 billion and a post-tax internal rate of return (IRR) of 19%, based on metal prices US$1,500 per oz. gold and US$3.85 per lb. copper. Using approximate spot prices of US$1,800 per oz. gold and US$4.25 per lb. copper, the project could generate an after-tax NPV of US$1.8 billion and an IRR of 24%. 

The Skouries project has been drilled to a depth of 920 metres from surface and the deposit remains open at depth. 

The project has proven and probable reserves of 147.12 million tonnes grading 0.77 gram per gold per tonne and 0.50 gram copper per tonne for contained metal of 3.63 million oz. gold and 740,000 tonnes of copper. 

Measured and indicated resources stand at 239.97 million tonnes grading 0.65 gram per gold per tonne and 0.47 gram copper per tonne for contained metal of 5.03 million oz. gold and 1.12 million tonnes copper. Inferred resources add 67.66 million tonnes grading 0.37 gram gold per tonne and 0.40 gram copper per tonne for 814,000 oz. gold and 267,000 lb. copper. 

Construction is likely to begin in mid-2022 with commercial production in late 2024, the company says.  

“The completion of the Skouries feasibility study is an important milestone for the company,” George Burns, Eldorado’s CEO, said in a press release. “The results of the study reflect the robust economics of this world-class asset that will support our growth strategy.” 

The mining operation will be a combined open pit and underground mine for nine years in the first phase, and an underground only mine for the remaining 11 years during phase 2. 

BMO analyst Brian Quast, who follows Eldorado Gold, expects the feasibility study results will have a positive impact on the company’s shares. 

 “The updated study’s $1.3B NAV represents a 40.5% improvement over the 2018 PFS as benefits from enhanced development sequencing were partially offset by increased capex,” Quast stated in a Dec. 16 research note. 

“The inclusion of Skouries should drive production to 950,000 oz. gold-equivalent in 2025,” he noted. “This 80% cumulative growth (or 16% five-year compound average growth rate) is among the best in the intermediate producer space. The growth outlook, in conjunction with the company’s discounted valuation, make Eldorado a compelling opportunity.” 

CIBC analyst Cosmos Chiu described the feasibility study in a research note as a “solid outcome.” 

“After completion of the feasibility study, the company plans to submit a modification to the Kassandra mines EIA by the end of 2021 that will cover the expansion of the Olympias processing facility and the Stratoni port modernization, with approval expected in 2022,” he wrote in a research note.  

“All permits are in place through the current EIA to commence construction at Skouries. The company is currently evaluating funding alternatives and investment decisions for the project, with a decision expected in the first half of 2022.”  

Kerry Smith of Haywood Research said that Eldorado shares remained undervalued “and there is substantial upside from current levels now that the Investment Agreement with the Greek Government has been ratified and Eldorado can move forward with their Skouries project,” he stated in note to clients. 

At presstime in Toronto, Eldorado was trading at $11.79 per share within a 52-week trading range of $18.43 and $9.52.