Eldorado finances Turkish projects

Vancouver-based Eldorado Gold (ELD-T) will use at least half the proceeds from a recent $10-million brokered private placement to advance its projects in Turkey.

A syndicate led by Loewen, Ondaatje, McCutcheon, and which included Haywood Securities and National Bank Financial, sold 18.2 million special warrants of Eldorado at 55 each. A special warrant is exercisable without additional payment for a unit consisting of one share of Eldorado and a half-warrant. A whole warrant will entitle the holder to buy an additional share at 80 for two years.

Eldorado recently sold its short-lived La Colorada open-pit, heap-leach gold mine for US$500,000 cash and the forgiveness of US$1.4 million of debt owing to the purchaser. The mine is in Sonora state, Mexico.

The sale reflects Eldorado’s decision to concentrate on sustaining lower-cost production at its Sao Bento underground gold mine in Brazil’s Minas Gerais state, while developing its Turkish projects.

In the first nine months of 2000, Sao Bento produced 85,675 oz. at a total cash cost of US$187 per oz. and a production cost of US$257 per oz. For the year, the mine is expected to produce 115,000 oz. at a total cash cost of US$193 per oz. The mine is expected to last another 7-8 years.

The company’s total gold production for the year is forecast to be 153,000 oz. at a total cash cost of US$214 per oz.

Chief among the Turkish projects is the wholly owned Kisladag porphyry gold project, in the west-central province of Usak, where a 29-hole program of reverse-circulation (RC) drilling program recently expanded the gold resource to 6.7 million contained ounces, representing a 45% increase.

Drilling confirmed the continuity of a higher-grade core, while extending the known margins of the deposit. The higher-grade core was extended farther to the west on several sections. Hole 106 intersected 252 metres averaging 2.11 grams gold per tonne from surface, including 100 metres of 3 grams.

The western margins were expanded by hole 107, which returned 132 metres grading 1.36 grams (including 60 metres of 1.93 grams), starting from 20 metres down-hole. Similarly, to the east, hole 103 intersected 167 metres grading 1.05 grams, beginning at 32.5 metres of depth.

Micon International, in conjunction with Eldorado, used a cutoff grade of 0.4 gram to estimate a total resource of 181.4 million tonnes grading 1.14 grams, based on 16,000 metres of percussion, core and RC drilling. The measured and indicated portion accounts for 126 million tonnes grading 1.2 grams, equal to 4.8 million oz.

The deposit remains open at depth, and Eldorado believes it could contain as much as 12 million oz.

In July, a positive scoping study was completed on the previous, 4.6-million-oz. resource estimate. The study envisioned a conventional 20,000-tonne-per-day open-pit, heap-leach operation capable of producing an average of 186,000 oz. per year at a cash operating cost of US$155 per oz. The mine life is estimated to exceed 11 years, during which time more than 2.1 million oz. would be produced.

The open-pit was modelled to contain an oxide and sulphide resource totalling 79.1 million tonnes grading 1.33 grams at a stripping ratio of 0.86-to-1. Metallurgical tests by Kappes Cassiday & Associates indicate gold recoveries of 80% for oxide and 57% for sulphide material, for an average projected recovery of 62%.

With capital costs pegged at US$98.7 million, the project carries a pretax internal rate of return of 19% and a payback period of 3.7 years using a gold price of US$300 per oz. At US$275 per oz., the rate of return falls to 14%, while the payback period extends to 4.5 years.

Preliminary pit optimization on the new, 6.7-million-oz. resource model indicates that life-of-mine production will be increased to 3.3 million oz., supporting the likelihood of a higher production rate and improved cost structure.

A prefeasibility study is to be completed before the end of January 2001, to be followed by further infill and stepout drilling and a bankable feasibility study.

Eldorado also holds a 100% interest in the Efemcukuru gold project, 200 km west of Kisladag. Efemcukuru hosts a proven and probable reserve of 1.9 million tonnes grading 13.14 grams, equivalent to 784,000 oz. The total resource stands at 2.5 million tonnes grading 13.71 grams, or 1.1 million contained ounces.

The company envisions Efemcukuru as a high-grade, 800-tonne-per-day underground operation utilizing gravity and flotation processing. A prefeasibility study assumed a yearly production rate of 87,000 oz. at a cash operating cost of US$177 per oz. The study incorporated treatment of the gold concentrate offshore. Revisions to the study assume the final concentrate could be treated at Kisladag, which would reduce cash costs to US$149 per oz., while generating a pretax internal rate of return of 40.7%.