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Monday, September 27, 2010

Eldorado (NYSE:EGO) and Low Cost Benefits

Eldorado Gold (NYSE:EGO) received a lot of attention recently when they were named as the fastest growing company in 2010 by Fortune, but growth isn't the only strengh of Eldorado, as their low operational costs puts them in an enviable place.

The two major benefits of any company with low costs advantage are the flexibility it has and the ability to navigate its way through difficult economic times.

In gold mining, and mining in general, that's one of the major differentiators and moats separating the miners as a quality investment.

Even though Eldorado suffered some negative media coverage when they were openly outbid for Andea Resources by Goldcorp (NYSE:GG), all it revealed is what everyone already knew: they aren't able to successfully wage a bidding war against the major miners.

But as Eldorado CEO Paul Wright noted recently, they have two solid in Turkey and China, with another in the permitting stage in Greece. That will keep them busy for several years even if nothing else happens.

Wright wasn't concerned over the major miners' strength to outbid them on companies either, as most the time they don't end up interested in the same assets.

While Wright has said he would be open to another potential acquisition, it would have to be a very opportunistic one. Much of that is related to geographic preferences for the company they want to work in.

In his mind it'll probably be a couple of years before they start looking in the acquisition area again.

Over the long term Wright says he making decisions on the assumption the price of gold will continue rising, and being one of the top low cost miners in the industry, can do well in strong and weak economic environments.

The cash cost for gold production in the latest quarter for Eldorado was $375 an ounce.

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