Eldorado to grow after good year

Eldorado Gold (ELD-T, EGO-N) rode a wave of higher production and rising gold prices to record earnings in 2011.

Gold production increased 4% to 658,652 oz. at average cash costs of US$405 per oz. Eldorado recorded a 33% increase in gold revenues from US$783 million to US$1.04 billion, owing to a 29% increase in the average realized gold price and a 3% increase in gold sales volume.

Basic earnings per share increased 41% to 58¢ through 2011 and the company paid an 11¢ dividend per share during the year, up from 5¢ per share in 2010.

Eldorado formally acquired European Goldfields in February 2012. The transaction carries a $2.5-billion market value, and swells Eldorado’s market capitalization to $11 billion. European Goldfields holds 9.2 million oz. in gold-reserve projects undergoing various developments in Turkey, Romania and Greece.

“We’re adding sizeable, high-quality, long-life assets with robust resource bases,” Paul Wright, president and CEO of Eldorado, said during a conference call. Wright stressed the importance of increasing company gold reserves by 53% to 29 million oz. and maintaining competitive cash costs.

The Skouries property in Greece carries full permit approval from the Ministry of Environment, Energy and Climate Change. The property hosts proven and probable reserves of 138 million tonnes averaging 0.81 gram per tonne gold, or 3.6 million contained oz. gold. Eldorado expects earthworks to start next quarter, and Skouries is projected to produce 150,000 oz. gold per year at average cash costs of US$450 per equivalent oz. gold. The mine has initial capital costs of US$300 million.

European Goldfields’ Olympias project in Northern Greece comes with a government-approved environmental impact statement. The property has proven and probable underground reserves of 13.6 million tonnes averaging 8.7 grams gold and 132 grams silver, or 3.8 million contained oz. gold and 58 million contained oz. silver. The Olympias mill is being refurbished with commissioning planned next quarter and first production planned before October. Additional underground rehabilitation and refurbishment are underway.

Eldorado also acquired 80% of the Certej project 12 km from Deva, Romania. A gold-silver mine was operated on the site by Romanian state-owned Minvest in 2006. Certej has in-pit measured and indicated resources of 41.5 million tonnes carrying 2 grams gold and 11 grams silver equalling 2.6 million contained oz. gold and 14.3 million contained oz. silver. Upgraded permitting is expected later this year. The mine is projected to produce 172,000 oz. gold and 720,000 oz. silver annually for the first three years at average cash costs of US$370 per equivalent oz. gold. The life-of-mine is estimated at 16 years.

The company’s fully owned Kisladag gold mine near Usak, Turkey, enjoyed a 4% increase in production to 284,648 oz. through 2011. The largest gold mine in the country has proven and probable reserves of 460 million tonnes grading 0.71 gram, or 10.5 million contained oz. gold. 

Eldorado is awaiting government permits before proceeding with a US$354-million expansion at Kisladag aimed at doubling mine capacity to 25 million tonnes per year. The Greek government expedited the permit process for Eldorado’s Perama Hill gold property in mid-2011. The company received approval on its preliminary environmental impact study in late February, and expects full permit authorization by year-end. Perama is expected to produce 110,000 oz. gold annually at cash costs of US$295 per oz., and carries initial capital costs of US$190 million.

The project has proven and probable reserves of 9.7 million tonnes averaging 3.13 grams, or 975,000 contained oz. gold.   

Eldorado also reported a 31% production increase at its White Mountain gold mine in China’s Jilin province. The operation benefited from higher throughput and recovery rates, as well as improved grades. The company commissioned a caustic pre-treatment system in the fourth quarter for better sulphide and oxide recovery.

White Mountain has proven and probable reserves of 5.8 million tonnes grading 3.68 grams, totalling 692,000 contained oz. gold. 

Eldorado is continuing exploration with 10 drill projects underway and 9,400 metres completed through January. The program is focused on expanding reserves at the Efemcukuru and Kisladag gold mines in Turkey, as well as exploring prospective deposits in China and Brazil.

Eldorado’s 2012 worldwide exploration budget is estimated at US$66 million, almost half of which will be spent in China.

Eldorado ended the year with a cash-equivalent balance of US$394 million, up 20% from a year ago. Company shares have risen 10% to $15.24 on average trade volumes of 3.73 million shares per day over the first eight weeks of 2012.