was named the No. 1 growing company by
Magazine, but CEO Paul Wright says it's just business as usual.
Eldorado Gold has a $10.81 billion market cap and reported a blowout second quarter. The company earned net income of $60.6 million, or 11 cents a share, by selling 172,826 ounces of gold for a cash cost of $357 an ounce, one of the lowest in the industry.
Eldorado Gold Bets on China
The one dark cloud for the company is its recent loss of
. The new project would have added 2.54 million ounces of gold to its existing 15.1 million ounces of proven and probable reserves.
Shares are up 27% year to date as gold prices have rallied 15.7%. I sat down with Wright at the Denver Gold Forum to see how the company was bouncing back after its failed acquisition.
Goldcorp just outbid you for Andean Resources which you've been working on for a couple of years now. How big of a deal was that to you? How big of a blow was that to you
: Well it was a bit of a disappointment because obviously we wouldn't have been there if we weren't interested in the project. But ... it's one of those situations that would have been nice to have but not necessary to have. We just move on beyond that.
Where are you moving to
: We're moving on principally with just the projects we have internally. I mean we have two new mines we're bringing onstream next year ... one in Turkey, one in China
and beyond that we have another project in Greece that's going through the permitting stage. We have a second project in Brazil that's going through permitting and engineering so it's not as if we don't have enough to keep ourselves busy for the next few years.
Are you going to try to make another acquisition soon
: It's very much opportunistic. I mean we've defined the parts of the world we want to focus on. The nature of the company is that it's one of the lowest-cost producers and what that really means is that the number of opportunities that really makes sense for us are few and far between. So part of what we do is remain open. I mean part of our business is to look for potential opportunities but conceivably it could be a couple of years before we do anything else.
What I think what's also hard that you're big but you're not huge, right? So it seems like Goldcorp (GG) and Newmont (NEM) - Get Report and Barrick (ABX) could always outbid you guys. How does that affect your decisions
: Well you know I think largely speaking we're looking for slightly different assets. You know for us, as a smaller company, assets that may produce 100,000 to 200,000 ounces a year are relevant whereas with the larger companies because of their scale those sizes of assets are really not of interest.
So it's not that often that we actually bump into each other and I think the difference in our company is because we've been successful in exploration most of our growth comes from internal success.
You were listed as the No. 1 growing company by Fortune magazine. Your stock seems to be hitting some resistance between $19-$20. Do you think expectations are too high for Eldorado
: I don't think they're too high. I think it's normal. We've been through periods in our history where you hit a plateau, you bump along it for a period of time and then you can continue beyond that so it's nothing that we're sort of concerned about. The underlying business continues to be sound, strategy remains intact.
What do you think it's going to take for your stock to really break out. Is there a catalyst coming up that you hope will push it out of this range
: Look, I think just continuing doing what we're doing; continuing to deliver upon the plan where there's production and new mine development we'll see the company start and continuing to go forward. I don't think there's anything magical about it.
I think the Andean transaction or the failed Andean transaction certainly created a lot of rumor mills. There's a lot of nonsense being discussed about every company ... that we're likely to acquire ... that tends to effect the short-term the way the share price performs but I think medium- to long-term it tends to wash over and we can get back to basics again.
What's your long-term price target for gold
: My view at the beginning of this year was that we'd probably end the year closer to $1,300 than $1,200 and I think we're fairly close to that. I think it would not be unreasonable to expect by the end of next year that we could be closer to $1,500. All the drivers really remain present for a strong gold price and a stronger gold price.
Long term it's tough. I've been in the industry for 30 years so I've been through a number of summers and there are always winters so winter will come again. But for us as one of the lowest-cost producers I'm not really concerned that much about the winter.
And what does $1,300 gold mean to you
: Look, we will derive a benefit from it but we're cautious in terms of doing long-term planning on our gold prices. We still very much look, when we're making acquisitions, when we're evaluating our own projects, we look at how these projects would behave at say $900 gold, even $800 gold price.
I think it's unrealistic to expect the gold price would go lower than that without a significant change in the inputs so then it becomes more difficult to model. But it's not inconceivable in the future that gold will return to lower levels and I think if you're building a long-term business you can't ignore that eventuality.
When you're at the Denver Gold conference and you're talking to your peers and to investors what are some trends that are popping out at you
: I think there is a general sense of optimism but I think at the same time there's also a concern about the manner in which, I refer to them as the two drill hole wonders
that are attaching ridiculous market capitalizations and the implications of that on the industry.
I think it has taken a long time for exploration to get in gear; it's taken the better part of a decade really for exploration to kick in. I think there is greater optimism among the group that you are going to start to see new exploration finds which are absolutely essential for the industry in the future. But again it's a tough business; it's not getting any easier. Rate of discovery continues to be challenging but ... I think generally it's a positive environment.
When you said the two drill wonders does that mean that a company will strike gold and everyone will get excited about it but then they can't produce anything else down the road
: I think there's probably an increasing tendency ... for people to imply on limited information a value that in many cases won't be realized and the market is getting ahead of itself and I think it just reflects a starvation factor for real success and exploration.
Written by Alix Steel in Denver.
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