Eldorado Gold shares rally on debt refinancing news

The ribbon cutting ceremony at the recently opened Lamaque gold mine near Val d’Or, Quebec, where commercial production was achieved on March 31, 2019. Source: Eldorado Gold Corp.

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Eldorado Gold Corp. [ELD-TSX; EGO-NYSE] shares rallied Monday May 13 after the company announced plans for refinancing its US$600 million 6.125% senior notes due in December 2020.

The company said it intends to offer up to US$300 million in 5-year senior secured notes. The company also said it has received commitments from a syndicate of lenders for a US$450 million senior secured facility consisting of a $200 million amortizing term loan (due June 2020 to 2022), the proceeds of which will be applied to redeeming existing notes, and a $250 million revolving credit facility (maturing four years from closing.

The facility is expected to close in the second quarter of 2019 and the existing credit facility (expiring June, 2020) will be cancelled. Total upfront proceeds from the new borrowings total $500 million (before transaction costs) and the remaining $100 million required to redeem the entire bonds is expected to be paid from Eldorado’s cash on hand.

Eldorado shares rallied on the news, rising 4.69% or 22 cents to $4.91 on volume of 608,162. The shares are trading in a 52-week range of $3.36 and $7.75.

Based in Vancouver, Eldorado is a mid-tier gold and base metals producer with a portfolio that includes mining and exploration projects in Turkey, Canada, Greece, Romania, Serbia and Brazil.

Key operations include the Olympias mine in Greece, Kisladag and Efemcukuru mines in Turkey and Lamaque mine in Quebec. Together they are expected to produce between 390,000 and 420,000 ounces this year at an all-in-sustaining cost of US$900-US$1,000 an ounce.

Eldorado CEO George Burns said refinancing the debt was deemed a priority after the company recently achieved two major milestones his year by resuming full operations at the Kisladag mine and starting commercial operations at the Lamaque mine.

Eldorado recently reported a higher than expected first quarter loss due to concentrate shipment days at Efemcukuru (lower sales), higher depreciation and higher expensed interest. Overall 2019 guidance was maintained. There was no new updates related to the Skouries gold-copper project in Greece, which is on care and maintenance and awaiting permits from the government of Greece.

Production for the first quarter was 83,000 ounces at a total cash cost of US$652 an ounce and AISC of $1,132 an ounce. (Q1 2018: 89,374 ounces). That included 19,678 ounces of pre-commercial production from the Lamaque mine in Quebec.

Sales were much weaker than commercial production as a result of delayed shipments of concentrates from Efemcukuru at quarter end (a contract dispute with customer combined with delays in port shipments as a result of inclement weather). Those ounces are expected to be sold by Q3/19.

The adjusted net loss was $17.9 million or 11 cents per share, compared to adjusted net earnings of $14 million (9 cents per share) in the first quarter of 2018, also a reflection of lower revenues from lower production and sales, primarily driven by the delayed shipments from Efemcukuru.

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