Eldorado Gold Corp (EGO) 2006 Q4 法說會逐字稿

Please be advised that this conference call is being recorded. Good morning and welcome to the Eldorado Gold 2006 financial results conference call for Friday, March 23, 2007. This call is also available on the Eldorado Web site at www.EldoradoGold.com. Your host for today will be Mr. Paul Wright, Mr. Wright, please go ahead.

Good morning.

As the operator mentioned, this call is to discuss our 2006 financial results and our reserves and resources statement. I'd ask you please to refer to our forward-looking statements as disclosed in our news release and Management's Discussion and Analysis.

With me today in Vancouver I have Norm Pitcher, the Company's Chief Operating Officer, and Earl Price, our Chief Financial Officer. The format will be similar to our past conference calls. I will provide some initial introductory comments. Earl, on this occasion, will take you through the 2006 financials, and Norm will provide some commentary on the reserves and resource statement as attached to the press release. Then we will open up for questions.

Just a recap on 2006 -- the Company's resources were almost exclusively dedicated to the successful completion of construction of our two mines, the Tanjianshan mine in China and the Kisladag mine in Turkey. And we are, as a matter of fact, the first North American Company to successfully accomplish the task of fully permitting and constructing and operating mines in both of these countries. We accomplished that in one year, which I think as everybody would appreciate was indeed a consuming task. At Kisladag, we commenced commercial production in July and in the balance of the year, produced in accordance with plan and slightly in excess of 70,000 ounces at cash cost of $206 an ounce, including a fourth-quarter cost of $191 an ounce. Tanjianshan production commenced in November, and we declared commercial production of in February of 2007. With both mines now up and running and performing to plan, we expect to produce approximately 325,000 ounces this year at an estimated cash cost of $225 an ounce.

We recognize that the successful execution of our operating plan for 2007 is critical to the Corporation and critical to the manner in which our shareholders view this company. To continue to give confidence and our ability to execute this plan, we are shortly going to depart from our normal reporting procedures and provide early in April an operational report which will detail the performance of both operations in terms of productions and costs month by month. We're confident that this disclosure will again provide additional confidence that both of these mines are indeed operating to plan and will deliver the results I've described.

In addition, in terms of disclosure that will be coming in the short-term, we will be, probably as early as next week, making more commentary on our Efemcukuru project where we continue to drill with five drills and designed to allow us to complete our feasibility study in the second quarter. We continue to actively explore in the regions in which we do business and with the heavy construction period behind us now, are turning our hands to looking for new opportunities.

With those comments, I'd like to hand the phone over to Earl, who will now take you through the financial statements. Thank you.

Thank you, Paul. Good morning.

I'm not going to go through each line item of the financial statement, but rather discuss the significant business events that have occurred and how they are reflected on the statement. I will then take your questions.

The balance sheet -- with the [declaration] of commercial production at Kisladag in July of 2006 and the completion of construction of TJS in the fourth quarter of 2006, our balance sheet now reflects not only construction activities in the fixed assets accounts but operational working capital changes.

Our Accounts Receivable increased mostly due to of the VAT, that's the V-A-T due in Turkey. Our inventories increased due to the leach pad inventory, year-end [dorey] inventory. And of course our mining interest capital increased because of these substantial investments that occurred during the year to complete construction of these two mines.

On our liability side, the bank debt has occurred because we took a $15 million working capital loan in the fourth quarter in China to complete not only construction but develop the working capital needs of that mine. This loan is fully secured by a letter of credit from HSBC.

Looking at the consolidated statement of operations, our gold sales are up substantially compared to the previous years. This is the direct result of the Kisladag gold sales for July through December of 63,400 ounces with Sao Bento at 64,200 ounces at an average gold price of $609, but more importantly a cost structure of a cash cost of $324 an ounce.

Interest income is much higher than compared to 2005, the result of the interest earned on the cash, the significant cash balances that we have throughout the Corporation. This is both on the restricted and unrestricted cash balances. All interest earned it is due to us, Eldorado, the Corporation.

We have a substantial gain on our foreign exchange. Again, this is the result of the financing that was completed last year in February. We as management elected to hold a significant portion of those funds raised in Canadian dollars because of our belief that the strengthening of the Canadian dollar that would occur during the year. This occurred and therefore resulted in the gains on foreign exchange on both funds held.

Our general and administration expenses of these financials are up substantially. Included in our general and administration costs are $3 million of stock based compensation. It is a cost, a payroll cost, and we're now reflecting that in the G&A cost where it belongs. Stock-based compensation expenses that are incurred are related to our foreign operations, are reflected in their cost of sales numbers. We also have 1.6 million of costs that were expended to become SOX compliant this year, as well as 1.4 million of staffing costs, additional travel costs that have been incurred by the Corporation. More importantly, we're booking a positive net income of 3.3 million or $0.01 a share, which reflects the change going forward now that we will be looking forward to for Eldorado in the future years having two fine operating gold mines.

Looking at the statement of cash flows, our changes in working capital, which is due to increased leach pad inventory and gold (indiscernible) (technical difficulty) significant change on the operating portion of the cash-flow statement. Property plant and equipment is up substantially by 88 million-plus, due to the construction of two operating gold mines today. We have a line of disposal of our mining interest; this was the sale of the power substation at the Sao Bento mine during the year. Our deferred property expenditures are the expenditures that occurred on the Efemcukuru and Vila Nova iron projects during the year.

Now, there is one comment I will make regarding the press release under our production cost statement. You'll note, in the fourth quarter, that our total production cost is lower than our total cash cost. One would wonder, how can that be? With opening up of the Kisladag mine during the six months, of course, we're going through and checking all our numbers, and we're required to put depreciation into our inventory. These calculations were checked and a correction was made, and entered into in the fourth quarter where we reduced our depreciation expense because it had to be applied to the inventory throughout. We had increased our leach pad inventory substantially. This resulted in a negative depreciation in the fourth quarter, but therefore, there was an overstatement of depreciation in the third quarter. That is why the negative number and the lower total production cost. Those are my comments on the financial statement.

I will turn it over to Norm now to make his comments regarding our reserve and resource statement. Thank you very much.

Thanks, Earl. I'm going to talk a little bit about the resources and reserves and also give a brief comment on the operations as well. But as Paul said, we're going to do some additional disclosure in April; it will be quite a bit more detailed than what we're going to do today.

On the resources and reserves, the numbers pretty much speak for themselves. Kisladag, there wasn't much changed except for what was mined out. The block model continues to perform extremely well in that area, and there will be no issues there. I guess the one that people may wonder about it is Tanjianshan. We increased the reserves by about 50,000 ounces there. I think there were -- there could than expectations that there was going to be more than that. A couple of things happened. As Paul said, it was a very busy year in terms of getting these operations up and running, and to be honest, we weren't particularly focused on trying to increase reserves at two mines that were actually being built. However, we were drilling inside at Tanjianshan, inside both the QLT and JLG, which are the two main mining area pit shells. We had a small loss within QLT based on some new information and new drilling. We had a net increase in JLG really more than the 50,000 ounces. That was partially offset by the decrease in QLT. We also raised the cutoff rate a little bit in JLG to account for some higher consumable prices, etc. So really that's kind of what happened there.

I think what we're going to focus on this year will be Brownfield's exploration at both Tanjianshan and Kisladag. We feel there's a lot of potential to increase both the resource and reserve base by sort of moving outside of the pit areas and focusing on (inaudible).

At Kisladag, we're very pleased with the performance of the mine, the leach pad processing facilities. Phase II crushing circuit installation which gets us up to the 10 million tons per year is essentially complete with the exception of the dust control system, which is being put in now. Commissioning is ongoing, and minor modifications and adjustments are being made on dayshift as necessary. But every -- the five crushers are now in place; conveyers are done; screens are done. So we're getting very close to having that completely up to speed.

As I mentioned on the comment about resources and reserves, the performance of the block model is actually exceptional in this (technical difficulty) is (technical difficulty) reconciliation is close to what we thought on sort of the first six months of production.

In Tanjianshan, we're continuing to mine at QLT with both a company and contractor fleets. We're mining the ore, contractors just working on stripping on one of the push-backs. The revised block model, which is we lost some of the material in QLT this year, is under-predicting now. So we may have whacked that a little too hard, so we're doing better in QLT than expected. The mill is doing very well. Recoveries on the whole ore CIL are a little bit better than what we expected.

Last month, we announced that we had gotten our Gold Certificate from NDRC in China. We are the first North American company to receive that; it's a very significant step. I would like to thank our folks in China for pushing that, and it's really quite (technical difficulty).

At Efemcukuru, we have five drills going, three Diamond, two RC. The drilling is going very well. We will have disclosure on drill results sometime next week, and the feasibility is still on track for Q2 of this year.

With that, I'll turn it back over to Paul.

Thanks Norm and thanks Earl. Operator, we will now open up for questions please.

Thank you. We will now take questions from the telephone lines. (OPERATOR INSTRUCTIONS). David Stein, Sprott Securities.

Thanks. Good morning. First, on exploration, we noticed that you expensed your exploration in 2006. I guess, given that there is going to be more of a focus on Brownfield's exploration in 2007, will that change to partially being depreciated and partially being -- you know, depreciated and -- and if you have any guidance for that for '07 as well.

Just to give you -- what our treatment of exploration is is we expense all exploration until a resource has been defined. Once the resource has been defined, then we capitalized it, and it would be depreciated. So in the case of exploration around the mine sites at either QLT, JLG in Tanjianshan, that would be capitalized and then amortized. If it is near the mine sites but other anomalies, which would then create other mines in the future if a resource is defined, then those would be capitalized. But those would be expensed for next year. Does that answer your question?

Yes. Guidance for this year for both expensed and capitalized?

For this year or for last year?

For this year, for '07.

For this year, for '07. I think we will have a budget for expensed exploration of 14 million. That's total expenditure for the Corporation of all of our locations.

Yes, and that will include the so-called Brownfield's and other exploration as well.

Okay.

I guess what we're saying, David, is we can't quickly give you a split. Some of that will (technical difficulty) capitalized because there will be some additional drilling in the (indiscernible) adjacent to the existing pits.

Do you consider Efemcukuru as having a resource even though it was down quite a while ago?

Yes.

So you're capitalizing now.

Right.

Okay.

Our cash flow statement shows investing activity, which I indicated was the Vila Nova iron ore project and the Efemcukuru project.

Great. Seeing as there was a depreciation issue in Q4, can you just remind us what the depreciation per ounce is for either the Corporation or for the two mines going forward?

[A moment] here. I have to look for that detailed piece of paper here. What you would be looking at, well, for the two mines, since we just brought up Tanjianshan (technical difficulty) looking at a cost of approximately $2.2 million.

In 2007 for depreciation?

Based upon the production schedule that we're going for.

Okay. And Kisladag, do you have that?

Yes.

David, could I get back to you with those (multiple speakers)?

No problem. Move on, I've got a quick one. When do you expect to start running through refractory ore in China?

Not until probably middle of the year after next.

So mid '08?

Yes. We'll start mining it in mid '08. We probably won't start processing it until the end.

Okay. Then lastly, what's going on, on the gold side, on Vila Nova?

We're going to be putting out some disclosure on exploration coming up. We had a pretty extensive exploration program this year, and we put out a fair number of the results on that. There's a lot of gold in the system. We haven't found it in concentrations yet that we could put together a resource on it. It doesn't mean -- we haven't given up on that area yet and we've got a lot of our 100% owned claims we're going to start looking at. So we're going to continue exploring this year on the gold side. But you won't see the resource coming out of what we have done, sort of '05, '06.

Okay, just periodic drill results kind of like we saw in '06?

Yes.

That's all I have for now. Thank you.

Tony Lesiak, United Bank of Switzerland Securities.

A couple of questions on Kisladag. Can you run through your annual production forecast, '08 through 2010?

We can. Just give us a moment here. We're looking -- we bracketed the '07 because it's obviously our first year of production there, and we have described it as 190 to 200,000 ounces. That 210 to 220, that reflects us obviously coming up to full 10 million tons of throughput, which we will obviously accomplish in the course of the year. In round numbers, at 20,000 ounces, that converts to 20,000 ounces a month. We are using as an average going forward 240,000 ounces, which fluctuates year by year just based on grade. Just bear with us a moment; we're digging up the numbers here.

In the meantime, maybe you can talk about your VAT recapture in 2007. How much would that be?

What we're looking forward to for recapture of VAT, this will be (technical difficulty) both on the capital equipment during the (indiscernible) mine, and the ongoing VAT recoverable from gold sales will be a total of $16 million.

So the capital number that you're talking about in '07 is inclusive of that recapture?

Yes. What we have is -- if you notice we had on the investing activities value-added tax recoverable on mining interest investment of 7.5 million. So, that's what we will be recovering on the VAT from the mining interest, so that's from building the mines. Then we have the difference net of that will be approximately 8 million, which we would be recovering because of debt that's paid on gold sales that are processed in Turkey. Then we ship the gold outside (technical difficulty) (indiscernible) and then we get of VAT recovery.

So should we be using 32 million for total CapEx for the mine in 2007?

No, no, no, because the CapEx number we have is net of VAT.

Okay, just before the VAT recapture. Then for 2008, you're talking about a new fleet buildout. What kind of capital should we be looking at there?

The fleet buildout is actually going on right now. That was pulled forward from the initial plans. The actual fleet of Caterpillar trucks should be commencing delivery I think in August, and will be completed in the fourth quarter. That's the big increase in our capital program at Kisladag for 2007.

Because if I -- reading the MD&A, it didn't list the fleet as one of the big capital items there. I thought that might have been in 2008.

No, that is in 2007.

While I've got you, cash taxes -- when do you think you're going to be cash taxable?

Unfortunately, at this gold price -- or I should say fortunately at this gold price, we'll probably move into a tax cash position in the fourth quarter of this year.

Should we be running at a 27% effective rate?

No, because the tax rate in Turkey is 20%.

I thought there were some changes recently.

There were some changes; they dropped it from 30% to 20%.

then they brought it back up, if I remember correctly, like royalties, or there's something else in there that they added back.

No, they gave you a certain selection. What they did is they took away basically the allowances that they were giving you on your capital investment and if you -- you have two choices. If you elect to use your loss carryforwards, then you're still constrained to the 30% tax rate. If you elect to give up those, then you can drop to the 20% tax rate. What we have been doing is, since we started up this past year, we've been using sort of those tax loss carryforwards. Then there is a breakeven point that we have to make a selection to determine are we going to give up our tax loss carryforwards in the future to drop to the 20% rate, or continue to use those. But still it's 20%

What do you plan on doing at Efemcukuru?

In capital spending?

No, just in the tax situation. Are you going to use the loss carryforwards?

We will look at that when we build it. I would imagine, depending upon -- we will just have to look at how much the capital is. That's why we will have to wait until we get the feasibility study and then we will have to make a decision as to what is the best tax structure to go with. I think there is an issue here that we will have to use the 20%, because I think, on new investments, you're just locked into the 20%. You don't get this grandfathered carryover.

Okay. Can you talk about the order of magnitude CapEx we should be looking at for Efemcukuru?

The guidance that we've given, Tony, in the absence of a feasibility study, is around 100 million.

Do you have those production numbers yet for Kisladag?

Look, the round numbers for production next year, 2008, would be about 250,000 ounces at cash costs around 205. 2009, it would be about 245,000 ounces at 220. In 2010, it would be 235,000 ounces at around 235. In 2011, it would be around 235,000 ounces at 245.

Okay. Life-of mine-cash costs, now that you've decided to go against the contractor, could you give us that number?

We'd rather not at this point until -- we're still in the process of finalizing exactly what those numbers are going to be.

The previous number was 232.

I mean, I would use that until we give you another number.

Finally, the recoveries that you're achieving at Kisladag, can you talk about how those are going and how you expect them to go over the next little while?

So far, frankly, we have seen metallurgical response consistent with expectations. I think the only real surprise that we have had has probably been a pleasant surprise as it relates to a fair amount of material that we've been able to taken out of the top benches and treat as run of mine where we are seeing recoveries coming off the test pads indicating sort of low 70s from run of mine on a relatively short 60-day cycle. So to date, the recoveries have been good. We're probably seeing some encouragement that on the oxide ore we can cut back a little bit on the crush side and see similar recoveries to what we anticipated on the finer crush just taking perhaps a little bit longer.

Can you remind me the life of mine recovery rate that we should be using?

Yes, on the primary ore, we're looking at low 60s, and on the oxide, it's low 80s. I think the feasibility was, yes, around 80% and sort of 62, 63%

Can you talk about the mix and how that might go over the next few years?

We will be getting -- we will go mining oxide probably for the next couple of years, then after that, we will be transitioning into sulfide. We will actually start putting sulfide on the pad next year.

Some of the sulfide is already filtering through, so it's probably now 90% oxide and 10% sulfide now.

Thanks very much.

Haytham Hodaly, Salman Partners.

Just a couple of quick questions. For starters maybe just I've looked through this quarterly. I am trying to find the actual CapEx breakdown for 2007 for Kisladag and Tanjianshan. Do you provide that anywhere in here, or am I missing it?

I think we have those numbers in our MD&A.

Could you give those to me quickly, Earl?

I'm just flipping through here quickly.

Maybe just a note, for sustaining CapEx outside of the expansion CapEx, etc., what's your rough sustaining CapEx number for Kisladag and Tanjianshan for each of those?

We have sustaining capital of approximate -- what we have in our budget is around 5 million.

That's for both?

Each.

Each, okay.

(indiscernible) next year.

Right, for next year. What's a good longer-term number to use, Earl?

Well, I think to the best long-term number, Paul or --

Yes, the two are very different operations, as you appreciate. We've got -- it's -- the big thing about Kisladag is you'll go certain years where it's very low, next to nothing, and then every two or three years, you're doing major leach pad expansions, which can be fairly, fairly significant. So I would say, on an average, you're probably looking at 4 to $5 million for Kisladag and a much lower number for Tanjianshan. It's about two for Tanjianshan. But it does vary from year to year.

That's fine; that's perfect. I think Earl was trying to source a breakdown for DD&A for Kisladag and Tanjianshan. Was it 2.2, was that just for Tanjianshan or was that for both?

I have the CapEx numbers for Kisladag in 2006 -- 39.7 million, Tanjianshan was 48.2,

That's 2006.

Yes, that was 2006.

What about 2007 forecast?

For CapEx, we're looking at Kisladag will be around 40 million. Tanjianshan will be around 9 million.

9 million, perfect. Is there -- outside of those two and assuming Efemcukuru -- before expansion at Efemcukuru, is there anything else out there that you'd be spending CapEx on?

Everything else is minimal. Let's say another 700,000.

Okay, so it's rounding.

Yes, you've got your exploration budget.

That's the only other thing to add in.

Earl, since I've got you there, did you manage to get a breakdown for DD&A for each Kisladag and Tanjianshan for 2007?

No, I don't have those numbers here. I will have to call you on that.

Was it 2.2 that you pointed out before, was that combined?

No, that isn't the combined yet. That's why -- let me go get you the right numbers and call you and give you the exact correct numbers.

That would be great. Maybe just a forecast for G&A for 2007 and indicate whether you're forecasting it with or without stock based compensation.

If you use the 19 to 20 billion, that will include stock-based compensation.

Okay. And just one note -- you didn't put the breakdown, obviously, of a Q4 breakdown. Could you give us what shares outstanding were in the fourth quarter? Do you have that handy, Earl?

At the end of the fourth quarter, they were --

No, just the weighted average in the fourth quarter.

I don't have the weighted average in the fourth quarter.

Okay, because I'm looking at the actual average for the year, and it seems kind of high relative to what the first three quarters were. It just kind of turned me off a little bit. Maybe you could get Nancy to give that to me later on.

Just maybe at Efemcukuru, it is there any permits or any obstacles that -- could you maybe look through a timeline here of what you see happening in the next 12 months I guess for Efemcukuru is the best way to do it?

What we've stated is that it is our intention to make a constructive decision this year. Where we are right now, we have the principle permit behind us in terms of the approval administrative environment. There are obviously a number of permits still required before we can start construction, but there are two principle permits. One is the approval of the zoning plan, and the second is the construction permit. The precursor to the zoning plan is our ability to be able to demonstrate that we have full legal access of all the private lands. That's really what we are engaged in right now, is the land acquisition exercise. That is what's going to determine how quickly we're able to reach a construction permit (inaudible).

Maybe kind of sensitive to talk about, how is that going in terms of the acquisitions? Are you locking in land as you go ahead, or are you purchasing land or are you locking in agreements on options on land?

No, we're buying the land. We're somewhere between sort of 45 and 50% acquired. I'll just make the point here that we have obviously certain legal rights in Turkey as it relates to land acquisition. It's well-established in the mining law that we have rights of expropriation. So it's not a question if we're going to acquire the land; it's just a question of how and when we're going to acquire the land. Our approach to the land acquisition at Efemcukuru is similar to the way we acquired land in Kisladag. That is to do it in a manner that at end of the day leaves us with the land that we require and a community that's, frankly, been seemed to be treated fairly and is supportive of us on a long-term basis. That means it is, at times, very difficult to accurately describe how long it's going to take to complete the process.

That's fair; that's fair. One last question, just a housekeeping issue. With regards to the cash cost guidance you gave going forward, was that before or after royalties and production taxes, the 220 to 230 guided for 2007?

(indiscernible) operating cost.

Yes, that's cash cost.

Before royalties and production taxes. Perfect, thank you.

Michael Fowler, Desjardins Securities.

I'm just trying to work out your (indiscernible) depreciation question. You've got no depreciation at Kisladag, and I don't know how you can have no depreciation, but anyway, maybe you can explain.

No, that's for the fourth quarter.

Yes.

The way that has occurred is prior to construction -- [or] started operations at Kisladag in July. At that time, we were expensing all of our depreciation. But under accounting rules, you cannot expense all your depreciation because you must apply depreciation to the work in process inventory. Otherwise, all your inventory is sitting on the leach pad. Remember, we have built all the models because they're not easy models; they're complicated models, built the model and then we knew how much inventory or depreciation we had to apply to that inventory. That correction was made in December.

Right. Okay, so let's go, going forward, what are the book values of both Tanjianshan and Kisladag? Because I presume that Sao Bento is off the books right now.

Yes, it's gone. That's correct. It now has a value on the books of approximately $9 million.

(indiscernible) has 9 million?

Which is correct (indiscernible) (multiple speakers). That is Sao Bento.

9 million for that. What about Kisladag and Tanjianshan?

You're looking at -- not having the detailed breakdown right in front of me, you're looking at approximately at $110 million with the acquisition cost and everything for Tanjianshan. Looking at the difference of -- on the mining interests, so you've got 311, so you're looking at approximately 160 million. You're looking at $25 million sitting on the books for Efemcukuru, and then you're looking at approximately let's say $120 million for Kisladag.

Now you're depreciating for the [2P] reserves and some resources or in the future?

Yes, what you're going to do is you will amortize that over the reserves and resources (technical difficulty) production method.

Okay, so that means to say that obviously the depreciation expense next year is going to be a lot bigger than what you have seen in 2006.

Well, of course. For one, we had no depreciation from Tanjianshan because it (technical difficulty) right, and we had just six months of (technical difficulty) on the depreciation total for Kisladag.

Right. I will be interested in getting that information regarding your DD&A per ounce, and perhaps you could send it out to everybody.

Okay, we shall.

Thanks very much, Earl.

Steven Butler, Canaccord Adams.

Good morning. A couple of questions. I wanted to clarify. You mentioned Earl, that Kisladag CapEx I believe I wrote down 40 million for 2007, 4-0?

That's correct. The bulk of that is the mining fleet. We're going from -- as was the original plan from a contractor mining to owner operated, so there's a fleet of Caterpillar 785s, large Hitachi shovels and support equipment coming in. The balance beyond the mining fleet was essentially being spent, and that was the completion of the Phase II crushing and screening plant.

Paul, you hesitated to give new life-of-mine cash guidance to Tony earlier, but can you say what -- I don't know (multiple speakers) maybe you mentioned the impact of this or you may not have mentioned the impact per ton, mining costs. But the impact would be favorable.

I mean, the present guidance we have is the $230 announced. It is in place. We've not updated our guidance.

Okay, but I assume there would be a slight reduction in unit costs per ton.

Yes (technical difficulty). A big driver in this is what are you going to use for energy costs going forward, Steve?

Okay. The other question I had was really clarifying the NSR or production tax royalty at Kisladag. I know that there used to be a much higher royalty rate at Kisladag. Is it now down to 1% only, Earl?

It's not really a royalty per se at Kisladag. It's estate tax that's calculated actually on your cost of production of ore move. But it worked out to be 1%.

1% of affective revenues or --?

Less than 1%, but for modeling purposes, you can round to 1%

Right, okay. Paul, what are your thoughts on -- I know Vila Nova gold is obviously early days and it is still maybe a bit sporadic, or not in concentrations where you can put a resource together as per Norm's comment. But Vila Nova -- are you serious at all about potentially building an iron ore operation there? I know that the IRR looked fairly good on a -- even only on albeit a five-year life, but it looks good. But is it really a core asset for you, or would you look to yield that off, or what's your thoughts on Vila Nova iron ore?

It's not a core asset, because we're a gold mining company. Would we stay in Brazil simply to execute a modest although profitable iron ore project? No. It really is tied to the bigger question as to do we see ourselves in (technical difficulty) long-term being in Brazil. That decision is going to be driven to a large extent by what success we see coming out of our Vila Nova gold project and frankly other situations where we're sensing in Brazil.

I think, just to follow-on on Norm's comments on Vila Nova gold exploration last year, we have, as Norm described, we've identified gold mineralization. We haven't been able to put it together in any type of a cohesive manner that would give us confidence that there's something there that could be ultimately mined. I think, in hindsight, we probably got ahead of ourselves in our expectations in Vila Nova, because it was abandoned ironstone formation system and because of our experience in our [BIF] of course of Sao Bento, we probably made some assumptions that we were going to come to grips with this a lot faster than we have done. As most of us know, there is a whole variety of BIFs out there and some take a long time to sort out to and determine whether or not ultimately there is going to be something that is indeed of value.

So sort of a long-winded question. We recognize that there is an asset there. There's no lack of people, frankly, also who recognize it and would be happy to purchase it from us. We're not in a big rush to make that decision. We want to make that decision in the context of whether or not, frankly, we stay in Brazil.

I couldn't resist making the comment here, it sounds like your tiffed with the BIF. Just kidding. Just at Sao Bento, you talked about selling some power infrastructure or substation, what have you. Are you done with any asset sales at Sao Bento? I know there was some discussions maybe with a neighboring party that you could indeed maybe sell -- I mean, there's obviously a fairly decent mill there. Any comments there?

Look, very similar to what I just said. We're sort of keeping our options open. Look, it's a seller's market for infrastructure and equipment right now. We sold the substation, but in selling it, we sold the ownership. We didn't sell our rights to be able to access the power from that substation. So it was a sensible sale to make so to speak in that regard. The rest of the equipment, frankly, we have -- despite the fact that we have a large number of people coming and wanting to buy all or some of the plant and infrastructure to date, we haven't committed to selling anything because, simply put, we've got plans on doing other things. What I want don't want to do is sell a sag mill frankly a month from now and nine months from now find that I'm in a two-year waiting list for a new sag mill somewhere. So this is -- we will make these decisions in 2007, but don't look for announcements next week or next month necessarily. Our cost of holding this infrastructure is negligible.

Thanks a lot, guys.

Anita Soni, Credit Suisse.

Congratulations on all you've accomplished in 2006. My question is with regards to the cash costs this quarter. I know it's a little lower than the 220 to 230 that you're forecasting for next year. Do you expect these low cash cost and to persist for at least one more quarter, or are we going to go straight back up to the 220?

Wait until the second week of April, then we will comment. We're sitting here quietly pleased. Things are going very well for us at the operations. But it's important; it's very important for us and it's very important for our shareholders that we deliver according to plan in 2007. We're not going to put ourselves in a position where we get overly confident.

Okay, so no revisions to any of your (indiscernible) cash cost guidance at this time?

No. But I would suggest that when we do give guidance in April, people will continue to feel comfortable with the targets we've set for 2007.

One more question with regards to the grade. This year, it was a little higher than the original feasibility study at I think 1.18. I think you were previously forecasting about 1 gram. Can you give us some guidance on the grade for this year?

It's going to be about 1.1 for this year. And yes, we were a little bit higher, but I'm not sure that's going to continue. The block model, as I said, is predicting extremely well. I think we're probably a little conservative on our forecast, but it's going to be right in that range.

Thank you very much.

[Philip Mentoni], Private Investor.

Congratulations on a good year and your accomplishments. I've kind of asked this question before and I've been listening here, and I missed the beginning of the show, of the call. I wanted to ask you, the second crusher, is that second crusher installed in Turkey at Kisladag?

Yes, it is.

Yes, it is. There's a total of five crushers now. There is a primary one, secondary, and three tertiaries.

And everything is running pretty smooth.

It is, yes. We're still commissioning, so we're not up to design capacity yet. We're in the 70% range, but we just started commissioning it within about the last ten days or so. So, there's no -- yes, everything is in place, as I said. The conveyors are there, the screens are there, and they're just sort of dealing with small issues that are bound to arise in a situation like this as they come up.

You also got the other well established there also too.

Yes. That was done months ago.

So we should be seeing, as we go forward here, some good throughput. Correct?

Yes. The crusher, Phase II crusher is designed for 10 million tons per year.

The other things too is you talked about having these assets and such and you're going to make those decisions as needed, as time goes on and go forward. Also, in April, is it somewhere -- is it in the middle of the month that you will be coming out with new guidance for production, or is it more towards the end of the month of April?

It will be in probably the second week of April, and it will be sort of, just to pick up on your question, new guidance. It won't necessarily be the new guidance. What it will be will be sort of early reporting of production and costs for the first quarter and obviously our sentiments, as it relates to the balance of the year, not necessarily through new guidance in terms of new numbers for the year.

The other thing too, there was earlier, or late last year, talk of -- and I guess you issued a press release on it about you listing on other exchanges and as such, partially -- I guess it was answered in a partial way that you would do to make decisions as needed to increase shareholder value. I'm kind of -- during last year of '06, the stock price has somewhat -- the equity appreciation has kind of not kept pace with others and even others with your -- in your market cap. I'm wondering if you could elaborate on what you might be doing going forward to make that a brighter picture, I guess.

I guess there's a couple of points there. On the point of listing on other exchanges, we have no intention or plans at present to list on other exchanges. We never actually made any disclosure in that regard. I was, frankly, somewhat misquoted by -- on the wire services as it related to some activity that was occurring around the Hong Kong Stock Exchange. So that's the way we sit there.

I think, look, last year, clearly our shares did not perform along with our peer group. I would suggest, frankly, that because we were busy building last year, we fell into the classic phenomenon of a stock that frankly wasn't viewed as being terribly exciting. I think, however, late in the year, as it became clear that we had actually successfully completed the construction task as we started to announce commercial production, that we started to see the numbers coming out in terms of gold and dollars per ounce. The market has started to recognize that we have indeed created something of value. You've seen us, I would say, in the last two to three months, probably outperform our peer group. That's one of the reasons why we are engaged in what I would call somewhat exceptional reporting and coming out early in April with our first-quarter operating results, because we want to reinforce the fact that we have confidence in our projections for 2007. The production levels that we're talking about, and particularly the cost levels, are indeed exceptional when you look at an industry that's presently producing at an average cash cost of $375 an ounce. So I think, from a shareholder's perspective, I think we've positioned the Company well for the long-term, and that's always been behind our strategy for moving the Company forward.

We should probably see more of this as we move into '07, as far as value being increased in the equity price.

Yes, I think it will. I think there's going to be a recognition. With due respect to our peers -- when we talk about the cost, the unit cost that Norm and Earl and I have described, these are costs of production for gold. We're not -- this isn't zinc, lead, (indiscernible) copper, byproduct credits. This is gold production. So we're not -- I think we are one of the exceptional companies in that regard.

Are there any -- I might have missed it, and I apologize if I did. Are you getting any credits from any byproducts that are (multiple speakers)?

Negligible, there's a modest amount of silver.

Just modest, okay. Listen, thank you very much. I look forward to things to come in the future.

Eric Zaunscherb, Haywood Securities.

Good morning. I just wanted to congratulate you specifically on establishing a nice beachhead in China. I was wondering if you could comment on, philosophically, given your experience the last few years in China, what makes the most sense for proceeding to grow in China? Is it exploration partnership, acquisition?

Yes. There's a whole bunch of ways you can grow in China. There's joint ventures -- and you've seen people do this. There's joint ventures with Brigade; you can do some grass-roots exploration yourself; you get liquid acquisitions, a la (indiscernible). I guess what doesn't make sense for us is to get into sort of the auction process on some of the bigger, well-known Chinese deposits because that is sort of a tough route. So I would say probably development/acquisition right now is the way to go. That's really along the lines that we're looking at right now.

Is there any specific region within China that makes the most sense?

Sure. Certainly we should and are focusing on Shanghai, where we are, in western China, although I wouldn't rule out -- I really wouldn't rule out anywhere. You've got the whole Tanjianshan belt that goes from really the western boundary of China across through inner Mongolia and up into northeastern China. That's -- we like that area. Then there's southern, the Golden Triangle down south. Those are sort of -- I think, if I had to pick two or three spots, that's kind of -- (indiscernible) nothing new.

I think, simplistically, Eric, we would really -- our ideal world would be to do another acquisition of a call it a development stage project to broaden our base in China. I think, medium to long-term, we certainly also view exploration as a sensible way forward. We're building up the skill sets and land position to make that a fundamental part of our business in China as we (indiscernible) Turkey.

Thank you. I appreciate the insight.

[Stephen Kipsey], (indiscernible) Capital.

Paul, on corporate strategy, I'm just wondering. Looking out to the next five years, what do you expect this company to look like? What will you intend to focus on over the next few years, given you are currently in China and Turkey?

I think, simplistically, Stephen, not to let anything of value slip by us in either of those jurisdictions. That clearly -- we have established early a significant presence in those jurisdictions, and that gives us I think a certain advantage going forward. So, we really would be disappointed if we missed out of anything of significance in those two areas.

With the operations and with the projects that we're developing, specifically Efemcukuru, we have a path that gets us close to 0.5 million ounces a year for the next 10 to 15 years. We're obviously looking beyond that. What we would like to be able to do is clearly have a company that, in the next couple of years, has within it the clear ability to be in the 0.75 million to 1 million ounce a year range. That clearly is not going to depend upon exploration success. It means going out there and looking for the acquisitions I described earlier in terms of China, development stage projects, and/or looking for appropriate transactions in the marketplace; I do emphasize appropriate. We're very cognizant that we do occupy a very special place in terms of the quality of the production base that we're building here. With that comes a challenge in terms of preserving the integrity of that position.

Very good. Thank you.

Don MacLean, Paradigm Capital.

Good morning. I guess this is sort of an extension of Eric's and Steve's questions about -- Paul, maybe you could give us a sense of how important you view moving -- or the opportunity you see moving outside of Turkey and China, and basically what you view the market state to be like. That is the value being placed on assets by the market at this current gold price. How comfortable do you feel with that, or do you think it's overvalued, or there are values out there?

What a great collection of questions, Don, challenging. It's a challenging environment to find things that are really worth doing. I think we've operated in Turkey for ten years; we have operated in Brazil for ten years. We've entered China now and having spent a couple of years assessing whether we wanted to be there. We I think are being incredibly successful in building Tanjianshan in the period of time we did, given our experience base in China. It's a long tough haul when you go into new jurisdictions. It takes a lot of effort, and so I think we're not adverse to going into new jurisdictions, but I think we would be more likely to go into new jurisdictions through transactions that bring with those transactions a set of operating skills and competencies and experience base in those new regions. So, I don't think -- I would suggest that, in certainly in the short-term, it will not be -- you won't see us starting exploration initiatives in new countries.

Okay.

We want to taken manage of the opportunities we've created in China in 2007.

I specifically don't want you to forecast what's going to happen with the gold price, but I'm just trying to put myself in your chair and the Board of Directors' with gold now having moved up into that $650 range. How comfortable is the Board and how comfortable are you looking at a market that seems to have repositioned itself up to that level when you're looking at acquisitions? What kind of gold price can you put your heart on your hand and say you can stand in front of the Board and say, well, I think we're reasonably comfortable at this price level?

A very good question. I'm not sure I want to give you the answer right now. That's the challenge that we all face, isn't it, really.

You bet, especially in a rising price market.

I think it depends a lot on what we see as the future opportunity in a transaction.

Great.

And what the price is that you're going to justify a transaction on.

Sure. Presumably then that's the optionality you look at in terms of the resource base.

We have this irony of course where we're in an environment right now where low-cost producers aren't necessarily as well rewarded as high-cost producers.

Right. That is correct.

That's a bit of a conundrum. Cycles that have gone before us have written the history on what happens if you respond to the present phenomena and become a high-cost producer.

I would also extend that to low risk versus high risk.

Correct.

It does not seem to be as efficient. Do you see any kind of opportunities there?

Very few.

Okay, fair enough. Then one last, more specific question -- on the Kisladag in the inferred, it's pretty significant potentially there if it was reclassified in the mineable. What are the odds of that and what would it take?

Well, it's going to take some more drilling. That is something we're going to look at this year. There's not a lot, and I can't give you an exact number. There's not a lot of inferred within the current pitch shell. Most of it falls either below or to the sides. So yes, we're going to drill it this year. We will run some areas shells on it and see at sort of what price it comes in. Between the 350 and 450, the pit was not particularly sensitive. But that could change as you get up to sort of 550, 650. So we'll take a look at that this year.

Okay, terrific. Thanks, guys.

Paul O'Brien, Raymond James.

Good afternoon. Most everything has been asked, but getting back to your joint press release with [Centera], is there going to be any outstanding or abnormal expense items coming up in the quarter over that?

Yes, we will have an expense side, and it will probably be around $0.6 million that you'll see (technical difficulty).

Thanks, that's all I have.

I would like to make one other comment since I have it right now. I do have these depreciation numbers. For Kisladag, it will be 9 million in 2007, and TJS, 9.6 million. I just wanted to pass those on.

Thank you.

For '07.

Tony Lesiak, United Bank of Switzerland Securities.

Just to follow up on the taxes in China, can you comment what numbers we should be using there and when you expect to be cash taxable there?

Currently -- first, we have an agreement on taxes that, after operation commences, we have two years of tax-free status, followed by five years at a 50% tax rate of 15%. But currently, the Chinese government is changing the tax legislation and what they're proposing is a flat income tax of 25% for all both the domestic and foreign investors. They do have some discussions in there regarding grandfathering operations that have foreign tax agreements. So we have to wait and see exactly how that law is going to sort out. They have certain grandfathering rules, and we're not -- I can't give you a definitive statement as to whether we want qualify at the present time since, one, given the change, we're just starting production, that would lead us to believe that we would be grandfathered in under those rules. But I don't know that because the legislation hasn't been totally put into place. But it would be 25% in the future. Part of the grandfathering rules, if you do have an exemption agreement and you're at 15%, the new law would indicate that, over the next five years, you would add 2% to that ever year, so you would go from 15 to 17, and in five years, you would be up to the 25% tax rate. Currently, under the rules, we see paying no tax this year and next year, but we will have to wait and see exactly how this legislation rolls out.

One follow up on the iron ore project -- how much value can we place on a small iron deposit in Brazil where there's arguably a sea of iron ore? Are you [beholden] to CVRD for infrastructure, and for their internal expansion opportunities?

We're not beholden to CVRD; this is one of these exceptional situations where the railway -- the transportation is not controlled by CVRD. Look, it's not a big deal. We did put out a pre-feasibility study that has been completed on the project, which would suggest that there is a 0% discount. There is pre-tax NPV of just under $100 million. So I mean, that's what it is. It's a very -- compared to gold mines, it's a very low-risk project and there's some value there. We will realize it one way or another.

That's the reason for the question. You're not interested in it, so you're looking for other people to take this off your hands. Can you comment on who is in the area up there that might be interested?

Look, I wouldn't say we're not interested in it, because it sits right adjacent to gold property that we're actively working on. (technical difficulty) I'll say categorically, if we were to see our way in the near-term to develop -- to having a development project, a gold project, we would in all likelihood simply develop this as a way of developing the infrastructure and sharing infrastructure costs (indiscernible) gold project. Because as I say, it delivers a handsome return, low technical risk and low capital investment. The groups that are active in iron ore that are in close proximity would probably include MMX, the (technical difficulty) iron ore. Again, we're 30 kilometers from a railway line, 120 kilometers from a port that has ore handling facilities.

Thanks very much.

Haytham Hodaly, Salman Partners.

My question has been answered. Thank you very much.

Michael Fowler, Desjardins Securities.

Paul, there's actually some questions here on that M&A side. Paul O'Brien talked about the center of gold. You came out with some announcement which was pretty short. But what was the thinking behind that transaction?

That was expressed in the news release.

Which was pretty short.

Exactly.

Were you contemplating a merger?

We're contemplating what was in the press release. Look, Michael, as you know, look, lots of people have discussions, and that's a matter of course. (inaudible) discussions.

Is that kind of the benchmark to going forward to thinking about what sort of merger or acquisition that Eldorado would get involved in?

Only if you decide it is.

Okay.

I'm not trying to be too obtuse.

I don't know about that but anyway, thanks.

No further comment, Michael.

(OPERATOR INSTRUCTIONS). There are no further questions registered. I would now like to turn the meeting back to Mr. Wright.

Look, on behalf of the Company, I'd like to thank you all for attending this conference call. We do appreciate your attention, do appreciate the questions, and look forward to the balance of the year. Thank you very much.

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