LATIN AMERICA — Eldorado funds mine expansion

Some of the proceeds of a newly arranged US$50-million revolving credit facility will be used by Eldorado Gold (ELD-T) to fund an ongoing expansion and optimization program at the Sao Bento gold mine in Brazil.

The US$28-million program, initiated in July of last year, is designed to increase gold production and decrease operating costs at Sao Bento. The work consists of: exploration and development drilling to expand resources; an upgrade of the shaft to increase the hoisting capacity; a change in mining methods to long-hole open stoping from cut-and-fill; an expansion of the existing processing plant; and mine equipment purchases associated with the elimination of contract mining.

Sao Bento traditionally has been a high-cost producer. The mine turned out 52,499 oz. gold in the first six months of 1997 at a cash cost of US$295 per oz. The expansion program is expected to boost annual production to 125,000 oz. from the current 100,000 oz. It also is expected to reduce operating costs to about US$270 per oz. from the historic US$320-to-$350-per-oz. range.

The expansion and optimization program is scheduled to be completed in 1998.

Already, Eldorado has noted a 20% increase in production directly related to the changeover to mine employees and new equipment. Hoisting capacity is expected to double when the shaft/hoist is upgraded later this year. Once this work is completed, the monthly hoisted tonnage will be 100,000 tonnes, up from the original 38,000 tonnes. The shaft upgrade is reported to be on budget and on schedule.

The processing plant is operating at the rate of 38,000 tonnes per month, 20% above planned capacity. Once the expansion of the plant is complete, the plant’s monthly throughput will be 40,000 tonnes per month.

Eldorado also operates gold projects in Mexico and has other advanced-stage gold projects elsewhere in the world.

The company expects to produce about 190,000 oz. this year from its mines at an average cash cost of US$268 per oz.

Eldorado recently restructured its gold-hedging program. The company put in place forward sales and put options totalling 536,000 oz. gold at an average price of US$373 per oz., extending from 1998 to 2002. This hedging program represents about 55% of the company’s anticipated production over the next two years.