Eldorado Gold earns $39.51-million (U.S.) in Q2 2014
posted on
Aug 02, 2014 11:33PM
Brazil, China, Turkey & Greece - In situ: +15 million oz Gold
Not too bad at all. Legman
Eldorado Gold earns $39.51-million (U.S.) in Q2 2014
2014-07-31 17:58 ET - News Release
Mr. Robert Gilmore
ELDORADO GOLD CORPORATION: 2014 SECOND QUARTER FINANCIAL AND OPERATING RESULTS
Eldorado Gold Corp. has released its financial and operational results for the second quarter ended June 30, 2014. All figures are in U.S. dollars unless otherwise stated. Net profit attributable to shareholders of the company for the quarter was $37.6-million, or five cents per share.
"The company has finished the second quarter ahead of our expectations and the operations are now on track to deliver production at the high end of the initial full-year range our teams had established. Total gold production for the period was 200,551 ounces, and cash operating costs continue to remain in the bottom quartile of the gold industry at $489 per ounce," said Paul Wright, chief executive officer of Eldorado Gold. "We are especially pleased to report that the Kisladag EIA [environmental impact statement] was approved during the quarter by the Turkish authorities, and we plan on completing the expansion to 20 million tonnes per year by mid-2016. Reflecting the strong results year to date and our outlook for the balance of 2014, we are confidently revising our guidance for the year to production of 790,000 ounces of gold with average cash costs for commercial production of $495 per ounce and all-in sustaining cash costs of $850 per ounce."
Second quarter financial and operational highlights
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-international financial reporting standards (IFRS) measures. Please see the management discussion and analysis for an explanation and discussion of these non-IFRS measures.
SUMMARIZED FINANCIAL RESULTS (in millions of U.S. dollars, except where noted) Three months ended Six months ended June 30, June 30, June 30, June 30, 2014 2013 2014 2013 Revenues $ 265.5 $ 266.9 $ 545.4 $ 605.0 Gold revenues $ 247.6 $ 243.6 $ 495.2 $ 550.8 Gold sold (ounces) 190,621 176,260 381,249 365,606 Average realized gold price (US$ per ounce) $ 1,299 $ 1,382 $ 1,299 $ 1,506 Cash operating costs (US$ per ounce sold) $ 489 $ 478 $ 504 $ 492 Total cash cost (US$ per ounce sold) $ 549 $ 536 $ 563 $ 552 All-in sustaining cash cost (US$ per ounce sold) $ 829 n/a $ 809 n/a Gross profit from gold mining operations $ 100.8 $ 117.2 $ 196.2 $ 281.0 Adjusted net earnings (millions) $ 35.9 $ 48.2 $ 73.2 $ 131.5 Net profit (loss) attributable to shareholders of the company $ 37.6 $ 43.3 $ 68.9 $ (2.2) Earnings (loss) per share attributable to shareholders of the company -- basic (US$/share) $ 0.05 $ 0.06 $ 0.10 $ 0.00 Earnings (loss) per share attributable to shareholders of the company -- diluted (US$/share) $ 0.05 $ 0.06 $ 0.10 $ 0.00 Dividends paid (Cdn$/share) $ 0.00 $ 0.00 $ 0.01 $ 0.07 Cash flow from operating activities before changes in non-cash working capital $ 92.2 $ 84.9 $ 186.9 $ 224.8
Financial results
Net income for the quarter was $37.6-million (or five cents per share), compared with $43.3-million (or six cents per share) in the second quarter of 2013. Gold revenues of $247.6-million were 2 per cent higher year over year as higher gold sales volumes were partially offset by lower gold prices. Gross profit from gold mining operations was 14 per cent lower than that of the second quarter of 2013, reflecting higher production costs and depreciation expense as a result of higher sales volumes. Total cash cost per ounce increased 2 per cent year over year.
Exploration expenses fell $6.4-million year over year, reflecting changes in the company's exploration program in response to lower gold prices. The company reported a foreign exchange gain of $1.6-million for the quarter, as compared with a loss of $5.9-million for the second quarter of 2013, mainly as a result of changes in foreign exchange rates on the company's Canadian-dollar investments. Interest and financing costs fell $3.1-million year over year, reflecting an increase in capitalization of interest on the company's Greek development projects.
The effective tax rate for the quarter was 39 per cent as compared with a rate of 36 per cent in the second quarter of 2013. The effective tax rate for the second quarter of 2013 was lower due to a tax recovery related to recognition of investment tax credits in Turkey, partly offset by the impact of movements in the Turkish lira on deferred tax balances. The effective tax rate for the second quarter of 2014 was higher due to higher withholding tax accruals on dividends from the company's Turkish and Chinese subsidiaries.
Operations update
Kisladag
Gold production at Kisladag during the quarter was level year over year, while sales of approximately 4,600 ounces of gold were delayed into the third quarter due to the timing of dore shipments to the refinery. Leaching of run-of-mine ore placed on the pad during the first quarter of 2014 contributed to gold production during the second quarter, making up for lower tonnes and grade year over year. Cash costs in the quarter were higher than the same period of 2013 due to lower head grade and an increase in operational waste mining (4.9 million tonnes in 2014 versus 700,000 tonnes in 2013). Capital expenditures during the quarter included equipment for expansion and capitalized waste stripping.
Efemcukuru
Gold production at Efemcukuru during the quarter was lower year over year, and cash operating costs per ounce were higher, mainly due to a lower planned average treated head grade. Capital spending in the quarter included costs related to capitalized underground development and mobile equipment, surface infrastructure, and process improvements.
Tanjianshan
Gold production at Tanjianshan during the quarter was lower year over year as a result of lower average treated head grade and recovery rate. Capital spending included exploration activities and waste stripping.
Jinfeng
Gold production at Jinfeng during the quarter was higher year over year and cash operating costs per ounce were lower mainly due to higher tonnes milled, average treated head grade and recovery rate, mainly due to ore production from the open pit. The open pit had resumed full mining operations midway through the second quarter of 2013 after completion of a cutback. Capital spending during the quarter included underground mine development and tailings dam construction.
White Mountain
Gold production at White Mountain for the quarter was higher year over year mainly as a result of increased process throughput, higher head grades and improved recovery rates. Cash operating costs per ounce decreased significantly due to higher gold production and reduced operation costs. Capital spending this quarter included underground development, exploration, camp improvements and completion of the new mobile maintenance workshop.
Vila Nova
Vila Nova recorded a loss of $3-million for the quarter compared with gross profit of $1.8-million in the second quarter of 2013. A $1-million negative price adjustment related to shipments in prior quarters impacted profitability. The average realized iron ore price for the quarter, not including the price adjustment, fell from $106 per tonne to $56 per tonne year over year. The company is reviewing options to improve profitability at Vila Nova in light of the recent decline in iron ore prices.
Stratoni
Combined metal concentrate production at Stratoni for the quarter was level year over year, with lower lead concentrate production offset by higher zinc concentrate production as a result of changes in metal head grades. The average realized combined concentrate price increased year over year as zinc prices improved while lead prices weakened. Taken in conjunction with the increase in zinc concentrate production the change in metal prices contributed to Stratoni's gross profit performance year over year.
Development project update
Kisladag mine expansion
During the quarter, the company received a positive EIA decision from the Ministry of Environment and Urbanization of Turkey on the Kisladag mine expansion project. The EIA approval will allow for the expansion of the Kisladag open-pit mine production from its current 12.5 million tonnes per year to a maximum of 35 million tonnes per year. The company has decided to proceed with an expansion to an annual production rate of 20 million tonnes per year of crushed ore to the leach pad at an additional capital cost of approximately $90-million. The company is forecasting completion in mid-2016, producing an average of 325,000 ounces per year in the first five years after expansion.
Skouries
Major structural concrete placements for the SAG and ball mills commenced in the quarter. The SAG mill foundation was completed, and concrete placement in the SAG mill plinths began. The majority of the ball mill concrete piles were completed and reinforcing fabrication and formwork for other major plant foundations was continuing. Mill mechanical equipment was being preassembled in a nearby warehouse and will be mobilized to site with on-site erection scheduled to begin in the third quarter. Construction of access roads to the tailings dam progressed during the quarter. A review of the tailings dam construction materials and methodology was completed and design modifications to enhance constructability were finalized. Site earthwork continued during the quarter, and included excavation and fill for the regrind mill, the flotation area and the tailings thickening area. The site batch plant construction commenced and is scheduled to be completed in the third quarter. The open-pit surface area was cleared, and topsoil removal commenced. Progress continued on the underground decline during the quarter. Capital spending totalled $29.7-million during the quarter.
Olympias
Approximately 168,000 tonnes of tailings were reprocessed during the quarter at a grade of 2.84 grams per tonne. A total of 6,179 payable ounces of gold in concentrate were produced. Cash proceeds from the sale of concentrate generated $11.8-million during the quarter on approximately 9,300 ounces of gold in concentrate. Capital spending totalled $35.6-million during the quarter, including approximately $11-million related to tailings reprocessing, production royalties, and transportation and selling costs, $1.9-million related to capitalized interest, and the remainder on mine development, as well as phase II engineering.
Perama Hill
Preliminary engineering continued on the project during the quarter with completion expected in the third quarter this year. Metallurgical test work to optimize the process is planned to be completed during the third quarter this year, with detailed engineering expected to begin shortly thereafter. The company continues to work with Greek government authorities to facilitate approval of the environmental impact assessment. Capital spending totalled $3.1-million during the quarter.
Certej
During the quarter, studies were conducted focusing on optimization of critical elements of the project identified in the prefeasibility study, including pressure oxidation, oxygen supply, open-pit development and use of Romanian resources to build the mine. Metallurgical test work continued during the quarter in order to provide further data for optimization of the pressure oxidation circuit. The company plans to commence work on the feasibility study in the third quarter this year. Capital spending totalled $2.3-million during the quarter.
Tocantinzinho
During the quarter, work continued on optimization of the Tocantinzinho feasibility study. Additionally, preparations were begun to upgrade the access road to the site, including obtaining the necessary permits and authorizations from the municipality. Capital spending totalled $500,000 during the quarter.
Eastern Dragon
Eastern Dragon remained on care and maintenance pending resolution of permitting issues. Site management worked with the local authorities to maintain local permits and permissions in good standing. Work continued on the preparation of the revised environmental impact assessment for submission to the Ministry of Environmental Protection. This will be followed by submission of the project permit approval to the National Development and Reform Commission.
Exploration update
Greece
In the Halkidiki district, underground exploration drilling continued at the Mavres Petres mine, targeting the western extension of the orebody. Several drill holes cut massive sulphide zones outside of the existing resource, and activities are now focused on extending underground development to allow further step-out drilling. Drilling commenced late in the quarter at the Piavitsa deposit with a 6,000-metre program planned to test the continuity of mineralized zones identified in previous widely spaced drill holes. At the Olympias deposit, drilling completed in the east ramp development project encountered several significant zones of high-grade gold and silver mineralization that lie outside of the current resource model.
In the Perama district, exploration activities focused on extending geological mapping coverage in the Perama South area, conducting reconnaissance field visits to nearby prospects and evaluating historical data for the newly acquired Sappes project.
Romania
Exploration activities during the quarter near Certej focused on defining drill targets at the Magura, Bocsa and P. Avram prospect areas. Reconnaissance mapping, soil sampling and drill hole targeting commenced during the quarter at the nearby Muncel and Brad exploration licences.
Turkey
Exploration activities in Turkey focused on reconnaissance of regional target areas in western Turkey and definition of new drilling targets at the Efemcukuru mine site.
China
Underground drilling at White Mountain targeted downplunge extensions in the middle and north ore zones. Detailed geological mapping was conducted over the mine area, and surface exploration drilling programs will commence in the third quarter. At Tanjianshan, drilling programs were completed at the Xijingou deposit and Dushugou prospect, and drilling is continuing at the Qinlongtan North deposit.
Brazil
Exploration resumed at the Tapajos region projects, including soil sampling along the Tocantinzinho trend northwest of the Tocantinzinho deposit, and drill testing of geochemical anomalies at the adjacent Ruben Zilio project.
2014 outlook
Total gold production for 2014 is forecast to be 790,000 ounces of gold with average cash costs for commercial production of $495 per ounce and average all-in sustaining cash costs of $850 per ounce. Previous guidance was production of 730,000 to 800,000 ounces at average cash costs of $550 to $590 per ounce and average all-in sustaining cash costs of $915 to $985 per ounce. Capital spending is forecast to be $170-million in sustaining capital and $265-million in project development capital, compared with previous guidance of $170-million and $345-million, respectively. The forecast for project development capital is lower than original guidance mainly due to presently projected lower capital spending at Skouries.
The company is evaluating the merits of pursuing a potential overseas listing on the Hong Kong Stock Exchange in relation to its Chinese business. Eldorado is the largest foreign producer of gold in China with three operating gold mines (Jinfeng, Tanjianshan and White Mountain) and the Eastern Dragon project. The company's Chinese operations presently produce roughly 300,000 ounces of gold annually.
Conference call
Eldorado will host a conference call on Friday, Aug. 1, 2014, to discuss the 2014 second quarter financial and operating results at 8:30 a.m. PDT (11:30 a.m. EDT). You may participate in the conference call by dialling 416-340-2219 in Toronto or 1-866-225-0198 toll-free in North America and asking for the Eldorado conference call.
The call will be available on Eldorado's website. A replay of the call will be available until Aug. 8, 2014, by dialling 905-694-9451 in Toronto or 1-800-408-3053 toll-free in North America and entering the passcode 5888733.
2014 SECOND QUARTER GOLD PRODUCTION HIGHLIGHTS (in U.S. dollars) First Second Second First First quarter quarter quarter six months six months 2014 2014 2013 2014 2013 Gold production Ounces sold 190,628 190,621 176,260 381,249 365,606 Ounces produced (1) 196,523 200,551 183,971 397,074 347,739 Cash operating cost ($/oz)(2)(4) 519 489 478 504 492 Total cash cost ($/oz)(3)(4) 577 549 536 563 552 Realized price ($/oz sold) 1,299 1,299 1,382 1,299 1,506 Kisladag mine, Turkey Ounces sold 66,852 72,815 76,680 139,667 146,930 Ounces produced 67,075 76,980 76,735 144,055 146,956 Tonnes to pad 3,856,882 3,127,844 3,301,333 6,984,726 6,216,841 Grade (g/t) 0.73 1.11 1.26 0.90 1.28 Cash operating cost ($/oz)(4) 456 443 327 449 331 Total cash cost ($/oz)(3)(4) 473 466 348 470 353 Efemcukuru mine, Turkey Ounces sold 27,647 25,435 25,187 53,082 75,478 Ounces produced 26,969 25,034 26,289 52,003 46,145 Tonnes milled 106,501 110,706 109,349 217,207 196,228 Grade (g/t) 8.56 7.99 9.28 8.27 8.91 Cash operating cost ($/oz)(4) 526 552 519 538 561 Total cash cost ($/oz)(3)(4) 547 576 537 561 592 Tanjianshan mine, China Ounces sold 28,379 25,790 27,938 54,169 54,145 Ounces produced 28,379 25,790 27,938 54,169 54,145 Tonnes milled 263,609 278,227 273,065 541,836 520,126 Grade (g/t) 3.44 3.30 3.50 3.37 3.61 Cash operating cost ($/oz)(4) 422 391 398 407 419 Total cash cost ($/oz)(3)(4) 592 570 577 581 605 Jinfeng mine, China Ounces sold 41,277 45,581 28,993 86,858 50,676 Ounces produced 41,295 45,568 28,889 86,863 50,631 Tonnes milled 364,987 371,971 336,707 736,958 688,608 Grade (g/t) 4.00 4.17 3.33 4.08 2.87 Cash operating cost ($/oz)(4) 626 540 757 581 789 Total cash cost ($/oz)(3),(4) 709 622 845 664 881 White Mountain mine, China Ounces sold 26,473 21,000 17,462 47,473 38,377 Ounces produced 26,473 21,000 17,462 47,473 38,377 Tonnes milled 200,682 213,741 203,033 414,423 401,967 Grade (g/t) 4.13 3.56 3.25 3.84 3.52 Cash operating cost ($/oz)(4) 607 583 742 596 683 Total cash cost ($/oz)(3)(4) 646 623 781 636 726 Olympias, Greece Ounces sold - - - - - Ounces Produced (1) 6,332 6,179 6,658 12,511 11,485 Tonnes milled 144,522 168,013 116,972 312,535 206,084 Grade (g/t) 3.08 2.84 3.80 2.95 3.86 Cash operating cost ($/oz)(4) - - - - - Total cash cost ($/oz)(3)(4) - - - - - (1) Ounces produced include production from tailings retreatment in Olympias. (2) Cost figures calculated in accordance with the Gold Institute Standard. (3) Cash operating costs, plus royalties and the cost of off-site administration. (4) Cash operating costs and total cash costs are non-international financial reporting standards measures. Please see the company's management discussion and analysis for an explanation and discussion of these.
CONDENSED CONSOLIDATED INCOME STATEMENTS (in thousands of U.S. dollars) Three months ended Six months ended June 30, June 30, June 30, June 30, 2014 2013 2014 2013 Revenue Metal sales $265,497 $266,929 $545,367 $604,997 Cost of sales Production costs 122,524 116,133 257,309 246,501 Depreciation and amortization 44,095 35,234 89,667 72,348 166,619 151,367 346,976 318,849 Gross profit 98,878 115,562 198,391 286,148 Exploration expenses 3,890 10,240 7,785 17,864 General and administrative expenses 19,099 18,239 34,943 34,725 Defined benefit pension plan expense 413 619 816 1,248 Share-based payments 5,281 3,291 12,275 12,168 Foreign exchange loss (gain) (1,553) 5,920 (2,914) 5,818 Operating profit 71,748 77,253 145,486 214,325 Loss (gain) on disposal of assets 1,819 (51) 1,825 (15) Loss (gain) on marketable securities and other investments 550 - 1,322 (21) Loss on investments in associates - 214 102 1,123 Other (income) (3,631) (3,138) (2,847) (5,114) Asset retirement obligation accretion 581 386 1,163 725 Interest and financing costs 7,916 11,061 16,321 21,562 Profit before income tax 64,513 68,781 127,600 196,065 Income tax expense 24,999 24,550 57,443 195,802 Profit for the period 39,514 44,231 70,157 263 Attributable to Shareholders of the company 37,632 43,274 68,900 (2,189) Non-controlling interests 1,882 957 1,257 2,452 Profit for the period 39,514 44,231 70,157 263 Earnings per share attributable to shareholders of the company Basic earnings per share 0.05 0.06 0.10 0.00 Diluted earnings per share 0.05 0.06 0.10 0.00