Eldorado signs on for Tocantinzinho earn-in (July 09, 2008)

Vancouver – Eldorado Gold (ELD-T) is focused on expansion. Fresh from negotiating a takeover of Frontier Pacific (FRP-V), the Vancouver-based producer just signed on to earn in majority ownership of Brazauro Resources‘ (BZO-T) Tocantinzinho gold project in Brazil.

The newly-inked agreement allows Eldorado to earn up to a 75% interest in the project, in stages. First the major will subscribe for 8.8 million Brazauro units at 95 a piece, with each unit comprising one share and one warrant. That initial $8.36-million investment, combined with exploration expenditures of $9.5 million over two years, will give Eldorado the option to acquire a 60% interest in Tocantinzinho by paying Brazauro $40 million.

Eldorado can then increase its interest to 70% by paying another $30 million within 90 days of a decision by the joint venture to proceed with mine construction, based on a feasibility study. Then, at any time during the construction phase Eldorado can exercise a third option and pay Brazauro another $20 million for an additional 5% interest, bringing its ownership to 75%.

Finally, if the feasibility study determines that Tocantinzinho hosts proven and probable gold reserves greater than 2 million oz. Eldorado must pay a production decision fee. For reserves between 2 and 2.5 million oz. Eldorado is on the line for $5 million; if reserves come in above 2.5 million oz. gold then Eldorado will have to hand over $10 million.

All told, payments for the project could exceed $120 million.

In addition to its earned interest in Tocantinzinho, the deal assures Eldorado a right of first offer if Brazauro wants to sell its interest in Tocantinzinho or is seeking a joint venture partner for any other properties in Brazil.

The Tocantinzinho project is located in the Tapajos district of north-central Brazil. Brazauro discovered gold in the area in 2004 by drill-testing the area underneath a tailings pile left behind by artisanal miners. As of June 2007 the project hosts resources of 24.6 million indicated tonnes grading 1.33 grams gold per tonne plus 27.7 million inferred tonnes grading 1.18 grams gold, for a total of 2.1 million contained oz. gold.

Gold mineralization occurs as stockwork veinlets within Proterozoic granite. Pyrite is ubiquitous; in high grade zones chalcopyrite and galena are also present. Metallurgical testing has indicated 91% gold recovery using conventional grinding, flotation, and cyanidation.

The 2007 resource estimate used indicated and inferred resources to develop a preliminary mine plan. The plan foresaw gold production of 123,000 oz. per year over a 13-year mine life. An open pit mine with a stripping ratio averaging 2.84 to 1 would produce 3 million tonnes of mill feed annually. Operating cash costs come in at $367 per oz. gold and the project would require $128 million in initial capital investment. The project’s net present value is $42 million, at a 5% discount and a gold price of $550 per oz., and the internal rate of return is 10%.

This is by no means Eldorado’s first foray in Brazil. The company owned and operated the San Bento underground gold mine in Minas Gerias state from 1986 until the mine ceased operations in early 2007. In all the mine produced 1.8 million oz. gold.

In announcing the agreement both Eldorado and Brazauro referred to the major’s Brazilian experience and its group of skilled mining professional available from the closure of San Bento to work at Tocantinzinho.

Eldorado is also working to develop the Vila Nova iron ore project in northern Brazil.

On news of the joint-venture agreement Eldorado gained as much as 32 in mid-day trading but ended the day down two pennies at $8.04. The company has a 52-week trading range of $3.79 to $9.01 and has 345.3 million shares issued.

Eldorado currently operates the Kisladaq gold mine in Turkey and the Tianjianshan gold mine in China. In addition the company is developing the Efemcukuru gold project, which is also in Turkey.