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Eldorado Gold Announces Decision to Develop the Vila Nova Iron
Ore Deposit, Brazil
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ELD No. 07-14
VANCOUVER, BC - Paul N. Wright, President and Chief Executive Officer
of Eldorado Gold Corporation ("Eldorado" the "Company" or "we") is
pleased to announce the results of the updated pre-feasibility study
and the economic analysis of the Vila Nova Iron Ore Project (the
"Project") in Amapa State, Brazil.
The initial capital required to construct the project (100% basis) is $
32.7 million including working capital. The Board has approved the
construction of the project, which is scheduled to commence during Q3
2007. Construction time is estimated at 12 months. The Company has
retained an engineering company to complete the detailed engineering
for the project.
Eldorado has renegotiated the terms of its 50-50% JV agreement with DSI
Consult ("DSI"), a Brazilian private company that controls the mineral
rights of Vila Nova. As a result Eldorado now owns 75% of the project
with the balance of 25% owned by DSI. In exchange for its increase in
the ownership of the project Eldorado has agreed to pay US$2.8 million
to DSI and finance up to US$30 million of the pre- production capex of
the project. Above the US$30 million threshold the parties will finance
their respective shares of the projects on a 75-25% basis.
The licensing of the project is at an advanced stage with one license
pending prior to the start of construction. This is a clearing permit,
which the Company expects to receive from SEMA (Environmental Agency of
Amapa State) during Q3 2007.
The update of the pre-feasibility study ("Study") was managed and
prepared by Roberto Costa Engenharia Ltda. of Belo Horizonte, Brazil.
The metallurgical testwork was done at Miguelao Technological Research
Center, which is owned by CVRD. The block model was updated by Eldorado
during Q2 2007 incorporating data from additional drilling. In the
prior 2006 pre-feasibility study conservative 2005 ore prices were used
for the pit optimization. In the update Study Eldorado used 2006 level
prices averaging $54/tonne of finished product FOB Santana Port,
approximately 9.5 percent below 2007 level. There is a market consensus
that ore prices will continue to rise in 2008 and beyond. The market
outlook for the VN products is good and negotiations regarding ore
sales are on-going.
The Study is based on owner operated mining rather than contract mining
which was used in the 2006 study. Furthermore, the Study calls for
truck haul of the ore to the port facilities, however Eldorado is
currently in negotiations for railroad access as a possible
alternative. The ROM ore will be processed at the mine by crushing and
screening and minor gravity separation for a total weight recovery of
88 percent. The finished product is sold as lump ore and sinter fines.
Resources and Reserves for the Vila Nova Iron Ore Project (100% basis)
are presented in Table 1.
Table 1
Tonnes (x1000) Fe%
Mineral Reserves
Proven Reserves ROM 2,285 63.5
Probable Reserves ROM 6,987 60.2
Proven & Probable Reserve ROM 9,272 61.0
Mineral Resources
Measured Resources 2,285 63.5
Indicated Resources 7,679 61.0
Measured & Indicated Resource 9,964 61.6
Inferred Resources 2,022 61.2
Study Economic Analysis (Eldorado's share - 75% Basis)
Life of Mine - 9 years
Initial Capex - US$32.0 million (includes working capital)
Operating Cash Flow - US$153.3 million
IRR - after tax - 41%
Pay back - after tax - 2 � years
NPV - after tax (5% discount) - US$69.1 million
Sensitivity Analysis (Eldorado's share -- 75% Basis)
% Base Case NPV@5% in US$M after tax - Eld's 75% interest
Ore Price Capex Opex
-20% 26.6 75.8 92.7
-10% 47.9 72.5 80.9
Base Case 69.1 69.1 69.1
+10% 90.4 65.8 57.3
+20% 111.6 62.4 45.6
The maximum general corporate tax rate in Brazil is 34%. However, due
to its location the project will enjoy a reduced tax rate of 15.25%,
which is the rate used in the economic analysis described above.
Furthermore, Eldorado has significant tax loss credits from its S�o
Bento operation and we are currently reviewing the availability of
these credits as a way to further reduce the tax burden at Vila Nova
Iron Ore. These tax loss credits have not been used in our economic
analysis. The exchange rate used in the Study was 2.10 (US$1.00 R$2.10).
Paul Wright, President and CEO of Eldorado, commented: "We are pleased
with the results of this study as they support an extremely robust
project, with significant financial upside. Eldorado continues to view
Brazil as an extremely favourable jurisdiction for mining and our
decision to develop the Vila Nova Iron Ore project is consistent with
our long term commitment in Brazil. The company will continue to focus
its exploration and acquisition activities on gold but will
opportunistically remain open to considering and investing in superior
opportunities in other metals and minerals in Brazil. "
Stephen Juras, Ph.D., P.Geo., Manager, Geology is the qualified person
under whose direction the mineral resources were estimated and he has
reviewed the contents of this news release. Roberto R. Costa, an
independent mining engineer and principal of Roberto Costa Engenharia
Ltda., directed the mine engineering and metallurgical testwork of the
Project.
Eldorado is a gold producing and exploration company actively growing
businesses in Brazil, Turkey and China. We operate the S�o Bento Mine,
Kisladag Mine and Tanjianshan Mine. With our international expertise in
mining, finance and project development, together with highly skilled
and dedicated staff, we believe that Eldorado is well positioned to
grow in value as we create and pursue new opportunities.
ON BEHALF OF
ELDORADO GOLD CORPORATION
"Paul N. Wright"
Paul N. Wright
President and Chief Executive Officer
The terms "Mineral Reserve", "Proven Mineral Reserve" and "Probable
Mineral Reserve" used in this release are Canadian mining terms as
defined in accordance with National Instrument 43-101 -- Standards of
Disclosure for Mineral Projects under the guidelines set out in the
Canadian Institute of Mining, Metallurgy and Petroleum (the "CIM")
Standards on Mineral Resources and Mineral Reserves, adopted by the CIM
Council on August 20, 2000 as may be amended from time to time by the
CIM. These definitions differ from the definitions in the United States
Securities & Exchange Commission ("SEC") 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.
The terms "Mineral Resource", "Measured Mineral Resource", "Indicated
Mineral Resource", "Inferred Mineral Resource" used in this release are
Canadian mining terms as defined in accordance with National
Instruction 43-101 -- Standards of Disclosure for Mineral Projects
under the guidelines set out in the CIM Standards. Mineral Resources
which are not Mineral Reserves do not have demonstrated economic
viability.
For a detailed discussion of resource and reserve estimates and related
matters see the Company's reports, including the Annual Information
Form and FORM 40-F dated March 23, 2006 and technical reports filed
under the Company's name at www.sedar.com.
Note to U.S. Investors. 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 in this report 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. Investors are cautioned not to assume
that any part or all of mineral deposits in these categories will ever
be converted into reserves.
Certain of the statements made herein may contain forward-looking
statements or information within the meaning of the United States
Private Securities Litigation Reform Act of 1995, and forward looking
statements or information within the meaning of the Securities Act
(Ontario) . Such forward looking statements or information include, but
are not limited to statements or information with respect to unknown
risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company, or industry
results, to be materially different from any future results,
performance or achievements expressed or implied by such
forward-looking statements. Forward-looking statements or information
are subject to a variety of risks and uncertainties, which could cause
actual events, or results to differ from those reflected in the
forward-looking statements or information. Should one or more of these
risks and uncertainties materialize, or should underlying assumptions
prove incorrect, actual results may vary materially from those
described in forward looking statements. Specific reference is made to
"Forward Looking Statements and Risk Factors" in the Company's Annual
Information Form and Form 40-F dated March 23, 2006. Forward-looking
statements herein include statements regarding the expectations and
beliefs of management. Such factors included, amongst others the
following: gold price volatility; impact of any hedging activities,
including margin limits and margin calls; discrepancies between actual
and estimated production, between actual and estimated reserves, and
between actual and estimated metallurgical recoveries; mining
operational risk; regulatory restrictions, including environmental
regulatory restrictions and liability; risks of sovereign investment;
speculative nature of gold exploration; dilution; competition; loss of
key employees; additional funding requirements; and defective title to
mineral claims or property, as well as those factors discussed in the
section entitled "Risk Factors" in the Company's Annual Information
Form and Form 40-F dated March 23, 2006. We do not expect to update
forward-looking statements continually as conditions change and you are
referred to the full discussion of the Company's business contained in
the Company's reports filed with the securities regulatory authorities
in Canada and the U.S.
Eldorado Gold Corporation's shares trade on the Toronto Stock Exchange
(TSX: ELD) and the American Stock Exchange (AMEX: EGO). The TSX has
neither approved nor disapproved the form or content of this release.
Contact:
Nancy E. Woo, Manager Investor Relations
Phone: 604.601.6650 or 1.888.353.8166
Fax: 604.687.4026
Email nancyw@eldoradogold.com
Request for information packages: info@eldoradogold.com
Eldorado Gold Corporation
1188, 550 Burrard Street
Vancouver, BC V6C 2B5
Web site: www.eldoradogold.com
http://www.eldoradogold.com/i/pdf/07-14.pdf
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Copyright (c) 2007 ELDORADO GOLD CORP. (ELD) All rights reserved. For
more information visit our website at http://www.eldoradogold.com/ or
send mailto:info@eldoradogold.com
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