Eldorado bleeds US$7.5M in Q1

Vancouver — Eldorado Gold (ELD-T, EGO-X) posted a first-quarter net loss of almost US$7.5 million in 2006, reflecting a transition phase for the company as it wound down one of its mines and brought two others into production.

The loss, a slight improvement over the US$9-million loss tabled in the same period of 2005, is attributed to higher exploration expenses in addition to foreign currency exchange losses from Canadian dollars held and from a non-cash future income tax expense due to an increased valuation of the Brazilian Real.

Eldorado logged slightly lower gold sales during the quarter, at 15,656 oz. compared with 16,910 oz. for the same quarter last year. However, this year’s realized price, at US$549 per oz. for a total of US$8.6 million, was higher than last year’s US$428 per oz. for US$7.2 million.

The aspiring mid-tier gold producer’s Sao Bento gold mine in Brazil is almost depleted; the company expects production to end in the first half of 2007. A shaft-deepening effort in 2005 allowed access to new ore, giving the mine a boost in production to 19,111 oz. gold at total cash costs of US$429 per oz. in the first quarter of 2006, up from 14,311 oz. at US$413 per oz. in last year’s corresponding quarter. Closure costs of about US$10 million have been earmarked for the mine.

At the start of the second quarter, the company’s Kisladaq heap-leach gold mine in western Turkey began operations, with the first gold pour of its expected 14-year mine life anticipated by late May. Eldorado reports the project is on budget with capital spending of US$83.4 million forecast. The operation is expected to produce about 120,000 oz. gold in 2006 at estimated cash costs of US$215 per oz. Production should climb to 240,000 oz. next year, which would boost the company’s overall production to 365,000 oz., and then up to 430,000 oz. by 2008.

Tanjianshan

Eldorado says construction at its 85%-owned Tanjianshan gold mine, in western China’s Qinghai province, is on track for production by October 2006. Pre-stripping of two planned open pits (Jinlonggou and Qinglongtan) continues while processing equipment is installed. The company anticipates 2006 gold production of about 40,000 oz. at a cash cost of US$320 per oz., rising to about 150,000 oz. per year over its 8-year mine life. At year-end 2005, proven and probable reserves stood at 8.45 million tonnes grading 4.1 grams gold per tonne.

The company reports that 600,000 tonnes of leach-pad material grading 1.91 grams gold per tonne has since been added to the probable reserve category, which resulted in a new life-of-mine plan for the production of 1.01 million oz. gold at cash costs averaging US$227 per oz. over the mine life.

Capital costs at Tanjianshan, excluding the purchase of a mining fleet, total US$63.4 million. The company had planned to use contract miners, but a review showed substantial cost savings by converting to an owner-operated mine. Eldorado decided to invest in a fleet of mining equipment for US$8.1 million.

While mine construction continues, Eldorado will launch a US$2.2-million exploration program at Tanjianshan in June, aimed at upgrading inferred reserves, testing potential extensions of the deposit, and testing other mineralized targets on the property.

The company also continues to seek permits for its Efemcukuru gold project, in western Turkey, where it hopes to have a mine in operation by 2008. A preliminary mine plan anticipates production of about 90,000 oz. gold annually over a 12-year mine life. A feasibility study should be completed by mid-2006, with infill and stepout drilling planned for this year.

Eldorado has budgeted US$14 million for exploration programs in 2006, earmarked for Turkey, Brazil and China. Earlier this year, Eldorado closed a $186-million equity financing to top up its treasury for mine development and possible acquisition of late-stage development gold projects in China.