Fiddich Review Centre

Bear of the Day: Eldorado Gold (EGO) – December 28, 2022

Eldorado Gold (EGO Free Report) is a $1.5 billion Canadian miner with gold producing and exploration assets in Brazil, Turkey, and a new development in Greece.

EGO shares fell over 50% from around $12 down to $5.30 as its yellow metal dropped 20% from highs above $2,000 earlier this year.

The good news is that EGO rallied back above $8.65 as gold made a triple bottom at $1,620 in September and October and climbed back to $1,800 while inflation stalled and interest rates fell.

The bad news is that earnings estimates have deteriorated further since a big EPS miss for the Sep quarter. And in the last two months, the profit consensus for the current year fell from 8-cents to zero.

Worse, next year has seen EPS projections drop 41.7% from $0.72 to $0.42. And that’s why EGO is in the cellar of the Zacks Rank.

Expansion in Greece

Part of the lowering of expectations revolves around new investment in Greece that was announced by the company on December 15.

On Dec 20, Canaccord metals analyst Carey MacRury downgraded Eldorado Gold to Hold from Buy with a price target of C$12, up from C$10.50, after Eldorado announced a EUR 680 million project financing package to complete construction of the Skouries project in Greece and a board decision to proceed with the project.

While MacRury views Skouries as potentially positive in the medium term and the financing terms as “reasonable,” he views the risk/reward for Eldorado as more balanced going forward with several years of negative free cash flow now potentially ahead.

Cuban Clobbers Gold Bugs

My thesis for years has been that gold is indeed the “barbarous relic,” especially in the age of permanent fiat systems and new digital currency innovations.

My most recent summary of these views can be found in this Zacks Ultimate report…

Why Gold Is Headed to Zero (email if you don’t have access and tell ’em Cooker sent you)

Another gold bear, billionaire Mark Cuban, just opined this week in much more “colorful” language.

Cuban appeared on the Bill Maher podcast Club Random over the weekend and got into a discussion about Bitcoin.

When the host said he’s “very anti-Bitcoin” and believed in the value of gold, the Dallas Mavericks owner replied “I want Bitcoin to go down a lot further so I can buy some more.”

He added, “If you have gold, you’re dumb as [a rock… or something like that].”

Maher retorted that gold “never goes away” and that it’s “like a hedge against everything else.”

Cuban’s response comparing gold vs. crypto in terms of their inflation hedging and “store of value” attributes wasn’t that articulate.

But then he said something I found of value…

“You don’t own the gold bar, and if everything went to hell in a hand basket and you had a gold bar, you know what would happen? Someone would beat the [rock] out of you or kill you and take your gold bar.”

According to Steve Mollman writing in Fortune online on December 24…

Cuban has slammed gold investing before. In 2019, for instance, he said in a Kitco News interview, “I hate gold. Gold is a religion.”

When discussing the recent FTX implosion, Mollman observed the Shark Tank figure-head still believes in crypto’s potential, noting these apt comments from Cuban…

“Separate the signal from the noise,” he suggested. “There’s been a lot of people making a lot of mistakes, but it doesn’t change the underlying value.”

Bottom line: Neither Cuban or myself knows when the right time to buy Bitcoin will appear. But we both agree that gold and it miners’ days are numbered as profitable investments. The beauty is that we all get to vote with our own dollars.

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