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Edited Transcript of ELD.TO earnings conference call or presentation 24-Feb-17 4:30pm GMT

Thomson Reuters StreetEvents

Q4 2016 Eldorado Gold Corp Earnings Call

VANCOUVER Feb 24, 2017 (Thomson StreetEvents) -- Edited Transcript of Eldorado Gold Corp earnings conference call or presentation Friday, February 24, 2017 at 4:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Paul Wright

Eldorado Gold Corporation - President & CEO

* Paul Skayman

Eldorado Gold Corporation - COO

* Fabiana Chubbs

Eldorado Gold Corporation - CFO

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Conference Call Participants

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* Andrew Quail

Goldman Sachs - Analyst

* Steven Butler

JMP Securities - Analyst

* John Bridges

JPMorgan - Analyst

* Dan Rollins

RBC Capital Markets - Analyst

* Kerry Smith

Haywood Securities - Analyst

* Tanya Jakusconek

Scotiabank - Analyst

* Anita Soni

Credit Suisse - Analyst

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Presentation

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Operator [1]

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Good morning. My name is Christine, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Eldorado Gold Corporation 2016 year-end and Q4 financial and operational results call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer session. (Operator instructions) Paul Wright, President and CEO, you may begin your conference.

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Paul Wright, Eldorado Gold Corporation - President & CEO [2]

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Thank you, operator and good morning and welcome to our fourth quarter and year-end 2016 financial and operating results call. I'm here this morning in Vancouver with Paul Skayman, Chief Operating Officer; Fabiana Chubbs, Chief Financial Officer; Krista Muhr, our Vice President of Investor Relations. And I'm soon to be successor of George Burns, whose is also [tones] you will listen to in April. As always, we have provided detailed financial and operational information in the press release from yesterday evening.

Before I begin, I need to remind you that any projections and objectives included in our discussion today are likely to involve risks which are detailed in our 2015 AIF and the forward-looking statement disclaimer at the end of the news release. As always, we will try to make this a brief call, Paul and Fabi will review of the operations and financial results where I want to touch briefly on the strategic objectives we achieved during the year and what we expect in this upcoming year of 2017.

First off, on a safety note, I would like to extend my congratulations to all of our teams as the Company continued in 2016 to improve the overall safety record, with a reduction in lost-time injury frequency rate for the fifth consecutive year. Through a global commitment to leadership, training, identification, management and mitigation of risks being prepared for incidents and learning from them, we are succeeding at making our working places safer.

Onto the year review, 2016 was a transitional year for the Company as we set out with specific targets and goals and I'm happy to say that we delivered. Including the discontinued Chinese operations, we finished the year having produced just over 486,000 ounces of gold at cash costs of $579 per ounce. The all-in sustaining cash cost averaged $900 per ounce, which was considerably lower than the initial 2016 guidance of $940 to $980. Progress continued at our Skouries and Olympias projects in Greece, we continue to advance our development projects in Romania and Brazil, and our exploration team demonstrated success in their early-stage projects with a goal of complementing our internal growth pipeline. The team delivered on the sales of our Chinese assets along and there I say (inaudible) process. With these sales, we ended the year with total liquidity approximately $1.1 billion, which includes $888 million in cash, cash equivalents and term deposits, and $250 million in undrawn lines of credit.

Throughout the year, underground mine development and access rehabilitation continued at Olympias, the team now is putting the finishing touches on Phase II, and is nearly complete as we move forward with the startup of commissioning this quarter. We expect Olympias to be in full production by the third quarter and is expected to produce 40,000 to 50,000 ounces of gold, at cash cost between $250 and $450 an ounce, depending on the base metal credit level. Skouries had a tough start to 2016, when after delays in the permitting process, we decided to move to a temporary suspension on the construction works. We ramp back up with development halfway through the year after the receipt of the necessary permits to recommence. Through the suspension period, we used the opportunity to take a better look at our engineering plans, we've made some significant changes to the mine plan sequencing and are moving forward with the engineering to change to dry stack tailings concept.

These decisions will facilitate early mining of the higher value underground ore and greatly reduced the overall environmental impact on the footprint of the project. We also believe we are making progress with the new Ministry of Energy and Environment, I've said before where I need cooperative and willing Government who chooses to work with us and all of our stakeholders over the long lives of these significant assets. This indeed a little slower process than we would have liked, but it is headed in the right direction.

In Turkey, while there were many news headlines throughout 2016, we experienced no disruptions in our two mines in the country. Late in the year, at Kisladag, we made the decision to maximize near-term and medium-term profitability, and re-engine the 13 million tonne per annum pit rather than deploying additional expansion and significant sustaining capital to move to the 20 million ton per annum scenario. The revised operating plan greatly enhances free cash flow from the operation in near-term and medium term, while maintaining the long-term operating integrity of this assets.

In exploration, throughout the year, we drilled over 50,000 meters of 16 Greenfields, brownfield and in mine programs. The results from the program have well defined our exploration plans for 2017. And Serbia, positive results from the drill testing of Copper Canyon and the Shanac zones led to the 100% acquisition of the KMC project.

In Brazil, we acquired an option covering over 3,000 square kilometers of prospective Greenstone Belts at the Borborema and Nazareno projects and commenced dill testing of several target areas. In Romania, we receive the exploration license for the Bolcana project in the Certej district and we have committed to over 25,000 meters of drilling of Bolcana through which we plan to define the large porphyry system. In addition, we recently reached the first two drill stations in our new hanging wall exploration drift development in Stratoni in Greece. Drilling will commence shortly in our initial three-year program of the exploration and resource definition drilling of the previously untested down dip and along strike extensions of the ore body. Our exploration budget for 2017 has increased to $35 million, and includes plans for over 80,000 meters of drilling.

I strongly believe that Eldorado is now set for the next phase of our Company's growth. We're well positioned to focus on and build our internal pipeline of quality assets. We have the cash balance to internally fund our capital growth plans and we have the right team in place to execute. And just before I turn over to Paul and Fabi, I'd like to take this opportunity to welcome George Burns to the Eldorado team. The official handover of the President, CEO titles is set to occur on our April 27 Annual General Meeting, but George's being in the office for a few weeks now and is fully engaged with all the different areas of the organization and we are gearing up to get on the road to meet many of you in the coming weeks and to spend some time at our operations in the various countries.

I will be moving to the role of Vice Chairman in April and of course, supporting George from that role. That's it for me. Over to Paul.

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Paul Skayman, Eldorado Gold Corporation - COO [3]

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Thanks, Paul. Good morning, everyone. Starting off with Turkey, cases are produced 59,000 ounces of gold, which is under our expectations for the quarter. Overall, though, we managed to produce 211,000 ounces we're just below our annual guidance of 225,000 ounces. Generally, we are not a successful in drawing down the pad inventories we predicted in Q4 last year with the commissioning of the new leach trains, even though we did reduce the inventory somewhat during the quarter. Inventory levels at the end of January as set as approximately 70,000 ounces.

Tons of ore mines and placed on pad were well above the budget with a small amount of run a mine material placed on pad in the last quarter. The year-to-date strip ratio as Kisladag was only 0.92 to 1 which is slightly below our budget of 1 to 1. We ran the year with 16.2 million tons of material mines and 13.1 of that place through the crusher, with the rest being placed on the pad as run of mine material.

I think the key item in the press release is reduction of reserves from Kisladag. I would like to remind people that when we commenced operations in 2006, it was with a reserve of 5.06 million ounces and 135 million tons of ore. At the end of 2016, we've mined 4.2 million ounces and 129 million tons. So in the last 10 years, we've mined 83% of the gold and 96% of the ore. We still have 5.3 million ounces and [278 million] tons, and an expected mine life of 17 years, at this state [8 million] tonne per annum mined plan, we still more in the reserve when we commenced operations. We design the new [13 million] tonne per annum pit to maximize profitability at Kisladag, given the projects that we're working on elsewhere have in our views and significant capital requirements and ensuring that Kisladag continues to provide the required cash flow throughout this project build cycle. To that end, the reserve is increasing grade by around 7%, 0.75 grams per tonne.

The ore body itself is reacted to both gold price, operating costs and technological advances, all of these will potentially play a part in future changes to reserves and we haven't yet sterilize any of the material that was taken out of this reserve in terms of ability to increase the pit size or higher gold prices at some point in the future. I'd like to draw your attention to the fact the resource is virtually unchanged and we have converted much of the probable to proven during 2016. The resource currently stands at 9.45 million ounces from last year's 9.6 million ounces, and reserves are drawn from that resource pool.

In terms of the current phase of mining, we're capable of extracting approximately 100 million tonnes from this ore body without increasing the strip ratio above 1:1, which gives us approximately seven years at current throughput rates. Overall, the strip ratio for the total reserve is around 1.35:1. Sustaining capital over the next four years is expected around $30 million per year. Recovery numbers that we're now using based on the latest metallurgical test work that only became available late in 2016.

When we first completed the feasibility study in 2005, the recoveries were based on oxidation state only and we were using [80%] for oxide and 60% for sulfide. It became obviously work completed from 2010 to 2015, that these recoveries were not high enough, as if (inaudible) with these numbers, the inventory levels in the pad would have been negative. Therefore, we completed a number of calling test, some various alteration types and methodologies and both recoveries down to the individual ore types. During this period, we had an average recovery from sulfide ore of 65%.

As we continue to mine underneath the water table and continue to refine the model, we've identified some bad actors in the ore types and in some cases, have significantly reduced their expected recoveries. This has allowed us to concentrate on the higher recovery materials and not place material that will potentially not be profitable on the pad at all. Overall, though, we're just under the initial feasibility expected sulfide recovery, sorry, just over the initial feasibility expected sulfide, recovery is 61% for sulfide. As we're now below the water table, the amount of oxides left in the ore body is very low, estimated at around 1% of the reserve.

Moving on from Kisladag, Efemcukuru turned an another solid quarter in year with tonnage mined and processed both over budget and the ounce production in line with our initial 2016 guidance of 90,00 to 100,000 ounces of $550 to $600 per ounce. We actually completed the year at 98,634, an average cash cost of $514 and we're looking forward to a similar year in 2017 from the [China National Gold Group]. As you're all aware, we completed the sale of our Chinese operations during the latter part of 2016. So I won't comment on those. On the development side, work continues on the Olympias Phase II construction. Despite a rough January from a weather standpoint, we continue to guide startup of commissioning Q1 2017 and looking forward to getting Olympias into production.

All of the mechanical equipment is now in place, and can place in electrical and part work on certain sections of the plant. At Skouries also, a slow start to 2017 with significant snowfall over the side. Things are starting to improve now, though and works moving forward with earthworks and some sites still work and equipment erection. And at Tocantinzinho, we continue to work through the permit process concentrating on the installation license in Brazil as well as completing basic engineering in Vancouver.

And with that, I'll turn it over to Fabi.

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Fabiana Chubbs, Eldorado Gold Corporation - CFO [4]

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Thank you, Paul. And good morning, everyone. I will go through the financial statements highlighting changes in significant accounts. We ended the year with cash, cash equivalent and term deposit balance of $883 million compared to $288 million at the end of 2015. The increase in cash balance is mainly the result of proceeds from the sale of asset of $793 million and $104 million generated by continued operations before changes in working capital and $298 million usage of cash for capital programs.

During the year, we completed the sale of our Chinese asset for net proceeds of $882 million. This resulted in a decrease of $1.3 billion in property plan and equipment, $50 million decrease in goodwill and $255 million decrease in our total liabilities. On the income statement, the results of the Chinese operation is shown in a single line as discontinued operations included $351 million loss on sale of these assets. Net loss attributable to shareholders of the Company was $344 million or $0.48 per share compared to loss of $1.5 billion or $2.15 per share in 2015.

Excluding the loss on the sale of our Chinese assets and related transaction cost of $364 million and exclude an unrealized losses of $17 million, we reported adjusted net earnings for the year of $47 million or $0.07 per share compared to earnings of $13 million or $0.02 per share in 2015. Gross profit from continued operations for the year of $163 million increased 30% year-over-year as the impact of lower sales volumes were offset by higher gold prices and lower operating costs. Gross profit from discontinued operations for the year was $53 million.

Those are my comments on the financial statements. I would turn the call back to Paul.

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Paul Wright, Eldorado Gold Corporation - President & CEO [5]

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Thank you, Fabiana. Thank you, Paul. Operator, we'll handover for questions now, please.

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Questions and Answers

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Operator [1]

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(Operator instructions) Andrew Quail, Goldman Sachs.

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Andrew Quail, Goldman Sachs - Analyst [2]

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Good morning, Paul and team. Thanks for the update. Just couple of questions on Kisladag, just for the expansion being (inaudible). Can you just sort of walk us through how much that was gold price driven Paul versus as far as capital allocation to other assets like obviously Skouries. But looking at now, I'm on screen it's gold just flowing through [12.50], and you guys probably would've been doing more of this planning at much lower gold prices, if we hold these levels, is this something that mid-year, we could get an update, this expansion is back on the table?

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Paul Wright, Eldorado Gold Corporation - President & CEO [3]

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I don't think [12.50] will cut it, Andrew, to be honest. Look, if you go back in the history of the expansion, the expansion was instead of move to an engineered back in the days of gold price being $1700 an ounce, and when we looked at how the Company was going to go move forward at that point in time and how we were going to finance the projects going forward and which led us to obviously the bond facility and the revolver, actually our downside was $1,500 and because gold went down lower and lower, yes, the expansion still worked. I mean you could at $1,300, but when you took a hard look at the cash flow generating capacity at $1,300 in the short-to-medium term compared to discontinuing where we are. It really was, it was really not a lot of value to be gained associated with putting a significant additional capital of risk.

And in our view, maybe we'll be proven wrong at the end of last year is that we were more or likely to be over the next, call it, two to four years in a relatively depressed gold price environment, relatively speaking and fairly volatile, and although we had and still have obviously an exceptionally strong balance sheet, it was important to us having disposed of the Chinese assets to have the financial security to be able to rebuild the production base off that balance sheet, and to do so, certainly, I feel very strongly as Board, that it was essential that we had the two remaining operations, clearly on-path with season delivering strong cash flow in a price deck that would be, call it somewhere in the $1,100, $1,300 range, and so that was a rationale behind it, which would ensure that we would have in terms of cash flow as well as cash on the balance sheet, sufficient funds to move forward to diversify the production base of the Company over the next couple of years.

So I think personally in my view, gold at $1,200, $1,250 projected for the next three or four years isn't likely to change our views on reactivating the expansion. What would it take. Firstly, I think you're probably taking a view of close to $1,400 in longer-term, before you would sort of say yes, it's worth putting this additional dollars to work. But again, you're going to do that in the context of what are the other alternatives for capital allocation inside the Company. But simply put, expanding to the 20 million tonnes a year of throughput, although it didn't cost a lot in terms of the residual capital, it put us very quickly into a mode of very high sustaining capital.

So we just really weren't generating much in the way of free cash flow, over the next couple years.

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Andrew Quail, Goldman Sachs - Analyst [4]

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Got it. As far as moving on, with some of the opportunities do have internally. Something like TZ, is there -- is there something in your mind that you want to get to, whether it be a bad reserves and resources of that size, and to you guys, obviously you're all economics, but personally, do you think is some sort of size component to actually committing to the project?

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Paul Wright, Eldorado Gold Corporation - President & CEO [5]

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Sorry, I've lost. I mean, size in terms of ounces per annum or.

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Andrew Quail, Goldman Sachs - Analyst [6]

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No. In terms of total ounces before you guys do, I mean it's obviously -- Greenfield project is now much infrastructure. I mean, before you actually really start to commit to the project. Is there a total number of ounces that you have in your head that you want to get to it?

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Paul Wright, Eldorado Gold Corporation - President & CEO [7]

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No, look, I think the project as configured delivering, whether it is around 150,000? Yes, 150,000 to 170,000 ounces is a reasonable size of project. I think as a Company given our overall objectives in terms of size of the Company, we're building the size of mines, we're comfortable operating and that would certainly satisfy the criteria. There's a lot of other considerations, however, to go into whether or not or if we and make that construction decision on TZ.

But it's certainly, I would say the production rate base -- the production rate boxes been already checked on that note.

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Andrew Quail, Goldman Sachs - Analyst [8]

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No, I suppose there is more about the reserve. Oil resources, what is there, if that's the, you've got the right pit, do you want to say 10 years of [Brazil]?

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Paul Wright, Eldorado Gold Corporation - President & CEO [9]

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Yes, look it's bit on the light side right now...

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Paul Skayman, Eldorado Gold Corporation - COO [10]

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Andrew, it's a bit of a chicken and egg situation here. You'd like to have a longer-live mine than what we have right now which is whatever it is a 10-year mine or thereabouts, you'd like to frankly see that closer to 15 years, it make, I think everybody feel more comfortable. But it's -- the reserve the pit -- the host of reserves is drilled-off, and we're in this sort of a situation where, although the district is prospective. There is no immediate targets for us in the near-term to change that reserve. I mean there is nothing out there obviously that we can go out and drill off, which will give us another 0.5 million ounces of reserves. And we have, over the years cut back significantly on exploration, doing exploration in that part of the world is an expensive business due to access, due to infrastructure, due to jungle, all of these things, and it is difficult to understandably motivate our team when they look at how we allocate money to different jurisdictions where we have frankly we can get better bank for a buck elsewhere.

Now, all of that change is, of course, if you actually make a decision to invest in a mine, may be, the access improves, the infrastructure improves, and the cost of doing exploration diminishes and there I say the motivation to find more ore increases,

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Paul Wright, Eldorado Gold Corporation - President & CEO [11]

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Threshold drops and....

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Paul Skayman, Eldorado Gold Corporation - COO [12]

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Exactly.

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Paul Wright, Eldorado Gold Corporation - President & CEO [13]

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The subsequent deposits.

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Paul Skayman, Eldorado Gold Corporation - COO [14]

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Yes, so it's a bit of a chicken and egg situation. I'm not sure that there is anything that we can look to in the short-term that's going to enhance the reserve life. I think fundamentally, there is enough smoke around the situation to support our thesis that the top resource and that trend is perspective. I mean there's no lack of mineralization in the trend.

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Andrew Quail, Goldman Sachs - Analyst [15]

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All right, got it. I'll leave at that. Thanks. If this is your last conference call, thanks, Paul for you have a way these. Stay in touch.

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Paul Wright, Eldorado Gold Corporation - President & CEO [16]

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Okay, likewise. Thanks, Andrew.

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Operator [17]

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Steven Butler, JMP Securities.

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Steven Butler, JMP Securities - Analyst [18]

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Good morning, Paul -- congrats Paul to you and welcome as well to George, in his new role. The question for you on Olympias, Paul Skayman, I guess on the new Kokkinolakas tailings management facility. Is that a bottleneck at all, Paul, with respect to startup of the mill, the mining you said starts up in the first quarter and I assume the mill will do the same. But the full facility is expected to commissioned by about middle of the year. So how do you manage the ore in the process?

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Paul Skayman, Eldorado Gold Corporation - COO [19]

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No, I guess I talk about the mine and the mill where we'll be putting all through end of the first quarter basically. To be honest, Steve, most of the material actually goes back on the underground as backfill, there is a very small component that might head over to the Kokkinolakas, we don't see that as. We continue to work on it, but we're well advanced in terms of where we need to be, if we do place material in that facility. So now it's certainly not an issue for us in terms of starting up Olympias.

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Steven Butler, JMP Securities - Analyst [20]

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Okay. And then Paul, you had mentioned the sustaining capital significantly higher or fair a bit higher on an expanded, I know you talked enough to beat this thing into a pulp in terms of discussion as to why not to proceed. But then, at the [20 million] tonne per year pit, what was the sustaining capital running through your models? I'm sorry, Kisladag.

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Paul Skayman, Eldorado Gold Corporation - COO [21]

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Under the expanded, guidance?

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Steven Butler, JMP Securities - Analyst [22]

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Yes.

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Paul Skayman, Eldorado Gold Corporation - COO [23]

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I'd need to go and double check, I'd be guessing up around the [100 million] mark for sort of that short-term, I'd need to double-check that and tell you.

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Paul Wright, Eldorado Gold Corporation - President & CEO [24]

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Over the life of mine ores, [900 million].

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Paul Skayman, Eldorado Gold Corporation - COO [25]

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But obviously, it's already heavily front-loaded. So there's a fair bit of sort of way stripping to get access to more material and type construction and rock-wise dump construction as well.

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Operator [26]

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John Bridges, JPMorgan.

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John Bridges, JPMorgan - Analyst [27]

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Good morning, everybody. I have no question, but just want to congratulate you, Paul and welcome you George to the business. It's just been very impressive what you've achieved over the years and Paul in particular, your determination to stay with the high road in terms of what you're investing. But congratulations, and best of luck in keeping George to control.

(Multiple Speakers)

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Paul Wright, Eldorado Gold Corporation - President & CEO [28]

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Thank you very much. You want -- role of support over the years.

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Operator [29]

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Dan Rollins, RBC Capital Markets.

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Dan Rollins, RBC Capital Markets - Analyst [30]

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Thanks very much. I appreciate it if you've already mentioned it, but I got on the call late, sorry to do that, but I was wondering if you might be able to provide a little bit more commentary around the reduction at the Kisladag reserves beyond what was outlined in the September Investor Day, but more specifically on the impact of different recovery factors on the differing metallurgy there and the ore types and if that has any impact on the existing life of mine recoveries for the existing reserves?

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Paul Wright, Eldorado Gold Corporation - President & CEO [31]

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Yes. I didn't talk about reserves earlier. The overall recoveries have moved from sulfide material as the group have moved from about 65% down to the sort of just over 60% which is back where we were from a feasibility standpoint. Overall in terms of sort of adjustments to year-on-year premium pay, the recovery accounted for around 25% of that. And obviously, as you'll isolate everything sort of interlinked, so it's a little tricky to sort of look at any of these in isolation because they obviously have an effect on other components.

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Dan Rollins, RBC Capital Markets - Analyst [32]

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And just to get a hand on potentially, optionality remaining in that large resource space and noting Paul's comments that it's really about ensuring strong free cash flow from the existing assets while the new value drivers of the Company are sort of developed. Is there a period in time in years where you basically once we pass like three, four years that it's really impossible to go back to that phase IV expansion and you're really just sort of now living with what you have been in that, the current reserve base.

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Paul Wright, Eldorado Gold Corporation - President & CEO [33]

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No, you're not losing that optionality. I guess some of the initial thinking behind the expansion now was the sort of sweet spot in terms of grade over the next couple of years. You could certainly go back and do that expansion. It would just -- you would need to put some money into it.

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Dan Rollins, RBC Capital Markets - Analyst [34]

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So the strike price on that option gets a lot higher as the years go by?

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Paul Wright, Eldorado Gold Corporation - President & CEO [35]

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I'm not sure I'm following that. The cost of pulling the option on expansion as you go through the next couple years gets higher because you are going to, you are basically taking more the sweetness of the ore body plus potentially you are going to could have a greater strip ratio going down the road. So it really becomes a call, really in the gold price and other opportunities within the Company.

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Paul Skayman, Eldorado Gold Corporation - COO [36]

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Yes, what you just said, is what we've already done, absolutely.

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Dan Rollins, RBC Capital Markets - Analyst [37]

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Okay, I'm just trying to find out if there is an optionality because of the large resource base that technically there could be value for but it's not really capable of being produced, or (multiple speakers) in fact it loses value.

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Paul Wright, Eldorado Gold Corporation - President & CEO [38]

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No, this we could have stated all of this, as a reserve, all right. This is about and it's a horrible thing to have to highlight in our conference call, it's about actually making money, all right, and this asset historically has made a lot of money for this corporation. I mean internal rate of return for this project since inception, as well through 45%. So we've always operated this mine to make money and that's what we're doing here as well, whilst maintaining the ability to be able to subsequently expanded metal prices and the conditions of corporation allow that, and that's what we're focused on, all right.

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Dan Rollins, RBC Capital Markets - Analyst [39]

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Perfect, I'm just trying to figure out what that, if there is an (multiple speakers) appeared but obviously it's fairly open-ended from your viewpoint right now.

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Paul Wright, Eldorado Gold Corporation - President & CEO [40]

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Yes, I mean -- the mines started with five million ounces of reserves. We still got million ounces of reserves, and we've been operating for 12 or 13 years.

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Dan Rollins, RBC Capital Markets - Analyst [41]

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Yes, I understand about the past of the asset. I'm just trying to get a feel for the optionality

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Paul Wright, Eldorado Gold Corporation - President & CEO [42]

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The past relevant to the extent that again, we've always used this asset to make money. That's where we're doing good.

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Dan Rollins, RBC Capital Markets - Analyst [43]

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Perfect Just on, going to Greece. Obviously we've seen a lot of changes there politically, it sounds like the tensions that were there, but a year-ago really [waned] and you're starting make a lot of headway. Is there any key permits that are remaining to -- for Olympias to get going or maybe if you could talk on how do the relationship between your assets, the Company agrees and the management agrees are now interacting with the Government there?

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Paul Wright, Eldorado Gold Corporation - President & CEO [44]

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This is going be a lengthy call, is it Dan? Look, in terms of key permits to get started at wrong (inaudible) at Olympics, I mean where there is a permit related to the Phase backfill plant

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Paul Skayman, Eldorado Gold Corporation - COO [45]

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While, there will be an operating permit, and you can't even stop with that until people can actually review sites -- fire risk and those sorts of things. So, we don't anticipate an issue there necessarily.

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Paul Wright, Eldorado Gold Corporation - President & CEO [46]

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Look, it is still a challenging environment, Dan. I mean these are, the situation is evolved, the relationship with the government is improved, the endorsement of the project now is frankly throughout the broader Greek society, the majority of Greek society, never mind the local region are supportive of the investment, it's become clear obviously as through the lifespan of this government to date that what the country needs is aligned, with what we're providing and but it has been slow progress, but yet there are still elements within frankly the government and there are still elements within the society, albeit, small better opposed to privatization, opposed to development or not, and are opposed to mining

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Paul Skayman, Eldorado Gold Corporation - COO [47]

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But we are prevailing, the projects are getting built and the evidence will be in front of everybody as it relates to Olympias in the second quarter as you start seeing production and cash flow.

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Dan Rollins, RBC Capital Markets - Analyst [48]

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That's fair, I just want to make sure, I want to confirm that the, the direction that we've seen over the last year is continuing and it's baby steps, but it's really good to see that continuing. So I appreciate it. Thank very much for the clarity in the call.

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Operator [49]

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Kerry Smith, Haywood Securities.

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Kerry Smith, Haywood Securities - Analyst [50]

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Paul Skayman, is there much run a mine material left at Kisladag than in the mine plan or is it basically going to be all crushed and put on the pad?

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Paul Skayman, Eldorado Gold Corporation - COO [51]

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It's pretty well old to be crushed now, Kerry. That's slightly a higher grade material. We get more value out of about putting it through the crushers. So there's no plans to put more run of mine on the pad.

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Kerry Smith, Haywood Securities - Analyst [52]

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And for Skouries, you talk about this permit amendment to go from paste to a dry stack tail, does that need a permit amendment or is that just an -- like does work in terms of getting approvals to do that or do you already have those approvals?

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Paul Skayman, Eldorado Gold Corporation - COO [53]

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We will submit and we've already had preliminary discussions with the Ministry of Environment as it relates to the proposed change. To be frank, I'm not sure -- I don't think we are sure what it will constitute in terms of amendment, but there will be an amendment I mean, the move from paste backfill to dry stack tailings is obviously and as recognized by the civil servants, beneficial on all fronts in terms of service impact, in terms of stability and in terms of flexibility, gives within the mine plant. So, but it is a change and we will have to work through that change with the civil servant.

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Kerry Smith, Haywood Securities - Analyst [54]

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Okay. But Paul, I guess you're not expecting that would impact the time to schedule and [as it were]?

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Paul Skayman, Eldorado Gold Corporation - COO [55]

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We don't see that at present.

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Kerry Smith, Haywood Securities - Analyst [56]

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Okay. And just on Olympias, on the CapEx, when we had the Analyst Day last September, at the time somebody that there was a $101 million left to spend to complete the CapEx for Phase II Olympias and in the back half of last year, you spent about [$85 million capital] numbers right. So that leaves about $20 million left to spend based on that old number, is that project still on schedule for that CapEx spend because you're talking about $85 million this year, but if I did the numbers, it looks like it is only $20 million less for the Phase II. But I guess there's other noises?

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Paul Skayman, Eldorado Gold Corporation - COO [57]

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Yes, I mean that all $801 million, the budget for this year includes other Kokkinolakas instruction and at least three little bit more underground development et cetera.

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Paul Wright, Eldorado Gold Corporation - President & CEO [58]

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So it's not apples and apples, Kerry. Who speaking you sort

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Kerry Smith, Haywood Securities - Analyst [59]

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Great. But I guess that all $101 million, but to complete Phase I is still roughly on schedule and on budget?

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Paul Skayman, Eldorado Gold Corporation - COO [60]

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Yes, I think so, I mean, we haven't seen, we're sort of pretty well stocked to the budget in terms of what we've done to suffice to generally. So I don't think we do follow up demand.

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Kerry Smith, Haywood Securities - Analyst [61]

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Okay. And then just on the dividend you declared, is that, I'm trying to read the language there, is that meant to be a one-time dividend I mean, you used to pay a semi-annual dividend and how are you sort of portraying this [$0.02] dividend.

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Paul Wright, Eldorado Gold Corporation - President & CEO [62]

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Well, it's simply a reflection of the performance of the corporation, our dividend policy that was stated in the 2010 and then revamp in 2011 and the metal priced environment that we experienced in the year. we went through a period of the year where we didn't pay dividend that was largely driven by metal price being below the level of, inside of our policy.

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Kerry Smith, Haywood Securities - Analyst [63]

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Okay. So let's call we're safe?

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Paul Skayman, Eldorado Gold Corporation - COO [64]

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Let's put this way, Kerry, it's not unreasonable to assume that there will continue to be a dividend as long as gold price averages over [$12.50] but as always these things are director's discretions.

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Kerry Smith, Haywood Securities - Analyst [65]

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Great. Okay, that's what I was going to basically ask. And just a last question if I could on this, in Serbia, you've got this Shanac scorn that you mentioned on the exploration side, you say, it was gold-rich, how big is the scorn even now and when you say gold-rich, what does that mean, is that like 0.5 gram, I'm just trying to get a sense for how important this could be?

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Paul Wright, Eldorado Gold Corporation - President & CEO [66]

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Gold-rich rather than copper-rich (multiple speakers) in my comment -- I mean I think we're very pleased with our entry into Serbia to the extent that we're very quickly, we're able to move into a fairly what we think is a fairly perspective part of Serbia gain, access gain, licenses, the other drill program going, identify a number of drilled targets, start to test these targets and hit mineralization, which frankly I don't think anybody is under illusion here is economic, but it's interesting as well as it's a good start to our commitment to do exploration in Serbia. I mean, relating to the specific drilling program that you're talking about, I mean, we tested in area roughly 400 meter by 400 meter so far.

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Operator [67]

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Anita Soni, Credit Suisse.

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Anita Soni, Credit Suisse - Analyst [68]

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Hi, good morning, guys. Just all -- actually all of my questions have been asked and so I'd leave it to congratulating Paul on your new role and welcoming George to his role of CEO and I'll leave at that.

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Operator [69]

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John [Comenzo], John Comenzo Research.

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Unidentified Participant [70]

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Thank you very much and congratulations on the sale of the assets in China. Do you think that you might sell other baskets of assets to simplify the Company and raise money. You don't seem to get credit for the full breadth of your efforts. Maybe, the market worries that you make a lot of money in Turkey and spend it somewhere else. Certainly, simplicity can be virtue too.

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Paul Wright, Eldorado Gold Corporation - President & CEO [71]

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Yes, look, we don't have any immediate plans to divest of any assets any part of -- obviously how we run our business, includes both acquisition development and consideration of divestment. But I wouldn't say at this stage that there is any plans in the near-term to medium-term to divest assets.

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Operator [72]

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Tanya Jakusconek, Scotiabank.

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Tanya Jakusconek, Scotiabank - Analyst [73]

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Just a question for Paul Skayman, if we can and sorry, Paul, to come back to Kisladag. But one of the statements that you made on with respect to Kisladag was bringing -- maximizing cash flow for the asset. Can you talk a little bit about some of the cost savings and the benefits that you see under this 30 million tonne pit. You mentioned obviously these savings in sustaining capital, so thank you for that 30 million from 100 million. But is there any other things that you can put some more color to that will help us to understand?

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Paul Skayman, Eldorado Gold Corporation - COO [74]

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I don't know that it's so much sort of cost savings, I think it's more sort of improvement in terms of generating free cash flow in that medium-term. The material, we're mining a slightly smaller pit, but it's got better grade. So putting 30 million tonnes on better grade will generate more ounces and obviously lower costs for that material. The other benefit when comparing it to the 20 million tonne obviously is that deferral in sort of requirements for waste stripping and pad construction, et cetera.

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Tanya Jakusconek, Scotiabank - Analyst [75]

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Yes, I know that was appreciated. It's just also that the -- I think the strip ratio goes up from 1 to 1.35?

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Paul Skayman, Eldorado Gold Corporation - COO [76]

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Yes, the prior reserve had an over 1.4. So what it does allow us to do is sort of mine within that -- the consistently lower strip ratio for a reasonable period of time, and the overall strip ratio compared to prior reserves is reduced as well.

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Tanya Jakusconek, Scotiabank - Analyst [77]

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So would it be fair to say that it's a combination then first obviously, of the better grade upfront. Clearly, you mentioned that the sustaining capital upfront is lower, and obviously, the lower strip upfront. All of this upfront maximizes the cash flow over the life of mine, would that be a fair statement?

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Paul Wright, Eldorado Gold Corporation - President & CEO [78]

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Yes, I mean simplistically, Tanya, what was happening is that, the expanded case and which obviously provided more gold, provided more gold at a higher operating costs and a significantly higher all-in sustaining costs. So when you broke it down into increments, you were paying, your additional ounces that you produced were very low margin ounces at the price deck that we've assumed over the next few years. Our price just to remind you, our assumption for this year is 1,150 1,200 for next year, 1,250 for the year after and 1,300. And we've run all the reserves of 1,200 life of mines and exactly reserves are 1,200. And in that price deck, just to put of very large amount of sustaining capital in the next couple of years, it was essentially eliminating most of the free cash flow from the operation over the next couple of years and albeit it will allow us to state a larger reserve, but then it really wasn't contributing much in the way of free cash flow and I guess again, keep repeating myself, we've always run our minds to make money rather than just simply to have reserve and then able to (technical difficulty) mine plans.

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Tanya Jakusconek, Scotiabank - Analyst [79]

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And I would have assumed that those reserves would have been at the end of the mine life?

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Paul Skayman, Eldorado Gold Corporation - COO [80]

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Yes, I mean there are -- we've removed tons that were fair bit lower grade and needed more stripping to do. And as Paul says, under a different price environment, we will revisit it and have another look, but today, this is what we think, makes the most sense for the corporation in the short to medium term.

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Tanya Jakusconek, Scotiabank - Analyst [81]

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No. We appreciate it. I was just trying to understand the benefits offsetting the loss of the ounces over like obviously, your 17 year mine life.

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Operator [82]

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There are no further questions at this time. Mr. Paul Wright, I turn the call back over to you.

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Paul Wright, Eldorado Gold Corporation - President & CEO [83]

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Okay. Thank you, operator and thank you everybody for attending the call and we all look forward to listen to George host his call in April. Thanks again. Have a good weekend.

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Operator [84]

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Thank you, ladies and gentlemen, this concludes today's conference call. You may now disconnect.