Eldorado Gold Corp (EGO) 2006 Q2 法說會逐字稿

Good morning and welcome to the Second Quarter 2006 Financial and Operating Results Conference Call for August 3, 2006. Certain of the statements and information contained in this call and in our news release, are forward-looking statements, and information within the meaning of the United States Private Securities Reform Act for 1995, and forward statements or information within the meaning of the Securities Act of Ontario. These forward-looking statements and information are subject to known and unknown risks, uncertainties and other factors as described in our Annual Information Form and Form 40-F dated March 23, 2006, under Risk Factors filed with the securities regulatory authorities in Canada and in the United States.

Please treat these forward-looking statements and information with caution, as many factors might change, which may cause future events to unfold differently than originally anticipated. Should one or more risk or uncertainty materialize or should underlying assumptions prove incorrect, the company does not assume the obligation to update any forward-looking statements and information, except as required by law. Statements concerning mineral resource estimates and as of future production may also be deemed to be -- to constitute forward-looking statements and information to the extent that they involve estimates of mineralization that will be encountered if the property is developed, and in the case of mineral reserves, such forward-looking statements and information reflect a conclusion, based on certain assumptions that the mineral deposit be economically exploited.

Your host for today will be Paul Wright. Mr. Wright, please go ahead.

Thank you, operator. Welcome ladies and gentlemen to Eldorado Gold's second quarter results conference call. And joining me this morning are, Earl Price, Chief Financial Officer of the company; and Norm Pitcher, Chief Operating Officer; and Nancy Woo, Manager of Investor Relations. We shall follow our usual format this morning. Following my brief introductory remarks, Earl Price will review the financial performance of the quarter; Norm Pitcher will then complete a review of the company's operational development and exploration activities. We will then open up for questions.

My comments this morning will be largely focused on the performance of the Kisladag Mine in the quarter, and our expectations for the balance of the year and in 2007. In April, we announced the startup of the mine; in May, we made our first gold pour; and in mid-July, celebrated the official mine opening and announced the commencement of commercial production effective July the 1st.

Now, then typical for a startup of mining operations, we've had some mechanical difficulties associated with water pumps and the crushing circuit, which has resulted in a slower than desired initial ramp-up in production, and has necessitated the reduction in 2006 projected production. These deficiencies have been and are being remedied in a timely manner, and should not overshadow the fact the fundamentals of this project remain sound.

Ore production to the leach pad remains in accordance with the plan. We are seeing very good reconciliation with the block model and the resources; metallurgical response appears to be as expected; and as a bonus we have ended up with material close to surface that has been amenable to run-of-mine leaching.

As we sit at this point, we are on schedule in terms of ounce placement, and I just like to provide a couple of numbers that would provide, I think, comfort in terms of our ability to be able to reach the production targets we projected for 2006 and 2007. In addition to the production as of the end of the second quarter, through ore placement in the first six months of the year, we have at the beginning of July an additional 38,000 ounces of recoverable gold in our leach pads.

At present, ore placement rates and allowing for the projected recovery of 70,000 ounces of production by year-end, we will enter 2007 with 72,000 ounces of recoverable gold on the leach pads, which are accessible for the 240,000 ounces of production we planned for 2007.

We are very aware that to reach our 70,000 ounce target for 2006, we have to be producing approximately 11,000 ounces a month for the balance of the year, and believe on the basis of daily ounces absorbed that we are going to be achieving that goal.

Elsewhere in the corporation, we remain on schedule in terms of our startup at Tanjianshan in October, Sao Bento continues to operate according to plan and make a contributions to the corporation. And as Norm will describe, we continue as evidenced by our recent disclosure, to meet with success in our exploration efforts.

Like just to hand the phone over to Earl now, who will take you through the financial performance for the quarter. Thank you.

Thank you Paul. Good morning. I will review each of the three pages of the financial statements, touching on those items of significant changes beginning with the balance sheet.

The company's balance sheet remained strong, with the period ending cash balance of 124.5 million in unrestricted cash. We have sufficient cash to complete all of our announced projects – Phase 2 at Kisladag, completion of the TJS mine in China, and our exploration program at Efemcukuru and our Efemcukuru project.

Inventories have increased to 18.9 million at the end of the quarter, a result of ending the period with 6,800 ounces of dore gold in inventory in Turkey, and increased leach pad inventories at Kisladag compared to 2005. This gold is to be refined and sold in July that we were holding in Turkey at the end of the period. On the liability side, our net debt position remains at zero.

Moving on to the statement of operations, gold sales were 17,907 ounces at an average price of $615 compared to 15,656 ounces at an average price of $549 in the previous quarter, as we see our gold prices continue to rise and we are able to now really benefit from increased production coming from Kisladag in the future months.

Interest and other income at June 30, 2006, for the quarter ended and six months 2006 has increased as a result of additional cash balances invested and held from the February 2006 financing. Operating costs have increased as ounces sold have increased.

Depreciation has decreased as we have written down the carrying value of our Sao Bento mine at the end of 2005 to scrap value, and are no longer recording depreciation on that asset. General and administration costs are higher compared to 2005 and Q1 2006, as costs related to additional staff increases, implementation of our SOX compliance program, higher travel costs associated with our operation and cost associated with unsuccessful corporate transactions have been recorded.

Foreign exchange was favorable this quarter as the Canadian dollar strengthened and the Brazilian real weakened. These gains were partially offset by a weakening Turkish lira. Overall, we were able to reclaim much of the loss on foreign exchange experienced in the quarter, in the first quarter of 2006. For Q2 2006, we ended the period with a profit of $215,000 at zero per share.

Turning to the statement of cash flow. The significant change is our continued investment in the quarter at Kisladag and TJS, Tanjianshan, with 27.6 million spent on property, plant and equipment, 10 million at the Kisladag project and 17.4 million at TJS. Mineral properties and deferred development spending of 1 million was 337 on Efemcukuru and 1.4 million on our Vila Nova iron project. These are my comments on our financial statements. I will now turn the call over to Norm Pitcher. Thank you.

Thanks Earl and good morning everyone. I will take you through my usual whirlwind trip through the wonderful world of Eldorado. You know, it's been a busy quarter, obviously, most of it quite positive, some of that not so, but here it is.

Sao Bento, we had a reasonable second quarter, lack of flexibility as the number of working areas in terms of stope decreases is, of course, a problem for us and will be throughout the rest of the mine life. Right now the union negotiations are ongoing, which is a yearly event. We expect a successful outcome this month to that with no interruption to the operation. Just a comment on, sort of, the timing of the actual shutdown of the mining operations, that's very much going to depend on what happens in the next two quarters there, and we will just continue to monitor that and see how we do as we approach the end of 2006.

At Kisladag, as Paul mentioned, issues with water and the crusher have impacted our forecast for 2006, and the main issue there really has been water. We had problems with one of the pumps, and actually our main producing well we have got two that are feeding the mine right now. It appears we got some drain rock into the pump early on, which gave us some problems with burned out motors. We have now repaired that pump, replaced the motor. It's back in the hole and operating, as it should be. And we also have a replacement pump available. So, if we have any more trouble at this one, we will just swap it out and while we get the other one fixed.

We have got two more wells, where we are going to be drilling and we expect that both of these should be online by the end of the year, which will allow us to get more flow to the leach pads. I also want to say that the problems we are having in terms of water have nothing to do with the actual well itself. The wells are producing actually very close to what they were supposed to. It's simply been a mechanical issue with the pumps.

The pressure problems relate to poorly manufactured and installed belts, which is something that is relatively easy to solve. We have also had some other mechanical issues on the crushers. All of these things are being worked through and we expect them to be fixed in a timely manner. Now, this does not impact our ability to ship run-of-mine ore to the leach pad. We are also using the temporary crusher to crush. We have encountered some higher-grade material in the pit, +2 gram. So, we are using a temporary crusher to crush that, so we get the full recovery on that material.

So far, recovery on the run-of-mine ores has been quite encouraging. We put a test heap at the bottom of one of the cells and we are getting close to 70% recovery on that one after 20 days. So that's higher than what we are actually putting in our model for the rest of year. So that's quite encouraging.

As Paul mentioned, the block model, reconciliation is very good. I mean, it's essentially bang on at this point. At the end of July, we've got 50 -- we had placed 56,250 recoverable ounces on the pad, and at the end of the year, we expect to have over 142,000. So you subtract a 70 and that's sort of what we have sitting on the pad.

July production, to the pad, which was mostly run-of-mine ore, just oxide ore was 540,000 tonnes, which at an annualized rate is over a 6.5 million. So, we are well above our -, what we are meaning to do for 5 this year and that's why we feel quite comfortable ramping up into 2007.

At Efemcukuru, the land acquisition continues. You know, it's really coming down now to price. I think any of you who have purchased carpets in Turkey understand, you know, that the Turks are very good negotiators and it’s just part of the national character and that's kind of where we are at now. Drill permits are in hand on that. We expect the dozer work to start next week. We've got two drills ready and the feasibility study is on track for early in the third quarter.

At Tanjianshan, we are on schedule for an October startup. The mining is progressing well in the Qinlongtan pit. Our fleet of equipment has been purchased and delivered and is now operating in conjunction with a mining contractor. We have had no real issues with equipment availability there, with the exception of one of the Chinese graders, but not unexpected. The rest of the fleet is operating very well, and obviously we are very encouraged by the drill results we released this week, which are drilling in inferred material towards the bottom of the Jinlonggou pit that was considered waste and of course in the pit design and reserve statement, and now it will be converted to measured and indicated resources at what looks like a very good grade.

On to exploration, you know, I guess just a general comment and I don't think it's a big surprise, but we've had -- this year I think, we are going to have very good results out of Brazil, I think we are going to have very good results out of China. You know, I think, less so in Turkey, that's fine, that's the nature of the exploration business. We have got a large land package in Turkey. We have acquired some land this year in what we think is an underexplored area. And so Turkey will just keep churning and going through the evaluations and we hope to have better results out of Turkey next year.

On to Brazil exploration; obviously the focus there for the Company is on the Vila Nova gold project. We are going to host an analyst trip there in early October, and we expect to be providing some disclosure shortly prior to that visit.

The drilling in Gaivota and Croado pit, which are sort of the main pits and trenching as well have been good. We are recently starting to the north of those two areas, probably about 500 meters. We have drilled two holes there. There are no assays back yet, looks encouraging. We have done some induced polarization geophysics in the south part, with some good anomalies down there and we are starting to drill now. So really sort of working our way out of the core of the deposit; looking at some of the on-strike extensions. We will do that, then we will get back and we will target some deeper holes, sort of into the guts of the system in Gaivota and Croado.

On the iron ore, we expect the pre-feasibility to come in at the end of Q3 and we will update that along with the gold disclosure prior to the analyst visit.

As I mentioned in China, we had excellent infill results from Jinlonggou. We sort of finished our -- we finished the infill portion of the drilling program. We are now going on to the two zones that lie between QLT and JLG, which will both be drilled this year. You know, it's exciting for us, because we are sort of getting out of the known mineralization and into some of the more prospective parts of this very large land package.

Now for both Brazil and China, you know, we may look at adding additional financial resources to both of these projects, depending on how things go in the next couple of months. Particularly at Vila Nova, I think.

And in Turkey, you know a -- disappointing, but we are not done there yet. You know, we still have some anomalies to the south that will be tested. It's still a large system. You know, the higher grade material in the Dogrudere anomaly looks to be fairly small in size. So, we need to sort of work our way out of that. And as I said, I think Turkey just needs to sort of keep churning away through their land package.

With that I will turn it back over to Paul.

Well thanks Norm, and operator that's our comments and if you could please and open the floor for questions.

Thank you. We will now take questions from the telephone lines. [OPERATOR INSTRUCTIONS]. Thanks for your patience. Our first question comes from Ms. Anita Soni, Merrill Lynch, Canada. Please go ahead.

Hi Paul. My question is with regards to the cash cost guidance. I guess the last cash cost guidance, that was in the low 200 and that seems that you are currently maintaining that at about 220, and I was just wondering what the source of that is, given that we're expecting a lot lower production this year?

Well, you know, a significant contributor to that, Anita, is the fact that we are benefiting from -- significant amount of the ore has been placed on the leach pad coming from run-of-mine, which isn't incurring crushing costs, and this was something that obviously we didn't anticipate at the beginning of the year. If you want to attribute the largest contributor to that, it would be the fact that it's a run-of-mine ore.

Okay. And how are the recoveries with the rest of ore?

They appear to be excellent. I mean, you know, it will be a number of months before we can actually quantify this, as you would appreciate, because we have got ore out on the leach pad, it has gone through various degrees of crushing, we've got run-of-mine ore and it's a bit like having three men dancing on the head of a pin right now, out on the leach pad. So, it's difficult to be able to allocate recoveries for the different crush sizes. But certainly, what we are seeing is very fast recovery coming off the areas that have been under leach. And as Norm has described, our biggest inhibitor really in terms of production has just been getting sufficient solution to the leach pad and getting it applied over the area that we have indeed containing gold.

Okay. And can you also run over again. Norm, you came out with a few numbers and they went a little too quickly for me. But you were talking about 54,000, was that tonnes per day or is that --

No, what I said there Anita was in July we placed 540,000 tons in the pad.

Okay.

That was mostly run-of-mine ore. I mean just sort of gives you an idea of, you know, like Paul was saying, the issue is not getting material to the pad right now, the issue is getting water to get it under leach. We can -- we'll have, you know, we're going to have in excess of 70,000 recoverable ounces sitting on the pad at the end of the year that hasn't been, sitting there available for 2007.

Okay.

And then again just to maybe clarify further. I mean, although we've had some teething problems with the crushing and screening and conveying system, they really haven't inhibited us because we deliberately wanted to take advantage of the fact that we have material that's amenable to run a mine.

Okay. And finally that 70,000 you said you're going to have sitting on the pad, that's in addition to the 70,000 that you will produce this year?

That's correct. Yeah.

Okay. Alright, thank you.

Thank you. Our next question now comes from David Stein of Sprott Securities. Please go ahead.

Thanks. Good morning guys. My first question is, I think, did you give us a number for Kisladag for 2007 production? If so, can you just repeat that?

Its 240,000 ounces.

240. So can you just go over briefly what needs to be done to complete the expansion in that timeframe?

Well it's -- what we are doing is we're adding two additional crushers to the system and a whole another set of screen for each crusher. That will be done through late December, early January. That's kind of a bulk of, that's the bulk of phase II expansion.

The ADR plant is sized for that product production unit to – conveyor transfer of the staffing unit, are all sized for the 10 million tonnes.

Yeah.

Norm described it as crushing and screening and that work is ongoing.

Okay. Great. And Norm you mentioned that there will be some disclosure before the analyst trip to Vila Nova. What is the nature of that disclosure?

That will be really mostly new drill results, new drill and trench results out of the gold zone, and it will also be the results of the prefeasibility study on the smaller iron ore project.

Okay. Any sense on the gold side, when you would be able to look at doing a resource calculation?

We hope at the end of the year to be doing a resource calculation on both Gaivota and Croado. So that will be first quarter of 2007. I mean, that's really sort of what we wanted to do at Vila Nova this year, was get to the point where we can do a resource on Croado and Gaivota. You know, explore the down-dip potential of both those zones and then sort of take a look at these along strike mineralized trends. Which is sort of the [6K] overall system.

Okay. That's great. That's all I have for now, thank you.

Okay.

Thank you. Our next question now comes from Haytham Hodaly, Salman Partners. Please go ahead.

Good morning, Paul and everybody else there.

Good morning.

Hi Haytham.

Couple of quick questions, I guess first one was just for the 70,000 ounces you're looking for -- from Kisladag this year. How would you break that out in terms of third and fourth quarter? What's the ramp-up roughly going to be look like? I know you said, 11,000 ounces was it a month --

Well, that's what it averages out.

Exactly. So what do you think it will look like between the third and fourth quarters?

You know, I don't think there will be much in it. I mean, we are sort of feeling our way right now, I mean as we speak we are producing at about 330 ounces a day that's being absorbed. That's --

And what do you expect that to get up to?

Well I think, what you are going to see and -- you're going to see monthly productions, whether they are going to range between 10 and 12,000 ounces.

Okay.

Over those -- over that period.

Yeah, that's a good average.

And I wouldn't want to try to pick each month, Haytham, you know.

So, I guess what I'm saying is that's what you are roughly at right now, 10 or 12,000 ounces a month?

That's right, yes.

Okay, so, fair enough. That's great. And I guess, in terms of the cost for the low 200's guidance that was given before, at Kisladag, is that still realistic?

That's what we see, certainly and again--

That's what we are seeing.

Yes, I mean that's what -- that's what our costs are coming in at, right to the bit, the end of the second quarter and what we see in the third quarter. As I mentioned to Anida we are benefiting right now from run-of-mine material but which is helping to offset the lower divisor.

Now it's perfect. Okay and just a couple of housekeeping issues, your G&A in the second quarter obviously was up, you said due to additional requirements, manpower requirements. What -- is that a number, that 3.6 million number for the quarter; is that a good number to annualize going forward?

Well I think -- Earl or I will probably both make same comments, I mean, that there were two fairly large what I consider extraordinary costs in there, one associated with costs associated with a corporate transaction that didn't proceed and the second, a large number associated with the initial implementation of SOX, which I think on a running cost basis will come down and we don't intend to have failed corporate transactions every quarter either, so Earl do you want to --

Yes, my only comment is that we will go through the third quarter and fourth quarter, continue to incur SOX implementation costs because we must be compliant by the end of this year and then that will of course drop off considerably going into 2007 quarter.

So you're saying it's fair to use roughly 7 million for the back half of the year for G&A and then drop off after that?

I think that's little aggressive.

Okay fair enough.

Yes. I would say it's high, it's high, because again, hopefully we are not going to have unsuccessful corporate transactions every quarter.

Can you give us an idea of what that cost was of that 3.6 million?

You are looking at up $0.5 million.

Okay. That, helps, thank you. Last question I guess would be with regards to your exploration budget from what I recall was 14 million, which was all going to be expensed; we've seen some interesting or some very positive drill results coming out of Tanjianshan and just wondering if you are planning up throwing any more at that, given that?

Yes, well that is what I sort of alluding to there, I mean we are not, obviously we are not going to spend what we thought we are going to spend in Turkey, and how much of that gets transferred to Brazil and Turkey, I think it’s fair to say that some of that will probably for both of those projects. Certainly Vila Nova, if we continue to get the sort of results we are getting, we could add a couple more drills in there easily, there is no lack of targets there. Tanjianshan I think is going to sort of matter, it’s going to depend on what we see on these two new zones and what we think we can handle in terms of personnel over there as well. But, yes, some of that is -- some of that I think is going to go to both of those.

So, you are talking more of a shifting of money rather than in addition of money, [multiple speakers] a good expense number?

That's right.

Last question I guess was just with regards to, and I haven’t really had a chance to look at this in very much detail, but in terms of taxation, what do you expect your effective tax rate to be, Earl, in the back half of the year?

In the back of the year, well, our tax rate that we are really going to be paying will be zero tax because of what we are currently structured at.

Great.

You know that the tax rate has been lowered in Turkey now, down to 20%, but we won't be moving in to tax-paying position for probably, well, at these gold prices we’ll move in there faster than what we initially planned on but probably not till the end of next year.

Okay, perfect. That’s no cash taxes; so it’s all deferred at that point?

Yeah. That's correct.

Perfect. Thank you very much.

Thanks Haytham.

Thank you. Our next question comes from Don MacLean, Paradigm Capital. Please go ahead.

Good morning everyone. Just wanted to ask some questions on the crusher, if we can get a bit more detail in terms of the tonnes per day you are able to put through it and the sizing. And then it sounds like your run-of-mine recovery is stronger than you might have thought, but whether that might have some implications in the longer term whether you might actually divert some material through to that area rather than suffer the cost of the crushing?

Well again Don, I mean that's, that in fact is the way that we are operating. I mean we are fortunate to have sort of crusher to be -- we are fortunate to be in a position resolving initial heating problems with our crusher at the time we are frankly we would, even if we weren't, we would be preferentially shipping run-of-mine anyway because when you just simply look at cost benefit, on the basis of the indicated recovery you are seeing out of run-of-mine it would make more sense to -- run-of-mine. Now, as with reality is, as we get deeper in the pit, we expect to see the characteristics change to what we had expected in material, that's going to need either two or three stage crushing.

Right. So, is it fair to say then Paul, or to assume that we will see more material through the run-of-mine for the next while anyways than we might have originally expected?

Yeah. I mean we expect frankly to have the fall of problems sorted out in the crusher in the month of August and then it's a matter of dealing your way forward operationally as to what is the best mix in terms of what it is that you've crush versus run-of-mine?

Have you been able to get the conveyance system sorted out and of to get a sense of whether the crusher facility will be able to crush at the size you need, at the throughput that you'd hoped for that the name plate?

Yeah. I mean we -- sure, now we've -- all the systems have been tested to a level that we are satisfied that we could hit throughput that we -- that's required in a steady state basis.

Good.

It’s just, we got small issues in the different parts of the system that are all being -- just are being remedied. We have got no fundamental concerns about the integrity of the system, the design, the construction of them, or the equipments being selected.

Great. I just find it very intriguing if your run-of-mine recoveries have been as strong as they have, [multiple speakers] energy cost?

It is a pleasant surprise, because in all the metallurgical test work we did, we never did do run-of-mine test work.

While as you get deeper in the ore body that's going to change.

Yeah. You have to deal with that.

Yeah. In an odd way, if there is a good time for the crusher to go down, it was now because we do have the ability to supplement that basically a 100% with a run-of-mine material.

And is there -- you were saying there was more or juicier grade in some areas, is there a lots of run-of-mine material, like how long could you run with that before you are starting to feel the pinch?

I mean we'll have the crusher -- we will have the crushers up and running before that happens.

Okay.

No, it's a situation Don, where we will have the crushers up and running and we'll probably running the crushers at max and if we have surplus mining capability and we have got surplus material in the pit that's run-of-mine amenable, we will run of mine that material out as well.

Sure.

That's the way we'll -- that's the way we will operate.

Okay. And just sort of switching, Norm you had mention on Sao Bento, you are going to look at how it is progressing over the next couple of quarters, are you sort of giving us a heads up that you might shutdown a bit early on that one?

No, not necessarily, no I mean it’s just, we often get the question when exactly is it going to shutdown? When exactly it shuts down really, we are going know kind of a couple of month's ahead, right. I mean we are looking at the end of 2007 or end of 2006, early 2007, whether it's December, whether it's January, whether it's February, we are not, honestly we are not going to know until sort of October, November the exact date; that's really what I am trying to get at.

Okay, so we are dealing with plus or minus a few months?

Yeah, yeah, yeah I mean you know what it is like towards the end of the mine, you've got very few places that are producing ore and we just sort to have to see how those places do for us.

Right, okay. I will let somebody else ask questions, thanks guys.

Thank you. Our next question now comes from Paul O'Brien, Raymond James. Please go ahead.

Hi good morning. I think you touched upon some CapEx numbers earlier but you have those four quarters for the next or the second half-year, third and fourth quarter?

Going forward, CapEx to be spent, we are fundamentally finished with the Kisladag project as far as the Phase I, we will have approximately $5 million, it will be spent on Kisladag going into Phase II, those will be the additional crushers that will be coming in and Tanjianshan, we will be spending approximately another 10 to 11 million to complete that project in October and then we will switch over to sustaining capital.

Okay great, are there any further details on this third-party agreement at Sao Bento?

On the concentrate?

Yeah.

No, I mean just what we said, it's 5,000 tonnes, we think about 3,000 ounces to our account. We do actually have the ability to take more of it, but it's going to be a matter of whether or not we have enough concentrate. It's a blending situation, so it depends on whether or not we have enough concentrate to blend with it.

Okay great. And just to characterize exploration regions. It sounds like, or would the ranking be Brazil, China and Turkey now?

Yeah, I am not quite sure how I would rank Brazil and China; they both look pretty good; but yeah, something like that.

And again, I don't want to sort of de-rate the importance of the prospectivity that we, you would, Turkey it's just simply, if you are looking at this month's scorecard or this quarter's scorecard, the reality is we are getting better results coming out of China and Turkey and Brazil. It doesn't change our continuous commitment to continue to explore in Turkey and our optimism that will eventually meet with success.

Okay, thanks. That's all I have.

Thank you. Our next question now comes from Steve Butler, Canaccord Adams, please go ahead.

Well guys, yeah, most of my questions were answered. I guess, I will just follow up Norm on your discussion of Jinlonggou, I am not pronouncing that perhaps correctly but--

Not bad.

Okay, thank you, my Chinese is not that great. On Jinlonggou, where you were talking about the drilling that in to an area where you previously modeled as waste, I looked at the cross sections or the longer cross section if you will and the drill hole plan map. Those drill holes to the southern part of the pit were actually drilled pretty close to prior existing holes. So, I am just bit confused as to whether there is much reserve expansion there really or was it indeed you are saying considered waste, its surprising given the--

Not considered waste, it was considered an Inferred Resource.

I see.

Yeah, so when we ran the pit design and did our reserves, it didn't get converted into either proved nor probable.

Okay. Can you remind us again, what the -- I have to look it up, but beyond reserves, what the resource is existing at, particularly at Jinlonggou?

I would have to check that number, Steve.

Okay.

I don't want to give you a wrong number.

Okay, I'll check this well. Okay, thanks very much.

Thank you. Our next question comes through [Philippe Zantoni], Private Investor. Please go ahead.

Hi to everyone there and the management. My question is, as all these questions that have been asked by these analysts and stuff whatever and talked about some of the problems with some poorly installed belts and some problems with the pumps and everything else and that's going to have some impact on some of the production going forward, and you're trying to make that up. How is all this stuff that you're doing going to translate into increasing shareholder equity as far as your equity price, with the projects in China, that mine coming online and your Phase II that's taking place in Turkey at that mine and stuff of the additional crushers. How is that translated into increased shareholder equity?

Well, I think -- well, thank you for the question. I think, simplistically the way the market works is, as you derisk projects through the various stages of development, whether that be through permitting, through construction, through establishing an operating performance that reaches peoples expectations, the market typically rewards that. And I think in the case of Kisladag, we've gone through a permitting process, we've gone through a construction process; we're now working out the bugs associated with initial operations. I think as we demonstrate in the next -- particularly in the next quarter, our ability to be able to bring this operation up to the production levels that people expect and what we've frankly committed to, that will be reflected in a value provided to the company in the share price.

In the case of Tanjianshan, we are that much further behind to the extent that we are still building and, therefore, the manner which the market values that project reflects that it's still at an earlier stage. We still have to demonstrate that we can build this according to spec, on schedule and on budget. As we do that, then again the market will tick that off as an accomplishment and simplistically, reward us. And as again, Tanjianshan reaches its production goals in terms of cost and ounces, you will see that, I think, flowing through our share price. That's probably the simplest answer I can give to that question as it relates to those production units. I mean, the other parts of equation are relating to exploration and development, but it's very similar, as you bring these projects to fruition that the market typically rewards you systematically.

Yeah. And pretty much, your stock has been in the trading range and it can't seem to move, but yet you have made progress on these projects and stuff and they’ve moved forward and I am --

I think it's -- and I appreciate what you are saying, and at times we have the same frustration. I think, however, Eldorado, really if you look at 2006 is what I refer to, is a sort of a backended year company, where most of what of I am describing in terms of being able to make discernible differences and whether it be completion of construction, production, hitting operating targets, disclosure on exploration; is very much directed towards the backend of the year, and that's reflected in what you have seen the trading of the stock. I would suggest that the back half of the year will indeed be a better half of the year for the Eldorado investor than the first half has been.

And then -- the hope, your personal hope and your team and everything else, executive team as well as your employees, are hoping that backend is better than the front-end and that will continue on into 2007?

Yeah, I mean, it's not a case of the year being better. It's just the recognition of the work that's being done, is more likely to occur in the backend of the year and carry on to 2007. Again, our responsibility here is largely to run the business, and through effectively running the business hopefully those results will get recognized by the market and we will be rewarded as shareholders.

One more question. I guess last year, in Turkey, in the mine there in Kisladag, it was exceptional snow that you had and stuff. Is that mine there, now at the point that any severe inclement weather that you had in this past season is not going to impact as much as it did this year?

Yes. I mean, the excessive weather that we experienced there was, excessive by Turkish standards and impacted us, because we were in a construction mode. I mean, that level of precipitation and those temperatures would not have as adverse affect now that we are up and operating.

And you don't see that as being a problem in your China mine either, as far as the weather being a factor. I mean --

No, no

No.

Okay, so you will have it over there. So, it's onward and upward now here.

That's correct.

And you have gone through the -- worked for some of the throughput problems of pumps and belts and everything else, and you should pretty much have the wind at your backs?

Yeah. I mean, these are not unusual problems. I mean, it's real life that we are experiencing.

Okay. All right. Well, thank you very much, and hopefully that you start to see the reflection of your accomplishments as we go further on here in the year and next year and -- hopefully, we will see some of that in this year too, the appreciation in the equity price.

We all agree with that. Thank you very much.

Thank you very much.

Thank you. Our next question now comes from Kerry Smith, Haywood. Please go ahead.

Thanks, operator. Paul, of the 2.4 million tonnes that you have put on the pad at Kisladag currently, how much of that is run-of-mine?

Just give me a moment here, Kerry, we will -- I think, Norm has that answer.

Okay. And maybe just as well, of the 5.8 million tonnes budgeted for the year, how much of that would be run-of-mine as well, if maybe Norm can look that up?

Run-of-mine so far, Kerry, to the pad is about 1.7 million tonnes.

Okay. And then for the year, how much of the 5.8 million would be run-of-mine?

2.5.

2.5 million tonnes, okay. And in your estimate of 142,000 ounces recoverable on the pad as of year-end when you get the 5.8 million tonnes out there, what recovery rate have you assumed for that estimate, Norm?

Kerry, can we just back up a little bit? At the end of the year, we estimate -- we recovered 70,000 and we will have remaining on the pad, 70,000 recoverable ounces.

Right. Sorry, I didn't -- I understood that. But -- and what sort of recovery it has been assumed in that calculation?

We are using 60% for run-of-mine and we are using 78% for the crushed ore side.

Okay, for the crushed. Okay. I mean, so you are realizing -- you are seeing sort of 70% recovery under run-of-mine currently --

That’s what we’ve seen off the test heap that we have done so far.

Right, okay. And what is -- I'm still confused a bit, Paul, what is the exact status of the crusher today? You have had some problems with the crusher. Is it actually repaired and back and running now or is the repair process still ongoing?

Well, the repair process is ongoing. I mean, part of the primary is operating. We would expect to have the secondary operating in a week, and the tertiary probably a couple of weeks after that.

So with the primary running, are you running ore through the primary and putting it on the pad with that primary crush, and then you are continuing to work on the secondary and the tertiary?

And we will run --

Setting a run-of-mine as well.

Setting run-of-mine.

Right. Okay.

We are also using a temporary -- we have got this temporary crusher that's mostly doing over liner and we are running some of the higher grade material through that.

Okay. And are the unit costs that you are seeing so far in the operation for the mining and the crushing and the stacking and the conveying, are they up pretty similar to what you would have budgeted then? Has there been any negative variance there?

Mining is what we expected. I mean, to be honest on the crushing, conveying, screening, we haven't run long enough at steady state to be able to --

To know.

Just carry that.

Okay. And with this run-of-mine material is it all -- is it the oxides that you are actually sending out as run-of-mine or is it some other particular ore type within the oxides that you have --

All oxide.

It's all oxide.

It's all the oxides. So about 20% of the reserve is oxide, so potentially maybe 20% could be run-of-mine then?

Yeah. But we will -- once the crusher is up and running, we'll maximize the crusher.

Right, okay.

And then, whatever we sort of need to make up through the rest of the year, we would with run-of-mine. But the idea is, once the crusher can do what it should be doing, it will be used to full capacity.

Okay.

This is a super crusher circuit. I mean, it’s all brand new, 10 million tonnes a year throughput capacity when we have that additional screenings. So at these metal prices, we want to chase that additional recovery, Kerry.

Right. And what is -- what's your sense of the recovery on the crush material so far relative to your budget of 78%? Is it pretty close to that or has it been a little bit better as well?

Currently, it's way too early for us to quantify that.

Okay.

What I can say, Kerry, is the rate at which we are seeing gold coming out of that material, is very encouraging and consistent with what we saw on the columns. All the column tests were -- indicated that we got very fast early recovery.

And that's what you are seeing. Right, okay. And just on Kisladag for the costs, I may have missed it. But what are you seeing now for costs for Kisladag this year and next year for cash costs?

Well, for the reminder of this year, we are forecasting $219 an ounce.

Okay.

And to be perfectly frank, we will be starting our budgeting scenario going into next year, and based upon what will we see of these recoveries, I don't have a number that I want to give you for 2007.

Well, we haven't updated our 2007 expectation.

Because we haven't --

I mean, we are basically -- what you see for 2007 is what we have been quoting based on the feasibility and plan as of end of 2005.

Okay. And the 50,000 ounce decline in production from what you budgeted earlier for Kisladag this year, Paul, is that pretty much all attributable to a lack of solution on to the pads, because you are getting the tonnage out there obviously and metallurgy seems fine. Is that really the issue?

It's taken us longer to the get to the point that we could apply solution to the pads compared to where we thought we are going to be at the beginning of the year. This time it has just taken longer, so we have had less months available to us to put solution to the pads and then compounded with that, have been problems, as Norm described in terms of the failure of the pumps to be able to deliver the amount of solution that we would like to have right now. And then I think thirdly, we've come -- we've come -- through run-of-mine, through taking advantages of the run-of-mine, we've compounded the usual problems that you have of the startup of a heap leach, where you've got, you're struggling to build a pad -- you've got lot of activity on the pad, and you've got a lot of conflicting objective. Your objective is to get as much out on the pad as possible, at the same time you are trying to get a lot under leach. We simply have to increase the aerial extent of the leach pads, so that we can really add tons at the same time maximize the area that we have under leach.

Okay.

Those are the -- those are the contributors Kerry.

Right okay. And just maybe one last question if I could Paul? Do you have you have any sense as to what sort of range of capital that you see might think will come out of the feasibility on Efemcukuru. You know, say a broad range but just in general terms?

You know.

Or is it too early? I'd like to just have a number if I could, just to compare it with what I am assuming?

Well, I would put it in the 60 to 70 million.

Okay, okay fine, I'm at 75, so I guess, I'm going to be okay with that for now. Okay, okay thanks very much Paul.

Thank you. Our next question now comes from Michael Fowler, Desjardins Securities. Please go ahead sir.

Yes, good morning. Just Paul, you said you were on target in China. Could you give us a little bit more information regarding basically on a capital perspective and maybe specifically on the mill and so forth? Thanks.

Well thanks for the question Michael, but I'll defer this to Norm who is probably little bit more current on that [construction].

Yeah we haven't -- you know, we haven't updated our capital of cost for Tanjianshan. We are still thinking in the 63.4 million range that we disclosed earlier. Really, now on construction wise, the tailings are done and lined, the mill is up, the building is constructed, you know, it's mostly mechanical and electric work inside the mill. Look at the power line, to site, is essentially complete. We are finishing the substation to connect to that. It is really down to the short strokes now.

I mean, the construction Michael, remains unscheduled to see us starting production in early October. The bulk of the materials are on site now, so I think based on money spent, we're pretty comfortable with the target Norm described.

Okay. Good, can you just remind me how much gold do you expect to produce, tail end of this year, I guess, and by the way who is the contractor on this or who is building this, this mine?

The target for this year was 40,000 ounces. The contractor, it's a combination, its BGRIMM, which is a large institute out of Beijing, who is doing the EPCM. The owners' representative on the job is as a company called a GBM out of Great Britain, with a lot of construction experience. They are really sort of working for us overseeing the EPCM contractor. Then there is a myriad of contractors working underneath, all of them Chinese, working underneath BGRIMM and GBM. BGRIMM is one of the biggest institutes in China.

Okay. You pretty -- you seem to be pretty happy the way things are going?

Yeah, I mean you know, the EPCM was sort of a new thing for BGRIMM and I think it's very fortunate for us that we've got a company like GBM in there helping. We wouldn't have wanted to do without GBM there as well. I mean they are sort of -- BGRIMM is learning on the fly and GBM is sort of pulling them through that process as well.

Okay. Just change in tracks here. Paul, in terms of strategic sense, maybe you can sort of give us your strategic vision here. I mean the industry is consolidating. You are in three countries in various parts of the world, you've got an eye on all project there, perhaps give us an idea as to where you think you might be in couple of years of time?

Well, we have chosen the jurisdictions on the basis of a belief that we can grow businesses in those jurisdictions. I mean we are -- just walking through the countries one by one, I mean in Turkey, we've obviously demonstrated an ability to successfully explore and develop and construct and operate, and I think you will continue to see us investing in exploration. In Turkey, you will continue to see our commitment to build our business in Turkey, largely driven, I think of exploration success. There is no better way to create value than exploration success and carrying that through, and I think we have a talented team there.

In China, we made a measured decision last year to enter China through the Afcan transaction, I think -- continued work on that project in exploration will support that was a good transaction, and becoming a better transaction. We have made that decision with a commitment to again grow business in China, and we'll continue to frankly look for acquisition opportunities in China. Our experience to date in the development of Afcan, our Tanjianshan project has not changed our view in terms of China as a place that we want to over time build a business.

The Brazil is a jurisdiction that we've operated for 10 years. It's a superb jurisdiction to build and operate, it’s a challenging environment in which to make discoveries that are worthy of investing. We arguably have let our business interest in Brazil lapse somewhat, but I think we are actively and successfully resuscitating those interests in the Northeast of Brazil and in Vila Nova. And we are going to be very aggressive in terms of expenditure on Vila Nova, results permitting to bring that to a development stage project as quickly as possible.

The iron ore project is, one, frankly where -- at present iron ore prices and given the nature of the project, we think it can be a very nice, frankly assist through the development of a gold project. You know, we wouldn't -- we would not go off into the Amazon searching for iron ore projects, but frankly if they are adjacent to gold, and we can make a decent return and enhance our gold business, we will.

So I think the focus is really on the three jurisdictions that were in. At the same time, however, I and the Board are very supportive of seeing this Company grow at a rate that is not limited simply to our ability to grow organically through exploration. So we are actively and we'll continue to actively look opportunistically for other further acquisitions and other potential transactions.

And just a follow-up on Brazil, the labor force, I guess, in Sao Bento, what's going to happen to them and maybe you could use those – the labor force to acquire something else?

Yeah, I mean there is two -- I mean we have put in -- I mean, we have a very talented management team in Sao Bento, and suffice to say, we have taken appropriate measures I think to retain that management force possibly beyond the life of Sao Bento. The mining industry in Brazil is quite vibrant right now, and there is a lot of opportunities for talented people to seek employment elsewhere, and so a reality that we face as the mine comes to closure.

Well, the point of the question there, Paul, is just that you have a talented labor force, but maybe there is a mine there in Brazil which is maybe not working as it should be working. Have you -- I presume you've been looking around towards various acquisition opportunities around the Sao Bento area?

Suffice to say we have been and continue to.

Was that the failed transaction?

No, it wasn't.

Thanks Paul.

All right.

Thank you very much. Our next question now comes from David Christie, TD Newcrest. Please go ahead.

Hi guys. I won't keep you much longer, here just quickly on the crushers that you are getting for Kisladag, are they in transit or where they are coming from and when do you expect them?

They are in transit. They are being provided by MetSo, the group that provided crushers and we expect delivery on site in September.

Okay. And they are going to be installed in December, is that what you said?

December-January.

December-January yeah.

Okay. And you talked about exploration not going so well in Turkey at the present time. What's happening at Efemcukuru at the depth extent drilling and the in-field drilling. What's going on there?

Yeah, I mean, I should -- I don't want to bash Turkey too much here. What -- I really what I was trying to get -- what I was trying to say there was in the grand scheme of things, this year only we are going to see better results out of Brazil and China than we are out of Turkey, and that's no knock in the guys in Turkey and there is certainly no knock on the geologic potential of the country, which will continue below a hefty budget there again next year. Efemcukuru, as I said, were just -- the dozer is going to be headed on site next week to start with some drill pack instructions. There is not a lot to do and the two drills are standing by there, once that's done we will start drilling. So I mean will be drilling here, within the next couple of weeks. So, really the answer to the question is nothing has happened on the downdip extension yet, because we haven't started.

Okay. So you haven't done anything there yet so, okay, okay.

We are just getting going there.

How many meters you are going to drill there?

Not a big program, David, we will knock it off pretty quickly.

Okay. That's great thanks guys.

Yeah.

Our next question now comes from Anita Soni, Merrill Lynch Canada. Please go ahead.

Hi, sorry just a couple of follow-up questions. With respect to the corporate transaction you guys opened up a bit of a can worms there. I was just wondering have you made any progress in China in terms of acquisition opportunities there.

The one-word answer I suppose would be yes, to the extent that we continue to be active in that area, Anita.

Okay. Is there any -- can you perhaps describe some of the types of companies that you are looking at? I mean, last time it was -- you are talking about high and low in both government entities and former brigades and that kind of thing so?

I wouldn't want to comment on the nature.

Okay. And just with respect to the Sao Bento plant. I was just wondering if you had any plans for that right now.

Yeah. We have intentions and we have discussions ongoing.

Okay. All right. Thank you.

Thanks Anita.

Thank you. Our next question now comes from Haytham Hodaly, Salman Partners. Please go ahead.

Sorry guys I just want to follow-up on the comment on taxes, the tax rate obviously the corporate tax rate went from 30% down to 20%. Is now -- do you have any other tax -- taxable benefits or hits I guess outside of that 20%?

Well, no, the 20% is the adjusted tax rate in Turkey.

That's what I am talking about specifically, just in Turkey, is there an additional mining tax or anything like that?

Well, there are additional taxes, but of course we have a lot of opportunities to reduce that tax and that's why, I say, given the price of gold and the income will earn we have a lot of deferred tax credit that we'll be carrying forward. That will offset our taxable income through 2007 at this $600 gold price. Initially in all of our models that was to run for a couple or two and a half years, but at $600 gold that will disappear quite rapidly.

Okay. And thereafter is a 20% of reasonable rate to use in country?

Oh certainly yes.

Okay. Thank you.

[OPERATOR INSTRUCTIONS]. There are no further questions registered at this time. I would now like to turn the meeting back over to Mr. Paul Wright. Mr. Wright, please go ahead.

Thank you, operator. Well, thank you very much for being on the call this morning. We do indeed appreciate your attendance and your questions and as always please feel free to contact us. Thank you again and have a good day.

The conference has now ended. Please disconnect your lines at this time. We thank you for your participation and we hope you have a great day.