Eldorado Gold (EGO): A Gold Sector Outperformer with a Clear Path to Free Cash Flow Inflection in 2026

Eldorado Gold (NYSE: EGO) has emerged as a standout performer in the gold sector, driven by a combination of strategic capital allocation, disciplined operational execution, and a favorable macroeconomic backdrop. With gold prices surging amid inflationary pressures and geopolitical uncertainty, EGO's Q2 2025 results—marked by a 52% year-over-year revenue jump to $451.7 million—underscore its ability to capitalize on market tailwinds while laying the groundwork for a transformative inflection in free cash flow by 2026.

Operational Execution: Revenue Growth and Cost Discipline

Eldorado's Q2 performance was fueled by higher gold prices and robust production. The company sold 131,489 ounces of gold at an average realized price of $3,270 per ounce, generating $439.7 million in gold revenue alone. Net earnings from continuing operations soared to $139 million ($0.68 per share), a 147% increase compared to Q2 2024. However, rising costs—particularly a 27% year-over-year increase in production costs to $162.2 million—highlight the challenges of operating in a tight labor market and elevated royalty environment. Despite this, all-in sustaining costs (AISC) rose only 14% to $1,520 per ounce, demonstrating effective cost management relative to gold price gains.

Skouries Project: The Catalyst for 2026 Free Cash Flow

The Skouries project in Greece, a cornerstone of EGO's growth strategy, is now 70% complete and on track for first production in Q1 2026. This high-grade copper-gold mine, with an updated capital cost of $1.06 billion, is expected to significantly diversify EGO's revenue streams and reduce unit costs. The project's progress—marked by $117 million in Q2 capital spending and $200.9 million in H1 2025—reflects disciplined execution despite inflationary pressures. Once operational, Skouries will add approximately 100,000 ounces of gold equivalent annually, with copper production further insulating EGO from gold price volatility.

Capital Allocation: Balancing Growth and Shareholder Returns

Eldorado's capital strategy is a masterclass in balancing reinvestment and returns. In Q2 2025, the company spent $240.9 million on capital expenditures, with $117 million directed to Skouries and $47.3 million allocated to growth projects at operating mines like Kisladag and Lamaque. These investments are designed to extend mine life, enhance throughput, and reduce long-term costs. Simultaneously, EGO has prioritized shareholder returns through aggressive buybacks. In Q2 alone, it repurchased $44.6 million in shares under its normal course issuer bid (NCIB), with an additional $13.8 million spent post-quarter. This dual focus—on growth and returns—has allowed EGO to generate $61.5 million in free cash flow (excluding Skouries capex) in Q2, even as it funds transformative projects.

Path to Free Cash Flow Inflection

The completion of Skouries in mid-2026 will mark a pivotal moment for EGO. With the project fully funded and construction on schedule, the company anticipates a material reduction in unit costs as fixed costs are amortized over higher production volumes. Additionally, the addition of copper—a commodity with strong demand in the green energy transition—will diversify EGO's revenue base and provide a buffer against gold price fluctuations. By 2026, EGO's free cash flow is projected to grow significantly, supported by a robust balance sheet and a production profile that benefits from both gold and copper price trends.

Investment Thesis: A High-Conviction Play in a Gold-Centric Market

Eldorado Gold's strategic positioning makes it a compelling investment in a gold-centric market. The company's ability to deliver 52% revenue growth while maintaining cost discipline, coupled with its near-term catalyst in Skouries, positions it to outperform peers. For investors seeking exposure to a gold sector inflection point, EGO offers a rare combination of near-term visibility (through share buybacks and operational cash flow) and long-term growth (via Skouries and mine life extensions).

Conclusion

Eldorado Gold is a rare blend of operational excellence and strategic foresight. As gold prices remain elevated and the global economy grapples with inflationary pressures, EGO's disciplined capital allocation and near-completion of the Skouries project position it for a free cash flow inflection in 2026. For investors with a medium-term horizon, EGO represents a high-conviction opportunity to capitalize on both the gold sector's momentum and the company's transformative growth trajectory.