Key Highlights

● Copper-gold concentrate came out of the Skouries plant in northern Greece.

● Annual production guidance was lowered and cost ranges were raised.

● Free Cash Flow was sharply negative as project spending peaked.

● Christian Milau became chief executive at the end of September.

Eldorado Gold Corporation (NYSE:EGO) reached a milestone in the third quarter that has long been awaited: copper-gold concentrate came out of the Skouries plant in northern Greece. The same quarterly report, issued in late October, also contained the price of getting there. Annual production guidance was cut, cost ranges were lifted, and the quarter's free cash flow was deeply negative as construction and commissioning spending peaked.

The report also marked a change at the top. Christian Milau became president and chief executive at the end of September, succeeding George Burns, who retired from the role but remains on the board. Within the results release, Milau acknowledged that the ramp-up at Skouries has taken longer and cost more than the company expected.

What did Eldorado Gold report for the quarter?

Gold production was about 106,000 ounces, down from roughly 115,000 a year earlier. Sales were slightly higher than production, at a little over 107,000 ounces, at an average realised price of about $4,300 an ounce.

Revenue rose to a little above $511 million from about $435 million a year earlier, because the higher gold price outweighed the lower volume. Net Earnings attributable to stock owners were about $118 million, or $0.45 a share, against roughly $56 million a year earlier. Adjusted earnings were about $0.49 a share.

Adjusted earnings before interest, tax, Depreciation and Amortisation reached about $275 million. Cash costs were around $1,400 an ounce delivered and the All-In Sustaining Cost about $2,050, well above the roughly $1,700 of a year earlier.

Why was free cash flow so negative?

Operating cash flow was about $135 million, while Capital spending totalled around $452 million. The result was negative consolidated free cash flow of about $191 million. Excluding the two new projects, free cash flow was positive at roughly $98 million.

That split matters. The legacy mines are generating cash, but Skouries and McIlvenna Bay are absorbing it faster than the older operations can provide it. Spending on the two sites is expected to ease as they approach commercial production, which the company now expects late in the fourth quarter.

The cash balance fell to about $400 million, excluding restricted cash tied to Skouries Debt service, while total debt was roughly $2 billion. Debt less cash works out to around one and $600 million, a figure derived here from the release rather than stated by the company.

What happened at Skouries?

Skouries, a copper-gold project in Halkidiki, produced its first concentrate in early September. The site was connected to permanent grid power at the end of the month, allowing the temporary generators to be removed. Only two of the six tailings filter presses are running, with the remaining four expected by November.

Guidance for gold from the project in the current year was cut to between 10,030-five thousand ounces from 60,000 to 100,000. Total project capital was lifted by about $110 million to roughly one and $400 million, and accelerated operating capital by about $130 million to around $390 million.

Up to $30 million more could be spent if commercial production slips. The term Facility for the project, around €740 million, is fully drawn, and a small restricted cash balance is set aside for its debt service. Commercial production is now expected late in the fourth quarter.

How is McIlvenna Bay progressing?

McIlvenna Bay in Saskatchewan came into the group through the Acquisition of Foran Mining, which closed in mid-April. The company issued about 65 million shares in the deal. First copper concentrate was produced in June and first zinc concentrate in July.

Commercial production slipped from the third quarter to late in the fourth quarter. The project capital estimate rose by about $23 million to roughly $975 million. Mill throughput in the quarter was a little under 60,000 tonnes, producing about a million pounds of copper and a small amount of gold.

A study is under way to expand the mill to 7,000 tonnes a day by the end of the decade. Guidance for the project's gold output this year, between 5,000 and 10,000 ounces, was unchanged. Readers following Gold Stocks will recognise a pattern: new base-metal-and-gold projects often take longer to reach nameplate than planned.

What did the guidance change look like?

Production guidance excluding the two new projects was lowered to between 410,400 and 30,000 ounces from the earlier 430 to 490,000. Including the two projects, the range is now 425 to 475,000 ounces, down from roughly 500 to 600,000.

Cost ranges moved up. Cash costs excluding the new projects are now between 1,400 and $1,500 an ounce delivered, from roughly 1,200 and 1,400 previously. The all-in sustaining cost range climbed to between about 1975 and $2,125.

Sustaining capital and growth capital ranges were also raised, while depreciation was lowered. Base metal ranges for copper, silver, lead and zinc were cut. Management said expectations for the following year are unchanged, with both new projects aiming for nameplate capacity by the middle of that year.

Which established mines carried the quarter?

Lamaque in Quebec was the bright spot. It produced about 53,000 ounces, up around 13 per cent, on higher throughput, grade and recoveries, including material from the Ormaque zone. Its cash cost was about $900 an ounce and its all-in sustaining cost around $1,436.

Kisladag in Turkey was the main disappointment, at roughly 23,000 ounces against more than 37,000 a year earlier. The company cited lower grades and delayed access to higher-grade ore. Higher-grade material sits on the North heap leach pad, with benefits expected late in the fourth quarter and into next year because leaching takes many months.

Efemcukuru produced a little over 17,000 ounces, with a concentrate shipment slipping into October. Olympias in Greece produced about 13,400 ounces, with cash costs falling meaningfully. A plant shutdown in the first quarter of next year is planned to expand throughput, with nameplate expected in the first half.

Why did the results miss expectations?

A published summary of the quarter noted that adjusted earnings of $0.49 a share fell short of a consensus estimate of $0.55, and that Revenue of about $512 million came in below an expected $553 million. The same summary said the company had missed consensus in four of the previous five quarters.

The shortfall reflected lower sales volumes at Kisladag and the pre-commercial costs at the two new sites. Royalties and pre-commercial costs at McIlvenna Bay drove much of the rise in production costs, which were about $200 million in the quarter.

Misses against consensus are not unusual during project ramp-ups, when costs are hard to model. The size of the gap, around a tenth on earnings and just over seven per cent on revenue, shows how much the new sites are affecting reported results at present.

Who is the new chief executive?

Christian Milau took on the role of president and chief executive on the last day of September. George Burns, who was chief executive until the end of September, retired from the role and stays on the board, which can provide continuity during the commissioning period.

Milau's first set of results as chief executive came with a candid assessment. The release quoted him as saying that the ramp-up has taken longer and cost more than expected. A new chief executive often resets expectations early, and the lowered guidance may be part of that process.

The change comes at a delicate moment. The company has two large projects in commissioning, a Credit facility that was recently amended, and a major legacy asset in Turkey with grade problems. How quickly Milau can demonstrate stable throughput at the new sites will shape how the transition is judged.

What changed in the credit facility and dividend?

The senior secured credit facility was amended to $600 million, with its Maturity extended to early in 2029. The amendment provides Liquidity as the company absorbs the heavy spending in the final months of the construction phase and the early stage of production.

The board also declared a fourth-quarter Dividend of $0.07 a share, payable in mid-December to stock owners of record at the start of that month. Maintaining a dividend while free cash flow is negative signals confidence from the board that the situation is temporary.

The company also has a normal course issuer bid mentioned in the release, though the pages reviewed gave no details of activity in the quarter. Readers who want to understand capital allocation should read the full document, which sets out the cash position, debt and restricted funds.

How did the cost per ounce move and why?

The all-in sustaining cost rose from roughly $1,700 an ounce a year earlier to about 2050. Several forces pushed it higher at once: lower grades at Kisladag, fewer ounces spread over fixed site costs, royalties that rise with the gold price, and a reclassification of some tunnel spending at Lamaque from growth to sustaining capital.

The last item is largely an accounting matter. It makes the Lamaque all-in sustaining cost look about a fifth higher than it would have been, even though the operation produced more gold at a cash cost below $900 an ounce. Readers comparing sites should therefore look at both cash cost and all-in sustaining cost.

The two new projects add a further distortion. Pre-commercial operating costs at McIlvenna Bay and Skouries are being treated as capital in some cases and as Operating Expense in others, which is why the company reports guidance both with and without them. The ranges excluding the new projects give the cleaner picture of the established base.

How could the new projects change the revenue mix?

Until now, almost all of the company's revenue has come from gold. Once Skouries and McIlvenna Bay are in commercial production, concentrates containing copper, zinc, silver and lead will add a base-metals component. The cut to base metal guidance in this report shows how little of that component will be visible this year.

For next year, management said expectations are unchanged, with both projects aiming for nameplate capacity by the middle of the year. If that timetable is met, copper and zinc would begin to appear as meaningful lines in the accounts, and the company's earnings would depend on a wider basket of prices than at present.

This shift also changes how the company markets its product. Concentrate is typically delivered to smelters under contracts that include treatment and refining charges, while the doré from a heap leach pad is refined into gold bars. The sales process, Working Capital pattern and exposure to smelter terms therefore differ, which is a further adjustment for the organisation.

How does the company sit in the wider gold sector?

Mid-tier gold producers have enjoyed windfall prices, yet cost Inflation and project delays have kept many from fully translating those prices into cash. Eldorado's quarter illustrates both: a realised price far above a year ago, but an all-in sustaining cost that also climbed sharply. Large benchmarks such as the S&P 500 contain few pure gold miners, so the sector is often tracked separately.

The company's strategy has been to pair gold with copper and other base metals. Skouries and McIlvenna Bay both produce concentrates that contain copper alongside gold, which links earnings more to industrial Demand and less to bullion alone. That Diversification is also what makes the ramp-up complicated, since concentrate plants have different operating demands than heap leach pads.

Peers have also faced setbacks with new projects in recent years, and permitting and construction timelines have been a common theme. What sets this quarter apart is that two major projects reached first concentrate within a few months of each other, which concentrates both the cost and the reward.

What should readers watch next for Eldorado Gold?

The key date is the end of the fourth quarter, when both Skouries and McIlvenna Bay are expected to declare commercial production. Before then, completion of the remaining four filter presses at Skouries in November is a concrete operational marker, as is any news on throughput and recoveries.

At Kisladag, the arrival of higher-grade ore from the North heap leach pad should show up in output late in the fourth quarter and into next year. At Olympias, planning for the plant shutdown in the first quarter of next year will matter for next year's production profile.

The next Quarterly Report will show whether the lowered guidance is met and how cash flow responds as spending eases.