Eldorado Gold makes headway in China

Eldorado Gold (ELD-T, EGO-N, EAU-A) has resumed construction at its Eastern Dragon gold project in China’s Heilongjiang province and says production will start late next year.

The gold producer has completed the engineering work and 95% of its procurement requirements at Eastern Dragon, a high-grade epithermal gold-silver vein deposit. Initial production will come from a small, high-grade open pit while the underground access is developed.

The company has become quite adept at bringing gold projects into production quickly in China. At its White Mountain underground mine in Jilin province, the first gold was produced two months ahead of schedule in October 2008, four years after the ore body was discovered. Its other mine, the Jinfeng open-pit and underground mine in Guizhou province, achieved commercial production in the third quarter of 2007 after construction began in the first quarter of 2005.

Development capex for Eastern Dragon should add up to about US$65 million and the company forecasts production of 70,000 to 80,000 oz. in 2011 at a cash operating cost of between US$140 and US$160 per oz. gold.

Eastern Dragon has measured and indicated resources of 3.5 million tonnes grading 7.5 grams gold per tonne for 852,000 oz. gold and 3.5 million tonnes grading 73 grams silver per tonne for 8.3 million oz. silver. Inferred resources add 2.2 million tonnes grading 2.67 grams gold for 190,000 oz. gold and 2.2 million tonnes at 20 grams silver for 1.5 million oz. silver.

While it works toward putting Eastern Dragon into production next year, Eldorado is also pushing ahead with exploration programs at White Mountain and at its newly acquired Xiaoshiren Central exploration license, 20 km to the southeast.

New exploration results at White Mountain include assays from hole 337 cutting 24.7 metres grading 8.7 grams gold per tonne, about 300 metres down-dip from the current resource. This new discovery remains open along strike and down-dip.

Drilling at White Mountain is focused on testing the host F100 structure down-dip from the current resource. Twelve diamond drill holes have probed the structure at wide spacing, up to 650 metres down-dip from the known mineralization. Of these, six holes were successful in intersecting breccias similar to those that host gold mineralization at White Mountain and two contain significant gold values.

Hole 327 intersected the F100 structure about 500 metres down-dip from known mineralization in the central portion of the White Mountain ore body and returned 8 metres at 1.1 grams gold per tonne.

Hole 337 was collared at the far northeastern section of the known ore body and intersected F100 roughly 200 metres down-dip from previous mineralized intercepts. Hole 337 returned 24.7 metres at 8.7 grams gold including 8.6 metres at 16.8 grams gold. This significant intercept remains open along strike and down dip.

The White Mountain mine is forecast to produce 65,000 ounces of gold this year at a cash operating cost of US$460 per oz. Last year the mine produced 33,958 oz. gold at a cash operating cost of US$461 per oz.

The mine has measured and indicated resources of 10.7 million tonnes grading 3.10 grams gold for 1.08 million oz. gold and inferred resources add 1.6 million tonnes grading 2.10 grams gold for 109,000 oz. gold.

Eldorado owns 95% of the project, with joint-venture partner Jilin Tonghua Institute of Geology and Minerals Exploration and Development, which holds 5%.

At its Xiaoshiren Central exploration license, the company has uncovered two mineralized northeast striking fault zones that it believes could be bedrock sources for the highly mineralized boulder field that first attracted Eldorado’s attention.

Hole HDDS011 intersected 6.5 metres of 7.8 grams gold and discovered one possible source of the highly mineralized boulders, the company reports. Additional intercepts in hole HDDS011 and HDDS010 confirm multiple mineralized zones at Xiaoshiren.

Trenching on the western zone over a strike length of 110 metres has returned gold values of up to 52.7 grams gold over a 1.2 metre sample length. Two diamond drill holes (HDDS006 and HDDS007) intersected the fault zone below the trenches. HDDS006 did not hit significant mineralization and results from HDDS007 are pending.

At the eastern zone, diamond drill holes HDDS010 and HDDS011 were successful in coring hematitic silicified breccia similar to the mineralized boulders found downslope from this area. Hole HDDS010 intersected 0.6 metres at 10.8 grams gold and hole HDDS011 intersected 6.5 metres at 7.8 grams gold and 7.7 metres at 3.3 grams gold.

These holes demonstrate that multiple mineralized zones are present at Xiaoshiren Central.

Eldorado acquired both its White Mountain and Jinfeng gold mines when it acquired Sino Gold in December 2009.

It owns 82% of the Jinfeng mine with its joint-venture partner, Guizhou Lannigou Gold Mine holding the remaining 18%.

The mine is forecast to produce about 190,000 oz. gold this year at a cash operating cost of US$450 per oz. Last year Jinfeng turned out 166,824 oz. gold at US$403 per oz.

Jinfeng has measured and indicated resources of 29 million tonnes grading 4.65 grams gold for 4.3 million oz. gold, and inferred resources of 5.4 million tonnes grading 3.91 grams gold for 674,000 oz. gold.

At presstime in Toronto, Eldorado was trading at $18.06 per share. Over the last year the gold producer has traded in a band of $12.02 to $21.35 per share and has about 547.7 million shares outstanding.