Eldorado Gold Stock Review of Q4 2021 Results (NYSE: EGO)
Eldorado Gold Company of Vancouver (NYSE: NYSE: EGO) released its fourth quarter and full year 2021 results on February 24, 2022.
Note: This article is an update of my article published on January 17, 2022.
1 – 4Q21 and full year Preview 2021
Gold production was weak this quarter. Gold production was 122,582 ounces, down from 138,220 ounces produced in 4Q20 and 125,459 ounces delivered in the prior quarter. Fourth quarter 2021 revenue was $244.64 million.
2021 production was 475,912 ounces, ending at the upper end of the revised production range of 460,000 to 480,000 ounces.
2 – Investment thesis
The investment thesis is always an arduous exercise for this gold digger. As I said in my previous article, I continue to be very disappointed with Greece’s painful lack of progress after the company finally received all the necessary green lights of the Greek government in April 2021.
We are now in 2022, and we are still waiting for the restart of the Skouries project. More importantly, we are still waiting to hear how management will secure the necessary funding to complete the Greek venture.
On the positive side, Olympias’ production is improving this quarter, which is encouraging after many quarters of failures and hesitations.
Also, the company buy back sharesand this is progress for shareholders.
Eldorado may purchase up to 1,421,373 of its common shares representing approximately 0.8% of the total of 182,659,032 common shares of Eldorado issued and outstanding as of December 17, 2021.
Finally, on December 15, 2021, the company released a mineral reserve update after the divestment of the Tocantinzinho mining project. The proven and probable ounce of gold as of September 30, 2021 was 15,264,000 ounces.
The gold sector is very volatile and could turn bearish or bullish in the short term.
3 – Stock market performance
The stock underperformed the VanEck Vectors Gold Miners ETF (NYSEARCA: GDX) and Newmont Corp. (NYSE: NEM) and is now up 7% YoY.
Eldorado Gold – 4Q21 Balance Sheet and Gold Production: The Raw Numbers
|El Dorado Gold||4T20||1T21||2Q21||3Q21||4Q21|
|Total revenue in millions of dollars||278.52||224.62||233.22||238.44||244.64|
|Net income in millions of dollars||22.79||8.27||-55.74||-52.22||-43.1|
|EBITDA in millions of dollars||95.27||105.65||2.24||97.11||103.8|
|Diluted EPS in $/share||0.13||0.05||-0.31||-0.29||-0.24|
|Cash flow from operating activities in millions of dollars||107.31||90.87||37.05||105.80||116.7|
|Capital expenditures in millions of dollars||59.64||67.42||74.16||76.41||82.1|
|Free cash flow in millions of dollars||47.67||11:45 p.m.||-37.11||29.39||34.6|
|Total cash in millions of dollars||511.19||533.81||410.73||461.20||481.33|
|Long-term debt in millions of dollars||501.14||491.54||426.31||493.62||489.76|
|Shares outstanding (diluted) in millions||179.73||177.23||181.60||183.95||184.80|
|Eldorado Gold Production Au Oz||4T20||1T21||2Q21||3Q21||4Q21|
|Au Oz gold production||138 220||111,742||116,066||125,459||122,582|
Source: Company filing and Fun Trading files.
Note: More data is only available to subscribers.
Part I – Review and Production Discussion
1 – 4Q21 revenue was $244.64 million
Revenue was $244.64 million, down from $278.52 million in the same quarter a year earlier and up 0.4% QoQ. The company posted a net loss to shareholders in the fourth quarter of $43.1 million or $0.24 per diluted share.
Gold sold this quarter was 122,582 ounces Au. The company sold its gold at $1,776 an ounce. Adjusted net income for the quarter was $25.1 million or $0.14 per share.
2 – Eldorado Gold’s net debt is $8.43 million in 4Q21
Total cash this quarter was $461.20 million, compared to $410.73 million in the prior quarter. Total debt, including short-term, is $689 million.
The total cash is climbing again.
3 – Free cash flow was estimated at $34.6 million for the fourth quarter of 2021
Note: Organic free cash flow is cash flow from operating activities less capital expenditures. The company has a slightly different way of calculating free cash flow.
EGO posted year-over-year free cash flow of $50.33 million, with $34.6 million for the fourth quarter of 2021.
Part II – Gold Production Details for 4Q21
This quarterly production comes with an estimated gold price of $1,776 per ounce, and the AISC was $1,077 per ounce.
1 – Olympias mine
The company continues to focus on improving efficiency and productivity at Olympias. Production stood at 15,461 ounces, higher than the 11,408 ounces produced in 4Q20.
Efficiency initiatives that began earlier in the year, coupled with positive ratings reconciliation to plan, resulted in higher production in the fourth quarter to end the year.
2 – Lamaque mine
Fourth quarter solid gold production at the Lamaque mine was mainly driven by higher than expected gold grades in the C4 zone.
The descent connecting the Sigma Mill to the Triangle underground mine was completed, on schedule and on budget, in December 2021. The descent will allow the direct transportation of ore and waste from the Triangle Mine to the mill, eliminating the re-handling of the ore.
Production was 51,354 ounces, compared to 44,168 ounces in 3Q20. It was an impressive quarter, up 37.4% sequentially.
3 – Kisladag mine
Production was in line with expectations, but production was low when we looked at the chart. It’s unclear why the company said the mine “performed well” this quarter.
Production was 33,136 ounces, compared to 56,816 ounces in 4Q20 and 51,040 ounces produced in 3Q21.
4 – Efemcukuru mine
The production was as expected. Gold production was 22,631 ounces compared to 25,828 ounces in the same quarter last year.
5 – Update of operations
Technical analysis and commentary
EGO is forming an ascending wedge pattern with resistance at $11.4 and support at $10.3.
Creeping inflation recently pushed the price of gold to $1,910 an ounce due to rampant inflation and Russia’s invasion of Ukraine.
I think it’s crucial to trade LIFO a large part of your short-term position to take advantage of the volatility that could accelerate significantly from the second half of March. The FED should raise the interest rate by 25 points or potentially more, and the price of gold could fall on the news.
Therefore, the trading strategy I suggest is to sell around 25% between $11.5 and $11.3 (LIFO trading). Accumulating on any weakness at or below $10.3 makes perfect sense.
However, if the price of gold turns bullish and trades above $1,975 an ounce, EGO might break through its resistance (breakout) and retest $12.5-$13.
Conversely, if the price of gold turns bearish due to Fed action, the EGO could quickly drop below $9.50.
Watch gold like a hawk.
Warning: The TA table must be updated frequently to be relevant. This is what I do in my stock tracker. The table above has a possible validity of approximately one week. Remember that the TA chart is a tool only to help you adopt the right strategy. This is no way to predict the future. Nobody and nothing can.
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