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Goldman Sachs upbeat on European Goldfields after Greek approval

Goldman Sachs called the long-awaited grant of the required permits for European Goldfields’ (LON:EGU, TSE:EGU) Skouries and Olympias projects in Greece a “strong positive event” that will boost the share price.

Analyst Eugene King expects European Goldfield’s shares to re-rate on the back of the update to close the gap to its price target for the stock, which was maintained at 1,350 pence today.

Goldman has also reiterated its “conviction buy” rating for the stock.

EGU announced on Friday that the Greek government confirmed that its 95 percent owned subsidiary Hellas Gold could now progress the mine development projects.

The approval allows Hellas Gold to continue its operations at the Mavres Petres deposit of the Stratoni mine and the mining and processing of ore at the Olympias project.

At the Skouries project, the permits allow the development of mining and processing.

Hellas has also been permitted to expand the port facilities at Stratoni.

European Goldfields initially submitted a final Environmental Impact Study (EIS) for the projects last August and the approval was initially expected before the end of 2010.

King called the delays experienced by the company in receiving the regulatory approvals “frustrating”, but analysts were optimistic about the outcome of the approval process in the wake of Greece’s economic problems.

UBS said last month that the Greek government was unlikely to reject capital investment given the current state of the economy and when the environmental study on a local level has been approved.

Goldman said that European Goldfields now needs to secure the funding to support its Greek operations in late 2012 and early 2013, which might be raised through a share placing.

Shares in European Goldfields initially climbed in London trading, but fell nearly 2% in Toronto to C$13.38. The company has a market cap of C$2.46 billion.

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