EX-99.2 3 mda.htm MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE SIX MONTHS ENDED JULY30, 2016

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MANAGEMENT'S DISCUSSION AND ANALYSIS  for the three and six-month periods ended June 30, 2016  

MANAGEMENT'S DISCUSSION and ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A)

for the three and six-month periods ended June 30, 2016

Throughout this MD&A, Eldorado, we, us, our and the Company mean Eldorado Gold Corporation.

This quarter means the second quarter of 2016. All dollar amounts are in United States dollars unless stated otherwise.

The information in this MD&A is as of July 28, 2016 unless otherwise stated. You should also read our audited consolidated financial statements for the year ended December 31, 2015 prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and the unaudited condensed consolidated financial statements for the three and six-month periods ended June 30, 2016 prepared in accordance with International Accounting Standard (IAS) 34 – "Interim Financial Reporting". We file our financial statements and MD&A with appropriate regulatory authorities in Canada and the United States. You can find more information about Eldorado, including our Annual Information Form, on SEDAR at www.sedar.com.

About Eldorado

Based in Vancouver, Canada, Eldorado owns and operates gold mines around the world. Its activities involve all facets of the gold mining industry including exploration and evaluation, development, production and reclamation.

Operating gold mines: 

·	Kisladag, in Turkey (100%)
·	Efemcukuru, in Turkey (100%)
·	Tanjianshan, in China (90%)
·	Jinfeng, in China (82%)
·	White Mountain, in China (95%)

Gold projects:  

·	Skouries, in Greece (95%)
·	Olympias, in Greece (95%)
·	Perama Hill, in Greece (100%)
·	Sappes, in Greece (100%)
·	Certej, in Romania (81%)
·	Eastern Dragon, in China (75%)
·	Tocantinzinho, in Brazil (100%)

Other mines: 

·	Vila Nova – iron ore, in Brazil (100%)
·	Stratoni – silver, lead, zinc, in Greece (95%)

Eldorado's common shares are listed on the following exchanges: 

·	Toronto Stock Exchange (TSX) under the symbol ELD
·	New York Stock Exchange (NYSE) under the symbol EGO

ELD is part of the S&P/TSX Global Gold Index. EGO is part of the AMEX Gold Bugs Index, the NYSE ARCA Gold Bugs Index, and the PHLX Gold/Silver Index.

1

MANAGEMENT'S DISCUSSION AND ANALYSIS  for the three and six-month periods ended June 30, 2016  

 

Second quarter summary results

Selected consolidated financial information and corporate developments

·	During the quarter the Company announced agreements to sell its Chinese assets to two parties for a total of $900 million in cash, subject to regulatory and other approvals and closing adjustments. The Company recorded a post-tax impairment loss on its China segment during the quarter of $339.0 million, representing the difference between the expected net proceeds on the sale of the Chinese assets and their net book value. (1)
·	Loss attributable to shareholders of the Company was $329.9 million ($0.46 per share) in the second quarter of 2016, compared to a loss attributable to shareholders of the Company of $198.6 million ($0.28 per share) in the second quarter of 2015.
·	Gold revenues were $162.7 million (2015 – $204.2 million) on sales of 128,090 ounces of gold at an average realized gold price of $1,270 per ounce (2015 – 170,056 ounces at $1,201 per ounce) in the second quarter of 2016.
·	During the second quarter the Company announced that it had renewed its $375.0 million revolving credit facility. The amended and restated credit agreement includes available credit of US$250 million, an accordion feature of US$100 million, and an extension of the term to June 13, 2020 from November 23, 2016.
·	At quarter end the Company reported liquidity of $422.8 million, including $202.8 million in cash, cash equivalents and term deposits, and $220.0 million in undrawn lines of credit. Cash of $71.8 million reported under "Assets held for sale" in the balance sheet is included in the $202.8 million above, and is expected to be included in the proceeds from the sale of the Chinese assets.

 

Selected performance measures ⁽²⁾

·	Gold production of 124,110 ounces (2015 – 181,160 ounces including production from Olympias tailings retreatment).
·	Cash operating costs averaged $607 per ounce (2015 – $569 per ounce).
·	All in sustaining cash costs averaged $933 per ounce (2015 – $854 per ounce).
·	Gross profit from gold mining operations of $55.5 million (2015 – $61.4 million).
·	Adjusted net earnings of $11.7 million ($0.01 per share) compared to adjusted net earnings of $17.0 million ($0.02 per share) in 2015.
·	Cash generated from operating activities of continuing operations before changes in non-cash working capital was $30.4 million (2015 – $34.5 million).

 

	(1)	In accordance with the requirements of IFRS 5 – Non-current assets held for sale and discontinued operations, the Company's China segment has been classified as a discontinued operation for the six-month period ended June 30, 2016, and accordingly the 2015 comparative information has been restated. Except where indicated the financial and performance information presented in this MD&A includes discontinued operations.
	(2)	Throughout this MD&A we use cash operating cost per ounce, total cash costs per ounce, all-in sustaining cost per ounce, gross profit from gold mining operations, adjusted net earnings, and cash flow from operating activities before changes in non-cash working capital as additional measures of Company performance. These are non-IFRS measures. Please see page 11 for an explanation and discussion of these non-IFRS measures.

 

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MANAGEMENT'S DISCUSSION AND ANALYSIS  for the three and six-month periods ended June 30, 2016  

Summarized Financial Results

Continuing operations

Summarized financial results from continuing operations– millions, except		3 months ended June 30,								6 months ended June 30,
where noted		2016				2015				2016				2015
Revenues		$	107.1			$	124.6			$	201.8			$	257.7
Gold revenues		$	98.3			$	114.7			$	188.8			$	233.7
Gold sold (ounces)			77,623				96,209				152,606				193,834
Average realized gold price (per ounce)		$	1,267			$	1,201			$	1,237			$	1,214
Cash operating costs (per ounce sold)		$	490			$	561			$	504			$	549
Total cash cost (per ounce sold)		$	505			$	577			$	521			$	565
All-in sustaining cash cost (per ounce sold)		$	808			$	797			$	833			$	799
Gross profit from gold mining operations		$	41.4			$	39.7			$	73.5			$	88.2

Including discontinued operations

Summarized financial results including discontinued operations– millions, except		3 months ended June 30,								6 months ended June 30,
where noted		2016				2015				2016				2015
Gold revenues		$	162.7			$	204.2			$	322.6			$	428.2
Gold sold (ounces)			128,090				170,056				261,557				351,876
Average realized gold price (per ounce)		$	1,270			$	1,201			$	1,233			$	1,217
Cash operating costs (per ounce sold)		$	607			$	569			$	605			$	545
Total cash cost (per ounce sold)		$	650			$	618			$	654			$	597
All-in sustaining cash cost (per ounce sold)		$	933			$	854			$	908			$	811
Gross profit from gold mining operations		$	55.5			$	61.4			$	96.6			$	138.5
Adjusted net earnings		$	11.7			$	17.0			$	11.0			$	36.5
Net profit (loss) attributable to shareholders of the Company		$	(329.9)			$	(198.6)			$	(332.3)			$	(206.8)
Earnings (loss) per share attributable to shareholders of the Company – Basic (per share)		$	(0.46)			$	(0.28)			$	(0.46)			$	(0.29)
Earnings (loss) per share attributable to shareholders of the Company – Diluted (per share)		$	(0.46)			$	(0.28)			$	(0.46)			$	(0.29)

Review of the quarterly financial results

Loss attributable to shareholders of the Company was $329.9 million (or $0.46 per share) for the quarter compared with a loss of $198.6 million (or $0.28 per share) in the second quarter of 2015. During the quarter the Company recorded a post-tax impairment loss of $339.0 million in discontinued operations related to the Company's Chinese assets. The loss reported during the second quarter of 2015 was mainly due to an impairment loss in the amount of $214.1 million recorded against Certej. Adjusted net earnings for the quarter were $11.7 million (or $0.01 per share) compared with $17.0 million (or $0.02 per share) in the second quarter of 2015.

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MANAGEMENT'S DISCUSSION AND ANALYSIS  for the three and six-month periods ended June 30, 2016  

Gross profit from continuing gold mining operations increased slightly year over year as the impact of lower sales volumes was offset by higher gold prices and lower unit operating costs. Gold sales volumes from continuing operations fell year over year due to an anticipated decrease in gold production from Kisladag in comparison with 2015. Kisladag's production was impacted by longer leach cycles as a result of solution being applied to higher lifts. Additionally, production during 2015 benefitted from significant leach pad inventory draw down due to an increase in the solution pumping and treatment capacity installed at the end of 2014. Cash operating costs per ounce from continuing operations decreased year over year due to lower cash operating costs at Kisladag. Mining costs at Kisladag fell 44% as a result of a 64% drop in waste stripping tonnes year over year.

Loss from discontinued operations was $339.4 million compared with a profit of $10.0 million in the second quarter of 2015. In addition to the $339.0 million impairment loss mentioned above, the loss from discontinued operations included gross profit from gold mining operations of $14.0 million (2015 - $21.6 million), general and administrative expenses of $10.5 million (2015 - $3.4 million), and income tax expense of $2.8 million (2015 – $7.4 million).

Agreements to sell Chinese assets

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 for US$300 million in cash, subject to certain closing adjustments. On May 16, 2016, the Company announced that it had reached a second agreement to sell its respective interests in the White Mountain and Tanjianshan mines, and the Eastern Dragon development project to an affiliate of Yintai Resources Co. Ltd. for US$600 million in cash, subject to certain closing adjustments. With the completion of these two transactions, the Company will have effectively disposed of its Chinese business segment. The transactions are expected to close in the second half of 2016 and are subject to obtaining various regulatory and other approvals.

Outlook

Quarterly production was in-line with internal plans. Gold production for 2016, including discontinued operations is forecast to be 570,000 ounces of gold with average cash costs for commercial production of $595 per ounce and all-in sustaining cash costs of $930 per ounce. Previous guidance was production of 565,000 - 630,000 ounces at average cash costs of $585 to $620 per ounce and all-in sustaining cash costs of $960 to $995 per ounce. Capital spending is forecast to be $95.0 million in sustaining capital and $250.0 million in new project development capital compared with previous guidance of $105.0 million and $235.0 million respectively. The forecast for new project development capital is higher than original guidance mainly due to projected higher capital spending at Skouries following the approval of the updated technical study during the quarter and the restart of construction activities at site.

In Turkey, the Company's two operating mines continue with no disruptions and all employees are accounted for and safe. The Company is confident the country will continue to provide conditions suitable for ongoing operations and further investment.

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MANAGEMENT'S DISCUSSION AND ANALYSIS  for the three and six-month periods ended June 30, 2016  

   

Operations update

		3 months ended June 30,								6 months ended June 30,
CONTINUING OPERATIONS:		2016				2015				2016				2015
Kisladag
Gross profit – gold mining operations (millions)		$	29.2			$	28.1			$	51.0			$	71.7
Ounces produced			49,924				67,778				102,300				147,034
Cash operating costs ($ per ounce sold)		$	479			$	596			$	508			$	556
Total cash cost ($ per ounce sold)		$	497			$	611			$	525			$	572
Efemcukuru
Gross profit – gold mining operations (millions)		$	12.2			$	11.6			$	22.5			$	16.5
Ounces produced			23,406				27,705				50,922				48,925
Cash operating costs ($ per ounce sold)		$	509			$	477			$	495			$	527
Total cash cost ($ per ounce sold)		$	521			$	494			$	512			$	544
Olympias
Ounces produced from tailings retreatment			0				3,686				2,774				8,429
SUBTOTAL: CONTINUING OPERATIONS
Gross profit – gold mining operations (millions)		$	41.4			$	39.7			$	73.5			$	88.2
Ounces produced			73,330				95,483				153,222				195,959
Cash operating costs ($ per ounce sold)		$	490			$	561			$	504			$	549
Total cash cost ($ per ounce sold)		$	505			$	577			$	521			$	565
DISCONTINUED OPERATIONS:
Tanjianshan
Gross profit – gold mining operations (millions)		$	4.0			$	6.1			$	4.5			$	18.8
Ounces produced			13,900				25,074				27,953				51,700
Cash operating costs ($ per ounce sold)		$	830			$	449			$	841			$	423
Total cash cost ($ per ounce sold)		$	963			$	626			$	1,023			$	594
Jinfeng
Gross profit – gold mining operations (millions)		$	6.9			$	13.7			$	11.1			$	24.5
Ounces produced			22,353				38,234				48,288				74,920
Cash operating costs ($ per ounce sold)		$	736			$	551			$	731			$	535
Total cash cost ($ per ounce sold)		$	821			$	632			$	813			$	621
White Mountain
Gross profit – gold mining operations (millions)		$	3.2			$	1.9			$	7.5			$	7.0
Ounces produced			14,527				18,683				32,862				39,566
Cash operating costs ($ per ounce sold)		$	824			$	757			$	689			$	674
Total cash cost ($ per ounce sold)		$	867			$	796			$	729			$	713
TOTALS INCLUDING DISCONTINUED OPERATIONS
Gross profit – gold mining operations (millions)		$	55.5			$	61.4			$	96.6			$	138.5
Ounces produced – including Olympias production from tailings retreatment )			124,110				181,160				265,099				370,574
Cash operating costs ($ per ounce sold) )		$	607			$	569			$	605			$	545
Total cash cost ($ per ounce sold) )		$	650			$	618			$	654			$	597

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MANAGEMENT'S DISCUSSION AND ANALYSIS  for the three and six-month periods ended June 30, 2016  

    

Kisladag

Operating Data				3 months ended June 30,								6 months ended June 30,
				2016				2015				2016				2015
Tonnes placed on pad					4,256,279				4,873,089				8,303,175				9,099,202
Average treated head grade - grams per tonne (g/t)					0.81				0.66				0.77				0.68
Gold (ounces)
- Produced					49,924				67,778				102,300				147,034
- Sold					49,942				67,981				102,621				146,983
Cash operating costs (per ounce sold)				$	479			$	596			$	508			$	556
Total cash costs (per ounce sold)				$	497			$	611			$	525			$	572
Financial Data (millions)
Gold revenues				$	63.0			$	81.2			$	125.5			$	177.4
Depreciation and depletion				$	9.0			$	11.4			$	20.6			$	21.6
Gross profit – gold mining operations				$	29.2			$	28.1			$	51.0			$	71.7
Sustaining capital expenditures				$	6.2			$	4.0			$	13.2			$	7.3

Kisladag's production during the quarter was impacted by longer leach cycles as a result of solution being applied to higher lifts. Additionally, production during 2015 benefitted from significant leach pad inventory draw down as a result of an increase in the solution pumping rate from equipment installed at the end of 2014. Production is expected to increase throughout the remainder of the year as leach cycles benefit from lower lifts placed on new leach pad cells. Cash operating costs per ounce decreased year over year due to lower mining costs and higher recovery rates. Mining costs at Kisladag fell 44% as a result of a 64% drop in waste stripping tonnes year over year. Capital expenditures for the quarter included costs for capitalized waste stripping and sustaining construction activities.

Efemcukuru

Operating Data				3 months ended June 30,								6 months ended June 30,
				2016				2015				2016				2015
Tonnes Milled					120,044				113,851				236,531				219,270
Average treated head grade - grams per tonne (g/t)					6.95				8.53				7.45				7.95
Average Recovery Rate					92.6	%			91.0	%			94.3	%			91.0	%
Gold (ounces)
- Produced					23,406				27,705				50,922				48,925
- Sold					27,681				28,228				49,985				46,851
Cash operating costs (per ounce sold)				$	509			$	477			$	495			$	527
Total cash costs (per ounce sold)				$	521			$	494			$	512			$	544
Financial Data (millions)
Gold revenues				$	35.4			$	33.5			$	63.3			$	56.2
Depreciation and depletion				$	8.7			$	8.1			$	15.2			$	14.3
Gross profit – gold mining operations				$	12.2			$	11.6			$	22.5			$	16.5
Sustaining capital expenditures				$	7.2			$	5.9			$	12.0			$	10.4

Efemcukuru's production during the quarter was lower year over year due to an 18% decrease in average treated head grade. Cash operating costs were higher year over year due to lower head grade. Capital spending during the quarter included underground development and mine mobile equipment.

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MANAGEMENT'S DISCUSSION AND ANALYSIS  for the three and six-month periods ended June 30, 2016  

     

Tanjianshan

Operating Data				3 months ended June 30,								6 months ended June 30,
				2016				2015				2016				2015
Tonnes Milled					272,673				274,194				541,288				531,491
Average treated head grade - grams per tonne (g/t)					2.01				3.29				1.92				3.42
Average Recovery Rate					79.3	%			82.0	%			78.8	%			81.5	%
Gold (ounces)
- Produced					13,900				25,074				27,953				51,700
- Sold					13,900				16,875				27,953				43,501
Cash operating costs (per ounce sold)				$	830			$	449			$	841			$	423
Total cash costs (per ounce sold)				$	963			$	626			$	1,023			$	594
Financial Data (millions)
Gold revenues				$	17.8			$	20.6			$	34.5			$	53.9
Depreciation and depletion				$	0.4			$	3.9			$	1.3			$	9.2
Gross profit – gold mining operations				$	4.0			$	6.1			$	4.5			$	18.8
Sustaining capital expenditures				$	0.1			$	6.7			$	0.4			$	8.8

Tanjianshan's production during the quarter was 45% lower year over year due to a decrease in head grade and lower recovery rate. Cash operating costs per ounce for the quarter were 85% higher year over year due to lower gold produced. Subsequent to the quarter, Tanjianshan reported a crack in the mill shell. It is expected that this will take three to four weeks to repair by welding. During this period, any other shutdown works requiring downtime will also be completed.

Jinfeng

Operating Data				3 months ended June 30,								6 months ended June 30,
				2016				2015				2016				2015
Tonnes Milled					262,101				329,738				567,585				651,444
Average treated head grade - grams per tonne (g/t)					3.22				4.21				3.24				4.15
Average Recovery Rate					84.0	%			87.1	%			83.1	%			86.7	%
Gold (ounces)
- Produced					22,353				38,234				48,288				74,920
- Sold					22,040				38,289				48,136				74,975
Cash operating costs (per ounce sold)				$	736			$	551			$	731			$	535
Total cash costs (per ounce sold)				$	821			$	632			$	813			$	621
Financial Data (millions)
Gold revenues				$	28.1			$	46.3			$	59.1			$	92.2
Depreciation and depletion				$	3.1			$	8.5			$	8.8			$	21.1
Gross profit – gold mining operations				$	6.9			$	13.7			$	11.1			$	24.5
Sustaining capital expenditures				$	1.1			$	4.2			$	1.2			$	6.4

Jinfeng's production during the quarter was 42% lower year over year mainly as a result of less ore milled and lower head grade, largely due to the end of open pit mining in the second quarter of 2015. Cash costs were higher year over year due to lower gold produced. Capital expenditures for the quarter included underground development, mining equipment and tailings dam improvements.

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MANAGEMENT'S DISCUSSION AND ANALYSIS  for the three and six-month periods ended June 30, 2016  

      

White Mountain

Operating Data				3 months ended June 30,								6 months ended June 30,
				2016				2015				2016				2015
Tonnes Milled					198,994				210,753				405,084				417,360
Average treated head grade - grams per tonne (g/t)					2.54				2.97				2.90				3.26
Average Recovery Rate					85.7	%			86.8	%			86.4	%			87.8	%
Gold (ounces)
- Produced					14,527				18,683				32,862				39,566
- Sold					14,527				18,683				32,862				39,566
Cash operating costs (per ounce sold)				$	824			$	757			$	689			$	674
Total cash costs (per ounce sold)				$	867			$	796			$	729			$	713
Financial Data (millions)
Gold revenues				$	18.6			$	22.6			$	40.2			$	48.5
Depreciation and depletion				$	2.8			$	5.8			$	8.8			$	13.2
Gross profit – gold mining operations				$	3.2			$	1.9			$	7.5			$	7.0
Sustaining capital expenditures				$	2.0			$	1.9			$	6.1			$	4.2

White Mountain's production during the quarter was 22% lower year over year due to slightly reduced milled tonnage and lower feed grade. Cash operating costs per ounce were 9% higher, as a result of lower gold produced. Capital expenditures for the quarter included underground development, exploration drilling, tailings dam construction, and sustaining capital projects within the processing plant.

Stratoni

Operating Data		3 months ended June 30,								6 months ended June 30,
		2016				2015				2016				2015
Tonnes ore mined (wet)			53,739				49,031				85,706				97,730
Tonnes ore processed (dry)			51,770				43,571				82,470				90,446
Pb grade (%)			6.40	%			6.41	%			6.40	%			6.66	%
Zn grade (%)			9.68	%			9.07	%			9.43	%			9.43	%
Ag grade (g/t)			166				168				169				178
Tonnes of concentrate produced			13,257				10,739				20,740				23,217
Tonnes of concentrate sold			10,252				11,188				14,860				26,896
Average realized concentrate price (per tonne)		$	755			$	843			$	755			$	840
Cash Costs (per tonne of concentrate sold)		$	843			$	799			$	858			$	763
Financial Data (millions)
Revenues		$	7.7			$	9.4			$	11.2			$	22.6
Depreciation and depletion		$	0			$	2.3			$	0			$	5.0
Earnings/(loss) profit from mining operations		$	(1.0	)		$	(1.9	)		$	(1.7	)		$	(3.3	)
Sustaining capital expenditures		$	0.9			$	0.8			$	2.0			$	1.3

Concentrate production during the quarter at Stratoni was higher year over year due to higher ore tonnes processed and zinc head grades. Higher mine production and plant throughput reflected commencement of a trial of continuous underground operations in April, and reduced days lost to stoppages.

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MANAGEMENT'S DISCUSSION AND ANALYSIS  for the three and six-month periods ended June 30, 2016  

 

Vila Nova

Vila Nova continued on care and maintenance during the quarter.

Gold projects update

GREECE

Olympias

At Olympias, progress was made in the Phase II civil works and steelwork fabrication during the quarter. Concrete demolition work was completed across the site, providing access into additional areas for the contractor. Progress was also made on the design and procurement of steel work with arrival of the first deliveries for the crushing area in late June.

By the end of the quarter the majority of the long lead items had arrived at site including a number of batches of flotation cells. Plate work fabrication also commenced for the crushing and main production buildings and the refurbishment of existing equipment is proceeding to schedule. The key highlight of the quarter was the awarding of the structural and mechanical installation contracts, which were placed in late June and mobilisation is due to begin early August. Total capital expenditure for the quarter was $30.0 million.

Skouries

Skouries began the quarter on care and maintenance, however activities recommenced late in the quarter after receipt of the approval of the Updated Technical Study on May 9, 2016. Construction teams began to remobilize in early June, with the ramp up planned over the next few months. Early activities will be limited to those that take advantage of the summer weather window, including earthworks, completion of building foundations and remaining tree cutting, as well as enabling works for the tailings management facility access road. Total capital expenditures during the quarter were $5.9 million.

Perama Hill

No project development activities took place during the quarter and the project remained on care and maintenance.

ROMANIA

Certej

During the quarter project development focused on continued optimization work in the areas of the metallurgical process, water and waste management and site infrastructure. Development continued at the onsite quarry to produce aggregates for onsite road construction and water management facilities. Offsite infrastructure work was focused on upgrading the main waterline. Higher level capital and operating costs updates are underway in order to support ongoing permitting activities. A total of $3.6 million was spent on Certej during the quarter.

BRAZIL

Tocantinzinho

Site activity increased during the quarter as a result of the beginning of the dry season. Work included further geotechnical drilling at the plant and infrastructure areas, maintenance work on the access road and an increase in security facilities, primarily around the camp. Work on the power line and access road focused on engineering design to bring both project areas to a high level of basic design for permitting and costing purposes. A similar approach has been taken with the tailings management and mine rock storage facilities to support ongoing permitting activities. Capital costs incurred at Tocantinzinho during the quarter totalled $0.9 million.

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MANAGEMENT'S DISCUSSION AND ANALYSIS  for the three and six-month periods ended June 30, 2016  

  

CHINA

Eastern Dragon

During the quarter, Eastern Dragon remained on care and maintenance as the Company continues to advance the permitting process. The Mining License application has been submitted. Work continued on amendments to the Feasibility Report for forest usage.

Exploration update

During the quarter 7,100 metres of exploration drilling were completed at the Company's operations and exploration projects. The 2016 drilling programs have been affected by delays in obtaining drilling permits. A total of $9.1 million was spent on exploration and evaluation programs.

Greece

In Greece, exploration activities focused on the Stratoni corridor, and included geological mapping, updating the three dimensional model for the Mavres Petres orebody and relogging of historical drillcore. Development of the hangingwall exploration drift, designed to provide access for exploration drilling of extensions to the Mavres Petres orebody, will commence in early July.

Romania

Fieldwork in Romania during the quarter focused on defining epithermal targets for drilling peripheral to the Certej deposit. Drilling permit applications are pending for several of these, and we expect the work to commence in the third quarter.

Turkey

Exploration in Turkey concentrated on project generation work, primarily to identify tertiary volcanic centers in the western part of the country similar to that which hosts the Kisladag deposit. Detailed mapping and modelling work was also completed at the Efemcukuru mine, targeting extensions to the Kokarpinar and Kestane Beleni veins that are scheduled for drilling later this year.

Brazil

There was no exploration activity during the quarter at Tocantinzinho in Brazil. Reconnaissance-level mapping and sampling programs were conducted over our licenses in the Mara Rosa belt in Goias State, and new project areas in Minas Gerais and northeastern Brazil.

China

In China, drilling was completed at both the White Mountain and Tanjianshan operations. High-grade extensions to the North and Far North ore zones continue to be intersected at White Mountain, with notable intercepts including 11.8 metres grading 12.82 grams per tonne gold and 11.2 metres grading 7.06 grams per tonne gold.  Drilling at Tanjianshan tested four areas, including the Xinjingou deposit which resulted in intercepts of 3.7 metres grading 3.71 grams per tonne gold and 7.0 metres grading 3.73 grams per tonne gold.

10

 

MANAGEMENT'S DISCUSSION AND ANALYSIS  for the three and six-month periods ended June 30, 2016  

  

Quarterly results

millions (except per share amounts)

				2016				2016				2015				2015				2015				2015				2014				2014
				Q2				Q1				Q4				Q3				Q2				Q1				Q4				Q3
Total revenues(1)				$	171.5			$	164.1			$	199.3			$	211.5			$	214.2			$	238.3			$	259.0			$	263.5
Profit (loss)(2)				$	(329.9	)		$	(2.5	)		$	(1,238.0	)		$	(96.1	)		$	(198.6	)		$	(8.2	)		$	13.9			$	19.8
Earnings (loss) per share(2)
- basic				$	(0.46	)		$	(0.00	)		$	(1.73	)		$	(0.13)			$	(0.28	)		$	(0.01	)		$	0.02			$	0.03
- diluted				$	(0.46	)		$	(0.00	)		$	(1.73	)		$	(0.13)			$	(0.28	)		$	(0.01	)		$	0.02			$	0.03

(1)	Total revenues for Q2 2016 include discontinued operations
(2)	Attributable to shareholders of the Company

 

As discussed above, the second quarter of 2016 was affected by the impairment write down of the Company's Chinese assets. Quarterly profit for the fourth and second quarters of 2015 were affected by impairments of goodwill and property, plant and equipment related to Skouries, Stratoni, Tanjianshan and Certej.

Non-IFRS measures

Throughout this document, we have provided measures prepared in accordance with IFRS, as well as some non-IFRS performance measures as additional information for investors who also use them to evaluate our performance. Since there is no standard method for calculating non-IFRS measures, they are not a reliable way to compare us against other companies. Non-IFRS measures should be used along with other performance measures prepared in accordance with IFRS. We have defined our non-IFRS measures below and reconciled them with the IFRS measures we report.

Cash operating cost and total cash cost

The table below reconciles cash operating cost from our gold mining operations to production costs. We calculate costs according to the Gold Institute Standard. Total cash cost is the sum of cash operating cost, royalty expense and production tax expense.

Reconciliation of cash operating costs to production costs for continuing operations
millions (except for gold ounces sold and cost per ounce sold)		Q2 2016				Q2 2015				YTD 2016				YTD 2015
Production costs (from consolidated income statement)		$	48.9			$	65.8			$	94.1			$	133.9
Vila Nova and Stratoni production costs			8.7				9.2				12.9				22.5
Production costs – excluding Vila Nova and Stratoni		$	40.2			$	56.6			$	81.2			$	111.4
By-product credits and other adjustments			(1.0	)			(1.1	)			(1.7	)			(1.8	)
Total cash cost		$	39.2			$	55.5			$	79.5			$	109.6
Royalty expense and production taxes			(1.2	)			(1.5	)			(2.6	)			(3.2	)
Cash operating cost		$	38.0			$	54.0			$	76.9			$	106.4
Gold ounces sold			77,623				96,209				152,606				193,834
Total cash cost per ounce sold		$	505			$	577			$	521			$	565
Cash operating cost per ounce sold		$	490			$	561			$	504			$	549

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MANAGEMENT'S DISCUSSION AND ANALYSIS  for the three and six-month periods ended June 30, 2016  

  

Reconciliation of cash operating costs to production costs including discontinued operations
millions (except for gold ounces sold and cost per ounce sold)		Q2 2016				Q2 2015				YTD 2016				YTD 2015
Production costs– excluding Vila Nova and Stratoni		$	40.2			$	56.6			$	81.2			$	111.4
Production costs – discontinued operations (note 5)			44.2				49.8				91.9				100.9
Production costs – including discontinued operations		$	84.4			$	106.4			$	173.1			$	212.3
By-product credits and other adjustments			(1.1	)			(1.2	)			(1.9	)			(2.1	)
Total cash cost – including discontinued operations		$	83.3			$	105.2			$	171.2			$	210.2
Royalty expense and production taxes			(5.6	)			(8.4	)			(13.0	)			(18.6	)
Cash operating cost – including discontinued operations		$	77.7			$	96.8			$	158.2			$	191.6
Gold ounces sold – including discontinued operations			128,090				170,056				261,557				351,876
Total cash cost per ounce sold – including discontinued operations		$	650			$	618			$	654			$	597
Cash operating cost per ounce sold – including discontinued operations		$	607			$	569			$	605			$	545

All-in sustaining cash cost

All-in sustaining costs are calculated by taking total cash costs and adding sustaining capital expenditures, corporate administrative expenses, exploration and evaluation costs, and reclamation cost accretion. Sustaining capital expenditures are defined as those expenditures which do not increase annual gold ounce production at a mine site and exclude all expenditures at the Company's projects and certain expenditures at the Company's operating sites which are deemed expansionary in nature. Certain other cash expenditures, including tax payments, dividends and financing costs are also not included. The Company believes that this measure represents the total costs of producing gold from current operations, and provides the Company and other stakeholders of the company with additional information of the Company's operational performance and ability to generate cash flows. The Company reports this measure on a gold ounces sold basis.

Calculation of all-in sustaining cash costs for continuing operations		Q2 2016				Q2 2015				YTD 2016				YTD 2015
millions (except for gold ounces sold and all-in sustaining cash cost per ounce sold)
Total cash cost – continuing operations		$	39.2			$	55.5			$	79.5			$	109.6
Sustaining capital spending at operating gold mines			13.5				10.0				25.2				17.6
Exploration spending at operating gold mines			0.1				0.1				0.6				0.2
General and administrative expenses			9.9				11.1				21.8				27.5
All-in sustaining cash costs		$	62.7			$	76.7			$	127.1			$	154.9
Gold ounces sold – continuing operations			77,623				96,209				152,606				193,834
All-in sustaining cash cost per ounce sold – continuing operations		$	808			$	797			$	833			$	799

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MANAGEMENT'S DISCUSSION AND ANALYSIS  for the three and six-month periods ended June 30, 2016  

  

Calculation of all-in sustaining cash costs including discontinued operations		Q2 2016				Q2 2015				YTD 2016				YTD 2015
millions (except for gold ounces sold and all-in sustaining cash cost per ounce sold)
Total cash cost – including discontinued operations		$	83.3			$	105.2			$	171.2			$	210.2
Sustaining capital spending at operating gold mines			16.7				22.7				32.9				37.1
Exploration spending at operating gold mines			1.5				2.4				2.6				3.3
General and administrative expenses			18.0				15.0				30.8				34.7
All-in sustaining cash costs – including discontinued operations		$	119.5			$	145.3			$	237.5			$	285.3
Gold ounces sold – including discontinued operations			128,090				170,056				261,557				351,876
All-in sustaining cash cost per ounce sold – including discontinued operations		$	933			$	854			$	908			$	811

Cash flow from mining operations before changes in non-cash working capital

We use cash flow from mining operations before changes in non-cash working capital to supplement our consolidated financial statements, and calculate it by not including the period to period movement of non-cash working capital items, like accounts receivable, advances and deposits, inventory, accounts payable and accrued liabilities.

Adjusted net earnings

The Company has included non-IFRS performance measures, adjusted net earnings and adjusted net earnings per share, throughout this document. Adjusted net earnings excludes gains/losses and other costs incurred for acquisitions and disposals of mining interests, impairment charges, unrealized and non-cash realized gains/losses of financial instruments and foreign exchange impacts on deferred income tax as well as significant non-cash, non-recurring items. The Company also excludes net earnings and losses of certain associates that the Company does not view as part of the core mining operations. The Company excludes these items from net earnings to provide a measure which allows the Company and investors to evaluate the results of the underlying core operations of the Company and its ability to generate cash flow. Accordingly, it is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. The following table provides a reconciliation of adjusted net earnings to the consolidated financial statements for the quarters ended June 30:

Reconciliation of adjusted net earnings to consolidated net earnings (loss) millions (except for weighted average shares and earnings per share)		Q2 2016				Q2 2015				YTD 2016				YTD 2015
Net (loss) earnings attributable to shareholders		($329.9)				($198.6)				($332.3)				($206.8)
Post-tax loss on re-measurement to fair value less costs to sell			339.0				0.0				339.0				0.0
Impairment loss on property, plant and equipment, net of tax			0.0				214.1				0.0				214.1
Write-down of assets net of tax			(0.4	)			0.0				0.6				0.0
Loss on disposal of assets			0.0				0.0				0.2				0.0
Losses (gains) on available-for-sale securities			0.6				0.0				4.9				0.0
Deferred tax recovery from OCI gain			(3.1	)			0.0				(3.1	)			0.0
Transaction costs			4.0				1.3				4.4				1.3
Unrealized losses (gains) on foreign exchange translation of deferred income tax balances			1.5				0.2				(2.7	)			21.7
Inventory writedown			0.0				0.0				0.0				6.2
Total adjusted net earnings		$	11.7			$	17.0			$	11.0			$	36.5
Weighted average shares outstanding			716,587				716,587				716,587				716,585
Adjusted net earnings ($/share)		$	0.01			$	0.02			$	0.01			$	0.05

13

MANAGEMENT'S DISCUSSION AND ANALYSIS  for the three and six-month periods ended June 30, 2016  

  

Gross profit from gold mining operations

Gross profit from gold mining operations represents gross revenues (including by-product revenues) from gold mining operations less production costs and depreciation, depletion and amortization related to those operations.

Financial condition and liquidity

Operating activities

Operating activities from continuing operations before changes in non-cash working capital generated $29.3 million in cash, compared to $34.5 million in 2015. Net cash provided by discontinued operations were $11.6 million (2015 - $34.7 million).

Investing activities

The Company invested $61.6 million in capital expenditures of continuing operations this quarter. Mine evaluation, expansion and development totalled $40.4 million while sustaining capital spending at our producing mines totalled $14.3 million ($13.4 million at our producing gold mines and $0.9 million at Stratoni). A total of $6.4 million in bond interest was also charged to capital projects. The remaining $0.5 million related to fixed assets for our corporate offices. Net cash used by investing activities of discontinued operations was $4.4 million (2015 - $15.1 million) related to sustaining capital expenditures and capitalized evaluation expenditures.

Capital resources

(millions)		June 30, 2016				December 31, 2015
Cash, cash equivalents and term deposits(1)		$	202.8			$	292.6
Working capital		$	1,177.6			$	335.4
Debt		$	620.5			$	589.4

_{(1) Including cash from discontinued operations.}

 

Management believes that the working capital at June 30, 2016, together with future cash flows from operations and, where appropriate, selected financing sources, including available credit lines, are sufficient to support our planned and foreseeable commitments, and dividends, if declared, in 2016 and beyond.

Contractual obligations

(millions)		Within 1 year				2 to 3 years				3 to 4 years				Over 5 years				Total
Debt			30.0				-				600.0				-				630.0
Capital leases			0.4				0.8				-				-				1.2
Operating leases			6.7				5.5				6.5				5.9				24.6
Purchase obligations			44.7				1.8				-				-				46.5
Totals			81.8				8.1				606.5				5.9				702.3

The above table does not include interest on debt.

As at June 30, 2016, Hellas Gold had entered into off-take agreements pursuant to which Hellas Gold agreed to sell a total of 5,885 dry metric tonnes of zinc concentrates and 5,087 dry metric tonnes of lead/silver concentrates through the financial year ending December 31, 2016, and the 18,000 dry metric tonnes of gold concentrate that remained to be delivered in 2016 have been deferred to 2017, when the new Olympias Concentrator will be operative.

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MANAGEMENT'S DISCUSSION AND ANALYSIS  for the three and six-month periods ended June 30, 2016  

  

In April 2007, Hellas agreed to sell to Silver Wheaton (Caymans) Ltd. ("Silver Wheaton") all of the payable silver contained in lead concentrate produced within an area of approximately seven square kilometres around Stratoni. The sale was made in consideration of a prepayment to Hellas of $57.5 million in cash, plus a fixed price per ounce of payable silver to be delivered of the lesser of $3.90 and the prevailing market price per ounce, adjusted higher every April by 1%. For the period April 2016 through December 2016, this amount is equal to $4.18 per ounce. In October 2015 the agreement with Silver Wheaton was amended to provide an increase in the price per ounce of payable silver to be delivered to Hellas based on Hellas achieving certain exploration drilling milestones.

In May 2013, the Company, in connection with Hellas Gold, entered into a Letter of Guarantee in favour of the Greek Ministry of Environment, Energy and Climate Change, in the amount of EUR50.0 million, as security for the due and proper performance of rehabilitation works committed in connection with the Environmental Impact Assessment approved for the Kassandra Mines (Stratoni, Olympias and Skouries). The Letter of Guarantee is renewed annually and expires on July 26, 2026. The Letter of Guarantee has an annual fee of 57 basis points.

As at December 31, 2015, Tuprag Metal Madencilik Sanayi Ve Ticaret A.S. ("Tuprag") had entered into off-take agreements pursuant to which Tuprag agreed to sell a total of 22,650 dry metric tonnes of gold concentrate through the financial year ending December 31, 2016.

Debt

Significant changes in our debt from that disclosed in our December 31, 2015 annual MD&A and consolidated financial statements are as follows:

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.

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 $2.0 million were paid on the amendment dated June 2016. This amount has been deferred as prepayment 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.

Senior notes

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

Entrusted loan

As at June 30, 2016, RMB 696.6 million ($105.0 million) had been drawn under the entrusted loan. The loan has been recorded on a net settlement basis.

15

MANAGEMENT'S DISCUSSION AND ANALYSIS  for the three and six-month periods ended June 30, 2016  

 

Equity

Common shares outstanding - as of June 30, 2016			716,587,134
- as of July 28, 2016			716,587,134
Share purchase options - as of July 28, 2016 (Weighted average exercise price per share: $10.11 Cdn)			31,240,239

Other information

New accounting developments

The following standard has been published and is mandatory for Eldorado's annual accounting periods no earlier than January 1, 2018:

	·	IFRS 9 'Financial Instruments' – This standard was published in July 2015 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.
	·	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 on its consolidated financial statements.

16

MANAGEMENT'S DISCUSSION AND ANALYSIS  for the three and six-month periods ended June 30, 2016  

  

Internal controls over financial reporting

Eldorado's management is responsible for establishing and maintaining adequate internal control over financial reporting. Any system of internal control over financial reporting, no matter how well designed, has inherent limitations. As a result, even those systems determined to be effective can only provide reasonable assurance regarding the preparation and presentation of our financial statements. There have been no changes in our internal control over financial reporting in the second quarter of 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Qualified Person

Except as otherwise noted, Paul Skayman, P. Eng., our Chief Operating Officer, is the Qualified Person under NI 43-101 responsible for preparing and supervising the preparation of the scientific or technical information contained in this MD&A and verifying the technical data disclosed in this document relating to our operating mines and development projects.

Dr. Peter Lewis, P. Geo., our Vice President, Exploration, is the Qualified Person for the technical disclosure of exploration results contained in this MD&A. Drillhole results quoted represent mineralized widths in drillholes, which are greater than the true widths of mineralized zones.  Assay results reported in this release for White Mountain in China were determined from diamond drill core samples that were crushed, split, and pulverized at Eldorado's sample preparation facilities at the White Mountain mine.  Gold analyses were completed by fire assay at the ALS Chemex facility in Guangzhou.  Field duplicate, and blank samples were inserted prior to shipment to the preparation facility, certified standard reference materials were inserted prior to shipment to the assay laboratory, and results were regularly monitored to ensure the quality of the data.

Forward-looking information and risks

This MD&A includes statements and information about what we expect to happen in the future. When we discuss our strategy, plans and future financial and operating performance, or other things that have not yet happened in this review, we are making statements considered to be forward-looking information or forward-looking statements under Canadian and United States securities laws. We refer to them in this document as forward-looking information.

Key things to understand about the forward-looking information in this document:

·	It typically includes words and phrases about the future, such as: plan, expect, forecast, intend, anticipate, believe, estimate, budget, scheduled, may, could, would, might, will, as well as the negative of these words and phrases.
·	Although it represents our current views, which we consider to be reasonable, we can give no assurance that the forward-looking information will prove to be accurate.
·	It is based on a number of assumptions, including things like the future price of gold, anticipated costs and spending, and our ability to achieve our goals.
·	It is also subject to the risks associated with our business, including

 

	·	the changing price of gold and currencies and the impact of any hedging activities,
	·	actual and estimated production and cost of production,
	·	discrepancies between actual and estimated mineral reserves and resources,
	·	the speculative nature of gold exploration,
	·	risks associated with mining operations and development,
	·	regulatory, title, permitting and licensing risks,
	·	acquisition risks, and
	·	other risks that are set out in our Annual Information Form.

17

MANAGEMENT'S DISCUSSION AND ANALYSIS  for the three and six-month periods ended June 30, 2016  

  

If our assumptions prove to be incorrect or the risks materialize, our actual results and events may vary materially from what we currently expect.

Forward-looking information is designed to help you understand management's current views of our near and longer term prospects, and it may not be appropriate for other purposes. We will not necessarily update this information unless we are required to by securities laws.

The Company's operations are subject to a number of risks and other uncertainties, including risks related to the Company's foreign operations, government, environmental and other regulations and operating costs. Occurrence of various factors and uncertainties of risk cannot be accurately predicted and could cause actual results to differ significantly from our current expectations and result in a material adverse effect on the Company's operations or profitability. A comprehensive discussion of the Company's risks and uncertainties is set out in our Annual Information Form dated March 30, 2016. By this reference we hereby incorporate this discussion as a part of this MD&A. The reader is directed to carefully review this discussion for a proper understanding of these risks and uncertainties.

18