Eldorado Gold earns $30.64-million (U.S.) in Q1

2014-05-01 17:27 ET - News Release

Mr. Paul Wright reports

ELDORADO GOLD CORPORATION: 2014 FIRST QUARTER FINANCIAL AND OPERATING RESULTS

Eldorado Gold Corp. has released its financial and operational results for the first quarter ended March 31, 2014. Net profit attributable to shareholders of the company for the quarter was $31.3-million or four cents per share. All figures are in U.S. dollars unless otherwise stated.

"The first quarter of 2014 proved to be another strong quarter for the company, with gold production of 196,523 ounces, representing a 20-per-cent increase over the first quarter 2013," said Paul Wright, chief executive officer of Eldorado. "Within the organization, our employees are dedicated to continuously improving safety, operational performance and overall cost reductions, enabling Eldorado to remain one of the lowest-cost gold producers, as demonstrated by our all-in sustaining cash costs for the quarter of $786 per ounce. Strong performance this quarter supports our guidance for 2014 of 730,000 to 800,000 ounces of gold at an average all-in sustaining cash cost of approximately $950 per ounce."

First quarter operational and financial highlights

• Liquidity of $994.2-million, including $619.2-million in cash, cash equivalents and term deposits, and $375-million in lines of credit;
• Strong operational performance resulting in gold production of 196,523 ounces, including Olympias production from tailings retreatment (2013 -- 163,768 ounces), a 20-per-cent increase over the first quarter of 2013;
• Continuing to remain below the industry average, with all-in sustaining cash costs averaging $786 per ounce;
• Cash generated from operating activities before changes in non-cash working capital of $94.7-million (2013 -- $139.9-million);
• Completion of the Glory Resources Ltd. acquisition on March 14, 2014;
• Entered into a strategic agreement with CDH Investments to advance the Eastern Dragon project.

Note: Throughout this press release, the company uses cash operating cost per ounce, total cash costs per ounce, all-in sustaining cost per ounce, gross profit from gold mining operations, adjusted net earnings and cash flow from operating activities before changes in non-cash working capital as additional measures of company performance. These are non-IFRS (international financial reporting standards) measures.

Financial results

                     SUMMARIZED FINANCIAL RESULTS
           (in millions of U.S. dollars, except where noted)

                                                       Quarter ended March 31,
                                                               2014      2013

Revenues                                                     $279.9    $338.1
Gold revenues                                                $247.6    $307.2
Gold sold (ounces)                                          190,628   189,346
Average realized gold price ($ per ounce)                    $1,299    $1,622
Cash operating costs ($ per ounce sold)                        $519      $505
Total cash cost ($ per ounce sold)                             $577      $567
All-in sustaining cash cost ($ per ounce sold)                 $786       n/a
Gross profit from gold mining operations                      $95.4    $163.8
Adjusted net earnings                                         $37.3     $83.3
Net profit (loss) attributable to shareholders of the
company                                                       $31.3   ($45.5)
Earnings (loss) per share attributable to shareholders
of the company -- basic ($/share)                             $0.04   ($0.06)
Earnings (loss) per share attributable to shareholders
of the company -- diluted ($/share)                           $0.04   ($0.06)
Dividends paid (Cdn$/share)                                   $0.01     $0.07
Cash flow from operating activities before changes in
non-cash working capital                                      $94.7    $139.9

Net profit attributable to shareholders of the company was $31.3-million (four cents per share) for the quarter, compared with a loss of $45.5-million (six cents per share) in the first quarter of 2013. Adjusted net earnings for the quarter were $37.3-million, compared with $83.3-million in the first quarter of 2013. Last year's difference between loss attributable to shareholders and adjusted net earnings reflected primarily the non-cash charge of $125.2-million to deferred income tax expense related to the change in Greek tax rates.

Realized gold prices fell 20 per cent year over year, affecting revenues and gross mine profit. Unit production costs from gold mining operations were unchanged compared with the first quarter of 2013, reflecting continuing measures taken by the company to control costs.

Depreciation, depletion and amortization expense increased 24 per cent over the first quarter of 2013, mainly as a result of an increase in the depreciation of capitalized waste stripping costs as well as higher production from the company's Chinese mines, which carry higher depreciation rates than the company's Turkish gold mining operations.

Excluding the $125.2-million adjustment referred to above, the effective tax rate was 36 per cent for the first quarter of 2013, as compared with 51 per cent for this quarter. The increase in the effective tax rate this year over last year was due to the effect of Turkish lira exchange rate changes on the tax basis of the company's Turkish tax assets, as well as an increase in accrued withholding taxes on dividends paid by subsidiaries.

Operations update

                                                                            
                    SUMMARIZED OPERATING HIGHLIGHTS 
                                                       Quarter ended March 31,
                                                               2014      2013

Gross profit -- gold mining operations (millions)             $95.4    $163.8
Ounces produced -- including Olympias production from
tailings retreatment                                        196,523   163,768
Cash operating costs ($ per ounce sold)                        $519      $505
Total cash cost ($ per ounce sold)                             $577      $567
Kisladag
Gross profit -- gold mining operations                        $47.7     $85.0
Ounces produced                                              67,075    70,221
Cash operating costs ($ per ounce sold)                        $456      $334
Total cash cost ($ per ounce sold)                             $473      $359
Efemcukuru
Gross profit -- gold mining operations                        $14.7     $38.7
Ounces produced                                              26,969    19,856
Cash operating costs ($ per ounce sold)                        $526      $582
Total cash cost ($ per ounce sold)                             $547      $619
Tanjianshan
Gross profit -- gold mining operations                        $13.5     $19.1
Ounces produced                                              28,379    26,207
Cash operating costs ($ per ounce sold)                        $422      $442
Total cash cost ($ per ounce sold)                             $592      $636
Jinfeng
Gross profit -- gold mining operations                        $12.3      $8.7
Ounces produced                                              41,295    21,742
Cash operating costs ($ per ounce sold)                        $626      $832
Total cash cost ($ per ounce sold)                             $709      $930
White Mountain
Gross profit -- gold mining operations                         $7.2     $12.3
Ounces produced                                              26,473    20,915
Cash operating costs ($ per ounce sold)                        $607      $634
Total cash cost ($ per ounce sold)                             $646      $679
Olympias
Ounces produced from tailings retreatment                     6,332     4,827

Kisladag

Gold production at Kisladag was 4 per cent lower year over year, due to lower average treated head grade, partially offset by higher ore tonnes. As expected, cash operating costs were higher year over year, as a result of lower average treated head grade and higher fuel and reagent costs incurred due to the higher tonnage throughput. Capital expenditures for the quarter included costs for capitalized waste stripping and construction of additional leach pad cells.

Efemcukuru

Gold production at Efemcukuru was 36 per cent higher year over year, due to higher average treated head grade and ore tonnes. Cash operating costs were 10 per cent lower year over year, due to lower mining and processing costs related to the weakening Turkish lira. Capital spending during the quarter included underground development and mobile mining equipment.

Tanjianshan

Gold production at Tanjianshan was 8 per cent higher year over year, mainly as a result of higher ore tonnes, partially offset by lower average treated head grade. Circuit recoveries were slightly higher in the quarter. Cash operating costs per ounce were 5 per cent lower year over year, mainly as a result of lower processing costs due to a decrease in the consumption of reagents. Capital spending this quarter included capitalized waste stripping on the JLG pit cutback.

Jinfeng

Gold production at Jinfeng was 90 per cent higher year over year, mainly as a result of higher average treated head grade. A total of 174,851 tonnes of ore was mined from the open pit this quarter (first quarter 2013 -- 54,126 tonnes). A total of 173,454 tonnes of ore was mined from the underground during the quarter (first quarter 2013 -- 138,989 tonnes). Cash costs were 24 per cent lower year over year, due to the increase in gold production from higher-grade ore, as well as lower-cost open-pit mining. Capital expenditures for the quarter included underground development, mining equipment and tailings dam improvements.

White Mountain

Gold production at White Mountain during the quarter was 27 per cent higher year over year, due to higher average treated head grade and higher recoveries. Cash operating costs per ounce were 4 per cent lower year over year, as a result of the increase in gold production from higher-grade ore. Capital expenditures for the quarter included capitalized underground development, delineation drilling and capitalized exploration costs.

Vila Nova

Iron ore production fell year over year as access to the pit and waste dump area was affected by an increase in the amount of rainfall year over year. Vila Nova has continued to use the Santana public port for iron ore shipments since the Anglo Ferrous port accident, which occurred at the end of the first quarter of 2013.

Stratoni

During the first quarter, Stratoni mined 57,242 tonnes of run-of-mine ore and produced 15,936 tonnes of lead and zinc concentrate at an average cash cost of $622 per tonne of concentrate sold. During the same period, Stratoni sold 16,717 tonnes of concentrate at an average price of $740 per tonne.

Development projects update

Kisladag mine optimization

The company continued its evaluation of mine development options for Kisladag, including the optimization of existing process operations and modification of the phase 4 expansion plans, with the objective to evaluate incremental increases in mine throughput. Equipment purchased for the phase 4 expansion is being included in this review, as is the utilization of existing infrastructure.

Efemcukuru expansion

Process design work was completed during the quarter to identify changes to the process plant required to increase mill throughput to approximately 500,000 tonnes per year from its current design of 400,000 tonnes per year. These changes would require upgrades to the flotation circuit and the concentrate-handling systems. A decision regarding the expansion will be made after a detailed cost-benefit analysis is completed, including the preparation of a new life-of-mine production plan.

Perama Hill

Front-end engineering work continued during the first quarter and is expected to be completed in the second quarter. Process design criteria and process flow diagrams were finalized during the quarter. Preliminary cost estimating, scheduling and implementation planning were commenced. Capital spending totalled $1.8-million during the quarter.

Olympias

Underground refurbishment continued during the quarter, in parallel with tailings retreatment. Approximately 276 metres of underground drifts were rehabilitated and 604 metres of new drifts were completed. The development rate in the main decline accessing the orebody from the Kokkinolakkas valley was reduced during the quarter due to inflows of groundwater into the heading. Development is now proceeding under advanced grout cover. During the quarter, Olympias treated 144,522 tonnes of tailings and produced 6,332 payable gold ounces. An estimated 1,710,500 tonnes of tailings remain to be reclaimed from the tailings dam.

Capital costs of $25.2-million were incurred during the quarter for mine development, rehabilitation and tailings retreatment. A total of $8.8-million in proceeds was received from the sale of gold recovered from the retreatment process and credited to capital.

Skouries

Site clearing and earthwork in the main process area was advanced during the quarter. Clearing in the open-pit area commenced and was substantially completed. Construction access roads to the first tailings dam and to one of the topsoil stockpile areas were substantially completed. The pouring of concrete for the mill foundations also began during the quarter. The rate of advance in the underground decline was adversely affected by inflows of water, which were effectively sealed through grouting, after which normal development resumed. Capital spending totalled $16.3-million during the quarter.

Certej

Work on Certej during the quarter focused on finalizing the prefeasibility study (PFS) to support the resource/reserve statement and the subsequent preparation of the National Instrument 43-101 technical report. The study, based on a production rate of three million tonnes per year, assumed conventional open-pit mining supported by flotation, pressure oxidation and cyanide leach treatment of the ore. The company will pursue a number of trade-off studies identified during the PFS prior to proceeding to a feasibility study in late 2014.

A total of $3.4-million was spent on Certej, including site work, metallurgical testwork, capitalized exploration and engineering for the prefeasibility study.

Eastern Dragon

Permitting at Eastern Dragon is focusing on the completion of the revised environmental impact assessment (EIA) (suitable for federal approval), which Eldorado expects to submit in the second quarter. Following approval of the revised EIA, Eldorado will formally submit the project permit approval (PPA) application, and anticipates approval by year-end. This permit will allow the company to finish construction and commence production in 2015.

Tocantinzinho

Work continued during the quarter on the optimization of the Tocantinzinho feasibility study. Finalization of the study is planned for the second quarter.

Exploration update

During the quarter, 5,500 metres of exploration drilling were completed at the company's operations and exploration projects. The 2014 drilling programs at most exploration sites are not scheduled to commence until the second or third quarter of the year.

Greece

In the Perama district, exploration activities for the quarter focused on extending geological mapping coverage in the Perama South area and conducting reconnaissance field visits to nearby prospects. The acquisition of the Sappes project was completed during the quarter, and historical exploration data are being compiled and evaluated.

In the Chalkidiki district, underground exploration drilling commenced at the Mavres Petres mine, targeting the western extension of the orebody. Mapping and soil sampling programs were initiated over the Piavitsa project area to better define exploration potential in the area to the west of the previous drilling.

Romania

At Certej, exploration activities during the quarter focused on refining alteration models for the deposit and defining targets peripheral to the deposit for coming drilling programs. The phase 1 drilling programs were completed at the nearby Brad and Deva exploration licences, testing porphyry and epithermal targets adjacent to historical mines.

Turkey

No exploration drilling was completed in Turkey during the quarter. At the Efemcukuru minesite, soil sampling was conducted to extend historical coverage into the relatively underexplored southern portion of the licence area. Detailed relogging of exploration drillholes from the Kokarpinar vein was completed, with the objective of defining structural controls on previous high-grade drill intercepts.

China

No exploration drilling was completed in China during the first quarter. At White Mountain, exploration activities focused on detailed characterization of mineralized breccias in the deposit, to assist in target definition for a coming drilling program. At Tanjianshan, preparations were completed for exploration drilling at the Xijingou and Qinlongtan north deposit areas, to be initiated in the second quarter.

Brazil

Approximately 1,350 metres of drilling were completed in the phase 1 program at the Goldfish project in Tocantins state, targeting high-grade orogenic veins that are exposed in shallow surface workings. Several drill holes intersected mineralized veins, though results have only been received for the first drill hole, including an intercept of 4.35 metres at 12.74 grams per tonne gold. Exploration elsewhere in Brazil included soil and stream sediment sampling at early-stage projects in Goias state.

Corporate transactions

During the quarter, the company completed its acquisition of Glory Resources Ltd. Glory was advancing the high-grade Sappes gold project in Thrace, Greece, located 15 kilometres from the company's Perama Hill project, with current JORC (joint ore reserves committee)-compliant total proven and probable reserves of 637,000 ounces of gold at an average grade of 15.1 g/t gold. The company plans to continue exploration work on the property throughout the year.

Also during the quarter, the company entered into a strategic agreement with CDH Investments, a leading Chinese private equity company, whereby CDH has acquired a 20-per-cent stake in the company's Eastern Dragon project for cash consideration of $40-million. Eastern Dragon has been on care and maintenance pending the receipt of outstanding permit approvals, and it is anticipated that the participation of CDH will assist in advancing the project through to production.

Corporate announcements

Wayne Lenton, an independent director of the company since 1995, will be retiring from the board of directors and will not be standing for re-election at the annual general meeting on May 1, 2014. The board and the company would like to thank Mr. Lenton for his years of service, dedication and commitment to the company.

Eldorado welcomes Krista Muhr as vice-president, investor relations, effective June 1, 2014. Ms. Muhr will be responsible for leading the company's investor relations and corporate communications strategies. She has extensive senior-level experience in the precious metals industry, most recently with Andean Resources Ltd. and Meridian Gold Corp.

Nancy Woo, who has been invaluable to the company since 2002 in her role as vice-president, investor relations, will be retiring effective June 1, 2014. The company would like to thank Ms. Woo for her enthusiasm and dedication over the past decade, and wishes her well in future endeavours.

Conference call

Eldorado will host a conference call on Friday, May 2, 2014, to discuss the first quarter 2014 financial and operating results, at 8:30 a.m. PT (11:30 a.m. ET). You may participate in the conference call by dialling 416-340-2219 in Toronto or 1-866-225-0198 toll-free in North America and asking for the Eldorado conference call.

The call will be available on Eldorado's website. A replay of the call will be available until May 9, 2014, by dialling 905-694-9451 in Toronto or 1-800-408-3053 toll-free in North America and entering the passcode 6120025.

                                                 
            UNAUDITED CONDENSED CONSOLIDATED INCOME STATEMENTS                          
         (in thousands of U.S. dollars, except per-share amounts)                                    
                                                                            
                                               For the quarter ended March 31,
                                                           2014          2013
Revenue
Metal sales                                         $   279,870   $   338,068
Cost of sales
Production costs                                        134,785       130,368
Depreciation and amortization                            45,572        37,114
                                                        180,357       167,482
Gross profit                                             99,513       170,586
Exploration expenses                                      3,895         7,624
General and administrative expenses                      15,844        16,486
Defined-benefit pension plan expense                        403           629
Share-based payments                                      6,994         8,877
Foreign exchange gain                                    (1,361)         (102)
Operating profit                                         73,738       137,072
Loss on disposal of assets                                    6            36
Loss (gain) on marketable securities and other              772           (21)
investments
Loss on investments in associates                           102           909
Other expense (income)                                      784        (1,976)
Asset retirement obligation accretion                       582           339
Interest and financing costs                              8,405        10,501
Profit before income tax                                 63,087       127,284
Income tax expense                                       32,444       171,252
Profit (loss) for the period                             30,643       (43,968)
Attributable to
Shareholders of the company                              31,268       (45,463)
Non-controlling interests                                  (625)        1,495
Profit (loss) for the period                             30,643       (43,968)
Earnings (loss) per share attributable to
shareholders of the company
Basic earnings (loss) per share                            0.04         (0.06)
Diluted earnings (loss) per share                          0.04         (0.06)