Eldorado Gold Corporation: Q3 2007 Financial and Operational Results
Posted on: Thursday, 1 November 2007, 09:00 CDT
(all figures in United States dollars, unless otherwise noted)
Paul N. Wright, President and Chief Executive Officer of Eldorado Gold Corporation (TSX: ELD)(AMEX: EGO), today is pleased to report on the Company's financial and operational results for the third quarter ended September 30, 2007. "While we have experienced a setback this quarter with the temporary shutdown of our Kisladag mine, we continued to make progress on many fronts. At Tanjianshan we produced 37,775 ounces of gold at an average cash operating cost of $251 per ounce; completed a positive feasibility study of our Efemcukuru project and announced our decision to develop the Vila Nova Iron Ore project in Brazil," he stated.
Q3 2007 Events
- Generated earnings of $5.2 million or $0.02 per share
- Produced 61,385 ounces of gold from our operations at an average cash operating cost of $228 per ounce with Tanjianshan producing gold at an average cash operating cost of $251 per ounce, a 43% improvement from Q2.
- Suspended production temporarily at the Kisladag mine August 18, 2007 to comply with a Court ordered injunction.
Financial Results
Our consolidated net income for Q3 2007 was $5.2 million or $0.02 per share compared with net income of $5.2 million or $0.02 per share in Q3 2006. The consolidated net income for the quarter is attributable to stronger gold sales driven by increased production, lower unit-of-production costs and higher gold prices. This was partially offset by increased tax expenses as well as $2.0 million in Mine Standby Costs related to the temporary shutdown of our Kisladag mine on August 18, 2007. Net income for the nine-month period ended September 30, 2007 was $44.5 million or $0.13 per share (2006 net loss - $2.0 million; $0.01 loss per share).
In Q3 2007, we sold 57,231 ounces of gold at an average price of $667 per ounce, compared to 46,238 ounces at an average price of $620 per ounce in Q3 2006.
Operating Performance
Kisladag
Prior to the shutdown of the Kisladag mine on August 18, 2007 following a Turkish court order, we placed 825,839 tonnes of ore at an average grade of 1.52 grams of gold per tonne ("g/t Au") on the leach pad and produced 23,610 ounces of gold at a cash operating cost of $191 per ounce in the third quarter. During the quarter, we sold 26,746 ounces of gold for revenues of $17.8 million.
We placed 4.5 million tonnes of ore (at an average grade of 1.33 g/t Au) on the leach pad during the first nine months of 2007. Over the nine-month period ending September 30, 2007, we poured 135,306 ounces of gold and sold 142,725 ounces of gold for revenues of $94.2 million.
During the fourth quarter, we expect to receive a decision from the Appellate Court on the merits of a plaintiff's appeal. The plaintiff is seeking to cancel Kisladag's Environmental Positive Certificate on the basis of alleged threats to the environment and deficiencies in the Environmental Impact Assessment study. We are optimistic that a decision in our favour will be rendered on the case and that our operations will be able to resume production prior to year end. If this is the case, we forecast production for the year of approximately 160,000 ounces at a cash cost of $195 per ounce. If the mine is unable to start up before year-end, 2007 production will stand at 135,306 ounces.
In the third quarter, we completed construction and commissioning of the mine expansion project, bringing the total designed throughput to 10 million tonnes per year.
Tanjianshan
During the third quarter, we produced 37,775 ounces of gold and sold 30,484 ounces for revenues of $20.4 million. Cash costs of $251 per ounce for the quarter reflected a strip ratio of 14:1. We are forecasting 2007 production of approximately 135,000 ounces of gold at an average cash cost of $290 per ounce.
In the nine months ended September 30, 2007, Tanjianshan has produced 106,162 ounces of gold, of which 12,492 ounces were treated as pre-production. Total 2007 production from February until September was 93,670 ounces of gold at a cash operating cost of $312 per ounce. Gold sales from commercial production in 2007 were 80,744 ounces of gold for a revenue stream of $53.5 million.
Sao Bento
Mining and production ceased at Sao Bento in the second quarter. Since then, we have been involved in reclamation and closing activities. In Q3, we spent $0.9 million against the projected reclamation liability of $9.6 million. We have moved substantially all of the equipment from the underground mine to the surface.
Development
Efemcukuru
In the third quarter, Wardrop Engineering completed their feasibility study (the "Study") of the Efemcukuru gold deposit. Based on updated drilling results from the 2006-2007 drilling program, the Study defines an operation based on underground mining and milling of the ore on site with post-treatment of a gold concentrate at our Kisladag mine. Highlights of the Study are: a mine life of 9.4 years; mine throughput of 3.785 million tonnes at 86.5% metallurgical recovery; with an average annual gold production of 112,400 ounces at a total cash cost of $227 per ounce. Initial capital cost is estimated to be $104.2 million.
We prepared and submitted a technical report according to NI 43-101 requirements. We are also investigating suppliers for various long lead items for the Efemcukuru project such as SAG and ball mills.
Ongoing infill and exploration drilling at Efemcukuru in the third quarter included an additional 48 holes totaling 6,500 meters. Results of this drilling program will be incorporated into a revised resource estimate to be completed in the fourth quarter.
Vila Nova Iron Ore
On July 31, 2007, we announced the results of an updated pre-feasibility study showing that the initial capital required to construct the project on a 100% basis is $32.7 million, including working capital. Following Board approval of the project, we retained the services of an engineering company and will begin construction in the fourth quarter of 2007. We expect to begin commercial production for start-up in Q4 2008. In the third quarter, we also received a property clearing license (the final permit required before beginning construction) from SEMA, the environmental agency of Amapa State, and retained a marketing agent to represent us in negotiations with potential iron ore purchasers.
Exploration
Exploration expense for Q3 2007 was $2.8 million (Q3 2006 - $3.6 million), and year-to-date exploration expense was $8.5 million (2006 - $9.0 million). The decrease in the third quarter is attributable to the timing of our exploration drilling activities in Brazil, Turkey and China.
Exploration - Turkey
In the third quarter, most of our work in Turkey focused on properties in the Pontides district: Kapikaya, Aydogon Tepe and Gumashane. The results of a 12 hole reverse circulation/core program (1,850 meters) at the Kapikaya project have not identified any significant gold mineralized areas. Soil sampling and mapping at Aydogon Tepe did not define any anomalous zones, and work will shift next quarter to the only remaining target, Derebas Hill (a porphyry target).
Work on our easternmost Pontides region property, Gumashane, focused on first pass mapping and rock chip sampling, which yielded numerous 0.5 to 2.0 g/t Au samples, with ubiquitous higher grade samples (+5 g/t, up to 33 g/t Au). A small reverse circulation program is planned for next quarter to assist in obtaining sub-crop information and mineralization potential.
Soil sampling and mapping at our Dogancilar property in the Biga Peninsula uncovered a 5 to 12 meter thick, east-west trending quartz vein and breccia zone at Tombek Tepe. Mapping and sampling will continue next quarter.
Exploration - Brazil
Exploration activities continued throughout the quarter on our exploration licenses in Amapa State. Work in the Vila Nova region continued to focus on mapping and geochemical sampling in license areas covering regional geophysical based targets. We completed work on license areas north of the former Vila Nova Gold joint venture property; follow-up soil sampling failed to extend anomalies uncovered during the initial wide-spaced reconnaissance sampling. Work has begun on license areas in the southern regions, and will continue well into next quarter.
We completed our exploration activities at Tartarugalzinho and did not uncover any significant gold mineralized zones. Final data compilation and organization are nearly complete.
Exploration - China
Diamond drilling on our TJS property finished at the end of this quarter. We drilled 19,800 meters in 146 holes on near deposit and regional area targets. Twenty-two holes were drilled with generally negative results.
Around our QLT deposit, we tested for continuation of the existing mineralization below the planned pit bottom. Drilling intersected mostly lower grade material, although the key down plunge extrapolation of the high grade north shoot remains untested as we were unable to drill in the area due to active mining. We also tested a potential satellite deposit, QLT South, by drilling 12 short holes. One of the southernmost holes successfully intersected a thick zone of moderate gold grade (9.7 meters at 5.1 g/t Au). As it lies in a locally folded area, mapping is ongoing to better understand the orientation. Once complete, we will test for continuity of this zone through reverse circulation drilling.
We also drilled two near mine targets at JLG: JLG North and XJG. At XJG, 15 drill holes tested mineralized structures in diorite and phyllite units. Results from the first six holes drilled at XJG returned numerous gold mineralized zones, confirming and extending earlier results from the first quarter. This area will be a key target for next year's TJS program.
"Despite the temporary shutdown of our Kisladag Mine, the year to date operating and financial performance has been strong. On a year-to-date basis production is up 178% and cash costs per ounce are down 33%. Even with the temporary shutdown of Kisladag on August 18, 2007, quarter over quarter production increased 49% while unit cash costs fell 26%. We remain confident that Kisladag will re-open with a positive decision from the Court and anticipate strong year-end results with production of 300,000 ounces at a cash cost of approximately $235 per ounce," commented Paul N. Wright, President and CEO.
ON BEHALF OF ELDORADO GOLD CORPORATION
Paul N. Wright, President and Chief Executive Officer
Eldorado will host a conference call today to discuss the Q3 2007 Financial and Operational Results at 11:30 a.m. EDT (8:30 a.m. PDT). You may participate in the conference call by dialing 416-641-6117 in Toronto or 1-866-223-7781 toll free in North America and asking for the Eldorado Conference Call with Chairperson: Paul Wright, President and CEO of Eldorado Gold. The call will be available on Eldorado's website. www.eldoradogold.com. A replay of the call will be available until November 8, 2007 by dialing 416-695-5800 in Toronto or 1-800-408-3053 toll free in North America and entering the Pass code: 3228830#.
Certain of the statements made herein may contain forward-looking statements or information within the meaning of the United States Private Securities Litigation Reform Act of 1995, and forward looking statements or information within the meaning of the Securities Act (Ontario). Such forward looking statements or information include, but are not limited to statements or information with respect to unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements or information are subject to a variety of risks and uncertainties, which could cause actual events, or results to differ from those reflected in the forward-looking statements or information. Should one or more of these risks and uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in forward looking statements. Specific reference is made to "Forward Looking Statements and Risk Factors" in the Company's Annual Information Form and Form 40-F dated March 29, 2007. Forward-looking statements herein include statements regarding the expectations and beliefs of management. Such factors included, amongst others the following: gold price volatility; impact of any hedging activities, including margin limits and margin calls; discrepancies between actual and estimated production, between actual and estimated reserves, and between actual and estimated metallurgical recoveries; mining operational risk; risks from litigation; regulatory restrictions, including environmental regulatory restrictions and liability; risks of sovereign investment; speculative nature of gold exploration; dilution; competition; loss of key employees; additional funding requirements; and defective title to mineral claims or property, as well as those factors discussed in the section entitled "Risk Factors" in the Company's Annual Information Form and Form 40-F dated March 29, 2007. We do not expect to update forward-looking statements continually as conditions change and you are referred to the full discussion of the Company's business contained in the Company's reports filed with the securities regulatory authorities in Canada and the U.S.
Eldorado Gold Corporation's shares trade on the Toronto Stock Exchange (TSX: ELD) and the American Stock Exchange (AMEX: EGO).
Request for information packages: info@eldoradogold.com
PRODUCTION HIGHLIGHTS(1) --------------------------------------------------------------------------- First First First Second Third Third Nine Nine Quarter Quarter Quarter Quarter Months Months 2007 2007 2007 2006 2007 2006 --------------------------------------------------------------------------- Gold Production --------------- Total Ounces Produced 88,780 98,970 61,385 41,082 249,135 85,228 Commercial Production 76,288 98,970 61,385 41,082 236,643 85,228 Cash Operating Cost ($/oz)(4) 220 259 228 309 239 354 Total Cash Cost ($/oz)(2,4) 233 287 264 315 263 361 Total Production Cost ($/oz)(3,4) 270 332 335 364 313 392 Realized Price ($/oz - sold) 647 664 667 620 660 605 --------------------------------------------------------------------------- Kisladag Mine, Turkey(5) ------------- Commercial Production 43,601 68,095 23,610 27,477 135,306 34,349 Tonnes to Pad 1,849,330 1,872,691 825,839 1,802,368 4,547,860 3,295,524 Grade (grams/tonne) 1.27 1.32 1.52 1.29 1.33 1.15 Cash Operating Cost ($/oz)(4) 192 187 191 218 189 223 Total Cash Cost ($/oz)(2,4) 194 190 194 220 192 225 Total Production Cost ($/oz)(3,4) 225 221 234 285 225 276 --------------------------------------------------------------------------- Tanjianshan Mine, China(6) ---------------- Total Ounces Produced 39,252 29,135 37,775 n/a 106,162 n/a Commercial Production 26,760 29,135 37,775 n/a 93,670 n/a Tonnes Milled 142,859 237,909 202,641 n/a 583,409 n/a Grade (grams/tonne) 7.17 4.41 6.87 n/a 5.94 n/a Cash Operating Cost ($/oz)(4) 260 440 251 n/a 312 n/a Total Cash Cost ($/oz)(2,4) 291 522 307 n/a 369 n/a Total Production Cost ($/oz)(3,4) 356 616 397 n/a 453 n/a --------------------------------------------------------------------------- Sao Bento Mine, Brazil -------------- Commercial Production 5,927 1,740 - 13,605 7,667 50,879 Tonnes Milled 20,069 - - 81,869 20,069 265,519 Grade (grams/tonne) 8.88 - - 6.38 11.71 6.88 Cash Operating Cost ($/oz)(4) 245 80 - 493 208 443 Total Cash Cost ($/oz)(2,4) 252 132 - 506 224 454 Total Production Cost ($/oz)(3,4) 211 (50) - 525 152 470 --------------------------------------------------------------------------- 1 Cost figures calculated in accordance with the Gold Institute Standard. 2 Cash Operating Costs, plus royalties and the cost of off-site administration. 3 Total Cash Costs, plus foreign exchange gain or loss, depreciation, amortization and reclamation expenses. 4 Cash operating, total cash and total production costs are non-GAAP measures. See the section "Non-GAAP Measures" of this MD&A. 5 The Kisladag gold mine commenced commercial production on July 1, 2006. 6 The Tanjianshan gold mine commenced commercial production on February 1, 2007. Eldorado Gold Corporation Unaudited Consolidated Balance Sheets (Expressed in thousands of U.S. dollars) September 30, December 31, 2007 2006 $ $ Assets Current assets Cash and cash equivalents 56,895 59,967 Restricted cash (note 3) 21,853 21,250 Accounts receivable, marketable securities and prepaids 28,885 28,306 Inventories 45,479 35,697 Future income taxes 683 10,182 ---------------------------- 153,795 155,402 Restricted cash (note 3) 58,300 58,300 Mining interests 372,001 311,080 Goodwill 2,238 2,238 ---------------------------- 586,334 527,020 ---------------------------- ---------------------------- Liabilities Current liabilities Bank indebtedness 10,651 15,367 Accounts payable and accrued liabilities 34,915 29,267 Current portion of long-term debt 383 333 Current portion of asset retirement obligations 3,912 8,271 ---------------------------- 49,861 53,238 Long-term debt (note 7) 50,499 50,499 Contractual severance obligations 1,763 3,216 Asset retirement obligations 5,381 5,420 Future income taxes 23,069 18,742 ---------------------------- 130,573 131,115 ---------------------------- Shareholders' Equity Share capital (note 4(a)) 752,785 740,061 Contributed surplus (note 4(d)) 11,981 9,314 Accumulated other comprehensive (loss) (note 4(e)) (61) - Deficit (308,944) (353,470) ---------------------------- 455,761 395,905 ---------------------------- 586,334 527,020 ---------------------------- ---------------------------- Contingencies (note 7) Approved by the Board of Directors (Signed) Robert Gilmore Director (Signed) Paul N. Wright Director ----------------------- ----------------------- See accompanying notes to consolidated financial statements. Eldorado Gold Corporation Unaudited Consolidated Statements of Earnings and Deficit For the periods ended September 30, (Expressed in thousands of U.S. dollars, except per share information) Three months ended Nine months ended ------------------- ------------------- 2007 2006 2007 2006 $ $ $ $ Revenue Gold sales 38,186 28,680 154,610 48,279 Interest and other income 1,852 2,043 5,577 5,137 --------------------------------------- 40,038 30,723 160,187 53,416 --------------------------------------- Expenses Operating costs 16,945 15,022 63,653 31,343 Depletion, depreciation and amortization 4,073 1,831 11,827 2,002 General and administrative 5,756 4,779 17,796 13,021 Exploration 2,823 3,608 8,484 9,011 Mine standby cost 1,954 - 1,954 - Accretion of asset retirement obligation 80 162 240 485 Foreign exchange (gain) loss (1,691) (651) (4,345) (1,565) Loss (gain) on disposal of assets 100 (41) (3,564) (945) Interest and financing costs 807 736 2,703 797 --------------------------------------- 30,847 25,446 98,748 54,149 --------------------------------------- Earnings (loss) before income taxes 9,191 5,277 61,439 (733) --------------------------------------- Income tax (expense) recovery Current (2,025) (287) (3,089) (356) Future (1,953) 209 (13,824) (953) --------------------------------------- (3,978) (78) (16,913) (1,309) --------------------------------------- Net earnings (loss) for the period 5,213 5,199 44,526 (2,042) Deficit, beginning of period (314,157) (364,011) (353,470) (356,770) --------------------------------------- Deficit, end of period (308,944) (358,812) (308,944) (358,812) --------------------------------------- --------------------------------------- Weighted average number of shares outstanding (thousands of shares) Basic weighted average number of common shares outstanding 343,867 340,885 342,850 335,516 --------------------------------------- --------------------------------------- Diluted weighted average number of common shares outstanding 344,979 342,520 344,295 341,474 --------------------------------------- --------------------------------------- Net earnings (loss) per share Basic - US$ 0.02 0.02 0.13 (0.01) Diluted - US$ 0.02 0.02 0.13 (0.01) Basic - Cdn$ 0.02 0.02 0.14 (0.01) Diluted - Cdn$ 0.02 0.02 0.14 (0.01) Eldorado Gold Corporation Unaudited Consolidated Statements of Cash Flows For the periods ended September 30, (Expressed in thousands of U.S. dollars) Three months ended Nine months ended ------------------- ------------------- 2007 2006 2007 2006 $ $ $ $ Cash flows generated from (used in): Operating activities Net earnings (loss) for the period 5,213 5,199 44,526 (2,042) Items not affecting cash Accretion of asset retirement obligation 80 162 240 485 Contractual severance expense - 344 598 1,032 Depletion, depreciation and amortization 4,073 1,831 11,827 2,002 Unrealized foreign exchange gain (loss) 150 - 515 (65) Future income taxes 1,953 (209) 13,824 953 Gain (loss) on disposal of assets 100 (41) (3,564) (945) Imputed interest and financing costs 16 720 50 709 Stock-based compensation expense 1,854 831 6,084 3,044 --------------------------------------- 13,439 8,837 74,100 5,173 Property reclamation payments (1,996) - (4,638) - Contractual severance obligation (141) (201) (2,051) (201) Changes in non-cash working capital (note 5) (6,857) (8,863) (9,314) (26,589) --------------------------------------- 4,445 (227) 58,097 (21,617) --------------------------------------- Investing activities Acquisition of property, plant and equipment for cash (34,692) (29,487) (68,720) (78,421) Proceeds on disposal of assets 203 - 1,276 1,481 Proceeds on disposal of property, plant and equipment 743 1,904 1,032 1,904 Investment purchases - 365 (380) (1,815) Recovery of mining interest costs from sale of pre-production gold - - 10,052 - Deferred development expenditures on non-producing properties (5,361) (2,916) (11,778) (4,622) Value added taxes recoverable on mining interest investments 413 - 3,874 - Restricted cash 3,450 (23,300) (603) (23,300) --------------------------------------- (35,244) (53,434) (65,247) (104,773) --------------------------------------- Financing activities Issuance of long term debt 10,000 10,115 10,000 10,115 Long-term debt repayment - - (10,000) - Bank indebtedness repayment - - (5,229) - Issuance of common shares for cash 1,810 (7,084) 9,307 163,500 Share issuance costs - 7,089 - - --------------------------------------- 11,810 10,120 4,078 173,615 --------------------------------------- Net increase (decrease) in cash and cash equivalents (18,989) (43,541) (3,072) 47,225 Cash and cash equivalents - beginning of period 75,884 124,592 59,967 33,826 --------------------------------------- Cash and cash equivalents - end of period 56,895 81,051 56,895 81,051 --------------------------------------- --------------------------------------- Supplementary cash flow information (note 5) Eldorado Gold Corporation Unaudited Consolidated Statements of Comprehensive Income For the periods ended September 30, (Expressed in thousands of U.S. dollars) Three months Nine months ended ended 2007 2007 $ $ Net earnings for the periods ended September 30, 2007 5,213 44,526 Other comprehensive income (loss) Adjustment for cumulative unrealized gains on available-for-sale investment at January 1, 2007 275 Net Unrealized gains (loss) on available-for-sale investment (note 4(e)) (32) (336) ------------------------ Comprehensive income for the periods ended September 30, 2007 5,181 44,465 ------------------------ ------------------------
To view Unaudited Interim Consolidated Financial Statements, Management's Discussion and Analysis (PDF) please click on the following link: http://www.ccnmatthews.com/docs/ELD1101.pdf
The TSX has neither approved nor disapproved the form or content of this release.
Contacts: Eldorado Gold Corporation Nancy E. Woo Manager Investor Relations (604) 601-6650 or 1-888-353-8166 (604) 687-4026 (FAX) Email: nancyw@eldoradogold.com Website: www.eldoradogold.com
SOURCE: Eldorado Gold Corporation
Source: MARKET WIRE
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