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Eldorado Gold's credit rating bumped down on limited production

S&P Global Ratings has downgraded Eldorado Gold Corp.'s long-term corporate credit rating to B+ from BB-.

The rating agency said May 27 that it believes the Vancouver-based gold producer has limited operating diversity as an operator of two mines in Turkey, as well as a modest annual scale of production.

In January, Eldorado flagged lower production expectations of between 365,000 and 400,000 ounces of gold from its operations this year after it missed its 2016 target.

At the same time, the company revealed that the low gold price had forced it to defer its plans to complete the expansion at its Kisladag mine.

S&P Global Ratings expects Eldorado's limited operating breadth to continue for the next two years during a period of high capital spending on multiple growth projects.

Eldorado's concentration of assets in Turkey, including its reliance on its Kisladag mine for the vast majority of cash flow, exposes the company to unexpected operating disruptions, according to S&P Global Ratings.

The company announced earlier in May that it plans to acquire Integra Gold Corp. in a C$590 million deal because it believes Integra's Lamaque gold project in Quebec will be a good fit for its portfolio.

S&P Global Ratings said production from the Olympias mine in Greece this year, and the advancement of other development projects such as Skouries in Greece, Tocantinzinho in Brazil and the Lamaque project should help improve Eldorado's operating breadth.

Development of the Lamaque project is also expected to improve the company's country-political risk profile.

These projects are forecast to boost Eldorado's annual gold output to more than 700,000 ounces by 2020.

S&P Global Ratings' outlook for the company is stable, reflecting the expectation that Eldorado will generate adjusted debt-to-EBITDA in the 2x to 3x range and maintain strong liquidity over the next two years.

S&P Global Ratings and S&P Global Market Intelligence are owned by S&P Global Inc.