Eldorado slashes debt

Vancouver — Eldorado Gold (ELD-T) doggedly continues to reduce its debt and shore up its cash position to take advantage of its assets in Turkey and Brazil.

Eldorado’s unrestricted cash position stands at US$4.7 million and its restricted cash balance is US$500,000. The company has further reduced its debt to US$13.9 million, down from US$24 million last year. At the end of 2001, Eldorado’s hedge position stood at 8,118 oz. gold at a price of US$292 per oz.

Last year the Sao Bento mine in Brazil cranked out 102,841 oz. gold at a total cash cost of US$196 per oz. gold net of amortization and the Real hedging loss. Eldorado believes that the mine will produce 105,000 oz. gold this year at a total cash cost of US$185 per oz. The lower forecast is a result of diminished oxidation throughput associated with the scheduled repair of the #2 autoclave during the first quarter this year and an assumption of energy restrictions during the first half of the year.

In December, Sao Bento received payment of US$3.2 million for the repair of the mine’s #2 autoclave from Brazil Resseguros. The funds cover the total costs of repairing the autoclave. In addition Eldorado will receive full business interruption coverage through the repair period.

In June last year, drought conditions in southern Brazil prompted the government to restrict electrical power usage throughout the country by 25%. Sao Bento was subjected to a 20% curtailment but still managed to achieve a gold put of 91% of the 2000 production level. Eldorado expects that power restriction will be relaxed by the second quarter this year.

In November, Eldorado inked a deal with Companhia Vale do Rio Doce to option the Brumal gold property, situated 3 km from the Sao Bento mine. Past work at the property has indicated the presence of mineralization that is geologically identical to the ore mined at Sao Bento. Gold mineralization is associated with sulphide replacement of carbonate banded ironstone formations within a sequence of chloritic and carbonaceous schists. Arsenopyrite is the dominant sulphide mineral with lesser amounts of pyrhotite and pyrite. Preliminary metallurgical work indicates that the ore is non-refractory.

The gold zone at Brumal has been traced for 600 metres along strike with drilling cutting the mineralization down to depths of 475 metres below the surface. The deepest hole drilled to date returned 13.3 grams gold per tonne over 3.6 metres. Three ore horizons similar to Sao Bento have been recognized close to the upper and lower contacts of the main iron formation.

Eldorado plans to outline a target resource necessary to make a production decision based on a shallow reserve accessible by a decline from the surface. The company envisions this target to be a 250,000-to-500,000-oz. resource that could be treated at its existing mill. A drill program aimed at confirming the mineral continuity is slated for early this year. Follow-up drilling will focus on extending mineralization laterally as well as to depth.

Moving to Turkey, the devaluation to the Turkish Lire last year had a positive impact on both the projected capital and operating costs of the company’s Kisladag deposit. The mine design is based on a 10,000-tonne-per-day (3.4-million-tonne-per-year) operation and proven and probable reserves of 39.7 million tonnes grading 1.44 grams, or 1.8 million contained ounces, with a stripping ratio pegged at 0.51-to-1. Eldorado envisages an operation that would produce 103,600 oz. gold per year for 11.5 years at a cash operating cost of US$149 per oz. Initial capital is projected to be US$29.6 million with an internal rate of return of 32%.