Eldorado remains committed to Greek assets, despite R1.2bn preliminary impairment

JOHANNESBURG (miningweekly.com) – TSX- and NYSE-listed low-cost gold producer Eldorado Gold Corporation, which earlier this month suspended mine construction and development at Skouries mine in northern Greece, expects to write down the value of its Greek assets by $1.2-billion to $1.6-billion (after tax), according to a preliminary impairment analysis.

After a year of confrontation with the country’s government, Eldorado suspended development work at Skouries on January 13 – putting 600 jobs at risk – owing to the alleged inaction of Greece’s Ministry of Energy and Environment regarding routine permits and licences required to continue construction and development.

The Council of State, Greece’s supreme court on administrative and environmental issues, last week issued a ruling that declared null and void the ministry’s decision to revoke certain permitting approvals due to environmental concerns, but the company was still awaiting an official decision on the mining permit.

Meanwhile, Eldorado had warned that it would also halt development at its Olympias mine, risking another 500 jobs in the region, if it did not secure the necessary permits by the end of March. Greece's energy minister had asked Eldorado to reverse its decision and safeguard jobs as a condition for the two parties to continue talks.

Nevertheless, Eldorado president and CEO Paul Wright said the company remained committed in the long-term to its portfolio of Greek assets and to “the realisable benefits to all of the stakeholders involved.”

PRELIMINARY RESULTS
Eldorado seems to have been significantly impacted by its spat with the Greek government, as the miner’s preliminary operational results and 2016 guidance, published on Monday, revealed that it expected to drop 2016 gold production by between 93 532 oz/y and 158 532 oz/y.

Its forecast gold production for 2016 was estimated to be between 565 000 oz and 630 000 oz of gold, down significantly from the miner’s 2015 gold production of 723 532 oz (including production from tailings retreatment at Olympias), which exceeded the 2015 guidance of 640 000 oz to 700 000 oz.

Further, while last year’s all-in sustaining cost (AISC) averaged $841/oz, the 2016 guidance predicted an AISC of between $940/oz and $980/oz.

Eldorado noted that the 2016 budget for Skouries was expected to be $33-million, including care-and-maintenance costs averaging about $1-million a month, as well as the excess required for the project’s ongoing costs and some demobilisation costs.

About $155-million in 2016 capital spending was planned for Olympias including mill refurbishment and continued underground mine development. Eldorado announced that commissioning of the plant was scheduled for 2017, assuming that the required installation permit was be received by the end of March and that development works continued at site.

However, should the permit not be issued by then, Eldorado said it would be forced to suspend all construction and development activities, thereby moving the project into care and maintenance.

Highlighting the overall preliminary operational results, Wright said he was pleased to report another strong year of production. “For the third year in a row, all of our operating mines met or exceeded original production and cost guidance. Our teams continue to operate safely and to the highest of international safety standards, as evidenced by a 30% improvement in accident rates across our global operations.”

Wright added that Eldorado continued to partner with the company’s local communities and was committed to investing in their long-term growth.