Eldorado perseveres on the road to more ounces

VANCOUVER — It has been a busy year for Eldorado Gold (ELD-T), but that’s business as usual for a company that has doubled its gold output in five years, and plans to more than double it again by 2015.

Eldorado operates seven mines in five countries, two of which it is expanding. The company also has an eighth mine under construction and is moving no fewer than four other projects towards development.

Two of Eldorado’s operating mines — Kisladag and Efemcukuru — are in Turkey. Kisladag, already the largest gold mine in Turkey, is being expanded to boost annual throughput to 25 million tonnes from 12 million tonnes. Ore mined at Efemcukuru is also processed at the Kisladag facility.

Turkey has been a good fit for Eldorado, which cannot be said about every country in which the company operates. The locales that have provided the greatest challenges are China and Greece — and Eldorado has big plans for both places.

In China the company already operates three gold mines: the Jinfeng mine, an open-pit and underground operation that extracts gold from refractory mineralization using bacterial oxidation; the Tanjianshan mine, an open pit with conventional leaching and flotation processing; and the White Mountain mine, an underground mine with a carbon-in-leach recovery circuit.

Those operations, all of which have minority Chinese owners, are operating smoothly. Eldorado’s Chinese headaches instead stem from Eastern Dragon, a gold-silver deposit in Heilongjiang province that is expected to produce 80,000 oz. gold annually — if Eldorado can get its hands on a permit.

“It has been a frustrating permitting exercise for all of us,” Eldorado CEO Paul Wright said on a conference call. The company has “had to wait patiently for the better part of six months,” while little happened because of a changeover in provincial and central government personnel.

Now the pace has quickened, thanks to Canadian government officials who pressed their Chinese counterparts to move on the Eastern Dragon file. Wright is hopeful that construction, which was suspended in late 2012, will soon recommence.

Eldorado’s permitting woes in China, however, pale in comparison to its struggles in Greece. Eldorado already operates one mine in Greece — the Stratoni zinc-lead-silver mine — but after taking over Frontier Pacific Mining in 2008 and European Goldfields in 2011, the company added a raft of new Greek projects to its portfolio.

The most advanced of these is Perama Hill, a shovel-ready gold deposit in northern Greece that is expected to produce 110,000 oz. gold annually once operational. The Greek government put the Perama Hill environmental impact assessment on its fast-track process in June 2011, but Eldorado is still waiting.

“Greece’s Prime Minister publicly stated a number of weeks ago that his government was going to approve the Perama Hill project within ten days,” Wright says. “Well, that hasn’t happened. All I can say is that we’re continually engaged with the government, and we believe the government remains firmly committed to the development of Perama Hill.”

The process has been plagued with court challenges, but those days may finally be over. On April 17, a Greek court determined the latest challenge to Eldorado’s permit was without merit, and rejected an appeal. The ruling clears the way for the government’s green light.

Eldorado did receive Greek governmental approval to start construction at the Skouries project, which is home to a copper-gold porphyry that will initially be mined as an open pit.

Eldorado is already building the mine, aiming at a 2015 start date, but in mid-February Eldorado reported that a “masked and armed group of approximately fifty persons illegally entered the project.” The group assaulted two security personnel — both of whom recovered — before setting fire to the construction offices, several trucks and other heavy equipment.

Skouries has been targeted by protestors before, but the February attack was the most violent. Many  observers say the local and federal authorities in Greece strongly support the project despite a decade of local-level opposition.

Then there’s Olympias, a historic lead-zinc mine in northern Greece that Eldorado is cleaning up and restarting. This year the company will refurbish the mill to process 815,000 tonnes of historic tailings, which carry an average grade of 3.6 grams gold per tonne. Meanwhile the company will be spending almost $70 million at the site to develop the underground mine, which will be expanded in several stages.

The company’s schedule is busy, to be sure. On top of all those undertakings, Eldorado is operating its Vila Nova iron ore mine in Brazil while developing its Tocantinzinho gold project, also in Brazil, and its Certej gold-silver property in Romania.

In 2012 Eldorado reported net earnings of US$305.3 million on the sale of 625,394 oz. gold. On average it cost the company US$489 to produce each ounce of gold.

This year the company expects production to rise to 705,000 to 760,000 oz., at an average cost of US$585 per oz., including taxes and royalties. As Skouries, Perama Hill and Olympia come online Eldorado expects production to keep climbing, hitting 1.5 million oz. annually by 2016.

Eldorado’s share price has not been climbing. After trading in the $14 to $15 range for several months in late 2012, the company’s share value fell to just $6.78 in mid-April. Eldorado has since recovered slightly to trade between $7.50 and $8.