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Why Eldorado Gold Corporation Stock Outperformed Other Gold Miners In December


Image Source: .

Image Source: Eldorado Gold Investor Update .

Beyond this transaction, Eldorado has been investing in new projects that it believes will increase production over 100% by 2020. It has additional initiatives that could increase production another 35% beyond that 2020 goal waiting in the wings, too. Even better, management believes the projects it's working on will allow it to reduce the company's all-in sustaining costs from approximately $800-$900 an ounce in 2017 to something in the $600 to $700 range, per ounce, by 2020. To put that in perspective, Newmont and Barrick have also been reducing costs, but doing so by either shrinking production or holding it steady.

The missing piece for Eldorado was the cash to fund these growth plans. With the sale of the Chinese assets, the company now believes it has the cash it needs to internally fund its future into the next decade. But this all happened in November.


It looks like Eldorado Gold can self fund its growth. Image Source: .

It looks like Eldorado Gold can self fund its growth. Image Source: Eldorado Gold Investor Update .

The other big change in December was in the corner office, where CEO Paul Wright announced plans to step down in early 2017. He has run the company since late 1999. Hired to replace him is George Burns, COO of GoldCorp (NYSE: GG) . GoldCorp is one of the largest gold miners in the world and Burns has a 30-year history in the mining industry. Leadership transitions are always fraught with risk, but it looks like Eldorado has hired a CEO that could easily handle the company's transition to a larger operation as it organically expands its business.

So, with the mid-December CEO announcement, Eldorado appears to have a plan, plenty of cash to pay for them, and a new leader that can oversee the process. Which helps explain why the stock started to outperform after the news release announcing Paul Wright's retirement.

EGO data by YCharts

Now What?

A lot can happen between now and 2020. Investors will need to watch the progress of Eldorado's growth initiatives. Right now, however, investors are caught up in a little bit of market euphoria because of the positive outlook that's taking shape around the gold miner. Eventually the excitement will fade. That, however, won't change the growth opportunity. Investors interested in a gold miner that's focused on growing its production while, at the same time, lowering its costs should be watching Eldorado.

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Reuben Brewer has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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