2018 is turning out to be a disappointing year for investors in Eldorado Gold (NYSE: EGO). The gold stock has lost 26.9% in the first six months of the year, according to data from S&P Global Market Intelligence. That still doesn't look as bad when you realize that Eldorado shares plummeted as much as 41% in just the first quarter of the year before recovering some ground. What should investors make of the gold stock's wild moves?
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Among all the announcements that Eldorado Gold has made so far this year, three stand out: its fiscal 2017 earnings release in March and a positive update on the Greek arbitration ruling, followed by its first-quarter earnings report in April. Now if you plot the stock's year-to-date price chart, you can correlate the stock's movement to the three events.
Investors began dumping Eldorado shares later last year for two reasons: uncertainty shrouding the miner's projects in Greece after the government initiated arbitration proceedings to settle long-pending disputes, and falling production from its flagship Kisladag mine in Turkey.
As if that wasn't enough, Eldorado dealt investors another blow in March, when it reported lower sales and adjusted profit for fiscal 2017 and gave a disappointing outlook for fiscal 2018 that included significantly higher cost projections.
In short, Eldorado is facing all sorts of challenges one can think of, from operational challenges to key development projects in limbo. Investors found some respite in May, when the Greek government announced its intention to resolve the deadlock with Eldorado in the "coming weeks," but the euphoria was short-lived. Not only has there been no update from Greece yet, but gold prices have also lost significant ground in the meantime. For a gold mining company that's already struggling with low production and high costs, falling gold prices are the last thing it wants to see.
There's no reason any investor would want to buy Eldorado shares right now, as the miner isn't out of the woods yet. Sure, a resolution in Greece will be welcome news, but buying shares on that basis alone is nothing but speculation, more so because it's difficult to estimate the cost implications and it'll still take years for Eldorado to bring its projects in the nation online. Mining is a tough business, and you'd perhaps be better off staying away from a struggling gold miner's stock.
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