Vancouver — Two mining-friendly laws passed by the Turkish government are expected to improve the profitability of the Kisladag project of
The company is at the permitting stage of its proposed open-pit, heap-leach mine, which is projected to produce 3.3 million oz. gold over a mine life of 15 years. Construction should start in the third quarter.
The exemption applies to exploration, construction, purchase of equipment, mine operation, smelting and refining. Vendors will not charge VAT for their goods and services, and by the same token, Eldorado will not be required to charge it on sales of its gold production.
Eldorado had been worried its costs at Kisladag would rise as a result of the 18% tax and was lobbying the government for an exemption. Initial capital costs would have soared to about US$73.3 million, compared with US$54 million as quoted in the March 2003 feasibility study. Cash operating costs would have risen to US$188 from US$152 per oz. gold; total production costs, to US$244 from US$203 per oz.; and the after-tax net present value, to US$286 million from US$255 million. Also, the after-tax internal rate of return would have fallen to 29% from 32.6%.
Under the VAT exemption, the company estimates that the initial capital investment for the project will decrease by US$10.7 million that and cash operating costs will shrink by US$23, to US$165 per oz. Eldorado Gold President Paul Wright says the exemption will improve the return on the Kisladag project to 43% at a US$350-per-oz. gold price.
Meanwhile, all activities in hard rock, soft rock and industrial minerals mining in Turkey, including quarrying and aggregate industries, will now be consolidated under a new mining act. As a result, the 5% fee on capital installations on forest lease lands no longer applies; the expropriation law governing acquisition of land critical to fulfilling investment now applies to mining activities; and, rather than the straight 3% royalty on operating cash costs, the royalty will be 1% on the sales value of ore processed off site, whereas ore processed on site will be reduced to 1%.
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