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Continuing to Build a
High Quality Gold Company
Eldorado Gold Corporation
2010 Annual Report
2010 Annual Report
2010 Annual Report
2010 Highlights
(All amounts in the annual report are expressed in US dollars, unless otherwise stated)
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
Reported net income of $206.1 million -- double the 2009 net income of $102.4 million.
(2010 net income per share was $0.38, compared to $0.26 in 2009)
Generated $356.5 million in cash from operating activities before changes in non-cash
working capital -- more than double the 2009 amount of $146.9 million.
Produced 632,539 ounces of gold -- 74% higher than in 2009.
Achieved an average realized price for gold sold of $1,223 per ounce, an increase of 23%
over 2009.
Established a dividend policy and paid an initial dividend of C$0.05 per share. Paid an
additional dividend of C$0.05 per share in February 2011, for a total 2010 dividend of C$0.10
per share.
Increased proven and probable gold reserves by approximately 24%.
Began trial mining operations at the Vila Nova iron ore mine in Brazil and sold 90,000 tonnes
of iron ore.
Made construction progress at Efemçukuru in Turkey. Anticipate production beginning in the
second quarter of 2011.
Recommenced construction activities at Eastern Dragon in China. Expect production to start
in the fourth quarter of 2011.
Acquired 100% of Tocantinzinho (TZ), located in the Tapajos District of Para State in northern
Brazil, with the completion of the Brazauro transaction. TZ has 1.98 million ounces of proven
and probable reserves.
Table of Contents
2010 Highlights
Where we Operate
Letter to Shareholders
Mineral Reserves and Resources
Production Highlights
Health, Safety, Environment & Community
MD&A
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
2
3
4
6
8
9
15
54
59
Corporate Information
Shareholder Information
Cautionary Notes
101
102
103
Increasing Net Cash (in US$1,000)
$200,000
$150,000
$100,000
$50,000
$0
2006
2007
2008
2009
2010
Where we Operate
Eldorado Gold Corporation is a Canadian international gold producer with five operating mines, two
mines under construction, development projects and an extensive exploration program. We operate in
China, Turkey, Brazil and Greece. Our goal is to focus on organic growth to produce approximately 1.5
million ounces of gold annually in 2015. As one of the lowest-cost gold producers, with new mines, robust
margins and a strong balance sheet, we are well positioned to grow in value as we create and pursue new
opportunities.
Front cover:
Terraced Vineyards at Efemçukuru -- Creating a Sustainable Industry for the Local Community
The village of Efemçukuru is located in Izmir Province, western Turkey, about two kilometres south of our project. We are eager to
begin operations at Efemçukuru in the second quarter of 2011. We are also very excited about a complementary project to support a
new sustainable industry in the region: wine production.
The environmental conditions in the area (hot and dry summers, and warm and rainy winters with limited snowfall) are ideal for
grape growing, and the local people have been growing table grapes for many years. Several years ago, we brought in advisors who
suggested that the region around Efemçukuru was very suitable for growing grapes for high-quality wine.This has led to a multi-year
commitment by Eldorado in collaboration with the local community to provide resources to diversify land use through cultivation of a
variety of grapes suitable for wine production.
After purchasing the majority of the land surrounding the mine site in 2006, we employed villagers who are cultivating the land in a two-
phase project supported by Eldorado. As part of phase one, the villagers have planted 2.5 hectares with 11,200 Cabernet Sauvignon,
Merlot and Chardonnay vines. In phase two, the villagers will plant an additional 2.5 hectares with 16,000 Pinot Noir, Chardonnay and
Sauvignon Blanc vines. In a few years the project should be in a position to produce 40 tonnes (50,000 bottles) of white wine and 25
tonnes (32,000 bottles) of red wine.
ELDORADO GOLD 2010 Annual Report
3
Letter to Shareholders
Kışladağ Mine, Turkey
Jinfeng Mine, China
Tanjianshan Mine, China
White Mountain Mine, China
Vila Nova Mine, Brazil
I am pleased to report on another successful year for Eldorado. Of particular note was the
integration of the Sino Gold Mining assets we acquired in December 2009. Our employees
worked hard to successfully integrate these assets within Eldorado.
The expanded company delivered further growth for shareholders, with production in 2010
increasing for the fifth consecutive year to 632,539 ounces of gold. Our continued strong
operating performance also translated into earnings of $0.38 per share.
Eldorado has now successfully matured to the extent that, as well as being self-funding in terms
of continued growth, it is capable of returning a dividend to its shareholders. In June 2010, we
declared and delivered our first dividend of $0.05 per share, followed by a second dividend in
February 2011 for the same amount.
Entering 2011, we now operate four gold mines in Turkey and China as well as our Vila Nova
iron ore mine in Brazil. As a result of consistent progress by our construction teams in China
and Turkey, we are looking forward to the start of production from both the Efemçukuru and
Eastern Dragon mines in 2011. Their contribution, combined with that from our Kişladağ, Jinfeng,
Tanjianshan and White Mountain mines, will bring 2011 gold production to approximately 750,000
ounces while enabling us to maintain one of the lowest operating costs in the industry.
Exploration efforts in 2010 continued to increase our gold resource and reserve base, with year-
end proven and probable reserves of 18.7 million ounces of gold, up favourably from 15.1 million
ounces of gold the prior year. We saw a significant increase at our Kışladağ mine to 10.2 million
ounces of gold, an increase that has prompted us to consider further expansion opportunities at
our cornerstone mine.
In Brazil, we are pleased to be re-building our gold business by developing the Tocantinzinho
project in the Tapajos District of Para State. Eldorado has been active in Brazil since 1996, and
our skilled management team is eager to develop our next gold mine in the country.
4
www.eldoradogold.com
Efemçukuru
Eastern Dragon
Perama Hill
Tocantinzinho (TZ)
Rotary Air Blast Drilling
All of us at Eldorado look forward to the future and building on our history of disciplined growth
that results in year after year of superior performance for our shareholders. Indeed, our
shareholders continue to benefit from the stable and dedicated teams in each of our business
units who successfully take on challenges and deliver superior results. It is a great pleasure and
honour to continue to be a part of this team.
Sincerely,
Paul N. Wright
President and Chief Executive Officer
March 23, 2011
Annual Gold Production (in x1,000 oz)
Expanding Margins
700
600
500
400
300
200
100
0
$1,223
$995
$876
$609
$674
z
o
/
$
1400
1200
1000
800
600
400
200
0
2006
2007
2008
2009
2010
2006
2007
2008
2009
2010
Total Cash Cost
Cash Margins
Realized Gold Price
ELDORADO GOLD 2010 Annual Report
5
Mineral Reserves and Resources
As of December 31, 2010
GOLD
Project
Kışladağ
Proven
Probable
Proven+Probable
Efemçukuru
Proven
Probable
Proven+Probable
Tanjianshan
Proven
Probable
Proven+Probable
Perama
Proven
Probable
Proven+Probable
Jinfeng
Proven
Probable
Proven+Probable
White Mountain
Proven
Probable
Proven+Probable
Eastern Dragon
Proven
Probable
Proven+Probable
Tocantinzinho
Proven
Probable
Proven+Probable
Total Gold
Proven
Probable
Proven+Probable
Mineral Reserves
Tonnes
(x1000)
Grade
(Au g/t)
In-situ
gold ounces
(x1000)
Mineral Resources
Tonnes
(x1000)
Grade
(Au g/t)
In-situ
gold ounces
(x1000)
122,703
306,631
429,334
1,129
4,007
5,136
4,846
499
5,345
2,477
7,220
9,697
7,384
7,310
14,694
2,454
3,531
5,985
837
2,253
3,090
17,735
31,315
49,050
159,565
362,766
522,331
0.95
0.66
0.74
12.00
8.30
9.10
3.37
3.86
3.42
4.44
2.68
3.13
3.78
4.27
4.03
3.88
3.65
3.74
11.07
6.46
7.71
1.39
1.17
1.25
1.43
0.97
1.11
3,733
6,498
10,231
437
1,069
1,506
525
62
587
354
621
975
898
1,005
1903
306
414
720
297
467
764
792
1,183
1,975
7,342
11,319
18,661
Measured
Indicated
M+I
Inferred
Measured
Indicated
M+I
Inferred
Measured
Indicated
M+I
Inferred
Measured
Indicated
M+I
Inferred
Measured
Indicated
M+I
Inferred
Measured
Indicated
M+I
Inferred
Measured
Indicated
M+I
Inferred
Measured
Indicated
M+I
Inferred
Measured
Indicated
M+I
Inferred
132,800
426,355
559,155
320,868
1,235
4,304
5,539
1,703
6,087
2,027
8,114
4,806
3,064
9,375
12,439
8,766
11,240
11,937
23,177
8,140
3,269
4,679
7,948
2,920
800
2,700
3,500
2,200
19,777
50,457
70,234
6,950
178,272
511,834
690,106
356,353
0.90
0.61
0.68
0.43
13.18
8.50
9.55
6.43
3.07
2.73
2.98
3.28
4.30
3.18
3.46
1.96
3.42
3.67
3.55
3.85
3.82
3.62
3.70
3.59
12.48
6.04
7.50
2.67
1.29
0.97
1.06
0.66
1.43
0.89
1.03
0.65
3,855
8,334
12,189
4,384
523
1,177
1,700
352
599
178
777
507
424
958
1,382
554
1,235
1,410
2,645
1,009
401
545
946
337
322
530
852
190
820
1,574
2,394
147
8,179
14,706
22,885
7,480
6
www.eldoradogold.com
IRON ORE
Project
Vila Nova
Proven
Probable
Proven+Probable
Mineral Reserves
Tonnes
(x1000)
Grade
(Fe %)
2,370
6,817
9,187
63.4
60.1
61.0
Mineral Resources
Tonnes
(x1000)
Grade
(Fe %)
Measured
Indicated
M+I
Inferred
2,370
7,509
9,879
2,022
63.4
60.9
61.5
61.2
NOTES ON MINERAL RESOURCES AND RESERVES:
1) Mineral reserves and mineral resources are as of December 31, 2010.
2) Mineral reserves are included in the mineral resources.
3) The Eastern Dragon Project also contains economic concentrations of silver. The silver grade for the project’s Proven and
Probable reserves averages 71 g/t Ag (7.0 million in-situ ounces) whereas the average silver grade in the Measured and Indicated
resources equals 73 g/t Ag (8.3 million in-situ ounces).
MINERAL RESERVE NOTES:
1) Gold price used was $1,000/oz except for the Efemçukuru project which used $825/oz.
2) Cut-off grades (gold g/t): Kişladağ : 0.20 g/t oxide, 0.33 g/t sulphide; Efemçukuru: 4.0 g/t; Perama: 0.8 g/t; Tanjianshan: 1.6 g/t JLG
sulphide, 1.3 g/t JLG oxide/transition; Jinfeng: 0.8 g/t open pit, 2.5g/t underground; White Mountain: 1.5 g/t; Eastern Dragon: 1.0 g/t
open pit, 1.7 g/t underground; Tocantinzinho: 0.49 g/t sulphide, 0.43 g/t oxide.
3) Qualified Persons:
Richard Miller, P.Eng. and Manager, Mining for the Company is responsible for the Kişladağ, Tanjianshan, Jinfeng open pit and
Perama reserves; Mark LeMessurier MAusIMM, VP China Operations for the Company, is responsible for the Jinfeng underground,
White Mountain and Eastern Dragon reserves; Sean Gregerson, P.Eng., Manager, Business Development for the Company, is
responsible for the Tocantinzinho reserves; Scott Cowie, B.Eng., MAusIMM, General Manager, Perth, for Tetra Tech Australia Pty.
Ltd. is responsible for the Efemçukuru reserves; Roberto Costa, principal of Roberto Costa Engenharia Ltda, is responsible for the
Vila Nova iron reserves.
MINERAL RESOURCE NOTES:
1) Cut-off grades (gold g/t): Kişladağ: 0.3 g/t;
Efemçukuru: 3.0 g/t; Perama: 0.5 g/t;
Jinfeng: 0.7 g/t open pit, 2.0 g/t underground;
Tanjianshan: 1.0 g/t; White Mountain: 1.0 g/t;
Eastern Dragon: 1.0 g/t; Tocantinzinho: 0.3 g/t.
2) Qualified Persons:
Stephen Juras, Ph.D., P.Geo. and Director,
Technical Services for the Company is responsible
for the Kişladağ, Efemçukuru, Perama, Tanjianshan,
Tocantinzinho, Jinfeng and White Mountain
resources; Yumin Qiu, Ph.D., MAIG, Director of
Geology and New Projects PRC for the Company
is responsible for the Eastern Dragon resources;
Roberto Costa, principal of Roberto Costa
Engenharia Ltda, is responsible for the Vila Nova
iron resources.
Gold Resources and Reserves (in x1,000 oz)
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
)
z
o
0
0
0
,
1
x
(
u
t
i
S
-
n
I
l
d
o
G
Inferred
M+I
P+P
2006
2007
2008
2009
2010
ELDORADO GOLD 2010 Annual Report
7
PRODUCTION HIGHLIGHTS
First
Quarter
2010
Second
Quarter
2010
Third
Quarter
2010
Fourth
Quarter
2010
Fourth
Quarter
2009
2010
2009
Gold Production
Ounces Sold
Ounces Produced
Cash Operating Cost ($/oz)1,3,4
Total Cash Cost ($/oz)2,3,4
Realized Price ($/oz - sold)
163,446
164,928
370
397
1,110
172,826
167,940
357
410
1,195
154,655
151,297
386
431
1,231
149,022
148,374
418
460
1,373
131,068
128,593
330
365
1,103
639,949
632,539
382
423
1,223
360,226
363,509
309
337
995
Kişladağ Mine, Turkey
Ounces Sold
Ounces Produced
Tonnes to Pad
Grade (grams/tonne)
Cash Operating Cost ($/oz)3,4
Total Cash Cost ($/oz)2,3,4
Tanjianshan Mine, China
Ounces Sold
Ounces Produced
Tonnes Milled
Grade (grams/tonne)
Cash Operating Cost ($/oz)3,4
Total Cash Cost ($/oz)2,3,4
Jinfeng Mine, China
Ounces Sold
Ounces Produced
Tonnes Milled
Grade (grams/tonne)
Cash Operating Cost ($/oz) 3,4
Total Cash Cost ($/oz) 2,3,4
White Mountain Mine, China
Ounces Sold
Ounces Produced
Tonnes Milled
Grade (grams/tonne)
Cash Operating Cost ($/oz) 3,4
Total Cash Cost ($/oz) 2,3,4
83,974
82,240
2,898,199
1.12
304
307
69,197
70,451
2,686,284
1.12
304
345
66,113
62,086
2,767,179
0.98
337
359
59,741
59,815
2,021,057
1.00
382
354
70,765
70,131
3,679,685
0.86
294
296
279,025
274,592
10,372,719
1.06
329
339
237,363
237,210
10,716,556
1.11
279
281
18,947
25,423
249,738
4.01
420
517
49,674
45,615
389,851
4.23
422
462
10,851
11,650
130,643
4.09
550
589
38,261
28,884
271,749
4.38
387
483
48,623
52,659
392,211
4.51
381
423
16,745
15,946
167,981
3.78
442
474
28,847
28,847
283,598
3.84
391
493
45,447
46,116
387,427
4.42
425
473
14,248
14,248
154,125
4.01
477
507
30,710
30,710
244,867
4.59
349
459
38,282
37,560
387,710
3.81
486
585
20,289
20,289
169,669
4.06
498
536
40,150
37,773
256,828
5.81
332
421
14,554
14,541
136,054
3.97
471
515
5,599
6,148
58,074
4.26
400
439
116,765
113,864
1,049,952
4.19
383
485
182,026
181,950
1,557,199
4.24
425
480
62,133
62,133
622,418
3.98
487
522
102,710
105,610
974,498
5.31
350
435
14,554
14,541
136,054
3.97
471
515
5,599
6,148
58,074
4.26
400
439
1
2
3
4
Cost fi gures calculated in accordance with the Gold Institute Standard.
Cash Operating Costs, plus royalties and the cost of off-site administration.
Cash operating costs and total cash costs are non-GAAP measures. See the section Non-GAAP Measures of this Review.
Cash operating costs and total cash costs have been recalculated for prior quarters based on ounces sold.
8
www.eldoradogold.com
Health, Safety, Environment & Community
Committed to Health, Safety and the Environment in our
Operations and Communities
HEALTH & SAFETY
Ensuring the health and safety
of our employees, contractors
and local stakeholders is of
fundamental importance in
gaining and maintaining our
social licence to operate from
the communities where we
have mines and projects under
development. As such, we have
developed and implemented
safety management systems and
job training, and we promote a
culture of safety.
The safety performance at our
operations in Brazil, China and
Turkey compares very favourably
with mining operations in Canada.
In 2010, our lost-time injury rate
was 1.6 per 1,000,000 man
hours worked compared to 3.0 in
Ontario, Canada. For 2011, all of
our operations have an ambitious
safety goal of zero fatalities and
no lost-time incidents.
ENVIRONMENT
We are committed to minimizing
our environmental impact and
protecting the natural areas in
which we work.
To do so, we follow industry
best practices; adhere to all
environmental regulations in
the jurisdictions in which we
work; train our employees and
contractors to use equipment
and systems to minimize
environmental risk and ensure
the most efficient use of non-
renewable resources; and
maintain systems to identify,
manage and audit the potential
impact of our projects from
inception through to closure.
In 2010, we had no major
environmental incidents, and this
continues to be our goal for all of
our operations.
COMMUNITY
Community Relations teams
at each of our mines and
development projects actively
listen to, communicate with
and work alongside local
stakeholders.
Early on, during the exploration
phases, we seek to understand
local communities’ concerns so
that we can address some of
their most important issues if we
decide to develop a mine.
Our operations contribute
significantly to local economies,
and our ongoing investments in
local education initiatives help
strengthen communities over the
long term and beyond the life of
the mine.
Villagers at Efemçukuru cultivating grapes
ELDORADO GOLD 2010 Annual Report
9
From top to bottom:
Training of Jinfeng Emergency Response Team
Plant nursery for rehabilitation of deforested areas
at Vila Nova
A program encourages young women in
Efemçukuru village to complete high school
The White Mountain mine built a new village for
residents
Mining Operations
TURKEY
Kisladağ
Kişladağ, the largest gold mine
in Turkey, is an open pit, heap
leach mine located 35 kilometres
southwest of Uşak city. A gold
porphyry deposit, Kişladağ was a
greenfield discovery by Eldorado
that began commercial production
in July 2006.
In 2010, we provided close to
30,000 hours of training to our
employees and contractors,
or approximately 54 hours per
person. This training ensures that
employees and contractors have
the knowledge and skills to do
their jobs safely and effectively,
understanding both the risks
associated with particular tasks
and knowing how to minimize
these risks. In 2010, the lost-time
injury rate for all employees and
contractors was 1.03 per million
man hours worked.
We monitor our impact on the
environment and share results
with members of the local
community, government agencies
and stakeholders. As part of our
water management program,
these stakeholders check our
records and monitor and test
our water each month. We also
conduct studies to predict water
quality and quantity for open pit
dewatering, and we recycle our
water.
To ensure air quality, we aim to
minimize dust at our operations,
particularly at our crusher
areas and on the roads through
and around the mine site. We
continue to improve our water
spray efficiency on the conveyor
belts and transfer chutes of the
overland conveyor system, and
our trucks routinely spray the
roads, especially in the summer
months, to keep dust to a
minimum.
The Kişladağ site will be seeking
its ISO 14001 certification in
2011. As part of the certification
process, we have carried out
environmental risk assessments
for each work area and we
are developing environmental
management system procedures.
Another goal of Kişladağ in
2011 is to become a signatory
to the International Cyanide
Management Code.
As part of our support of the
local community, we built
children’s playgrounds in two
nearby villages and supported
the renewal of the Gumuskol
village mosque. In 2010, we also
distributed 2,400 toothbrushes
and toothpaste to all the Ulubey
students from kindergarten
through high school, and we
paved 6.5 kilometres of village
roads near Kişladağ with asphalt.
Dust control on mine roads at Kişladağ
Fire and Rescue Team training at Kişladağ
Paved village roads near Kişladağ
10
www.eldoradogold.com
China, and has over 10 years of
mine life remaining.
The current safety focus of
our Jinfeng mine is to improve
the frontline supervisor’s
capability and operator skills
while bringing all contractors
up to our safety standards. We
recently implemented a safety
and leadership program at
the mine, which supports and
encourages leaders, managers
and supervisors to ‘walk the talk’
and lead by example.
We provided 7,490 man hours
of training in 2010 to improve
employees’ skills and safety
knowledge. The training included
safety induction, driving skills,
Emergency Response Training
(ERT), operation procedures,
job safety analysis, first aid and
leadership.
Jinfeng’s 10 environmental
management employees are
involved in water and waste
management, monitoring,
rehabilitation and incinerator
operations. In 2010, Jinfeng
had zero major environmental
incidents and minimal impact on
the local environment. We are
working on a study to improve the
agricultural soil quality in the area
near the mine, and last year we
planted 16,000 seedlings.
In 2010, we invested over 6.8
million renminbi (or US$1 million)
on six initiatives in the three local
communities surrounding the
mine. Our Community Relations
teams have worked with two local
villages on road and path-paving
Golden Mountain Primary School is one
of the community projects supported by
the Jinfeng mine -- part of the company’s
ongoing commitment to education
Cardiopulmonary resuscitation training
Water sampling
CHINA
At Jinfeng, Tanjianshan and
White Mountain, all employees
meet the operational safety
and environmental licensing
requirements under Chinese
law. Local authorities provide
certification at many of our
operations in China. In 2010,
our lost-time injury rate at our
Chinese operations was 1.68
per million man hours worked.
We deeply regret that we had
two fatalities at our Chinese
operations and have established
tighter safety measures to prevent
such incidents in the future as
much as possible.
Jinfeng
Jinfeng, the second-largest gold
mine in China, is an open pit and
underground gold mine using
BIOX® technology. The mine is
located 236 kilometres southwest
of the capital city of Guiyang
in Guizhou Province, southern
ELDORADO GOLD 2010 Annual Report
11
projects. The mine provided the
materials and conducted sessions
on how to pave walkways, front
paths and roads, and the villagers
completed the work. More than
2,500 people from over 500
households in Jinshan Village
and Lannigou Village participated
in this improvement project.
Villagers now have a paved
road to cycle and walk on during
the rainy season. An education
improvement project in the area
benefited 450 primary students
and 17 teachers. The mine also
contributed to a river cleaning
project during the storm season
and a pool project at a teaching
site.
Tanjianshan
Tanjianshan is an open pit
float-roast-CIL mine in Qinghai
Province in northwest China.
All Tanjianshan mine employees
have completed a formal safety
training program, and the mine
meets all operational safety and
environmental certification and
licensing requirements under
Chinese law. These requirements
include certification in tailings
dam operations, boiler operations,
chemical handling and storage,
radiation use and electrical use.
Local authorities provide training
in mobile equipment operations.
The mine has an extensive
recycling program where it
recycles all paper, plastics,
aluminum cans and scrap steel
used at the site.
In 2011, Tanjianshan will run a
trial project with local villages on
growing various plant species
12
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Donation for Qinghai earthquake relief fund
Students at the Mahai Primary School
around the mine site, with a
long-term goal of having suitable
plants grown for mine closure
rehabilitation.
The Tanjianshan mine
contributed $100,000 to the
Qinghai earthquake relief fund
and over $25,000 to the Gansu
mudslide relief fund. In addition,
the mine provided the Mahai
Village with solar lights and
educational materials for the
Mahai Primary School. Members
of the Community Relations
team are also working with
Mahai villagers to raise fowl for
meat and eggs.
White Mountain
White Mountain is an
underground mine that uses
sub-level and cut-and-fill stoping
mining methods. The orogenic
gold deposit is located northeast
of Beijing, in China’s Jilin
Province.
White Mountain re-opened in
January 2010. Although the mine
had received its Mine Safety
Permit, two workers died at the
site in 2010 and we deeply regret
this tragic event. We have taken
steps to prevent similar incidents
from occurring in the future.
Department managers are now
responsible for safety, with their
programs and initiatives backed
up by the safety department. In
2010, we conducted 850 hours
of safety training, instructing all
employees in first aid, risk and
hazard training, fire extinguisher
use and hazard identification.
The training emphasized risk
and hazard identification to
strengthen and broaden the
safety culture of the operation,
and we implemented an
improved inspections program
and risk register to track all
actions. We also developed and
implemented full emergency
response plans, and the mine
has now instituted regular
emergency response training
and drills.
In 2010, we established a Village
Greenhouse project where
we are assisting local farmers
to grow vegetables that have
a market in urban areas. We
provide 20 university students
from the community with
summer employment.
BRAZIL
Vila Nova
Vila Nova is an open pit iron ore
mine located in Amapa State,
Brazil. We began trial production
in the third quarter of 2010 and
sold two shipments of ore, one
of lump and one of sinter fine,
totalling 90,000 tonnes.
Safety training at the operation is
ongoing.
The mine has established a plant
nursery to grow seedlings that will
be used to rehabilitate deforested
areas.
DEVELOPMENT PROJECTS
Efemçukuru
Efemçukuru is a high-grade
epithermal gold vein deposit
suitable for underground
mechanized mining that is
located in Izmir Province in
western Turkey. We expect to
begin production in the second
quarter of 2011.
At Efemçukuru, we have
established a culture of personal
risk awareness and management,
focused on safe operating
procedural training and we also
continue to offer defensive driver
training to employees.
We have established a program
to encourage more young women
in the local area to complete high
school. This year there were five
female graduates compared to
just one last year. In addition, our
vineyard project is now entering
its fourth year and is beginning to
produce fruit.
We constructed new agriculture water wells to provide water for crops in the
area surrounding Perama
Eastern Dragon
Eastern Dragon is located
in Heilongjiang Province in
northeastern China. Weather
conditions are typical of
northern latitudes, with warm
summers followed by severe
cold in the winter.
To allow site construction to
proceed safely during these
winter conditions, we introduced
a special health and safety
program in October 2010. We
provided extensive training
to Eldorado’s employees and
contractors to recognize health
hazards resulting from exposure
to cold temperatures.
In addition, we implemented
procedures to protect workers
against these conditions, such
as scheduling regular rest
periods in warm conditions
to limit exposure, identifying
special hazards associated
with snow and ice, and safety
requirements for working with
steel. We also provided special
cold weather clothing to all
workers to ensure that each
person is protected from the
elements and equipped to carry
out their tasks in a safe manner.
Perama Hill
Perama Hill is a shallow, high
sulphidation, non-refractory oxide
gold deposit with a low strip
ratio located in Thrace Province
in northeastern Greece. We
submitted the Pre-Environmental
Impact Assessment in October
2009 and anticipate receiving
approval in 2011. We are
continuing to work with all levels
of government to advance the
understanding of the project and
its importance to the regional
economy.
A central focus over the past
year has been on building
relationships with our
stakeholders in Greece. We have
drilled two water wells in the local
villages near the mine, and we
have also established a black
pine nursery for reforestation in
the area.
ELDORADO GOLD 2010 Annual Report
13
Financial Review
Kişladağ mine
Jinfeng mine
Tanjianshan mine
White Mountain
mine
Vila Nova mine
Management’s Discussion & Analysis of Financial Condition and Results of Operations.....................
15
Management’s Responsibility for Financial Reporting...........................................................................
51
Report of Independent Registered Public Accounting Firm...................................................................
52
Consolidated Balance Sheets................................................................................................................
55
Consolidated Statements of Operations................................................................................................
56
Consolidated Statements of Cash Flows...............................................................................................
57
Consolidated Statements of Shareholders’ Equity ................................................................................
58
Consolidated Statements of Comprehensive Income............................................................................
59
Notes to the Consolidated Financial Statements...................................................................................
60
14
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MANAGEMENT’S DISCUSSION & ANALYSIS
of Financial Condition and Results of Operations
of Financial Condition and Results of Operations
3311 22010100
D
December 31, 2010
b
AMENDED
Throughout this MD&A, Eldorado, we, us, our and the company mean Eldorado Gold Corporation.
This year means 2010. All dollar amounts are in United States dollars unless stated otherwise.
The information in this MD&A is as of March 17, 2011. You should also read our audited consolidated
financial statements for the year ended December 31, 2010. We prepare our consolidated financial
statements in accordance with Canadian GAAP and file them with appropriate regulatory authorities
in Canada and the United States. You can find more information about Eldorado, including our annual
information form, on SEDAR at www.sedar.com.
What’s inside
About Eldorado
2010 highlights, corporate developments and outlook
Highlights and outlook
Corporate developments
Annual updates
Operations
Development projects
Exploration
Annual results
Financial results
Results of operations
Non-GAAP measures
Financial condition
Capital resources
Managing Risk
Other information
Critical accounting policies and estimates
Changes in accounting policies
New accounting developments
Disclosure controls and procedures
Internal controls over financial reporting
Forward-looking information and risks
16
17
17
19
21
22
26
26
29
29
30
35
38
41
41
48
48
49
Summary of quarterly results
50
ELDORADO GOLD 2010 Annual Report
15
MANAGEMENT’S DISCUSSION & ANALYSIS
of Financial Condition and Results of Operations
of Financial Condition and Results of Operations
December 31, 2010
3311 22010100
DD
bb
About Eldorado
Based in Vancouver, Canada, Eldorado owns and operates gold mines around the world. Its activities
involve all facets of the gold mining industry including exploration, development, production and
reclamation.
Operating gold mines:
▪
▪
▪
▪
Kişladağ, in Turkey (100%)
Tanjianshan, in China (90%)
Jinfeng, in China (82%)
White Mountain, in China (95%)
Development gold projects:
▪
▪
▪
▪
Eastern Dragon, in China (95%)
Efemçukuru, in Turkey (100%)
Tocantinzinho, in Brazil (100%)
Perama Hill, in Greece (100%)
Iron ore mine:
▪
Vila Nova, in Brazil (100%)
Jinfeng, White Mountain and Eastern Dragon were included in the acquisition of Sino Gold Ltd. (Sino Gold)
in December 2009. Tocantinzinho was included in the acquisition of Brazauro Resources Corporation in
July 2010.
Eldorado is listed on the following exchanges:
▪
▪
Toronto Stock Exchange (TSX) under the symbol ELD
New York Stock Exchange (NYSE) under the symbol EGO
ELD is part of the S&P/TSX Global Gold Index. EGO is part of the AMEX Gold BUGS Index.
Eldorado CHESS Depositary Interests (CDIs) trade on the Australian Securities Exchange (ASX) under the
symbol EAU.
16
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MANAGEMENT’S DISCUSSION & ANALYSIS
of Financial Condition and Results of Operations
of Financial Condition and Results of Operations
31 2010
D
December 31, 2010
b
2010 Highlights, corporate developments and 2011 outlook
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
Production
solution processing improvements at Kışladağ.
was 74% higher than in 2009, due to the addition of Jinfeng and White Mountain, and
(in ounces) were up 78%, as a result of higher production and drawing down on gold-in-
Gold sales
circuit inventories. Our average realized price was $1,223 per ounce of gold, an increase of 23% over
last year.
Earnings per share
increased 46% over last year to $0.38 per share.
Cash generated from operating activities
140% over last year. This is a non-GAAP measure. See page 27 for more information.
before changes in non-cash working capital increased
Paid our
first dividend of Cdn$0.05 per share on June 4, 2010.
Kişladağ’s
reserves increased 50% compared to year-end 2009.
Completed our acquisition of Brazauro Resources Corporation (Brazauro) on July 20, 2010, for
5,993,898 Eldorado common shares and other consideration.
Acquired the exploration licence for Xiaoshiren Central (20 km southeast of White Mountain).
Sold our interest in Beyinhar on February 6, 2010 for $20 million.
2011 production is expected to be 715,000 to 770,000 ounces of gold, at a cash operating cost of $375
to $395 per ounce.
▪
2011 capital expenditures are expected to be approximately $230 million.
Corporate developments
Brazauro acquisition
On July 20, 2010, Eldorado acquired, through a court-approved plan of arrangement under the laws of British Columbia
(the arrangement), all the issued and outstanding securities of Brazauro Resources Corporation (Brazauro) that we did
not already own for total consideration of 5,993,898 common shares of Eldorado.
Under the terms of the arrangement, former Brazauro shareholders other than Eldorado received 0.0675 of an Eldorado
common share for each Brazauro share held, as well as 1/3 of a share of TriStar Gold Inc. (TriStar), a new exploration
company that Eldorado funded with Cdn$10 million on July 19, 2010 as part of the Arrangement. TriStar will hold certain
exploration properties previously owned by Brazauro.
Brazauro’s principal asset, the Tocantinzinho Project in Tapajos, Brazil, is a late-stage exploration project with current
measured and indicated resources of 2.1 million ounces of gold. Eldorado also acquired option agreements to earn
into 100% of the Água Branca and Piranhas properties, located in the Tapajos District immediately adjacent to the
Tocantinzinho Project.
Investment in Serabi Mining plc
Eldorado acquired 12,000,000 common shares and 2,500,000 special warrants of Serabi Mining Plc (Serabi) in 2010,
for a total price of approximately $6.8 million. This represents a 26.8% interest in Serabi. We are accounting for the
investment in Serabi using the equity method.
Serabi is a gold mining company whose main asset is 100% of the Palito Gold property in the Tapajos region of Brazil.
The Palito deposit consists of high grade, narrow gold-copper veins, with considerable exploration potential.
Disposition of Beyinhar
On April 27, 2010, Eldorado completed the disposition of its interest in the Beyinhar joint venture in Inner Mongolian
Autonomous Region, China, through the sale of its wholly owned subsidiary Golden China Nei Men Gold Exploration
Corporation for $20.0 million. Beyinhar was included in the acquisition of Sino Gold but considered to be a non-core
asset. The sale did not have an impact on our earnings as the fair value of the property at the date of acquisition was
equal to the sale price.
ELDORADO GOLD 2010 Annual Report
17
MANAGEMENT’S DISCUSSION & ANALYSIS
of Financial Condition and Results of Operations
of Financial Condition and Results of Operations
December 31, 2010
Operating highlights and outlook1,5
2010
2009
2011 Outlook7
Total
Gold ounces produced
Ounces sold
Cash operating costs ($ per ounce) 3
Total cash cost ($ per ounce) 2,3
Kışladağ
Gold ounces produced
Ounces sold
Cash operating costs ($ per ounce) 3
Total cash cost ($ per ounce) 2,3
Tanjianshan
Gold ounces produced
Ounces sold
Cash operating costs ($ per ounce) 3
Total cash cost ($ per ounce) 2,3
Jinfeng4
Gold ounces produced
Ounces sold
Cash operating costs ($ per ounce) 3
Total cash cost ($ per ounce) 2,3
White Mountain4
Gold ounces produced
Ounces sold
Cash operating costs ($ per ounce) 3
Total cash cost ($ per ounce) 2,3
Efemçukuru
Gold ounces produced
Cash operating costs ($ per ounce) 3
Eastern Dragon4
Gold ounces produced
Cash operating costs ($ per ounce) 3,6
Vila Nova
Iron ore tonnes sold
Cash operating costs ($ per tonne
sold)
632,539
639,949
382
423
274,592
279,025
329
339
113,864
116,765
383
485
181,950
182,026
425
480
62,133
62,133
487
522
n/a
n/a
n/a
n/a
89,074
41
363,509
360,226
309
337
237,210
237,363
279
281
105,610
102,710
350
435
14,541
14,554
471
515
6,148
5,599
400
439
n/a
n/a
n/a
n/a
n/a
n/a
715,000 to 770,000
$375 to $395
270,000 to 285,000
$350 to $365
110,000 to 120,000
$410 to $430
175,000 to 185,000
$445 to $465
70,000 to 75,000
$485 to $500
70,000 to 80,000
$285 to $300
20,000 to 25,000
$$40 to $45
440,000 to 480,000
$40 to $45
1 We calculate costs according to the Gold Institute Standard.
2 Total cash cost is cash operating costs plus royalties and off-site administration costs.
3 Cash operating costs and total cash cost are non-GAAP measures. See page 29 for more information.
4 We acquired Jinfeng, White Mountain and Eastern Dragon in December 2009.
5 We recalculated cash operating costs and total cash costs for 2009 based on ounces sold.
6 Eastern Dragon cash operating costs are net of silver by-product credits.
7 Outlook uses the following assumptions:
Gold price: $1,250 per ounce
Oil price: $80 per barrel (Kişladağ only)
Exchange rates:
Cdn$1.05 = $1.00
Brazilian Real 1.75 = $1.00 Chinese RMB 6.50 = $1.00
Turkish Lira 1.50 = $1.00
18
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MANAGEMENT’S DISCUSSION & ANALYSIS
of Financial Condition and Results of Operations
of Financial Condition and Results of Operations
31 2010
D
December 31, 2010
b
Annual updates - Operations
Kışladağ
Ore mined (tonnes)
Total material mined (tonnes)
Strip ratio
Ore to pad (tonnes)
Gold grade (g/t)
Gold production (ounces)
2010
10,046,503
27,299,803
1.72:1
2009
10,550,764
24,034,645
1.28:1
10,372,719
10,716,556
1.06
274,592
1.11
237,210
In 2010 we increased the column size in the ADR plant and instigated intermediate leaching. The
combination of these two changes resulted in an inventory drawdown of gold in the leach pad of
approximately 40,000 ounces, accounting for the favourable variance from our initial guidance for 2010 of
240,000 ounces.
Cash operating cost of $329 per ounce (this is a non-GAAP measure; see page 29 for more information)
was within our initial guidance of $310 to $330 per ounce. The increase in cash operating cost per ounce
from the previous year (2009 - $279 per ounce) was due to higher fuel costs as well as higher strip ratios
and slightly lower head grade. In 2011 we expect to produce 270,000 to 285,000 ounces of gold at a cash
operating cost $350 to $365 per ounce.
In 2010, we continued to work on the Phase III expansion of the crushing circuit. This is designed
to increase the crushing capacity to more than 12 million tonnes per annum. This equipment will be
commissioned in Q1 2011.
We spent $54.9 million on capital projects at Kişladağ in 2010. The majority of this was to complete the
Phase III crusher expansion. Other capital costs included the installation of six new leach pads (pads
16-21) and continued resource delineation drilling.
Tanjianshan
Ore mined (tonnes)
Total material mined (tonnes)
Strip ratio
Ore processed (tonnes)
Gold grade (g/t)
Gold production (ounces)
2010
1,178,293
4,155,030
2.53:1
1,049,952
4.20
113,864
2009
1,566,379
11,847,818
6.56:1
974,498
5.31
105,610
Gold production was higher than our initial guidance of 105,000 ounces due to higher than planned mill
throughput and head grade. The cash operating cost, $383 per ounce, was lower than our guidance of $435
per ounce due to higher than planned production related to the higher head grade. The increase in cash
operating cost per ounce from the previous year (2009 - $350 per ounce) was due to lower head grade. In
2011 we expect to produce 110,000 to 120,000 ounces of gold at a cash operating cost of $410 to $430 per
ounce.
ELDORADO GOLD 2010 Annual Report
19
MANAGEMENT’S DISCUSSION & ANALYSIS
of Financial Condition and Results of Operations
of Financial Condition and Results of Operations
December 31, 2010
The process plant continued to perform well. Various metallurgical improvements were completed during
the year with the installation of a flash float circuit and extra flotation tank cells. Also during 2010, a major
roaster shutdown was completed to coincide with an extended power outage. The roaster was inspected
and found to be in good condition. An upgrade was completed at this time with improvements to the roaster
cyclones to reduce the fine dust that has been overloading the Electrostatic Precipitator (ESP).
We spent $17.1 million in capital at Tanjianshan in 2010 for delineation drilling on identified resources and
process plant upgrades, as well as an expansion of the tailings dam.
Jinfeng
Ore mined - underground (tonnes)
Ore mined - open pit (tonnes)
Total material mined - open pit (tonnes)
Strip ratio
Ore processed (tonnes)
Gold grade (g/t)
Gold production (ounces)
2010
405,015
1,432,278
17,832,838
11.45:1
1,557,199
4.24
181,950
20091
34,744
118,778
2,604,277
20.9:1
136,054
3.97
14,541
1 2009 numbers only from date of acquisition on December 4, 2009.
Gold production at Jinfeng for 2010 was within our initial guidance, while cash operating costs of $425 per
ounce were below our initial guidance of $450 per ounce, due to lower than planned waste mining costs. In
2011 we expect to produce 175,000 to 185,000 ounces of gold at a cash operating cost of $445 to $465 per
ounce.
A cutback will be completed in the open pit in 2011 to allow further pit development.
The process plant continued to perform well.
We spent $15.1 million in capital at Jinfeng in 2010 on underground equipment and development, and
tailings dam improvements.
White Mountain
Ore mined - underground (tonnes)
Ore processed (tonnes)
Gold grade (g/t)
Gold production (ounces)
1 2009 numbers only from date of acquisition on December 4, 2009.
2010
624,723
622,418
3.98
62,133
20091
52,077
58,074
4.26
6,148
Gold production at White Mountain for 2010 was within our initial guidance, while cash operating costs of
$487 per ounce were above our initial guidance of $460 per ounce due to higher mining costs related to
stope development and dewatering, as well as lower than planned recovery rates. In 2011 we expect to
produce 70,000 to 75,000 ounces of gold at a cash operating cost of $485 to $500 per ounce.
20
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MANAGEMENT’S DISCUSSION & ANALYSIS
of Financial Condition and Results of Operations
of Financial Condition and Results of Operations
December 31, 2010
Mining issues, including water inflow and cavities in the ore zone, are being addressed by increasing
underground development and stope availability.
We spent $16.4 million in capital at White Mountain in 2010, mainly on underground equipment and
development. A mercury removal plant was also installed and commissioned to remove mercury vapour
from the electrowinning and carbon regeneration circuits.
Annual updates – Development projects
Eastern Dragon
Permitting issues delayed the start of construction at Eastern Dragon to the fourth quarter of the year. We
made the decision to enter into a specialized winter works program to complete critical path items on the
implementation schedule. Due to the extremely cold weather in the region, construction activity is normally
very restricted in the winter. The work program we prepared focused on providing safe working conditions
for all contractors and employees. We took special precautions to ensure workers were provided with
suitable clothing to work outside, working hours were restricted, there were regularly scheduled rest periods
in heated areas, and special training was provided for those working in snowy conditions, particularly
at height. As a result, we were able to carry out installations of critical machinery foundations and erect
structural steel for the concentrator building enclosure. In addition, we were able to complete infrastructure
projects to support the winter work program, such as worker housing, the electrical substation, sewage
treatment infrastructure and limited road works. This effort will position the project for completion in late
2011.
We spent $10.9 million on capital projects at the Eastern Dragon project in 2010.
Efemçukuru
We continued with all aspects of the implementation phase of the Efemçukuru project this year. The main
concentrator plant was advanced from civil foundation installations early in the year, through mechanical
and electrical installations, to dry commissioning in the fourth quarter. Major infrastructure installations
were also advanced, including preparing the tailings impound area, ancillary buildings and services and
preparation of the rock dump area to receive development rock from underground. We also constructed
a major water dam on site following design changes brought on by permitting issues. Construction of the
tailings filtration and backfill plants was initiated mid-year with planned commissioning of the circuits in the
first quarter of 2011.
Engineering and procurement of major equipment and steel work for the concentrate treatment plant at
Kişladağ was nearing completion at year-end. With receipt of the modified Kişladağ environmental impact
assessment, civil and mechanical construction will begin in mid-2011. The plant is expected to be complete
in the fourth quarter of 2011.
Start-up of underground preproduction development was delayed while we were waiting for legislative
changes in the Turkish mining law. The contractor was able to start development mid-year and completed
approximately 45% of the contract by year-end. With completion of the mine infrastructure and continued
good performance from the mine contractor, we expect production at Efemçukuru to be at full capacity by
mid-2011.
We spent $69.0 million on capital projects at Efemçukuru in 2010.
ELDORADO GOLD 2010 Annual Report
21
MANAGEMENT’S DISCUSSION & ANALYSIS
of Financial Condition and Results of Operations
of Financial Condition and Results of Operations
December 31, 2010
Vila Nova
During 2010 we sold 89,074 dry metric tonnes of iron ore as part of a trial mining program designed to test
the project logistics, processing plant, and mining capacity. We expect to ramp up production to between
440,000 and 480,000 dry metric tonnes in 2011.
Tocantinzinho
With the purchase of Brazauro and acquisition of the Tocantinzinho project in 2010, we initiated additional
work on defining the ore body, completing approximately 5,600 metres of diamond drilling and preparing a
prefeasibility study to define what will be an open pit mining operation. Various engineering studies have
examined metallurgical response and the process design for gold recovery, geotechnical stability of the pit,
hydrology and hydrogeology of the area and major infrastructure needs such as the incoming power line
and the access road to the site. This work has been carried out while preparing the environmental impact
assessment, which will be submitted to the Ministry of Environment in the first quarter of 2011, and issuing
the prefeasibility study and declaration of resources and reserves at Tocantinzinho.
We spent $9.6 million on capital projects at the Tocantinzinho project in 2010.
Perama Hill
We continue to work closely with the Greek government and local agencies to advance the project through
the permitting stage. Our dialogue with the local communities and stakeholders has focused on informing
and educating them about both the technical aspects and benefits of the project and we are encouraged by
the level of support we have received.
We spent $2.4 million on capital projects at the Perama Hill project in 2010.
Annual updates – Exploration
Exploration drilling in 2010 totalled 107,088 metres at eighteen projects worldwide.
Turkey
Kişladağ
Two phases of infill and resource extension drilling totalling 75 diamond drill holes (40,825 m)
were completed. Notable results include:
▪
▪
▪
▪
Delineation of a new contiguous high-grade gold zone within Intrusion 2A, in areas of the deposit that
were originally modelled to contain low gold grades and waste.
Definition of the southeast margin high-grade zone, which was traced over an east-west strike length
of approximately 300 metres, and lies just outside the boundary of the 2009 design pit.
Identification of high-grade zones along the Intrusion 3-Intrusion 1 contact in the northwest deposit
area.
Discovery of ore-grade gold values in the basement schist adjacent to a late-stage intrusive dyke. This
highlights the prospectivity of relatively unexplored areas to the west of the current deposit.
Efemçukuru
Six diamond drill holes (1,907 m) testing the Kokarpinar vein were completed in 2010. The vein was
intersected at or near the projected depth in all drill holes, with four of the six holes returning significant
mineralized intervals. Additional planned drilling on the Kokarpinar and Kestane Beleni veins was deferred
until early 2011 due to delays in obtaining the required forestry permits.
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MANAGEMENT’S DISCUSSION & ANALYSIS
of Financial Condition and Results of Operations
of Financial Condition and Results of Operations
December 31, 2010
Reconnaissance programs
At the MH iron-oxide copper-gold project, results of detailed geological mapping, soil geochemistry, and
geophysical surveys provided several large-scale drill targets. Eight diamond drill holes were completed for
a total of 3,066 metres, testing the Köskale, Karakaya, and Kuşkayasi targets. The best results to date are
from the Köskale target, a structurally controlled breccia zone with strong hematite alteration.
At the Sizma project, 22 short reverse circulation holes (1,146 m) tested structurally controlled, phyllite-
hosted gold mineralization. Several of the holes intersected low-grade gold values over several tens of
metres.
Six diamond drill holes were completed at the AS project for a total of 2,745 metres. Drilling targeted
newly defined porphyry targets based on alteration mapping, geochemistry, and magnetic data. All
holes intersected variably altered and mineralized rocks, including zones of weak porphyry-style copper,
molybdenum, and gold mineralization.
At the Sayaçik project, we completed five reverse circulation holes (986 m) and two diamond drill holes
(866m) targeting geophysical and geochemical anomalies. No significant mineralized intervals were
encountered.
Reconnaissance fieldwork including rock chip sampling, geological mapping, and soil geochemical surveys
were completed at the Catak, Dolek, and Atalan projects.
China
Tanjianshan
A total of 52 diamond drill holes were completed at the 323 zone for a total of 9,838 metres. Geological
modelling of the mineralization defined to date has delineated a preliminary Inferred Resource of 160,000
ounces gold at 2.75 g/t. Mineralization remains open down-plunge to the south.
At the ZXS prospect area, 40 shallow RC/RAB holes (4,418 m) were completed. These were designed to
test covered areas and delineate targets for follow up diamond drilling
Jinfeng
At the Jinfeng Mine, 15,318 metres of underground and surface drilling focused on upgrading zones of
inferred resources.
At the Bannian prospect, approximately 20 km southwest of the Jinfeng mine, 12 diamond drill holes
(1,146 m) targeted near-surface zones of structurally controlled gold mineralization. Results were mixed,
highlighting the erratic nature of mineralization along the target F207 zone.
At Lintan and Yaojiatan, immediately north of the mine, 13 diamond drill holes were completed, targeting the
F14 and F70 structures. Mineralized intercepts were generally narrow and low grade, and future drilling will
be directed towards conceptual targets where larger tonnage deposits may be possible.
White Mountain
Drilling at the White Mountain mine focused on down-dip and along-strike extensions to known
mineralization on the F100 zone. A new lens of high-grade mineralization was intersected approximately
200 metres down-dip of the known deposit in drill hole 337 (24.7 m @ 8.7 g/t Au). This intercept is
completely open along strike and down-dip and will be followed up with additional drilling.
ELDORADO GOLD 2010 Annual Report
23
MANAGEMENT’S DISCUSSION & ANALYSIS
of Financial Condition and Results of Operations
of Financial Condition and Results of Operations
December 31, 2010
At Xiaoshiren, approximately 20 km southeast of the mine, surface mapping, rock chip sampling and soil
geochemistry led to late season diamond drilling on the #4 and #5 zones. Seven holes (1,223 m) were
completed, several of which intersected significant mineralized breccia zones with the most significant
interval grading 7.8 g/t Au over 6.5 metres.
At Dongdapo, along strike immediately northeast of the mine, geological mapping and soil geochemical
surveys were completed and drill targets defined.
Three diamond drill holes were completed at the Caijiagou project (983 m). No significant mineralization
was encountered and the project has been dropped.
Eastern Dragon
Field activities this year included a detailed ground magnetic survey, float and outcrop sampling, and
prospecting within the EL53 licence area. Results of these surveys have been incorporated into our
geological interpretation of the area and drill targets defined. Of note is the newly identified high-grade gold
in outcrop along the river valley north of the Lode 5 deposit, which is being evaluated as a potential drill
target.
Four exploration diamond drill holes (719 m) were completed at the Sanjianfang exploration licence
immediately south of EL53. The drilling intersected veins in several locations, but did not encounter any
significant gold grades.
Brazil
Tocantinzinho
Exploration efforts at Tocantinzinho included 5,598 metres of diamond drilling and 635 metres of
reverse circulation drilling. These programs included infill drilling at the Tocantinzinho deposit (15 holes),
geotechnical drilling within and peripheral to the deposit (6 holes), and exploratory drilling outside the known
deposit (9 diamond holes and 7 RC holes).
In addition to drilling, the soil geochemical grid was significantly expanded and a 38.5 line kilometre induced
polarization geophysical survey was completed. Several zones of anomalous chargeability/resistivity
response were identified and will be drill tested.
Reconnaissance
At the Agua Branca project, three diamond drill holes (584 m) were completed, finishing the program started
by Brazauro before we assumed control of the project. Results were encouraging in that similar lithologies
and alteration styles to those associated with the Tocantinzinho deposit were intersected; however, gold
grades were generally low. We have subsequently begun a program of property-wide geochemical sampling
designed to identify possible additional drill targets on the property.
At Piranhas, work has focused on rehabilitation of the airstrip and camp facilities so that exploration crews
can begin reconnaissance work in 2011.
A stream sediment and rock sampling program was completed at the Triguiero project in northeast Brazil.
Several isolated anomalies were defined; however, follow-up work failed to identify significant mineralization
and the project was subsequently dropped.
24
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MANAGEMENT’S DISCUSSION & ANALYSIS
of Financial Condition and Results of Operations
of Financial Condition and Results of Operations
December 31, 2010
Nevada
A controlled source audio magnetotelluric (CSAMT) geophysical survey was completed at the Cathedral
Well project which defined several drill targets in covered areas adjacent and down-dip from known
mineralization. A reverse circulation drill program designed to test these targets began in December.
Geological mapping and rock sampling programs were completed at the Buffalo Canyon project and defined
several distinct styles of mineralization and drill targets. We plan to test these targets early in 2011.
Geological and alteration mapping, soil sampling, rock sampling, and a CSAMT geophysical survey were
completed at the Richmond Mountain project. Two reverse circulation holes were completed (815 m) testing
a conceptual target beneath cover. Results were generally disappointing and the project has been dropped.
We dropped the option on the Green Monster project due to continued permitting delays.
ELDORADO GOLD 2010 Annual Report
25
MANAGEMENT’S DISCUSSION & ANALYSIS
of Financial Condition and Results of Operations
of Financial Condition and Results of Operations
December 31, 2010
Annual results
Financial results
($000)
Total revenue
Net income (loss)
Total assets
Total long-term financial liabilties1
Earnings per share
- basic
- diluted
2010
791,175
206,063
3,779,909
92,415
0.38
0.38
Cash dividends declared per share
1 Includes long-term debt net of deferred financial cost and aset retirement obligations.
0.05
2009
358,467
102,404
3,436,108
161,099
0.26
0.26
-
2008
277,723
163,656
905,369
4,812
0.46
0.46
-
Net income
Our consolidated net income for the year increased by 102% over last year – from $102.4 million or
$0.26 per share in 2009 to $206.1 million or $0.38 per share in 2010. The increase was driven by higher
results from gold mining operations partially offset by higher income tax, general and administrative, and
exploration expenses.
Revenue
Total revenues this year included $782.9 million in gold revenues and $8.3 million in iron ore sales.
Gold revenues this year were 121% higher than last year mainly for two reasons:
▪
▪
selling prices increased by 23%
sales volumes were up 78%: sales from Kişladağ and Tanjianshan increased by 55,717 ounces, and
Jinfeng and White Mountain increased by 224,006 ounces. Jinfeng and White Mountain sales in 2009
were for the month of December.
Gold ounces sold
- Kişladağ
- Tanjianshan
- Jinfeng
- White Mountain
Average selling price per ounce
Gold revenue (000s)
2010
639,949
279,025
116,765
182,026
62,133
$1,223
2009
360,226
237,363
102,710
14,554
5,599
$995
$782,850
$358,467
Iron ore revenues were derived from two shipments totalling 89,074 dry metric tonnes of iron ore sold in the
fourth quarter at an average price of $93.50 per dry metric tonne.
Results of gold mining operations
Results from gold mining operations before taxes were up 113% over last year for three main reasons:
▪
▪
▪
the addition of Jinfeng and White Mountain
higher sales volumes at Kışladağ
higher gold prices overall
26
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MANAGEMENT’S DISCUSSION & ANALYSIS
of Financial Condition and Results of Operations
of Financial Condition and Results of Operations
December 31, 2010
Earnings from gold mining operations before taxes
($ millions)
Total
Gold sales
Operating costs
Depletion, depreciation and amortization
Earnings from mine operations
Kışladağ
Gold sales
Operating costs
Depletion, depreciation and amortization
Earnings from mine operations
Tanjianshan
Gold sales
Operating costs
Depletion, depreciation and amortization
Earnings from mine operations
Jinfeng
Gold sales
Operating costs
Depletion, depreciation and amortization
Earnings from mine operations
White Mountain
Gold sales
Operating costs
Depletion, depreciation and amortization
Earnings from mine operations
2010
782.9
278.2
104.0
400.7
339.1
98.1
14.1
226.9
144.0
58.9
25.5
59.6
222.0
88.3
45.4
88.3
77.8
32.9
19.0
25.9
2009
358.5
132.7
37.6
188.2
233.1
67.7
12.0
153.4
102.5
45.7
20.5
36.3
16.5
14.5
4.3
(2.3)
6.4
4.8
0.8
0.8
Operating costs
Operating costs rose 110% this year for two main reasons:
▪
▪
volume was higher at all our mines
unit operating costs were higher at Tanjianshan and Kışladağ
Unit operating costs were higher than 2009:
▪
Kışladağ’s cash operating costs per ounce increased 18% because of higher fuel costs, stripping ratios
and slightly lower head grade
anjianshan’s unit operating costs rose 9% because of lower head grade
T ▪
Depletion, depreciation and amortization from gold mining operations
Depletion, depreciation and amortization expense was $104.0 million this year, 177% higher than 2009,
mainly because of the additional expense at Jinfeng and White Mountain, including amortization of the
excess purchase price allocated to proven and probable reserves at Jinfeng and White Mountain.
ELDORADO GOLD 2010 Annual Report
27
MANAGEMENT’S DISCUSSION & ANALYSIS
of Financial Condition and Results of Operations
of Financial Condition and Results of Operations
December 31, 2010
Other expenses
$000
General and administrative
Income tax
Exploration
Foreign exchange
Interest and other
Gains on sales of marketable securities
Non-controlling interest and other
2010
59.8
89.8
23.2
14.8
(12.9)
(6.6)
17.5
2009
32.5
41.9
12.0
(3.0)
(2.3)
(1.7)
2.6
General and administrative expense
We incur general and administrative costs at our head office in Vancouver, Canada and in the countries
where we conduct our business.
General and administrative expense increased $27.3 million or 84% over 2009 due to higher stock-based
compensation expense as well as higher headquarters costs in both Vancouver and China due to the
increase in the size of our company. Stock-based compensation expense increased over 2009 because
there were no significant option grants in 2009.
Income taxes
Income tax expense increased $47.9 million or 114% over 2009 as a result of higher taxable income from
our gold mining operations in Turkey and China. The effective tax rate of 29% was unchanged from 2009.
Foreign exchange gain/loss
We reported $14.8 million in foreign exchange losses this year, mainly related to unrealized losses on
future income tax liabilities originating from the Sino acquisition denominated in Chinese renminbi. In 2009
we reported $3.0 million in foreign exchange gains, mainly related to realized gains on cash deposits
denominated in Canadian dollars.
Interest and other income
Interest and other income of $12.9 million in 2010 included $7.5 million related to the sale of our Turkish
subsidiary’s Agi Dagi royalty interest, and $2.6 million from the sale of silver by-product, mainly from
Kişladağ.
Non-controlling interest
Non-controlling interest was $17.5 million - an increase from 2009 because of the addition of Jinfeng and
White Mountain.
Exploration expense
Exploration expense increased by $11.2 million over 2009 as a result of increasing exploration activities.
See Exploration on page 22 for more information.
28
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MANAGEMENT’S DISCUSSION & ANALYSIS
of Financial Condition and Results of Operations
of Financial Condition and Results of Operations
December 31, 2010
Non-GAAP measures
Throughout this document, we have provided measures prepared in accordance with Canadian GAAP, as
well as some non-GAAP performance measures as additional information for investors who also use them
to evaluate our performance.
Since there is no standard method for calculating non-GAAP measures, they are not a reliable way to
compare us against other companies. Non-GAAP measures should be used with other performance
measures prepared in accordance with Canadian GAAP.
We have defined our non-GAAP measures below and reconciled them with the GAAP measures we report.
Cash operating cost
The table below reconciles cash operating cost to operating costs. We calculate costs according to the Gold
Institute Standard.
$ thousands (except for gold ounces sold)
Operating costs - excluding Vila Nova
(from consolidated statements of operations)
Less:
Royalty expense and production taxes
By-product credits and other adjustments1
Sino Gold inventory fair value adjustment
Cash operating cost
Gold ounces sold
Cash operating cost per ounce
2010
278,194
(26,734)
(7,306)
-
244,154
639,949
382
2009
132,464
(10,025)
(4,172)
(6,957)
111,310
360,226
309
1 Stock-based compensation expense allocated to operating expense.
Cash flow from operations before changes in non-cash working capital
We use cash flow from operations (or operating activities) before changes in non-cash working capital to
supplement our consolidated financial statements, and calculate it by not including the period to period
movement of non-cash working capital items, like accounts receivable, advances and deposits, inventory,
accounts payable and accrued liabilities.
We believe this provides a better indication of our cash flow from operations and may be meaningful in
evaluating our past performance or future prospects. It is not meant to be a substitute for cash flow from
operations (or operating activities), which we calculate according to Canadian GAAP.
Financial condition
Operating activities before changes in non-cash working capital generated $356.5 million in cash this year,
compared to $147.0 million in 2009.
ELDORADO GOLD 2010 Annual Report
29
MANAGEMENT’S DISCUSSION & ANALYSIS
of Financial Condition and Results of Operations
of Financial Condition and Results of Operations
December 31, 2010
Capital expenditures
We invested $226.3 million in capital expenditures, mine development, mining licences and other assets
this year.
Mine development expenditures totalled $91.9 million:
▪
▪
▪
▪
$69.0 million at Efemçukuru
$10.9 million at Eastern Dragon
$9.6 million at Tocantinzinho
$2.4 million at Perama Hill.
Spending at our producing mines totalled $103.5 million:
▪
▪
▪
▪
$54.9 million at Kişladağ, mostly related to the Phase III expansion
$15.1 million at Jinfeng, mostly related to tailings dam construction and underground mine
development
$16.4 million at White Mountain, mainly related to underground mine development exclude Xiaoshiren
$17.1 million at Tanjianshan, mainly related to processing plant upgrades.
We also spent $16.0 million on Eastern Dragon joint venture buy-in payments, $10.4 million on land
acquisition costs in Turkey, and $1.5 million to acquire the Xiaoshiren Central exploration licence in China.
The remaining $3.04 million related to fixed assets for our corporate offices in Canada and China.
Capital resources
$000
Cash and cash equivalents
Working capital
Restricted collateralized accounts
Debt
2010
314.3
310.9
52.4
166.7
2009
265.4
266.9
50.0
191.0
Chinese regulations governing cash movements within and injected into the country require that our existing
debt only be paid from cash flows generated from our Chinese operations that are party to the loan.
Management believes that the working capital at December 31, 2010, together with future cash flows from
operations, is sufficient to support our planned and foreseeable commitments.
Contractual obligations
as at December 31, 2010
($ thousands)
Debt
Capital leases
Operating leases
Purchase obligations
Totals
2011
$
98,523
63
2,921
114,487
215,994
2012
$
2013
$
2014
$
31,120
26,347
12,079
51
3,208
23,853
58,232
51
2,639
1,467
30,504
32
673
1,501
14,285
2015
and later
$
-
6
1
-
7
Total
$
168,069
203
9,442
141,308
319,022
The table does not include interest on debt.
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MANAGEMENT’S DISCUSSION & ANALYSIS
of Financial Condition and Results of Operations
of Financial Condition and Results of Operations
3311 22010100
DD
December 31, 2010
bb
Debt
Eastern Dragon
Standby line of credit
In 2008, Eastern Dragon entered into a RMB 320.0 million ($48.3 million) standby letter of credit with China
Construction Bank.
The interest rate was 5.4%, and the loan was collateralized by an irrevocable letter of credit drawn on China
Construction Bank, which was collateralized by Sino Gold funds held by Bank of China Sydney Branch as
restricted cash.
Eastern Dragon repaid the loan on February 5, 2010 and Sino Gold’s restricted cash was released.
Project financing loan
In 2009, Eastern Dragon entered into a RMB 450.0 million ($67.9 million) project financing loan with China
Merchants Bank. No amounts had been drawn down at December 31, 2010.
The loan has three components:
• a long-term loan of RMB 320.0 million ($48.3 million), with a five-year term, to replace the $48.3
million standby letter of credit with China Construction Bank
• a fixed asset loan of RMB 100.0 million ($15.1 million) with a four-year term
• a working capital loan of RMB 30.0 million ($4.5 million) with a one-year term
Interest is floating at the prevailing lending rate stipulated by the People’s Bank of China for similar loans with
a 10% discount, adjusted quarterly. The applicable interest rates as at December 31, 2010 are 5.60% for the
lonterm loan and 5.23% for the fixed asset loan after discount.
The project-financing loan is secured by an irrevocable letter of Guarantee issued by Sino Gold. Under the
terms of the agreement, the following conditions are required to be met before the first drawdown:
• the project receives approval from the Heilongjiang Provincial Development and Reform
Commission
• Sino Gold opens an offshore banking business bank account with CMB and deposit $40.0 million
• The total of the amount deposited in the offshore account, Eastern Dragon registered capital and
shareholder loan is at least $84.7 million (this threshold had been reached as at December 31, 2009)
In addition, before the drawdown on the fixed asset loan, Eastern Dragon should obtain the gold operation
permit.
The working capital loan can be drawn down once the following conditions are satisfied:
• the project obtains the mining licence
• the project has been developed and is in production
• the gold operation permit has been granted
• the safety production permit and environmental protection permit have been granted.
The project-financing loan requires Eastern Dragon to maintain a liability to asset ratio of 70% or lower, not
including shareholder loan. Its total banking debt cannot exceed RMB 550.0 million ($83.0 million).
The project-financing loan is subject to an annual management fee of 10% of the annual interest on the
drawn-down amount.
No amounts were drawn down under the project-financing loan as at December 31, 2010.
ELDORADO GOLD 2010 Annual Report
31
MANAGEMENT’S DISCUSSION & ANALYSIS
of Financial Condition and Results of Operations
of Financial Condition and Results of Operations
December 31, 2010
Standby letter of credit
In January 2010, Eastern Dragon entered into a RMB 320.0 million ($48.3 million) Standby letter of credit
loan with CMB. This loan has a one-year term and is subject to a floating interest rate adjusted quarterly at
90% of the prevailing lending rate stipulated by the People’s Bank of China for working capital loans. It is
collateralized by way of a $52.2 million irrevocable letter of credit issued by Sino Gold to CMB.
On February 5, 2010, Eastern Dragon made a drawdown on this loan which was used to repay the LC loan
with CCB.
In February 2011, this loan was extended for another year.
This loan is to be repaid when Eastern Dragon obtains the required project approval that will allow it to
complete the first drawdown on the project-financing loan. The loan is subject to an annual management
fee of 10% of the interest accrued on the drawn down and outstanding amount. This management fee is
paid in advance quarterly. The interest rate on this loan as at December 31, 2010 is 5.23%.
HSBC revolving loan facility
In May 2010, Eastern Dragon entered into a RMB 80.0 million ($12.1 million) revolving facility with HSBC
Bank (China). The facility can be drawn down in minimum tranches of RMB 1.0 million ($0.2 million) or its
multiples. Each drawdown bears interest fixed at the prevailing lending rate stipulated by the People’s Bank
of China on the date of drawdown. The facility has a term of up to one year.
In December 2010, the facility was reviewed by the bank and extended to November 30, 2011.
The facility is secured by a letter of Guarantee issued by Eldorado. Eldorado must maintain at all times
a security coverage ratio of 110% of the amounts drawn down. As at December 31, 2010, the security
coverage is $6.1 million.
As at December 31, 2010, RMB 37.0 million ($5.6 million) had been drawn under this facility. This facility
is to be repaid when Eastern Dragon obtains the required project approval that will allow it to complete the
second drawdown on the project-financing loan.
After December 31, 2010, Eastern Dragon drew RMB 11.6 million ($1.8 million) under the facility and the
security coverage was increased to $8.1 million.
Entrusted loan
Eastern Dragon, HSBC Bank (China) and QDML entered into an RMB 12.0 million ($1.8 million) entrusted
loan agreement in November 2010.
Under the terms of the loan, QDML uses its own funds to entrust HSBC Bank (China) to provide a loan
facility to Eastern Dragon in QDML’s name.
The loan can be drawn down in tranches. Each drawdown has a term of three months, bears interest fixed
at the prevailing lending rate stipulated by the People’s Bank of China on the date of drawdown, and can
be rolled forward at QDML’s discretion. As at December 31, 2010, RMB 7.9 million ($1.2 million) has been
drawn.
The loan was increased to RMB 50.0 million ($7.6 million) subsequent to year-end, and an additional RMB
21.1 million ($3.2 million) drawn down. It is recorded on a net settlement basis.
32
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MANAGEMENT’S DISCUSSION & ANALYSIS
of Financial Condition and Results of Operations
of Financial Condition and Results of Operations
December 31, 2010
Jinfeng
Jinfeng construction loan
In 2009, Jinfeng entered into a RMB 680.0 million ($102.7 million) construction loan facility with China
Construction Bank (CCB).
The construction loan has a term of 6 years commencing from February 27, 2009 and is subject to a
floating interest rate adjusted annually at the prevailing lending rate stipulated by the People’s Bank of
China for similar loans with a 5% discount. The applicable interest rate as at December 31, 2010 is 6.08%
(after 5% discount). The construction loan is secured against the following:
• Sino Gold corporate guarantee
• pledge of 82% Jinfeng shares held by Sino Gold
• mortgage on all fixed assets of Jinfeng with a value above $0.1 million
• mortgage on Jinfeng mining license and exploration license
• mortgage on land use right
While the construction loan is outstanding, Jinfeng is required to obtain written consent from CCB before
transferring funds to Sino Gold or any of its subsidiaries, and must have a leverage ratio of 64% or lower in
order to distribute dividends to its shareholders.
Principal repayment of this loan is as follows:
• in 2011, 2012 and 2013 – quarterly payments of RMB 35.0 million ($5.3 million)
• in 2014 – quarterly payments of RMB 32.5 million ($4.9 million)
Any pre-payments are applied to reduce future payments starting from the final payment. In 2010, Jinfeng
pre-paid RMB 180.0 million ($27.2 million) on the outstanding balance of this loan, leaving a balance owing
of RMB 500.0 million ($75.5 million) at December 31, 2010.
$1.7 million in deferred financing costs have been included as an offset in the balance of the loan in the
financial statements, and are being amortized using the effective interest method for net deferred financing
costs at December 31, 2010 $1.4 million.
Jinfeng working capital loan
In 2009, Jinfeng entered into a RMB 85.0 million ($12.8 million) working capital loan with CCB.
The working capital loan has a term of 3 years and was due on August 17, 2012. This loan was subject to a
floating interest rate adjusted annually at 95% of the prevailing lending rate stipulated by the People’s Bank
of China for similar loans.
While the working capital loan was outstanding, Jinfeng was required to obtain written consent from CCB
before transferring funds to Sino Gold or any of its subsidiaries and was required to have a leverage ratio of
64% or lower in order to distribute dividends to its shareholders.
In 2010, Jinfeng pre-paid the full amount on this loan.
ELDORADO GOLD 2010 Annual Report
33
MANAGEMENT’S DISCUSSION & ANALYSIS
of Financial Condition and Results of Operations
of Financial Condition and Results of Operations
December 31, 2010
White Mountain
Project loan
In 2008, White Mountain entered into a project loan with CCB. The project loan has two components:
• a fixed asset loan of RMB 190.1 million ($28.7 million) with final payment due on September 2013
• a working capital loan of RMB 40.9 million ($6.2 million) due in November 2010
The interest rate on the project loan is the prevailing lending rate stipulated by the People’s Bank of China,
adjusted annually for the fixed asset loan and twice a year for the working capital loan. The applicable
interest rates as at December 31, 2010 are 5.76% for the fixed asset loan and 5.81% for the working capital
loan.
The project loan is secured by a Sino Gold corporate guarantee and White Mountain’s fixed assets with a
value above $0.1 million.
Principal repayment of the fixed asset loan is as follows:
• September 2010 – RMB 24.8 million ($3.8 million) (paid)
• September 2011 – RMB 64.5 million ($9.7 million)
• September 2012 – RMB 66.1 million ($10.0 million)
• September 2013 – RMB 34.7 million ($5.2 million)
In 2010, White Mountain made the first payment on the fixed asset loan and extended the working capital
loan for one additional year to November 15, 2011.
Working capital loan
In 2010, White Mountain entered into a RMB 50.0 million ($7.5 million) working capital loan with China
Merchants Bank (CMB).
The working capital loan has a term of one year and is due on September 1, 2011. The loan is subject to
a floating interest rate adjusted annually to the prevailing lending rate stipulated by the People’s Bank of
China for similar loans. The applicable interest rate as at December 31, 2010 is 5.31%.
This loan is secured by a letter of guarantee issued by Eldorado.
In January 2011, White Mountain pre-paid the full amount of this loan.
Defined benefit plans
We have a defined benefit pension program with two components: a registered pension plan and a
non-registered supplementary pension plan (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. Our annual contributions are actuarially determined, and are at or above the minimum
requirements prescribed by legislation. We are not required to pre-fund any benefit obligation under the
SERP.
Total cash payments for pension benefits for 2010, including cash contributed to the pension plan and the
SERP, were $0.2 million. Based on minimum funding requirements, we may not need to make a contribution
to the pension plan or to the SERP in 2011.
34
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MANAGEMENT’S DISCUSSION & ANALYSIS
of Financial Condition and Results of Operations
of Financial Condition and Results of Operations
3311 22010100
DD
December 31, 2010
bb
Equity
This year we received net proceeds of $35.9 million for issuing 5,056,216 common shares related to stock
options being exercised.
We may make minor accounting adjustments to these figures before they are presented in future
consolidated financial statements.
Common shares outstanding
- as of March 17, 2011
- as of December 31, 2010
Share purchase options
- as of March 16, 2011
(Weighted average exercise price per share: $11.40 Cdn)
Managing risk
548,438,799
548,187,192
11,761,753
This section describes the types of risks we are exposed to and our objectives and policies for managing
them (please read the Company’s Annual Information Form for additional information).
We manage risk using our risk management review process. Management prepares a risk assessment
report every quarter outlining our operational and financial risks. The Board reviews the report to evaluate
and assess the risks we are exposed to in various markets, and discusses the steps management takes to
protect the company against them.
Financial risk
Liquidity risk
Liquidity risk is the risk that we cannot meet our financial obligations. We use a rigorous planning, budgeting
and forecasting process to help determine the funds we will need to support our ongoing operations and
our expansion plans. We believe that expected cash flows from operations and current cash and cash
equivalents will provide enough cash to meet our financial obligations in 2011 and beyond.
Credit risk
Credit risk is the risk that the counterparty to a financial instrument will not meet its obligations. To mitigate
exposure to credit risk on financial assets, we have policies that require counterparties demonstrate
minimum creditworthiness, and ensure liquidity of available funds. We also monitor our concentrations of
credit risk and closely monitor our 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.
Customer default to date has been negligible, so we consider the credit risk associated with trade
receivables at December 31, 2010 to be minimal.
We invest our cash and cash equivalents in major financial institutions and in government issuances,
according to our short-term investment policy. The credit risk associated with these investments is
considered to be low, but many financial institutions have gone into bankruptcy or been rescued by
ELDORADO GOLD 2010 Annual Report
35
MANAGEMENT’S DISCUSSION & ANALYSIS
of Financial Condition and Results of Operations
of Financial Condition and Results of Operations
31 2010
D
December 31, 2010
b
government authorities over the past few years. That makes us subject to the risk of loss of the deposits
we have with financial institutions. As at December 31, 2010, approximately 44% of our cash and cash
equivalents, including restricted cash, were with one financial institution.
Currency risk
We sell gold in US dollars, but our costs are mainly in US dollars, Canadian dollars, Turkish lira, Brazilian
real and Chinese renminbi. An increase in the value of any of these currencies against the US dollar can
increase our production costs and capital expenditures, which can affect future cash flows.
The table below shows our assets and liabilities denominated in currencies other than the US dollar at
December 31, 2010. We recognized a loss of $14.8 million on foreign exchange this year, compared to gain
of $3.0 million in 2009.
$000s
Cash and cash equivalents
Marketable securities
Accounts receivable and other
Future income tax receivables
Accounts payable and
accrued liabilities
Future income tax liabilities
Debt
Net balance
Equivalent in US dollars
Canadian
Dollar
Australian
Dollar
Euro
Turkish lira
Chinese
renminbi
Brazilian real
24,587
7,984
2,078
-
134
-
-
-
102
-
516
-
1,386
536,644
-
-
1,269
-
16,837
137,174
10,898
659
1,192
-
(13,682)
(13)
(124)
(36,940)
(525,951)
(6,548)
-
-
20,967
21,081
-
-
121
125
-
(26,334)
(25,840)
(34,601)
-
(2,211,552)
(16,851)
(1,103,790)
(34,909)
(3,207,961)
(22,581)
(484,373)
-
(85,188)
(79,569)
(47,755)
Accounts receivable and other current and long-term assets relate to goods and services taxes, income
taxes, value-added taxes and insurance receivables.
We recorded $424.2 million in future income tax liabilities resulting from our acquisitions, which were valued
in local currencies. We revalue these liabilities at the end of each reporting period at the exchange rate at
that time, and record the non-cash gain or loss in that period’s net earnings.
Interest rate risk
Interest rates determine how much interest we pay on our debt, and how much we earn on our cash and
cash equivalents, which can affect future cash flows.
Much of our debt has a floating interest rate. The average interest rate on our debt at December 31, 2010
was 5.94%, compared to 5.45% at the end of 2009. We earned an average of approximately 0.51% in
interest on our cash and cash equivalents this year, compared to 0.83% in 2009.
We don’t actively manage our exposure to changes in interest rates.
Price risk
Our profitability depends on the price of gold, which is affected by many things, including the sale or
purchase of gold by 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
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of Financial Condition and Results of Operations
of Financial Condition and Results of Operations
31 2010
D
December 31, 2010
b
demand, and the political and economic conditions of the world’s major gold-producing countries. We don’t
hedge against changes in the price of gold.
The cost of production, development and exploration varies depending on the market prices of certain
mining consumables, including diesel fuel and electricity. We are evaluating a hedge against changes in the
price of diesel fuel.
Electricity is regionally priced in Turkey and China and semi-regulated by the federal governments of those
countries, which reduces the risk of price fluctuations. We don’t hedge against changes in the price of
electricity.
Sensitivity analysis for key variables
Currency values against the US dollar
Price of gold (based on the expectations and
assumptions we used in our 2010 outlook)
Interest rate on debt
Interest earned on cash and cash equivalents
Price of diesel fuel
Other risks and uncertainties
A change of
Would change our after-tax net
earnings by
1%
10%
10%
10%
10%
$5.6 million
$66.8 million
$0.5 million
$0.3 million
$1.8 million
Exploration and development
The cost and results of our exploration and development programs affect our profitability and value. The life
of a mine is fixed based on its mineral reserves, so we actively seek to replace and expand our reserves,
mainly through exploration, acquisition and the development of our existing operations. Exploring for
minerals involves many risks and may not lead to new economically viable mining operations or yield new
reserves to replace and expand current reserves. Our reserve estimates are based on certain assumptions
and affected by the inherent 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 that we have, or are seeking,
an interest in. Although we take every precaution to ensure that legal title to our properties is properly
recorded in our name, there can be no assurance we will ultimately secure title on every property. Legal title
to our properties depends on the laws in the countries we operate in, and their appropriate and consistent
application.
Operations
The business of gold mining involves many operational risks and hazards. We work to reduce the risks
associated with our projects by setting high operational standards, hiring and training appropriately skilled
personnel, and making improvements to our operations. We maintain adequate insurance to cover normal
business risk. We rely on a number of key employees. Our success depends on attracting and retaining
qualified personnel in a competitive labour environment.
ELDORADO GOLD 2010 Annual Report
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MANAGEMENT’S DISCUSSION & ANALYSIS
of Financial Condition and Results of Operations
of Financial Condition and Results of Operations
3311 22010100
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December 31, 2010
bb
Environment
Our activities are subject to extensive federal, provincial, state and local laws and regulations that govern
environmental protection and employee health and safety. We need governmental permits and have
to 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 our financial condition, liquidity or results of operations.
Permits
We are required to obtain and maintain a wide range of government permits for our projects and operations.
There is no assurance that we will be able to get them on a timely basis, or at all.
Laws and regulations
Our mining operations and exploration activities are subject to extensive federal, provincial, state and local
laws and regulations that govern 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 mining, are subject to legal claims that can be with and without merit. Defence and
settlement costs can be substantial, even for claims that have no merit. We describe the legal status of our
worldwide projects and operations in our annual information form.
The litigation process is inherently uncertain, so there can be no assurance that the resolution of a legal
proceeding will not have a material adverse effect on our future cash flow, results of operations or financial
condition.
Political risk
We operate in four countries outside of North America: Turkey, China, Brazil and Greece. Our operations in
these countries may be subject to political, economic and other risks that may affect our future operations
and financial position.
Other information
Critical accounting policies and estimates
We are required to make estimates that affect the amount of assets, liabilities, contingent liabilities revenue
and expenses we report. We have identified the following critical accounting policies and estimates. You
can find all of our significant account policies in note 2 of our 2010 consolidated financial statements.
Inventories
We value finished goods, work-in-process, heap leach ore and stockpiled ore at the average production
cost or its net realizable value – whichever is lower.
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of Financial Condition and Results of Operations
of Financial Condition and Results of Operations
31 2010
D
December 31, 2010
b
We consider ore stacked on our leach pads and in process at our mines as work-in-process inventory and
record their value in earnings, and include them in the cost of sales on based on ounces of gold recovered,
using the following assumptions in our estimates:
▪
▪
▪
▪
the amount of gold we estimate is in the ore stacked on the leach pads
the amount of gold we expect to recover from the stacks
the amount of gold in the mill circuits
the gold price we expect to realize when the gold is recovered
If our estimates or assumptions are inaccurate, we could be required to write down the value we have
recorded on our work-in-process inventories, which would reduce our earnings and working capital. At
December 31, 2010, the average cost of inventory was significantly below its net realizable value.
Reserves and resources
Our estimates for Kişladağ, Efemçukuru, Tanjianshan, Jinfeng, White Mountain, Perama, Tocantinzinho,
Eastern Dragon and Vila Nova are based on the definitions adopted by the Canadian Institute of Mining,
Metallurgy and Petroleum, and in compliance with Canadian National Instrument 43-101 – Standards of
Disclosure for Mineral Projects (NI 43-101), developed by the Canadian Securities Administrators.
You will not be able to compare the mineral reserve and resources information in this report with similar
information from U.S. companies. The United States Securities & Exchange Commission (SEC) defines a
mineral reserve as the part of a mineral deposit that can be economically and legally extracted or produced.
It does not recognize the terms measured, indicated and inferred mineral resources (mining terms under NI
43-101 and the JORC Code), and does not accept them in reports and registration statements. You should
not assume that:
▪
▪
▪
the mineral reserves defined in this report qualify as reserves under SEC standards
the measured and indicated mineral resources in this report will ever be converted to reserves
the inferred mineral resources in this report are economically mineable, or will ever be upgraded to a
higher category
Value beyond proven and probable reserves
On acquisition of a mineral property, we prepare an estimate of the fair value of the exploration potential of
that property and record this amount as an asset, called value beyond proven and probable (VBPP), as at
the date of acquisition. As part of our annual business cycle, we prepare estimates of proven and probable
reserves for each mineral property. The change in reserves, net of production, is used to determine the
amount to be converted from VBPP to proven and probable reserves subject to amortization.
Mining interests
We depreciated most of our mining properties, plant and equipment using the unit-of-production method,
where the value of property is reduced as reserves are depleted. We base this on mining rates and our
estimates of reserves. If these change, 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.
ELDORADO GOLD 2010 Annual Report
39
MANAGEMENT’S DISCUSSION & ANALYSIS
of Financial Condition and Results of Operations
of Financial Condition and Results of Operations
December 31, 2010
At the end of every year, we assess whether there has been an impairment of our capitalized mining
properties, plant and equipment. If there were an impairment, we would be required to write down the
recorded value of our mining properties, plant and equipment, which would reduce our earnings and net
assets.
For producing properties, we base our assessment on the future net cash flows we expect the property will
generate. There will be an impairment if metal prices are lower, production costs have increased, or metal
recoveries are lower than previously estimated.
For non-producing properties, we base our assessment on whether there are factors that might indicate the
need for a writedown. There will be an impairment if we believe current economics or permitting issues will
prevent us from recovering the costs we have deferred for the property.
At December 31, 2010, based on an average projected gold price for 2011 of $1,400 per ounce decreasing
to a long-term price of $1050 per ounce by 2014, the estimated undiscounted net cash flow from our mining
properties, plant and equipment exceeded their carrying values.
Goodwill and impairment testing
We account for business combinations using the purchase method of accounting. We record the fair market
value of assets acquired and liabilities assumed as of the date of acquisition, and record any excess of the
purchase price over fair value as goodwill. The assumptions underlying fair value estimates are subject to
significant risks and uncertainties.
We review and evaluate the carrying amount of goodwill every year by comparing the fair value of our
reporting units to their carrying amounts. If a reporting unit’s carrying value exceeds its fair value, we
compare its carrying value to the implied fair value of its goodwill, and charge the amount the carrying value
exceeds fair value to operations.
At December 31, 2010, our consolidated balance sheet included $365.9 million in goodwill for Sino Gold
($363.7 million) and Tanjianshan ($2.2 million). We used a discount rate of 9% to calculate the net present
value of cash flows from Tanjianshan to estimate its implied fair value. We used a discount rate of between
7% and 9% to calculate the net present value of cash flows from Sino Gold mines in order to estimate their
fair values. There was no impairment of goodwill for either unit.
Operating costs
We calculate cash operating costs according to the Gold Institute Standard. Future operating costs include
estimates of foreign currency exchange and inflation trends.
Stock-based compensation
We use the Black-Scholes Model to calculate the fair value of stock options that have been given to
employees, officers and directors. This model uses assumptions of share price, volatility and expected life
of options.
Asset retirement obligations
We estimate the mine closure date, the credit-adjusted risk-free rate, the inflation rate and the timing
reclamation costs to determine the carrying value of an asset retirement obligation.
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MANAGEMENT’S DISCUSSION & ANALYSIS
of Financial Condition and Results of Operations
of Financial Condition and Results of Operations
31 2010
D
December 31, 2010
b
Income taxes
We record income taxes using income tax rates we expect to apply in the years we estimate the temporary
differences will be recovered or settled. Where the tax laws and regulations are unclear or subject to varying
interpretations, these estimates could change, and materially affect the amount of income tax liabilities
recorded at the balance sheet date.
Financial instruments
We report investments classified as held for trading or available for sale, and derivative financial
instruments, at fair value, and include unrealized gains or losses in earnings. We use the published price in
an active market when it’s available, or calculate fair value using inputs observed from the market.
Pension plans
We use various actuarial assumptions to estimate our obligations and expenses, 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.
Key assumptions - pension plans
Pension plan
SERP
Pension plan
December 31, 2010
December 31, 2009
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
Changes in accounting policies
6.50%
6.00%
5.50%
4.50%
6.50%
6.00%
5.50%
4.50%
6.50%
7.50%
6.00%
4.50%
SERP
6.50%
7.50%
6.00%
4.50%
5 years
5 years
5 years
5 years
We adopted an accounting policy for long-term investments in the second quarter of this year. We use the
equity method to account for Investments in significantly influenced companies, where we adjust the original
cost of the shares for our share of post-acquisition earnings or losses, less dividends.
New accounting developments
Business combinations (Section 1582)
In January 2009, the Canadian Institute for Chartered Accountants (CICA) issued 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 consideration and contingencies be recorded at fair value at the acquisition
date
acquisition-related costs be expensed as incurred
restructuring charges be expensed in the periods after the acquisition date
The section applies prospectively to business combinations with an acquisition date on or after the
beginning of the first annual reporting period on or after January 1, 2011. We have not yet adopted this
standard.
ELDORADO GOLD 2010 Annual Report
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MANAGEMENT’S DISCUSSION & ANALYSIS
of Financial Condition and Results of Operations
of Financial Condition and Results of Operations
3311 22010100
D
December 31, 2010
bb
Consolidations (Section 1601) and non-controlling interest (Section 1602)
In January 2009, the CICA issued Section 1601, Consolidations, and Section 1602, Non-Controlling
Interests.
Section 1601 establishes standards for preparing consolidated financial statements. Section 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. We have not yet adopted these standards.
International financial reporting standards (IFRS)
Canadian GAAP for publicly listed companies will be replaced with IFRS for fiscal years beginning on or
after January 1, 2011.
We will begin reporting our financial statements in accordance with IFRS in the first quarter of 2011,
and restate comparative information. Converting to IFRS will affect our accounting policies, information
technology and data systems, internal controls over financial reporting, and disclosure controls and
procedures. The transition may also affect business activities, such as foreign currency and certain
contractual arrangements, debt covenants, capital requirements and compensation arrangements.
We have started the transition process from current Canadian GAAP to IFRS. We have established a
project team that is led by finance management and have designated the appropriate resources to the
project to develop an effective plan. We will continue to assess our resource and training requirements as
the project progresses. The team makes regular progress reports to the Audit Committee of the Board of
Directors on the status of our transition to IFRS.
Our conversion has four phases:
Phase 1 – Scoping and planning (completed in 2008)
▪
▪
establish a project management team and organizational structure, including oversight of the process
develop a project management plan, stakeholder analysis and communication strategy
carry out an initial assessment of the key areas where the IFRS transition may have a significant
impact and present significant challenges
Phase 2 – Detailed assessment (completed in the third quarter of 2010)
▪
▪
conduct in-depth technical analysis to understand potential impacts, make decisions on accounting
policy choices and draft accounting policies
identify additional resource and training requirements and processes for preparing financial
statements, establishing IT system requirements and preparing detailed transition plans
Phase 3 – Implementation (in progress)
▪
▪
identify and carry out the implementation requirements for management’s accounting choices
develop sample financial statements, implement business and internal control requirements, calculate
the opening balance sheet at January 1, 2010 and complete other transitional reconciliations and
disclosure requirements
This phase will be completed with our annual financial reporting under IFRS in 2011.
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MANAGEMENT’S DISCUSSION & ANALYSIS
of Financial Condition and Results of Operations
of Financial Condition and Results of Operations
31 2010
D
December 31, 2010
b
Phase 4 – Post-implementation
▪
▪
continuous monitoring of changes in IFRS throughout the implementation process
assessing their impacts on the company and our reporting
Progress update
We began implementing Phase 3 of our plan in the fourth quarter of 2010, and made progress in the
following areas:
▪
▪
▪
▪
identifying and amending internal controls over financial reporting and business processes affected by
IFRS
determining and selecting accounting policies
development of Eldorado’s IFRS Accounting Policy Manual
preparing draft annual mock-up financial statements and notes under IFRS
As we complete the implementation phase, and as changes to IFRS standards may continue to occur, the
differences and impacts described below may be subject to change.
We have evaluated the options available to us, and plan to apply the following exemptions:
▪
▪
▪
▪
▪
we are applying IFRS 3, Business Combinations, prospectively from January 1, 2010 (the transition
date)
we are applying IFRS 2, Share-Based Payments, only to share-based payments granted after
November 7, 2002 that had not vested as of the transition date
we are applying the borrowing cost exemption and will apply IAS 23, Borrowing Costs, prospectively
from the transition date
we have chosen to recognize all cumulative actuarial gains and losses for all defined benefit plans that
exist at the transition date in opening retained earnings
we have chosen to apply IFRIC 1, Changes in Existing Decommissioning, Restoration and Similar
Liabilities, for changes in these liabilities prospectively from the transition date
These may have a significant impact on our results.
Significant accounting differences
We have identified the following areas where the accounting differences between Canadian GAAP and
existing IFRS may have an impact on our consolidated financial statements. This is not, however, a
complete list of changes that will result from the transition to IFRS. It is intended to highlight the areas we
believe to be most significant.
The International Accounting Standards Board (IASB) has significant ongoing projects that are expected
to result in new and/or revised accounting standards. We can measure the final impact of IFRS on our
consolidated financial statements only when we know all of the standards that will apply at the conversion
date. The differences we describe below are based on existing Canadian GAAP and IFRS at December 31,
2010.
ELDORADO GOLD 2010 Annual Report
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MANAGEMENT’S DISCUSSION & ANALYSIS
of Financial Condition and Results of Operations
of Financial Condition and Results of Operations
3311 22010100
D
December 31, 2010
bb
Impairment of assets
Canadian GAAP generally uses a two-step approach to impairment testing:
▪
▪
first, compare asset carrying values with undiscounted future cash flows to determine whether there is
an impairment
if so, measure it by comparing asset carrying values with fair values
International Accounting Standard (IAS) 36, Impairment of Assets, uses a one-step approach for both
testing for and measuring impairment:
▪
compare asset carrying values directly with the higher of fair value less costs to sell and value in use
(which uses discounted future cash flows)
This can result in more writedowns if the carrying values of assets were previously supported under
Canadian GAAP on an undiscounted cash flow basis but could not be supported on a discounted cash flow
basis.
IAS 36 also requires any previous impairment losses to be reversed if circumstances change and the
impairments are reduced. Canadian GAAP does not allow impairment losses to be reversed.
Provision for reclamation and rehabilitation
The key areas of difference between IFRS and Canadian GAAP include:
▪
▪
▪
the discount rate used
the re-measurement requirements
the constructive obligation concept
Under IFRS, a liability must be recognized at the time the entity becomes legally or constructively obliged to
rehabilitate disturbance resulting from mining activities. Under Canadian GAAP, a liability is only recognized
when the entity is legally bound.
Discount rates should reflect the risks specific to the decommissioning provision. Unlike IFRS, discount
rates for asset retirement obligations under Canadian GAAP are based on the entity’s credit-adjusted risk-
free rate. IFRS requires re-measurement of the liability at each reporting date, whereas Canadian GAAP
requires re-measurement of the liability in the event of changes in the amount or timing of cash flows
required to settle the obligation.
The use of the current discount rate for all changes in estimates combined with the requirement to re-
measure the liability at each reporting date under IFRS, will significantly simplify the process required to
measure any restoration liabilities because there will no longer be a need to record separate layers for
the original liability and each subsequent upward revision in estimated cash flows. Under IFRS, accretion
must be presented as an interest expense and included in Interest and financing costs on the statement
of earnings. There is no prescribed presentation for asset retirement obligation accretion under Canadian
GAAP.
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MANAGEMENT’S DISCUSSION & ANALYSIS
of Financial Condition and Results of Operations
of Financial Condition and Results of Operations
31 2010
D
December 31, 2010
b
Business combinations
There are certain differences between IFRS and Canadian GAAP when accounting for business
combinations.
Canadian GAAP requires share-based consideration to be valued based on the announcement date share
price. Under IFRS, share-based consideration must be valued based on its fair value at the acquisition date.
Under IFRS, restructuring costs and other transactions costs are expensed on acquisition. They are
included in the purchase consideration under Canadian GAAP.
Under Canadian GAAP, after a business combination, we record non-controlling interest at the historical
carrying value of the assets and liabilities of the acquired entity. Under IFRS, we record non-controlling
interest based on its share of the fair value of the assets and liabilities of the acquired entity.
Income taxes
Existing IFRS requires the recognition of deferred taxes in situations not required under Canadian GAAP.
Specifically, a deferred tax liability (asset) is recognized for exchange gains and losses relating to foreign
non-monetary assets and liabilities that are re-measured into the functional currency using historical
exchange rates.
Similar timing differences are also recognized for the difference in tax bases between jurisdictions as
a result of intra-group transfer of assets. Future tax liabilities for temporary tax differences on asset
acquisitions are not recognized.
Property, plant and equipment
Separate accounting for components of property, plant and equipment is more rigorously applied and
broader under IFRS. Costs are allocated to significant parts of an asset if the useful lives differ, and each
part is then separately depreciated.
ELDORADO GOLD 2010 Annual Report
45
MANAGEMENT’S DISCUSSION & ANALYSIS
of Financial Condition and Results of Operations
of Financial Condition and Results of Operations
3311 22010100
DD
December 31, 2010
bb
Opening balance sheet as at January 1, 2010
This draft opening balance sheet as at January 1, 2010 reflects our estimates of the most significant
differences between Canadian GAAP and IFRS earnings, and our first-time adoption elections. It is
preliminary and unaudited and may be adjusted for new IFRS pronouncements or other changes identified
after the date of this MD&A.
(see note)
Canadian GAAP
Effect of
transition
to IFRS
January 1, 2010
($ thousands)
Assets
Cash and cash equivalents
Restricted cash
Marketable securities
Accounts receivable and other
Inventories
Total current assets
Inventories
Restricted assets and other
Mining interests
Goodwill
Total non-current assets
Total assets
Liabilities
Accounts payables and accrued liabilities
Debt – current
Future income taxes
Total current liabilities
Debt – long term
Pension fund obligation
Asset retirement obligations
Future income taxes
Total non-current liabilities
Total liabilities
Equity
Share capital
Contributed surplus
Accumulated other comprehensive income
Deficit
Total equity attributable to equity holders of the
Company
Non-controlling interest
Total equity
Total liabilities and equity
46
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265,369
50,000
13,951
32,041
129,197
490,558
31,534
8,265
2,580,816
324,935
2,945,550
3,436,108
154,124
56,499
4,264
214,887
134,533
3,126
26,566
390,242
554,467
769,354
2,671,634
17,865
2,227
(51,116)
-
-
-
-
-
-
-
(52,934)
-
(52,934)
(52,934)
-
-
(4,264)
(4,264)
-
4,870
429
(34,967)
(29,668)
(33,932)
-
-
-
(19,002)
IFRS
265,369
50,000
13,951
32,041
129,197
490,558
31,534
8,265
2,527,882
324,935
2,892,616
3,383,174
154,124
56,499
-
210,623
134,533
7,996
26,995
355,275
524,799
735,422
2,671,634
17,865
2,227
(70,118)
2,640,610
(19,002)
2,621,608
26,144
2,666,754
3,436,108
-
(19,002)
(52,934)
26,144
2,647,752
3,383,174
(ai) (c)
(aii)
(b)
(c)
(a)
(d)
MANAGEMENT’S DISCUSSION & ANALYSIS
of Financial Condition and Results of Operations
of Financial Condition and Results of Operations
31 2010
D
December 31, 2010
b
Explanatory notes – all amounts in $1,000’s
a) i) Under IFRS, we no longer recognize deferred income taxes on an asset acquisition. Reversing the
deferred income tax liability recognized on our acquisition of Frontier results in the following adjustments
at January 1, 2010: a $51,440 decrease in mineral interest, a $37,582 decrease in deferred income tax
liabilities and a $13,858 increase in deficit.
ii) Under IFRS, we calculate deferred income tax in the functional currency by translating the asset’s
tax basis using historical rates. Under Canadian GAAP, we calculated deferred income tax in the local
currency, and then translated it into the functional currency at the period-end rate. Adopting IFRS results in
the following adjustments at January 1, 2010: an $1,864 decrease in mineral interest, a $4,264 decrease in
current deferred income tax liability, a $2,615 increase deferred income tax liability and a $215 increase in
deficit.
b) i) Under IFRS, we recognize actuarial gains and losses arising from the re-measurement of employee
future benefit obligations in other comprehensive income as they arise. Under Canadian GAAP, we applied
the corridor method of accounting for these gains and losses, and recognized them only if they exceed
specified thresholds. Adopting IFRS increases the carrying value of the net liability for employee future
benefit obligations and deficit by $2,095 to recognize cumulative net actuarial gains and losses as at
January 1, 2010. We did not recognize any actuarial gains and losses under Canadian GAAP using the
corridor approach.
ii) Under IFRS, we expense the cost of past service benefits awarded to employees under
postemployment benefit plans over the periods in which the benefits vest, which usually corresponds to the
period in which the benefits are granted. Under Canadian GAAP, we expensed past service costs over the
weighted average service life of active employees remaining in the plan. Adopting IFRS increases account
payables, accrued liabilities and deficit for employee future benefits in the statement of financial position by
$2,775 at January 1, 2010.
c) Under IFRS, a change in the current market-based discount rate changes the measurement of our
provision for asset retirement obligations. Under Canadian GAAP, a change in the discount rate alone did
not result in a re-measurement.
We have performed an analysis of the discount rate used to calculate the present value of our asset
retirement obligations at January 1, 2010, re-measured it using the discount rate in effect at that date, and
recorded an adjustment to the corresponding asset. This adjustment increases mining interest by $370,
increased asset retirement obligations by $429 and increased deficit by $59 at January 1, 2010.
d) Under IFRS, we include a subsidiary’s non-controlling interest in the joint venture’s net assets in equity,
and allocate its share of the joint venture’s comprehensive income directly to equity. Under Canadian
GAAP, we presented the subsidiary’s non-controlling interest as a separate item in its statement of financial
position, between liabilities and equity, and deducted its non-controlling interest in the joint venture’s net
income and comprehensive income from its net income and comprehensive income. We reclassified non-
controlling interest of $26,144 at January 1, 2010, as determined under Canadian GAAP, to equity.
e) We have chosen to apply IFRS relating to business combinations prospectively from January 1, 2010, in
accordance with IFRS transitional provisions, and have carried forward Canadian GAAP balances relating
to business combinations entered into before that date, including goodwill, without adjustment.
ELDORADO GOLD 2010 Annual Report
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MANAGEMENT’S DISCUSSION & ANALYSIS
of Financial Condition and Results of Operations
of Financial Condition and Results of Operations
31 2010
D
December 31, 2010
b
The following is a summary of adjustments to our retained earnings on transition from
Canadian GAAP to IFRS:
(US$ thousands)
January 1, 2010
Retained earnings as reported under Canadian GAAP
Employee future benefits – actuarial gains and losses (b i)
Employee future benefits – past service costs (b ii)
Deferred income tax (a)
Asset retirement obligation (c)
Retained earnings as reported under IFRS
Disclosure controls and procedures
(51,116)
(2,095)
(2,775)
(14,073)
(59)
(19,002)
(70,118)
Disclosure controls and procedures are designed to provide reasonable assurance that material information
is gathered and reported to senior management, including the CEO and CFO, as appropriate to allow for
timely decisions about public disclosure.
Management, including the CEO and CFO, has evaluated the effectiveness of the design and operation
of our disclosure controls and procedures as at December 31, 2010, as defined in the rules of the U.S.
Securities and Exchange Commission and Canadian Securities Administration. Based on this evaluation,
they concluded that our disclosure controls and procedures are effective in providing reasonable assurance
that the information required to be disclosed in reports we filed or submitted under United States and
Canadian securities legislation was recorded, processed, summarized and reported within the time periods
specified in those rules.
We acquired Brazauro on July 20, 2010. We included Brazauro’s operations in our annual assessment
of disclosure controls and procedures for the year ended December 31, 2010, only to the extent they
overlapped with internal control, as permitted by rules of certification.
Internal controls over financial reporting
Management, including the CEO and CFO, is responsible for establishing and maintaining adequate
internal control over financial reporting, and used the framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) to evaluate the effectiveness of our controls in 2010.
Based on this evaluation, management concluded that our internal control over financial reporting was
effective as at December 31, 2010 and provided a reasonable assurance of the reliability of our financial
reporting and preparation of the financial statements.
No matter how well it’s designed, however, any system of internal control has inherent limitations. Even
systems determined to be effective can provide only reasonable assurance of the reliability of financial
statement preparation and presentation.
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MANAGEMENT’S DISCUSSION & ANALYSIS
of Financial Condition and Results of Operations
of Financial Condition and Results of Operations
31 2010
D
December 31, 2010
b
On July 20, 2010, we completed our acquisition of Brazauro. We consider the acquisition of Brazauro non-
material to our results of operations, financial position and cash flows from the date of acquisition through
December 31, 2010, and believe that the internal controls and procedures at Brazauro have a non-material
effect on our internal control over financial reporting. We are in the process of integrating the Brazauro
operations and will be expanding our internal control over financial reporting compliance program to include
Brazauro over the next year.
We did not include Brazauro in our annual assessment of internal control over financial reporting for the
year ended December 31, 2010, as permitted by the Sarbanes-Oxley Act and applicable rules relating to
business acquisitions. The Brazauro operations represented $160.0 million of total assets and none of our
consolidated revenues as at and for the year ended December 31, 2010.
KPMG LLP, an independent registered public accounting firm, has audited management’s assessment of
the effectiveness of internal control over financial reporting, and have expressed their opinion in their report
included with our annual consolidated financial statements in Form 40-F.
Changes in internal control over financial reporting
There have been no changes in our internal control over financial reporting during the year ended
December 31, 2010 that have materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting, except for the following.
We completed the integration of the Sino Gold operations in 2010, and expanded our internal controls
over financial reporting compliance program to include those operations. We also implemented a new ERP
system in Vancouver and at our Turkish operations. Management used appropriate procedures to ensure
internal controls were in place during and after the implementation.
Forward-looking information and risks
This MD&A includes statements and information about what we expect to happen in the future. When we
discuss our strategy, plans and future financial and operating performance, or other things that have not
yet happened in this review, we are making statements considered to be forward-looking information or
forward-looking statements under Canadian and United States securities laws. We refer to them in this
document as forward-looking information.
Key things to understand about the forward-looking information in this document:
▪
▪
▪
It typically includes words and phrases about the future, such as: plan, expect, forecast, intend,
anticipate, estimate, budget, scheduled, may, could, would, might, will.
Although it represents our current views, which we consider to be reasonable, we can give no
assurance that the forward-looking information will prove to be accurate.
It is based on a number of assumptions, including things like the future price of gold, anticipated costs
and spending, and our ability to achieve our goals.
ELDORADO GOLD 2010 Annual Report
49
MANAGEMENT’S DISCUSSION & ANALYSIS
of Financial Condition and Results of Operations
of Financial Condition and Results of Operations
December 31, 2010
▪
It is also subject to the risks associated with our business, including
the changing price of gold and currencies,
▪
actual and estimated production and mineral reserves and resources,
▪
the speculative nature of gold exploration,
▪
▪
risks associated with mining operations and development,
regulatory and permitting risks,
▪
acquisition risks, and
▪
▪
other risks that are set out in our annual information form and MD&A.
If our assumptions prove to be incorrect or the risks materialize, our actual results and events may
vary materially from what we currently expect.
▪
We recommend that you review our annual information form, which include a more detailed discussion of
material risks that could cause actual results to differ significantly from our current expectations.
Forward-looking information is designed to help you understand management’s current views of our near-
and longeterm prospects, and it may not be appropriate for other purposes. We will not necessarily update
this information unless we are required to by securities laws.
Summary of quarterly results
($000)
2010
2009
First quarter Second quarter
Third quarter Fourth quarter
First quarter Second quarter
Third quarter Fourth quarter
Total revenues
181,479
206,443
190,305
212,948
Net income (loss)
52,845
60,508
48,773
43,937
52,206
13,061
80,147
25,900
81,608
144,506
30,154
33,289
Earnings per share
- basic
- diluted
0.10
0.10
0.11
0.11
0.09
0.09
0.08
0.08
0.04
0.04
0.07
0.07
0.08
0.08
0.08
0.08
The increases in the quarterly results for 2010 result primarily from the acquisition of Sino Gold in the fourth quarter
2009.
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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, 2010, 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.
KPMG, 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, 2010 has also been audited by KPMG, and their opinion is included in their report.
Paul N. Wright
President and Chief Executive Officer
Edward Miu
Chief Financial Officer
March 16, 2011
Vancouver, British Columbia, Canada
ELDORADO GOLD 2010 Annual Report
51
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of Eldorado Gold Corporation
We have audited the accompanying consolidated financial statements of Eldorado Gold Corporation, which
comprise the consolidated balance sheets as at December 31, 2010 and 2009, the consolidated statements of
operations, cash flows, shareholders’ equity and comprehensive income for the years then ended, and notes,
comprising a summary of significant accounting policies and other explanatory information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements
in accordance with Canadian generally accepted accounting principles, and for such internal control as
management determines is necessary to enable the preparation of consolidated financial statements that are
free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We
conducted our audits 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 comply with
ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on our judgment, including the assessment
of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In
making those risk assessments, we consider internal control relevant to the entity’s preparation and fair
presentation of the consolidated financial statements in order to design audit procedures that are appropriate in
the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well as evaluating the overall presentation
of the consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a
basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position
of Eldorado Gold Corporation as at December 31, 2010 and 2009 and its consolidated results of operations
and its consolidated cash flows for the years then ended in accordance with Canadian generally accepted
accounting principles.
Other Matter
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), Eldorado Gold Corporation’s internal control over financial reporting as of December 31, 2010,
based on the criteria established in Internal Control – Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 16, 2011
expressed an unmodified opinion on the effectiveness of Eldorado Gold Corporation’s internal control over
financial reporting.
Chartered Accountants
Vancouver, Canada
March 16, 2011
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Report of Independent Registered Public Accounting Firm
To the Board of Directors of Eldorado Gold Corporation
We have audited Eldorado Gold Corporation’s (the Company) internal control over financial reporting as of
December 31, 2010, 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 accompanying Management’s Report
on Controls and Procedures. Our responsibility is to express an opinion on the Company’s internal control over
financial reporting based on our audit.
We conducted our audit 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. Our
audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, and testing and evaluating the design and operating effectiveness of internal control
based on the assessed risk. Our audit also included performing such other procedures as we considered
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 (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that 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 (3) 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 of December 31, 2010, based on criteria established in Internal Control – Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission.
The Company acquired Brazauro Resources Corporation (Brazauro) during the year ended December 31, 2010,
and management excluded from its assessment of the effectiveness of the Company’s internal controls over
financial reporting as of December 31, 2010, Brazauro’s internal controls over financial reporting associated with
$160.0 million of total assets and nil revenue included in the consolidated financial statements of the Company as
of and for the year ended December 31, 2010. Our audit of internal control over financial reporting of the
Company also excluded an evaluation of the internal control over financial reporting of Brazauro.
We also have audited, in accordance with Canadian generally accepted auditing standards and the standards
of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of the
Company as of December 31, 2010 and 2009, and the related consolidated statements of operations, cash
flows, shareholder’ equity, and comprehensive income for each of the years in the two-year period ended
December 31, 2010, and our report dated March 16, 2011 expressed an unqualified opinion on those
consolidated financial statements.
Chartered Accountants
Vancouver, Canada
March 16, 2011
ELDORADO GOLD 2010 Annual Report
53
Consolidated Balance Sheets
(Expressed in thousands of U.S. dollars)
Assets
Current assets
Cash and cash equivalents
Restricted cash (note 5 and 12(e))
Marketable securities (note 6)
Accounts receivable and other (note 7)
Inventories (note 8)
Future income taxes (note 15)
Inventories (note 8)
Investment in significantly influenced company (note 4(c))
Restricted assets and other (note 9)
Mining interests (note 10)
Goodwill (note 11)
Liabilities
Current liabilities
Accounts payable and accrued liabilities
Debt - current (note 12)
Future income taxes (note 15)
Debt - long-term (note 12)
Asset retirement obligations (note 13)
Future income taxes (note 15)
Non-controlling interests
Shareholders’ equity
Share capital (note 16(b))
Contributed surplus
Accumulated other comprehensive income
Retained earnings (deficit)
Subsequent events (note 12)
Commitments and contingencies (note 19)
Approved on behalf of the Board of Directors
December 31,
2010
$
December 31,
2009
$
314,344
52,425
8,027
42,437
147,263
606
565,102
29,627
6,202
19,328
2,793,722
365,928
265,369
50,000
13,951
26,434
129,197
-
484,951
31,534
-
13,872
2,580,816
324,935
3,779,909
3,436,108
152,781
98,523
2,915
254,219
68,140
24,275
430,020
776,654
157,250
56,499
4,264
218,013
134,533
26,566
390,242
769,354
36,021
26,144
2,814,679
22,967
998
128,590
2,671,634
17,865
2,227
(51,116)
2,967,234
2,640,610
3,779,909
3,436,108
Robert R. Gilmore
Director
Paul N. Wright
Director
See accompanying notes to consolidated financial statements.
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Consolidated Statements of Operations
For the years ended December 31,
(Expressed in thousands of U.S. dollars except per share amounts)
Revenue
Gold sales
Iron ore sales
Expenses
Operating costs
Depletion, depreciation and amortization
General and administrative
Exploration
Mine standby costs
Accretion of asset retirement obligations (note 13)
Foreign exchange loss (gain)
Gain on disposal of assets
Gain on marketable securities
Interest and financing costs
Interest and other income
Income before income taxes and non-controlling interests
Income tax (expense) recovery (note 15)
Current
Future
Non-controlling interests in income
Net income for the year
Weighted average number of shares outstanding
Basic
Diluted
Earnings per share
Basic income per share
Diluted income per share
2010
$
2009
$
782,850
8,325
358,467
-
791,175
358,467
282,465
106,791
59,769
23,181
1,335
1,564
14,792
132,464
38,658
32,530
11,970
2,580
291
(2,966)
489,897
215,527
(592)
(6,572)
8,089
(12,937)
(854)
(1,689)
824
(2,262)
477,885
211,546
313,290
146,921
(95,022)
5,252
(44,862)
2,972
(89,770)
(41,890)
(17,457)
(2,627)
206,063
102,404
542,861
545,850
389,384
391,707
0.38
0.38
0.26
0.26
See accompanying notes to consolidated financial statements.
ELDORADO GOLD 2010 Annual Report
55
Consolidated Statements of Cash Flows
For the years ended December 31,
(Expressed in thousands of U.S. dollars)
Cash flows generated from (used in):
Operating activities
Net earnings for the year
Items not affecting cash
Accretion on asset retirement obligations
Depletion, depreciation and amortization
Unrealized foreign exchange loss (gain)
Future income taxes (recovery) expense
Gain on disposal of assets
Gain on marketable securities
Stock-based compensation (note 17(b))
Fair value of bonus cash award units
Pension expense (note 14)
Non-controlling interest
Changes in non-cash working capital (note 18)
Investing activities
Acquisition of subsidiaries net of cash received (note 4)
Mining interests
Capital expenditures
Sales and disposals
Marketable securities
Purchases
Proceeds on disposals
Equity investment purchase
Pension plan contributions (note 14)
Restricted cash
Restricted asset and other
Financing activities
Capital stock
Issuance of common shares for cash
Dividend paid to non-controlling interest
Dividend paid to shareholders
Long-term and bank debt
Proceeds
Repayments
Net increase in cash and cash equivalents
Cash and cash equivalents - beginning of year
Cash and cash equivalents - end of year
Supplementary cash flow information (note 18)
See accompanying notes to consolidated financial statements.
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2010
$
2009
$
206,063
102,404
1,564
106,791
17,974
(5,252)
(592)
(6,572)
16,557
-
2,517
17,457
356,507
(64,432)
291
38,658
281
(2,972)
(854)
(1,689)
9,091
(2,543)
1,689
2,627
146,983
45,059
292,075
192,042
(6,083)
54,179
(226,296)
23,756
(106,614)
35
(11,983)
15,611
(6,727)
-
(2,463)
(7,007)
(3,967)
42,770
-
(1,856)
-
1,877
(221,192)
(13,576)
35,907
(1,287)
(26,357)
59,839
(90,010)
25,201
(149)
-
4,983
(4,983)
(21,908)
25,052
48,975
265,369
203,518
61,851
314,344
265,369
Consolidated Statements of Shareholders’ Equity
For the years ended December 31,
(Expressed in thousands of U.S. dollars)
Share capital
Balance beginning of year
Shares issued upon exercise of share options, for cash
Estimated fair value of share options exercised
Share issued in consideration for interests acquired
Shares issued for cash upon exercise of warrants
Balance end of year
Contributed surplus
Balance beginning of year
Non-cash stock-based compensation
Non-cash stock-based compensation on
Brazauro warrants & options converted
Options exercised, credited to share capital
Balance end of year
Retained earnings (deficit)
Balance beginning of year
Dividends paid
Net income for the year
Balance end of year
Accumulated other comprehensive income (loss)
Balance beginning of year
Other comprehensive (loss) income
Balance end of year
Total shareholders’ equity
2010
$
2009
$
2,671,634
35,895
12,020
95,118
12
2,814,679
931,933
25,201
10,045
1,704,455
-
2,671,634
17,865
16,557
19,378
8,532
565
(12,020)
-
(10,045)
22,967
17,865
(51,116)
(26,357)
206,063
(153,520)
-
102,404
128,590
(51,116)
2,227
(1,229)
998
(5,971)
8,198
2,227
2,967,234
2,640,610
See accompanying notes to consolidated financial statements.
ELDORADO GOLD 2010 Annual Report
57
Consolidated Statements of Comprehensive Income
For the years ended December 31,
(Expressed in thousands of U.S. dollars)
Net earnings for the year ended December 31,
Other comprehensive income
Unrealized gains on available-for-sale investments
Reversal of unrealized gains on available-for-sale investments on acquisition of
subsidiary (note 4 (a)(b))
Realized (gains) losses on available-for-sale investments transferred to net income
Future income taxes on changes in available-for-sale investments
Other comprehensive (loss) income
Comprehensive income for the year ended December 31,
2010
$
206,063
2009
$
102,404
13,480
129,418
(11,424)
(3,245)
(40)
(122,617)
1,717
(320)
(1,229)
8,198
204,834
110,602
See accompanying notes to consolidated financial statements.
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Notes to the Consolidated Financial Statements
December 31, 2010 and 2009
(Expressed in thousands of U.S. dollars, unless otherwise stated)
1. 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 Turkey, China,
Greece and Brazil. The Company acquired control of Sino Gold Mining Ltd. (“Sino Gold”) in December
2009, along with its two producing mines, Jinfeng and White Mountain, as well as the Eastern Dragon
development project. It also completed in July 2010 the acquisition of Brazauro Resources Corporation
(“Brazauro”), whose main asset is the Tocantinzinho exploration and development project in Tapajós,
Brazil.
2. Significant accounting policies
(a) 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
23, 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
Qinghai Dachaidan Mining Ltd (QDML)
Tüprag Metal Madencilik Sanayi ve Ticaret AS
Unamgen Mineração e Metalurgia S/A
Thracean Gold Mining SA
Sino Guizhou Jinfeng Mining Limited
Sino Gold Jilin BMZ Mining Limited
Heihe Rockmining Limited
Location
China
Turkey
Brazil
Greece
China
China
China
Ownership
interest
Status
Operations and development
projects owned
90% Consolidated TJS Gold Mine
100% Consolidated Kis¸ladag˘ Gold Mine
Efemcukuru Project
100% Consolidated Vila Nova Iron Ore Mine
100% Consolidated Perama Hill Project
82% Consolidated Jinfeng
95% Consolidated White Mountain
95% Consolidated Eastern Dragon
All material inter-company balances and transactions have been eliminated.
(b) 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 purchase price allocations for business acquisitions, asset impairment analysis, valuation
of derivative contracts, determination of recoverable metal on leach pads, reclamation obligations,
non-cash stock-based compensation and warrants, pension benefits, valuation allowances for future
income tax assets, the provision for income tax liabilities, future income taxes and assessing and
evaluating contingencies. Actual results could differ from these estimates.
ELDORADO GOLD 2010 Annual Report
59
Notes to the Consolidated Financial Statements
December 31, 2010 and 2009
(Expressed in thousands of U.S. dollars, unless otherwise stated)
2. Significant accounting policies (continued)
(c) Cash and cash equivalents
Cash and cash equivalents consist of cash and highly liquid investments that are readily convertible to
cash and that have maturity dates of three months or less from the date of acquisition. Cash and cash
equivalents and restricted cash are designated as held-for-trading and measured at fair value.
(d)
Inventories
i.
Product inventory consists of stockpiled ore, ore on leach pads, crushed ore, in-circuit material at
properties with milling or processing operations, doré awaiting refinement and unsold bullion, 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.
Inventories for which processing and sale is not expected to complete within one year is
classified as non-current.
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.
(e)
Investments
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.
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 until a decline in fair value is determined to be other than temporary. Factors that
contribute to an other than temporary decline include a significant and prolonged period during which
fair value is below cost, and the existence of a significant adverse change in the market and economic
environment 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 in “Gain on marketable securities”.
Investments in significantly influenced companies are accounted for using the equity method. Under
the equity method, the original cost of the shares is adjusted for the Company’s share of post-
acquisition earnings or losses less dividends.
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Notes to the Consolidated Financial Statements
December 31, 2010 and 2009
(Expressed in thousands of U.S. dollars, unless otherwise stated)
2. Significant accounting policies (continued)
(f) Deposits
Deposits, such as those required by governmental authorities for possible environmental liabilities, are
classified as held-for-trading and measured at fair value.
(g) 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.
(h) Mining interests
Mining interests include acquisition costs, 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 the 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 plant and equipment
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, 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 best estimates of fair value based on the information available.
(i) Goodwill
Goodwill is the excess of the cost of an acquired business over the net amounts assigned to assets
acquired and liabilities assumed. Goodwill is not amortized. It is tested for impairment annually or more
frequently if events or changes in circumstances indicate that it is impaired. Goodwill is allocated to a
reporting unit and any potential goodwill impairment is identified by comparing the carrying amount of
the reporting unit with its fair value. If any potential impairment is identified, the impairment loss is
quantified by comparing the carrying amount to its fair value and is recognized in earnings.
ELDORADO GOLD 2010 Annual Report
61
Notes to the Consolidated Financial Statements
December 31, 2010 and 2009
(Expressed in thousands of U.S. dollars, unless otherwise stated)
2. Significant accounting policies (continued)
(j) 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. After the property is placed into production,
costs incurred that increase production volume or extends 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:
i.
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.
(k) Deferred financing charges
Deferred financing costs represent the issuance costs of the Company’s long-term debt. Deferred
costs are netted against the carrying value of long-term debt on the consolidated balance sheet and
amortized using the effective interest rate method over the expected term of the related liability.
(l)
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.
(m) 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 lesser of the term of the lease and the life of the asset. Obligations recorded under
capital leases are reduced by lease payments net of imputed interest.
(n) Asset retirement obligations
Asset retirement obligations (“AROs”) represent the estimated 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.
The carrying value of property, plant, equipment and mining interests are increased by the same
amount as the ARO liability recognized as such obligations are incurred. The amount is amortized to
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.
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Notes to the Consolidated Financial Statements
December 31, 2010 and 2009
(Expressed in thousands of U.S. dollars, unless otherwise stated)
2. Significant accounting policies (continued)
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 ARO obligation is adjusted accordingly and the adjustment is
added to, or deducted from, the carrying value of property, plant and equipment and mining interest. In
the event that the adjustment occurs after the mine in question has closed, the adjustment is included
in earnings.
(o) 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 recognized attributable to unvested stock options that are forfeited are credited
to earnings as they occur.
Bonus cash award units are considered liability awards and are measured at the amount by which the
quoted market value of the shares covered by the grant exceeds the option price. Deferred share units
are liability awards recorded at the quoted market price at the grant date. The corresponding liability is
marked to market at each reporting date.
(p)
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 realization is more likely than not.
(q) 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.
(r) 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.
(s) Capitalization of interest
Where the Company has secured debt financing to finance the cost of specific capital projects, interest
is capitalized on the related construction and development project until the project begins commercial
operation or the development ceases.
ELDORADO GOLD 2010 Annual Report
63
Notes to the Consolidated Financial Statements
December 31, 2010 and 2009
(Expressed in thousands of U.S. dollars, unless otherwise stated)
2. Significant accounting policies (continued)
(t) 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,
unless the stripping activity can be shown to be a betterment of the mineral property, in which case the
stripping costs are capitalized. Betterment occurs when stripping activity increases future output of the
mine by providing access to additional reserves. Stripping costs incurred to prepare the ore body for
extraction are capitalized as mine development costs (pre-stripping). Capitalized stripping costs are
amortized on a unit-of production basis over the economically recoverable proven and probable
reserves to which they relate. Production is deemed to have commenced when saleable minerals are
extracted from an ore body.
(u) 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.
(v) Defined benefit pension plan
Defined benefit pension plan obligations and expense are based on actuarial determinations. The
projected benefit method prorated on service is used to determine the accrued benefit obligation and
expense. Actuarial assumptions used to determine defined benefit pension plan liabilities are based
upon best estimates of expected plan investment 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.
(w) Comparative figures
Certain comparative figures have been reclassified to conform to the current year’s presentation.
3. Changes in accounting policies and new accounting developments
Business Combinations (Section 1582)
In January 2009, the Canadian Institute of Chartered Accountants (“CICA”) issued 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 consideration and contingencies will also be recorded at fair value
at the acquisition date. The standard also requires that acquisition-related costs be expensed as incurred
and that restructuring charges be expensed in the periods after the acquisition date. The Section applies
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Notes to the Consolidated Financial Statements
December 31, 2010 and 2009
(Expressed in thousands of U.S. dollars, unless otherwise stated)
3. Changes in accounting policies and new accounting developments (continued)
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. The Company has not yet adopted this standard.
Consolidations (Section 1601) and Non-Controlling Interest (Section 1602)
In January 2009, the CICA issued Section 1601, Consolidations, and Section 1602, Non-Controlling
Interests. Section 1601 establishes standards for preparing consolidated financial statements and
Section 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 has not yet adopted these standards.
International Financial Reporting Standards
Canadian public companies will be required to prepare their financial statements in accordance with IFRS,
as issued by the International Accounting Standards Board, for financial years beginning on or after
January 1, 2011. Effective January 1, 2011, the Company will adopt IFRS as the basis for preparing its
consolidated financial statements. The Company will issue its financial results for the quarter ended
March 31, 2011 prepared on an IFRS basis and provide comparative data on an IFRS basis as required.
4. Acquisitions
(a) Sino Gold
Eldorado acquired all of the outstanding Sino Gold Securities not previously held by Eldorado on
December 15, 2009, pursuant to a Scheme Implementation Deed dated August 26, 2009, as amended
October 27, 2009 (the “Scheme Deed”), with Sino Gold, by way of schemes of arrangement (the
“Schemes”) under the laws of Australia (the “Transaction”).
Pursuant to the Schemes, Eldorado acquired all of the outstanding ordinary shares of Sino Gold (“the Sino
Gold Shares”) not previously held by Eldorado that, together with the Sino Gold Shares already held by
Eldorado, constituted 100% of the issued and outstanding Sino Gold Securities following the
implementation of the Transaction. All outstanding options to purchase Sino Gold Shares were cancelled
pursuant to the Schemes in connection with the implementation of the Transaction.
Consideration for the Sino Gold Shares acquired was common shares of Eldorado (“Eldorado Shares”),
with the number issued based on a share exchange ratio of 0.55 Eldorado Share for each Sino Gold
Share. Consideration for cancellation of Sino Gold Options was Eldorado Shares, with the number issued
calculated with reference to the share exchange ratio, the exercise price and time value for such Sino Gold
Options and whether the Sino Gold Options were “in the money” or not.
Eldorado issued an aggregate of 131,772,777 common shares in the capital of Eldorado, either directly or
indirectly as CHESS Depository Interests (“CDIs”), through CHESS Depository Nominees Pty Limited, to
former shareholders and option holders of Sino Gold pursuant to the Scheme Deed in connection with the
implementation of the Schemes.
Eldorado previously acquired 57,968,029 Sino Gold Shares (19.8%) on July 27, 2009, pursuant to a Share
Purchase and Sale Agreement (the “Share Purchase Agreement”) dated June 3, 2009, as amended on
July 10, 2009, with Gold Fields Australasia (BVI) Limited (“GFA”) in consideration for 27,824,654 Eldorado
ELDORADO GOLD 2010 Annual Report
65
Notes to the Consolidated Financial Statements
December 31, 2010 and 2009
(Expressed in thousands of U.S. dollars, unless otherwise stated)
4. Acquisitions (continued)
Shares and a purchase price adjustment right. In connection with the implementation of the Schemes,
Eldorado has issued a further 4,057,762 Eldorado Shares to GFA pursuant to the purchase price
adjustment provisions of the Share Purchase Agreement. A total of 135,830,539 Eldorado Shares
(including those issued to GFA) were issued in connection with the implementation of the Schemes.
The business combination has been accounted for as a purchase transaction, with Eldorado being
identified as the acquirer and Sino Gold as the acquiree. For accounting purposes, Eldorado acquired
control of Sino Gold on December 4, 2009 and these consolidated financial statements include the results
of Sino Gold from December 4, 2009.
The cost of acquisition comprises the fair value of Eldorado shares issued, based on the issuance of
135,830,539 Eldorado shares at $10.61 per share based on the share price around the announcement
date of the Transaction, for a total of $1,441,162, the original cost of the Sino Gold common shares
previously acquired of $263,293 based on the share price at their acquisition date of July 27, 2009, which
amount is net of the reversal of the unrealized gain of $122,617 included in other comprehensive income,
plus Eldorado’s transaction costs of $24,010, for total consideration of $1,728,465.
Eldorado received net cash proceeds from the Sino Gold Transaction of $53,771. Net cash proceeds result
from the cash balance acquired of $77,781 less acquisition costs incurred of $23,602 in the year 2009 and
$408 in the year 2010 for total acquisition costs incurred of $24,010.
The allocation of the purchase price is as follows:
131,772,777 common shares of Eldorado issued as CDIs
4,057,762 common shares of Eldorado issued to GFA
27,824,654 common shares of Eldorado issued to GFA, being the cost of 57,968,029 Sino
Gold shares previously acquired
Transaction costs
The above purchase price has been allocated as follows:
Fair value of net assets acquired
Cash
Restricted cash
Accounts receivable and other
Inventory
Mining interests and property, plant and equipment, including value beyond proven and
probable reserves
Goodwill
Accounts payable and accrued liabilities
Asset retirement obligations
Debt
Future income taxes
Non-controlling interests
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$
1,398,109
43,053
263,293
24,010
1,728,465
$
77,781
50,000
21,171
38,791
1,799,377
363,690
(74,737)
(19,249)
(191,121)
(319,386)
(17,852)
1,728,465
Notes to the Consolidated Financial Statements
December 31, 2010 and 2009
(Expressed in thousands of U.S. dollars, unless otherwise stated)
4. Acquisitions (continued)
The acquired goodwill of $363,690 relates to the China reporting segment (note 22) and none of it is
expected to be deductible for tax purposes.
The preliminary purchase price allocation was finalized as at December 31, 2010. Changes from that
originally reported include a reduction of $58,523 to mining interest, an increase of $40,993 to goodwill, a
reduction of $1,464 to accounts payable and accrued liabilities, a reduction of $16,474 to future income
taxes and an increase in the purchase price of $408.
Sino Gold is a gold exploration and mining company in China. The Company operates the Jinfeng and
White Mountain Gold Mines in the Guizhou Province and Jilin Province respectively. The Company also
has a major development project, Eastern Dragon, which is planned to commence commercial production
in 2011.
(b) Brazauro
Eldorado completed the acquisition of all of the issued and outstanding common shares of Brazauro that it
did not already own on July 20, 2010. As a result, Eldorado acquired a 100% interest in the Tocantinzinho
exploration and development project in Tapajós, Brazil as well as the option agreements on two early-stage
exploration projects, Piranhas and Água Branca, also located in the Tapajós district of Brazil.
Under the terms of the arrangement, former Brazauro shareholders received 0.0675 of an Eldorado
common share for each Brazauro share held, as well as 1/3 of a share of TriStar Gold Inc. (“TriStar”), a
new exploration company that Eldorado agreed to fund with C$10 million. TriStar holds certain exploration
properties owned by Brazauro prior to the arrangement.
The Company issued 5,993,898 common shares and paid the C$10 million in connection with this
transaction. Eldorado incurred acquisition costs of $3,474.
As at the date of the transaction, Eldorado held 14,326,000 common shares of Brazauro with a total cost of
$7,071, net of the reversal of the unrealized gain of $11,424 included in other comprehensive income at
the date of the acquisition.
This transaction has been accounted for as an acquisition of assets and liabilities because Brazauro was in
the development stage. These consolidated financial statements include 100% of Brazauro results
commencing July 20, 2010.
ELDORADO GOLD 2010 Annual Report
67
Notes to the Consolidated Financial Statements
December 31, 2010 and 2009
(Expressed in thousands of U.S. dollars, unless otherwise stated)
4. Acquisitions (continued)
The allocation of the purchase price to the assets and liabilities of Brazauro is as follows:
Purchase price:
Share consideration
Brazauro warrants and options converted
Brazauro warrants previously held
Cash consideration
Cost of shares previously acquired
Transaction costs
Total purchase price
Fair value of net assets acquired:
Cash
Accounts receivables and other
Mining interests
Liabilities
Future income taxes payable
$
95,118
565
294
9,479
7,071
3,474
116,001
$
7,278
73
155,964
(560)
(46,754)
116,001
Eldorado paid net cash of $5,675 as a result of the Brazauro transaction. This net reduction of cash was a
result of an acquired cash balance of $7,278 less cash consideration of $9,479 and transaction costs of
$3,474.
(c) Serabi Mining Plc (“Serabi”)
In June 2010, the Company acquired 120,000,000 common shares of Serabi for $5,375. This represents a
26.8% interest in Serabi. The investment in Serabi is being accounted for under the equity method as
follows:
Original purchase
Additional purchase during the year
Equity loss
Balance at December 31, 2010
$
5,375
1,352
(525)
6,202
Additionally, the Company acquired 2,500,000 special warrants for $1,352 in December 2010 in order to
maintain its 26.8% ownership percentage. Each special warrant is convertible to one ordinary common
share and one half of one purchase warrant with no further action by the Company upon Serabi obtaining a
share listing on the TSX or TSX-V. If those conditions are not met by March 31, 2011, each special warrant
is automatically convertible to 1.1 of an ordinary common share and 0.55 of one purchase warrant with no
further action by the Company.
The Company initially purchased 120,000,000 common shares of Serabi, however, in anticipation of a
listing application to a Canadian stock exchange Serabi consolidated the existing ordinary shares on the
basis of 1 New Ordinary Share for every 10 Existing Ordinary Shares. Therefore, the Company’s
investment was revised to 12,000,000 new ordinary shares at the date of consolidation.
Serabi is a gold mining company that is focused on the Tapajos region of Northern Brazil.
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Notes to the Consolidated Financial Statements
December 31, 2010 and 2009
(Expressed in thousands of U.S. dollars, unless otherwise stated)
4. Acquisitions (continued)
(d) Vila Nova Iron Ore project
On August 5, 2009, the Company acquired the remaining 25% interest in its Vila Nova Iron Ore Project
(“Vila Nova”) from Mineração Amapari SA (“Amapari”), a Brazilian private company, in exchange for a Net
Profits Interest royalty of 10% plus a sliding scale royalty based on the operating margin of the project.
5. Restricted cash
Restricted cash represents short-term interest-bearing money market securities and funds held on deposit
as collateral for the following loans:
Eastern Dragon CMB standby letter of credit loan – (note 12 (e))
Eastern Dragon CCB loan – (note 12 (e))
6. Marketable securities
Marketable securities – Available-for-sale
Marketable securities – Held-for-trading
Warrants – Held-for-trading
7. Accounts receivable and other
Value added and other taxes recoverable
Other receivables and advances
Prepaid expenses and deposits
December 31,
2010
$
52,425
-
December 31,
2009
$
-
50,000
52,425
50,000
December 31,
2010
$
8,027
-
-
December 31,
2009
$
13,470
399
82
8,027
13,951
December 31,
2010
$
4,196
16,223
22,018
42,437
December 31,
2009
$
5,956
9,123
11,355
26,434
ELDORADO GOLD 2010 Annual Report
69
Notes to the Consolidated Financial Statements
December 31, 2010 and 2009
(Expressed in thousands of U.S. dollars, unless otherwise stated)
8.
Inventories
Current:
Ore stockpiles
In-process inventory including doré
Materials and supplies
Non-current: (1)
Ore stockpiles
In-process inventory
December 31,
2010
$
December 31,
2009
$
39,483
62,366
45,414
37,503
56,098
35,596
147,263
129,197
15,659
13,968
29,627
15,987
15,547
31,534
(1) Non-current inventories represent material not scheduled for processing within the next twelve months at
the Company’s TJS mine.
9. Restricted assets and other
Restricted long-term asset – SERP (note 14)
Restricted credit card deposits
Restricted marketable securities long-term
Accounts receivable long-term
Environmental guarantee deposit
Accrued pension benefit asset (note 14)
10. Mining interests
December 31,
2010
$
7,872
656
-
352
10,448
-
December 31,
2009
$
7,066
618
156
2,477
3,442
113
19,328
13,872
December 31, 2010
Producing properties
Properties under development
Iron ore property
Other mineral interests
Cost
$
1,671,989
1,319,358
49,588
3,040,935
24,511
Accumulated
depreciation,
depletion and
amortization
$
Net book
Value
$
263,982 1,408,007
867 1,318,491
46,760
2,828
267,677 2,773,258
20,464
4,047
3,065,446
271,724 2,793,722
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Notes to the Consolidated Financial Statements
December 31, 2010 and 2009
(Expressed in thousands of U.S. dollars, unless otherwise stated)
10. Mining interests (continued)
Producing properties
Properties under development
Iron ore property
Other mineral interests
December 31, 2009
Accumulated
depreciation,
depletion
and
amortization
$
159,361
516
252
160,129
2,790
Cost
$
1,616,794
1,021,981
47,464
2,686,239
57,496
Net book
value
$
1,457,433
1,021,465
47,212
2,526,110
54,706
2,743,735
162,919
2,580,816
Included in producing properties and other mineral interest is $473,495 (2009 – $339,242) and $16,975
(2009 – $52,163) respectively, related to assets that are not being depreciated, including value beyond
proven and probable, and construction in progress.
The amount of capitalized interest during the year ended December 31, 2010 included in mining interest
was $2,897 (2009 – nil).
11. Goodwill
Balance at beginning of year
Acquisitions during the year (note 4 (a))
Adjustments to preliminary purchase price allocation (note 4 (a))
Balance at end of year
12. Debt
Current:
Jinfeng construction loan (a)
White Mountain fixed asset project loan (c)
White Mountain working capital project loan (c)
White Mountain working capital loan (d)
Eastern Dragon CMB standby letter of credit loan (e)
Eastern Dragon HSBC revolving loan facility (f)
Eastern Dragon CCB loan (e)
Long-term:
Jinfeng construction loan (a)
White Mountain fixed asset project loan (c)
Jinfeng working capital loan (b)
December 31,
2010
$
324,935
-
40,993
December 31,
2009
$
2,238
322,697
-
365,928
324,935
December 31,
2010
$
December 31,
2009
$
21,139
9,749
6,176
7,549
48,317
5,593
-
98,523
52,951
15,189
-
68,140
-
3,633
5,991
-
-
-
46,875
56,499
97,867
24,214
12,452
134,533
ELDORADO GOLD 2010 Annual Report
71
Notes to the Consolidated Financial Statements
December 31, 2010 and 2009
(Expressed in thousands of U.S. dollars, unless otherwise stated)
12. Debt (continued)
Principal debt repayments are as follows:
Jinfeng construction loan (a)
White Mountain fixed asset project loan (c)
White Mountain working capital project loan (c)
White Mountain working capital loan (d)
Eastern Dragon CMB standby letter of credit loan (e)
Eastern Dragon HSBC revolving loan facility (f)
(a) Jinfeng construction loan
2013
$
2012
$
2011
$
2014
$
21,139 21,139 21,139 12,079
-
-
-
-
-
9,749
6,176
7,549
48,317
5,593
9,981
-
-
-
-
5,208
-
-
-
-
Total
$
75,496
24,938
6,176
7,549
48,317
5,593
98,523 31,120 26,347 12,079 168,069
In 2009, Guizhou Jinfeng Mining Ltd. (“Jinfeng”), our 82% owned subsidiary, entered into a RMB
680.0 million ($102,674) construction loan facility (“the construction loan”) with China Construction
Bank (“CCB”).
The construction loan has a term of 6 years commencing from February 27, 2009 and is subject to a
floating interest rate adjusted annually at the prevailing lending rate stipulated by the People’s Bank of
China for similar loans with a 5% discount. The applicable interest rate as at December 31, 2010 is
6.08% (after 5% discount). The construction loan is secured against the following:
i. Sino Gold corporate guarantee;
ii. pledge of 82% shares held by Sino Gold in Jinfeng;
iii. mortgage on all fixed assets of Jinfeng with a value above $100;
iv. mortgage on Jinfeng mining license and exploration license; and
v. mortgage on land use right.
While the construction loan is outstanding, Jinfeng is required to obtain written consent from CCB
before transferring funds to Sino Gold or any of its subsidiaries and must have a leverage ratio of 64%
or lower in order to distribute dividends to its shareholders.
Principal repayment of this loan is as follows: for the years 2011, 2012 and 2013 – quarterly payments
of RMB 35.0 million ($5,285); for the year 2014 – quarterly payments of RMB 32.5 million ($4,907); and
for the year 2015 a final payment of RMB 130.0 million ($19,626). Any pre-payments are applied to
reduce future payments starting from the final payment. During 2010, Jinfeng pre-paid RMB
180.0 million ($27,178) on the outstanding balance of this loan, leaving a balance owing of RMB
500.0 million ($75,496) at December 31, 2010.
Deferred financing costs in the amount of $1,743 have been included as an offset in the balance of the
loan in the financial statements and are being amortized using the effective interest method for net
deferred financing costs at December 31, 2010 of $1,406.
(b) Jinfeng working capital loan
In 2009, Jinfeng entered into a RMB 85.0 million ($12,834) working capital loan (“the working capital
loan”) with CCB.
The working capital loan has a term of 3 years and was due on August 17, 2012. This loan was subject
to a floating interest rate adjusted annually at 95% of the prevailing lending rate stipulated by the
People’s Bank of China for similar loans.
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Notes to the Consolidated Financial Statements
December 31, 2010 and 2009
(Expressed in thousands of U.S. dollars, unless otherwise stated)
12. Debt (continued)
While the working capital loan was outstanding, Jinfeng was required to obtain written consent from
CCB before transferring funds to Sino Gold or any of its subsidiaries and was required to have a
leverage ratio of 64% or lower in order to distribute dividends to its shareholders.
During 2010, Jinfeng pre-paid the full amount on this loan.
(c) White Mountain project loan
In 2008, Sino Gold Jilin BMZ Mining Limited (White Mountain”), our 95% owned subsidiary, entered
into a project loan (“project loan”) with CCB. The project loan has two components:
i. A fixed asset loan of RMB 190.1 million ($28,703) with final payment due on September 2013; and
ii. a working capital loan of RMB 40.9 million ($6,176) due in November 2010.
The interest rate on the project loan is the prevailing lending rate stipulated by the People’s Bank of
China, adjusted annually for the fixed asset loan and twice a year for the working capital loan. The
applicable interest rates as at December 31, 2010 are 5.76% and 5.81% respectively.
The project loan is secured by a Sino Gold corporate guarantee and White Mountain’s fixed assets
with a value above $100.
Principal repayment of the fixed asset loan is as follows: September 2010 – RMB 24.8 million ($3,765)
(paid); September 2011 – RMB 64.5 million ($9,749); September 2012 – RMB 66.1 million ($9,981);
September 2013 – RMB 34.7 million ($5,208).
During 2010, White Mountain made the first payment on the fixed asset loan and extended the working
capital loan for one additional year to November 15, 2011.
(d) White Mountain working capital loan
In 2010, White Mountain entered into a RMB 50.0 million ($7,549) working capital loan with China
Merchants Bank (“CMB”).
The working capital loan has a term of one year and is due on September 1, 2011. This loan is subject
to a floating interest rate adjusted annually to the prevailing lending rate stipulated by the People’s
Bank of China for similar loans. The applicable interest rate as at December 31, 2010 is 5.31%.
This loan is secured by a letter of guarantee issued by Eldorado.
In January 2011, White Mountain pre-paid the full amount of this loan.
(e) Eastern Dragon facilities
CCB loan
In 2008, Heihe Rock Mining Industry Development Company Limited (“Eastern Dragon”), our 95%
owned subsidiary, entered into a RMB 320.0 million ($48,317) Standby letter of credit loan (“LC loan”)
with CCB. The interest rate on this loan as at December 31, 2009 was 5.40%.
ELDORADO GOLD 2010 Annual Report
73
Notes to the Consolidated Financial Statements
December 31, 2010 and 2009
(Expressed in thousands of U.S. dollars, unless otherwise stated)
12. Debt (continued)
The LC loan was collateralized by way of irrevocable letter of credit drawn on CCB. The letter of credit
is collateralized by Sino Gold’s funds held by Bank of China Sydney Branch as restricted cash.
During the 2010 year, the LC loan was repaid and the restricted cash was released.
China Merchants Bank – project-financing loan
In 2009, Eastern Dragon entered into a RMB 450.0 million ($67,946) project-financing loan (“project-
financing loan”) with China Merchants Bank (“CMB”). The project-financing loan has three
components:
i. A 5 year term, RMB 320.0 million ($48,317) long term loan (“the long term loan”) to replace the LC
loan with CCB;
ii. a 4 year term RMB 100.0 million ($15,099) fixed asset loan (“the fixed asset loan”); and
iii. a one year term RMB 30.0 million ($4,530) working capital loan (“the working capital loan”).
The project-financing loan is subject to a floating interest rate adjusted quarterly to 90% of the
prevailing lending rate stipulated by the People’s Bank of China for similar loans. The applicable
interest rates as at December 31, 2010 are 5.60% for the long term loan and 5.23% for the fixed asset
loan after discount.
The project-financing loan is secured by an irrevocable letter of Guarantee issued by Sino Gold. Under
the terms of the agreement, the following conditions are required to be met before the first drawdown:
1. Obtain project approval from the Heilongjiang Provincial Development and Reform Commission;
2. Sino Gold to open an offshore banking business bank account with CMB and deposit $40,000;
3. The aggregate of the amount deposited in the offshore account, Eastern Dragon registered capital
and shareholder loan is at least $84,660 (this threshold has been reached as at December 31,
2009).
In addition, before the drawdown on the fixed asset loan, Eastern Dragon should obtain the gold
operation permit.
The working capital loan can be drawn down once the following conditions are satisfied:
i.
ii.
iii.
iv.
The project obtains the mining license;
the project has been developed and in production;
the gold operation permit has been granted; and
the safety production permit and environmental protection permit have been granted.
The project-financing loan requires Eastern Dragon to maintain a liability to asset ratio of 70% or lower,
excluding shareholder loan and total banking debt cannot exceed RMB 550.0 million ($83,045).
The project-financing loan is subject to an annual management fee of 10% of the annual interest on the
drawn down amount.
No amounts were drawn down under the project-financing loan as at December 31, 2010.
CMB Standby letter of Credit loan
In January 2010, Eastern Dragon entered into a RMB 320.0 million ($48,317) Standby letter of credit
loan with CMB. This loan has a one year term and is subject to a floating interest rate adjusted
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Notes to the Consolidated Financial Statements
December 31, 2010 and 2009
(Expressed in thousands of U.S. dollars, unless otherwise stated)
12. Debt (continued)
quarterly at 90% of the prevailing lending rate stipulated by the People’s Bank of China for working
capital loans. This loan is collateralized by way of a $52,200 irrevocable letter of credit issued by Sino
Gold to CMB.
On February 5, 2010, Eastern Dragon made a drawdown on this loan which was used to repay the LC
loan with CCB.
In February 2011, this loan was extended for another year.
This loan is to be repaid when Eastern Dragon obtains the required project approval that will allow it to
complete the first drawdown on the project-financing loan. This loan is subject to an annual
management fee of 10% of the interest accrued on the drawn down and outstanding amount. This
management fee is paid in advance quarterly. The interest rate on this loan as at December 31, 2010
is 5.23%.
(f) HSBC revolving loan facility
In May 2010, Eastern Dragon entered into a RMB 80.0 million ($12,079) revolving facility (“the Facility)
with HSBC Bank (China). The Facility can be drawn down in minimum tranches of RMB 1.0 million
($151) or its multiples. Each drawdown bears interest fixed at the prevailing lending rate stipulated by
the People’s Bank of China on the date of drawdown. The Facility has a term of up to one year.
In December 2010, the Facility was reviewed by the bank and was extended to November 30, 2011.
The Facility is secured by a letter of Guarantee issued by Eldorado. Eldorado must maintain at all
times a security coverage ratio of 110% of the amounts drawn down. As at December 31, 2010, the
security coverage is $6,141.
As at December 31, 2010, RMB 37.0 million ($5,593) had been drawn under this Facility.
This Facility is to be repaid when Eastern Dragon obtains the required project approval that will allow it
to complete the second drawdown on the project-financing loan.
Subsequent to December 31, 2010, Eastern Dragon drew RMB 11.6 million ($1,752) under this Facility
and the security coverage was increased to $8,080.
(g) Entrusted loan
In November 2010, Eastern Dragon, HSBC Bank (China) and QDML, entered into a RMB 12.0 million
($1,812) entrusted loan agreement.
Under the terms of the entrusted loan, QDML with its own funds entrusts HSBC Bank (China) to
provide a loan facility in the name of QDML to Eastern Dragon.
The entrusted loan can be drawn down in tranches. Each drawdown bears interest fixed at the
prevailing lending rate stipulated by the People’s Bank of China on the date of drawdown. Each draw
down has a term of three months and can be rolled forward at the discretion of QDML.
As at December 31, 2010, RMB 7.9 million ($1,193) has been drawn under the entrusted loan.
ELDORADO GOLD 2010 Annual Report
75
Notes to the Consolidated Financial Statements
December 31, 2010 and 2009
(Expressed in thousands of U.S. dollars, unless otherwise stated)
12. Debt (continued)
Subsequent to December 31, 2010, the entrusted loan was increased to RMB 50.0 million ($7,550)
and an additional RMB 21.1 million ($3,186) was drawn down.
The entrusted loan has been recorded on a net settlement basis.
13. Asset retirement obligations
Balance at beginning of year
Accretion during the year
Revisions to estimate of final obligation
Balance at end of year
Estimated undiscounted amount
Balance at beginning of year
Additions resulting from acquisition (note 4 (a))
Accretion during the year
Revisions to estimate of final obligation
Balance at end of year
Estimated undiscounted amount
Brazil
$
1,062
53
1,129
2,244
3,805
Brazil
$
753
-
51
258
1,062
1,730
December 31, 2010
Turkey
China
$
$
4,944
20,560
1,264
247
4,232
(9,216)
9,423
12,608
39,533
22,127
December 31, 2009
Turkey
China
$
$
2,773
1,286
-
19,249
71
169
2,002
(46)
4,944
20,560
77,758
14,687
Total
$
26,566
1,564
(3,855)
24,275
65,465
Total
$
4,812
19,249
291
2,214
26,566
94,175
The net present values are computed using credit-adjusted risk-free interest rates of between 5% and 7%.
Revisions to the estimate of the discounted obligations in 2010 include $1,129 related to Vila Nova, $1,073
related to TJS, ($3,257) related to Jinfeng, ($3,425) related to White Mountain, ($3,608) related to Eastern
Dragon, $3,423 related to Kis¸ladag˘ and $809 related to Efemçukuru. Revisions for 2009 include $258
related to Vila Nova, ($80) related to TJS, $34 related to Jinfeng, $1,972 related to Kis¸ladag˘ and $30
related to Efemçukuru.
14. 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. The Pension
Plan and the SERP were last actuarially evaluated on January 1, 2008 and January 1, 2009 respectively
for funding purposes and the next required valuation will be as of January 1, 2011 for the Pension Plan and
January 1, 2012 for the SERP. The measurement date used to determine all of the accrued benefit
obligation and plan assets for accounting information was December 31, 2010 and 2009.
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Notes to the Consolidated Financial Statements
December 31, 2010 and 2009
(Expressed in thousands of U.S. dollars, unless otherwise stated)
14. Defined benefit plans (continued)
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 2010, including cash contributed to the Pension Plan and the
SERP and payments made directly to beneficiaries were $167 (2009 – $1,856). Based on minimum
funding requirements, the Company may not need to make a contribution to the Pension Plan or to the
SERP in 2011.
The estimated future pension payments for the next five years and thereafter are as follows:
Estimated future pension payments
The details of the Company’s benefit plans are as follows:
Accrued benefit obligation
Balance at beginning of year
Benefits paid
Current service cost
Interest cost
Actuarial losses (gains)
Foreign exchange
Balance at end of year
Plan assets
Fair value at beginning of year
Actual return on plan assets
Qualifying transfer
Foreign exchange
Fair value at end of year
Funded status
Fair value of plan assets
Accrued benefit obligation
Plan (deficit) surplus
Unamortized actuarial losses (gains)
Unamortized past service cost
Net accrued benefit asset (liability)
2011
2012
2013
2014
2015
$
$
211 820 820 820 820
$
$
$
2016 and
later
$
4,966
December 31, 2010
Pension Plan
$
SERP
$
December 31, 2009
Pension Plan
$
SERP
$
1,263
-
122
81
62
132
7,652
(167)
681
483
2,483
740
1,660 11,872
-
102
69
753 4,037
-
484
369
219 2,121
641
120
1,263 7,652
December 31, 2010
December 31, 2009
Pension Plan
SERP
Pension Plan
SERP
$
1,137
76
-
126
1,339
$
-
-
-
-
-
1,339
1,660
(321)
60
166
(95)
-
11,872
(11,872)
4,426
1,805
(5,641)
$
848
48
107
134
1,137
$
-
-
-
-
-
-
1,137
7,652
1,263
(7,652)
(126)
1,995
17
222
2,418
113 (3,239)
ELDORADO GOLD 2010 Annual Report
77
Notes to the Consolidated Financial Statements
December 31, 2010 and 2009
(Expressed in thousands of U.S. dollars, unless otherwise stated)
14. Defined benefit plans (continued)
The Company has $7,872 (2009 – $7,066) in an investment account to fund its SERP obligation. The
breakdown of the investment is provided in note 23(g). This amount is included in restricted assets and
other (note 9).
The accrued benefit asset (liability) is included in the Company’s balance sheet as follows:
Restricted assets and other (note 9)
Accounts payable and accrued liabilities
Total
December 31, 2010
December 31, 2009
Pension Plan
$
-
(95)
(95)
SERP
$
-
(5,641)
(5,641)
Pension Plan
$
113
-
SERP
$
-
(3,239)
113 (3,239)
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 net actuarial gains
Amortization of past service costs
Net pension expense
December 31, 2010
December 31, 2009
Pension Plan
$
122
81
(76)
-
80
207
SERP
$
681
483
-
269
877
2,310
Pension Plan
$
94
63
(62)
(54)
72
SERP
$
445
340
-
-
791
113 1,576
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:
Cash and equivalents
Fixed income
Equity
Total
Significant assumptions
The significant assumptions used are as follows:
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
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December 31, 2010
December 31, 2009
Pension Plan
4%
96%
-
100%
SERP
4%
51%
45%
100%
Pension Plan
1%
99%
-
100%
SERP
3%
49%
48%
100%
December 31, 2010
December 31, 2009
Pension Plan
6.50%
6.00%
5.50%
4.50%
SERP
6.50%
6.00%
5.50%
4.50%
Pension Plan
6.50%
7.50%
6.00%
4.50%
SERP
6.50%
7.50%
6.00%
4.50%
5 years
5 years
5 years
5 years
Notes to the Consolidated Financial Statements
December 31, 2010 and 2009
(Expressed in thousands of U.S. dollars, unless otherwise stated)
14. Defined benefit plans (continued)
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.
15. Income taxes
The significant components within the Company’s future tax liability are as follows:
Future income tax assets
Mining interests
Loss carry forwards
Other
Liabilities
Valuation allowance
Future income tax liabilities
Mining interests
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,
2010
$
December 31,
2009
$
9,972
68,179
3,250
10,241
91,642
(71,368)
20,274
443,287
9,316
452,603
432,329
10,800
46,240
3,156
9,394
69,590
(54,885)
14,705
397,076
12,135
409,211
394,506
December 31,
2010
$
(606)
2,915
430,020
December 31,
2009
$
-
4,264
390,242
432,329
394,506
ELDORADO GOLD 2010 Annual Report
79
Notes to the Consolidated Financial Statements
December 31, 2010 and 2009
(Expressed in thousands of U.S. dollars, unless otherwise stated)
15. Income taxes (continued)
Income tax expense differs from the amount that would result from applying the combined 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
Tax expense at the statutory income tax rate
Tax effect of:
Losses not recognized
Difference in foreign tax rates
Foreign exchange
Withholding tax
Adjustment due to change in tax rates
Non-deductible expense and other items
2010
$
313,290
28.50%
89,288
2009
$
146,921
30.00%
44,076
9,859
(23,532)
3,316
3,278
-
7,561
89,770
8,455
(16,135)
(3,895)
-
5,638
3,751
41,890
At December 31, 2010, the Company had available losses for income tax purposes of approximately
$111,014 (2009 – $83,185) in Canada and Greece expiring in various years from 2011 to 2030.
The Company’s Australian subsidiaries have losses for income tax purposes of $26,384 that do not expire.
In addition, the Company’s Brazilian subsidiaries have losses of $60,842 (December 31, 2009 – $41,702)
that can be used to offset taxable income, and $74,913 (December 31, 2009 – $41,600) 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.
16. Shareholders’ equity
(a) 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, 2010 there were no non-voting common shares outstanding.
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Notes to the Consolidated Financial Statements
December 31, 2010 and 2009
(Expressed in thousands of U.S. dollars, unless otherwise stated)
16. Shareholders’ equity (continued)
(b)
Issued and outstanding share capital
Voting common shares
Balance, January 1, 2009
Shares issued upon exercise of share options, for cash
Estimated fair value of share options exercised
Shares issued for acquisition of Sino Gold
Balance, December 31, 2009
Shares issued upon exercise of share options, for cash
Estimated fair value of share options exercised
Shares issued for acquisition of Brazauro
Shares issued for cash upon exercise of warrants
Balance, December 31, 2010
(c) Accumulated other comprehensive income (loss)
Accumulated other comprehensive income includes the following:
Number of
shares
Amount
$
931,933
368,278,029
25,201
5,203,013
10,045
-
163,655,193 1,704,455
537,136,235 2,671,634
35,895
12,020
95,118
12
5,056,216
-
5,993,898
843
548,187,192 2,814,679
Balance, beginning of year
Unrealized gains on available-for-sale investments
Reversal on acquisition of subsidiary (note 4 (a) and (b))
Realized losses (gains) on sale of available-for-sale investments transferred to
net income
Future income tax on changes in available-for-sale investments
Balance, end of year
17. Stock-based compensation
(a) Share option plans
2010
$
2,227
13,480
(11,424)
2009
$
(5,971)
129,418
(122,617)
(3,245)
(40)
998
1,717
(320)
2,227
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, 2010, a total of 5,424,669 Options
(December 31, 2009 – 4,810,000) 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, 2010, a total of 4,990,394 Options
(December 31, 2009 – 4,760,000) were available to grant to directors and officers under the D&O Plan.
ELDORADO GOLD 2010 Annual Report
81
Notes to the Consolidated Financial Statements
December 31, 2010 and 2009
(Expressed in thousands of U.S. dollars, unless otherwise stated)
17. Stock based compensation (continued)
The continuity of share purchase options outstanding is as follows:
Balance, December 31, 2008
Granted
Exercised
Forfeited
Balance, December 31, 2009
Granted
Exercised
Forfeited
Contractual
weighted
average
remaining
life
(years)
3.9
3.3
Weighted
average
exercise price
Cdn$
Number of
options
5.71 13,438,914
748,000
9.80
(5,203,013)
5.59
(55,000)
6.46
6.11
13.30
7.37
11.76
8,928,901
5,448,842
(5,056,216)
(601,003)
Balance, December 31, 2010
9.49
8,720,524
3.5
At December 31, 2010, 5,423,758 share purchase options (December 31, 2009 – 5,528,557) with a
weighted average exercise price of Cdn$7.32 (December 31, 2009 – Cdn$6.16) had vested and were
exercisable.
Options outstanding at December 31, 2010 are as follows:
Total options outstanding
Exercisable options
December 31, 2010
Weighted
average
remaining
contractual
life
(years)
3.1
1.9
2.4
1.8
3.5
3.5
4.4
4.3
2.1
1.4
3.5
Weighted
average
exercise
price
Cdn$
4.88
5.26
6.44
7.26
9.61
11.40
12.67
13.23
15.53
11.40
9.49
Weighted
average
exercise
price
Cdn$
4.88
5.26
6.44
7.26
9.69
11.40
12.53
13.23
15.53
19.16
7.32
Shares
2,584,473
97,500
866,000
570,900
237,199
20,000
97,667
738,817
200,000
11,202
5,423,758
Range of
exercise price
Cdn$
$4.00 to $4.99
$5.00 to $5.99
$6.00 to $6.99
$7.00 to $7.99
$9.00 to $9.99
$11.00 to $11.99
$12.00 to $12.99
$13.00 to $13.99
$15.00 to $15.99
$16.00 to $16.99
Shares
2,584,473
97,500
866,000
570,900
403,200
30,000
251,000
3,683,845
200,000
33,606
8,720,524
(b) 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.
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Notes to the Consolidated Financial Statements
December 31, 2010 and 2009
(Expressed in thousands of U.S. dollars, unless otherwise stated)
17. Stock based compensation (continued)
This expense has been included in the undernoted expenses in the Consolidated Statements of
Operations as follows:
Operating costs
Exploration
Administrative
2010
$
4,491
680
11,386
16,557
2009
$
1,830
958
5,744
8,532
The assumptions used to estimate the fair value of Options granted during the years ended
December 31, 2010 and 2009 were:
Risk-free interest rate (range)
Expected volatility (range)
Expected life (range)
Expected dividends
2010
1.69% –1.99%
38% – 73%
0.8 -2.8 years
Nil
2009
1.40% –2.11%
64% – 76%
1.5 -3.8 years
Nil
The weighted average fair value per stock option (CAD$) was $4.12 (2009 – $4.80).
(c) 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 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, 2009, all Bonus Cash Award Units (“BCAUs”) awarded by the Company were
exercised. The Company paid $2,543 in bonus cash award units in the 2009 year. The related expense
in the amount of $559 is included in general and administrative expense in the Consolidated
Statements of Operations.
(d) Deferred Share Units plan
On July 15, 2010 the Company adopted the Independent Directors Deferred Share Unit (“DSU”) Plan
under which DSU’s will be granted by the Board from time to time to independent directors
(“participants”). The performance period of each DSU commences on the Grant Date and expires on
the Termination Date of the participant. On redemption each unit entitles the participant to receive a
cash payment equal to the market value of the Company’s shares on the date of redemption. At
December 31, 2010, 29,970 DSU’s were outstanding with a value of $573, which is included in
accounts payable and accrued liabilities.
ELDORADO GOLD 2010 Annual Report
83
Notes to the Consolidated Financial Statements
December 31, 2010 and 2009
(Expressed in thousands of U.S. dollars, unless otherwise stated)
18. Supplementary cash flow information
Changes in non-cash working capital
Accounts receivable and other
Inventories
Accounts payable and accrued liabilities
Supplementary cash flow information
Income taxes paid
Interest paid
Non-cash investing and financing activities
2010
$
2009
$
(14,307)
(12,452)
(37,673)
(64,432)
25,386
(19,799)
39,472
45,059
93,056
10,415
46,317
839
Shares, options and warrants issued on acquisition of subsidiaries
Increased in mineral interest financed by accounts payable
95,683
-
1,704,455
750
19. Commitments and contingencies
a) Commitments
The Company’s contractual obligations, not recorded on the balance sheet, at December 31, 2010,
include:
Operating leases and property expenditures
Purchase obligations
Totals
b) Contingencies
2012
$
2011
$
2,921
2014
$
673
114,487 23,853 1,467 1,501
2013
$
3,208 2,639
2015 and
later
$
-
-
117,408 27,061 4,106 2,174
-
Due in part to the size, complexity and nature of the Company’s operations, various social, political,
environmental, land title, legal, permitting and tax matters are outstanding from time to time. In the
opinion of management, these matters are not expected to have an adverse effect on the Company’s
consolidated financial position or operations.
20. Capital disclosure
Eldorado’s objectives when managing capital are to:
safeguard our ability to continue as a going concern,
a)
b) have sufficient capital to develop our mining projects and take them into production, and
c) 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, 2010 and December 31, 2009 was 5.62% and 7.23% respectively.
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Notes to the Consolidated Financial Statements
December 31, 2010 and 2009
(Expressed in thousands of U.S. dollars, unless otherwise stated)
21. Financial instruments
a) Recognition, measurement and presentation
Financial instruments are either measured at amortized cost or fair value. Held-to-maturity
investments, loans and receivables and other financial liabilities are measured at amortized cost.
Held-for-trading financial assets and available-for-sale financial assets are measured on the balance
sheet at fair value.
b)
Fair value
The following table provides the carrying value and the fair value of financial instruments at
December 31, 2010 and December 31, 2009:
Financial Assets
Held-for-trading
Cash and cash equivalents
Restricted cash
Marketable securities
Restricted assets and other
Available-for-sale
Marketable securities
Loans and receivables
Financial Liabilities
December 31, 2010
December 31, 2009
Carrying amount
$
Fair value
$
Carrying amount
$
Fair value
$
314,344
52,425
-
19,328
314,344
52,425
-
19,328
265,369
50,000
481
13,603
265,369
50,000
481
13,603
8,027
38,241
8,027
38,241
13,626
20,478
13,626
20,478
Accounts payable and accrued liabilities
Debt
147,045
166,663
147,045
166,663
154,011
191,032
154,011
191,032
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.
The fair value hierarchy established by CICA Handbook Section 3862 – Financial Instruments –
Disclosures (“Section 3862”) establishes three levels to classify the inputs to valuation techniques used
to measure fair value and is harmonized with disclosure requirements included in ASC Subtopic
820-10 on financial instruments under US GAAP. The three levels of the fair value hierarchy 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).
ELDORADO GOLD 2010 Annual Report
85
Notes to the Consolidated Financial Statements
December 31, 2010 and 2009
(Expressed in thousands of U.S. dollars, unless otherwise stated)
21. Financial instruments (continued)
Assets and liabilities measured at fair value on a recurring basis as at December 31, 2010 include:
Financial Assets
Held for trading
Cash and cash equivalents
Restricted cash
Marketable securities
Restricted asset and other
Available for sale
Marketable securities
Balance at
December 31,
2010
$
Quoted Prices
in Active
Markets for
Identical Assets
$
(Level 1)
Other
Observable
Inputs
$
(Level 2)
Unobservable
inputs
$
(Level 3)
314,344
52,425
-
19,328
314,344
52,425
-
19,328
8,027
7,871
-
-
-
-
-
-
-
-
-
156
The table below sets forth a summary of changes in the fair value of the Company’s Level 3 financial
assets and liabilities for the year ended December 31, 2010.
Assets
Beginning balance
Total gains or losses (realized/unrealized)
Included in earnings (or changes in net assets)
Included in other comprehensive income
Purchases, issuances and settlements
Transfers in and/or out of Level 3
Ending Balance
c)
Financial risk management
Marketable Securities
Held-for-
trading
$
Available-for-
sale
$
Total
$
174
-
-
(174)
-
-
344
518
-
-
-
(188)
-
-
(174)
(188)
156
156
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
and environmental guarantee deposit. Eldorado deposits its cash and cash equivalents, including
restricted cash, with high credit quality financial institutions as determined by rating agencies. As at
December 31, 2010, approximately 44% of the Company’s cash and cash equivalents, including
restricted cash, are held with one financial institution. The Company considers this to be its only
significant credit risk exposure.
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Notes to the Consolidated Financial Statements
December 31, 2010 and 2009
(Expressed in thousands of U.S. dollars, unless otherwise stated)
21. Financial instruments (continued)
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, 2010.
Foreign exchange 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
and long-term debt are denominated in several currencies (mainly Canadian dollars, Turkish liras,
Chinese renminbi and Brazilian real) which are subject to fluctuation against the US dollar.
As a result of the Company’s acquisitions, Eldorado has recorded $424,239 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, 2010:
Cash and cash equivalents
Marketable securities
Accounts receivable and other
Future income tax receivable
Accounts payable and accrued
liabilities
Loan
Future income tax liabilities
Canadian
dollar
24,587
7,984
2,078
-
Australian
dollars
134
-
-
-
Euro
102
-
516
-
Turkish
lira
1,386
-
16,837
659
Chinese
renminbi
536,644
-
137,174
1,192
Brazilian
real
1,269
-
10,898
-
(13,682)
-
-
(13)
-
-
(124)
-
(26,334)
(36,940)
-
(16,851)
(567,629)
(1,103,790)
(2,211,552)
(6,548)
-
(85,188)
Net balance
Equivalent in US dollars
20,967
$ 21,081
121
$125
(25,840)
(34,909)
(3,207,961)
(79,569)
$(34,601) $(22,581) $ (484,373) $(47,755)
Based on the balances as at December 31, 2010, a 1% increase/decrease in the exchange rates on
that date would have resulted in a decrease/ increase of approximately $5,681 in earnings before
income taxes. 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. We have elected not to actively manage our exposure to
currency risk at this time.
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 exposed to
interest rate risk as it is subject to floating interest rates. As at December 31, 2010 the average interest
ELDORADO GOLD 2010 Annual Report
87
Notes to the Consolidated Financial Statements
December 31, 2010 and 2009
(Expressed in thousands of U.S. dollars, unless otherwise stated)
21. Financial instruments (continued)
rate in Eldorado’s debt was 5.94%. A 1% increase or decrease in the interest rate on debt held at
December 31, 2010 would result in a $48 decrease or increase in the Company’s after-tax net
earnings.
The approximate average interest rate earned by the Company in 2010 on its cash and cash
equivalents was 0.51% (2009 – 0.83%). A 1% increase or decrease in the interest earned from
financial institutions on deposits and money market investments held at December 31, 2010 would
result in a $28 increase or decrease in the Company’s after-tax net earnings.
We have elected not to actively manage our exposure to interest rate risk at this time.
Metal price risk and other price risk
Eldorado is subject to price risk for fluctuations in the market price of gold and iron ore. Gold and iron
ore 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 and iron ore production levels also affect their prices, and the prices of these metals
are occasionally subject to rapid short-term changes due to speculative activities. We have elected not
to actively manage our exposure to metal 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 and iron ore.
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. Contractual maturities relating to debt are included in note 12.
22. Segmented information
During the year ended December 31, 2010, Eldorado had five reporting segments. The Brazil reporting
segment includes the development activities of Vila Nova, Tocantinzinho and exploration activities in Brazil.
The Turkey reporting segment includes the operations of the Kis¸ladag˘ mine, development activities of the
Efemçukuru development project and exploration activities in Turkey. The China reporting segment
includes the operations of the Tanjianshan mine, Jinfeng mine, White Mountain mine, the Eastern Dragon
development project and exploration activities in China. The Greece reporting segment includes
development activities on the Perama Hill development project. The Other reporting segment includes the
operations of the Company’s corporate office and exploration activities in other countries.
88
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Notes to the Consolidated Financial Statements
December 31, 2010 and 2009
(Expressed in thousands of U.S. dollars, unless otherwise stated)
22. Segmented information (continued)
Interest and other income for the year 2010 of $1,173 (2009 – $981) pertaining to the center of domicile
are reflected in the “Other” segment of operations.
Turkey
$
China
$
Brazil
$
Greece
$
Other
$
Total
$
2010
Net mining interests
Producing properties
Properties under development
Iron ore property
Other mining interests
Goodwill
Net mining interests
Producing properties
Properties under development
Iron ore property
Other mining interests
Goodwill
Operations
Revenue
Gold sales
Iron ore sales
Expenses except the undernoted
Depletion, depreciation and amortization
Exploration
Mine standby costs
Interest and other (income) expense
Gain on disposal of assets
Income (loss) before tax
Income tax expense
Non-controlling interest
Net income (loss)
246,039 1,161,968
170,555
-
11,580
- 1,408,007
-
- 1,318,491
754,754 181,406 211,776
46,760
-
46,760
-
20,464
- 3,489
245
-
5,150
-
428,174 1,921,872 228,411 211,776 3,489 2,793,722
-
365,928
-
-
-
365,928
Turkey
$
China
$
Brazil
$
Greece
$
Canada
$
Total
$
2009
196,066 1,261,367
715,782
96,275
-
7,214
- 47,212
29,405 15,544
-
-
- 209,408
-
-
-
-
-
2,543
1,457,433
1,021,465
47,212
54,706
299,555 2,006,554 62,756 209,408
2,543
2,580,816
-
324,935
-
-
-
324,935
Turkey
$
China
$
Brazil
$
Greece
$
Other
$
Total
$
2010
339,151 443,699
-
-
-
8,325
-
-
- 782,850
8,325
-
339,151 443,699
102,498 212,638
89,938
3,464
-
(1,887)
(384)
14,419
13,181
-
(10,271)
-
-
8,325
- 791,175
7,952 (2,274) 39,293 360,107
1,403 106,791
1,031
23,181
3,473
3,063
1,335
-
1,335
(12,937)
(771)
(8)
(592)
(2)
(206)
-
-
-
-
-
219,324 139,930 (4,842) 2,274 (43,396) 313,290
(89,770)
(45,790)
(17,457)
-
(43,708)
(17,457)
(272)
-
-
-
-
-
173,534
78,765 (4,842) 2,274 (43,668) 206,063
ELDORADO GOLD 2010 Annual Report
89
Notes to the Consolidated Financial Statements
December 31, 2010 and 2009
(Expressed in thousands of U.S. dollars, unless otherwise stated)
22. Segmented information (continued)
Operations
Revenue
Gold sales
Expenses except the undernoted
Depletion, depreciation and amortization
Exploration
Mine standby costs
Interest and other income
Loss (gain) on disposal of assets
Income (loss) before tax
Income tax (expense) recovery
Non-controlling interest
Net income (loss)
Turkey
$
China
$
Brazil
$
Greece
$
Other
$
Total
$
2009
233,133 125,334
233,133 125,334
68,643
25,665
1,001
-
(278)
501
71,902
12,015
6,074
-
(999)
-
-
-
169
73
2,284
2,580
(2)
-
-
-
519
-
-
-
-
-
- 358,467
- 358,467
20,221 161,454
38,658
11,970
2,580
(2,262)
(854)
905
2,611
-
(983)
(1,355)
144,141
(29,752)
-
29,802 (5,104)
-
(12,362)
-
(2,627)
(519)
(96)
-
(21,399) 146,921
(41,890)
(2,627)
320
-
114,389
14,813 (5,104)
(615)
(21,079) 102,404
23. 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:
Statement of operations
Net earnings reported under Canadian GAAP
Add (deduct) items subject to US GAAP
Exploration costs (a)
Capitalized interest expense (e)
Depreciation on capitalized interest (e)
Bonus cash award units (f)
Depreciation related to start-up period (b)
Loss on fair value of warrants issued on acquisition of Brazauro (i)
Transaction costs on Sino Gold acquisition (j)
Sino Gold step acquisition gains (j)
Depreciation related to recording 100% of fair value of Sino Gold assets (j)
Foreign exchange loss on future income taxes increment relating to Sino (j)
Future income taxes (c)
Non-controlling interest (h)
Net earnings under US GAAP attributable to the Company
Attributable to non-controlling interest
Attributable to common shareholders
Other comprehensive income (loss) for the year under Canadian GAAP
Add (deduct) items subject to US GAAP:
Pension plans (net of tax) (g)
Comprehensive income under US GAAP attributable to the Company
Attributable to non-controlling interest
Attributable to common shareholders
Basic and diluted earnings per share - US GAAP
90
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2010
$
2009
$
206,063
102,404
(8,814)
-
(402)
-
125
(81)
(408)
-
(4,898)
(1,464)
(5)
17,457
207,573
12,559
195,014
(1,229)
(1,805)
191,980
-
191,980
0.36
(7,768)
228
(418)
198
225
-
(23,602)
110,644
(304)
-
343
2,627
184,577
2,323
182,254
8,198
(1,916)
188,536
-
188,536
0.47
Notes to the Consolidated Financial Statements
December 31, 2010 and 2009
(Expressed in thousands of U.S. dollars, unless otherwise stated)
23. Differences between Canadian and United States GAAP (continued)
Accumulated other comprehensive income (loss)
Balance under Canadian GAAP
Pension plans (net of tax) (g)
Balance under US GAAP
Assets
Total assets reported under Canadian GAAP
Exploration costs (a)
Future income taxes (c)
Pension plan (g)
Depreciation related to start-up period (b)
Capitalized interest expense – net (e)
Adjust non-controlling interest to fair value on Sino Gold acquisition (j)
Goodwill adjustments related to Sino Gold acquisition (j)
Deferred financing costs (k)
Total assets under US GAAP
Liabilities
Total liabilities reported under Canadian GAAP
Financial liability of warrants issued on acquisition of Brazauro (i)
Future income taxes related to Sino Gold acquisition (j)
Foreign exchange loss on future income taxes increment relating to Sino (j)
Pension plans (g)
Deferred financing costs (k)
Total liabilities under US GAAP
Shareholders’ equity
Shareholders’ equity reported under Canadian GAAP
Cumulative adjustments to shareholders’ equity:
Exploration costs (a)
Future income taxes (c)
Depreciation related to start-up period (b)
Accumulated other comprehensive income - pension plans (g)
Financial liability of warrants issued on acquisition of Brazauro (i)
Transaction costs on Sino Gold acquisition (j)
Sino Gold step acquisition gains (j)
Share capital (j)
Adjust non-controlling interest to fair value on Sino Gold acquisition (j)
Foreign exchange loss on future income taxes increment relating to Sino (j)
Interest expense capitalized – net (e)
Shareholders’ equity under US GAAP attributable to Company
Non-controlling interest (h)
Total shareholders’ equity
2010
$
998
(6,457)
(5,459)
2009
$
2,227
(4,652)
(2,425)
2010
$
2009
$
3,779,909
(46,714)
4,879
-
(876)
3,733
165,039
530,232
1,406
3,436,108
(37,900)
4,884
(113)
(1,001)
4,135
182,247
533,411
1,743
4,437,608
4,123,514
776,654
431
41,259
1,464
6,457
1,406
769,354
-
45,562
-
4,539
1,743
827,671
821,198
2,967,234
2,640,610
(46,714)
6,512
(876)
(6,457)
(431)
(24,010)
110,644
400,706
165,039
(1,464)
3,733
3,573,916
36,021
(37,900)
4,985
(1,001)
(4,652)
-
(23,602)
110,644
400,706
182,247
-
4,135
3,276,162
26,144
3,609,937
3,302,316
ELDORADO GOLD 2010 Annual Report
91
Notes to the Consolidated Financial Statements
December 31, 2010 and 2009
(Expressed in thousands of U.S. dollars, unless otherwise stated)
23. Differences between Canadian and United States GAAP (continued)
Cash flows (used in) generated from:
Operating activities under Canadian GAAP
Exploration costs (a)
Transaction costs on Sino Gold acquisition (j)
Capitalized interest expense (e)
Operating activities under US GAAP (l)
Investing activities under Canadian GAAP
Exploration costs (a)
Transaction costs on Sino Gold acquisition (j)
Capitalized interest expense (e)
Investing activities under US GAAP
Financing activities under Canadian and US GAAP
Net increase (decrease) in cash and cash equivalents for Canadian and US
purposes
Cash and cash equivalents – beginning of year
Cash and cash equivalents – end of year
2010
$
2009
$
292,075
(8,814)
(408)
-
282,853
(221,192)
8,814
408
-
(211,970)
(21,908)
192,042
(7,768)
(23,602)
228
160,900
(13,576)
7,768
23,602
(228)
17,566
25,052
48,975
265,369
314,344
203,518
61,851
265,369
A description of US GAAP that results in differences from Canadian GAAP is as follows:
(a) Exploration costs
Exploration costs are accounted for in accordance with Canadian GAAP as disclosed in note 2(j). 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.
A difference in classification on the cash flow also arises as expenditures associated with capitalized
exploration costs under Canadian GAAP are treated as an investing activity whereas under US GAAP,
such exploration costs are expensed and shown in the operating section of the cash flow statement.
(b) 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.
(c) Future income taxes
Under US GAAP, the Company would record an decrease of $5 (2009 – increase of $343) in future income
tax recovery related to the reconciliation items described under items (a), (b), (e) and (i) of this note.
(d) Tax uncertainties
US GAAP requires that the tax effect(s) of a tax 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-
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Notes to the Consolidated Financial Statements
December 31, 2010 and 2009
(Expressed in thousands of U.S. dollars, unless otherwise stated)
23. Differences between Canadian and United States GAAP (continued)
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.
As a result of this adoption, the Company did not recognize any further increases or decreases in the
liability for unrecognized tax benefits from that recorded under Canadian GAAP. 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
Additions on acquisition of Sino Gold
Balance at December 31,
2010
$
11,110
276
-
443
(2,857)
-
2009
$
6,930
87
(266)
1,059
-
3,300
8,972
11,110
As at December 31, 2010, the Company had $8,972 unrecognized tax benefits (2009 – $11,110). If
recognized, none of the unrecognized tax benefit would materially 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, 2010 and 2009, the Company recognized
approximately $nil and $209 in interest and penalties, respectively. The Company had approximately
$209 and $209 accrual for paying interest and penalties at December 31, 2010 and 2009, respectively.
The Company is subject to taxes in Canada, Brazil, China, Turkey and Australia. The tax years that
remain subject to examination as of December 31, 2010 for these jurisdictions are:
Canada
Brazil
China
Turkey
Australia
2001 to the present
2006 to the present
2008 to the present
2006 to the present
2001 – 2002 and 2007 to the present
(e)
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.
ELDORADO GOLD 2010 Annual Report
93
Notes to the Consolidated Financial Statements
December 31, 2010 and 2009
(Expressed in thousands of U.S. dollars, unless otherwise stated)
23. Differences between Canadian and United States GAAP (continued)
(f) 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. US GAAP 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.
(g) Pension plans
For US GAAP purposes, the Company is required to report the overfunded net asset or underfunded
net liability of its defined benefit pension plans on its consolidated 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 14.
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:
Funded status as at December 31,
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)
Funded status
2010
Pension Plan
$
SERP
$
2009
Pension Plan
$
SERP
$
1,339
1,660
-
11,872
1,137
1,263
-
7,652
(321)
(11,872)
(126)
(7,652)
2010
Pension Plan
$
SERP
$
2009
Pension Plan
$
SERP
$
-
-
321
(321)
-
-
11,872
(11,872)
-
-
126
(126)
-
-
7,652
(7,652)
2010
Pension Plan
$
60
166
226
SERP
$
4,426
1,805
6,231
2009
Pension Plan
$
17
222
239
SERP
$
1,995
2,418
4,413
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Notes to the Consolidated Financial Statements
December 31, 2010 and 2009
(Expressed in thousands of U.S. dollars, unless otherwise stated)
23. Differences between Canadian and United States GAAP (continued)
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, 2010
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
2010
$
2009
$
13,532
12,193
1,339
8,915
7,778
1,137
The Company has $7,872 in an investment account to fund its SERP obligation. This amount is
included in restricted assets and other (note 9).
The estimated amounts that will be amortized from accumulated other comprehensive income into net
periodic benefit cost in 2011 are as follows:
Net actuarial loss (gain)
Past service cost (credit)
Total
Pension plan asset information
i. Investment objective and strategies
Pension Plan
$
-
82
82
SERP
$
871
898
1,769
The investment objectives are to satisfy the plans’ financial liabilities, and to achieve the highest long-
term investment return that can be obtained within a below average degree of risk.
Target asset allocations for aggregate of the plans’ assets, which were established in 2010, are 40%
public equity investments and 60% fixed income investments. For tax efficiency, the registered plan
assets are invested in fixed income securities.
The investment objectives for the plan assets have been reviewed with regard to the risk tolerance of
the Company and characteristics of the plans, and their financial condition.
All assets are externally managed and invested in actively managed pooled funds. Managers are not
permitted to invest outside of the asset classes outlined in the written agreements. Investment policies
are established to ensure investment managers invest solely within the investment context they have
been retained.
Derivatives are permitted investments as efficient substitutes for traditional securities and to manage
exposure to risks, in accordance with the investment policies of the investment manager’s pooled
funds.
ii. Significant concentration of risk
Significant concentration of risk in the plans’ assets relate to equity, interest rate, and operating risk. In
order to increase investment return to satisfy contribution requirements, a portion of plans assets is
allocated to equity investments that are expected to earn higher returns with more volatility than fixed
ELDORADO GOLD 2010 Annual Report
95
Notes to the Consolidated Financial Statements
December 31, 2010 and 2009
(Expressed in thousands of U.S. dollars, unless otherwise stated)
23. Differences between Canadian and United States GAAP (continued)
income investments over time. Within equities, risk is mitigated by constructing a portfolio that is
broadly diversified by geography, industry and market capitalization.
In order to reduce asset volatility relative to the liabilities, a higher portion of the plans’ assets is
allocated to fixed income investments that are exposed to interest rate risk. Rate increases generally
will result in decline in fixed income assets while reducing the present value of liabilities.
Operating risks include the risks of inadequate diversification and weak controls. To mitigate these
risks, the external fund manager’s investments are diversified across and within asset classes in
support of investment objectives. Policies to address operating risks include ongoing manager
oversight, investment guideline, and periodic compliance reviews to ensure adherence.
iii. Expected long-term rate of return on assets.
The long-term return assumption at year-end 2010 is 6.5% for the plans and was developed based
primarily inputs from advisors for long-term capital market returns, inflation, bond yields and other
variables, adjusted for specific aspects for our investment strategy. Historical returns were considered
where appropriate.
At December 31, 2010, actual one-year annual rate of return on pension plan assets was 6.5% (2009 –
6.8%) for the registered plan and 8.0% (2009 – 15.4%) for the supplemental retirement plan.
Fair value of plan assets
The fair value of our pension benefits plan assets at December 31, 2010 by asset category is as
follows:
Pension Plan
Fixed Income
Canadian Government
US Government
Corporate Bonds (a)
Investment Grade
High Yield
Cash and Cash Equivalents (b)
Balance at
December 31,
2010
Level 1
Level 2
Level 3
$
$
752
77
441
14
1,284
55
1,339
752
77
441
14
1,284
55
1,339
$
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
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Notes to the Consolidated Financial Statements
December 31, 2010 and 2009
(Expressed in thousands of U.S. dollars, unless otherwise stated)
23. Differences between Canadian and United States GAAP (continued)
SERP
Equity
Canadian Companies
U.S. Companies
International Companies
Fixed Income
Canadian Government
US Government
Corporate Bonds (a)
Investment Grade
High Yield
Cash and Cash Equivalents (b)
Balance at
December 31,
2010
Level 1
Level 2
Level 3
$
$
$
$
1,610
979
948
3,537
2,355
240
1,383
42
4,020
315
7,872
1,610
979
948
3,537
2,355
240
1,383
42
4,020
315
7,872
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(a)
“Investment Grade” bonds are those rated Baa3/BBB or higher by at least two rating agencies;
“High Yield” bonds are those rated below investment grade.
(b) Primarily short-term investment funds to provide liquidity to plan investment managers.
The three levels of the fair value hierarchy 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).
(h) Non-controlling interest
For US GAAP purposes, non controlling interest, previously referred to as minority interest, should be
reported as part of equity in the consolidated financial statements; losses should 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; changes in ownership interests should be treated as equity
transactions if control is maintained and, upon a loss of control, any gain or loss on the interest
disposed of should be recognized in earnings.
(i)
Fair value of warrants
Under Canadian GAAP, share purchase warrants are accounted for as equity and recorded at their
historical cost. For US GAAP purposes, Eldorado’s share purchase warrants issued as part of the
Brazauro acquisition, which are priced in Canadian dollars, must be classified as liabilities at their fair
ELDORADO GOLD 2010 Annual Report
97
Notes to the Consolidated Financial Statements
December 31, 2010 and 2009
(Expressed in thousands of U.S. dollars, unless otherwise stated)
23. Differences between Canadian and United States GAAP (continued)
value with any resulting gains or losses being included in the calculation of US GAAP earnings. In
these circumstances, a loss (gain) would be recorded by the Company when the fair value of the share
purchase warrants increases (decreases).
(j) Business combination
The Company has accounted for the 2009 acquisition of Sino Gold in accordance with Section 1581 of
the CICA Handbook as disclosed in note 4(a). For US GAAP purposes, the Company adopted ASC805
(SFAS No. 141R – Business Combinations). The effect of adopting the new requirements is outlined
below with respect to the Sino Gold acquisition. Adoption of the new requirements in 2009 had no
effect on prior year numbers.
The following provides an analysis of the significant accounting and disclosure differences between
Section 1581 and ASC 805 on the Sino Gold acquisition (refer to note 4(a)):
i.
Purchase price allocation
The allocation of the purchase price of the shares of Sino Gold based on final estimates is
summarized as follows:
Final purchase price
131,772,777 common shares of Eldorado issued as CDIs
4,057,762 common shares of Eldorado issued to GFA
Fair value of the Sino Gold shares originally acquired in July 2009
Fair value of net assets acquired based on final allocation:
Cash
Restricted cash
Accounts receivable and other
Inventory
Mining interests and property, plant and equipment, including value beyond proven
and probable reserves
Goodwill
Accounts payable and accrued liabilities
Asset retirement obligations
Debt
Future income taxes
Non-controlling interests
ii. Acquisition consideration and costs
US GAAP
$
1,786,842
55,026
373,937
2,215,805
$
77,781
50,000
21,171
38,791
1,970,948
893,922
(74,737)
(19,249)
(191,121)
(362,279)
(189,422)
2,215,805
Under existing Canadian GAAP, the value of shares issued in a business combination is determined
based on the announcement date. Under US GAAP the value of shares issued in a business
combination is determined based on the fair value of the shares at the date of closing. The effect of
this difference is to increase share capital by $400,706 and increase goodwill by a similar amount.
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Notes to the Consolidated Financial Statements
December 31, 2010 and 2009
(Expressed in thousands of U.S. dollars, unless otherwise stated)
23. Differences between Canadian and United States GAAP (continued)
Under Canadian GAAP, step acquisitions are accounted for at original cost subject to equity
accounting adjustments. Under US GAAP, acquisitions of equity interests prior to acquisition of
control are included in the business combination accounting at fair value at the date of acquisition
with any gain or loss being included within the determination of net income. Under US GAAP, net
income and goodwill would be higher by $110,644 in 2009.
Under Canadian GAAP, non-controlling interests are carried at the pro-rata value of the underlying
assets and liabilities based on carrying values. Under US GAAP, non-controlling interests at the
date of the business combination are recorded at fair value.
Under Canadian GAAP, transaction costs are included as a cost of an acquisition. Under
US GAAP, transaction costs, including restructuring costs, are expensed in the statement of
earnings. Under US GAAP, expenses would increase and goodwill arising on the business
combination would be $24,010 lower.
iii. Goodwill
The $893,922 of goodwill resulting from the acquisition is currently assigned to the China operating
segment. The goodwill recognized is attributable primarily to the exposure to sustained increases
in gold prices, over the long term price expectations used in the Company’s fair value estimates
and other factors. None of the goodwill is expected to be deductible for income tax purposes.
iv. Deferred tax liabilities
The deferred tax liabilities of $362,279 recognized upon acquisition under US GAAP are related
primarily to the difference between the book basis and fair value of identifiable tangible assets.
v.
Pro forma information
The following supplemental pro forma information presents the financial results as if the acquisition
of Sino Gold had occurred January 1, 2009 for the year ended December 31, 2009. This
supplemental pro forma information has been prepared for comparative purposes and does not
purport to be indicative of what would have occurred had the acquisition of Sino Gold been
completed on January 1, 2009, nor are they indicative of any future results.
Pro forma consolidated results, in thousands except per share date:
Revenue – gold sales
Net income
Basic net (loss) income per shares
Diluted net (loss) income per share
Year ended
2009
$
529,387
(63,327)
(0.12)
(0.12)
These amounts have been calculated after applying the Company’s accounting policies and
adjusting the results of Sino Gold to reflect the additional depreciation and amortization that would
have been charged assuming the fair value adjustments to property, plant and equipment and
mineral interests, had been applied on January 1, 2009, as applicable, together with the
consequential tax effects.
ELDORADO GOLD 2010 Annual Report
99
Notes to the Consolidated Financial Statements
December 31, 2010 and 2009
(Expressed in thousands of U.S. dollars, unless otherwise stated)
23. Differences between Canadian and United States GAAP (continued)
(k) Deferred financing costs
Deferred financing costs represent legal, other professional and bank underwriting fees incurred in
connection with the issuance of debt. Under Canadian GAAP, unamortized deferred financing costs are
included as an offset to debt in liabilities. Under US GAAP such costs are included in assets as a deferred
asset. Such fees are amortized over the life of the related debt using the interest method. Amortization of
deferred financing costs is included in interest expense, net.
(l)
Presentation of statement of cash flows
Under Canadian GAAP, the presentation of the statement of cash flows includes a subtotal in the operating
activities section that is not allowed under US GAAP.
(m) Adoption of new United States accounting pronouncements
i.
Fair value accounting
In January 2010, ASC guidance for fair value measurements and disclosure was updated to
require additional disclosures related to transfers in and out of level 1 and 2 fair value
measurements. The guidance was amended to clarify the level of disaggregation required for
assets and liabilities and the disclosures required for inputs and valuation techniques used to
measure the fair value of assets and liabilities that fall in either level 2 or level 3. The updated
guidance was effective for the Company’s fiscal year beginning January 1, 2010. The adoption
had no impact on the Company’s consolidated balance sheets, statement of operations or cash
flows. Refer to note 21 for further details regarding the Company’s assets and liabilities measured
at fair value.
(n) Recently issued accounting pronouncements
i.
Business combinations
In December 2010, the ASC guidance for business combinations was updated to clarify existing
guidance which requires a public entity to disclose pro forma revenue and earnings of the
combined entity as though the business combination(s) that occurred during the current year had
occurred as of the beginning of the comparable prior annual period only. The update also expands
the supplemental pro forma disclosures required to include a description of the nature and amount
of material, nonrecurring pro forma adjustments directly attributable to the business combination
included in the reported pro forma revenue and earnings. The updated guidance is effective for
the Company’s fiscal year beginning January 1, 2011. The Company is evaluating the potential
impact of adopting this guidance on the Company’s consolidated financial statements.
ii.
Fair value accounting
In January 2010, the ASC guidance for fair value measurements and disclosure was updated to
require enhanced detail in the level 3 reconciliation. The updated guidance is effective for the
Company’s fiscal year beginning January 1, 2011. The Company expects minimal impact from
adopting this guidance.
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Corporate Information
DIRECTORS
Robert R. Gilmore (1) (2)
Denver, CO, USA
Non-executive Chairman of the Board
(Independent Director)
John S. Auston (2) (4)
West Vancouver, BC, Canada
(Independent Director)
K. Ross Cory (1) (3)
Vancouver, BC, Canada
(Independent Director)
Geoffrey Handley (2) (4)
Dover Heights, NSW, Australia
(Independent Director)
Wayne D. Lenton (2) (4)
Tucson, AZ, USA
(Independent Director)
Jonathan A. Rubenstein (1) (3)
Vancouver, BC, Canada
(Independent Director)
Donald Shumka (1) (3)
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
(4) Environmental, Health & Safety
Committee
OFFICERS
Paul N. Wright
President & Chief Executive Officer
Ed Miu
Chief Financial Officer
Norman S. Pitcher
Chief Operating Officer
Dawn L. Moss
VP, Administration and Corporate Secretary
SENIOR MANAGEMENT
Dale L. Churcher
VP, Engineering
Mark LeMessurier
VP, China Operations
Peter D. Lewis
VP, Exploration
Eduardo E. Moura
VP, Corporate Development
Paul J. Skayman
Senior VP, Operations
Nancy E. Woo
VP, Investor Relations
Brazil Operations
Lincoln Silva
General Manager and Director
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 (cid:6)irketi
China Operations
Richard (Shilin) Li
Managing Director, China
Greece Operations
George Markopoulos
General Manager and Director
Thracean Gold Mining SA
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: 55-31-2101-3750
Fax: 55-31-2101-3758
China
Eldorado Gold Corporation
Room 1001, West Tower,
LG Twin Towers
B-12 Jianguomenwai Avenue,
Chaoyang District,
Beijing, China 100022
Tel: 86-10-5828-7966
Fax: 86-10-5828-7967
Turkey
Tüprag Metal Madencilik Sanayi ve
Ticaret A.S.
Iran Caddesi
Turan Emeksiz Sok. No. 1
06700 Gaziosmanpasa / Ankara
Turkey
Tel: 90-312-468-4536
Fax: 90-312-468-2646
Greece
Thracean Gold Mining SA
27, Omirou Street
Athens, Greece, 10672
Tel: 30-210-3633930
Fax: 30-210-3633383
LEGAL COUNSEL
Fasken Martineau DuMoulin LLP
Vancouver, BC, Canada
Dorsey & Whitney LLP
Denver, CO, USA
AUDITORS
KPMG LLP
Chartered Accountants
Vancouver, BC, Canada
ELDORADO GOLD 2010 Annual Report
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3/24/2011 11:54:09 AM
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
Email: inquiries@valianttrust.com
In Australia:
Link Market Services Limited
Locked Bag A14
Sydney South NSW 1235
Phone: 1 300 554 474 or (02) 8280 7111
International: +61 2 8280 7111
Fax: (02) 9287 0303
Email: registrars@linkmarketservices.com.au
Stock Exchanges
The Toronto Stock Exchange
Stock Symbol: ELD
The New York Stock Exchange
Stock Symbol: EGO
Australian Securities Exchange
Stock Symbol: EAU
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), the US Securities and Exchange Commission EDGAR
website (www.edgar-online.com) and the Australian Securities Exchange website (www.asx.com.au).
Website Address:
www.eldoradogold.com
Investor Relations Email:
info@eldoradogold.com
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NOTICE TO READERS
(the “Notice”)
This Notice accompanies, and should be read in conjunction with, the 2010 Annual
Report for Eldorado Gold Corporation (the “Annual Report”). The following excerpt was
inadvertently omitted from the Annual Report, but was included as an insert to all
securityholders of the Company in our April 7, 2011 mailing of the Annual Report and
Management Proxy Circular.
NOTICE TO ALL SECURITYHOLDERS
Section 303A.11 of the NYSE Listed Company Manual permits foreign private issuers to
follow home country practices in lieu of certain provisions of the NYSE Listed Company
Manual. A foreign private issuer that follows home country practices in lieu of certain
provision of the NYSE Listed Company Manual must disclose any significant ways in
which its corporate governance practices differ from those followed by domestic
companies. A description of the significant ways in which the Company’s governance
practices differ from those followed by domestic companies pursuant to the NYSE
Listed Company Manual
the Company's website at
www.eldoradogold.com.
is available on
Cautionary Notes
Cautionary Note about Forward-Looking Statements and Information
Certain statements and information in this Annual Report, including all statements that are not historical facts, are 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, cash costs, and
future growth, 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 Annual Report, we have made numerous assumptions including
among other things, assumptions about the price of gold and other commodities; exchange rates; anticipated costs and expenditures; estimated
production, mineral reserves and metallurgical recoveries; the impact of the integration of acquired businesses on our operation, financial position,
reserves and resources and gold production; and the 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; risks of not meeting production
and cost targets; discrepancies between actual and estimated production, mineral reserves and resources and metallurgical recoveries; mining
operational and development risk; litigation risks; regulatory restrictions, including environmental regulatory restrictions and liability; risks of sovereign
investment and operating in foreign countries; currency fluctuations; speculative nature of gold exploration; global economic climate; dilution; share
price volatility; risks related to the integration of acquired businesses; ability to complete acquisitions; competition; the speculative nature of gold
exploration; ability to obtain financing; environmental risks; share price volatility; 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 Annual Report except
as may be required by law. All forward-looking statements and information made in this document are qualified by this cautionary statement.
Cautionary Note about Production Outlook, Guidance and Estimates
Readers are cautioned that production outlook, guidance and estimates are subject to a variety of factors that are likely to cause actual results to
vary from our estimates, and such variations may be material. Forward-looking information generally involves risks and uncertainties as described
above which are, in many instances, beyond our control, including: (i) global economic conditions; (ii) pricing and cost factors; (iii) unanticipated
events or changes in current development plans, execution of development plans, future operating results, financial conditions or business over
time; and (iv) unfavourable regulatory developments, that could cause actual events and results to vary significantly from those included in or
contemplated by such statements. The production outlook, guidance and estimates reflect certain assumptions by us, which assumptions may differ
with respect to future events, economic, competitive and regulatory conditions, financial market conditions and future business decisions, including,
without limitation, a continuation of existing business operations on substantially the same basis as currently exists all of which assumptions are
difficult to predict and many of which are beyond our control. Accordingly, there can be no assurance that the outlook, guidance and estimates
are indicative of our future performance or that actual results would not differ materially from those in the outlook, guidance and estimates.
Cautionary Note to US Investors Concerning Estimates of Measured, Indicated and Inferred Resources
The terms “mineral resource”, “measured mineral resource”, “indicated mineral resource”, “inferred mineral resource” used herein are
Canadian mining terms used 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 and Metallurgy and Petroleum (the “CIM”) Standards on Mineral Resources
and Mineral Reserves, adopted by the CIM Council, as may be amended from time to time. These definitions differ from the definitions in the
United States Securities & Exchange Commission (“SEC”) Industry Guide 7. In the United States, a mineral reserve is defined as a part of
a mineral deposit which could be economically and legally extracted or produced at the time the mineral reserve determination is made.
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 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 herein concerning descriptions of mineralization and resources under
Canadian standards may not be comparable to similar information made public by U.S. companies in SEC filings. With respect to “indicated mineral
resource” and “inferred mineral resource”, there is a great amount of uncertainty as to their existence and a great uncertainty as to their economic and
legal feasibility. It can not be assumed that all or any part of an “indicated mineral resource” or “inferred mineral resource” will ever be upgraded to a
higher category. Accordingly, information herein containing 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.
Eldorado Gold 2010 Annual Report - COVER, front and back.indd 5
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ELDORADO GOLD 2010 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: EGO ASX: EAU
X: EAU
www.eldoradogold.com
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: EGO ASX: EAU
www.eldoradogold.com