Eldorado Gold Corp Annual Report 2008

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FY2008 Annual Report · Eldorado Gold Corp

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Eldorado Gold Corporation

2008 Annual Report

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Tanjianshan mine, China
Tanjianshan mine, China

Kişladağ mine, Turkey
Kişladağ mine, Turkey

Summary

Corporate Profile..................................................................................................................................

2008 Highlights...................................................................................................................................

Letter to Our Shareholders.................................................................................................................

Resources and Reserves....................................................................................................................

Production Highlights..........................................................................................................................

Stakeholder and Community Relations.............................................................................................

Financial Review

Management’s Discussion & Analysis of Financial Condition and Results of Operations.......

Management’s Responsibility for Financial Reporting................................................................

Independent Auditors’ Report.......................................................................................................

Consolidated Balance Sheets.......................................................................................................

Consolidated Statements of Operations and Deficit...................................................................

Consolidated Statements of Cash Flows......................................................................................

Consolidated Statements of Comprehensive Income.................................................................

Notes to the Consolidated Financial Statements........................................................................

Consolidated Financial Information..............................................................................................

Corporate Information.........................................................................................................................

Forward-Looking Statements..............................................................................................................

Corporate Profile

Eldorado Gold Corporation is a gold producer active in exploration and development in Brazil,
China, Greece, Turkey and surrounding regions.

We are one of the lowest cost pure gold producers reporting, with a strong balance sheet, no
debt and no hedge positions.

Our goal is to produce 700,000 to 800,000 ounces of gold annually by 2013. We are well
positioned to grow in value as we create and pursue new opportunities in gold and other
resources.

Our shares trade on the Toronto Stock Exchange (TSX) under the symbol ELD and on the New
York Stock Exchange Amex (NYSE-A) under the symbol EGO.

2008 Highlights (All amounts expressed in U.S. dollars, unless otherwise stated)

Solid growth
▪

308,802 ounces of gold produced (15%
increase)

▪

11.8 million ounces of measured and indicated
resources and 4.2 million ounces of inferred
resources (12% increase)

7.6 million ounces of proven and probable gold
reserves (replaced reserves mined in 2008)

Proven ability to explore, develop,
and operate
▪

Advanced construction at the Efemçukuru gold
project in Turkey and at the Vila Nova iron ore
project in Brazil

▪

Completed two transactions with the potential
to add 300,000 ounces of annual production
by 2013

Low cost production
▪

Total cash cost of $289 per ounce, which
positions Eldorado in the lowest quartile of
production cost

Enhancing shareholder value
▪

Top performer on the S&P/TSX composite index
with share appreciation of 65.5 per cent

▪

Record earnings of $0.46 per share

Strong balance sheet
▪
Debt free and unhedged

▪

Paid all debt owed to HSBC Bank, releasing
restricted cash

Completed sale of São Bento mine to AngloGold
Ashanti for $70.0 million

▪

Cash flow from operations of $0.30 per share

2008 Annual Report

Sulphide Ore Processing Facilities
Sulphide Ore Processing Facilities
Tanjianshan mine, China
Tanjianshan mine, China

Coarse Ore Stock Pile
Coarse Ore Stock Pile
Kişladağ mine, Turkey
Kişladağ mine, Turkey

Letter to Our Shareholders

I am extremely pleased to report that 2008 was another successful year for Eldorado despite an extremely
turbulent and volatile economic environment. Our teams around the world continue to execute in
accordance with our articulated plans.

In 2008, our mines produced 308,802 ounces of gold at a total cash cost of $289 per ounce, maintaining
our position as one of the lowest cost pure gold producers. Despite significant cost pressures we expanded
operating cash margins for the fourth consecutive year. Our ability to grow our margins is in sharp contrast
to other companies in our sector who have, despite higher gold prices, failed to deliver improved margins.

Our strong operating performance contributed significantly to the profit of $0.46 per share for the year.
The market recognized and rewarded this performance: Eldorado was the top performer on the S&P/TSX
composite index, with a share appreciation of 65.5 percent.

In Turkey at our Kişladağ mine the year saw the successful expansion of throughput from 5 to 10 million
tonnes per annum and the conversion to owner operated mining with the purchase of our own mining fleet.

Construction began at our Efemçukuru project, where production is now anticipated to begin in 2010.

In China, our Tanjianshan mine produced in excess of plan with 118,468 ounces of gold for the year,
while successfully managing the construction of the sulphide processing circuit that is presently being
commissioned.

Eldorado Gold

In 2008, we also completed two transactions, acquiring
the Perama Hill project in Greece and establishing
participation in the highly prospective Tocantinzinho
project in the Tapajos district in Brazil. We believe that
the development of these projects will provide the
opportunity to contribute approximately 300,000 ounces
of annual gold production to Eldorado within a five-year
time frame.

The Company’s exploration efforts, which totalled $19.7
million in expenditures, were rewarded by an expanded
resource base. This enabled us to essentially replace
reserves mined maintaining 7,561,000 ounces of proven
and probable reserves at year-end.

The continued success of our Company is largely
attributed to the dedication of our staff in the regions we
operate.

$/oz

1,000

Growing Margins

800

600

400

200

876

674

609

409

444

107 279 411 587

302 416 330 263 289

2004

2005

2006

2007

2008

Total Cash Cost

Margins

Realized Gold Price

It is with great enthusiasm that I look forward to together
continuing to build a Company that we all take great
pride in.

Au oz

800,000

Increasing Production

We remain committed in 2009 to following our stated
path that provides for the development of a strong
sustainable mining company based on high quality, low-
cost, long-lived assets. Our strong balance sheet with
no debt and no hedge positions supports our continued
growth.

Sincerely,

640,000

480,000

320,000

160,000

2007
Actual

2008
Actual

2009
Forecast

2010
Forecast

2011
Forecast

2012
Forecast

2013
Forecast

Paul N. Wright
President and Chief Executive Officer
March 19, 2009

São Bento

Kişladağ

Tanjianshan

Efemçukuru

Perama + TZ

Expanding Resources and Reserves

000s Au oz

16,000

12,000

8,000

4,000

2005

2006

2007

2008

Reserves

Measured

Indicated

Inferred

2008 Annual Report

Resources and Reserves

GOLD

Property

Kişladağ
Measured
Indicated
M + I
Inferred

Tanjianshan
Measured
Indicated
M + I
Inferred

Efemçukuru
Measured
Indicated
M + I
Inferred

Perama
Measured
Indicated
M + I
Inferred

Total
Measured
Indicated
M + I
Inferred

RESOURCES

RESERVES

Tonnes
(x1000)

Grade
(Au g/t)

In–Situ Gold
ounces (x1000)

Tonnes
(x1000)

Grade
(Au g/t)

In–Situ Gold
ounces (x1000)

72,810
207,070
279,880
126,900

6,985
2,941
9,926
3,493

1,235
3,683
4,918
2,109

–
11,710
11,710
8,733

81,030
225,404
306,434
141,235

1.04
0.82
0.88
0.63

3.34
2.76
3.17
3.54

13.80
8.39
9.75
9.95

–
3.62
3.62
1.96

1.43
1.11
1.20
0.92

2,432
5,430
7,862
2,552

751
261
1,012
398

548
993
1,541
675

–
1,363
1,363
552

3,731
8,047
11,778
4,177

Proven
Probable
Total

67,746
93,811
161,557

1.08
1.05
1.06

Proven
Probable
Total

5,609
1,152
6,761

3.77
3.71
3.76

Proven
Probable
Total

1,320
2,465
3,785

11.89
9.04
10.04

Proven
Probable
Total

–
–
–

2,353
3,170
5,523

680
137
817

505
716
1,221

–
–
–

Proven
Probable
Total

74,675
97,428
172,103

1.47
1.28
1.37

3,538
4,023
7,561

IRON

RESOURCES

Property

Vila Nova
Measured
Indicated
M + I
Inferred

Tonnes
(x1000)

Grade
(Fe%)

2,285
7,679
9,964
2,022

63.5
61.0
61.6
61.2

RESERVES

Tonnes
(x1000)

Grade
(Fe%)

Proven
Probable
Total

2,285
6,987
9,272

63.5
60.2
61.0

Notes for Resources:
1) Gold price used was $725/oz.
2) Cut–off grades (gold g/t): Kişladağ: 0.4 g/t; Tanjianshan: 1.0 g/t; Efemçukuru: 3.0 g/t; Perama: 1.0 g/t.
3) Qualified Person: Stephen Juras, Ph.D., P.Geo. and Manager, Geology for the Company is the qualified person responsible for all the mineral
resource estimates for the Company’s material properties, namely Kişladağ, Tanjianshan and Efemçukuru; the Company does not currently
consider Perama or Vila Nova to be material properties.

Notes for Reserves:
1) Gold price used for Kişladağ and Tanjianshan was $725/oz. and for Efemçukuru was $530/oz.
2) Cut–off grades (gold g/t): Kişladağ: 0.35 g/t oxide, 0.50 g/t sulphide; Tanjianshan: 1.3 g/t JLG oxide, 1.64 g/t JLG sulphide; Efemçukuru: 4.5 g/t.
3) Qualified Persons: Richard Miller, P.Eng. and Manager, Mine Engineering of the Company, is responsible for the Kişladağ and Tanjianshan
reserves; Andy Nichols, P.Eng., Chief Mining Engineer of Wardrop Engineering, is responsible for the Efemçukuru reserves.
4) Mineral Reserves include Mineral Resources.

Eldorado Gold

Production Highlights

Gold Production
Total Ounces Produced
Commercial Production
Cash Operating Cost ($/oz)1,4
Total Cash Cost ($/oz)2,4
Total Production Cost ($/oz)3,4
Realized Price ($/oz–sold)

Kişladağ Mine, Turkey5
Commercial Production
Tonnes to Pad
Grade (grams/tonne)
Cash Operating Cost ($/oz)4
Total Cash Cost ($/oz)2,4
Total Production Cost ($/oz)3,4

Tanjianshan Mine, China
Total Ounces Produced
Commercial Production
Tonnes Milled
Grade (grams/tonne)
Cash Operating Cost ($/oz)4
Total Cash Cost ($/oz)2,4
Total Production Cost ($/oz)3,4

São Bento Mine, Brazil
Commercial Production
Tonnes Milled
Grade (grams/tonne)
Cash Operating Cost ($/oz)4
Total Cash Cost ($/oz)2,4
Total Production Cost ($/oz)3,4

First
Quarter
2008

Second
Quarter
2008

Third
Quarter
2008

Fourth
Quarter
2008

Fourth
Quarter
2007

2008

2007

67,234
67,234
213
268
393
933

87,380
87,380
229
259
293
904

72,343
72,343
283
313
402
870

81,845
81,845
298
319
404
800

32,000
32,000
216
262
522
774

308,802
308,802
257
289
370
876

281,135
268,643
236
263
338
674

27,228
529,480
1.18
217
218
246

55,490
2,092,957
1.47
230
232
273

46,863
2,562,343
1.05
270
273
310

60,753
2,371,101
1.34
279
281
314

–
–
–
–
–
–

190,334
7,555,881
1.27
254
256
291

135,306
4,547,860
1.33
189
192
224

40,006
40,006
223,395
6.83
211
302
493

31,890
31,890
193,035
6.04
229
305
327

25,480
25,480
226,126
4.16
306
387
571

21,092
21,092
216,273
4.33
352
429
664

32,000
32,000
173,945
7.20
216
261
526

118,468
118,468
858,829
5.31
261
343
496

–
–
–
–
–
–

138,162
125,670
757,354
6.23
288
342
472

7,667
20,069
11.71
208
224
152

1 Cost figures calculated in accordance with the Gold Institute Standard.
2 Cash Operating Costs, plus royalties and the cost of off-site administration.
3 Total Cash Costs, plus foreign exchange gain or loss, depreciation, amortization and reclamation expenses.
4 Cash Operating, Total Cash and Total Production Costs are non-GAAP measures. See the section “Non-GAAP Measures” in the MD&A.
5 Kişladağ temporarily ceased operations on August 18, 2007 and re-opened on March 6, 2008.

2008 Annual Report

Vineyard project in Efemçukuru, Turkey
Vineyard project in Efemçukuru, Turkey

Stakeholder and Community Relations

At Eldorado, we believe that only by taking a responsible approach can a company achieve long-term
financial success and maintain its “social license” to operate. For us, corporate social responsibility means
doing the right thing – investing in infrastructure, economic development, and health and education – so
that we can help enrich the communities where we operate.

Over the past decade, we have operated mines around the world – in Mexico, Brazil, Turkey and China. We
are proud of our record of implementing industry best practices that minimize environmental impacts while
maximizing social and economic benefits.

We are committed to fostering open dialogue between ourselves and the members of the local
communities where our mines are located. This enables us to undertake initiatives that bring positive
impacts to communities and meet their specific needs – whether it’s creating new infrastructure, investing
in education and training, or supporting economic development projects in the area.

In the following section, we describe our commitment to responsible operations throughout all stages of
the mine cycle, and then highlight our initiatives relating to the environment and community development
over the past 10 years of our operations.

Eldorado Gold

Committed to responsible operations throughout the life of a mine

We bring new opportunities and build value for our stakeholders at all stages of the mining cycle, from
initial exploration through to mine closure and reclamation.

Exploration

Development

Construction and
Training

Mining and
Processing

Reclamation and
Closure

Exploration
We initiate our community relations activities in the
early stages of the mining cycle. During exploration,
while we conduct geological surveys and sampling
to determine the existence and location of an ore
deposit, we initiate dialogue with local community
members to identify their main social and
environmental concerns and start our baseline
data recording. This is a period of building trust – of
listening to our stakeholders to better understand
their needs.

Development
During the development stage, we complete a
feasibility study that outlines the economics,
optimal mining method and mineral recovery
process for the project, including closure
considerations. It is also during this stage that
we file an Environmental Impact Assessment
(EIA) report with the appropriate authorities. As
part of preparing an EIA, we conduct extensive
environmental testing and studies to firmly
establish baseline data and characteristics for air,
water, soil and biodiversity.

materialize. Depending on the communities’ needs
and priorities, we begin infrastructure development
initiatives that include improving roads, building
sewage systems or drilling water wells.

Construction and training
We train all employees and instruct construction
contractors in the best environmental, health and
safety practices, procedures and controls. We
also make it a priority to hire local residents when
recruiting new personnel. Based on our dialogue
with the communities, we identify gaps in skills,
provide on-the-job training and work with local
technical schools and universities to enhance
their mining-specific programs to help increase
employability.

An example of this kind of partnership was our
agreement with the Technical School in Barão de
Cocais, Brazil. We helped approximately 80 new
technicians each year in the mining and mechanics
technical programs by providing the facilities for
their internship at our São Bento mine, until its
closure.

During the development stage, the results of our
dialogue with the surrounding communities start to

Mining and processing
All our mining operations comply with local

Exploration activities in Brazil
Exploration activities in Brazil

Construction of the Vila Nova iron ore
Construction of the Vila Nova iron ore
project, Brazil
project, Brazil

Gold pour at the Kişladağ mine, Turkey
Gold pour at the Kişladağ mine, Turkey

2008 Annual Report

and international environmental standards. We
implement the practices described in our EIA and
our feasibility study to mitigate any potentially
negative environmental effects of the mine’s
construction and operation.

We work to maintain a good safety record by
investing in environmental, health and safety
training. This is of considerable importance in
mining operations, which require the use of
hazardous materials and substances such as
explosives and process chemicals.

It is during this stage of a mine’s life cycle that
communities begin to more fully benefit from the
nearby presence of an operating mine. We employ
approximately 1,400 employees and contractors
worldwide, the majority of whom are from the local
communities near our operations. The competitive
salaries and benefits we pay our employees and
contractors enable them to improve their families’
standard of living.

In addition to creating jobs in local communities, we
promote many sustainable economic development
initiatives. Since the life of any mine is limited,
we encourage and work with local communities
to create new opportunities for economic
development, even after the mine is closed.

In Brazil, for example, we partnered with four other
companies and the Santa Bárbara government
to create and support the Municipal Social and
Economic Development Agency, an organization
mandated to help local enterprises identify and
pursue opportunities.

In Turkey, we donated funds to the Uşak Agricultural
Directorate for the Sheep Genetic Improvement
Project. Rams were distributed to the Uşak villages,
and there has been an improvement in the quality
of the local flocks. Community members have seen
increased profits resulting from improved sheep
fertility and better wool value.

In 2008, we also launched a pilot project in
Efemçukuru to establish a local vineyard based
on a study conducted by a university researcher
to identify how we could help local farmers
obtain greater value from their crops. As part
of the project, we planted 11,200 vines on our
Efemçukuru property. Local farmers will benefit

from the introduction of new technologies and best
practices.

Vineyard project at Efemçukuru developing mine, Turkey
Vineyard project at Efemçukuru developing mine, Turkey

Reclamation and closure
During the operating life of a mine, research is
conducted to establish best reclamation practices.
These reclamation activities are concurrent with
mine operations.

Once a mine is no longer profitable to operate,
we close the mine site and conduct reclamation
activities so that the physical environment can
successfully transition to a productive ecosystem.

We have an excellent record on
mining closure and reclamation.
In October 2000, we were the first
company to receive a final full
regulatory environmental release
from the Mexican government
for reclamation activities at our
La Trinidad mine near Rosario,
Mexico. The former mine became a
lake capable of supporting fish.

La Trinidad mine in Mexico
La Trinidad mine in Mexico

10 Eldorado Gold

Protecting the environment

We are committed to best practices in protecting the environment and ensuring the health and safety of
our workers.

Water sampling at São Bento mine, Brazil
Water sampling at São Bento mine, Brazil

Environmental Education Centre at São
Environmental Education Centre at São
Bento mine, Brazil
Bento mine, Brazil

Waste management at Kişladağ mine,
Waste management at Kişladağ mine,
Turkey
Turkey

Ongoing monitoring and analysis
We monitor the air, water and soil throughout
the development phase of a project and during
mine operations to ensure that our mitigation
measures are having their intended effect. We
share the results of our monitoring programs and
analyses with governments and other stakeholders,
including non-governmental organizations and local
communities.

At our Kişladağ mine in Turkey, for example,
we are regularly audited by the Inspection and
Monitoring Committee – a group created by the
Uşak government that includes members from non-
governmental organizations.

Water
We monitor and evaluate both surface and
underground water on a monthly basis, in line
with the local water control regulations and the
commitments we have made in our EIA report. An
independent agent analyzes these samples and we
share the results with government agencies as well
as with other stakeholders. Additionally, we conduct
a thorough evaluation of the water samples we
collect from strategically located monitoring wells
to check for any changes in the underground water
quality.

Biodiversity
To minimize the impact on the local fauna and
flora in the areas where we operate, we invest in
programs that help preserve native biodiversity.

At our Kişladağ gold mine in Turkey, we planted
native trees along the mine roads and we maintain
greenhouses around the mine area where we grow
flowers and shrubs. We’ve also helped reforest the
neighbouring communities. In 2002, we planted
72,000 young trees in the Eşme area and we
reforested Söğütiü Village/Ulubey in 2008.

In Brazil, we created a 180-hectare environmental
preservation area inside the mine property, for
which we received the government’s Environmental
Preservation Award in 2004. This preservation area
was created to safeguard and enhance habitat for
native flora and fauna.

The Environmental Education Centre we established
at the site to share the results of our studies on the
local flora and fauna has provided information to
more than 50,000 students and teachers.

In 2008, our Tanjianshan mine
received one of two Provincial
Awards for Environment Friendly
Projects from the Provincial
Environment Protection Bureau in
recognition of our environmental
initiatives at the mine site.

2008 Annual Report

Air quality
We regularly monitor dust levels at our mine sites
as stipulated by air quality control regulations.

Waste
We manage our waste and have implemented
recycling programs throughout our operations.

At our Kişladağ mine, we paved the main access
road. We also use water trucks to minimize dust on
the mine’s internal roads during intense production
periods, and the crushing areas include water
sprays and filters to collect dust.

In Turkey, for example, the wastes generated by
the operation of our Kişladağ mine are sent to a
licensed firm authorized by the Environmental and
Forestry Ministry to be recycled or disposed of
according to the relevant regulations.

Noise
We use advanced equipment to monitor each site’s
noise levels, and our employees use ear protection
during production periods.

Worker safety
The health and safety of our workers is our top
priority. We conduct ongoing health and safety
training.

Kişladağ is currently the largest gold mine in Turkey
Kişladağ is currently the largest gold mine in Turkey

12 Eldorado Gold

Enhancing local communities

Our community enhancement programs have evolved out of our ongoing conversations with local
community members. These programs are generally focused on four areas: education and training,
infrastructure, community life and economic development.

Desks upgrade at the Agong Chunwa Tibetan
Desks upgrade at the Agong Chunwa Tibetan
Village Primary School, China
Village Primary School, China

Uşak Governor and Eldorado’s CEO at
Uşak Governor and Eldorado’s CEO at
dedication of village water system, Turkey
dedication of village water system, Turkey

Community historical heritage preservation
Community historical heritage preservation
close to São Bento mine, Brazil
close to São Bento mine, Brazil

Education and training

Brazil
▪

Preventive health and safety program: offered
training to employees and their family members
on health, nutrition, hygiene and safety

▪

School uniforms: donated uniforms to public
school students in Brumal and Barra Feliz

Partnership with local technical schools:
allowed students enrolled in the mining and
mechanics technical courses in the Barão de
Cocais community to use our facilities during
their internships

Partnership with schools: welcomed students
to our facilities so they could better understand
the industrial application of academic subjects
such as chemistry, mathematics and biology

Employee education: offered tutoring and
support materials for employees to complete
their elementary and secondary education

Volunteer tutoring: created a tutoring program
in the public schools in Barra Feliz and
Carrapato

China
▪

School facility upgrade: replaced the roof,
improved the facilities and purchased
equipment and books for students and
teachers at the Agong Chunwa Tibetan Village
Primary School

Turkey
▪

High school education: encouraged female
students to complete their high school
education in Efemçukuru’s neighbouring
villages; five girls recently completed high
school compared to only one the year before

▪

Donated computers to Ulubey College

Infrastructure

Brazil
▪

Provided furnishings for a court hearing room in
Santa Bárbara

Turkey
▪

Helped finance a new building planned for Uşak
University

▪

Completed in 2003 water distribution pipelines
to bring fresh water to nine villages nearest to
the mine

Paved all main roads in Kişladağ with
cobblestones and conducted ongoing repairs
and upgrades to all roads in the Gümüşkol,
Katrancilar, and Söğütiü villages

Installed sewage systems in Gümüşkol village
and Ulubey, Katrancilar village and Eşme and
Söğütiü village and Ulubey, and planned a
similar program for Bekişli village and Eşme

2008 Annual Report

▪

Drilled water wells to provide potable water for
the communities of Ulubey, Eşme, Gümüşkol,
Katrancilar, Bekişli, Söğütiü, Küçükilyasli,
Karaömerli, Akçaköy and Güzelköy; planned a
similar program for Söğütiü village/Ulubey

Constructed a hemodialysis centre in Eşme
(prior to this, people needed to travel 60 km to
be treated in Uşak)

Donated money to the Uşak health department
to purchase a health scan bus for Uşak and
surrounding villages

Repaired the Crisis Center in the village of
Ulubey

Donated a pickup truck to the municipality
of Kişladağ, built fire ponds to help the Uşak
Forestry Department prevent fires, built a milk
tank building in Gümüşkol village and Ulubey,
built a water pump in the Omurca municipality
and installed a septic tank in the Hasköy
municipality

▪

Repaired a camera system for the Eşme police
department to assist in crime prevention

China
▪

Contributed to an earthquake relief fund after
the Sichuan earthquake in May 2008

Community life

Brazil
▪

Matriz de Santo Antonio: restored the
nineteenth-century church towers as part of
a community historical heritage preservation
project

▪

Pio XII Square: assisted in re-building this
historical heritage square in the commercial
centre of Santa Bárbara

Christmas party: donated toys to children in
need in Brumal and Barra Feliz

Turkey
▪

Built a football field in the Gümüşkol village/
Ulubey area, a wedding hall in Kişladağ, a
meeting hall/village house in Katrancilar village
and a new public house building for the imam
in Söğütiü village/Ulubey

▪

Mosque repair and painting: planned repairs to
the mosques of Söğütiü and Gümüşkol villages

Sustainable economic development

Brazil
▪

Along with four other companies and the Santa
Bárbara government, we helped establish the
Municipal Economic and Social Development
Agency to support socio-economic development
in the region

Turkey
▪

Vineyard project in Efemçukuru: we hired a
university professor to conduct a study on how
we could help local farmers get more value
from their vineyards. We recently planted
11,200 cabernet sauvignon, merlot and syrah
vines on our property; this may provide a
valuable economic opportunity for local farmers
as the vines develop and mature over the next
five to ten years.

▪

Sheep Genetic Improvement Project: we
donated funds to Uşak Agricultural Directorate
to distribute rams to the Uşak villages. As a
result, there was an improvement in the quality
of the local flocks (in terms of both improved
fertility and better wool value) and community
members saw increased revenues.

Kişladağ Mine Foundation: in co-operation
with the Canadian International Development
Agency, we developed a business plan that
identified initiatives with specific sustainable
development criteria, including agriculture and
training.

Health scan bus for Uşak and its
Health scan bus for Uşak and its
surrounding villages, Turkey
surrounding villages, Turkey

14 Eldorado Gold

Kişladağ's own mining fleet, Turkey
Kişladağ's own mining fleet, Turkey

Financial Review

Management’s Discussion & Analysis of Financial Condition and Results of Operations...................

Management’s Responsibility for Financial Reporting...........................................................................

Independent Auditors’ Report..................................................................................................................

Consolidated Balance Sheets..................................................................................................................

Consolidated Statements of Operations And Deficit..............................................................................

Consolidated Statements of Cash Flows.................................................................................................

Consolidated Statements of Comprehensive Income............................................................................

Notes to the Consolidated Financial Statements...................................................................................

Consolidated Financial Information.........................................................................................................

2008 Annual Report

MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

(For the years ended December 31, 2008 and 2007)

This Management’s Discussion and Analysis (“MD&A”) reviews the business of Eldorado Gold Corporation (“Eldorado”,
“we” or “the Company”) and compares the Company’s financial results for 2008 with those of 2007. For a
comprehensive understanding of Eldorado’s financial condition and results of operations, you should read this MD&A
together with the consolidated financial statements and accompanying notes. Unless otherwise noted, all monetary
amounts are in United States dollars. This MD&A is prepared as of March 18, 2009.

2008 – Year in Review

Eldorado is one of the world’s lowest cost gold producers engaged in gold mining and related activities including
exploration, development, extraction, processing and reclamation. Based in Vancouver, Canada, Eldorado is listed on
the Toronto Stock Exchange (TSX) under the symbol ELD and on the New York Stock Exchange Amex (NYSE-A) under
the symbol EGO. ELD is on the S&P/TSX Global Gold Index and EGO is part of the AMEX Gold BUGS Index. We own
and operate the Kişladağ gold mine (“Kişladağ”) in Turkey and the Tanjianshan gold mine (“TJS”) in China, and we are
developing gold projects in Turkey and Greece as well as an iron ore project in Brazil.

During the year ended December 31, 2008, we:

▪

Reported record earnings of $0.46 per share (2007 – $0.10),

Produced 308,802 ounces of gold at a cash operating cost of $257 per ounce (2007 – 281,135 ounces at $236
per ounce),

Sold 316,918 ounces of gold at a realized average price of $876 per ounce (2007 – 266,012 ounces, $674 per
ounce),

Resumed operations on March 6, 2008 at Kişladağ, which had been on standby since August 18, 2007, and
completed the mine’s expansion project, doubling its mining and processing capacity to a rate of 10 million tonnes
of ore per year,

Completed the sale of our São Bento gold mine in Brazil (“São Bento”) to AngloGold Ashanti for $70.0 million in
AngloGold Ashanti shares, resulting in a gain of $72.5 million after consideration of net liabilities divested ($0.21
per share),

Began construction of our Efemçukuru gold mine (“Efemçukuru”) in Turkey,

Neared completion of construction of our Vila Nova iron ore mine (“Vila Nova”) in Brazil,

Acquired Frontier Pacific Mining Corporation (“Frontier”) and its Perama Hill gold development project (“Perama
Hill”) in Greece,

Finalized an agreement with Brazauro Resources Corporation to earn an interest in the 43,000 hectare
Tocantinzinho gold project (“Tocantinzinho”) in Brazil and

Generated $105.5 million in cash from operating activities (2007 - $69.8 million), which was used to pay off debt
of $70.9 million and fund ongoing development projects.

Net income for the year
In 2008, Eldorado’s profits increased substantially over the previous year. Our consolidated net income for 2008 was
$163.7 million or $0.46 per share (2007 – $35.4 million or $0.10 per share). The main contributors to our 2008
operating results were strong performances from Kişladağ and TJS as well as the $72.5 million gain on the sale of São
Bento.

16 Eldorado Gold

Sales from Kişladağ totalled 185,425 ounces of gold (2007 – 142,725 ounces) at an average price of $871 per ounce
(2007 – $660), while cash operating costs averaged $254 per ounce (2007 – $189). Sales from TJS totalled 131,493
ounces of gold (2007 – 112,646 ounces) at an average price of $884 per ounce (2007 – $694), while cash operating
costs averaged $261 per ounce (2007 – $288).

Net income for the fourth quarter
Our consolidated net income for Q4 2008 was $100.7 million or $0.27 per share (Q4 2007 – net loss of $9.1 million
or $0.03 per share). Excluding the $72.5 million gain on the sale of São Bento, our consolidated net income was
$28.2 million or $0.08 per share. Gold revenues for Q4 2008 increased 159% compared to Q4 2007 due to higher
selling prices and increased ounces sold. Selling prices during Q4 2008 increased 3% and units sold increased
48,063 ounces, or 151%, compared to Q4 2007. Kişladağ operations shut down on August 18, 2007 and remained
shut down during all of Q4 2007, resulting in lower gold production for that quarter. Operating costs for Q4 2008
were $25.9 million, an increase of 187% over Q4 2007 due to the shutdown of the Kişladağ during Q4 2007. Costs of
sales per ounce increased at TJS as a result of lower grades and recoveries from transitional ore at the newly opened
Jinlonggou pit (“JLG”) as well as higher stripping costs.

Financial position
Gold has maintained its value during the current global economic crisis, with average prices up 30% as compared to
2007. In 2008, we sold 19% more ounces of gold than in 2007, at an average realized gold price of $876 per ounce, a
30% increase from 2007. In general, unit costs of our Turkish and Chinese operations have increased due to inflation
and operational factors, offset at Kişladağ by gains from the weakening of the Turkish lira relative to the US dollar and
at TJS by the shift to contract mining. The Turkish lira weakened by 20% relative to the US dollar during the second
half of 2008. A beneficiary of the current economic crisis is the US dollar, which has gained relative to a number of
currencies since August 2008.

While Eldorado’s financial performance has not been negatively impacted, the economic downturn has adversely
affected other exploration stage or intermediate mining companies in which Eldorado holds equity interests. In the
fourth quarter, we recorded an impairment loss of $0.5 million relating to an other than temporary decline in the
fair value of one of our investments. Additionally, we recorded a $5.9 million charge to other comprehensive losses
related to unrealized losses on two of our investments. As part of our growth strategy, we will continue to leverage our
resources by making strategic equity investments. Investments in marketable securities available-for-sale represented
1.3% of our total assets as at December 31, 2008.

Eldorado is well positioned to confront the current economic crisis with strong cash reserves and no long-term debt. At
December 31, 2008, we held $61.9 million in cash and short-term deposits (2007 – $46.0 million), had no restricted
cash or long-term debt (2007 – $65.7 million restricted cash, $65.5 million long-term debt) and had an environmental
guarantee deposit of $2.5 million (2007 – $8.3 million). The reduction in the environmental guarantee is the result of
obtaining a favourable bank guarantee. We remain hedge free.

Corporate developments
Frontier acquisition
On July 7, 2008, we completed the acquisition of Frontier. Under the terms of the agreement, each Frontier common
share was exchanged for 0.122 common shares of Eldorado, CA$0.0001 in cash and one Exchange Receipt. Each
Exchange Receipt entitles the holder to receive an additional 0.008 Eldorado common shares if, prior to July 1, 2009,
a Joint Ministerial Resolution is issued in Greece by the Joint Ministerial Council (comprised of the ministries of the
Environment, Agriculture, Development and Health) accepting the Environmental Terms of Reference drafted by the
Ministry of Environment regarding Perama Hill.

2008 Annual Report

MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Eldorado issued 20,339,334 common shares and paid $0.02 million in cash in connection with this transaction. No
value was assigned to the Exchange Receipts as we believe it is highly unlikely that the condition for their exchange
into Eldorado shares will be met. The total consideration paid for Frontier was valued at $158.6 million and Eldorado
incurred acquisition costs of $3.9 million.

This transaction was accounted for as an asset acquisition because Frontier was in the development stage. Eldorado’s
consolidated financial statements include 100% of Frontier results from July 7, 2008.

This acquisition affected our balance sheet as is explained in Note 4 of the consolidated financial statements. We
recorded a future tax liability of $51.4 million, which results from an imputed income tax liability we incurred due to the
difference between the allocated fair values and tax values of the property, plant and equipment assets we acquired.

Brazauro agreement
On July 8, 2008, Eldorado entered into an option agreement with Brazauro Resources Corporation (“Brazauro”) under
which Eldorado can acquire from Brazauro a 60% to 75% interest in Tocantinzinho in Brazil in return for purchasing
Brazauro securities (“units”), undertaking $9.5 million of exploration and development expenditures and paying
Brazauro $90.0 million plus a production decision fee of up to $10.0 million. On July 24, 2008, Eldorado subscribed
for 8,800,000 units of Brazauro at a price of C$0.95 per unit. Each unit includes one common share of Brazauro and
one warrant. Each warrant will entitle the holder to acquire one-half of one common share of Brazauro at a price of
C$1.30 per share for a period of 18 months.

The purchase price of the 8,800,000 units was allocated between marketable securities and mineral interest based
on the fair value of the Brazauro units on July 18, 2008 – the date that Eldorado notified Brazauro of its decision to
proceed with the transaction. The fair value of the units of $4.9 million was recorded in marketable securities while the
value of the option of $3.4 million was record in mineral interest.

São Bento divestiture
On December 15, 2008, we completed the sale of São Bento to AngloGold Ashanti (“AngloGold”) for $70.0 million
payable by the issuance of 2,701,660 common shares of AngloGold, resulting in a gain on the sale of $72.5 million
after consideration of net liabilities divested. As of December 31, 2008, we had sold 1,566,500 AngloGold shares for
cash of $25.5 million and accounts receivable of $16.2 million, generating a gain on disposal of $1.1 million over the
cost of the shares. The remaining 1,135,160 shares were valued at $31.5 million at December 31, 2008 and reported
as Marketable Securities on the Balance Sheet. The shares generated an unrealized gain of $2.0 million when marked
to the market price at year-end. All of the remaining shares were sold in January 2009.

18 Eldorado Gold

Production

OPERATING DATA 1

2008

2007

2006

TOTAL GOLD PRODUCTION
Total ounces produced
Commercial production
Cash operating costs ($/oz) 4
Total cash cost ($/oz) 2, 4
Total production cost ($/oz) 3, 4

KISLADAG MINE, TURKEY 5
Commercial production
Cash operating costs ($/oz) 4
Total cash cost ($/oz) 2, 4
Total production cost ($/oz) 3, 4

TANJIANSHAN MINE, CHINA 6

Total ounces produced
Commercial production
Cash operating costs ($/oz) 4
Total cash cost ($/oz) 2, 4
Total production cost ($/oz) 3, 4

SAO BENTO MINE, BRAZIL 7
Commercial production
Cash operating costs ($/oz) 4
Total cash cost ($/oz) 2, 4
Total production cost ($/oz) 3, 4

308,802
308,802
$ 257
$ 289
$ 370

190,334
$ 254
$ 256
$ 291

118,468
118,468
$ 261
$ 343
$ 496

–
$ –
$ –
$ –

281,135
268,643
$ 236
$ 263
$ 338

135,306
$ 189
$ 192
$ 224

138,162
125,670
$ 288
$ 342
$ 472

7,667
$ 208
$ 224
$ 152

135,653
135,653
$ 324
$ 330
$ 343

70,895
$ 206
$ 208
$ 229

n/a
n/a
n/a
n/a
n/a

64,758
$ 454
$ 464
$ 467

Notes
1 Cost figures calculated in accordance with the Gold Institute Standard.
2 Cash operating costs, plus royalties and off-site administration costs.
3 Total cash costs, plus foreign exchange gain or loss, depreciation, amortization and reclamation expenses.
4 Cash operating, total cash and total production costs are non-GAAP measures. See the section “Non-GAAP Measures” of this MD&A.
5 The Kişladağ mine temporarily ceased operations on August 18, 2007 and reopened on March 6, 2008.
6 The Tanjianshan mine began commercial production on February 1, 2007.
7 Q2 2007 was the last quarter of production at the São Bento mine.

Operations

Tanjianshan mine
In 2008, we milled a total of 858,829 tonnes of ore at TJS at an average grade of 5.31 g/t, resulting in 118,468
ounces of gold produced at an average cash operating cost of $261 per ounce.

Capital expenditures for the year were $38.9 million, with the majority of the capital spending allocated to the Phase II
construction program. At completion, Phase II will include a sulphide ore processing facility to treat sulphide ore from
the newly opened JLG pit as well as an expanded tailings dam. Commissioning is expected in the first quarter of 2009.

The mining contractor operated to expectations in 2008, validating our decision to move to contract mining.

2008 Annual Report

MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Kişladağ mine
During 2008, approximately 7,555,881 tonnes of ore were placed on the leach pad at Kişladağ at an average grade
of 1.27 g/t, and we produced 190,334 ounces of gold at an average cash operating cost of $254 per ounce. Mining
operations resumed on March 6, 2008 after a court injunction forced the mine to close on August 18, 2007.

Capital expenditures for the year were $27.3 million, with capital spending allocated to mobile equipment for plant
and infrastructure upgrades ($11.3 million), an excavator and trucks ($5.2 million), the lime project ($3.4 million),
geological core drilling ($2.3 million) and a 200 tonne process crane ($1.7 million). The remaining $3.4 million
consisted of smaller purchases and upgrades.

Development

Efemçukuru
We drilled 1,519 meters at Efemçukuru in 2008. Of this, 961 meters were to explore the down plunge and along-strike
extensions of the North Ore Shoot and 558 meters were for geotechnical purposes to support detailed mine designs.

We received forestry permits during the year covering all the forestry land needed for construction. By the end of 2008,
we had completed the new access road to the site and had cleared and grubbed the plant site, rock dump and tailings
area. We began constructing the north and south underground portals during the year, as well as the access road and
pad for the north portal. We have ordered items with long lead times, such as the ball and SAG mills, and we have
finalized the process design criteria. We negotiated the contract for underground pre-production development and
awarded it to a Turkish contractor. Manpower increased significantly as staff positions were filled during the year.

At the end of 2008, we had purchased approximately 78% of the land required for operations. An expropriation
decree was awarded to our wholly owned subsidiary, Tüprag Metal Madencilik Sanayi ve Ticaret A.S. (“Tüprag”) that
will allow the company to acquire the remaining private land at a price set by the government. During the year, the
Fourth Administrative Court in Izmir ruled in favour of the Environmental Positive Opinion issued by the Ministry of
Environment and Forestry for the project.

Capital spending at Efemçukuru in 2008 was $14.3 million.

Vila Nova iron ore
On February 25, 2008, we received a construction permit issued by the Environmental Agency of Amapa State for the
Vila Nova Iron Ore project and we were able to start construction and development activities.

During 2008, the majority of the construction was completed, including the crushing and screening plant, the run of
mine (“ROM”) and finished product stockpiles, and the tailings impoundment area. We finished clearing the open pit,
stockpiled topsoil and took delivery of all the major mining equipment, which is ready for use. We drilled a total of
2,708 meters during the year for metallurgical characterization and mine planning, and we are continuing negotiations
on the sale of the iron ore.

Exploration

In 2008, exploration costs increased to $19.7 million (2007 – $14.6 million) as we expanded our exploration activities
in Brazil, Turkey, China and the USA. Included in these costs were $7.4 million (2007 – $3.0 million) in deferred
exploration costs reported in mineral interests on the balance sheet. Exclusive of stock-based compensation costs of
$1.4 million, we incurred exploration expenditures of $8.7 million in Turkey, $3.4 million in China, $3.1 million in Brazil,
$1.1 million in the USA and $2.0 million in other locations.

20 Eldorado Gold

Turkey
Our main reconnaissance focus in 2008 was on the Sayacik project, adjacent to Kişladağ. Work included detailed
mapping, a magnetic geophysical survey and soil geochemical sampling. Program planning and government permitting
processes were also begun for planned drill testing in 2009. We also conducted work on properties in the Central and
Eastern Pontide regions of Turkey that included stream sampling and general mapping/prospecting. Positive results
were obtained for the Arpali porphyry project and further work is planned in 2009.

At Efemçukuru, we completed 7 drill holes totalling 1,292 meters over the North Ore Shoot. The holes successfully
intersected precious metal and base metal rich intercepts down plunge from current limits. Detailed mapping and soil
geochemical sampling programs were also carried out over the property.

We executed a 45 hole, 16,586 meter exploration drilling program at Kişladağ. Results outlined areas of new oxide
mineralization in the southeast portion of the deposit and confirmed lateral extensions of sulphide mineralization to
the southeast and west.

Brazil
Our exploration efforts in Brazil focused on general reconnaissance of prospective lands in the Carajas and
Tapajos regions of Para state. During Q4 2008, emphasis switched to managing an infill diamond drill campaign
at Tocantinzinho as part of our joint venture commitment with Brazauro Resources. We drilled 3,518 meters in 11
diamond drill holes by year-end. Results confirmed extent and predicted gold grades in areas of inferred mineral
resources.

China
We completed 70 drill holes totalling 15,500 meters at TJS during 2008. Most of the drilling tested the Xijinggou
and Qinlongtan (“QLT”) areas of the property. Xijinggou drilling outlined two main areas of gold mineralization on
which inferred mineral resources were estimated at year-end. QLT drilling proved the presence of a dip reversal in the
mineralized zone below the open pit floor.

USA
We conducted mapping, soil geochemical sampling and ground magnetic geophysical surveys on our joint venture
projects with AuEx Ventures (Buffalo Canyon, Green Monster, Hays Canyon and Klondike North). We also executed
a reverse circulation drill program on one of the projects, Klondike North, where drilling totalled 2,584 meters in 12
holes.

Legal

Kişladağ
On February 28, 2008, the Turkish Ministry of Environment and Forestry and Eldorado’s subsidiary Tüprag (as co-
defendant) filed an appeal requesting the 6th Department of the High Administrative Court reconsider its February
6 decision on the essence of the Kişladağ EIA case. This appeal is now at the high administrative court waiting for
consideration. There has been no change in the status of the case since the first quarter of 2008.

Efemçukuru
On January 26, 2009, the Sixth Department of the High Administrative Court in Ankara, Turkey delivered a favourable
decision for the Company in cases by certain third parties seeking to cancel the Environmental Positive Certificate for
Efemçukuru issued by the Turkish Ministry of Environment and Forestry.

2008 Annual Report

MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Review of Financial Results

Net income
Our consolidated net income for 2008 was $163.7 million or $0.46 per share (2007 – $35.4 million or $0.10 per
share). Strong performances from Kişladağ and TJS as well as the $72.5 million ($0.21 per share) gain on the sale of
São Bento, were the main factors in explaining our record net income. Additionally, net income was positively affected
by a $9.2 million decrease in future income tax related to a 20% reduction in Greek income tax rates.

Gold revenues
Our gold revenues consist of gold bullion sales at spot. We sell the refined bullion either to large financial institutions
or on the Istanbul and Shanghai Gold Exchanges.

Gold revenues in 2008 increased 55% over 2007 due to increases in both selling prices and sales volumes. Selling
prices in 2008 increased 30% over 2007, and ounces sold in 2008 increased 19% over 2007, reflecting increased
production from Kişladağ and TJS.

Gold ounces sold
Kişladağ
Tanjianshan
São Bento
Total gold ounces sold
Average selling price per ounce
Gold revenues (000s)

2008

2007

2006

185,425
131,493
-
316,918
$ 876.32
$ 277,723

142,725
112,646
10,641
266,012
$ 674.04
$ 179,302

63,352
–
64,200
127,552
$ 608.70
$ 77,641

Interest and other income
Interest income earned on cash, short-term money market investments and restricted cash balances held during 2008
was $2.9 million (2007 – $7.5 million). The decrease in interest income from 2007 was the result of lower average
cash balances during 2008 as well as a decline in interest rates. Other income of $7.6 million in 2008 (2007 – $1.9
million) was related to the sale of excess electricity at São Bento as well as Brazilian tax credits resulting from the spin-
off of Vila Nova from São Bento prior to the sale of São Bento to AngloGold.

Operating costs
Operating costs in 2008 increased 27% over 2007 due to increased sales volumes and higher costs of production
at Kişladağ. At Kişladağ, production costs increased due to increased lime consumption, as ore with higher sulphide
content was treated on the leach pad. Production costs at TJS were lower than 2007 as a result of lower mining costs
related to the change from Company-owned mining equipment to contract mining, as well as lower strip ratios at the
QLT pit.

Depletion, depreciation and amortization
Depletion, depreciation and amortization (“DD&A”) expense of $26.0 million (2007 – $20.0 million) was higher than
2007 due to higher volumes of ore processed at Kişladağ.

General and administrative
General and administrative costs reflect the costs of our head office in Vancouver, Canada, as well as our liaison
offices in Ankara, Turkey and Beijing, China. We have continued to add to our administrative staff to support expanding

22 Eldorado Gold

international operations. General and administrative expense of $38.3 million increased $11.5 million over 2007,
primarily due to higher stock-based compensation costs allocated to general administrative expense, and the addition
of administrative staff in Vancouver.

Exploration expense
Exploration activities are discussed in the section “Exploration” of this MD&A.

Mine standby costs
Mine standby costs of $2.4 million reflected the costs of maintaining Kişladağ while it was shut down in Q1 2008
(2007 – $6.6 million).

Asset retirement obligation costs
Asset retirement obligation costs in 2008 of $3.1 million reflected a $2.5 million revision to estimated future
reclamation costs at São Bento prior to its sale (2007 – $0.6 million).

Foreign exchange (gain) loss
We reported a foreign exchange loss of $0.2 million in 2008 (2007 – $4.7 million gain). Foreign exchange losses in
Brazil and China were partially offset by foreign exchange gains in Greece and Turkey. The major factor in the foreign
exchange gains was the revaluation of future income tax liabilities denominated in non-US currencies into US dollars.

Gain on disposal of assets
We reported a net gain on the disposal of assets totalling $70.8 million (2007 – $3.6 million). The net gain included a
$72.5 million gain on the sale of São Bento and a $1.7 million loss on the disposal of mining equipment at TJS.

Gain on marketable securities
In 2008 we reported a net gain on marketable securities of $2.5 million (2007 – $0.2 million). The net gain included
a $1.1 realized gain on the sale of AngloGold shares, a $2.0 unrealized gain on AngloGold shares marked to market at
year-end, a $0.5 million impairment adjustment to the carrying value of marketable securities treated as available for
sale financial instruments and a $0.1 million unrealized loss in other marketable securities held for trading.

Interest and financing costs
Interest expense in 2008 was $2.9 million, compared to $3.4 million in 2007, reflecting the decrease in interest rates
and the repayment of debt in during the year.

Unrealized gain on derivative contract
In 2007 we recorded a $3.0 million asset, reflecting the fair value of an energy contract related to São Bento, which we
concluded was a derivative financial instrument. This resulted in the recognition of an unrealized gain in 2007 of $2.1
million. In 2008 we charged $3.0 million to loss on derivative contract as the life of the contract had expired prior to
the sale of São Bento.

Income taxes
Current income tax expense for 2008 was $25.4 million (2007 – $4.8 million). Tax expense by country was: Turkey
– $14.4 million (2007 – nil), China – $6.9 million (2007 – $4.8 million) and Brazil – $4.1 million (2007 – nil). Tax
expense in Turkey was nil in 2007 due to the mine shutdown of Kişladağ in the second half of the year. Tax expense
in China increased due to higher profits. Tax expense in Brazil related to a taxable gain that was triggered by the
repayment of intercompany debt as part of the Vila Nova spin-off prior to the sale of São Bento. The taxes due in Brazil
were completely offset by tax credits from prior years.

2008 Annual Report

MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Future income tax recovery for 2008 was $12.9 million (2007 – expense $17.3 million). Future tax recovery (expense)
by country was: Turkey – $3.5 million expense (2007 – $9.5 million expense), China – $3.4 million expense (2007 –
$3.2 million expense), Brazil – $9.5 million recovery (2007 – $4.6 million expense), Greece – $10.3 million recovery
(2007 – no Greek business investment). Future tax recovery in Brazil related to the reversal of unrealized foreign
exchange gains on intercompany loans, while future income tax recovery in Greece related to the reduction of the
Greek tax rate from 25% to 20%.

The two major factors causing the effective tax rate to decline from 38.41% in 2007 to 6.90% in 2008 are the tax-free
gain from the sale of São Bento and the reduction of the future income tax recorded on the Frontier acquisition due to
a reduction in the Greek future income tax rates from 25% to 20%.

Non-controlling interest
We reported a charge of $5.1 million in 2008 related to our joint venture partners’ 10% interest in TJS (2007 – nil).

Summary of Quarterly Results

Revenue
Net income (loss)
Earnings (loss) per share (US$)

Basic
Diluted

($000 except per share amounts)

Year ended December 31, 2008

4th Quarter
65,148
100,724

3rd Quarter
68,238
17,040

2nd Quarter
82,462
25,155

1st Quarter
72,383
20,737

0.27
0.27

0.05
0.05

0.07
0.07

0.06
0.06

Revenue
Net income (loss)
Earnings (loss) per share (US$)

Basic
Diluted

4th Quarter
28,512
(9,105)

(0.03)

Year ended December 31, 2007

3rd Quarter
40,038
5,213

2nd Quarter
76,662
26,731

1st Quarter
43,487
12,582

0.02
0.02

0.08
0.08

0.04
0.04

The first quarter of 2007 included the first two months of commercial production at TJS. The third and fourth quarter of
2007 were impacted by the temporary shutdown of Kişladağ resulting from the suspension of operations from August
18, 2007 to March 6, 2008. The fourth quarter of 2008 included the $72.5 million gain ($0.21 per share) on the sale
of São Bento.

Outlook

Eldorado plans to produce 325,000 to 340,000 ounces in 2009 at a cash operating cost of approximately $300 per
ounce. Production is expected to increase at Kişladağ by approximately 40,000 to 50,000 ounces from the 2008 total
of 190,334 ounces as a result of operating the mine for a full year. On the other hand, production at TJS is expected
to decrease approximately 20,000 ounces from the 2008 total of 118,468 ounces due to an expected decrease in
Q1 2009 production resulting from the commissioning of the sulphide ore processing facility. Assumptions used to

24 Eldorado Gold

forecast total cash costs for 2009 include: exchange rates of Cdn$1.10 = US$1.00, Brazilian Real 2.00 = US$1.00,
Turkish Lira 1.45 = US$1.00, and Chinese RMB 6.50 = US$1.00; and diesel fuel = US$1.52 per liter (Kişladağ only).

Capital expenditures for 2009 are forecast at $117.1 million, including $84.8 million at Efemçukuru, $11.1 million
at TJS, $10.0 million at Kişladağ, $10.6 million at Vila Nova and $0.6 in other. Exploration expenditures in 2009 are
expected to amount to $18.4 million, of which $12.4 million will be expensed, with efforts focused on Tocantinzinho,
TJS and general exploration in Turkey. General and administrative expense is forecast at $31.6 million for the year.
Depreciation and depletion expense is expected to be $34.0 million, and we anticipate an overall effective tax rate of
30%.

10.

Financial Instruments and Related Risks

Eldorado manages its exposure to financial risks, including liquidity risk, credit risk, currency risk, interest rate risk and
price risk, through a risk management review process. On a quarterly basis, management prepares a risk assessment
report outlining the Company’s operational and financial risks. The Company’s Board of Directors reviews this report
with management to evaluate and assess the risks Eldorado is exposed to in various markets and the steps that
the Company takes to protect itself against adverse price movements. All transactions undertaken are to support
the Company’s ongoing business. Eldorado does not acquire or issue derivative financial instruments for trading or
speculative purposes.

The following section describes the types of risks that the Company is exposed to and its objectives and policies for
managing these risk exposures.

Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial
liabilities. Eldorado has a rigorous planning, budgeting and forecasting process to help determine the funds required
to support its normal operating requirements on an ongoing basis and its expansion plans. The Company believes
that its anticipated cash flows from operations and its holdings of cash and cash equivalents are sufficient to meet its
obligations in 2009 and beyond.

At December 31, 2008, we held $61.8 million in cash and cash equivalents (December 2007 – $46.0 million) and $nil
in restricted collateral accounts (December 2007 – $65.7 million), which securitize debt of $nil (December 2007 –
$65.0 million).

Credit risk
Credit risk is the risk that the counterparty to a financial instrument will cause a financial loss for the Company by
failing to discharge its obligations. Credit risk is primarily associated with trade receivables; however, it also arises
on cash and cash equivalents. To mitigate exposure to credit risk on financial assets, we have established policies to
ensure counterparties demonstrate minimum acceptable credit worthiness and to ensure liquidity of available funds.
The Company also monitors its concentration of credit risk.

Eldorado closely monitors its financial assets. We sell our products exclusively to large international financial
institutions and other organizations with strong credit ratings, and payment is normally in advance or within one week
of receipt of shipment. The historical level of customer defaults is negligible, and as a result, the credit risk associated
with trade receivables at December 31, 2008 is considered to be negligible. We invest our cash and cash equivalents
in major financial institutions and in government issuances in accordance with our short-term investment policy, and
the credit risk associated with our investments is considered to be low.

As a result of current global financial conditions, numerous financial institutions have gone into bankruptcy or have
been rescued by government authorities. As such, the Company is subject to the risk of loss of its deposits with

2008 Annual Report

MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

financial institutions that hold the Company’s cash. As at December 31, 2008, approximately 55% of the Company’s
cash and cash equivalents were with one financial institution.

Eldorado’s maximum exposure to credit risk at December 31 was as follows:

Cash and cash equivalents
Accounts receivable

($000s)

2008

61,851
36,109

2007

46,014
28,720

The increase in accounts receivable from 2007 related to the sale of AngloGold shares in the amount of $16.2 million.
This balance was received in January 2009. The remaining balance related to Turkish value added tax credits and
subsidies, mining contractor advances and prepaid land leases and insurance premiums.

Market risk

Currency risk

Currency risk is the risk that the fair values or future cash flows of the Company’s financial instruments will
fluctuate because of changes in foreign exchange rates. Exchange rate fluctuations may affect the costs that
Eldorado incurs in its operations. Gold is sold in US dollars and the Company’s costs are incurred principally in
US dollars, Canadian dollars, Turkish lira, Brazilian real and Chinese renminbi. The appreciation of non-US dollar
currencies against the US dollar can increase the cost of gold production and capital expenditures in US dollar
terms. We also hold cash and cash equivalents that are denominated in non-US dollar currencies that are subject
to currency risk. Accounts receivable and other current and long-term assets denominated in non-US dollars
relate to goods and services taxes, income taxes, value added taxes and insurance receivables. As a result of
the acquisitions of Afcan Mining Corporation (“Afcan”) and Frontier assets in 2005 and 2008 respectively, we
recorded $56.6 million of future income tax liabilities on mining interests that are recorded in local currencies.
The future income tax liabilities are monetary items that are revalued each period-end at current exchange rates,
with the gain or loss recorded in net earnings in the period.

The Company is exposed to currency risk through the following financial assets and liabilities, value added tax
and other taxes recoverable and future income tax asset and liabilities denominated in currencies other than US
dollars at December 31, 2008:

Cash and cash equivalents
Marketable securities
Accounts receivable and
other

Future income tax
receivable

Canadian
dollar
4,618
14,804
1,902

Accounts payable and
accrued liabilities
Future Income tax liabilities
Net balance
Equivalent in US dollars

(8,549)

-
12,775
10,489

26 Eldorado Gold

Australian
dollar

70
-
78

($000s)
Turkish
lira
1,280
-
12,733

Chinese
renminbi
48,453
-
44,426

Euro

139
-
357

Brazilian
real
3,487

Peruvian
sol
415

830

1,197

(153)

(14,233)

(155,879)

(2,113)

(165)

-
148
103

(26,390)
(26,047)
(36,462)

(15,302)
(15,522)
(10,140)

(88,144)
(149,947)
(22,025)

(2,826)
(622)
(277)

-
250
112

During the year ended December 31, 2008, Eldorado recognized a loss of $0.2 million (2007 – $4.7 million gain)
on foreign exchange. Included in this amount was a $4.0 million gain resulting from the revaluation of future
income taxes denominated in currencies other than US dollars (2007 – nil). Based on the above net exposures
at December 31, 2008, a 10% depreciation or appreciation of the above currencies against the US dollar would
result in a $5.8 million increase or decrease in our after-tax net earnings. Eldorado currently does not hedge to
reduce risks associated with currency fluctuation.

Interest rate risk

Interest rate risk is the risk that the fair values and future cash flows of the Company will fluctuate because of
changes in market interest rates. The Company’s debt is not exposed to interest rate cash flow risk as the interest
rate has been fixed at the time of each drawdown. As at December 31, 2008, Eldorado had an outstanding $0.1
million debt to Sino Gold Mining Limited (“Sino Gold”) related to our acquisition of Afcan. The approximate average
interest rate earned by the Company in 2008 on its cash and cash equivalents was 2.36% (2007 – 5.17%). A 10%
increase or decrease in the interest earned from financial institutions on deposits and money market investments
held at December 31, 2008 would result in a $0.1 million increase or decrease in our after-tax net earnings.

The status of our financing arrangements and obligations is as follows:

In April 2005, Tüprag entered into a $65.0 million term revolving credit facility (the “Revolving Credit Facility”)
with HSBC due February 28, 2010. The Revolving Credit Facility is secured by Eldorado cash deposits in restricted
accounts equivalent to the HSBC advances to Tüprag. The Revolving Credit Facility bears interest fixed at the
prevailing LIBOR on the date of the draw plus 0.50%. As at December 31, 2008, the Company has repaid all the
amounts drawn previously on the facility.

At December 31, 2008, $65.0 million remained available under the Revolving Credit Facility.

In November 2007, our 90% owned subsidiary QDML entered into a $15.0 million revolving facility (“the Facility”)
with HSBC Bank (China). The Facility has a term of one year and is subject to annual review and renewal. In
November 2008, the Facility was renewed for a second year and the interest rate is fixed at 1.2 times the
prevailing lending rate stipulated by the People’s Bank of China.

At December 31, 2008, $15.0 million remained available under the Revolving Credit Facility. Subsequent to year-
end, QDML drew down $5.0 million under the Facility.

Price risk

Price risk is the risk that the fair value or future cash flows of the Company’s financial instruments will fluctuate
because of changes in market prices. Eldorado’s profitability depends on the price of gold, which is affected by
numerous factors such as the sale or purchase of gold by various central banks and financial institutions, interest
rates, exchange rates, inflation or deflation, fluctuations in the value of the US dollar and foreign currencies,
global and regional supply and demand, and the political and economic conditions of the world’s major gold-
producing countries. A 10% increase or decrease in the price of gold would result in approximately a $20.0 million
increase or decrease in our after-tax net earnings based on the expectations and assumptions we used in our
2009 outlook.

At present, Eldorado does not hedge gold sales.

The costs relating to Eldorado’s production, development and exploration activities vary depending on the market
prices of certain mining consumables, including diesel fuel and electricity. A 10% increase or decrease in diesel

2008 Annual Report

MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

fuel market prices would result in approximately a $1.0 million decrease or increase in our after-tax net earnings.
We are evaluating a hedge against diesel fuel price fluctuations. Electricity is regionally priced in Turkey and China
and semi-regulated by the federal governments of those countries. The regulation of electricity reduces the risk of
price fluctuations and we therefore do not contemplate entering into contracts to hedge against such risk.

Defined benefit plans
During the year ended December 31, 2008, the company implemented a defined benefit pension program with
two components: a registered pension plan (“the Pension Plan”) and a non-registered supplementary pension plan
(“the SERP”). These plans, which are only available to certain qualifying employees, provide benefits based on
an employee’s years of service and final average earnings at retirement. Annual contributions to these plans are
actuarially determined and made at or in excess of minimum requirements prescribed by legislation. The Company is
not required to pre-fund any benefit obligation under the SERP. Total cash payments for pension benefits for 2008,
including cash contributed to the Pension Plan and the SERP were $3.8 million. We expect to contribute $0.1 million to
the Pension Plan and $1.3 million to the SERP in 2009 based on minimum funding requirements.

Capital resources
During the year ended December 31, 2008, Eldorado invested $124.0 million in capital expenditures and mine
development. At Kişladağ, capital expenditures totalling $27.3 million related mostly to the Phase II expansion
program. Capital expenditures at Tanjianshan totalling $38.9 million related to the sulphide ore processing
construction project and stripping of the JLG pit. At Efemçukuru, development expenditures totalled $14.3 million,
while at Vila Nova we spent $31.0 million on mine construction and development. We also spent $5.3 million on
Tocantinzinho (including $3.4 million related to the Brazauro units purchased as part of the option agreement) and
$4.2 million on mineral licenses in Turkey. The remaining $3.0 million of expenditures relate to Perama Hill, and the
acquisition of fixed assets in Vancouver, Canada and Ankara, Turkey.

During Q4 2008 we received $25.5 million on the sale of AngloGold shares.

In 2008, we received net proceeds of $14.7 million in consideration for issuing 3,730,155 common shares related to
the exercise of stock options.

At December 31, 2008, we had cash and cash equivalents of $61.8 million and working capital of $184.8 million,
compared with $46.0 million of cash and cash equivalents and working capital of $97.6 million at the beginning of the
year. In the opinion of management, the working capital at December 31, 2008, together with future cash flows from
operations, is sufficient to support the Company’s commitments. The Company’s total planned capital expenditures for
2009, with a focus on bringing Efemçukuru to commercial production by Q3 2010, are forecasted to be $117.1 million.
These expenditures will be funded partly by cash flows from operations and partly from the sales proceeds of the
AngloGold Ashanti shares received by the Company from the sale of São Bento.

Looking beyond 2009, Eldorado’s cash flows from operations are expected to significantly increase with commercial
production at Efemçukuru and are expected to be sufficient to support currently planned expansions and growth.

Acquisitions of additional mineral resource properties may require additional capital. Our ability to pursue growth
through acquisitions will depend on our ability to obtain financing through joint venture projects, debt financing and
equity financing or other means. There is no assurance that we will be successful in obtaining the required financing.

Contractual obligations and guarantees
In the normal course of business, we enter into contracts that give rise to commitments for future minimum payments.
The following table summarizes the remaining contractual maturities of our financial liabilities and operating and
capital commitments at December 31, 2008:

28 Eldorado Gold

Debt
Capital leases
Operating leases
Purchase obligations
Totals

($000s)

2009

2010

2011

2012

150
65
2,336
33,805
36,356

-
65
2,016
11,557
13,638

-
36
1,877
11,498
13,411

-
23
1,860
11,476
13,359

2013 and
later
-
-
2,140
-
2,140

Total

150
189
10,229
68,336
78,904

Purchase obligations from 2010 forward relate solely to Kişladağ, including the estimated commitments under the
unhedged diesel fuel purchase commitments for 2010 through 2012. Imputed interest relating to the Sino Gold loan is
included in the debt commitment.

11.

Off-Balance Sheet Arrangements

None.

12.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of revenues
and expenditures during the reporting period. Management has identified the following critical accounting policies
and estimates. Note 2 of the Company’s consolidated financial statements describe all of the significant accounting
policies.

Inventories
Finished goods, work-in-process, heap leach ore and stockpiled ore are valued at the lower of average production cost
and net realizable value.

We record the cost of mining ore stacked on our leach pads and in process at our mines as work-in-process inventory,
which we value at the lower of cost and estimated net realizable value. These costs are charged to earnings and
included in cost of sales on the basis of ounces of gold recovered. The assumptions used to value work-in-process
inventories include estimates of gold contained in the ore stacked on leach pads, assumptions of the amount of
gold stacked that is expected to be recovered from the leach pads, the amount of gold in the mill circuits and an
assumption of the gold price expected to be realized when the gold is recovered. If these estimates or assumptions
prove inaccurate, we could be required to write down the recorded value of our work-in-process inventories, which
would reduce our earnings and working capital. At December 31, 2008, the average cost of inventory was significantly
below its net realizable value.

Reserves and resources
Mineral reserves and resources are calculated in accordance with National Instrument 43-101, as required by
Canadian Securities regulatory authorities. For United States reporting purposes, Industry Guide 7 (under the
Securities Exchange Act of 1934, as interpreted by the staff of the Securities and Exchange Commission (“SEC”))
applies different standards to classify mineralization as a reserve.

We advise our investors that while the terms “mineral resource,” “measured mineral resource,” “indicated mineral
resource” and “inferred mineral resource” are recognized and required by Canadian regulations, they are not defined

2008 Annual Report

MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

terms under standards in the United States and normally are not permitted to be used in reports and registration
statements filed with the SEC. As such, information contained in this report concerning descriptions of mineralization
and resources required under Canadian standards may not be comparable to similar information made public by US
companies in SEC filings. Investors are cautioned not to assume that any part or all of the mineral deposits in these
categories will ever be converted into reserves.

Mining interests
A significant portion of Eldorado’s mining properties, plant and equipment is depreciated and amortized on a unit-of-
production basis. Under the unit-of-production method, the calculation of depreciation, depletion and amortization
of mining properties, plant and equipment is based on the amount of reserves expected to be recovered from each
location. If these estimates of reserves prove to be inaccurate, or if we revise our mining plan for a location due to
reductions in the metal price forecasts or otherwise, to reduce the amount of reserves expected to be recovered, we
could be required to write down the recorded value of our mining properties, plant and equipment, or to increase the
amount of future depreciation, depletion and amortization expense, both of which would reduce our earnings and net
assets.

In addition, generally accepted accounting principles require us to consider at the end of each period whether
there has been an impairment of our capitalized mining properties, plant and equipment. For producing properties,
this assessment is based on expected future net cash flows to be generated from the location. For non-producing
properties, this assessment is based on whether factors that may indicate the need for a write-down are present. If the
Company determines there has been an impairment because its prior estimates of future net cash flows have proven
to be inaccurate, due to reductions in the metal price forecasts, increases in the costs of production, reductions in the
amount of reserves expected to be recovered or otherwise, or because the Company has determined that the deferred
costs of non-producing properties may not be recovered based on current economics or permitting considerations,
the Company would be required to write down the recorded value of its mining properties, plan and equipment, which
would reduce the Company’s earnings and net assets. A review of Eldorado’s mining properties, plant and equipment
at December 31, 2008 indicated that their estimated undiscounted net cash flows are significantly in excess of their
carrying values. In our review, we used an average projected gold price of $895 per ounce for the period 2009 to 2013
and $750 per ounce from 2014 onwards.

Goodwill and impairment testing
The Company’s business combinations are accounted for using the purchase method of accounting whereby assets
acquired and liabilities assumed are recorded at their fair market values as of the date of acquisition and any excess
of the purchase price over such fair value is recorded as goodwill.

The Company evaluates on an annual basis the carrying amount of goodwill to determine whether current events and
circumstances indicate that such carrying amount may no longer be recoverable. To accomplish this, the Company
compares the fair value of its reporting units to their carrying amounts. If the carrying value of a reporting unit exceeds
its fair value, the Company compares the implied fair value of the reporting unit’s goodwill to its carrying amount,
and any excess of the carrying value over the fair value is charged to operations. Assumptions underlying the fair
value estimates are subject to significant risks and uncertainties. Goodwill totalling $2.2 million related to TJS was
reflected on the consolidated balance sheet at year-end 2008. A review of TJS’s fair value indicated that there was no
impairment of goodwill at December 31, 2008. We used a discount rate of 9% to calculate the net present value of
cash flows from TJS in order to estimate its implied fair value.

Operating costs
We report our operating costs in accordance with the Gold Institute Standard. Future operating costs include estimates
of foreign currency exchange and inflation trends.

30 Eldorado Gold

Stock-based compensation
We use the Black-Scholes Model to determine the fair value for awards of stock options to employees, officers and
directors. Key assumptions used in this model are share price, volatility and expected life of options.

Asset retirement obligation
When assessing the carrying value of the asset retirement obligation, we estimate, among other things, the mine
closure date, the credit-adjusted risk-free rate, the inflation rate and the timing of reclamation costs.

Income taxes
Income taxes are recorded using income tax rates expected to apply in the years in which the temporary differences
are estimated to be recovered or settled. In circumstances where the applicable tax laws and regulations are either
unclear or subject to varying interpretations, it is reasonably possible that changes in these estimates could occur that
would materially affect the amount of income tax liabilities recorded at the balance sheet date.

Financial instruments
Investments classified as held for trading and derivative financial instruments are reported at fair value with unrealized
gains or losses included in earnings. Fair values are determined directly by reference to published price quotations in
an active market when available, or by using a valuation technique that uses inputs observed from the market.

Pension plans
To measure the obligations and expenses of pension plans, we are required to set various actuarial assumptions
including a long-term estimate of the expected rate of return on plan assets, the discount rate, the rate of salary
escalation and the average remaining service period of active employees expected to receive benefits. The following
table outlines the key assumption of our pension plans:

Expected long term rate of return on plan assets
Discount rate beginning of year
Discount rate end of year
Rate of salary escalation
Average remaining service period of active employees
expected to receive benefits

December 31, 2008

Pension Plan
6.50%
5.25%
7.50%
4.50%
5 years

SERP
6.50%
5.25%
7.50%
4.50%
5 years

13.

Future Canadian Accounting Pronouncements

The CICA has issued three new standards and an EIC abstract that may affect Eldorado’s financial disclosures and
results of operations for interim and annual periods beginning January 1, 2009, 2010 and 2011. We will adopt the
requirements beginning in the interim period ended March 31, 2009, 2010 and 2011 and we are considering the
impact this will have on our financial statements.

Goodwill and Intangible Assets (Section 3064)
In February 2008, the CICA issued Section 3064, “Goodwill and Intangible Assets”, which replaces Section 3062,
“Goodwill and Other Intangible Assets”. This new standard provides guidance on the recognition, measurement,
presentation and disclosure of goodwill and intangible assets and is effective beginning January 1, 2009. Concurrent
with the adoption of this standard, EIC-27, “Revenues and Expenditures in the Pre-operating Period”, will be withdrawn.

2008 Annual Report

MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

This will result in a change to our accounting for the start-up of mining operations, as pre-commercial production costs
will no longer be capitalized as an asset. The adoption of this new accounting policy will not have any material impact
on the Company’s consolidated financial statements.

Business Combinations (Section 1582)
In January 2009, the CICA issued Handbook Section 1582, “Business Combinations” (“CICA 1582”). CICA 1582
requires that all assets and liabilities of an acquired business be recorded at fair value at acquisition. Obligations for
contingent considerations and contingencies will also be recorded at fair value at the acquisition date. The standard
also states that acquisition-related costs will be expensed as incurred and that restructuring charges will be expensed
in the periods after the acquisition date. The Section applies prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting period on or after January 1, 2011.

Consolidations (Section 1601) and Non-Controlling Interest (Section 1602)
In January 2009, the CICA issued Handbook Section 1601, “Consolidations” (“CICA 1601”), and Section 1602,
“Non-Controlling Interests” (“CICA 1602”). CICA 1601 establishes standards for preparing consolidated financial
statements and CICA 1602 establishes standards for accounting for a non-controlling interest in a subsidiary in
consolidated financial statements subsequent to a business combination. These standards apply to interim and
annual consolidated financial statements relating to fiscal years beginning on or after January 1, 2011. The Company
is currently assessing the impact of the new standard on its consolidated financial statements.

Credit Risk and the Fair Value of Financial Assets and Financial Liabilities (EIC Abstract 173)
In January 2009, the CICA issued EIC Abstract 173, “Credit Risk and the Fair Value of Financial Assets and Financial
Liabilities”. The EIC requires the Company to take into account the Company’s own credit risk and the credit risk of the
counterparty in determining the fair value of financial assets and financial liabilities, including derivative instruments.
This abstract applies to interim and annual consolidated financial statements relating to fiscal years beginning on
or after January 1, 2010. We are currently assessing the impact of the new standard on our consolidated financial
statements.

International Financial Reporting Standards (“IFRS”)
We have established a changeover plan to adopt IFRS by 2011 and have created an implementation team. The
implementation team has started the process of assessing accounting policy choices and elections that are allowed
under IFRS. We are also assessing the impact of the conversion on our business activities, including the effect on
information technology and data systems, internal controls over financial reporting and disclosure controls. We will
continually review and adjust our changeover plan to ensure our implementation process properly addresses the key
elements of the plan.

14.

Other Risks and Uncertainties

Exploration and development
The costs and results of our exploration and development programs affect our profitability and value. Since mines
have finite lives based on proven reserves, we actively seek to replace and expand our reserves, primarily through
recognizance exploration and acquiring, exploring and developing our existing operations. Exploration for minerals
involves many risks and may not result in any new economically viable mining operations or yield new reserves to
replace and expand current reserves. Determination of reserves is a process of estimation and, as such, reserve
calculations are subject to the assumptions and limitations of the estimation process.

Acquiring title to mineral properties is a detailed and time-consuming process. We take steps, in accordance with
industry standards, to verify and secure legal title to mineral properties in which we have or are seeking an interest.

32 Eldorado Gold

Although we take every precaution to ensure that legal title to our properties is properly recorded in the name of
Eldorado, there can be no assurance that such title will ultimately be secured on every property. The legal title to our
properties depends on the appropriate and consistent application of the laws in the countries in which we operate.

Operations
The business of gold mining involves many operational risks and hazards. We work to reduce the risks associated with
our projects through high operational standards, an emphasis on hiring and training appropriately skilled personnel
and operational improvements. We also maintain adequate insurance to cover normal business risk.

We also rely on a number of key employees. Our success depends on attracting and retaining qualified personnel in a
competitive labour environment.

Environment
Our activities are subject to extensive federal, provincial, state and local laws and regulations governing environmental
protection and employee health and safety. We must obtain governmental permits and provide associated financial
assurance to carry on certain activities. We are also subject to various reclamation-related conditions imposed under
federal, state or provincial air, water quality and mine reclamation rules and permits.

While we have budgeted for future capital and operating expenditures to maintain compliance with environmental laws
and permits, any future changes to these laws could adversely affect Eldorado’s financial condition, liquidity or results
of operations.

Laws and regulations
Eldorado’s mining operations and exploration activities are subject to extensive federal, provincial, state and local
laws and regulations governing prospecting, development, production, exports, taxes, labour standards, occupational
health and safety, mine safety and other matters. These laws and regulations are subject to change, which may restrict
our ability to operate. We draw on the expertise and commitment of our management team, advisors, employees and
contractors to ensure compliance with current laws, and we foster a climate of open communication and co-operation
with regulatory bodies.

Litigation
All industries, including the mining industry, are subject to legal claims, with and without merit. In addition to the
litigation in Turkey as described under Item 6 – Legal of this MD&A and under the heading “Development Projects
– Turkey Projects” in the Company’s Annual Information Form and the litigation risks discussed therein, we are also
involved in various legal proceedings. Defence and settlement costs can be substantial, even with respect to claims
that have no merit. Due to the inherent uncertainty of the litigation process, there can be no assurance that the
resolution of any particular legal proceeding will not have a material adverse effect on our future cash flow, results of
operations or financial condition.

Political risk
Eldorado conducts operations in a number of countries outside of North America, namely Turkey, China, Brazil and
Greece. These operations are potentially subject to a number of political, economic and other risks that may affect our
future operations and financial position.

15.

Non-GAAP Measures

Throughout this document, we have provided measures prepared according to Canadian generally accepted
accounting principles (GAAP), as well as some non-GAAP performance measures. Because the non-GAAP performance

2008 Annual Report

MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

measures do not have any standardized meaning prescribed by GAAP, they may not be comparable to similar measures
presented by other companies. We provide these non-GAAP measures as they are used by some investors to evaluate
Eldorado’s performance. Accordingly, they are intended to provide additional information and should not be considered
in isolation or as a substitute for measures of performance prepared in accordance with Canadian GAAP. We have
defined the non-GAAP measures below and reconciled them to reported GAAP measures.

Unit costs
A reconciliation of cash operating costs calculated in accordance with the Gold Institute Standard to the cost of sales is
included below:

Cash operating cost

($000s, except cash operating cost per ounce)

Gold ounces sold
Operating costs
Royalty expense and production taxes
Effects of inventory adjustments
Fair value of stock option grants
Expense of contractual severance costs
Expense of certain development costs
Cash operating cost

Cash operating cost per ounce

2008
316,918
$92,004
(10,117)
625
(1,526)
-
-
$ 80,986

$ 257

2007
266,012
$72,691
(7,343)
(979)
(1,504)
-
(113)
$ 62,752

$ 236

2006
127,552
$45,850
(824)
(771)
(359)
(1,377)
(1,129)
$ 41,390

$ 324

Cash operating costs are calculated in accordance with the Gold Institute Standard. Cash costs are derived from
amounts included in the Consolidated Statements of Operations.

16.

Other MD&A Requirements

Additional information relating to the Company, including the Company’s Annual Information Form, is available on
SEDAR at www.sedar.com.

17.

Disclosure of Outstanding Share Data

The following table describes the share capital structure as at March 18, 2009, the date of this MD&A. These figures
may be subject to minor accounting adjustments prior to presentations in future consolidated financial statements.

Equity Type

Common shares

Share purchase options

18.

Control and Procedures

Weighted average exercise
price per share
Cdn$

Total number of common
shares

5.93

370,329,056

11,650,887

Disclosure controls and procedures
Disclosure controls and procedures are designed to provide reasonable assurance that material information is
gathered and reported to senior management, including the Chief Executive Officer and Chief Financial Officer, as
appropriate to permit timely decisions regarding public disclosure.

34 Eldorado Gold

Management, including the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of
the design and operation of the Company’s disclosure controls and procedures, as defined in the rules of the U.S.
Securities and Exchange Commission and Canadian Securities Administration, as at December 31, 2008. Based on
this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure
controls and procedures were effective to a reasonable assurance standard to ensure that information required to
be disclosed in reports filed or submitted by the Company under United States and Canadian securities legislation is
recorded, processed, summarized and reported within the time periods specified in those rules.

Management’s report on internal control over financial reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over financial
reporting. Any system of internal control over financial reporting, no matter how well designed, has inherent limitations.
Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to
financial statement preparation and presentation.

Management has used the Committee of Sponsoring Organizations of the Treadway Commission (COSO) framework
to evaluate the effectiveness of the Company’s internal control over financial reporting. Based on this assessment,
management has concluded that as at December 31, 2008, the Company’s internal control over financial reporting
was effective.

On July 7, 2008, we completed our acquisition of Frontier Pacific Mining Corporation (“Frontier”). We consider the
acquisition of Frontier non-material to our results of operations, financial position and cash flows from the date of
acquisition through December 31, 2008, and believe that the internal controls and procedures at Frontier have a
non- material effect on our internal control over financial reporting. We are in the process of integrating the Frontier
operations and will be expanding our internal control over financial reporting compliance program to include Frontier
over the next year. We excluded Frontier from our annual assessment of internal control over financial reporting for
the year ended December 31, 2008 as permitted by the Sarbanes-Oxley Act and applicable rules relating to business
acquisitions. The Frontier operations represent $220 million of total assets and $nil of consolidated revenues as at
and for the year ended December 31, 2008.

Management’s assessment of the effectiveness of internal control over financial reporting has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, who have expressed their opinion in
their report included with the Company’s annual consolidated financial statements.

Changes in internal control over financial reporting
There have been no changes in the Company’s internal control over financial reporting during the year ended
December 31, 2008 that have materially affected, or are reasonably likely to materially affect, its internal control over
financial reporting.

19.

Cautionary Statement on Forward-Looking Information

Certain statements and information in this MD&A, including all statements that are not historical facts, contain
forward-looking statements and forward-looking information within the meaning of applicable US and Canadian
securities laws. Such forward-looking statements or information include, but are not limited to, statements or
information with respect to financial disclosure, the future price of gold, estimation of mineral reserves and exploration
and development capital requirements, and our goals and strategies. Often, these statements include words such
as “plans”, “expects” or “does not expect”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”,
“anticipates” or “does not anticipate” or “believes” or variations of such words and phrases or statements that certain
actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved.

2008 Annual Report

MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

With respect to forward-looking statements and the information included in this MD&A, we have made numerous
assumptions, including, among other things, assumptions about the price of gold, anticipated costs and expenditures
and our ability to achieve our goals, even though our management believes that the assumptions made and the
expectations represented by such statements or information will prove to be accurate. By their nature, forward-looking
statements and information are based on assumptions and involve known and unknown risks, uncertainties and other
factors that may cause our actual results, performance or achievements, or industry results, to be materially different
from future results, performance or achievements expressed or implied by such forward-looking information. Such
risks, uncertainties and other factors include among other things the following: gold price volatility; discrepancies
between actual and estimated production and mineral reserves and resources; the speculative nature of gold
exploration; mining operational and development risk; and regulatory risks.

See our Annual Information Form for additional information on risks, uncertainties and other factors relating to the
forward-looking statements and information. Although we have attempted to identify factors that would cause actual
actions, events or results to differ materially from those disclosed in the forward-looking statements or information,
there may be other factors that cause actual results, performances, achievements or events not to be anticipated,
estimated or intended. Also, many of the factors are beyond our control. Accordingly, readers should not place undue
reliance on forward-looking statements or information. We undertake no obligation to reissue or update forward-
looking statements or information as a result of new information or events after the date of this MD&A except as
may be required by law. All forward-looking statements and information made in this document are qualified by this
cautionary statement.

Eldorado’s consolidated financial statements are prepared in accordance with Canadian GAAP and are filed with
appropriate regulatory authorities in Canada and the United States.

36 Eldorado Gold

MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING

The management of Eldorado Gold Corporation is responsible for the integrity and fair presentation of the financial
information contained in this annual report. Where appropriate, the financial information, including financial
statements, reflects amounts based on management’s best estimates and judgments. The financial statements
have been prepared in accordance with accounting principles generally accepted in Canada. Financial information
presented elsewhere in the annual report is consistent with that disclosed in the financial statements.

Management is responsible for establishing and maintaining adequate internal control over financial reporting.
Management has established and maintains a system of internal accounting control designed to provide reasonable
assurance that assets are safeguarded from loss or unauthorized use, financial information is reliable and accurate
and transactions are properly recorded and executed in accordance with management’s authorization. This system
includes established policies and procedures, the selection and training of qualified personnel and an organization
providing for appropriate delegation of authority and segregation of responsibilities. Any system of internal control
over financial reporting, no matter how well designed, has inherent limitations. Therefore, even those systems
determined to be effective can provide only reasonable assurance with respect to financial statement preparation and
presentation.

Management has a process in place to evaluate internal control over financial reporting based on the criteria
established by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control
– Integrated Framework. Based on this assessment, management has concluded that as at December 31, 2008, the
Company’s internal control over financial reporting was effective.

The Board of Directors oversees management’s responsibility for financial reporting and internal control systems
through an Audit Committee, which is composed entirely of independent directors. The Audit Committee meets
periodically with management, the Company’s outside advisors and the independent auditors to review the scope and
results of the annual audit and to review the financial statements and related financial reporting and internal control
matters before the financial statements are approved by the Board of Directors and submitted to the Company’s
shareholders.

PricewaterhouseCoopers LLP, an independent registered public accounting firm appointed by the shareholders, has
audited the Company’s financial statements in accordance with Canadian generally accepted auditing standards and
the standards of the Public Company Accounting Oversight Board (United States) and has expressed its opinion in the
auditors’ report. The effectiveness of the Company’s internal control over financial reporting as at December 31, 2008
has also been audited by PricewaterhouseCoopers LLP, and their opinion is included in their report.

Paul N. Wright
President and Chief Executive Officer

Earl W. Price
Chief Financial Officer

March 18, 2009
Vancouver, British Columbia, Canada

2008 Annual Report

INDEPENDENT AUDITORS’ REPORT

To the Shareholders of Eldorado Gold Corporation

We have completed integrated audits of the consolidated balance sheets as at December 31, 2008 and 2007 and the
related consolidated statements of operations and deficit, comprehensive income and cash flows for each of the years
in the three-year period ended December 31, 2008 of Eldorado Gold Corporation (the “Company”) and of its internal
control over financial reporting as at December 31, 2008. Our opinions, based on our audits, are presented below.

Consolidated financial statements

We have audited the accompanying consolidated balance sheets of the Company as at December 31, 2008 and 2007,
and the related consolidated statements of operations and deficit, comprehensive income and cash flows for each
of the years in the three-year period ended December 31, 2008. These financial statements are the responsibility of
the Company’s management. Our responsibility is to express an opinion on these financial statements based on our
audits.

We conducted our audits of the Company’s consolidated financial statements in accordance with Canadian generally
accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform an audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit of financial statements includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. A financial statement audit also
includes assessing the accounting principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of the Company as at December 31, 2008 and 2007 and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 2008 in accordance with Canadian generally
accepted accounting principles.

Internal control over financial reporting

We have also audited the Company’s internal control over financial reporting as at December 31, 2008, based on
criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal
control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting
included in the Management’s Report on Internal Control over financial reporting included in the Management’s
Discussion & Analysis of Financial Condition and Results of Operations. Our responsibility is to express an opinion on
the Company’s internal control over financial reporting based on our audit.

We conducted our audit of internal control over financial reporting in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design
and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as
we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal control over financial reporting includes those
policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that

38 Eldorado Gold

transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance
with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have
a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as at
December 31, 2008 based on criteria established in Internal Control – Integrated Framework issued by the COSO.

Chartered Accountants
Vancouver, BC
March 18, 2009

2008 Annual Report

CONSOLIDATED BALANCE SHEETS

(Expressed in thousands of U.S. dollars)

December 31,
2008
$

December 31,
2007
$

Assets

Current assets

Cash and cash equivalents

Restricted cash (note 6)

Marketable securities (note 7)

Accounts receivable and other (note 8)

Inventories (note 9)

Derivative contract (note 10)

Future income taxes (note 16)

Restricted assets and other (note 11)

Mining interests (note 12)

Liabilities
Current liabilities

Accounts payable and accrued liabilities
Debt – current (note 13)
Future income taxes (note 16)

Debt – long-term (note 13)
Contractual severance obligations
Asset retirement obligations (note 14)
Future income taxes (note 16)

Non-controlling interest

Shareholders’ Equity
Share capital (note 17(a))
Contributed surplus (note 17(b))
Accumulated other comprehensive income (note 17(c))
Deficit

Commitments (note 20)

Approved on behalf of the Board of Directors

61,851

–

43,610

36,109

86,966

–

175

228,711

8,349

668,309

905,369

42,659
139
1,097
43,895
–
–
4,812
60,043
108,750

4,799

931,933
19,378
(5,971)
(153,520)
791,820

905,369

46,014

65,710

1,615

28,720

57,525

2,956

959

203,499

10,538

377,705

591,742

40,452
65,422
–
105,874
139
1,479
8,290
26,781
142,563

–

753,058
13,083
214
(317,176)
449,179

591,742

Robert Gilmore
Director

Paul N. Wright
Director

See accompanying notes to the consolidated financial statements.

40 Eldorado Gold

CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT

For the years ended December 31 (expressed in thousands of U.S. dollars, except per share amounts)

2008
$

2007
$

Revenue
Gold sales
Interest and other income

Expenses
Operating costs
Depletion, depreciation and amortization
General and administrative
Exploration
Mine standby costs
Asset retirement obligation costs (note 14)
Foreign exchange loss (gain)

Gain on disposal of assets
Gain on marketable securities
Interest and financing costs
Loss (gain) on derivative contract (note 10)
Writedown of assets

Income before income taxes and non-controlling interest

Income tax (expense) recovery (note 16)
Current
Future

Non-controlling interest

Net income for the year

Deficit, beginning of year:
As previously reported
Change in accounting policy
As adjusted
Deficit, end of year

Weighted average number of shares outstanding
Basic
Diluted

Earnings per share
Basic income (loss) per share – US$
Diluted income (loss) per share – US$

2006
$

77,641
7,048
84,689

45,850
1,763
19,030
12,719
–
661
(2,050)
77,973

(41)
(904)
1,586
–
2,186
80,800
3,889

(2,080)
1,491
(589)

277,723
10,508
288,231

92,004
25,995
38,299
12,316
2,432
3,108
176
174,330

(70,774)
(2,475)
2,940
2,956
–
106,977
181,254

(25,403)
12,904
(12,499)

(5,099)

179,302
9,397
188,699

72,691
20,041
26,798
11,634
6,575
604
(4,658)
133,685

(3,602)
(221)
3,415
(2,083)
–
131,194
57,505

(4,823)
(17,261)
(22,084)

–

163,656

35,421

3,300

(317,176)
–
(317,176)
(153,520)

(353,470)
873
(352,597)
(317,176)

(356,770)
–
(356,770)
(353,470)

355,132
356,308

343,194
344,621

337,376
339,177

0.46
0.46

0.10
0.10

0.01
0.01

See accompanying notes to the consolidated financial statements.

2008 Annual Report

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the years ended December 31 (expressed in thousands of U.S. dollars, unless otherwise stated)

Cash flows generated from (used in):

Operating activities
Net earnings for the year
Items not affecting cash

Asset retirement obligations costs
Contractual severance expense
Depletion, depreciation and amortization
Unrealized foreign exchange (gain) loss
Future income taxes (recovery) expense
Gain on marketable securities
Gain on disposal of assets
Imputed interest and financing costs
Stock-based compensation
Fair value of bonus cash award units
Pension expense
Non-controlling interest
Loss (gain) on derivative contract

Property reclamation payments
Contractual severance payments
Changes in non-cash working capital (note 19)

Investing activities
Mining interests

Acquisition of Frontier net of cash received (note 4)
Capital expenditures
Sales and disposals
Marketable securities

Purchases
Disposals

Pension plan contributions (note 15)
Value added taxes recoverable on mining interests
Restricted cash

Financing activities
Capital stock

Share issuance costs
Issuance of common shares for cash
Dividend paid to non-controlling interest
Long-term and bank debt

Proceeds
Repayments

Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents – beginning of year
Cash and cash equivalents – end of year
Supplementary cash flow information (note 19)

2008
$

2007
$

2006
$

163,656

35,421

3,300

3,108
–
25,995
(3,950)
(12,904)
(2,475)
(70,774)
39
11,866
1,815
1,478
5,099
2,956
125,909
(1,225)
(953)
(18,187)
105,544

7,479
(123,950)
5,214

(20,462)
25,737
(3,791)
–
71,515
(38,258)

–
14,730
(300)

5,000
(70,879)
(51,449)
15,837
46,014
61,851

604
721
20,041
796
17,261
(221)
(3,602)
67
7,267
–
–
–
(2,083)
76,272
(5,496)
(2,458)
1,487
69,805

–
(97,886)
1,482

(1,556)
663
–
–
5,540
(91,757)

–
9,500
–

24,859
(26,360)
7,999
(13,953)
59,967
46,014

661
1,377
1,763
–
(1,491)
(904)
(41)
91
3,542
–
–
–
–
8,298
–
(598)
(30,208)
(22,508)

–
(95,170)
1,845

–
–
–
(7,579)
(29,550)
(130,454)

(7,089)
171,225
–

15,367
(400)
179,103
26,141
33,826
59,967

See accompanying notes to the consolidated financial statements.

42 Eldorado Gold

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the year ended December 31 (expressed in thousands of U.S. dollars, unless otherwise stated)

2008
$

2007
$

Net earnings for the period ended December 31,

163,656

35,421

Other comprehensive income (loss)
Unrealized gains (losses) on available-for-sale investments (note 17(c))
Realized gains on available-for-sale investments (note 17(c))
Reversal on acquisition of Frontier (note 4)
Other than temporary impairment charges

(6,431)
(61)
(153)
460

209
(270)
-
-

Comprehensive income for the period ended December 31,

157,471

35,360

See accompanying notes to the consolidated financial statements.

2008 Annual Report

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007 (expressed in thousands of U.S. dollars, unless otherwise stated)

NOTE

44 Eldorado Gold

Nature of operations
Eldorado Gold Corporation (“Eldorado” or “the Company”) is a gold exploration, development,
mining and production company. The Company has ongoing exploration and development projects
in Brazil, China, Turkey and Greece. On July 1, 2006, the Company began production in Turkey, and
on February 1, 2007, the Company began production in China. Production at the Kişladağ mine in
Turkey was suspended in August 2007 as a result of a court injunction and the mine remained shut
down throughout the rest of that year. The court injunction was removed in February 2008 and the
mine restarted production on March 6, 2008. Production operations in Brazil ceased in the second
quarter of 2007 and the São Bento mine (“São Bento”) was sold to AngloGold Ashanti on December
15, 2008.

Significant accounting policies

Basis of presentation and principles of consolidation
These consolidated financial statements are prepared in accordance with Canadian generally
accepted accounting principles (“Canadian GAAP”) and presented in United States dollars.
As disclosed in note 24, Canadian GAAP differs in certain material respects from accounting
principles generally accepted in the United States (“US GAAP”). The consolidated financial
statements include the wholly owned and partially owned subsidiaries of the Company, the
most significant of which are presented below:

Subsidiary

Location

Ownership
interest

Status

Operations and
development projects
owned

Qinghai Dachaidan Mining
Ltd (QDML)

Tüprag Metal Madencilik
Sanayi ve Ticaret Anonim
Şirketi

Unamgen Mineração e
Metalurgia S/A

China

90%

Consolidated

TJS Gold Mine

Turkey

100%

Consolidated

Brazil

100%

Consolidated

Kişladağ Gold Mine
Efemcukuru Project

Vila Nova Iron Ore
Mine (75% owned)

Thracean Gold Mining SA

Greece

100%

Consolidated

Perama Hill Project

All material inter-company balances and transactions have been eliminated.

Use of estimates
The preparation of financial statements in accordance with Canadian GAAP requires
management to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period.
Significant areas requiring the use of management estimates include assumptions and
estimates relating to determining defined ore bodies, value beyond proven and probable
reserves, fair values for purposes of impairment analysis and valuation of derivative contracts,
reclamation obligations, non-cash stock-based compensation and warrants, pension benefits,
valuation allowances for future income tax assets and future income tax liabilities. Actual
results could differ from these estimates.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007 (expressed in thousands of U.S. dollars, unless otherwise stated)

NOTE

02continued

Cash and cash equivalents
Cash and cash equivalents consist of cash and highly liquid investments having maturity dates
of three months or less from the date of acquisition that are readily convertible to cash.

Inventories
i.

Product inventory consists of stockpiled ore, ore on leach pads, crushed ore, in-circuit
material at properties with milling or processing operations and doré awaiting refinement,
all of which are valued at the lower of average cost and net realizable value. Product
inventory costs consist of direct production costs including mining, crushing and
processing; site administration costs; and allocated indirect costs, including depreciation,
depletion and amortization of mining interests.

Inventory costs are charged to operations on the basis of ounces of gold sold. The
Company regularly evaluates and refines estimates used in determining the costs charged
to operations and costs absorbed into inventory carrying values based upon actual gold
recoveries and operating plans.

ii.

Materials and supplies inventory consists of consumables used in operations, such as
fuel, chemicals, reagents and spare parts, which are valued at the lower of average cost
and replacement cost and, where appropriate, less a provision for obsolescence.

Investments
On January 1, 2007, the Company adopted the new accounting standard related to financial
instruments. Under the standard, investments classified as available for sale are reported
at fair value with unrealized gains or losses excluded from earnings and reported as other
comprehensive income or loss until such gains or losses are realized or an other than
temporary decline in fair value has been determined to have occurred. Factors that contribute
to an other than temporary decline include a significant and prolonged decline in fair value
below its cost, and the existence of factors such as significant adverse changes in the market
and economic environments in which the Company operates, which indicate the prospects for
recovery in the fair value of the investment are compromised in the near term.

Investments classified as held-for-trading are reported at fair value with unrealized gains or
losses included in earnings. Marketable securities and investments in equity securities held
for the purpose of trading are classified as held-for-trading and those that are not held for the
purpose of trading are classified as available-for-sale.

Deposits
Deposits, such as those required by governmental authorities for possible environmental
liabilities, are classified as held-for-trading.

Financial instruments
Fair value estimates are made at the balance sheet date, based on relevant market
information and other information about the financial instruments.

Derivative financial instruments are reported at fair value with unrealized gains or losses
included in earnings. Fair values are determined directly by reference to published price
quotations in an active market, when available, or by using a valuation technique that uses
inputs observed from the markets.

2008 Annual Report

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007 (expressed in thousands of U.S. dollars, unless otherwise stated)

NOTE

02continued

Mining interests
Mining interests include development expenditures and property, plant and equipment
recorded at cost. Cost includes expenditures incurred on properties under development and
the estimated fair value of any related asset retirement obligation at the time the obligation is
originally recorded. Significant payments related to the acquisition of land and mineral rights
are capitalized as incurred.

Mineral properties, buildings, plant and equipment, and other assets whose estimated useful
life is the same as the remaining life of the mine are depreciated, depleted and amortized
over a mine’s estimated life using the units of production method calculated based on proven
and probable reserves. Capitalized development costs related to a multi-pit operation are
amortized on a pit-by-pit basis over the pit’s estimated life using the unit of production method
calculated based on proven and probable reserves related to each pit. Furniture and fixtures,
vehicles, computers and other assets whose estimated useful lives are less than the remaining
life of the mine are depreciated on a straight-line basis over the estimated useful life of the
assets.

When events or changes in circumstances suggest impairment of long-lived assets, estimated
undiscounted future net cash flows are calculated using estimated future gold prices, proven
and probable reserves, value beyond proven and probable reserves, and estimated net
proceeds from the disposition of assets on retirement less operating and sustaining capital
and reclamation costs. If projected undiscounted future cash flows are less than the carrying
value, the estimated fair value is calculated using discounted future net cash flows and the
asset is written down to fair value with an impairment charge to operations. Management
assesses the asset for impairment by comparing its fair value, determined using their best
estimates of fair value based on the information available.

Exploration and development
Exploration costs are charged against operations as incurred until a mineral resource having
economic potential is identified on a property, from which time a property is considered to be
a development project and such expenditures are capitalized as development costs. Costs
incurred after the property is placed into production that increase production volume or extend
the life of the mine are capitalized.

A mineral resource is considered to have economic potential when it is expected that proven
and probable reserves can be economically developed considering long-term metal prices.
Therefore, prior to capitalizing such costs, management determines that the following
conditions have been met:

There is a probable future benefit that will contribute to future cash inflows;

ii.

The Company can obtain the benefit and control access to it, and;

iii.

The transaction or event giving rise to the benefit has already occurred.

Foreign currency translation
Monetary assets and liabilities denominated in currencies other than the United States dollar
are translated into United States dollars using rates of exchange in effect at the balance sheet
date. Revenue and expense items denominated in foreign currencies are translated at average
rates. Non-monetary items are translated at historical rates. Any gains and losses are reflected
in earnings.

46 Eldorado Gold

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007 (expressed in thousands of U.S. dollars, unless otherwise stated)

NOTE

02continued

Capital lease obligations
Leases that transfer substantially all of the benefits and risks of ownership to the Company
are accounted for as capital leases. Assets recorded under capital leases are amortized on
a straight-line basis over the term of the lease. Obligations recorded under capital leases are
reduced by lease payments net of imputed interest.

Asset retirement obligations
Asset retirement obligations (“AROs”) represent the estimated discounted net present value
of statutory, contractual or other legal obligations relating to site reclamation and restoration
costs that the Company will incur on the retirement of assets and abandonment of mine and
exploration sites. AROs are added to the carrying value of property, plant, equipment and
mining interests as such expenditures are incurred and amortized against income over the
useful life of the related asset. AROs are determined in compliance with recognized standards
for site closure and mine reclamation established by government regulation.

Over the life of the asset, imputed interest on the ARO liability is charged to operations as
“accretion of asset retirement obligations” using the discount rate used to establish the ARO.
The offset of accretion expense is added to the balance of the ARO.

Where information becomes available that indicates a recorded ARO is not sufficient to meet,
or exceeds, anticipated obligations, the obligation is adjusted accordingly and added to, or
deducted from, the ARO. In the event that the adjustment occurs after the mine in question
has closed, the adjustment is added to or deducted from earnings.

Stock-based compensation
Stock-based compensation is measured at the estimated fair value of the consideration
received or the estimated fair value of the equity instruments issued or liabilities incurred,
whichever estimate is more reliable. Compensation expense is recognized on the graded
method over the stock option vesting period. The fair values attributable to unvested stock
options that are forfeited are credited to earnings.

Bonus cash award units are measured at the amount by which the quoted market value of the
shares covered by the grant exceeds the option price.

Income taxes
Future income taxes are recognized for the future income tax consequences attributable to
differences between the carrying values of assets and liabilities and their respective income
tax bases. Future income tax assets and liabilities are measured using income tax rates
expected to apply in the years in which temporary differences are expected to be recovered
or settled. The effect on future tax assets and liabilities of a change in rates is included in
operations. A future income tax asset is recorded when the probability of the realization is
more likely than not.

Revenue recognition
Revenue from the sale of bullion is recognized when persuasive evidence of an arrangement
exists, the bullion has been shipped, title has passed to the purchaser, the price is fixed or
determinable, and collection is reasonably assured.

2008 Annual Report

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007 (expressed in thousands of U.S. dollars, unless otherwise stated)

NOTE

02continued

Earnings (loss) per share
Basic earnings per share is computed by dividing net income or loss by the weighted average
number of outstanding common shares for the year.

The computation of diluted earnings per share reflects the dilutive effect of the exercise of
stock options and warrants outstanding as at year-end using the treasury stock method.

Capitalization of interest
Where the Company has secured debt financing to finance the cost of specific projects,
interest is capitalized on the related construction and development project until the project
begins commercial operation or the development ceases.

Stripping costs
Stripping costs incurred during the production phase of a mine are considered production
costs and are included in the cost of inventory produced during the period in which stripping
costs are incurred. Pre-stripping costs incurred to prepare the ore body for extraction are
capitalized as mine development costs. Production is deemed to have commenced when
saleable minerals are extracted from an ore body.

Mine standby and restructuring costs
Mine standby costs and costs related to restructuring a mining operation are charged directly
to expense in the period incurred. Examples of mine standby costs are labour, maintenance
and mine support costs during temporary shutdowns of a mine. Examples of restructuring
costs are severance payments to employees laid off as a result of outsourcing the mining
function.

Defined benefit pension plan
Defined benefit pension plan obligations are based on actuarial determinations. The projected
benefit method prorated on services is used to determine the accrued benefit obligation.
Actuarial assumptions used to determine defined benefit pension plan liabilities are based
upon our best estimates of expected plan performance, salary escalation rates and retirement
dates of employees. The expected return on plan assets is estimated based on the fair value of
plan assets, asset allocation and expected long-term returns on these components.

Past service costs are amortized on a straight-line basis over the expected average remaining
service period of active members at the time of the past service event.

Differences between the actuarial liabilities and the amounts recorded in the financial
statements will arise from changes in plan assumptions, changes in benefits or through
experience as results differ from actuarial assumptions. Cumulative differences that are
greater than 10% of either the fair value of the plan assets or the accrued benefit obligation,
whichever is greater, are amortized over the expected average remaining service period of
active members.

Certain comparative figures have been reclassified to conform to the current year’s presentation.

48 Eldorado Gold

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007 (expressed in thousands of U.S. dollars, unless otherwise stated)

NOTE

Changes in accounting policies and new accounting developments

Capital Disclosures (Section 1535)
Effective January 1, 2008, Eldorado adopted Section 1535, “Capital Disclosures”, which requires
disclosure of qualitative and quantitative information that enables readers to evaluate the
Company’s objectives, policies and processes for managing capital as well as the implications of
non-compliance. Disclosures required by this standard are included in note 21.

Inventories (Section 3031)
Effective January 1, 2008, the Company adopted Section 3031, “Inventories”. This Section
prescribes the accounting treatment for inventories and provides guidance on the determination
of inventory cost and its subsequent recognition as an expense, including any writedown to net
realizable value. It also provides guidance on the cost formulas used to assign costs to inventories.
The adoption of this new accounting policy did not have any impact on the Company’s consolidated
financial statements.

Financial Instruments – Disclosures (Section 3862) and Presentation (Section 3863)
Effective January 1, 2008, Eldorado adopted Section 3862, “Financial Instruments – Disclosures”
and Section 3863 “Financial Instruments – Presentation”. These sections require entities to
disclose quantitative and qualitative information in their financial statements that enables readers
to evaluate (a) the significance of financial instruments for the entity’s financial position and
performance; and (b) the nature and extent of risks arising from financial instruments to which the
entity is exposed during the period and at the balance sheet date, and management’s objectives,
policies and procedures for managing such risks. Disclosures required by these standards are
included in note 22.

Income statement presentation of tax loss carryforward recognized following an
unrealized gain recorded in other comprehensive income (EIC Abstract 172)
In August 2008, the CICA issued EIC-172, “Income statement presentation of tax loss carryforward
recognized following an unrealized gain recorded in other comprehensive income”. This new
abstract provides guidance on whether the tax benefit from recognizing tax loss carryforwards
consequent to the recording of unrealized gains in other comprehensive income, such as
unrealized gains on available-for-sale financial assets, should be recognized in net income or in
other comprehensive income. This abstract should be applied retrospectively, with restatement of
prior periods from the date of adoption of Section 3855, “Financial Instruments”, for all interim
and annual reporting periods ending on or after December 31, 2008. The adoption of this new
accounting policy did not have any impact on the Company’s consolidated financial statements.

Goodwill and Intangible Assets (Section 3064)
In February 2008, the CICA issued Section 3064, “Goodwill and Intangible Assets”, which replaces
Section 3062, “Goodwill and Other Intangible Assets”. This new standard provides guidance on
recognizing, measuring, presenting and disclosing goodwill and intangible assets and is effective
beginning January 1, 2009 and applies prospectively.

Concurrent with the adoption of this standard, EIC-27, “Revenues and Expenditures in the Pre-
operating Period”, will be withdrawn. This will result in a change to the Company’s accounting for
the start-up of mining operations, as pre-commercial production costs will no longer be capitalized
as an asset. The adoption of this new accounting policy will not have any material impact on
Eldorado’s consolidated financial statements.

2008 Annual Report

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007 (expressed in thousands of U.S. dollars, unless otherwise stated)

NOTE

03continued

Business Combinations (Section 1582)
In January 2009, the CICA issued Handbook Section 1582, “Business Combinations”, which
requires that all assets and liabilities of an acquired business be recorded at fair value at
acquisition. Obligations for contingent considerations and contingencies will also be recorded
at fair value at the acquisition date. The standard also states that acquisition-related costs will
be expensed as incurred and that restructuring charges will be expensed in the periods after
the acquisition date. The Section applies prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting period on or after January
1, 2011.

Consolidations (Section 1601) and Non-Controlling Interest (Section 1602)
In January 2009, the CICA issued Handbook Section 1601, “Consolidations” (“CICA 1601”), and
Section 1602, “Non-Controlling Interests” (“CICA 1602”). CICA 1601 establishes standards for
preparing consolidated financial statements and CICA 1602 establishes standards for accounting
for a non-controlling interest in a subsidiary in consolidated financial statements subsequent
to a business combination. These standards apply to interim and annual consolidated financial
statements relating to fiscal years beginning on or after January 1, 2011. The Company is currently
assessing the impact of the new standard on its consolidated financial statements.

Credit Risk and the Fair Value of Financial Assets and Financial Liabilities (EIC
Abstract 173)
In January 2009, the CICA issued EIC Abstract 173, “Credit Risk and the Fair Value of Financial
Assets and Financial Liabilities”. The EIC requires the Company to take into account the Company’s
own credit risk and the credit risk of the counterparty in determining the fair value of financial
assets and financial liabilities, including derivative instruments. This abstract applies to interim
and annual consolidated financial statements relating to fiscal years beginning on or after January
1, 2010. The Company is currently assessing the impact of the new standard on its consolidated
financial statements.

50 Eldorado Gold

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007 (expressed in thousands of U.S. dollars, unless otherwise stated)

NOTE

Acquisition of Frontier Pacific Mining Corporation
Eldorado completed the acquisition of all of the issued and outstanding common shares of
Frontier Pacific Mining Corporation (“Frontier”) on July 7, 2008. As a result, Eldorado acquired a
100% interest in the Perama Hill gold project in Greece and other exploration projects in Peru and
Colombia.

Under the terms of the offer, each Frontier common share was exchanged for 0.122 common
shares of Eldorado, C$0.0001 in cash and one Exchange Receipt. Each Exchange Receipt entitles
the holder to receive an additional 0.008 Eldorado common shares if, prior to July 1, 2009, a
Joint Ministerial Resolution is issued in Greece by the Joint Ministerial Council (comprised of the
ministries of the Environment, Agriculture, Development and Health), accepting the Environmental
Terms of Reference drafted by the Ministry of Environment regarding the Perama Hill project.

The Company issued 20,339,334 common shares and paid $16 in cash in connection with this
transaction. No value was assigned to the Exchange Receipts as the Company considers it highly
unlikely that the condition for their exchange into Eldorado shares will be met. Eldorado incurred
acquisition costs of $3,935.

As at the date of the transaction, Eldorado held 4,871,300 common shares of Frontier with a
total cost of $3,412, net of the reversal of the unrealized gain of $153 included in comprehensive
income.

This transaction has been accounted for as an asset acquisition because Frontier was in the
development stage. These consolidated financial statements include 100% of Frontier results from
July 7, 2008 to December 31, 2008.

The allocation of the purchase price of the shares of Frontier is as follows:

Purchase price:
Share consideration
Cash consideration
Cost of shares previously acquired
Transaction costs
Total purchase price

Fair value of net assets acquired:
Cash
Accounts receivables and other
Other assets
Mining interests
Liabilities
Due to Eldorado
Future income taxes payable

158,574
16
3,412
3,935
165,937

11,947
1,135
154
207,091
(2,434)
(517)
(51,439)
165,937

As at July 6, 2008, Frontier had borrowed $517 from the Company to fund ongoing administration
costs. Amounts owing are eliminated on consolidation from July 7, 2008 forward.

Eldorado received net cash proceeds from the Frontier transaction of $7,479, made up of an
acquired cash balance of $11,947 less cash consideration of $16, transaction costs of $3,935 and
intercompany debt outstanding of $517.

2008 Annual Report

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007 (expressed in thousands of U.S. dollars, unless otherwise stated)

NOTE

05 continued

Sale of São Bento Gold Ltd. and São Bento Mineração S.A.
Effective December 15, 2008, Eldorado sold its wholly owned Bermudian subsidiary, São Bento
Gold Ltd. and its wholly owned Brazilian subsidiary São Bento Mineração S.A. to AngloGold
Ashanti. The Company received $70,000 payable by the issuance of 2,701,660 common shares of
AngloGold Ashanti. Costs of disposition totalled $426. There were no taxes payable as a result of
the transaction. The gain on sale is calculated as follows:

Assets
Current assets
Cash
Accounts receivable
Inventories
Tax receivable

Mining interest
Total Assets

Liabilities
Current liabilities
Account payable
Contractual severance obligations
Current portion of asset retirement obligations

Asset retirement obligations
Future income taxes
Total Liabilities

Consideration received – shares
Costs of disposition

Gain on disposition of subsidiary

104
341
733
1,653
2,831

6,611
9,442

4,453
526
1,603
6,582

4,489
1,252
12,323

(2,881)

70,000
(426)

72,455

06 Restricted cash

Restricted cash represents short-term interest-bearing money market securities and funds held on
deposit as collateral. As at December 31, 2008, the Company had repaid all the amounts drawn
previously on its revolving credit facilities for Turkey and China.

Collateral account against the HSBC bank loan – Turkey (note 13(a))
Collateral account against the HSBC bank loan – China (note 13(b))
Electricity deposit

December 31,
2008
$

December 31,
2007
$

–
–
–
–

55,000
10,500
210
65,710

52 Eldorado Gold

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007 (expressed in thousands of U.S. dollars, unless otherwise stated)

NOTE

07 Marketable securities

Marketable securities – Available for sale
Marketable securities – Held for trading
Warrants – Held for trading

08 Accounts receivable and other

Value added and other taxes recoverable
Other receivables and advances
Prepaid expenses and deposits

Inventories

Ore stockpiles
In-process inventory including doré
Materials and supplies

December 31,
2008
$
12,084
31,514
12
43,610

December 31,
2007
$
1,615
–
–
1,615

December 31,
2008
$
8,454
20,535
7,120
36,109

December 31,
2007
$
19,829
3,986
4,905
28,720

December 31,
2008
$
24,199
43,825
18,942
86,966

December 31,
2007
$
8,484
33,573
15,468
57,525

Derivative contract
In December 2004, São Bento Mineração SA entered into an energy supply contract with
Companhia Energetica de Minas Gerais (“CEMIG”). With the closure of São Bento in 2007, the
energy contracted for 2007 and 2008 exceeded the estimated consumption for that period and,
accordingly, this contract was accounted for as a derivative financial instrument, which is measured
at fair value with unrealized gains or losses reported in earnings.

In accordance with the transitional provision of the financial instrument standard, the asset fair
value of this contract of $873 as at January 1, 2007 has been recorded with a credit directly to
deficit.

2008 Annual Report

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007 (expressed in thousands of U.S. dollars, unless otherwise stated)

NOTE

10continued

The fair value as at December 31, 2007 was calculated based on a capital asset pricing model
(“CAPM”) to estimate the forward price of Brazilian electricity for 2008, adjusted by the Brazilian
real and US dollar forward exchange rates and then discounted for time value.

CAPM estimates the risk-adjustment applied to spot electricity prices as a means to deriving a
forward price.

Assumptions used to calculate the fair value of this contract as at December 31, 2007 are as
follows:

Quantity of energy to purchase
Set price per contract
Spot price in Brazilian reals
Forward price of energy (range)
US treasury yield (range)

78,880.20 MWh
$24.50/MWh
R$502.45/MWh
$111.78/MWh – $54.75/MWh
2.90% – 3.31%

This resulted in a fair value of the asset of $2,956 and the recognition of an unrealized gain for the
year ended December 31, 2007 of $2,083.

As a result of the sale of the mine on December 15, 2008, the balance of the derivative contract at
December 31, 2008 was nil.

11 Restricted assets and other

Environmental guarantee deposit
Restricted long-term asset – SERP (note 15)
Accrued pension benefit asset
Goodwill

December 31,
2008
$
2,495
3,505
111
2,238
8,349

December 31,
2007
$
8,300
–
–
2,238
10,538

The environmental guarantee deposit is held on account with a Turkish bank pursuant to
environmental and pollution guarantees required by the Turkish Ministry of the Environment. The
funds earn interest at prevailing bank rates, and the interest earned on these deposits is included
in interest and other income.

54 Eldorado Gold

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007 (expressed in thousands of U.S. dollars, unless otherwise stated)

NOTE

12 Mining interests

Producing properties
Properties under development

Other mineral interests

Producing properties
Properties under development

Other mineral interests

December 31, 2008
Accumulated
depreciation,
depletion and
amortization

$
60,086
494
60,580
–
60,580

December 31, 2007

Accumulated
depreciation,
depletion and
amortization

$
32,961
–
32,961

–

32,961

Net book
value

$
355,634
300,665
656,299
12,010
668,309

Net book
value

$
334,030
43,675
377,705

–

377,705

Cost

$
415,720
301,159
716,879
12,010
728,889

Cost

$
366,991
43,675
410,666

–

410,666

Debt

Current:
HSBC term revolving credit facility
HSBC revolving credit facility due November 30, 2008
Sino Gold Limited loan

Long-term:
Sino Gold loan due December 31, 2009

December 31,
2008
$

December 31,
2007
$

–
–
139
139

–
–

55,000
10,062
360
65,422

139
139

HSBC term revolving credit facility
HSBC has authorized advances of up to $65,000 to Tüprag Metal Madencilik Sanayi Ve Ticaret
Limited Surketi (“Tüprag”), a wholly owned subsidiary of the Company, under the terms of a
term revolving credit facility due February 28, 2010 (the “Credit Facility”). As at December 31,
2008, the Company has repaid all the amounts drawn previously on the facility. The Credit

2008 Annual Report

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007 (expressed in thousands of U.S. dollars, unless otherwise stated)

NOTE

13continued

Facility can be drawn down in minimum tranches of $1,000 plus multiples of $250. Each
drawdown bears interest fixed at the prevailing LIBOR plus 0.50% on the date the tranche is
drawn down.

Under the terms of the Credit Facility, Eldorado is required to fully collateralize any HSBC
advances to Tüprag with funds of an equal amount deposited on account with HSBC (note 6).

HSBC revolving credit facility
In November 2007, Qinghai Dachaidan Mining Limited (“QDML”), our 90% owned subsidiary,
entered into a $15,000 revolving facility (“the Facility) with HSBC Bank (China). As at
December 31, 2008, the Company has repaid all amounts previously drawn on the Facility. The
Facility can be drawn down in minimum tranches of $100 or in integral multiples of $10. Each
drawdown bears interest fixed at the prevailing lending rate stipulated by the People’s Bank
of China with a 10% markdown. The Facility has a term of one year and is subject to annual
review and renewal. In November 2008, the Facility was renewed for a second year and the
interest rate is fixed at 1.2 times the prevailing lending rate stipulated by the People’s Bank of
China.

The facility is collateralized by way of irrevocable letter of credit drawn on HSBC Bank USA,
National Association (“HSBC”). Eldorado should maintain at all times a security coverage ratio
of 110% of the amounts drawn down. The letter of credit has an expiry date of December 1,
2009 and is collateralized by Eldorado’s funds held by HSBC as restricted cash.

Subsequent to year-end, QDML drew down $5,000 under the Facility.

Sino Gold loan
The consideration paid for the Tanjianshan property in 2003 included a non-interest-bearing
loan from Sino Gold Limited (the “Loan”). Imputed interest has been calculated using a
discount rate of 8%.

The Loan is repayable in equal annual instalments of $400 on December 31 of each year until
2008, with a final instalment of $150 due on December 31, 2009. Payment of the third annual
instalment was made in December 2008, resulting in an outstanding balance at December 31,
2008 of $139 excluding imputed interest.

Fair value of loan outstanding
Less: imputed interest

December 31,
2008
$
150
11
139

December 31,
2007
$
550
51
499

56 Eldorado Gold

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007 (expressed in thousands of U.S. dollars, unless otherwise stated)

NOTE

Asset retirement obligations

Balance at beginning of year
Accretion during the year
Revisions to estimate of final obligation
Payments
Disposal (see note 5)

Balance at end of year

Estimated undiscounted amount

Balance at beginning of year
Accretion during the year
Revisions to estimate
ARO liability paid

Balance at end of year
Less: current portion

Long-term portion

Estimated undiscounted amount

Brazil
$
4,463
377
3,229
(1,225)
(6,091)

753

1,350

Brazil
$
9,595
364
–
(5,496)

4,463
509

3,954

5,149

December 31, 2008
Turkey
China
$
$
3,118
1,218
187
68
(532)
–
–
–
–
–

1,286

1,775

2,773

6,823

December 31, 2007
Turkey
China
$
$
2,941
1,155
177
63
–
–
–
–

3,118
–

3,118

1,218
–

1,218

1,775

Total
$
8,799
632
2,697
(1,225)
(6,091)

4,812

9,948

Total
$
13,691
604
–
(5,496)

8,799
509

8,290

5,919

12,843

The ARO estimates attributable to our mines have been determined with reference to independent
studies obtained by the Company (Brazil – 2006, Turkey and China – 2007) that assumed a closure
in 2014 in Brazil, 2017 in China and 2024 in Turkey.

The net present values contemplate credit-adjusted risk-free interest rates of between 5% and 7%.

Revision to estimate of final obligation in Brazil includes $2,476 related to São Bento and $753
related to the Vila Nova project (“Vila Nova”). ARO costs included in the Statement of Operations
and Deficit include the São Bento revision of $2,476 and accretion during the year of $632.

2008 Annual Report

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007 (expressed in thousands of U.S. dollars, unless otherwise stated)

NOTE

15 Defined benefit plans

During the year ended December 31, 2008, the company implemented a defined benefit pension
program with two components: a registered pension plan (“the Pension Plan”) and a non-registered
supplementary pension plan (“the SERP”). These plans, which are only available to certain
qualifying employees, provide benefits based on an employee’s years of service and final average
earnings at retirement. There are no indexation features. Annual contributions to these plans
are actuarially determined and made at or in excess of minimum requirements prescribed by
legislation.

The Company’s plans are actuarially evaluated for funding purposes on a three-year cycle. Both of
the plans were last actuarially evaluated on January 1, 2008 for funding purposes and the next
required valuation will be as of January 1, 2011. The measurement date used to determine all of
the accrued benefit obligation and plan assets for accounting information was December 31, 2008.

The SERP is designed to provide supplementary pension benefits to qualifying employees affected
by the maximum pension limits under the Income Tax Act and the Company is not required to pre-
fund any benefit obligation under the SERP.

Total cash payments
Total cash payments for pension benefits for 2008, including cash contributed to the Pension Plan
and the SERP were $3,791. No cash payments were made directly to beneficiaries during the year.
The Company expects to contribute $88 to the Pension Plan and $1,313 to the SERP in 2009
based on minimum funding requirements.

The estimated future pension payments for the next five years and five years thereafter are as
follows:

2009
$

2010
$

2011
$

2012
$

2013
$

2014 and
later
$

Estimated future pension payments

–

450

2,429

58 Eldorado Gold

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007 (expressed in thousands of U.S. dollars, unless otherwise stated)

NOTE

15continued

The details of the Company’s benefit plans as at December 31, 2008 are as follows:

December 31, 2008

Pension Plan
$

Accrued benefit obligation
Balance at beginning of year
Current service cost
Past service costs (net of qualifying transfer)
Qualifying transfer
Interest cost
Benefits paid
Actuarial gains
Balance at end of year

Plan assets
Fair value at beginning of year
Actual return on plan assets
Employer's contribution (1)
Qualifying transfer
Benefit paid
Fair value at end of year

Funded status
Fair value of plan assets
Accrued benefit obligation
Plan surplus (deficit)
Unamortized actuarial gains
Unamortized past service cost
Net accrued benefit asset (liability)

–
104
326
561
49
–
(287)
753

–
17
270
561
–
848

848
753
95
(243)
259
111

SERP
$

–
378
3,570
–
197
–
(108)
4,037

–
–
–
–
–
–

–
4,037
(4,037)
(108)
2,828
(1,317)

(1) The Company has deposited $3,505 in an investment account to fund its SERP obligation. This
amount is included in restricted assets and other (note 11)

The accrued benefit asset (liability) is included in the Company’s balance sheet as follows:

Restricted assets and other (note 11)
Accounts payable and accrued liabilities
Total

December 31, 2008

Pension Plan
$
111
–
111

SERP
$
–
(1,317)
(1,317)

2008 Annual Report

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007 (expressed in thousands of U.S. dollars, unless otherwise stated)

NOTE

15continued

The net expense recognized for the Company’s defined benefit plans is as follows:

Current service cost
Interest cost
Expected gains on plan assets
Amortization of past service costs
Net pension expense

December 31, 2008

Pension Plan
$
104
49
(45)
66
174

SERP
$
378
194
–
732
1,304

TOTAL
$
482
243
(45)
798
1,478

Plan assets
The assets of the Pension Plan and the amounts deposited in the SERP account are managed by a
major investment management company and are invested only in conformity with the investment
requirements of applicable pension laws.

The following table summarizes the defined benefit plans’ weighted average asset allocation
percentages by asset category at December 31, 2008:

Cash and equivalents
Fixed income
Equity
Total

Pension Plan

6%
94%
0%
100%

SERP
5%
52%
43%
100%

Combined

5%
55%
40%
100%

Significant assumptions
The significant assumptions used are as follows:

December 31, 2008

Pension Plan
6.50%
5.25%
7.50%
4.50%
5 years

SERP

6.50%
5.25%
7.50%
4.50%
5 years

The assumptions for the expected long-term rate of return on plan assets for the purposes of the
actuarial valuation are based on the asset mix of the portfolio, historical data from similar plans
and the review of projected returns by asset class.

60 Eldorado Gold

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007 (expressed in thousands of U.S. dollars, unless otherwise stated)

NOTE

16 Income taxes

The significant components within the Company’s future tax liability are as follows:

Future income tax assets

Mining interest
Loss carry forwards
Other
Liabilities

Valuation allowance

Future income tax liabilities

Mining interest
Unrealized gains on foreign exchange translation and other

Net future income tax liabilities

This is represented on the balance sheet as:

Current future income tax assets
Current future income tax liabilities
Long-term future income tax liabilities

December 31,
2008
$

December 31,
2007
$

3,824
30,655
2,367
1,897
38,743
(35,946)
2,797

61,149
2,613
63,762
60,965

17,109
113,807
8,630
5,000
144,546
(137,919)
6,627

16,921
15,528
32,449
25,822

December 31,
2008
$
(175)
1,097
60,043
60,965

December 31,
2007
$
(959)
–
26,781
25,822

Income tax expense differs from the amount that would result from applying the statutory Canadian
federal and provincial tax rates to income before income taxes. These differences result from the
following items:

Net income before taxes
Statutory tax rate

2008
$
181,254
31.00%

2007
$
57,505
34.12%

2006
$
3,889
34.12%

Tax expense at the statutory income tax rate

56,189

19,620

1,327

Tax effect of:

Losses not recognized
Difference in foreign tax rates
Foreign exchange
Sale of São Bento
Change in Greek tax rate
Future income tax assets not previously recognized
Non-deductible expense and other items

Income tax expense

4,249
(17,792)
(3,364)
(22,462)
(10,287)
–
5,966
12,499

6,265
(2,105)
(2,738)

–
–
1,042
22,084

1,070
(1,895)
4,239

–
(7,010)
2,858
589

2008 Annual Report

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007 (expressed in thousands of U.S. dollars, unless otherwise stated)

NOTE

16continued

The two major factors causing the effective tax rate to decline from 38.41% in 2007 to 6.90% in
2008 are the tax-free gain from the sale of São Bento and the reduction of the future income tax
recorded on the Frontier acquisition due to a reduction in the Greek future income tax rates from
25% to 20%.

At December 31, 2008, the Company had available losses for income tax purposes of approximately
$51,943 in Canada and Greece expiring in various years from 2009 to 2028.

In addition, the Company’s Brazilian subsidiaries have losses of $24,000 (December 31, 2007
– $268,000) that can be used to offset taxable income, and $24,000 (December 31, 2007 –
$243,000) that can be used to offset income for social contribution tax. These losses have no
expiry date and can be used to offset 30% of taxable income in any one year. The Brazilian losses
declined this year due to the sale of São Bento, which at December 31, 2007 had $239,426
of losses to offset taxable income and $214,498 that could be used to offset income for social
contribution tax (note 5).

17 Shareholders’ equity

Authorized share capital
The Company’s authorized share capital consists of an unlimited number of voting common
shares without par value and an unlimited number of non-voting common shares without par
value. At December 31, 2008 there were no non-voting common shares outstanding.

Voting common shares

Number of
shares

Amount
$

Balance, January 1, 2006

302,577,378

573,721

Financing, February 2006, net of issue costs
Shares issued upon exercise of share options, for cash
Shares issued upon exercise of Afcan warrants, for cash
Warrants reallocated to share capital upon exercise
Estimated fair value of share options exercised

34,500,000
1,476,075
2,594,778
–
–

154,406
4,234
5,496
902
1,302

Balance, December 31, 2006

341,148,231

740,061

Shares issued upon exercise of share options, for cash
Estimated fair value of share options exercised

3,060,309
–

9,500
3,497

Balance, December 31, 2007

344,208,540

753,058

Shares issued upon exercise of share options, for cash
Estimated fair value of share options exercised
Shares issued for acquisition of Frontier

3,730,155
–
20,339,334

14,730
5,571
158,574

Balance, December 31, 2008

368,278,029

931,933

62 Eldorado Gold

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007 (expressed in thousands of U.S. dollars, unless otherwise stated)

NOTE

17continued

Contributed surplus
The continuity of contributed surplus on the Consolidated Balance Sheet is as follows:

Contributed surplus attributable to:

Balance, January 1, 2006

Stock-based
compensation

$
5,979

Other

$
1,996

Credited to share capital on Afcan warrants
exercised after acquisition
Non-cash stock-based compensation
Options exercised, credited to share capital

–

(902)

3,542
(1,302)

–
–

Total

$
7,975

(902)

3,542
(1,302)

Balance, December 31, 2006

8,219

1,094

9,313

Non-cash stock-based compensation
Options exercised, credited to share capital

7,267
(3,497)

–
–

7,267
(3,497)

Balance, December 31, 2007

11,989

1,094

13,083

Non-cash stock-based compensation
Options exercised, credited to share capital

11,866
(5,571)

–
–

11,866
(5,571)

Balance, December 31, 2008

18,284

1,094

19,378

Accumulated other comprehensive income (loss)
Accumulated other comprehensive income includes the following:

Balance, beginning of period
Unrealized gains (losses) on available-for-sale
investment-net of taxes
Other than temporary impairment charges
Realized gains on sale of available-for-sale investment
transferred to net income
Reversal on acquisition of Frontier (note 4)

Balance, end of period

2008
$
214

(6,431)

460

(61)

(153)

(5,971)

2007
$
275

209

–

(270)

–

214

2008 Annual Report

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007 (expressed in thousands of U.S. dollars, unless otherwise stated)

NOTE

18 Stock-based compensation

Share option plans
The Company has two share option plans (“Plans”) approved by the shareholders under which
share purchase options (“Options”) can be granted to directors, officers, employees and
consultants.

The Company’s Employee Plan, as amended from time to time, was established in 1994.
Subject to a 10-year maximum, Employee Plan Options generally have a five-year term.
Employee Plan Options vest at the discretion of the Board of Directors at the time an Option is
granted, typically in three separate tranches over two years. As at December 31, 2008, a total
of 662,701 Options (December 31, 2007 – 1,618,511) were available to grant to employees,
consultants or advisors under the Employee Plan.

The Company’s Directors and Officers Plan (“D&O Plan”) was established in 2003 and
amended in 2005. Subject to a 10-year maximum, D&O Plan Options generally have a five-year
term. D&O Options vest at the discretion of the Board of Directors at the time an Option is
granted, typically in three separate tranches over two years. As at December 31, 2008, a total
of 1,138,041 Options (December 31, 2007 – 2,999,850) were available to grant to directors
and officers under the D&O Plan.

The continuity of share purchase options outstanding is as follows:

Weighted
average
exercise price
Cdn$

3.82
6.67
3.10
5.25

5.36
5.50
3.95
6.55

5.71

Number of
options

7,276,463
4,108,125
(3,060,309)
(100,000)

8,224,279
8,960,000
(3,730,155)
(15,210)

13,438,914

Contractual
weighted
average
remaining life
(years)

2.8

3.1

3.9

Balance, December 31, 2006

Granted
Exercised
Cancelled

Balance, December 31, 2007

Granted
Exercised
Cancelled

Balance, December 31, 2008

At December 31, 2008, 6,119,729 share purchase options (December 31, 2007 – 5,064,193)
with a weighted average exercise price of Cdn$5.69 (December 31, 2007 – Cdn$4.64) had
vested and were exercisable.

64 Eldorado Gold

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007 (expressed in thousands of U.S. dollars, unless otherwise stated)

NOTE

18continued

Options outstanding at December 31, 2008 are as follows:

December 31, 2008

Total options outstanding

Exercisable options

Weighted
average
remaining
contractual
life
(years)

Weighted
average
exercise
price
Cdn$

826,100
5,389,338
1,307,138
2,823,000
3,093,338
13,438,914

0.8
4.8
2.8
4.1
3.4
3.9

3.48
4.88
5.42
6.43
7.20
5.71

826,100
1,538,670
1,047,957
899,331
1,807,671
6,119,729

Weighted
average
exercise
price
Cdn$

3.48
4.88
5.48
6.42
7.16
5.69

Range of
exercise price
Cdn$

$3.00 to $3.99
$4.00 to $4.99
$5.00 to $5.99
$6.00 to $6.99
$7.00 to $7.99

Stock-based compensation expense
The exercise prices of all Options granted during the period were at or above the market
price at the grant date. Stock-based compensation expense is calculated using a Black-
Scholes option pricing model to determine the estimated fair values of all Options granted.
The value determined on the date an Option is granted is recorded over the vesting period of
each respective option. This expense has been included in the undernoted expenses in the
Consolidated Statements of Operations as follows:

Operating costs
Exploration
Administrative

Total

2008
$
1,526
1,401
8,939

11,866

2007
$
1,504
1,009
4,754

7,267

2006
$
359
170
3,013

3,542

The assumptions used to estimate the fair value of Options granted during the years ended
December 31, 2008, 2007 and 2006 were:

2008

2007

2006

Risk-free interest rate (range)
Expected volatility (range)
Expected life (range)
Expected dividends

2.39% – 3.48%
40% – 53%
3.4 years
Nil

3.53% – 4.25%
42% – 53%
4 years
Nil

4.0% – 4.5%
42% – 50%
4-5 years
Nil

Bonus Cash Award Units plan
In August 2007, the directors adopted a Bonus Cash Award Units (“BCAU”) plan with an
effective date of August 2, 2007. The plan provides for the Board of Directors (the “Directors”)
to grant BCAUs to officers, employees and consultants subject to vesting and other conditions

2008 Annual Report

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007 (expressed in thousands of U.S. dollars, unless otherwise stated)

NOTE

18continued

as determined by the Directors; however, the vesting period may not exceed five years from the
grant date, but may be accelerated at the discretion of the Directors. The settlement of BCAUs
must be made in cash and is calculated as the excess of trading price of Eldorado shares
traded on the Toronto Stock Exchange (“TSX”) on the trading day on which the designated
participant elects to exercise their BCAU over the trading price of Eldorado shares traded on
the TSX on the grant day.

As of December 31, 2008, 587,500 BCAUs with a vesting date of February 8, 2009 were
outstanding. The carrying value of the BCAUs at December 31, 2008 was $2,059, and is
reflected in accrued liabilities on the balance sheet. The Company paid $1,658 in bonus cash
award units in the year 2008. The related cost in the amount of $3,473 is included in general
and administrative expense in the Consolidated Statements of Operations.

Supplementary cash flow information

Changes in non-cash working capital

Accounts receivable and prepaids
Inventories
Accounts payable and accrued liabilities

Supplementary cash flow information

Income taxes paid
Interest paid

Non-cash investing and financing activities

2008
$

2007
$

2006
$

7,504
(26,057)
366
(18,187)

1,976
(16,900)
16,411
1,487

(2,129)
(26,222)
(1,857)
(30,208)

3,952
24,971

2,887
4,078

434
2,566

Shares issued on acquisition of Frontier
Shares received on sale of São Bento

158,574
70,000

–
–

Commitments
The Company’s contractual obligations, not disclosed on the balance sheet, at December 31, 2008,
include:

Operating leases and property
expenditures
Purchase obligations
Totals

2009
$

2010
$

2011
$

2012
$

2,336

2,016

1,877

1,860

33,805 11,557 11,498
11,476
36,141 13,573 13,375 13,336

2013 and
later
$

2,140

–
2,140

Purchase obligations from 2010 forward relate solely to Kişladağ operations, including the
estimated commitments under the unhedged diesel fuel purchase commitments for 2010 through
2012.

66 Eldorado Gold

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007 (expressed in thousands of U.S. dollars, unless otherwise stated)

NOTE

21 Capital disclosure

Eldorado’s objectives when managing capital are to:

a.
b.
c.

safeguard our ability to continue as a going concern,
have sufficient capital to develop our mining projects and take them into production, and
meet external capital requirements on our credit facilities.

The Company monitors capital based on the debt to adjusted capital ratio. Debt is defined as
the total of current and long-term debt shown on the balance sheet. Adjusted capital includes all
components of shareholders’ equity, which includes accumulated comprehensive income, share
capital, contributed surplus and deficit.

Eldorado’s strategy is to keep the debt to adjusted capital ratio below 40%. The debt to adjusted
capital ratio at December 31, 2008 and December 31, 2007 was nil and 14.60% respectively.

22 Financial instruments

Fair value
The fair value of financial instruments at December 31, 2008 and December 31, 2007 is
summarized as follows:

Financial Assets
Held for trading
Cash and cash equivalents
Restricted cash
Marketable securities
Accounts receivable and other
Derivative contract
Restricted asset and other

Available for sale
Marketable securities

December 31, 2008

December 31, 2007

Carrying
amount
$

Fair value
$

Carrying
amount
$

Fair value
$

61,851
–
31,526
27,655
–
6,000

46,014
65,710
–
8,891
2,956
8,300

12,084

1,615

Financial Liabilities
Accounts payable and accrued liabilities
Debt

41,342
139

40,452
65,561

Fair values are determined directly by reference to published price quotations in an active
market, when available, or by using a valuation technique that uses inputs observed from
relevant markets.

2008 Annual Report

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007 (expressed in thousands of U.S. dollars, unless otherwise stated)

NOTE

22continued

Financial risk management
Eldorado’s activities expose it to a variety of financial risks, including credit risk, foreign
exchange risk, interest rate risk, gold price risk and liquidity risk.

Credit risk
Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation
and cause the other party to incur a financial loss. Financial instruments that potentially
subject the Company to credit risk consist of cash and cash equivalents, restricted cash and
accounts receivable. Eldorado deposits its cash and cash equivalents, including restricted
cash, with high credit quality financial institutions as determined by ratings agencies. As at
December 31, 2008, approximately 55% of the Company’s cash and cash equivalents are held
with one financial institution.

The Company sells its gold bullion exclusively to large international financial institutions or on
the Istanbul and Shanghai Gold Exchanges. Payment is normally in advance or within one week
of receipt of shipment. The historical level of customer defaults is negligible which reduces the
credit risk associated with trade receivables at December 31, 2008.

Currency risk
The Company operates principally in Canada, Turkey, China, Brazil and Greece, and is therefore
exposed to foreign exchange risk arising from transactions denominated in foreign currencies.

Eldorado’s cash and cash equivalents, accounts receivable, accounts payable and accrued
liabilities are denominated in several currencies (mainly Canadian dollars, Turkish liras,
Chinese renminbi and Brazilian real) and are therefore subject to fluctuation against the US
dollar.

As a result of the acquisitions of Afcan and Frontier assets in 2005 and 2008 respectively,
the Company recorded $56,600 of future income tax liabilities on mining interests which are
recorded in local currencies. The future income tax liabilities are monetary items that are
revalued each period-end at current exchange rates, with the gain or loss recorded in net
earnings in the period.

The Company is exposed to currency risk through the following financial assets and liabilities,
value added tax and other taxes recoverable and future income tax asset and liabilities
denominated in currencies other than US dollars at December 31, 2008:

68 Eldorado Gold

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007 (expressed in thousands of U.S. dollars, unless otherwise stated)

NOTE

22continued

Cash and cash
equivalents

Canadian
dollar

Australian
dollar

Euro

Turkish
lira

Chinese
renminbi

Brazilian
real

Peruvian
sol

4,618

139

1,280

48,453

3,487

415

Marketable securities

14,804

–

Accounts receivable
and other

Future income tax
receivable

Accounts payable
and accrued
liabilities

Future income tax
liabilities

1,902

357

12,733

44,426

830

–

1,197

–

(8,549)

–

(153)

(14,233)

(155,879)

(2,113)

(165)

–

(26,390)

(15,302)

(88,144)

(2,826)

–

Net balance

12,775

148

(26,047)

(15,522)

(149,947)

(622)

250

Equivalent in US
dollars

10,489

103

(36,462)

(10,140)

(22,025)

(277)

112

Based on the balances as at December 31, 2008, a 1% increase (decrease) in the exchange
rates on that date would have resulted in a (decrease) increase of approximately $582 in
earnings before income. There would be no effect in other comprehensive income.

Our cash flows from our operations are exposed to foreign exchange risk, as commodity sales
are set in US dollars and a certain amount of our operating expenses are in the currency of the
country in which our mining operations take place.

Interest rate risk
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument
will fluctuate due to changes in market interest rates. Current financial assets and financial
liabilities are generally not exposed to interest rate risk because of their short-term nature.
Eldorado’s debt is not exposed to interest rate cash flow risk as the interest rate has been
fixed at the time of each drawdown. The approximate average interest rate earned by the
Company in 2008 on its cash and cash equivalents was 2.36% (2007 – 5.17%). A 10%
increase or decrease in the interest earned from financial institutions on deposits and money
market investments held at December 31, 2008 would result in a $0.1 million increase or
decrease in the Company’s after-tax net earnings.

Gold price risk and other price risk
Eldorado is subject to price risk for fluctuations in the market price of gold. Gold prices are
affected by numerous factors beyond our control, including central bank sales, producer
hedging activities, the relative exchange rate of the US dollar with other major currencies,
global and regional demand and political and economic conditions. Worldwide gold production
levels also affect gold prices, and the price of gold is occasionally subject to rapid short-term
changes due to speculative activities. We have elected not to actively manage our exposure
to gold price risk at this time. From time to time, we may use commodity price contracts to
manage our exposure to fluctuations in the price of gold.

2008 Annual Report

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007 (expressed in thousands of U.S. dollars, unless otherwise stated)

NOTE

22continued

Other price risk is the risk that the value of a financial instrument will fluctuate as a result of
changes in market prices. Eldorado’s other price risk includes equity price risk, whereby the
Company’s investments in marketable securities are subject to market price fluctuation.

Liquidity risk
Liquidity risk is the risk that an entity will encounter difficulty in raising funds to meet
commitments associated with financial instruments. The Company manages liquidity by
maintaining adequate cash and cash equivalent balances and by using its lines of credit as
required. Our treasury department monitors and reviews both actual and forecasted cash
flows, and also matches the maturity profile of financial assets and liabilities.

23 Segmented information

During the period ended December 31, 2008, Eldorado had four reporting segments. The Brazil
reporting segment includes the development activities of Vila Nova and exploration activities in
Brazil. The Turkey reporting segment includes the operations of the Kişladağ mine, development
activities of the Efemçukuru project and exploration activities in Turkey. The China reporting
segment includes the operations of the Tanjianshan mine and exploration activities in China. The
Greece reporting segment includes development activities on the Perama Hill project. The other
reporting segment includes the operations of the Company’s corporate office and exploration
activities in other countries.

Net mining interests

Producing properties
Properties under
development
Other mineral interests

Turkey
$

China
$

December 31, 2008
Greece
$

Brazil
$

Other
$

Total
$

190,881 163,157

–

106

1,490 355,634

54,378

–

38,986 207,301

– 300,665

4,151

–
249,410 163,157

7,359

–
46,345 207,407

500

12,010
1,990 668,309

Net mining interests

Producing properties
Properties under
development

December 31, 2007

Turkey
$

China
$

175,888

149,267

38,358

–

Brazil
$

7,919

5,317

Other
$

Total
$

956

334,030

–

43,675

214,246

149,267

13,236

956

377,705

70 Eldorado Gold

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007 (expressed in thousands of U.S. dollars, unless otherwise stated)

NOTE

23continued

Operations

Revenue

Gold sales
Interest and other income

Expenses except the
undernoted

Depletion, depreciation and
amortization

Exploration
Loss (gain) on disposal of
assets

2008

Turkey
$

China
$

Brazil
$

Greece
$

Other
$

Total
$

161,442 116,281
387
162,207 116,668

765

–
7,661
7,661

–
–
–

– 277,723
1,695
10,508
1,695 288,231

63,506

47,652

13,399

(4,543)

19,426 139,440

8,190

17,201

206

5,865

1,897

1,235

–

1,665 (72,455)

–

398

25,995

3,319

12,316

16 (70,774)

Income (loss) before tax
Income tax recovery (expense)
Non-controlling interest

84,646
(17,866)
–

48,253
(10,311)
(5,099)

65,276
5,473
–

4,543 (21,464) 181,254
(12,499)
(83)
(5,099)
–

10,288
–

Net income (loss)

66,780

32,843

70,749

14,831 (21,547) 163,656

Revenue

Gold sales
Interest and other income

Expenses except the
undernoted
Depletion, depreciation and
amortization
Exploration

Turkey
$

94,219
1,869
96,088

China
$

78,176
137
78,313

2007
Brazil
$

6,907
2,639
9,546

Corporate
$

Total
$

–
4,752
4,752

179,302
9,397
188,699

39,630

45,399

(1,286)

15,776

99,519

4,248

15,502

–

291

20,041

6,500

102

3,588

1,444

11,634

Income (loss) before tax
Income tax recovery (expense)
Net income (loss)

45,710
(9,325)
36,385

17,310
(7,941)
9,369

7,244
(4,786)
2,458

(12,759)
(32)
(12,791)

57,505
(22,084)
35,421

2008 Annual Report

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007 (expressed in thousands of U.S. dollars, unless otherwise stated)

NOTE

23continued

Revenue

Gold sales
Interest and other income

Expenses except the
undernoted
Depletion, depreciation and
amortization
Exploration

Income (loss) before tax
Income tax recovery (expense)
Net income (loss)

Turkey
$

39,232
310
39,542

19,248

1,489

4,845

13,960
2,113
16,073

China
$

–
82
82

465

172

(594)
–
(594)

2006
Brazil
$

38,409
1,154
39,563

Corporate
$

Total
$

–
5,502
5,502

77,641
7,048
84,689

36,514

10,091

66,318

–

235

1,763

7,702

(4,653)
(2,636)
(7,289)

–

12,719

(4,824)
(66)
(4,890)

3,889
(589)
3,300

72 Eldorado Gold

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007 (expressed in thousands of U.S. dollars, unless otherwise stated)

NOTE

24 Differences between Canadian and United States GAAP

These consolidated financial statements have been prepared in accordance with Canadian GAAP.

The material differences between Canadian GAAP and US GAAP affecting the Company are
summarized below:

2008
$

2007
$

2006
$

163,656

35,421

3,300

Statement of operations

Net income reported under Canadian GAAP
Add (deduct) items subject to US GAAP
Exploration costs (a)
Capitalized interest expense (g)
Depreciation on capitalized interest (g)
Bonus cash award units (h)
Deferred start-up costs and revenues (b)
Depreciation related to start-up period (b)
Unrealized gain (loss) on derivative contracts (c)
Future income taxes (d)

Net income
Other comprehensive income (loss) for the year
under Canadian GAAP
Add (deduct) items subject to US GAAP
Pension plans (i)

(1,361)
1,368
(440)
187
(2,172)
175
–
3,280

164,693

(6,185)

(7,585)
2,009
(198)
(385)
2,172
(1,401)
873
654

31,560

(61)

(2,736)

–

Comprehensive income under US GAAP

155,772

31,499

Basic and diluted earnings per share - US GAAP

0.46

0.09

Accumulated other comprehensive income (loss)
under US GAAP

Beginning of year
Net unrealized gain (loss) on investments (f)
Pension plans (i)

End of year

2008
$

2007
$

214
(6,185)
(2,736)

(8,707)

275
(61)
–

214

(4,662)
1,586
–

–
–
–
607

831

228

–

1,059

0.00

2008 Annual Report

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007 (expressed in thousands of U.S. dollars, unless otherwise stated)

NOTE

24continued

Assets

Total assets reported under Canadian GAAP
Exploration costs (a)
Future income taxes (d)
Deferred start-up costs and revenues (b)
Depreciation related to start-up period (b)
Unrealized gain (loss) on investments (f)
Capitalized interest expense – net (g)

2008
$

2007
$

905,369
(30,132)
4,541
–
(1,226)
–
4,325

591,742
(28,771)
1,261
2,172
(1,401)
–
3,397

Total assets under US GAAP

882,877

568,400

Liabilities
Total liabilities reported under Canadian GAAP
Pension plans (i)
Bonus cash award units (h)

Total liabilities under US GAAP

2008
$

2007
$

108,750
2,736
198

142,563
–
385

111,684

142,948

Non-controlling interest under Canadian and US GAAP

4,799

–

Shareholders’ equity
Shareholders’ equity reported under Canadian
GAAP
Cumulative adjustments to shareholders’ equity

Exploration costs (a)
Future income taxes (d)
Deferred start-up costs and revenues (b)
Depreciation related to start-up period (b)
Accumulated other comprehensive income -
pension plans (i)
Bonus cash award units (h)
Unrealized gain on investments (f)
Interest expense capitalized – net (g)

791,820

449,179

(30,132)
4,541
–
(1,226)

(2,736)

(198)
–
4,325

(28,771)
1,261
2,172
(1,401)

–

(385)
–
3,397

Shareholders’ equity under US GAAP

766,394

425,452

74 Eldorado Gold

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007 (expressed in thousands of U.S. dollars, unless otherwise stated)

NOTE

24continued

Cash flows (used in) generated from:

Operating activities under Canadian GAAP

Exploration costs (a)
Deferred start-up costs and revenues (b)
Capitalized interest expense (g)

2008
$

105,544
(1,361)
–
1,368

2007
$

69,805
(7,585)
5,159
2,009

2006
$

(22,508)
(4,662)
–
1,586

Operating activities under US GAAP

105,551

69,388

(25,584)

Investing activities under Canadian GAAP

Exploration costs (a)
Deferred start-up costs and revenues (b)
Capitalized interest expense (g)

(38,258)
1,361
–
(1,368)

(91,757)
7,585
(5,159)
(2,009)

(130,454)
4,662
–
(1,586)

Investing activities under US GAAP

(38,265)

(91,340)

(127,378)

Financing activities under Canadian and US
GAAP

Net increase (decrease) in cash and cash
equivalents for Canadian and US purposes

(51,449)

7,999

179,103

15,837

(13,953)

26,141

Cash and cash equivalents – beginning of year

46,014

59,967

33,826

Cash and cash equivalents – end of year

61,851

46,014

59,967

A description of US GAAP that results in differences from Canadian GAAP is as follows:

Exploration costs
Exploration costs are accounted for in accordance with Canadian GAAP as disclosed in note
2(i). For US GAAP purposes, exploration costs relating to unproven mineral properties are
expensed as incurred until completion of an economic feasibility study, after which exploration
and development costs are capitalized.

Deferred start-up costs and revenues
US GAAP requires that operating profits and losses from newly commissioned operations be
recorded at the time the first product is shipped. Canadian GAAP records operating profits
and losses from the date commercial production commences. Under Canadian GAAP, deferred
start-up costs and revenues are amortized over the life of the project.

Derivative contracts
Under US GAAP, SFAS 133 requires that all derivatives be recorded on the balance sheet
as either assets or liabilities at their fair value. Changes in the fair value of derivatives are
recognized in income unless specific hedge accounting criteria are met. Commencing January
1, 2007, under Canadian GAAP, the Company adopted the new Financial Instrument Standards
as disclosed in note 2. As a result of this, there are no continuing differences with respect to
derivatives.

2008 Annual Report

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007 (expressed in thousands of U.S. dollars, unless otherwise stated)

NOTE

24continued

Future income taxes
Under US GAAP, the Company would record an increase of $3,280 (2007 – $654) in future
income tax recovery related to the reconciliation items described under items (a), (b) and (g) of
this note.

FASB Interpretation No. 48 – Accounting for Uncertainty in Income Taxes, an
interpretation of FASB Statement No. 109 (Accounting for Income Taxes) (FIN 48)
In June 2006, the Financial Accounting Standard Board (FASB) issued Interpretation No. 48,
“Accounting for Uncertainty in Income Taxes” (FIN 48), which supplements SFAS No. 109,
“Accounting for Income Taxes” (SFAS No. 109), by defining the confidence level that a tax
position must meet in order to be recognized in the financial statements. FIN 48 requires
that the tax effect(s) of a position be recognized only if it is “more likely than not” to be
sustained based solely on its technical merits as of the reporting date. The more likely than
not threshold represents a positive assertion by management that a company is entitled to
the economic benefits of a tax position. If a tax position is not considered more likely than
not to be sustained based solely on its technical merits, no benefits of the tax position are to
be recognized. The more likely than not threshold must continue to be met in each reporting
period to support continued recognition of a benefit.

With the adoption of FIN 48, companies are required to adjust their financial statements to
reflect only those tax positions that are more likely than not to be sustained. The Company
adopted FIN 48 as of January 1, 2007. As a result of this adoption, the Company did not
recognize any further increases or decreases in the liability for unrecognized tax benefits.
A reconciliation of the beginning and ending amount of the unrecognized tax benefits is as
follows:

Balance at January 1,
Additions based on tax positions related to the current year
Reductions based on tax positions related to the current year
Additions for tax positions of prior years
Reductions for tax positions of prior years
Balance at December 31,

2008
$
10,034
–
(294)
–
(2,810)
6,930

2007
$
8,537
1,343
–
154
–
10,034

As at December 31, 2008, the Company has $6,930 unrecognized tax benefits (2007 –
$10,034). If recognized, none of the unrecognized tax benefit would affect the effective tax
rate.

The Company recognizes accrued interest and penalties related to unrecognized tax benefits
in income taxes. During the years ended December 31, 2008, 2007 and 2006, the Company
recognized approximately $nil, $236 and $562 in interest and penalties. The Company had
approximately $nil and $908 for paying interest and penalties accrued at December 31, 2008
and 2007 respectively.

The Company is subject to taxes in Canada, Brazil, China and Turkey. The tax years that remain
subject to examination as of December 31, 2008 for these jurisdictions are:

Canada
Brazil
China
Turkey

2001 to the present
2004 to the present
2007 to the present
2004 to the present

76 Eldorado Gold

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007 (expressed in thousands of U.S. dollars, unless otherwise stated)

NOTE

24continued

Investments
Under US GAAP, marketable securities are classified as “held to maturity”, “held for trading”,
or “available for sale” in accordance with FASB Statement No. 115, Accounting for Certain
Investments in Debt and Equity Securities (“FAS 115”). Certain securities held by the Company
would be classified as “available for sale” under FAS 115 and would be recorded at market
value, with any unrealized gain or loss recorded in other comprehensive income.

Under Canadian GAAP prior to January 1, 2007, the Company carried its investments in public
companies at cost, less provision for other than temporary declines in value. Effective January
1, 2007, with the adoption of the financial instrument standard, the Company carries these
investments at fair value with unrealized gains or losses recorded in other comprehensive
income. As a result there is no longer a difference.

Interest expense
Under Canadian GAAP, where the Company has secured debt financing to finance the cost
of specific projects, interest is capitalized on the related construction and development
project until the project begins commercial operation or development ceases, at which time
the interest is charged to operations. Under US GAAP, interest is capitalized on an interest
avoidance basis. Under this method, regardless of the application of the loan proceeds, any
interest incurred is capitalized to the cost of any development or construction project to the
extent of the lesser of the interest cost incurred or the amount that can be attributed to the
cost of any capital development or construction costs and any uncapitalized interest is charged
to operations.

Bonus cash award units
Under Canadian GAAP, bonus cash award units are measured at the amount by which the
quoted market value of the shares covered by the grant exceeds the option price. Under US
GAAP, Statement 123 (R) requires that awards classified as liabilities be measured at fair value
at each reporting date. The fair value is estimated using an option pricing model.

Pension plans
For US GAAP purposes, the Company is required to report the overfunded asset or
underfunded liability of its defined benefit pension plans on the balance sheet. Changes in
the funded status are recorded through other comprehensive income. The information set
out below should be read in conjunction with the information disclosed under Canadian GAAP
requirements for pension plans provided in note 15.

The funded status at the end of the year and the related amounts recognized on the statement
of financial position for US GAAP purposes are as follows:

2008 Annual Report

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007 (expressed in thousands of U.S. dollars, unless otherwise stated)

NOTE

24continued

78 Eldorado Gold

Funded status as at December 31, 2008
Fair value of plan assets
Benefit obligations
Funded status

Amounts recognized in the balance sheet
Non current assets
Current liabilities
Non current liabilities
Funded status

Amounts recognized in other comprehensive income
Net actuarial loss (gain)
Past service cost (credit)

Pension Plan
$

848
753
95

95
–
–
95

(243)
259
16

SERP
$

–
4,037
(4,037)

–
–
4,037
(4,037)

(108)
2,828
2,720

The projected benefit obligation, accumulated benefit obligation and fair value of plan assets
for pension plans with an accumulated benefit obligation in excess of plan assets at December
31, 2008 are as follows:

Accumulated benefit obligation in excess of plan assets
Projected benefit obligation at end of year
Accumulated benefit obligation at end of year
Fair value of plan assets at end of year

2008
$

4,145
4,037
–

The Company has deposited $3,505 in an investment account to fund its SERP obligation. This
amount is included in restricted asset and other (note 11).

The estimated amounts that will be amortized from accumulated other comprehensive income
into net periodic benefit cost in 2009 are as follows:

Net actuarial loss (gain)
Past service cost (credit)
Total

Pension Plan
$
(46)
67
21

SERP
$
–
741
741

Adoption of new United States accounting pronouncements

Fair value measurements

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”
(SFAS No. 157), which provides a consistent definition of fair value that focuses on
exit price and prioritizes, within a measurement of fair value, the use of market-based
inputs over entity-specific inputs. SFAS No. 157 requires expanded disclosures about
fair value measurements. SFAS No. 157 is effective for financial statements issued for
fiscal years beginning after November 15, 2007 and interim periods within those fiscal

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007 (expressed in thousands of U.S. dollars, unless otherwise stated)

NOTE

24continued

years. The provisions of SFAS No. 157 were applied prospectively. The Company adopted
the provisions of SFAS No. 157 on January 1, 2008, which did not have any effect on its
overall financial condition and results of operations. Fair values as of December 31, 2008
were calculated as follows:

Balance at
December 31,
2008

Quoted Prices
in Active
Markets for
Identical
Assets
$

Significant
Other
Observable
Inputs

Significant
unobservable
inputs

(Level 1)

(Level 2)

(Level 3)

Financial Assets
Held for trading
Cash and cash equivalents
Marketable securities
Accounts receivable and other
Restricted asset and other

Available for sale
Marketable securities

Financial Liabilities
Debt

61,851
31,526
27,655
6,000

61,851
31,526
16,231
6,000

12,084

139

–

–
–
–
–

–

–
–
11,424
–

–

139

SFAS No. 157 establishes a fair value hierarchy that prioritizes the inputs to valuation
techniques used to measure fair value. The hierarchy gives the highest priority to
unadjusted quoted prices in active markets for identical assets or liabilities (level 1
measurement) and the lowest priority to unobservable inputs (level 3 measurements). The
three levels of the fair value hierarchy under SFAS No. 157 are described below:

Level 1 – Unadjusted quoted prices in active markets that are accessible at the
measurement date for identical unrestricted assets or liabilities.

Level 2 – Inputs that are observable, either directly or indirectly, but do not qualify as
Level 1 inputs (i.e., quoted prices for similar assets or liabilities).

Level 3 – Prices or valuation techniques that require inputs that are both significant to the
fair value measurement and unobservable (i.e., supported by little or no market activity).

ii.

Fair value option for financial assets and financial liabilities

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial
Assets and Financial Liabilities – including an Amendment of SFAS No. 115”
(SFAS No. 159), which permits an entity to measure certain financial assets and financial
liabilities at fair value that are not currently required to be measured at fair value. Entities
that elect the fair value option will report unrealized gains and losses in earnings at each
subsequent reporting date. The fair value option may be elected on an instrument-by-
instrument basis, with few exceptions. The Statement also establishes presentation and
disclosure requirements to help financial statement users understand the effect of the

2008 Annual Report

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007 (expressed in thousands of U.S. dollars, unless otherwise stated)

NOTE

24continued

election. SFAS No. 159 is effective as of the beginning of the first fiscal year beginning
after November 15, 2007 and therefore became effective for the Company as of January
1, 2008. The Company has not elected to measure any eligible items at fair value.
Accordingly, the adoption of this standard has not impacted the Company’s financial
condition and results of operations.

Recent United States accounting pronouncements

Hierarchy of generally accepted accounting principles

In May 2008, the FASB issued FASB Statement No. 162, “The Hierarchy of Generally
Accepted Accounting Principles”. This Statement identifies the sources of accounting
principles and the framework for selecting the principles to be used when preparing
financial statements of non-governmental entities that are presented in conformity with
generally accepted accounting principles in the United States. This Statement is effective
60 days following the SEC’s approval of the Public Company Accounting Oversight
Board amendments to AU Section 411, “The Meaning of Present Fairly in Conformity
With Generally Accepted Accounting Principles”. The Company does not expect any
material impact on its financial position and results of operation with the adoption of this
statement.

ii.

Derivatives

In March 2008, the FASB issued Financial Accounting Standards No. 161, “Disclosures
about Derivative Instruments and Hedging Activities – An Amendment of FASB Statement
No. 133” (“FAS No. 161”). FAS No. 161 enhances the disclosure requirements under FAS
No. 133 pertaining to how and why an entity uses derivative instruments, how derivative
instruments and related hedge items are accounted for under FAS No. 133, and how
derivative instruments and related hedge items affect an entity’s financial position,
financial performance and cash flows. FAS No. 161 is effective for fiscal years, and interim
periods within those fiscal years, beginning after November 15, 2008. The Company is
currently evaluating the potential impact of adopting this statement on the Company’s
derivative instrument disclosures.

iii.

Effective Date of FASB Statement No. 157

In February 2008, the FASB issued Staff Position No. 157-2, “Effective Date of FASB
Statement No. 157”. FSP FAS 157-2 delayed the effective date of FAS No. 157 by one
year (until fiscal years beginning after November 15, 2008) for non-financial assets
and non-financial liabilities that are recognized or disclosed at fair value in the financial
statements on a non-recurring basis. The Company is currently evaluating the potential
impact of adopting this statement.

iv.

Business combinations

In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations”, which
retained the underlying concepts of SFAS No. 141 in that all business combinations are
still required to be accounted for at fair value under the acquisition method of accounting.
However, SFAS No. 141(R) changed the method of applying the acquisition method in a
number of significant aspects.

80 Eldorado Gold

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007 (expressed in thousands of U.S. dollars, unless otherwise stated)

NOTE

24continued

SFAS No. 141(R) will require that: (1) for all business combinations, the acquirer records
all assets and liabilities of the acquired business, including goodwill, generally at their
fair values; (2) certain contingent assets and liabilities acquired be recognized at their
fair values on the acquisition date; (3) contingent consideration be recognized at its fair
value on the acquisition date and, for certain arrangements, changes in fair value will be
recognized in earnings until settled; (4) acquisition-related transaction and restructuring
costs be expensed rather than treated as part of the cost of the acquisition and included
in the amount recorded for assets acquired; (5) in step acquisitions, previous equity
interests in an acquiree held prior to obtaining control be re-measured to their acquisition-
date fair values, with any gain or loss recognized in earnings; and (6) when making
adjustments to finalize initial accounting, companies revise any previously issued post-
acquisition financial information in future financial statements to reflect any adjustments
as if they had been recorded on the acquisition date.

SFAS No. 141(R) is effective on a prospective basis for all business combinations for which
the acquisition date is on or after the beginning of the first annual period subsequent to
December 15, 2008, with the exception of the accounting for valuation allowances on
deferred taxes and acquired tax contingencies. SFAS No. 141(R) amends SFAS No. 109
such that adjustments made to valuation allowances on deferred taxes and acquired
tax contingencies associated with acquisitions that closed prior to the effective date of
this statement should also apply the provisions of SFAS No. 141(R). This standard will be
applied to all future business combinations for US GAAP purposes.

Non-controlling interests in consolidated financial statements

In December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in
Consolidated Financial Statements, an Amendment of ARB 51” (SFAS No. 160), which
amends ARB 51 to establish new standards that will govern the accounting for and
reporting of non-controlling interests in partially owned consolidated subsidiaries and the
loss of control of subsidiaries.

Also, SFAS No. 160 requires that: (1) non-controlling interest, previously referred to as
minority interest, be reported as part of equity in the consolidated financial statements;
(2) losses be allocated to the non-controlling interest even when such allocation might
result in a deficit balance, reducing the losses attributed to the controlling interest;
(3) changes in ownership interests be treated as equity transactions if control is
maintained; and, (4) upon a loss of control, any gain or loss on the interest sold be
recognized in earnings. SFAS No. 160 is effective on a prospective basis for all fiscal
years, and interim periods within those fiscal years, beginning on or after December 15,
2008, except for the presentation and disclosure requirements, which will be applied
retrospectively. The Company is currently evaluating the effects, if any, that SFAS No. 160
may have on its financial condition and results of operations.

2008 Annual Report

CONSOLIDATED FINANCIAL INFORMATION

Five-Year Summary
(Expressed in thousands of U.S. dollars, except per share and per ounce amounts)

2008

2007

2006

2005

2004

Balance Sheet

Net working capital
Mining interests
Other non-current assets and restricted cash
Non-current liabilities
Non-controlling interest

Net assets

184,816
668,309
8,349
(64,855)
(4,799)

97,625
377,705
10,538
(36,689)
–

102,164
311,080
60,538
(77,877)
–

30,456
209,936
59,088
(74,553)
–

144,017
75,013
1,224
(13,293)
–

791,820

449,179

395,905

224,927

206,961

Share capital
Contributed surplus
Accumulated Other comprehensive income (loss)
Deficit
Net equity

931,933
19,378
(5,971)
(153,520)
791,820

753,058
13,083
214
(317,176)
449,179

740,061
9,314
–
(353,470)
395,905

573,721
7,976
–
(356,770)
224,927

508,373
6,232
–
(307,644)
206,961

Operations

Revenues

Gold revenues
Interest and other

Operating
Depreciation, depletion and amortization
General and administrative
Exploration
Mine stand-by costs
Accretion of asset retirement obligation

Net operating income (loss) before the undernoted

(Gain) loss on disposal of assets
(Gain) loss on marketable securities held for
trading
Interest and financing expense
Foreign exchange (gains) losses
Unrealized (gain) on derivative contracts
Non-controlling interest
Writedown of assets
Income tax (expense) recovery
Net income (loss)

277,723
10,508
288,231
92,004
25,995
38,299
12,316
2,432
3,108
114,077
(70,774)
(2,475)

2,940
176
(2,956)
(5,099)
–
(12,499)
163,656

179,302
9,397
188,699
72,691
20,041
26,798
11,634
6,575
604
50,356
(3,602)
(221)

3,415
(4,658)
2,083
–
–
(22,084)
35,421

77,641
7,048
84,689
45,850
1,763
19,030
12,719
–
661
4,666
(41)
(904)

1,586
(2,050)
–
–
2,186
(589)
3,300

29,680
4,117
33,797
35,378
9,798
14,937
7,386
–
484
(34,186)
(227)
662

88
547
–
–
13,375
(495)
(49,126)

33,153
2,762
35,915
33,109
4,431
8,425
4,312
–
430
(14,792)
7
(37)

25
(196)
–
–
–
649
(13,942)

82 Eldorado Gold

CONSOLIDATED FINANCIAL INFORMATION

Five-Year Summary
(Expressed in thousands of U.S. dollars, except per share and per ounce amounts)

Cash flows generated from (used in)

Operating activities

Operations before stock-based compensation
Stock-based compensation

Non-cash working capital changes

Investing activities

Net mining interest investment
Restricted cash
Other

Financing activities

Debt proceeds, net of repayments
Common shares, net of issuance costs

2008

2007

2006

2005

2004

111,865
11,866
123,731
(18,187)
105,544

61,051
7,267
68,318
1,487
69,805

5,618
3,542
9,160
(31,668)
(22,508)

(17,390)
2,426
(14,964)
4,478
(10,486)

(7,630)
3,720
(3,910)
(6,955)
(10,865)

(109,773)
71,515
–
(38,258)

(97,297)
5,540
–
(91,757)

(100,904)
(29,550)
–
(130,454)

(97,940)
(50,000)
664
(147,276)

(22,988)
–
70
(22,918)

(66,179)
14,730
(51,449)

(1,501)
9,500
7,999

14,967
164,136
179,103

49,014
7,184
56,198

–
63,708
63,708

Net cash generated (used)
Cash – beginning of year
Cash – end of year

15,837
46,014
61,851

(13,953)
59,967
46,014

26,141
33,826
59,967

(101,564)
135,390
33,826

29,925
105,465
135,390

Mining Operations

Production:
Gold (oz.)
Ounces production
Ounces sold

Average selling price realized
($/oz.) – sold
Total cash cost ($/oz.)

308,802
316,919

281,135
266,012

135,653
127,552

64,298
66,804

82,024
81,913

876
289

674
263

609
330

444
416

409
302

2008 Annual Report

CORPORATE INFORMATION

DIRECTORS

Hugh C. Morris (1) (3)
Delta, BC, Canada
Non-executive Chairman of the Board
(Independent Director)

John S. Auston (2) (3)
West Vancouver, BC, Canada
(Independent Director)

K. Ross Cory (1) (3)
Vancouver, BC, Canada
(Independent Director)

Robert R. Gilmore (1) (2)
Denver, CO, USA

Geoffrey Handley (2) (3)
Dover Heights, NSW, Australia
(Independent Director)

Wayne D. Lenton (2)
Tucson, AZ, USA
(Independent Director)

Donald Shumka (1)
Vancouver, BC, Canada
(Independent Director)

Paul N. Wright
Vancouver, BC, Canada
President & Chief Executive Officer
Eldorado Gold Corporation

Committees of the Board of Directors
(1) Audit Committee
(2) Compensation Committee
(3) Corporate Governance and Nominating
Committee

OFFICERS

Paul N. Wright
President & Chief Executive Officer

Earl W. Price
Chief Financial Officer

Norman S. Pitcher
Chief Operating Officer

Dawn L. Moss
VP, Administration and Corporate Secretary

SENIOR MANAGEMENT

Dale L. Churcher
VP, Engineering

Eduardo E. Moura
VP, Corporate Development

Paul J. Skayman
VP, Operations

Nancy E. Woo
VP, Investor Relations

Brazil Operations

Lincoln Silva
General Manager and Director
Unamgen Mineração e Metalurgia S/A

Sergio Martins
Director, Exploration & Geology
Unamgen Mineração e Metalurgia S/A

Turkey Operations

David A. Bickford
Chairman of the Board of Directors and
General Manager
Tüprag Metal Madencilik Sanayi ve Ticaret
Anonim Şirketi

M. Umit Akdur
Vice Chairman of the Board of Directors
Tüprag Metal Madencilik Sanayi ve Ticaret
Anonim Şirketi

Mehmet Yilmaz
Director
Tüprag Metal Madencilik Sanayi ve Ticaret
Anonim Şirketi

William R. Crabtree
General Manager
Kişladağ Mine

China Operations

Mark Platts
General Manager
Tanjianshan Gold Mine

Richard Li
General Manager of Eldorado Gold Corp.,
Beijing and Director, Qinghai Dachaidan
Mining Ltd.

Alex Zhang
Manager, Exploration, China, Beijing

Greece Operations

George Markopoulos
General Manager and Director
Thracean Gold Mining SA

George Falakis
Chief Geologist
Perama Project

OFFICES

Canada
Eldorado Gold Corporation
Head Office
1188 Bentall 5
550 Burrard Street
Vancouver, BC, Canada V6C 2B5
Tel: 604-687-4018
Fax: 604-687-4026
Toll Free: 1-888-353-8166

Brazil
Unamgen Mineração e Metalurgia
S/A
Avenida Olegário Maciel, 1846 -
Santo Agostinho
Belo Horizonte, MG, Brazil,
CEP 30180-112
Tel: 55-31-3292-1617

Turkey
Tüprag Metal Madencilik Sanayi ve
Ticaret Anonim Şirketi
Iran Caddesi
Turan Emeksiz Sok. No. 1
06700 Gaziosmanpasa, Ankara,
Turkey
Tel: 90-312-468-4536
Fax: 90-312-468-2646

Kişladağ Mine
Kişladağ Altin Madeni
Gumuskol Koyu Ovacik Mevkii
64900 Ulubey, Usak, Turkey

Efemçukuru Project
Cumhuriyet Meydanı
Cumhuriyet Apt. No: 12
1001-1002 Alsancak, Izmir, Turkey

China
Eldorado Gold Corporation
Room 1101 - 11th Floor, Tower B,
Wanda Plaza
No. 93 Jianguo Road,
Chaoyang District
Beijing, China 100022
Tel: 86-10-5820-5477
Fax: 86-10-5820-5476

84 Eldorado Gold

CORPORATE INFORMATION

Stock Exchange
The Toronto Stock Exchange
Stock Symbol: ELD

The New York Stock Exchange Amex
Stock Symbol: EGO

Sources of Shareholder Information

This Annual Report is one of several
sources of information for shareholders of
Eldorado Gold Corporation.

Other sources include:

The audited comparative financial
statements published annually.

The comparative interim financial
statements published quarterly.

The Management Proxy Circular
describing the matters to be considered
at the Annual Meeting of Shareholders.

The Annual Information Form, Form 40F
and other corporate and continuous
disclosure documents available on the
Company’s website, CDS SEDAR website
(www.sedar.com) and the US Securities
and Exchange Commission EDGAR
website (www.edgar-online.com).

Website Address:
www.eldoradogold.com

Investor Relations Email:
info@eldoradogold.com

Qinghai Dachaidan Mining Ltd.
Room 501, Huizhi Business
Building
No: 16 Wusi West Road
Xining, Qinghai, PRC 81008

Tanjianshan Mine
Dachaidan County
Haixi District
Qinghai Province, PRC

Greece
Thracean Gold Mining SA
27, Omirou Street
Athens, Greece, 10672
Tel: 30-210-3633930
Fax: 30-210-3633383

Alexandroupolis Office
51, Venizelou Street
68100 Alexandroupolis, Greece
Tel: 30-25510-81887
30-25510-80987
Fax: 30-25510-35613

LEGAL COUNSEL

Fasken Martineau DuMoulin LLP
Vancouver, BC, Canada

Dorsey & Whitney LLP
Denver, CO, USA

AUDITORS

PricewaterhouseCoopers, LLP
Chartered Accountants
Vancouver, BC, Canada

SHAREHOLDER INFORMATION

Transfer Agent
Valiant Trust Company
600-750 Cambie Street
Vancouver, BC, Canada V6B 0A2
Shareholder Inquiries Line (Toll
Free): 1-866-313-1872

2008 Annual Report

FORWARD-LOOKING STATEMENTS

Certain statements and information in this Annual Report, including all statements that are not historical
facts, contain forward-looking statements and forward-looking information within the meaning of applicable
US and Canadian securities laws. Such forward-looking statements or information include, but are not
limited to, statements or information with respect to financial disclosure, estimates of future production
the future price of gold, estimation of mineral reserves and resources and estimates of exploration and
development capital expenditures, permitting and our goals and strategies. Often, these statements
include words such as “plans”, “expects” or “does not expect”, “is expected”, “budget”, “scheduled”,
“estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate” or “believes” or variations of
such words and phrases or statements that certain actions, events or results “may”, “could”, “would”,
“might” or “will” be taken, occur or be achieved.

With respect to forward-looking statements and information included in this report, we have made
numerous assumptions including among other things, assumptions about the price of gold, anticipated
costs and expenditures and our ability to achieve our goals. Even though our management believes
that the assumptions made and the expectations represented by such statements or information are
reasonable, there can be no assurance that the forward-looking statement or information will prove to
be accurate. By their nature, forward-looking statements and information are based on assumptions
and involve known and unknown risks, uncertainties and other factors that may cause our actual
results, performance or achievements, or industry results, to be materially different from future results,
performance or achievements expressed or implied by such forward-looking statements or information.
Such risks, uncertainties and other factors include among other things the following: gold price volatility;
discrepancies between actual and estimated production and mineral reserves and resources; the
speculative nature of gold exploration; mining operational and development risk; ability to obtain financing;
currency fluctuations; environmental risks; global economic climate; ability to complete acquisitions; share
price volatility; and community and non-governmental actions and regulatory risks.

See our Annual Information Form and our quarterly and annual MD&A for additional information on risks,
uncertainties and other factors relating to the forward-looking statements and information. Although we
have attempted to identify factors that would cause actual actions, events or results to differ materially
from those disclosed in the forward-looking statements or information, there may be other factors that
cause actual results, performances, achievements or events not to be anticipated, estimated or intended.
Also, many of the factors are beyond our control. Accordingly, readers should not place undue reliance
on forward-looking statements or information. We undertake no obligation to reissue or update forward-
looking statements or information as a result of new information or events after the date of this report
except as may be required by law. All forward-looking statements and information made in this document
are qualified by this cautionary statement.

The terms “mineral reserve,” “proven mineral reserve” and “probable mineral reserve” are Canadian
mining terms as defined in accordance with National Instrument 43-101 – Standards of Disclosure for
Mineral Projects (“NI 43-101”) under the guidelines set out in the Canadian Institute of Mining, Metallurgy
and Petroleum (the “CIM”) CIM Standards on Mineral Resources and Mineral Reserves, adopted by the
CIM Council as may be amended from time to time by the CIM.

86 Eldorado Gold

The definitions of proven and probable reserves used in NI 43-101 differ from the definitions in the United
States Securities and Exchange Commission ("SEC") Industry Guide 7. Under SEC Industry Guide 7 stan-
dards, a "Final" or "Bankable" feasibility study is required to report reserves, the three-year history average
price is used in any reserve or cash flow analysis to designate reserves and the primary environmental
analysis or report must be filed with the appropriate governmental authority.

In addition, the terms "mineral resource", "measured mineral resource", "indicated mineral resource" and
"inferred mineral resource" are defined in and disclosed in accordance with the requirements of NI 43-101;
however, these terms are not defined terms under SEC Industry Guide 7 and normally are not permitted to
be used in reports and registration statements filed with the SEC. Investors are cautioned not to assume
that any part or all of the mineral deposits in these categories will ever be converted into reserves. "In-
ferred mineral resources" have a great amount of uncertainty as to their existence, and great uncertainty
as to their economic and legal feasibility. It cannot be assumed that all or any part of an inferred mineral
resource will ever be upgraded to a higher category. Under Canadian rules, estimates of inferred mineral
resources may not form the basis of feasibility or prefeasibility studies, except in rare cases.

Accordingly, information contained in this report and the documents incorporated by reference herein con-
taining descriptions of our mineral deposits may not be comparable to similar information made public by
US companies subject to the reporting and disclosure requirements under US federal securities laws and
the rules and regulations thereunder.

2008 Annual Report

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Corporate Office: 1188 - 550 Burrard Street, Bentall 5, Vancouver, BC, Canada V6C 2B5
Telephone: (604) 687-4018 Fax: (604) 687-4026 Email: info@eldoradogold.com
TSX: ELD NYSE-A: EGO
www.eldoradogold.com