THE GLOBAL SEARCH FOR GOLD SPECIAL — Eldorado laying groundwork for expansion

Determined to become a 500,000-oz.-per-year producer in five years and a 1-million-oz. producer in 10, Eldorado Gold (ELD-T) is bent on expanding its base of operations throughout the world.

In just the past year, the Vancouver-based company bought a 19.28% interest in Australian gold producer Croesus Mining NL, began constructing the Trinidad gold mine in Mexico and acquired an international portfolio of assets (including the Sao Bento gold mine in Brazil) from the Gencor Group of South Africa.

Its fully owned Colorado open-pit, heap-leach mine in Mexico’s Sonora state produced 31,128 oz. gold in 1995 at a cash cost of US$209 per oz., compared with 19,900 oz. at US$191 per oz. in the previous year. Geological reserves stand at 22 million tons grading 0.034 oz. gold, for a contained resource of 747,477 oz. An additional inferred resource is estimated at 3.8 million tons grading 0.032 oz. gold.

Eldorado arranged a US$20-million credit facility with NM Rothschild & Sons to expand Colorado and construct a new gold mine at the Trinidad project, in Sinaloa state.

Colorado is forecast to produce 51,000 oz. in 1996 at a cash operating cost of US$200 per oz., rising to 80,000 oz. per year by 1998.

Trinidad is a joint venture, in which Eldorado owns 51% and Almaden Resources (AMH-V), the remainder. The open-pit, heap-leach operation is expected to enter production by the fourth quarter of 1996, producing 30,000 oz. in its first year of operation and then dropping to 22,000 oz. per year for the remainder of a 4-year mine life. Capital costs are estimated at US$6.1 million, including working capital. Cash operating costs are expected to average US$217 per oz.

Geological reserves are calculated at 3.1 million tons grading 0.051 oz., equivalent to 160,054 contained ounces. An additional inferred resource is estimated at 532,419 tons grading 0.033 oz.

Elsewhere in the state, Eldorado holds an option to earn up to a 70% interest from Treminco Resources (TMO-T) in the Magistral copper-gold porphyry property. A program of ground geophysics, mapping, trenching and drilling is planned. Eldorado owns a 15.44% interest in Treminco.

During the past year, Eldorado invested in an Australian gold producer by acquiring a 19.28% interest in Croesus Mining NL at a cost of US$6.3 million. The acquisition provides a base for Eldorado from which to expand its operations into Australia and the South Pacific.

Near Kalgoorlie, in Western Australia, Croesus owns the Binduli open-pit gold mine, which is expected to yield 40,000 oz. in 1996 at a cash cost of US$218 per oz. Minable oxide reserves stand at 3.3 million tons grading 0.059 oz., or 193,876 oz. of contained gold. An additional indicated reserve, combining both oxide and sulphide material, is estimated at 8.8 million tons grading 0.047 oz.

Croesus’ other holdings in Western Australia include 26 prospects, of which 19 are joint-ventured with larger gold producers.

Gencor deal

In an equity-for-asset swap with international mining giant Gencor, Eldorado acquired the Sao Bento underground gold mine and the rights to a 40% interest in the Piaba gold deposit in Brazil, as well as a 100% interest in three projects in Turkey that are at an advanced stage of development.

Eldorado also acquired the North American licence for the BIOX bacterial oxidation technology, which is used to treat refractory sulphide ore in an environmentally safe, economic manner. At present, the technology is employed at five mines throughout the world.

In a parallel transaction, Eldorado’s exploration affiliate, HRC Development (HDC-V), acquired from Gencor a portfolio of exploration and development properties in Brazil totalling 9,000 sq. miles, as well as 18 exploration properties in Turkey comprising 320 sq. miles.

Gencor chose to invest in Eldorado and HRC Development after reviewing more than 500 companies worldwide. Gary Maude, executive director of the Gencor Group, said Gencor was attracted by the shared management team of Eldorado and HRC, which has demonstrated an ability to discover and acquire gold deposits, and place them into production.

Situated in Brazil’s Minas Gerais state, the Sao Bento underground mine is a 100,000-oz.-per-year producer that employs cut-and-fill, as well as manual shrinkage-stoping methods, at an average rate of 1,200 tons per day.

Gold is recovered by several means, including conventional milling, gravity separation, froth flotation, a combination of pressure oxidation and bio-oxidation, and carbon-in-leach.

Sao Bento to expand

Sao Bento contains a measured and indicated reserve of 2.3 million tons grading 0.36 oz., equivalent to 809,423 contained ounces. An additional inferred reserve stands at 2.4 million tons grading 0.37 oz.

In 1995, the mine produced 101,950 oz. at a cash operating cost of US$309 per oz. It is projected to produce 100,000 oz. in 1996 at a cash cost of US$325 per oz. Eldorado intends to boost production to 125,000 oz., while lowering costs to US$272 per oz. by 1998.

In total, the company expects its mining operations to produce 165,000 oz. in 1996 at an average cash operating cost of US$264 per oz., rising to more than 250,000 oz. in 1998 at a cost of US$231 per oz.

Elsewhere in Brazil, the 116-sq.-mile Piaba gold property occurs within one of several greenstone belts in the northeastern state of Maranhao. It hosts a geological reserve of 6 million tons grading 0.045 oz. and an inferred resource of 8.8 million tons averaging 0.039 oz.

The deposit is 1.3 miles long and varies in width from 50 to 300 ft. Gold mineralization occurs in quartz veins and stockworks within sheared felsite dykes and country rocks. According to a prefeasibility study, the capital cost of constructing a combined open-pit and underground mine is pegged at US$16 million. The study calls for annual output of 25,000 oz. at a cash cost of US$190 per oz.

Eldorado holds the back-in right to a 40% interest and intends to carry out a program of extensive drilling to define the resource base further and determine the extent of sulphide mineralization beneath the weathered zone.

Turkish potential

In Turkey, Eldorado is encouraged by a commitment, on the part of the government, to attract foreign investment in the mineral sector. With three gold projects already at an advanced stage, the company is poised to reap the benefits of a renewed interest in exploration in the country.

Construction permits are awaited for the Kaymaz gold deposit, in central Turkey, which is hosted in a sequence of altered marine sediments and associated ophiolites. Indicated reserves stand at 1 million tons grading 0.19 oz., while an inferred reserve is estimated at 220,463 tons of similar grade.

A positive feasibility study calls for a 400-ton-per-day, open-pit operation employing semi-autogenous grinding and a carbon-in-leach facility. The capital cost of such an operation is pegged at US$12 million, with production averaging 25,000 oz. per year and the cash operating cost coming in at around US$142 per oz. A mine life of at least eight years is projected.

The other two Turkish projects lie on the west coast. The 7-sq.-mile WT property hosts a vein deposit containing indicated reserves of 1.6 million tons at 0.38 oz., plus an inferred resource of 1.6 million tons at 0.35 oz.

It is estimated that a 750-ton-per-day underground mining operation, with conventional milling and a carbon-in-leach plant, would yield 80,000 oz. per year over a mine life of seven years. The cash cost is projected at US$109 per oz.; the capital cost, at US$29 million.

Eldorado plans to drill the deposit at depth with the intention of expanding the reserves.

The Kucukdere property covers 38 sq. miles and hosts five quartz-carbonate vein zones with open-pit potential. Indicated reserves stand at 1.6 million tons grading 0.15 oz., and there is an inferred resource estimated at 771,622 tons averaging 0.15 oz.

790 tons per day

A positive feasibility study suggests US$21 million would cover the cost of constructing a 790-ton-per-day conventional milling operation with carbon-in-pulp gold
recovery. The proposed mine is projected to produce 38,000 oz. per year over a mine life of six years. Cash operating costs would amount to about US$125 per oz.

Earlier this year, Eldorado raised $26.6 million to explore and develop properties it acquired from Gencor.

Eldorado has since entered into a 50-50 joint venture with Gencor to pursue an interest in the state-controlled Pueblo Viejo gold mine in the Dominican Republic. The mine, which has essentially depleted its oxide reserve, is struggling to achieve a satisfactory recovery from a sulphide reserve estimated at 120 million tons grading 0.094 oz. gold and 0.6 oz. silver. The total resource is calculated at 510 million tons grading 0.062 oz. gold and 0.39 oz. silver.

At the invitation of mine owner Rosario Dominicana, the joint-venture partners were invited to set up a BIOX pilot plant. Eldorado and Gencor have given themselves a 9-month timetable to complete a $2.5-million program and come up with a firm proposal to acquire an interest in the mine.

Eldorado is no stranger to the Dominican Republic. It already holds a 48.14% interest in Energold Mining (EGD-V), which has the right to acquire Minera Hispaniola, a Dominican company which holds, or has the right to, six exploration concessions. One of these, El Higo, is reported to host a potential open-pit resource of 1.2 million tons grading 0.18 oz. within the Centenario deposit.

Merger plans

Energold has also applied for mineral concessions surrounding the Pueblo Viejo mine property.

Recently, Eldorado announced plans to merge with exploration affiliate HRC Development. In so doing, the companies will combine their interests in various mines and exploration projects around the world.

The new company will retain the name Eldorado Gold and have 62 million shares outstanding (71 million, fully diluted). Gencor will hold a fully diluted 42% equity interest in the new company, with voting rights limited to 40%.

HRC’s portfolio of exploration properties includes: the 1,200-sq.-mile Andes project in Argentina, which is a 50-50 joint venture with Eldorado; 12 projects covering 9,000 sq. miles within four major prospective gold belts and one copper-nickel-platinum metal belt in Brazil; and 20 projects covering more than 320 sq. miles in Turkey. HRC also has interests in Canada and the U.S.

At the Pena Negra property, in the southern portion of the Andes, a 3,000-ft. program of reverse-circulation drilling was recently completed. Three widely spaced holes intersected gold mineralization over a strike length of 1,000 ft. along a northwest-trending structure.

The mineralized intervals included: 26 ft. of 0.022 oz., starting at a 138-ft. depth in hole 2; 223 ft. of 0.025 oz., starting at a 105 ft. in hole 3; and 33 ft. of 0.011 oz., starting at 131 ft. in hole 7.

The deposit remains open to the north and at depth, and, in the fourth quarter, a second phase of drilling will test it further.