Eldorado shareholders OK Gencor transaction

Shareholders of Eldorado Gold (ELD-T) and exploration affiliate HRC Development (HDC-V) have approved an equity-for-asset swap with Gencor, a South African-based international mining conglomerate.

Eldorado will issue Gencor just under 12.2 million common shares and almost 11.6 million non-voting shares. In return, it will receive full ownership of the 100,000-oz. Sao Bento gold mine, rights to a 40% interest in the Piaba gold project in Brazil, a full interest in three advance-staged gold projects in Turkey, and the North American licence to bacterial oxidation technology for treating refractory sulphide ore.

In a parallel transaction, HRC will issue Gencor almost 7.7 million common shares and 4.9 million non-voting shares. In return, it will receive a portfolio of exploration and development properties encompassing 9,000 sq.

miles in Brazil, as well as 18 exploration properties comprising 320 sq.

miles in Turkey.

As a result, HRC will hold a total of about 11,000 sq. miles of prospective ground in Argentina, Brazil and Turkey.

Gencor will gain a fully diluted 45% equity interest in Eldorado and a 42% equity interest in HRC. Voting rights in both companies are held at 40%.

Gencor is the world’s leading producer of ferrochrome; it is also the world’s largest producer of coal, the second-largest producer of platinum, and the fourth-largest producer of gold.

Gencor’s willingness to invest in Eldorado and HRC is attributed to the shared management team of the two juniors, which has demonstrated an ability to discover gold deposits and place them into production.

In 1995, Eldorado’s fully owned Colorado open-pit, heap-leach mine in Mexico achieved gold production of 31,128 oz. at a cash operating cost of US$209 per oz. For the first quarter of 1996, the mine produced 11,168 oz. at a cash cost of US$190 per oz. For the year, production is forecast at 51,000 oz. at a cash cost of US$200 per oz.

Expected to come on-line by the fourth quarter is Eldorado’s 51%-owned Trinidad mine in Mexico’s Sinaloa state. Almaden Resources (AMH-V) owns the other 49% interest. The mine is expected to produce 30,000 oz. during the first year, dropping to 22,000 oz for the remainder of its 4-year life.

The Gencor transaction is expected to propel Eldorado into the ranks of a mid-tier international gold producer. With the addition of the Sao Bento underground mine, Eldorado is projecting a production level of 165,000 oz. in 1996 at a cash cost of US$279 per oz., rising to 254,000 oz. in 1999 at US$235.

In 1995, gold production at Sao Bento amounted to 101,950 oz. at a cash operating cost of US$309 per oz. The mine is forecast to produce 100,000 oz.

in 1996 at a cash cost of US$325 per oz. Eldorado intends to boost production at Sao Bento, while decreasing cash operating costs to US$250-260 per oz.

Geological reserves at Sao Bento stand at 6.6 million tons grading 0.36 oz.

gold per ton.

Eldorado says it is determined to become a 500,000-oz. producer in five years, and a 1-million-oz. producer in 10 years.