Vancouver – A feasibility cost update by Hatch shows that Eldorado Gold’s (ELD-T) Kisladag gold project in western Turkey will be significantly impacted by the value added tax (VAT) which has been applied to both capital and operating costs.
The study updates the feasibility study dated March 2003 for the company’s wholly-owned Kisladag gold project.
The initial project capital cost is up from US$54 million to US$73.3 million. Cash operating costs are up from US$152 to US$188 per oz. gold. Total production costs rose from US$203 to US$244 per oz. The after tax net present value is US$286 million compared with US$255 million last year. Finally the after tax internal rate of return is 29% compared with 32.6% last year.
The major changes negatively affecting the economics of the project are the 18% VAT on capital costs and operating costs; the rise in price of diesel fuel from US$0.75/litre to $1.00/litre. Inflation at 27% in Turkey and 5% in North America has also added to the costs since the initial feasibility study was completed.
This is despite the positive effects of a higher gold price from US$325 per oz. used last year to the $350/oz. used in the study. With no changes made to the original technical concepts of the open pit heap leach operation developed in the feasibility study the update resulted in 3.3 million oz. gold produced over the 15 year mine life of the project from 2.9 million oz. last year.
The company maintains that despite higher costs, Kisladag remains a robust and attractive development project and that it will have no problems to finance the construction.
The company is in discussions with the Turkish Government regarding mitigation of the effects of the VAT on gold projects.
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