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Eldorado Gold (EGO) Upgraded To 'Sector Outperformer' By CIBC

 February 25, 2013 03:42 PM

(By Balaseshan) CIBC World Markets analyst Cosmos Chiu upgraded rating of Eldorado Gold Corp. (NYSE: EGO) to "Sector Outperformer" from "Sector Performer" with $16 price target.

Since the beginning of 2013, EGO's share price has lost ground against its "high-growth, large-cap" peer group -- Goldcorp Inc. (NYSE: GG), Yamana Gold Inc. (NYSE: AUY), New Gold Inc. (NYSEAMEX: NGD), Chiu noted. Trading at 0.95 times price to net asset value (versus GG at 1.15 times and AUY at 1.45 times), the analyst believes it is now a great entry point for EGO shares.

Although "growth" is no longer the buzz word it used to be in the gold mining industry, the analyst believes producers that possess strong production growth, low costs, and a strong balance sheet will outperform, and EGO satisfies all three criteria.

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EGO has industry-leading production growth of 24% (3-year compound annual growth rate) and 20% (5-year CAGR), and its mid-$500/oz cash cost profile puts it in the lowest quartile of the global cost curve. More near term, Chiu is comfortable with EGO's ability to meet its 2013 guidance of 705,000-760,000 ounces.

EGO reported earnings of $0.16/share, in-line with estimates of $0.15/share, as most items had already been pre-released, the analyst noted. An increase in the Greek corporate tax rate to 26% has minimal impact to the analyst's NAV, while its definitive conclusion lifts an overhang that has clouded the Greek projects.

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The brokerage increased its 2013 EPS estimate to $0.58 from $0.55 and its 2014 estimate to $0.89 from $0.86.

EGO is trading up 4.89% at $10.08 on Monday.



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