Over several years, Eldorado Gold Corp. earned a reputation for getting mines built in challenging countries where its rivals struggled.
But in Greece, that reputation is being seriously tested.
The Vancouver-based miner’s stock plunged 19 per cent to $3.53 on Tuesday after it announced the suspension of most of its activity in northern Greece, including all construction work at the crucial Skouries project. The decision came after Eldorado faced ongoing permitting delays and some outright government opposition to its activities.
“This has been an incredibly frustrating four years, to be blunt,” chief executive Paul Wright said on a conference call Tuesday.
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Eldorado first got into Greece in 2007, and then made a big bet on the country in 2012 with its $2.5 billion acquisition of European Goldfields Ltd. With that deal, Greece became the focal point of Eldorado’s future growth strategy.
But since the acquisition, development in Greece has moved at a snail’s pace as Eldorado has failed to receive permits on a reasonable timeline. The far-left Syriza government, which was elected last year, has been openly hostile to the company at times, revoking a key permit and suspending its technical studies.
Eldorado has also faced fierce local protests that have occasionally turned violent. But the company maintains that the vast majority of local citizens support its activities.
More than 600 jobs are being cut due to the Skouries suspension. Additionally, Eldorado said it might suspend the Olympias project if a permit is not granted by the end of March. The company also placed two earlier-stage projects, Perama Hill and Sapes, on so-called “care and maintenance” to keep spending at a bare minimum. An expansion of the Stratoni mine is in doubt due to the Greek investment climate.
With regards to Skouries, where Eldorado has spent more than US$300 million to date, Wright said the lack of permitting has made progress too slow, costly and inefficient to continue.
“We’re simply not able to be active enough at this stage for it to be a sensible construction activity,” he said on the call.
Despite the problems, Wright said he is confident Eldorado will eventually get to “a better place” with the Greek government. But he could not put a date on when that will happen. Eldorado has pitched its gold projects as a critical boost to the Greek economy, which has been pummeled by austerity measures and an ongoing debt crisis.
Eldorado is not the first mining company to struggle in Greece. In the 1990s, the Skouries and Olympias projects were controlled by a company called TVX Gold Inc., which failed to develop them because of local opposition. Eldorado felt it could do better, in part because of its strong track record of developing mines in both neighbouring Turkey and China.
The 19 per cent drop in the stock price was its biggest one-day decline since 2008. Several analysts also slashed their price targets as a result of the news.
“In our view increasing uncertainty has materialized with Eldorado’s long-term corporate strategic outlook,” Dundee Capital Markets analyst Josh Wolfson said in a note.