EX-99.1 2 fins.htm UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2016

JA Filed by Filing Services Canada Inc. 403-717-3898

June 30, 2016		Unaudited Condensed Consolidated Financial Statements
		Suite 1188, 550 Burrard Street
		Vancouver, British Columbia
		V6C 2B5
		Phone: (604) 687-4018
		Fax: (604) 687-4026

1

Eldorado Gold Corporation 

Unaudited Condensed Consolidated Balance Sheets

(Expressed in thousands of U.S. dollars)

					June 30, 2016				December 31, 2015
					$				$
ASSETS
Current assets
Cash and cash equivalents						125,652				288,189
Term deposits						5,317				4,382
Restricted cash						253				248
Marketable securities						41,445				18,331
Accounts receivable and other						49,367				85,468
Inventories						117,476				175,626
Assets held for sale		5				1,219,455				-
						1,558,965				572,244
Other assets						81,469				83,147
Defined benefit pension plan						12,856				10,897
Property, plant and equipment						3,498,434				4,747,759
Goodwill		5				-				50,276
						5,151,724				5,464,323
LIABILITIES & EQUITY
Current liabilities
Accounts payable and accrued liabilities						92,930				236,819
Current debt		6				30,000				-
Liabilities held for sale		5				258,431				-
						381,361				236,819
Debt		6				590,492				589,395
Other non-current liability						6,876				6,166
Asset retirement obligations						79,717				102,636
Deferred income tax liabilities						423,613				607,871
						1,482,059				1,542,887
Equity
Share capital		7				2,819,101				5,319,101
Treasury stock						(8,015	)			(10,211	)
Contributed surplus						2,602,027				47,236
Accumulated other comprehensive loss						5,301				(20,572	)
Deficit						(1,916,215	)			(1,583,873	)
Total equity attributable to shareholders of the Company						3,502,199				3,751,681
Attributable to non-controlling interests						167,466				169,755
						3,669,665				3,921,436
						5,151,724				5,464,323

Approved on behalf of the Board of Directors

(Signed)John Webster	Director
(Signed)Paul N. Wright	Director

The accompanying notes are an integral part of these consolidated financial statements.

2

Eldorado Gold Corporation

Unaudited Condensed Consolidated Income Statements

(Expressed in thousands of U.S. dollars except per share amounts)

					Three months ended								Six months ended
					June 30,								June 30,
		Note							(restated)*								(restated)*
					2016				2015				2016				2015
Continuing operations:					$				$				$				$
Revenue
Metal sales						107,063				124,561				201,755				257,734
Cost of sales
Production costs						48,927				65,793				94,134				133,947
Inventory write-down (reversal)						(1,048	)			-				298				6,210
Depreciation and amortization						17,551				22,586				36,519				42,589
						65,430				88,379				130,951				182,746
Gross profit						41,633				36,182				70,804				74,988
Exploration expenses						3,314				2,812				5,275				5,666
Mine standby costs						5,819				913				15,377				1,412
General and administrative expenses						10,688				9,757				20,155				23,054
Defined benefit pension plan expense						297				434				580				860
Share based payments						2,699				3,759				6,400				10,174
Impairment loss on property, plant and equipment						-				254,910				-				254,910
Other write-down of assets						478				-				478				-
Foreign exchange loss (gain)						287				(1,858	)			(3,153	)			7,212
Operating profit (loss)						18,051				(234,545	)			25,692				(228,300	)
Loss (gain) on disposal of assets						(93	)			-				196				1
Loss on marketable securities and other investments						565				-				4,881				-
Other (income) expense						(1,372	)			(2,015	)			323				(4,184	)
Asset retirement obligation accretion						449				482				898				965
Interest and financing costs						4,082				4,502				9,778				9,434
Profit (loss) from continuing operations before income tax						14,420				(237,514	)			9,616				(234,516	)
Income tax expense (recovery)						5,720				(29,965	)			10,515				(5,649	)
Profit (loss) from continuing operations						8,700				(207,549	)			(899	)			(228,867	)
Profit (loss) from discontinued operations			5			(339,438	)			9,964				(333,732	)			24,769
Loss for the period						(330,738	)			(197,585	)			(334,631	)			(204,098	)
Attributable to:
Shareholders of the Company						(329,864	)			(198,600	)			(332,342	)			(206,844	)
Non-controlling interests						(874	)			1,015				(2,289	)			2,746
Loss for the period						(330,738	)			(197,585	)			(334,631	)			(204,098	)
Profit (loss) attributable to shareholders of the Company
Continuing operations						9,331				(207,472	)			903				(227,879	)
Discontinued operations						(339,195	)			8,872				(333,245	)			21,035
						(329,864	)			(198,600	)			(332,342	)			(206,844	)
Weighted average number of shares outstanding
Basic						716,587				716,587				716,587				716,585
Diluted						716,591				716,587				716,590				716,585
Earnings (loss) per share attributable to shareholders
of the Company:
Basic earnings (loss) per share						(0.46	)			(0.28	)			(0.46	)			(0.29	)
Diluted earnings (loss) per share						(0.46	)			(0.28	)			(0.46	)			(0.29	)
Earnings (loss) per share attributable to shareholders of the Company - Continuing operations:
Basic earnings (loss) per share						0.01				(0.29	)			0.00				(0.32	)
Diluted earnings (loss) per share						0.01				(0.29	)			0.00				(0.32	)

________

* See note 5

The accompanying notes are an integral part of these consolidated financial statements.

3

Eldorado Gold Corporation

Unaudited Condensed Consolidated Statements of Comprehensive Income

(Expressed in thousands of U.S. dollars)

		Three months ended								Six months ended
		June 30,								June 30,
		2016				2015				2016				2015
		$				$				$				$
Loss for the period			(330,738	)			(197,585	)			(334,631	)			(204,098	)
Other comprehensive income (loss):
Change in fair value of available-for-sale financial assets (net of income taxes of $3,140 and nil)			11,405				1,020				21,094				909
Realized gains on disposal of available-for-sale financial assets			565				-				4,901				-
Actuarial losses on severance obligation			-				-				(122	)			-
Total other comprehensive gain for the period			11,970				1,020				25,873				909
Total comprehensive loss for the period			(318,768	)			(196,565	)			(308,758	)			(203,189	)
Attributable to:
Shareholders of the Company			(317,894	)			(197,580	)			(306,469	)			(205,935	)
Non-controlling interests			(874	)			1,015				(2,289	)			2,746
			(318,768	)			(196,565	)			(308,758	)			(203,189	)

The accompanying notes are an integral part of these consolidated financial statements.

4

Eldorado Gold Corporation 

Unaudited Condensed Consolidated Statements of Cash Flows 

(Expressed in thousands of U.S. dollars)

					Three months ended								Six months ended
					June 30,								June 30,
									(restated)*								(restated)*
		Note			2016				2015				2016				2015
					$				$				$				$
Cash flows generated from (used in):
Operating activities
Profit (loss) for the period from continuing operations						8,700				(207,549	)			(899	)			(228,867	)
Items not affecting cash:
Asset retirement obligation accretion						449				482				898				965
Depreciation and amortization						17,551				22,586				36,519				42,589
Unrealized foreign exchange loss (gain)						3,068				(50	)			2,422				913
Deferred income tax expense recovery						(3,328	)			(40,082	)			(12,562	)			(26,836	)
Loss (gain) on disposal of assets						(93	)			-				196				1
Other write-down of assets						478				-				478				-
Impairment loss on property, plant and equipment						-				254,910				-				254,910
Loss on marketable securities and other investments						565				-				4,881				-
Share based payments						2,699				3,759				6,400				10,174
Defined benefit pension plan expense						297				434				580				860
						30,386				34,490				38,913				54,709
Property reclamation payments						(814	)			(93	)			(894	)			(93	)
Changes in non-cash working capital		10				(39,251	)			37,393				(59,624	)			72,638
Net cash provided (used) by operating activities of continuing operations						(9,679	)			71,790				(21,605	)			127,254
sNet cash provided (used) by operating activities of discontinued operations						12,165				(17,860	)			26,533				1,683
Investing activities
Purchase of property, plant and equipment						(61,568	)			(76,309	)			(120,888	)			(143,814	)
Proceeds from the sale of property, plant and equipment						373				94				757				106
Proceeds on production from tailings retreatment						-				4,381				3,878				10,102
Purchase of marketable securities						(692	)			-				(2,526	)			(5,233	)
Proceeds from the sale of marketable securities						378				-				3,665				-
Redemption of (investment in) term deposits						(22	)			45,000				(935	)			(902	)
Decrease (increase) in restricted cash						7				(10	)			(6	)			591
Net cash used by investing activities of continuing operations						(61,524	)			(26,844	)			(116,055	)			(139,150	)
Net cash used by investing activities of discontinued operations						(4,431	)			(15,128	)			(9,573	)			(22,694	)
Financing activities
Issuance of common shares for cash						-				-				-				121
Dividend paid to shareholders						-				-				-				(5,768	)
Purchase of treasury stock						-				-				-				(2,394	)
Long-term and bank debt proceeds						30,000				-				30,000				-
Net cash provided (used) by financing activities of continuing operations						30,000				-				30,000				(8,041	)
Net cash used by financing activities of discontinued operations						-				(11,440	)			-				(11,440	)
Net increase (decrease) in cash and cash equivalents						(33,469	)			518				(90,700	)			(52,388	)
Cash and cash equivalents - beginning of period						230,958				445,608				288,189				498,514
Cash and cash equivalents - end of period						197,489				446,126				197,489				446,126
Less cash and cash equivalents held for sale - end of period						(71,837	)			-				(71,837	)			-
Cash and cash equivalents excluding held for sale- end of period						125,652				446,126				125,652				446,126

________

* See note 5

The accompanying notes are an integral part of these consolidated financial statements.

5

Eldorado Gold Corporation 

Unaudited Condensed Consolidated Statements of Changes in Equity 

(Expressed in thousands of U.S. dollars)

						Three months ended								Six months ended
						June 30,								June 30,
		Note				2016				2015				2016				2015
						$				$				$				$
Share capital
Balance beginning of period							5,319,101				5,319,101				5,319,101				5,318,950
Shares issued upon exercise of share options, for cash							-				-				-				121
Transfer of contributed surplus on exercise of options							-				-				-				30
Capital reduction			7				(2,500,000	)			-				(2,500,000	)			-
Balance end of period							2,819,101				5,319,101				2,819,101				5,319,101
Treasury stock
Balance beginning of period							(8,015	)			(12,662	)			(10,211	)			(12,949	)
Purchase of treasury stock							-				-				-				(2,394	)
Shares redeemed upon exercise of restricted share units							-				657				2,196				3,338
Balance end of period							(8,015	)			(12,005	)			(8,015	)			(12,005	)
Contributed surplus
Balance beginning of period							46,758				41,371				47,236				38,430
Share based payments							2,369				3,936				5,503				10,241
Shares redeemed upon exercise of restricted share units							-				(657	)			(2,196	)			(3,338	)
Recognition of other current liability related costs							-				(110	)			(1,416	)			(763	)
Reversal of other current liability and related costs							52,900				-				52,900				-
Transfer to share capital on exercise of options							-				-				-				(30	)
Capital reduction			7				2,500,000				-				2,500,000				-
Balance end of period							2,602,027				44,540				2,602,027				44,540
Accumulated other comprehensive loss
Balance beginning of period							(6,669	)			(18,238	)			(20,572	)			(18,127	)
Other comprehensive gain for the period							11,970				1,020				25,873				909
Balance end of period							5,301				(17,218	)			5,301				(17,218	)
Deficit
Balance beginning of period							(1,586,351	)			(67,816	)			(1,583,873	)			(53,804	)
Dividends paid							-				-				-				(5,768	)
Loss attributable to shareholders of the Company							(329,864	)			(198,600	)			(332,342	)			(206,844	)
Balance end of period							(1,916,215	)			(266,416	)			(1,916,215	)			(266,416	)
Total equity attributable to shareholders of the Company							3,502,199				5,068,002				3,502,199				5,068,002
Non-controlling interests
Balance beginning of period							168,340				305,510				169,755				305,414
Profit attributable to non-controlling interests							(874	)			1,015				(2,289	)			2,746
Dividends declared to non-controlling interests							-				(1,627	)			-				(3,262	)
Balance end of period							167,466				304,898				167,466				304,898
Total equity							3,669,665				5,372,900				3,669,665				5,372,900

The accompanying notes are an integral part of these consolidated financial statements.

6

 

Eldorado Gold Corporation

Notes to the unaudited condensed consolidated financial statements

(Expressed in thousands of U.S. dollars, unless otherwise stated)

1. General Information

Eldorado Gold Corporation ("Eldorado" or the "Company") is a gold exploration, development, mining and production company. The Company has operations and ongoing exploration and development projects in Turkey, China, Greece, Brazil and Romania.

Eldorado is a public company which is listed on the Toronto Stock Exchange and New York Stock Exchange and is incorporated and domiciled in Canada.

2. Basis of preparation

a) Statement of compliance

These unaudited condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting'. They do not include all of the information and footnotes required by the International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board for full annual financial statements and should be read in conjunction with the Company's annual financial statements for the year ended December 31, 2015.

The same accounting policies are used in the preparation of these unaudited condensed consolidated interim financial statements as for the most recent audited annual financial statements and reflect all the adjustments necessary for fair presentation in accordance with IFRS for the interim periods presented.

b) Judgement and estimates

The preparation of these unaudited condensed consolidated interim financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

The significant judgements made by management in applying the Company's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended December 31, 2015 with the exception of the judgements related to assets held for sale, as discussed in note 5.

3. Adoption of new accounting standards and upcoming changes

The following standards have been published and are mandatory for Eldorado's annual accounting periods no earlier than January 1, 2018:

	·	IFRS 9 'Financial Instruments' – This standard was published in July 2014 and replaces the existing guidance in IAS 39, 'Financial Instruments: Recognition and Measurement'. IFRS 9 includes revised guidance on the classification and measurement of financial instruments, including a new expected credit loss model for calculating impairment on financial assets, and the new general hedge accounting requirements. It also carries forward the guidance on recognition and derecognition of financial instruments from IAS 39. IFRS 9 is effective for annual reporting periods beginning on or after January 1, 2018, with early adoption permitted. The Company is currently evaluating the extent of the impact of the adoption of this standard.
	·	IFRS 15 'Revenue from Contracts with Customers' – This standard contains a single model that applies to contracts with customers and two approaches to recognising revenue: at a point in time or over time. The model features a contract-based five-step analysis of transactions to determine whether, how much and when revenue is recognized. New estimates and judgmental thresholds have been introduced, which may affect the amount and/or timing of revenue recognized. This standard is effective for annual reporting periods beginning on or after January 1, 2018, with early adoption permitted. The Company does not expect this standard to have a material impact on its financial statements.

 

7

 

Eldorado Gold Corporation

Notes to the unaudited condensed consolidated financial statements

(Expressed in thousands of U.S. dollars, unless otherwise stated)

3. Adoption of new accounting standards and upcoming changes(continued)

 

· IFRS 16 'Leases' – This standard was published in January 2016 and replaces the existing guidance in IAS 17, 'Leases'. IFRS 16 introduces a single accounting model for lessees and for all leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee will be required to recognize a right-of-use asset, representing its right to use the underlying asset, and a lease liability, representing its obligation to make lease payments. The accounting treatment for lessors will remain largely the same as under IAS 17. IFRS 16 is effective for annual reporting periods beginning on or after January 1, 2019, with early adoption permitted. The Company is currently evaluating the extent of the impact of the adoption of this standard.

 

There are other new standards, amendments to standards and interpretations that have been published and are not yet effective. The Company believes they will have no material impact to its consolidated financial statements.

4. Transactions

 

Eastern Dragon agreement

 

In March 2014, the Company, through one of its subsidiaries, entered into a Subscription and a Shareholders agreement ("Agreements") with CDH Fortune II Limited ("CDH").

As a result of these Agreements, CDH acquired 21.05% of the total ordinary shares of Sino Gold Tenya (HK) Limited ("Tenya"), a subsidiary of the Company, and indirectly a 20% interest in the Eastern Dragon Project ("ED"). This transaction has been accounted as an equity transaction with the recognition of a non-controlling interest in the amount of $40,000 representing the consideration received.

Under the terms of the Agreements, CDH had the right to require Eldorado to purchase or procure the purchase by another party of CDH's shares in Tenya at a fixed price ("Put Option") for 90 days following the second anniversary of the Agreements. A liability in the initial amount of $46,970 was recorded against equity at the transaction date, representing the present value of the redemption amount of the Put Option. Future changes in the present value of the redemption amount of the Put Option were also charged against equity. Upon expiration of the Put Option in the second quarter of 2016, the net present value of this liability was reversed against equity as at June 30, 2016 as the Put Option lapsed without being exercised by CDH.

The Agreements include a second put option that can be exercised by CDH within 90 days following the third anniversary of the Agreements. No liability has been recorded for the second put option, as the conditions under this put option are not within the control of CDH.

The Agreements include other rights and obligations of the Company and CDH associated with the advancement of the ED project, the holding structure, and the number of subsidiaries related to our Chinese assets.

 

5. Discontinued operations

On April 26, 2016, the Company announced that it had reached an agreement to sell its 82 percent interest in the Company's Jinfeng mine to a wholly-owned subsidiary of China National Gold Group ("CNG") for $300 million in cash, subject to certain closing adjustments. The transaction is expected to close in the third quarter of 2016 and is subject to obtaining various regulatory approvals and other customary closing conditions.

In addition to the April 26, 2016 announcement, on May 16, 2016 Eldorado announced it had reached an agreement to sell its respective interest in the White Mountain and Tanjianshan mines and the Eastern Dragon development project to an affiliate of Yintai Resources Co. Ltd. ("Yintai") for $600 million in cash, subject to certain closing adjustments. The transaction is expected to close in the fourth quarter of 2016 and is subject to obtaining various regulatory and shareholders approvals and other customary closing conditions.

8

Eldorado Gold Corporation

Notes to the unaudited condensed consolidated financial statements

(Expressed in thousands of U.S. dollars, unless otherwise stated)

5. Discontinued operations(continued)

 

The aggregate consideration amount of $900 million is considered the fair value measurement of our Chinese operations ("China Business"). A post-tax loss of $339 million has been recognized on re-measurement to fair value less cost of disposal for the China Business. This loss was allocated first to goodwill and the remainder to property, plant and equipment.

The results from operations for our China Business have, together with restated comparatives, been presented as discontinued operations within the Condensed Consolidated Income Statements and the Condensed Consolidated Statements of Cash Flows.

		Three months ended								Six months ended
		June 30,								June 30,
		2016				2015				2016				2015
		$				$				$				$
Revenue			64,476				89,624				133,916				194,762
Production costs			44,170				49,755				91,911				100,906
Depreciation and amortization			6,305				18,280				18,996				43,686
Gross profit			14,001				21,589				23,009				50,170
Exploration expenses			364				374				645				643
General and administrative expenses			10,499				3,440				12,603				6,421
Foreign exchange loss (gain)			448				270				720				1,439
Operating profit (loss)			2,690				17,505				9,041				41,667
Interest and financing costs			131				331				146				574
Asset retirement obligation accretion			116				113				232				233
Other expenses			92				(286	)			68				35
Profit from discontinued operations before income tax			2,351				17,347				8,595				40,825
Income tax expense (recovery)			2,771				7,383				3,309				16,056
Loss from discontinued operations			(420	)			9,964				5,286				24,769
Loss on re-measurement to fair value less costs to sell			339,018				-				339,018				-
Net loss from discontinued operations			(339,438	)			9,964				(333,732	)			24,769

The Company applies judgment to determine whether an asset or disposal group is available for immediate sale in its present condition and that its sale is highly probable and therefore should be classified as held for sale at the balance sheet date. Conditions that support a highly probable sale include the following: an appropriate level of management is committed to a plan to sell the asset or disposal group, an active program to locate a buyer and complete the plan has been initiated, the asset or disposal group has been actively marketed for sale at a price that is reasonable in relation to its current fair value, and the sale of the asset or disposal group is expected to qualify for recognition as a completed sale within one year from the date of classification as held for sale.

The CNG and Yintai transactions were a result of a strategic review by the Company's management to maximize the value of the Company's operations in China. Accordingly, the disposal of substantially all of the China Business through the CNG and Yintai transactions represents a single coordinated plan to dispose of a major line of business or geographical area of operations.

The Company concluded that during the second quarter of 2016, the assets and liabilities of the China Business met the criteria for classification as held for sale. Accordingly, the group of assets and liabilities were presented separately under current assets and current liabilities, respectively. These assets have been re-measured to fair value less cost of disposal with the loss recognized in the Consolidated Income Statement for the three and six months ended June 30, 2016. In addition, the assets of the China Business are not depreciated while they are classified as held for sale.

9

Eldorado Gold Corporation

Notes to the unaudited condensed consolidated financial statements

(Expressed in thousands of U.S. dollars, unless otherwise stated)

5. Discontinued operations (continued)

 

		June 30, 2016
		$
ASSETS
Cash and cash equivalents			71,837
Accounts receivable and other			25,645
Inventories			72,929
Other assets			18,944
Property, plant and equipment			1,030,100
Total assets held for sale			1,219,455
LIABILITIES
Accounts payable and accrued liabilities			58,727
Asset retirement obligations			23,073
Deferred income tax liabilities			176,631
Total liabilites from assets held for sale			258,431
Net assets held for sale			961,024

6. Debt

 

		June 30, 2016 $				December 31, 2015 $
Current:
Revolving credit facility (a)			30,000				-
Non-current:
Senior notes (b)			590,492				589,395
Total debt			620,492				589,395

(a) Revolving credit facility

 

In November 2012, the Company entered into a $375.0 million revolving credit facility with a syndicate of banks ("the credit facility"). The credit facility was to mature on November 23, 2016.

In June 2016, the Company amended and restated the existing revolving credit agreement ("the amended and restated credit agreement" or "ARCA") to $250.0 million with the option to increase by an additional $100.0 million through an accordion feature. The maturity date was also extended to June 13, 2020. The ARCA continues to be secured by the shares of SG Resources and Tuprag, wholly owned subsidiaries of the Company.

The ARCA contains covenants that restrict, among other things, the ability of the Company to incur aggregate unsecured indebtedness exceeding $850.0 million, incur secured indebtedness exceeding $200.0 million and permitted unsecured indebtedness exceeding $150.0 million. The ARCA also contains restrictions for making distributions in certain circumstances, selling material assets (other than the permitted disposition of the China Business) and conducting business other than that which relates to the mining industry. Significant financial covenants include a maximum Net Debt to Earnings before Interest, Taxes, Depreciation and Amortization ("EBITDA") of 3.5:1 and a minimum EBITDA to Interest of 3:1. The Company is in compliance with these covenants at June 30, 2016.

10

Eldorado Gold Corporation

Notes to the unaudited condensed consolidated financial statements

(Expressed in thousands of U.S. dollars, unless otherwise stated)

6. Debt (continued)

 

Loan interest is variable dependent on a Net Leverage ratio pricing grid. The Company's current net leverage ratio is approximately 2.1:1. At this ratio, interest charges and fees are as follows: LIBOR plus margin of 2.625% and undrawn standby fee of 0.725%. Fees of $2,031 were paid on the amendment dated June 2016. This amount has been deferred as pre-payment for liquidity services and will be amortized over the term of the credit facility.

As of June 30, 2016, the Company had $30.0 million drawn against the facility, with a maturity day in August 2016.

 

(b) Senior notes

On December 10, 2012, the Company completed an offering of $600.0 million senior notes (“the notes”) at par value, with a coupon rate of 6.125% due December 15, 2020. The notes pay interest semi-annually on June 15 and December 15. Net deferred financing costs of $9,508 have been included as an offset in the balance of the notes in the financial statements and are being amortized over the term of the notes.

The fair market value of the notes as at June 30, 2016 was $600.8 million.

(c) Entrusted loan

In November 2010, Eastern Dragon, HSBC Bank (China) and QDML entered into an entrusted loan agreement, which currently has an approved limit of RMB 720.0 million ($108,578).

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 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 drawdown has a term of one year and can be rolled forward at the discretion of QDML. The interest rate on this loan as at June 30, 2016 was 4.59%.

As at June 30, 2016, RMB 696.6 million ($105,041) had been drawn under the entrusted loan. The entrusted loan has been recorded on a net settlement basis.

7. Share capital

Eldorado’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 June 30, 2016 there were 716,587,134 (December 31, 2015 – 716,587,134) voting common shares and no non-voting common shares (December 31, 2015 – none) outstanding.

On May 25, 2016 the shareholders of the Company approved by special resolution the reduction of the stated capital account of the Company. As at June 30, 2016, the stated capital of the Company has been reduced by $2,500,000.

11

Eldorado Gold Corporation

Notes to the unaudited condensed consolidated financial statements

(Expressed in thousands of U.S. dollars, unless otherwise stated)

8. Share-based payments

(a) Share option plans

Movements in the number of share options outstanding and their related weighted average exercise prices are as follows:

	2016
	Weighted average exercise price Cdn$	Number of options
At January 1,	9.97	25,519,434
Granted	3.23	9,001,164
Exercised	-	-
Forfeited	14.61	(3,175,667)
At June 30,	7.56	31,344,931

At June 30, 2016, 19,698,340 share options (June 30, 2015 – 18,984,305) with a weighted average exercise price of Cdn$9.67 (June 30, 2015 – Cdn$11.30) had vested and were exercisable.

Share based compensation expense related to share options for the quarter ended June 30, 2016 was $1,549 (YTD - $3,669).

(b) Restricted share unit plan

A total of 784,203 restricted share units (“RSUs”) at a grant-date fair value of Cdn$3.22 per unit were granted during the six-month period ended June 30, 2016 under the Company’s RSU plan.

The fair value of each RSU issued is determined as the closing share price at grant date. The current maximum number of common shares authorized for issue under the RSU plan is 5,000,000.

A summary of the status of the restricted share unit plan and changes during the quarter ended June 30, 2016 is as follows:

	Total RSUs
Balance at December 31, 2015	884,846
RSUs Granted	784,203
Redeemed	(298,483)
Forfeited	(93,536)
Balance at June 30, 2016	1,277,030

As at June 30, 2016, 1,277,030 common shares purchased by the Company remain held in trust in connection with this plan. At the end of the period, 320,591 restricted share units are fully vested and exercisable. These shares purchased and held in trust have been included in treasury stock in the balance sheet.

Restricted share units expense for the quarter ended June 30, 2016 was $408 (YTD - $1,072).

(c) Deferred share units plan

 

At June 30, 2016, 493,922 deferred share units ("DSUs") were outstanding with a value of $2,222, which is included in accounts payable and accrued liabilities.

Compensation expense related to the DSUs was $330 for the quarter ended June 30, 2016 (YTD - $897).

 

12

 

Eldorado Gold Corporation

Notes to the unaudited condensed consolidated financial statements

(Expressed in thousands of U.S. dollars, unless otherwise stated)

8. Share-based payments (continued)

 

(d) Performance share units plan

 

A total of 796,652 performance share units ("PSUs") were granted during the six-month period ended June 30, 2016 under the Company's PSU plan. The PSUs vest on the third anniversary of the grant date, subject to achievement of pre-determined performance criteria. When fully vested, the number of PSUs redeemed will range from 0% to 200% of the target award, subject to the performance of the share price over the 3 year period. The current maximum number of common shares authorized for issuance from treasury under the PSU plan is 3,130,000.

Compensation expense related to PSUs for the quarter ended June 30, 2016 was $412 (YTD - $762).

9. Fair value of financial instruments

 

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 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).

 

The only assets measured at fair value as at June 30, 2016 are marketable securities and assets held for sale (see note 5). No liabilities are measured at fair value on a recurring basis as at June 30, 2016 except for the liabilities related to the assets held for sale.

The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm's length basis. The quoted market price used for financial assets held by the group is the current bid price. These instruments are included in Level 1. Instruments included in Level 1 comprise primarily publicly-traded equity investments classified as available-for-sale securities.

With the exception of the fair market value of the Company's senior notes (note 6b), which are included in level 2, all carrying amounts of financial instruments approximate their fair value.

10. Supplementary cash flow information

 

		Three months ended June 30,								Six months ended June 30,
		2016 $				2015 $				2016 $				2015 $
Changes in non-cash working capital
Accounts receivable and other			(8,385	)			(14,269	)			(9,777	)			3,134
Inventories			(9,743	)			277				(17,963	)			11,288
Accounts payable and accrued liabilities			(21,123	)			51,385				(31,884	)			58,216
Total			(39,251	)			37,393				(59,624	)			72,638
Supplementary cash flow information
Income taxes paid			16,217				23,235				30,458				45,799
Interest paid			16,844				17,047				16,844				17,275

13

Eldorado Gold Corporation

Notes to the unaudited condensed consolidated financial statements

(Expressed in thousands of U.S. dollars, unless otherwise stated)

11. Segmented information

Identification of reportable segments

The Company has identified its operating segments based on the internal reports that are reviewed and used by the chief executive officer and the executive management (the chief operating decision makers or CODM) in assessing performance and in determining the allocation of resources.

The CODM considers the business from both a geographic and product perspective and assesses the performance of the operating segments based on measures of profit and loss as well as assets and liabilities. These measures include gross profit (loss), expenditures on exploration, property, plant and equipment and non-current assets, as well as total debt. As at June 30, 2016, Eldorado had five reportable segments based on the geographical location of mining and exploration and development activities.

11.1 Geographical segments

Geographically, the operating segments are identified by country and by operating mine or mine under construction. The Turkey reporting segment includes the Kişladağ and the Efemçukuru mines and exploration activities in Turkey. The Brazil reporting segment includes the Vila Nova mine, Tocantinzinho project and exploration activities in Brazil. The Greece reporting segment includes the Stratoni mine, the Olympias, Skouries, Perama Hill and Sapes projects and exploration activities in Greece. The Romania reporting segment includes the Certej project and exploration activities in Romania. Other reporting segment includes operations of Eldorado's corporate office and exploration activities in other countries.

Financial information about each of these operating segments is reported to the CODM on at least a monthly basis. The mines in each of the different segments share similar economic characteristics and have been aggregated accordingly.

For the three months ended June 30, 2016

		Turkey				Brazil				Greece				Romania				Other				Total
		$				$				$				$				$				$
Information about profit and loss
Metal sales from external customers			99,321				-				7,742				-				-				107,063
Production costs			40,231				-				8,696				-				-				48,927
Inventory write-down (reversal)			-				-				(1,048	)			-				-				(1,048	)
Depreciation			17,797				(461	)			146				-				69				17,551
Gross profit (loss)			41,293				461				(52	)			-				(69	)			41,633
Other material items of income and expense
Other write-down of assets			478				-				-				-				-				478
Exploration expenses			398				572				184				133				2,027				3,314
Income tax expense (recovery)			12,123				(2,161	)			(1,037	)			(64	)			(3,141	)			5,720
Additions to property, plant and
equipment during the period			14,456				1,165				41,960				4,039				6				61,626

14

Eldorado Gold Corporation

Notes to the unaudited condensed consolidated financial statements

(Expressed in thousands of U.S. dollars, unless otherwise stated)

11. Segment information (continued)

For the three months ended June 30, 2015

		Turkey				Brazil				Greece				Romania				Other				Total
		$				$				$				$				$				$
Information about profit and loss
Metal sales from external customers			115,820				(691	)			9,432				-				-				124,561
Production costs			56,594				115				9,084				-				-				65,793
Depreciation			19,600				504				2,362				-				120				22,586
Gross profit (loss)			39,626				(1,310	)			(2,014	)			-				(120	)			36,182
Other material items of income and expense
Impairment loss on property, plant and equipment			-				-				-				254,910				-				254,910
Exploration costs			428				387				571				679				747				2,812
Income tax expense (recovery)			14,296				(480	)			(2,557	)			(41,225	)			1				(29,965	)
Additions to property, plant and
equipment during the period			15,918				354				55,808				4,008				70				76,158

For the six months ended June 30, 2016

		Turkey				Brazil				Greece				Romania				Other				Total
		$				$				$				$				$				$
Information about profit and loss
Metal sales from external customers			190,541				-				11,214				-				-				201,755
Production costs			81,206				-				12,928				-				-				94,134
Inventory write-down			-				-				298				-				-				298
Depreciation			36,041				-				340				-				138				36,519
Gross profit (loss)			73,294				-				(2,352	)			-				(138	)			70,804
Other material items of income and expense
Write down on assets			478				-				-				-				-				478
Exploration costs			757				904				832				341				2,441				5,275
Income tax expense (recovery)			16,990				(3,825	)			1,061				(633	)			(3,078	)			10,515
Additions to property, plant and
equipment during the period			28,577				2,039				85,016				6,436				14				122,082
Information about assets and liabilities
Property, plant and equipment (*)			887,922				180,911				2,023,405				404,582				1,614				3,498,434
Debt			-				-				-				-				620,492				620,492

15

Eldorado Gold Corporation

Notes to the unaudited condensed consolidated financial statements

(Expressed in thousands of U.S. dollars, unless otherwise stated)

11. Segment information (continued)

For the six months ended June 30, 2015

		Turkey				Brazil				Greece				Romania				Other				Total
		$				$				$				$				$				$
Information about profit and loss
Metal sales from external customers			235,507				(355	)			22,582				-				-				257,734
Production costs			111,450				1,587				20,910				-				-				133,947
Inventory write-down			-				6,210				-				-				-				6,210
Depreciation			36,082				1,010				5,229				-				268				42,589
Gross profit (loss)			87,975				(9,162	)			(3,557	)			-				(268	)			74,988
Other material items of income and expense
Impairment loss on property, plant and equipment			-				-				-				254,910				-				254,910
Exploration costs			872				773				1,400				1,155				1,466				5,666
Income tax expense (recovery)			27,087				3,098				4,892				(40,753	)			27				(5,649	)
Additions to property, plant and
equipment during the period			29,886				726				104,846				9,103				151				144,712

As at December 31, 2015

		Turkey				China				Brazil				Greece				Romania				Other				Total
		$				$				$				$				$				$				$
Information about assets and liabilities
Property, plant and equipment (*)			898,027				1,327,725				179,702				1,942,419				398,147				1,739				4,747,759
Goodwill			-				50,276				-				-				-				-				50,276
			898,027				1,378,001				179,702				1,942,419				398,147				1,739				4,798,035
Debt			-				-				-				-				-				589,395				589,395

* Net of revenues from sale of production from tailings retreatment

The Turkey segment derive their revenues from sales of gold. The Brazil segment derives its revenue from sales of iron ore. The Greece segment derives its revenue from sales of zinc, lead and silver concentrates.

11.2 Seasonality/cyclicality of operations

Management does not consider operations to be of a significant seasonal or cyclical nature. 

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