How do you wipe out investors' money month after month but end the year with a bang just when the market's giving up on you? Ask Eldorado Gold (NYSE: EGO). After a disaster of a year, shares of the Canadian gold miner surprisingly turned around in December to clock 23% gains, leaving investors scratching their heads. There were only two announcements from the miner last month, one of which wasn't exactly good news. So what stoked the market's hopes?
To give you a quick recap, Eldorado was dealt a huge blow in September of last year, when the Greek government initiated arbitration proceedings against the miner's subsidiary, Hellas Gold, alleging deficiency in the technical study for a plant set up to treat concentrates at its Olympias and Skouries projects. While Olympias recently received pending permits and is close to commercial production, Skouries has been mired in controversies, and development at the mine was suspended for several months in 2016 thanks to delayed permits.
Last November, Eldorado scrapped further investments in Skouries, put the mine under "maintenance and care," and initiated legal action against the Greek government for permit delays that led to "unjustifiable delays" in the development of the project. At the same time, management believed that the arbitration process will conclude in a timely manner, but that doesn't seem to be the case just yet.
In December, the Greek government extended the 90-day arbitration window by another 60 days to April 6, 2018. That only adds to the uncertainty around Eldorado's prospects in Greece, as the company would've preferred quick proceedings after an already painfully long wait in getting its projects in the country up and running.
While extended arbitration sounds like a setback, investors appear to have found a silver lining and, perhaps, believe that it could buy Eldorado more time and opportunity to initiate an open dialogue with the Greek authorities to come to a "mutually agreeable solution" that allows the company to develop its mines and unlock value from the heavy investments that it has already made in the nation.
Meanwhile, investors are also warming up to Eldorado's efforts to cut costs, a glimpse of which was available during the last week of December when the company announced a churn in its board of directors by appointing Dr. George Albino as the chairman of the board and deciding to lower "total and individual director compensation in keeping with peer group considerations."
So while a leaner board and a cut in compensation should save Eldorado some cash, investors could also be pinning hopes on Albino to getting Eldorado back on track, as the chairman plays a key role in strategizing and monitoring a company's way forward. Albino was a geologist for 18 years and brings with him rich experience in the mining industry that spans more than three decades. Whether he can provide a growth booster to Eldorado remains to be seen, but for now, positive news from Greece is the only trigger that could help Eldorado shares sustain momentum.
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