Eldorado Gold Corp (EGO) 2010 Q4 法說會逐字稿

Good morning, ladies and gentlemen, welcome to the Eldorado Gold Corporation 2010 fourth quarter financial results conference call. This call is also being webcast and is available on the Eldorado Gold website at www.eldoradogold.com. I would now like to turn the meeting over to Ms. Nancy Woo. Please go ahead.

Thank you, operator. This presentation includes statements that may constitute forward-looking statements or information. Any forward-looking statements made and information provided reflect our current plans, estimates and views.

Forward-looking statements are information which include all statements that are not historical facts, are based on certain material factors and assumptions and are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in or suggested by the forward-looking statements or information. Consequently undue reliance should not be placed on these forward-looking statements and information.

The information contained in our annual information forum in our annual quarterly management discussion and analysis available on our website and on SEDAR identifies factors and assumptions upon which the forward-looking statements or information are based on and the risks, uncertainties and other factors that could cause actual results to differ. All forward-looking statements and information made or provided during this presentation are express qualified in this entirety by this cautionary statement and the cautionary statement contained in our press release dated February the 18th, 2011. I will now turn the call over to Paul Wright, President and CEO of Eldorado Gold.

Thank you, Nancy. Good morning, ladies and gentlemen. Welcome to Eldorado Gold's fourth quarter 2010 financial and operating results conference call. Joining me this morning in Vancouver are Norm Pitcher, Chief Operating Officer, Ed Mui, Chief Financial Officer and Nancy Woo, Vice President of Investor Relations.

In the customary manner following a brief introduction from myself Norm will take you through the fourth quarter operating results and then provide some color in terms of what you can expect operationally in 2011. Ed will then provide a recap on the fourth quarter financials and then we'll open up for questions.

We are very pleased to have ended 2010 with a strong performance from all of our mines. With 148,000 ounces produced in the quarter, the Company completed the year producing in excess of 632,000 ounces at a cash operating cost of $382 an ounce. Well in line with our upwardly provided guidance with the year of 625,000 ounces at $375 an ounce.

In the quarter we made very good progress at Efemcukuru with our Turkish mining contractor putting in an excellent performance in term of advancing on three declines concurrently and by year-end we had accessed the ore zone. Going into 2011 we are now on track to start processing ore through the mill early in Q2. Following substantial progress in the permitting of the Eastern Dragon project in China, we resume construction in the fourth quarter and are continuing through the winter.

In Brazil our Vila Nova iron ore project started production in the fourth quarter and by year-end we had completed two shipments of lump and center. We're continuing operations into 2011 and we are extremely pleased with cash margins of which now approximate $100 per ton. We entered 2011 in a strong financial position with an excess of $360 million of cash. We're looking forward to further production growth with continued low costs.

The focus this year will be to ensure on time delivery of new production from both Efemcukuru and Eastern Dragon. In addition, over the next 12 months you will see us delivering plans associated with expanding production from our existing asset base which will support our plan production growth to approximately 1.5 million ounces over the next year -- next five years from assets that we presently own and control.

We are finishing up our year-end 2010 reserve and resource estimates which were delayed slightly to ensure inclusion of all drilling results in the year just gone by and we expect to be releasing these results very early in March. Although not complete, it is clear that the Company will have increased both its reserves and resources beyond depletion in both total terms and also on a per share basis.

We have significantly increased our planned expiration budget to $54 million in 2011 and look forward to reporting on these -- on this progress. With that I'll hand over to Norm.

Thanks, Paul. Good morning, everyone. As usual I'll sort of go through the operations first and then on to development and then on to exploration. So let's start with Kisladag.

Q4 we sold 59,815 ounces, cash cost of $383, that gives us for 2010 274,592 at a cash cost of $329. We provided our 2011 guidance which is 270,000 to 285,000 ounces at $250 to $350 per ounce. A little bit higher cash costs in the quarter mostly due to less ounces being sold, a little bit higher strip ratio.

We had a little bit excess capacity because we reached our 10 billion EIA limit on ore, thus we mined a little bit extra waste and put a little bit less on the pad than usual. We have completed the recent metallurgical column testing program which is now indicating average sulfide recoveries of approximately 65% versus 60% that was used in the feasibility study.

Oxide remains the same at about 80%. The expansion of the project at 12.5 million tons per year is on track and is scheduled for mid-March startup. At Jinfeng we produced 37,560 ounces in Q4 at $486 per ounce. That gives us for 2010 181,950 at $425 per ounce and we had given our guidance for 2011 at 175,000 to 185,000 ounces at $445 to $465.

A little bit higher cash costs in Q4 at Jinfeng mainly again due to less ounces sold. In this case it was a result of treating some lower grade material towards the end of the year. In 2010 we continued on a major underground drilling program which will be incorporated into the resource and reserve update coming out in March.

You know, Jinfeng is a structurally complex ore body but I think we made great progress in advancing our understanding in the structural controls on mineralization there. Tanjianshan for Q4 did 30,709 ounces at $349 per ounce, that gives us for 2010 a 113,863 ounces at $383 and our guidance for 2011 is 110,000 to 120,000 ounces at $410 to $430 per ounce. Q4 is a good quarter for Tanjianshan. It continues to be a very solid performer for us.

At White Mountain strong fourth quarter. We did just over 20,000 ounces at $494 per ounce. That gave us for the year 62,132 ounces at $486 per ounce and we have given guidance for 2011 at 70,000 to 75,000 ounces at $485 to $500 per ounce. It was a good quarter and I think that we're starting to see the benefits of the measures we have put in place to improve the underground operating conditions there.

Vila Nova as Paul mentioned, we in Q4 we mined 164,000 tons of run of mine ore and made two shipments, one of lump and one of center fine and our guidance there is we're looking about 10 ships, so it's going to be 440,000 to 480,000 tons of product in 2011. On to development, at Efemcukuru did very well during the quarter. We continue dry commissioning of the concentrator, continued work on the tailings filtration and backfill mountains, finished it up various buildings, administration, mine dry in the warehouse and maintenance shop.

Preproduction development has moved ahead on the three main declines. We've cross -cutted the middle ore chute with about an 18 meter intersection this and we're currently driving parallel to the ore zone in the salt ore chute. At Eastern Dragon we made good progress despite severe winter weather, focusing on enclosing the concentrator building and pouring foundations.

Tocantinzinho we will complete the pre-feasibility study this quarter and will continue to evaluate both capital and operating costs to optimize the project. Perama, the administrative environment continues to review the PEIA, the pre-environmental impact assessment, and we continue to work with the Greek government to advance the permitting.

On the exploration front let's just take a look at Q4 first and I'll talk a little bit about this year. Kisladag, we finished the Phase II resource. In Turkey Kisladag we finished the Phase II resource drilling during the quarter. Those results have been incorporated into the updated block model. One interesting aspect of this is the discovery of ore grade mineralization in the basement chest which we hadn't really had before.

That was in the past treated as an unmineralized unit which opens up the area to the west of the main introduce sieve bodies at Kisladag. Efemcukuru most of the geologic work during the quarter consisted of mapping and sampling the three declines, exploration drilling in 2011 will target the Northwest extension of the main ore zone as well as the parallel Kokarpinar vein.

In Turkey, we're active on six projects there, including drilling on four of them and three of these projects we'll see follow-up drilling in 2011. On to China at Tanjianshan we finished the 2010 drilling program in the 323 zone and now have an inferred ream source of approximately 160,000 ounces that we'll upgrade in 2011. We also completed rotary air blast drilling in the ZXS prospect which is located between the 323 zone and the main GLG pit area that we're mining now and that drill will allow us to define drill targets in 2011.

At Jinfeng as previously discussed the focus has been on underground drilling to better define the structural controls on mineralization as well as some drilling of targets around the main Jinfeng ore body. At White Mountain and the surrounding area we intersected 24.7 meters at 8.7 grams per ton.

This intersection comes approximately 200 meters down dip from the main ore zone. It would appear that this is a separate ore lens. We obviously from one drill hole don't have all the answers to it yet, but it is still open along strike and down dip. At Xiaoshiren we finished late in the year seven diamond drill holes several of which hit mineralized breccia with the best intercept of 7.8 grams per ton over 6.5 meters.

We'll continue to explore Xiaoshiren in 2011 and we see this project as having the potential to add supplemental feed in a fairly short time period to the White Mountain mill. At Eastern Dragon most of the work focused on activities designed to generate targets for the 2011 program and included a ground magnetic survey of the full property as well as float and old crop sampling.

On to Brazil at Tocantinzinho we drilled 13 holes both for resource in fill and infrastructure condemnation. We also did soil sampling at Agua Blanca and Piranhas projects both in the which will define drill targets for 2011. Just a couple of comments about exploration in 2011. You know, we've got $54 million budgeted.

It's a big program for this year with over $30 million targeted for near mine drilling. We feel that we have exceptional targets out and around our existing operations and we intend to maximize this potential aggressively in the coming year. We'll also take advantage of the regional potential of the jurisdictions in which we work. In Turkey drilling will start at Efemcukuru in March followed by Kisladag.

In China we'll start drilling in the second quarter at White Mountain to explore the recently discovered down dip lens and once field conditions permit we'll recommence drilling at Xiaoshiren and Dongdapo. By the end of Q2 we'll be drilling at Tanjianshan at the QLT deep target and we'll move from there to the ZXS prospect and 323 in fill extensions by midyear.

Drilling will continue throughout the year at Jinfeng through surface and underground on the main ore body and surrounding targets. In Brazil we will continue the ongoing drilling program at Tocantinzinho and in Q2 start drilling at Agua Blanca followed by Piranhas. With that I'll turn it over to Ed Mui.

Thank you, Norm. Good morning, ladies and gentlemen, starting off on the balance sheet 2010 year ending asset balance of $3.78 billion increased by approximately $23 million in the fourth quarter and $340 million for the whole year mainly due to increases in cash, capital investments and the Brazauro acquisition.

Total cash balance at year-end was $367 million, a decrease of $25 million in the quarter, but an increase of $51 million for the year. At year-end total liabilities amounted to $770 million, a decrease of $29 million in the fourth quarter due primarily to bank debt reduction and essentially unchanged from year-end 2009.

Moving on to the statements of operations, fourth quarter's gold sale revenues of $213 million had a year-on-year increase of $60 million or 48%. This significant increase was accounted for by a 15% increase in gold sold over fourth quarter 2009 in terms of ounces coupled with the average realized gold price being $1,373 in fourth quarter 2010, a 24% increase from the same quarter in 2009.

Another contributing factor was the production commencement of really low volume for fourth quarter of 2010 which generated $8.3 million of revenues in the quarter. With the higher production and Sino Gold acquisition, operating cost, DD&A and interest expenses all went up year on year.

Current operating permit has a limit of 10 million tons of ore to be placed on the leach pad which resulted in its fourth quarter's production ounces being lower and operating cash cost higher than the preceding quarters. Incidentally, Kisladag plans to increase through-put to 12 million tons in 2011 upon approval of an amended permit.

Fourth quarter G&A costs also increased by about $12.5 million from 2009 primarily due to stock-based compensation being higher as a result of the Sino Gold acquisition, higher legal and compliant costs and several nonrecurring charges. Note that 2009 P&L statement numbers contain only one month's worth of Sino Gold's numbers which was December 2009 versus the whole period in 2010 which also explains part of the year on year variances.

There was a non-cash foreign exchange unrealized loss of $6.5 million in Q4 2010 primarily as a result of the weaker US dollar's impact on future income tax liabilities denominated in the operating local currencies. The quarter's net income of $44 million increased from the same period last year by $11 million or 31% and by $103 million for the total year, an increase of 201%.

In terms of diluted earnings per share it was $0.08 this quarter which was the same as Q4 2009. Excluding the nonrecurring charges and the non-cash foreign exchange unrealized loss from the equation, would have increased the earning per share to $0.11 for the quarter. For the total year earning per share was $0.38 in 2010 versus $0.26 in 2009, an increase of 146%.

On the cash flow statement, $83 million of cash was generated from operations before changes in non-cash, working capital in the quarter, a 40% increase over Q4 '09. For the total year it was $352 million or 140% over 2009.

In spite of the higher cash generated from operations, the cash balance had a net decrease of $25 million in Q4 2010, which was accounted for by the quarter's capital and expiration expenditures and the bank loan prepayment more than offsetting the cash generated from operations. By contrast Q4 2009 had a net increase of $116 million mostly due to the Sino Gold acquisition. I now turn it back to Paul.

Thanks, Ed. Thanks, Norm. Operator, we'll open up for questions now, please.

We do have a question from Rahul Paul of Canaccord Genuity. Please go ahead.

Hello, just quickly could you refresh us of the applicable tax rate for your Chinese operations?

The tax rate in China is 25%.

Okay. And what about royalties at Jinfeng, White Mountain and Tanjianshan?

The total royalty for 2011?

Yes.

On a per ounce basis is $18.

$18. The reason I was asking, if I look at Jinfeng, for example, the difference between total cash costs and cash operating costs, it's running at about $100 an ounce. Is that all royalties or is there something else that goes in there?

I believe it's all royalties.

Okay, but that would be, it implies about 7% or so. So I was just wondering if that was maybe one time item or something in there.

On a per ounce basis?

Yes.

The royalty in Jinfeng is about $36.

Okay.

And White Mountain is about the same.

Okay. So --

So total company basis, it average out to be about $18.

Okay sure. And what I was trying to get at is, what else other than royalties are included in the total cash costs for Jinfeng? I mean you have $486 in cash operating costs and $585 in total cash costs. So if I take royalties of $30 an ounce, is it about $70 an ounce there?

Well, there's production taxes also included as well.

Okay. How much is that?

Which amount to about $18 in the case of Jinfeng again on a per ounce basis.

And is that the same? That would be the same at Tanjianshan as well?

Tanjianshan is higher. Tanjianshan is about $40, close to $50.

$50 that's in production tax.

Yes.

Okay, thank you. Just moving on to Vila Nova, I see that you made two shipments during the quarter and the split was about, 50/50 center finds and lumps. Is that represented of the mix that we should expect going forward?

Yes, it is pretty much. It's 50/50 because you do a ship of -- you either do a ship of lump or a ship of center and that is about the split going forward.

Okay, thank you. That's it for me.

Thank you. The next question is from Anita Soni with Credit Suisse. Please go ahead.

Good morning, Norm and Paul. Just a question with regards to Kisladag, actually a couple of them. Did you say the average recovery for sulfides with metallurgical test work is now 65 versus 60 in the original?

That's correct.

And the oxide stayed the same, right?

Yes.

The oxide recovery is about the same. Practically speaking, we're getting those recoveries with a courser crush than we originally planned for, Anita.

And then, a question on Kisladag and I did ask Nancy but it seems to me going through a lot of your statements I'm not quite sure if it is, in fact a typo but the fourth quarter cash operating costs is higher than the total cash costs. Was there an adjustment of some sort there?

I see what you're saying, Anita. You've got me sort of flat footed here.

Okay. No, I just wanted to confirm -- it's just that --It wasn't just in the one press release. It seems to be in all your MD&A and everything.

It looks as if it's transposed.

But they were consistent about transposing and that's why I just wanted to double check. And then, in terms of the strip ratio at Kisladag, is that going to -- you've given us guidance, obviously, for the full year, but can you give us an idea, Norm, how that's going to spread out through the course of the year? It's been trending up through 2010, so would we expect to see higher strip ratio for the first and second quarter as well?

Anita, we don't get into giving quarterly guidance. No, we just don't.

I always try.

I know you do. You and Kerry do a very good job of that.

Okay, all right. And then, lastly on the mid-March startup at Kisladag, that was your tying in -- expansion of the circuits? Did you say that was --

Yes. That's getting us up to the run rate of 12.5 million or 12 million tons a year.

Thank you very much.

Thank you. The next question is from Mike Curran with RBC. Please go ahead.

Hello, guys, I saw you had a pretty high G&A in Q4. I assume that's not a good run rate. Is the 8 million to 10 million sort of range per quarter or is there a better number for going ahead?

Fourth quarter (inaudible) number is not a good run rate. For the total 2011 G&A budget, we're looking at about $64 million. The Q4 numbers included some non-recurring one time charges.

Okay.

I'm sorry, are we waiting on a question or are we waiting on an answer?

No. I think we're good.

All right.

The next question is from [Jeff] Wilson with Stifel Nicolaus. Please go ahead.

Hello, I'm just saw an Efemcukuru I wonder if you can give us some more contacts on how the underground is going, in particular what depth the ramp is at and what sort of development rate you're running at.

Well, the underground is going very well. You know, we're at three different -- there are three different declines now. The contractor has pulled up his performance quite a bit and, as I say, we've already gone through ore in the middle ore chute and we're running parallel -- drifting parallel to the ore in the (inaudible) chute. I don't have the daily advance rates in front of me, but --

I mean I was there a couple weeks ago underground in all three declines, the conveyor decline now has reached the bottom where the ore bins are going to be located. The access to the -- to what will be the waste dump is in place and is at the level of the first ore drive. All three declines now have multiple headings. The ground conditions are very good, I would say generally and the progress of the contractor I think is excellent to the extent that he's, he's picked up his advanced rate each month since he's become engaged starting in April when we start feeding ore through the mill, we're going to start to be phasing out the contractor and bringing in our own crews to start taking on some of the development ourselves, so --

Okay. That's helpful.

Yes. I'm sure Norm can get back to you on all the minutia of how many meters a month and meters a week we're doing on the different headings. We're happy to do that.

Yes. The release seemed a little vague because we had received some updated -- you had been down to 500 meters last quarter and this quarter just said this was some improvement, but it didn't say exactly what the specifics were.

Yes. We can provide total meters and meters per day advance.

That would be great and then I know this is a difficult question. I'm not sure if you can answer it, but it looks like it will be a good 2011, if you can deliver some updates on the expansion potentials. Now you said over the next 12 months you'll be updating the market. Should we expect updates at all of Kisladag, Efemcukuru, White Mountain and Eastern Dragon or is this going to be just the first Kisladag update will be in the next 12 months?

No. Our intention is to by this time next year to have laid out on all four areas where we see opportunities for expansion to lay out plans which will enable you fellows to be able to put things in your model, understand what the thinking is, what the methodology is, what the capital requirements are, what the expectations are in terms of production, operating costs and time lines. And the first deliverable on that will be what amounts to probably the largest element of the expansion opportunity and that's Kisladag and we'll be looking to do that in, call it midyear. In July time, we'll be laying that out. We've had a -- obviously we haven't released our reserves and resources yet because we're just finishing off the exercise, but we've certainly seen a substantive increase in Kisladag which just supports our belief that this mine can and should operate at a much higher production rates. That's the first one out the gate come midyear.

So would you say it would be safe to say that the other expansions would be as evident when the reserve and resource update is released?

No, I wouldn't say so. I think, in Efemcukuru, as an example, if you go down the list, I think we're seeing opportunities within the existing plant as constructed, to give us additional capacity. We're certainly looking critically at the planned mining methods and mining methods that will be implemented you'll probably see us shifting towards a method that has better control over dilution and thereby will increase grade. So I think you'll see in Efemcukuru us commenting more probably towards the end of the third quarter once we have more operating experience underground with the mill. Crudely put, the mill that -- capacity that we're talking about is based on 50 tons an hour.There's certainly some indications that this mill is -- the mill's circuit there is probably fully capable of operating at 65 to 70 tons an hour. So you don't have to be too swift to see how with increased mill through-put, at a perhaps a gram a ton on the head grade you can realize this expansion fairly easily, but these expansion plans will come out, as I've described, over the next 12 months.

Okay. That's very helpful and I guess on Kisladag, then, in comparison where you can ramp up the existing operation you'd be looking at a much more significant capital cost to get that?

Yes. Absolutely.

Okay.

The expansion that we're just completing that Norm has spoken about where we're going up to 12 million tons, that's essentially done, and that's really just being adding [debottle-necking] and adding some additional secondary, tertiary and screening capacity. The type of expansion we're envisioning now is an order of magnitude step-up which will require, as you described, significant capital.

That's very helpful guys. Thanks so much for taking my questions.

Thank you. (Operator Instructions)The next question is from Joung Park, with Morningstar. Please go ahead.

Hello, Norm, Paul. Good morning.

Good morning.

So my first question was on Vila Nova. Were you guys able to ship out any additional iron ore shipments out of that mine during the quarter?

We just had the two shipments in Q4.

Okay. So none in Q1 so far?

We're shipping, in the next couple weeks there will be another shipment going out, two, two shipments, yes. Sorry. We've had two already. Sorry.

Okay, in Q1. And what kind of prices were you guys able to receive for those shipments?

About $120 to $130 a ton.

Okay. And a follow-up question on Vila Nova, you guys mentioned that it has the capacity to produce more iron ore than your guidance, but there's some transportation logistics bottlenecks. So, just wondering if you guys were able to make any progress on negotiations with Anglo?

Work in progress is the best way to describe that. Suffice to say, we're incentivized to look to try to enhance the performance of that operation through the year. We have a plant as you acknowledge that's capable of producing more. We have an ore body that's capable of producing more and we're going to work with Anglo American to try to ensure that we're running at the best through-put possible. As we're fully aware that we have approximately $100 margins on our present operating rate, and given a relatively high fixed cost element to the operation, the motivation is there obviously to get the devisor up.

That's fair enough. My final question was on Kisladag. You guys mentioned that the 12 million ton expansion will go online by mid-March. So I guess it's fair to say you guys expect the amended environmental permit to be received by then?

Yes. That's right.

Okay. Thanks very much.

Thank you. The next question is from Kerry Smith with Haywood Securities. Please go ahead.

Okay, thanks, operator. Paul or Norm, just on the tie-in of the tertiary crushers in February, is there much down time to actually doing that or is that fairly quick so you're not really going to have an issue getting tons through the plant?

It's about a week or so, Kerry. It's not too onerous.

And I think just from the last question you're anticipating that that permit for the 12 million-ton per year rate by the end of March.

Yes.

Is what that what you said? And it is 12 not 12.5, right?

I keep saying 12 point -- yes, it's 12.

It is 12, okay, okay. Just on White Mountain, maybe Ed knows the answer to this.

It's 12.5.

It's 12.5, okay, okay.

People keep saying 12 and they shouldn't.

Well, I think it's because what's happened, Kerry, because we don't get to that run rate until part of the year the budget shows $12 million -- 12 million tons for this year.

But with the permit in hand you don't want to be constrained by your ability to get tons through the plant effectively, so, okay. That's fine.

The permit's for 12.5, but it's just that we don't kick it in until March. Therefore, we can only push 12 million tons through this year.

Right, okay. And then, at White Mountain in Q4 the cash costs were roughly $500 an ounce. It was $498 and I know that you had records through-put the grades look to be good, sounds like the recoveries were better. I'm just curious why the costs were effectively actually higher than the last couple of quarters. Is there something else going on in there that your mining costs are going up? I just would have expected that the costs would have actually been lower given the through-put.

No, you're right there, Kerry. It was mostly on the mining cost side and that's just a function of putting a little more in development in. We're trying to catch up to -- so we can deal with the -- you've got voids in the ore body, you've got some water issues in some areas and we've been trying to catch up to -- so there's more flexibility in the mine plan to deal with that and in Q4 I guess we just did a little bit better on catching up in terms of development.

Yes. Just more ore development, Kerry.

Okay. So should we kind of assume that that carries on through 2011 at that kind of rate, then?

You should take the guidance we've given you, Kerry.

Okay. And on the $54 million of exploration.

Yes.

How much of that, Ed, would be expensed this year, or will any of it be expensed?

$25 million is going to be expensed.

Right.

The remainder $29 million to be capitalized.

Okay, great. And then on Perama, as a last question. The feedback you're getting as part of the review, is there anything there that's happening that's either positive or negative, or is it as you'd expected?

I don't know if Greece is --

Or can you comment?

I don't know if Greece is ever as you expect it, Kerry. Look, to be perfectly blunt it's a frustrating environment in which to make progress there. We are making progress, but it is -- I would characterize it of all the jurisdictions we operate the most -- probably the most frustrating. Given the present conditions that exist in Greece, one would think it would be blindingly obvious why permitting projects provide employment, investment and tax base would move along fairly quickly. That's not what we're finding right now. We are making progress but certainly as you probably detected, there is a note of frustration.

Right, okay. That's great. Thanks very much, guys.

Thanks.

Thank you. The next question is from Barry Cooper with CIBC. Please go ahead.

Yes. Good day, everyone. Just wondering what were the profit margins that you saw at Vila Nova?

It's a bit early to say, Barry, because you appreciate we really just got started in fourth quarter.

Okay. So is it fair to say there was a profit in Q4 or --?

Yes.

Yes, okay. Fair enough.

Yes, yes. But I guess if you're looking for, implications on future based on what we did in --

Yes. I realize that's meaningless.

Yes.

Okay. Just wondering if there was a positive cash generation there.

Absolutely. Crudely speaking, as I mentioned it, today's prices that we're realizing is almost a $100 a ton cash margin on this one.

Right. On Kisladag, because of the inability to put more tons to the pad, is it fair for me to assume that the strip ratio that you had in the fourth quarter was brought about by perhaps some advanced stripping such that for 2011 it would be down because you had the equipment, but you couldn't put the tons to the pad?

Yes, that's correct.

Okay. That's kind of what I thought. And then when you hit the ore at Eremcukuru, what exactly did it look like? Was there --

It looked very nice.

It was marvelous, Kerry. We waited a long, long time to see that ore.

In sampling how did that -- more or less exactly what you thought were the grades?

Yes. Pretty darn close and, you know, ground conditions, not bad, as you expect in an epithermal vein of this type, given a wide intercept, too. There was 18 meters more in there.

On a comical light hearted note, Barry, you'll appreciate we selected with great care where we would put the conveyor decline in what was meant to be waste between two chutes and low and behold what do we intersect but about 15 meters of ore.

That's always a Hollywood problem, isn't it?

Exactly. This are a lot of smiles around in terms of that Efemcukuru and we're always looking forward to getting it started here.

Probably smiles from the geologists, maybe not from the engineer. At Kisladag again the basement schist where you found the mineralization, is it of similar grade, and how do you see that kind of opening up with respect to the amount of basement? Obviously there's a whole bunch of basement schist there. Is it a structural zone that is relatively combine or is this -- ?

No. In terms of the grade probably a little bit lower than average -- than average, than the gram per ton, 0.9 per ton grade. What this is, this is sort of the zone that we hit, back, I guess, two years ago when we actually took some inferred resources off the books in that area because we thought it was cutting off the ore. So it's really mostly in the western -- that's where we drilled it anyway, in the western part of the deposit. And to really -- it's something we're going to -- it's a question we're going to have to answer this year with more drilling as to what the eventual significance of this is.

But it also has implications, Barry, I think in terms of our views on exploration in the district for other Kisladag look-alikes. We had certain views on the schist before in terms of the types of models for expiration, and that obviously changes our thinking a little bit elsewhere.

Yes. Is there much money then, being allocated for that on a regional basis?

Yes, there is, yes. I mean we're still over at [Sayachak] and we're going to start looking, peripheral, Sayachak is in the southwest. We'll start looking more in the west and northwest areas of the deposit and, as always, budgets are budgets, but what we end up spending is going to be dependent on results.

Sure, right. Okay. Thanks. That's all my questions.

Thank you. The next question is from Lihor Abraham with Scotia Capital. Please go ahead.

Hi, guys, just two quick questions. First of all on Eastern Dragon, you're saying the construction is going well through this winter. I'm just wondering if you are still expecting startup for the end of this year?

Yes.

That's the plan.

That's the plan, all right, okay. And then going back on the costs there, we talked about White Mountain, but I just wanted to ask also on Jinfeng, it seems overall the costs are creeping up but especially so at those two Chinese mines, and I'm wondering why at Jinfeng is it creeping up and is it a trend that we are going to keep seeing?

Well, as I said in the -- when I was going through the operations, at Jinfeng in the fourth quarter it was really less ounces sold in the quarter and we treated some lower grade material towards the end of the year. I would in terms of where it's going, I would look at what we've given for guidance for 2011 which is in the $445 to $465 range.

$445 to $465

Yes.

Which is quite a bit higher than your previous guidance. Any reason for that?

More underground material probably, yes.

Okay. And is it going to continue basically?

Which previous guidance are you referring to?

I --

We've only given one set of guidance for 2011 this year.

Yes. Two years from now. Two years from now and I mean I understand it's quite outdated. It was $373.90 now it's $445, $465.

Sure.

Okay. That's it for me.

Thank you.

Thanks.

Thank you. The next question is from Ehsan Dana with BC Investment Management. Please go ahead.

Hi, Paul, Norm, Nancy. Most of my questions have been answered. Maybe just on the reserve and resource update coming in March. Is there going to be a significant change in the Eastern Dragon numbers with respect to the outcropping of [wane] sets that you talked about before or is that going to be coming through in 2011?

Yes. That will be coming in the future. I mean at Eastern Dragon as people are aware, we didn't drill this year. We did other exploration on the licenses, but, yes. We didn't drill anything and really the effect -- it's a high enough grade deposit that the effect of changing the cutoff doesn't mean much, mostly goes as ore anyway.

And also on, the expected increase in the reserves, is that going to be significantly from a change in the gold price or is it mostly through drill bit and fill extension drilling, that sort of thing?

Look, it's going to be both and I'm afraid we'll have to sort of defer until we lay out the details to be able to find out properly.

Fair enough. Thank you.

Thank you. There are no further questions registered at this time. I would now like to turn the meeting back over to the presenters.

Let me spend one minute to go back to the question raised earlier as to why the total cash cost in Kisladag in the fourth quarter was lower than the cash operating costs. It has to do with the fact that in the fourth quarter we reversed an accrual on tax, when we gained better clarity on the timing of the effective stage of the new tax law. So that resulted in the reversal of over-accrual that we did. So that explains the reason why total cash costs were lower than the operating costs.

All right. Thanks, Ed. Thanks, Norm. Thanks, everybody, for attending, and look forward to talking to you in the end of the first quarter. Have a very good day.

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