Eldorado Gold Corp (EGO) 2005 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Eldorado Gold 2005 financial results and corporate update conference call. This call is also available on Eldorado Gold's website, www.EldoradoGold.com. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. This call is being recorded on March 23rd, 2006.

Certain of the statements made may contain forward-looking statements within the meaning of Section 21-E of the Securities Exchange Act of 1934 and forward-looking information within the meaning of the Securities Act Ontario, which involves known and unknown risks, uncertainties and other factors which may [cause] the actual results, performance, or achievements of the Company. Other industry results to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements.

Forward-looking statements are subject to a variety of risks and uncertainties which could cause actual events or results to differ from those reflected in the forward-looking statements. Should one or more of these risks and uncertainties materialize or should underlying assumptions prove incorrect, actual results may vary materially from those described in forward-looking statements. Factors include but are not limited to the Company's need for additional funding; the Company's expectation as to the use of proceeds from the offering. The completion of the offering is subject to the satisfaction, customary closing conditions and other risk factors associated with the Company's business contained in the Company's annual information form and Form 40-F filed with securities regulatory authorities and dated March 30th, 2005, and in the Company's preliminary short form prospectus filed with securities regulatory authorities and dated January 23rd, 2006.

The Company does not expect to update forward-looking statements continually as conditions change, and you are referred to a full discussion of the Company's business contained in the Company's reports filed with securities regulatory authorities. I would now like to turn the call over to Paul Wright, President and CEO of Eldorado Gold.

Thank you operator. Good morning ladies and gentlemen, and welcome to the Eldorado Gold conference call. Joining me this morning in Vancouver are Earl Price, Chief Financial Officer, and Norm Pitcher, the Company's Chief Operating Officer. The format for this morning's call will include a brief review of the Corporation's 2005 financial results that will be provided by Earl, followed by an updated outlook on the Company's operations provided by Norm. We will then be pleased to field any questions.

Before handing over to Earl, I would like to make a few introductory remarks pertaining to both 2005 and 2006. Last year was both a challenging and rewarding one, with the principal challenges and disappointments being associated with our Sao Bento mine in Brazil. Where at year-end we have elected to write down the asset to essentially scrap value and enter our final year of full production.

In the year, we also made considerable progress with the completion of the majority of construction at Kisladag and approval of our environmental impact assessment report for the [FM2] group project. In China, the Company's acquisition of Afcan Mining with the two addition Tanjianshan project has been very successful with our team in short order adding to the reserve base, and making excellent progress on construction.

On the exploration front, we're very pleased with our results in Brazil from our Vila Nova project and remain encouraged from the results from the AS project in Turkey. Both of these projects will see substantive programs in 2006.

Turning to 2006, the focus of our attention and the principal objectives of the Company are very simple. And they are to bring our Kisladag and Tanjianshan projects onstream, and to establish planned performance levels as quickly and efficiently as practicable. At Kisladag over the next five weeks, we will be transitioning through the completion of construction activities, commissioning production startup with the intention to have our first [goal for] by the end of April. At this time, I would like to hand the platform over to Earl, who will provide a brief summary of our 2005 financial results. Earl?

Thank you, Paul. Good morning. Turning to the statement, in 2005 we lost 49.1 million or $0.17 per share. For the fourth quarter, that would be 22.6 million loss or $0.07 per share. Of the loss, 18.8 million was a non-cash charge for the write-down of our Sao Bento mine, as the shortened mine life and higher operating costs resulted in the mine failing to meet net realizable value tests that we conduct each year on all of our assets. This write-down was partially offset by the sale of our of [Taymaz] and [Khudairi] properties in Turkey for 5.5 million.

Increased expenditures in exploration in Turkey for sale in China increased general administration expenditures for additional staff worldwide, and higher depreciation on our Sao Bento line as a result of the shortened mine life were major contributors of the year-end loss. Our balance sheet remains strong. We ended the year with 33.8 million in cash, having spent 88.8 million in capital investments with the majority spent on our construction of our Kisladag and Tanjianshan mines.

As you're all aware, we completed an equity financing in February of this year for a net cash of 155 million, which will allow us to complete our capital program, exploration programs, and have funds for future opportunities. I will now turn the platform over to Norm so he can give you an update on our exploration and operations.

Thanks, Earl. We'll start with Turkey. As Paul mentioned, the focus is of course Kisladag. And before we get down to the nitty-gritty on Kisladag, I would like to bring up again a story you probably heard before. But this is a mine that has 14 years of gold production. It's going to do 0.25 million ounces per year at full capacity.

This thing went from first drill hole to development to construction to production in a ten-year period. So as the schedule is now being measured in -- it has gone from service months to days to weeks to days, I think it's going to keep that point in perspective. So far we mined at Kisladag about 1.1 million tons of oxide ore and put about half of that oxide ore on the leach pad.

So far, the block model is performing well. If anything, a little better than expected. The [AER] plant has been commissioned. The permanent buildings are now occupied. We have completed pre-commissioning on solution pumps and the overland conveyor. Looking forward to April, in early April we will commission the heat leach conveyors and get solution to the pad, commissioning the full crusher system in mid-April and expect gold and refinery towards the end of April.

At Efemcukuru, our development project in Western Turkey, the land purchase process has begun. Sort of the next big permitting milestone is going to be the zoning plan once the land purchase is completed, which we expect sometimes in Q3 of this year. In addition, this year, we'll be conducting a drilling program for infill drilling and [sound of] extensions. We will also be doing pre-engineering and doing the feasibility study.

In China at Tanjianshan, unlike Turkey, we've had pretty reasonable weather there this year, so the EPCM is on schedule and on the revised budget. Stripping of the [Chin Long Tan] and [Jin Long Gao hits] are on schedule. We're currently reviewing an owner-operated mining option. The decision on that will be made in early April, so things are going well at Tanjianshan.

Looking at Sao Bento, as Paul mentioned, it's a challenging operation this declining year. We're still on track to produce 71,350 ounces in 2006. In fact, our first couple of months have been slightly better. And we're currently reviewing the options, because we got an efficient and well maintained metallurgical plant there with permitted tailings, a dam that does have excess capacity.

Turning to exploration, of course the focus for 2006 will be on AS and Vila Nova. In addition, we'll be conducting an infill drilling program and exploration at Tanjianshan. At AS in Western Turkey, drilling continues to intersect gold and copper mineralization with associated [core free] style alteration. We will continue drilling there throughout the year. Geophysics will be coming in the next couple of months.

At Vila Nova in Brazil on the iron ore project, we completed about 1500 meters of extension to infill drilling. We are encouraged by the ability to increase resources there. We have the metallurgical testing program ongoing with results expected in April, which will be incorporated into a scoping study around midyear.

At the Vila Nova gold project, we've resumed drilling in the main zone with one drill. The second drill will be shifted to the gold in April and we'll continue to drill throughout the year with at least two drills and maybe look at adding a third there. Again, we are very encouraged by the Vila Nova project. It's a great looking exploration project and we hope that our view of it will be reflected in the drill results. With that I will turn it over to Paul.

Well thank you very much, Norm and Earl. At this point, operator, we would like to open floor for questions.

(OPERATOR INSTRUCTIONS). David Stein, Sprott Securities.

Good morning. My first question is I guess maybe a bit of an accounting one for Earl. I noticed for the year that the operating expenses were higher than the revenue, and the -- sort of using the total cash cost members, there should have been a little bit of margin there from Sao Bento. Can you explain what the difference is?

Yes. What the differences is, we elected to expense the shaft deepening project costs that occurred in 2005 since we will be closing the mine down in 2007. So I think if you go to the last page of the MD&A, there's an explanation for reconciliation of the cost. And you will note that there is a charge there of 5.5 million.

Excellent. Is there a -- sort of like a global CapEx plus exploration number for 2006?

Yes there is, and it's approximately 80 million.

Okay. 80 million. And okay, so I guess that will leave you roughly 100 million on your -- the cash that you have now. Can you just sort of say in general terms what you're looking to do with that?

In general terms, David, it's obviously complete the construction of Phase I of Kisladag, complete the Phase II construction of Kisladag which includes bringing the production up to 10 million tons of throughput. Move Efemcukuru forward in the manner that Norm has described, including land acquisition, feasibility study, drilling programs. In Tanjianshan in China, complete the construction of the Tanjianshan mine as well as we have $14 million of exploration budgeted across the Corporation.

Plus it does give us the funds to build up Efemcukuru going into 2007.

Okay. So I guess essentially to look at it as you're fully funded to do everything up until the end of 2007 and get everything into production that you have on your plate right now.

That's right. The present balance sheet allows us to develop Efemcukuru, develop -- we have in our corporate model capital associated with development of the iron ore project in Brazil. We're basically fully funded for everything we have within the fence.

Steve Butler, Canaccord Adams.

Just a question -- maybe a follow-up on Vila Nova, Paul. Are your plans there for -- to do this project on your own or would you [otherwise] look to have a partner or sell it, or what are your thoughts there?

Well it depends a little bit on the size. Our present view right now is that this is a -- call it an 8 to 15 million ton project. It's likely that we will do it ourselves. It's going to depend largely on the metallurgical test work. If it confirms that a relatively simple metallurgical process, i.e. crushing and screening, can be employed, it is a relatively low capital, low-risk project.

Part of the rationale, Steve, for us getting involved in the iron ore was that we wanted to have basic control over development on the property and didn't want to have to try to coordinate other extraneous activities and groups. So consistent with that would see us moving forward with the development and the development would be organized in a manner that would be consistent with serving our interests as far as the subsequent development of the gold property is concerned.

Right. The other question I had was G&A guidance and/or stock based compensation guidance for 2006.

For 2006, of course we had in our notes 4.4 million of costs for expense related to the Kisladag mine, which will not be occurring going forward in 2006. That was 4.4 million a 2005 if I [recall] which will not be going forward. So we will be seeing a drop in our G&A cost.

Okay. So you're looking at your G&A of 12 or -- you're saying just take a look at the G&A, Earl, of -- what the heck is the number -- sorry, 13 million in '05. You're saying 13 million minus --

Minus your 4.5 million.

Yes, and the stock base compensation will be -- that's included in that number, correct?

No, it is not. If you notice on our financial statements, we list the stock based compensation separately (multiple speakers) line item.

Okay, separately. And is that going to be in a similar level in '06?

I would say you could look at it as being similar, yes.

Okay. And what -- Norm or any of the other guys there, expectations for grade in 2006 to be stacked grade at Kisladag and the grade at Tanjianshan if you have those?

Well Tanjianshan will be around a gram or so head grade. And Tanjianshan is around 7 grams, so you can sort of do a weighted -- we we're doing 120,000 ounces at Kisladag and 40,000 ounces at Tanjianshan.

Mike Curran, Royal Bank.

Just maybe -- I think I heard and $80 million capital spend for '06, but I'm actually looking for little more detail on what is the amount less the spend at Kisladag or -- and the same for Tanjianshan in '06.

Well as of the first of year, where we're basically looking to -- the remaining expenditures at Kisladag to complete the mine is about 10.5 million. And we're looking at 27.5 million remaining to be spent at Tanjianshan.

Great. And then just on the $14 million of exploration spending planned for '06, is that all going to be expensed or how much of that do you think you'll expense?

Yes, that's the expense number.

And just to help you on adding those numbers up to 80, you then have to add 15 -- approximately 15 million for the Phase II expansion of Kisladag which occurs in 2006.

Right. That one is a total -- it's about 30 total for that is it not? Or is it just 15?

It's 15 in 2006. Going to 2007 in our corporate plan, we plan on replacing the contractor with owner-operated fleets. Production through 2007, 2008 of owner-operated fleet.

(OPERATOR INSTRUCTIONS). There are no further questions at this time.

Right. Well thank you very much everybody for attending. And as always, please feel free to contact us if you have any questions regarding the Company's business. Thank you operator.

Thank you. The conference has now ended. Please disconnect your lines at this time. Thank you for your participation and have a nice day.