For some gold companies, less is more: Why investors seem to be rewarding firms that scrap projects – by Gabriel Friedman (Financial Post – February 2, 2019)

Eldorado Gold and Iamgold both shelved projects this week, sending stock prices soaring

Eldorado Gold Corp. on Thursday cancelled plans to build a $500-million processing mill in Turkey and investors took note, sending the stock soaring 28 per cent Friday morning after watching it decline for the past year.

A similar trading pattern occurred on Iamgold Inc.’s stock last week, which rose more than 20 per cent after the miner indefinitely delayed construction of its nearly $1-billion Côté mine in Ontario.

Taken together, the two companies’ decisions may offer a picture of what investors want from mid-tier gold companies, particularly those suffering through years-long slumps: fewer projects with hefty price tags as analysts across the board predict greater consolidation in the precious metals sector.

“The way I would describe it is, if you look at our sector, there was a period of time when growth was being rewarded,” said George Burns, chief executive of Eldorado Gold. “That’s changed pretty significantly. The market today does have a preference for cash flows and short-term returns.”

Cancelling the Kisladag gold mill in Turkey may not have been entirely voluntarily, since Eldorado Gold has approximately $600 million in debt due in 2020, is building a mine in Quebec and had just $293 million in cash on its balance sheet at the end of 2018.

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