Blueprint

EX-99.1 2 ego_ex991.htm UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SECOND QUARTER - JUNE 30, 2018 Blueprint

Exhibit 99.1


June 30, 2018	Unaudited Condensed Consolidated Financial Statements
	Suite 1188, 550 Burrard Street Vancouver, British Columbia V6C 2B5 Phone: (604) 687-4018 Fax: (604) 687-4026

Eldorado Gold Corporation

Unaudited Condensed Consolidated Balance Sheets

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

	Note	June 30, 2018	December 31, 2017
		$	$
ASSETS
Current assets
Cash and cash equivalents		423,170	479,501
Term deposits		6,626	5,508
Restricted cash		301	310
Marketable securities		3,720	5,010
Accounts receivable and other		83,742	78,344
Inventories		147,866	168,844
		665,425	737,517
Restricted cash and other assets		19,542	22,902
Defined benefit pension plan		9,374	9,919
Property, plant and equipment		4,275,264	4,227,397
Goodwill	4	92,591	92,591
		5,062,196	5,090,326
LIABILITIES & EQUITY
Current liabilities
Accounts payable and accrued liabilities		91,340	110,541
Current portion of asset retirement obligation		1,232	3,489
		92,572	114,030
Debt	5	594,880	593,783
Other non-current liability		2,648	110
Defined benefit pension plan		11,909	13,599
Asset retirement obligations		97,072	96,195
Deferred income tax liabilities		556,135	549,127
		1,355,216	1,366,844
Equity
Share capital		3,007,924	3,007,924
Treasury stock		(10,104)	(11,056)
Contributed surplus		2,617,108	2,616,593
Accumulated other comprehensive loss		(21,859)	(21,350)
Deficit		(1,964,242)	(1,948,569)
Total equity attributable to shareholders of the Company		3,628,827	3,643,542
Attributable to non-controlling interests		78,153	79,940
		3,706,980	3,723,482
		5,062,196	5,090,326

Approved on behalf of the Board of Directors

(Signed) John Webster Director (Signed) George Burns Director

Date of approval: July 26, 2018

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

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	2018	2017	2018	2017
		$	$	$	$
Revenue
Metal sales	6	153,171	82,736	285,076	194,616

Cost of sales
Production costs		85,844	39,433	153,079	90,121
Depreciation and amortization		34,482	15,556	63,670	33,620
		120,326	54,989	216,749	123,741
Gross profit		32,845	27,747	68,327	70,875

Exploration expenses		6,849	7,124	10,997	12,371
Mine standby costs		4,304	1,301	7,010	2,332
Other operating items		-	1,525	-	3,658
General and administrative expenses		14,006	11,498	22,231	23,112
Defined benefit pension plan expense		1,047	782	2,130	1,612
Share based payments	8	2,844	1,990	4,162	7,118
Write-down of assets		4,483	2,177	8,507	3,231
Foreign exchange loss (gain)		2,266	(749)	3,408	(661)
Operating profit (loss)		(2,954)	2,099	9,882	18,102

Gain (loss) on disposal of assets		42	40	128	(267)
Gain on derivatives and other investments		1,406	743	2,194	778
Other income		2,175	2,211	5,272	4,560
Asset retirement obligation accretion		(509)	(523)	(1,019)	(1,047)
Interest and financing (costs) income		(2,691)	61	(6,255)	(1,050)

Profit (loss) from continuing operations before income tax		(2,531)	4,631	10,202	21,076
Income tax expense (recovery)		21,579	(2,693)	28,663	8,083
Profit (loss) from continuing operations		(24,110)	7,324	(18,461)	12,993
Profit (loss) from discontinued operations		-	203	-	(2,797)
Profit (loss) for the period		(24,110)	7,527	(18,461)	10,196

Attributable to:
Shareholders of the Company		(24,391)	11,215	(15,673)	15,049
Non-controlling interests		281	(3,688)	(2,788)	(4,853)
Profit (loss) for the period		(24,110)	7,527	(18,461)	10,196

Profit (loss) attributable to shareholders of the Company
Continuing operations		(24,391)	11,012	(15,673)	17,846
Discontinued operations		-	203	-	(2,797)
		(24,391)	11,215	(15,673)	15,049

Weighted average number of shares outstanding (thousands)
Basic		793,307	716,824	793,082	716,713
Diluted		793,307	717,479	793,082	717,380

Profit (loss) per share attributable to shareholders
of the Company:
Basic profit (loss) per share		(0.03)	0.02	(0.02)	0.02
Diluted profit (loss) per share		(0.03)	0.02	(0.02)	0.02

Profit (loss) per share attributable to shareholders
of the Company - continuing operations:
Basic profit (loss) per share		(0.03)	0.02	(0.02)	0.02
Diluted profit (loss) per share		(0.03)	0.02	(0.02)	0.02

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

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,

	2018	2017	2018	2017
	$	$	$	$

Profit (loss) for the period	(24,110)	7,527	(18,461)	10,196
Other comprehensive income (loss):
Items that will not be reclassified to profit or loss:
Change in fair value of investments in equity securities	(420)	(359)	(1,159)	(71)
Actuarial losses on defined benefit pension plans	641	226	650	331
	221	(133)	(509)	260
Items that may be reclassified subsequently to profit or loss:
Change in fair value of investments in equity securities	-	2,049	-	18,625
Income tax on change in fair value of investments in equity securities	-	(451)	-	(2,595)
	-	1,598	-	16,030
Total other comprehensive income (loss) for the period	221	1,465	(509)	16,290
Total comprehensive income (loss) for the period	(23,889)	8,992	(18,970)	26,486

Attributable to:
Shareholders of the Company	(24,170)	12,680	(16,182)	31,339
Non-controlling interests	281	(3,688)	(2,788)	(4,853)
	(23,889)	8,992	(18,970)	26,486

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

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,

	Note	2018	2017	2018	2017
		$	$	$	$
Cash flows generated from (used in):
Operating activities
Profit (loss) for the period from continuing operations		(24,110)	7,324	(18,461)	12,993
Items not affecting cash:
Asset retirement obligation accretion		509	523	1,019	1,047
Depreciation and amortization		34,482	15,556	63,670	33,620
Unrealized foreign exchange loss (gain)		169	(304)	418	(378)
Deferred income tax expense (recovery)		9,407	(9,847)	7,008	(12,559)
(Gain) loss on disposal of assets		(42)	(40)	(128)	267
Write-down of assets		4,483	2,177	8,507	3,231
Gain on derivatives and other investments		(1,406)	(743)	(2,194)	(778)
Share based payments		2,844	1,990	4,162	7,118
Defined benefit pension plan expense		1,047	782	2,130	1,612
		27,383	17,418	66,131	46,173
Property reclamation payments		(1,592)	(496)	(2,399)	(1,087)
Severance payments		(2,250)	-	(2,250)	-
Changes in non-cash working capital	10	13,163	(44,835)	(1,892)	(22,226)
Net cash provided (used) by operating activities of continuing operations		36,704	(27,913)	59,590	22,860
Net cash provided (used) by operating activities of discontinued operations		-	203	-	(2,797)

Investing activities
Purchase of property, plant and equipment		(74,346)	(75,047)	(141,332)	(148,884)
Proceeds from the sale of property, plant and equipment		7,751	82	7,812	83
Proceeds on pre-commercial production sales		3,509	1,092	16,891	1,092
Value added taxes related to mineral property expenditures, net		(1,412)	(7,240)	4,802	16,345
Investment in term deposits		(1,102)	(37,513)	(1,118)	(263,479)
Increase in restricted cash		(26)	(9,720)	(868)	(9,724)
Net cash used by investing activities of continuing operations		(65,626)	(128,346)	(113,813)	(404,567)

Financing activities
Issuance of common shares for cash		-	32	-	586
Dividend paid to shareholders		-	-	-	(10,610)
Purchase of treasury stock		(2,108)	(3,252)	(2,108)	(5,301)
Net cash used by financing activities of continuing operations		(2,108)	(3,220)	(2,108)	(15,325)

Decrease in cash and cash equivalents		(31,030)	(159,276)	(56,331)	(399,829)
Cash and cash equivalents - beginning of period		454,200	642,618	479,501	883,171
Cash and cash equivalents - end of period		423,170	483,342	423,170	483,342

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

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,

	2018	2017	2018	2017
	$	$	$	$
Share capital
Balance beginning of period	3,007,924	2,819,821	3,007,924	2,819,101
Shares issued upon exercise of share options, for cash	-	32	-	586
Transfer of contributed surplus on exercise of options	-	10	-	176
Balance end of period	3,007,924	2,819,863	3,007,924	2,819,863

Treasury stock
Balance beginning of period	(11,056)	(8,000)	(11,056)	(7,794)
Purchase of treasury stock	(2,108)	(3,252)	(2,108)	(5,301)
Shares redeemed upon exercise of restricted share units	3,060	196	3,060	2,039
Balance end of period	(10,104)	(11,056)	(10,104)	(11,056)

Contributed surplus
Balance beginning of period	2,618,323	2,609,055	2,616,593	2,606,567
Share based payments	1,845	2,811	3,575	7,308
Shares redeemed upon exercise of restricted share units	(3,060)	(196)	(3,060)	(2,039)
Transfer to share capital on exercise of options	-	(10)	-	(176)
Balance end of period	2,617,108	2,611,660	2,617,108	2,611,660

Accumulated other comprehensive loss
Balance beginning of period	(22,080)	7,653	(21,350)	(7,172)
Other comprehensive income (loss) for the period	221	1,465	(509)	16,290
Balance end of period	(21,859)	9,118	(21,859)	9,118

Deficit
Balance beginning of period	(1,939,851)	(1,934,800)	(1,948,569)	(1,928,024)
Dividends paid	-	-	-	(10,610)
Profit (loss) attributable to shareholders of the Company	(24,391)	11,215	(15,673)	15,049
Balance end of period	(1,964,242)	(1,923,585)	(1,964,242)	(1,923,585)
Total equity attributable to shareholders of the Company	3,628,827	3,506,000	3,628,827	3,506,000

Non-controlling interests
Balance beginning of period	77,872	87,621	79,940	88,786
Loss attributable to non-controlling interests	281	(3,688)	(2,788)	(4,853)
Contributions fron non-controlling interest	-	-	1,001	-
Balance end of period	78,153	83,933	78,153	83,933

Total equity	3,706,980	3,589,933	3,706,980	3,589,933

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

Eldorado Gold Corporation

Notes to the unaudited condensed consolidated financial statements

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

General Information

Eldorado Gold Corporation (“Eldorado” or the “Company”) is a gold exploration, development and mining company. The Company has operations and ongoing exploration and development projects in Turkey, Greece, Brazil, Canada, Romania and Serbia. In 2017, the Company acquired Integra Gold Corporation (“Integra”), a Canadian company with mineral assets in Quebec, Canada (note 4).

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.

Basis of preparation

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 as at and for the year ended December 31, 2017.

Except as described in note 3, 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.

These unaudited condensed consolidated interim financial statements were authorized for issue by the Company’s Board of Directors on July 26, 2018.

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.

On December 31, 2017, the Company declared commercial production at the Olympias mine, having reached certain milestones. Upon declaring commercial production, Olympias transitioned from accounting for certain costs as a development stage entity to an operating entity. All other significant judgements made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty are the same as those that applied to the consolidated financial statements as at and for the year ended December 31, 2017.

Adoption of new accounting standards and upcoming changes

The following standards and amendments to existing standards have been adopted by the Company commencing January 1, 2018:

●

IFRS 2 ‘Share-Based Payments’ – In June 2016, the IASB issued final amendments to this standard. IFRS 2 clarifies the classification and measurement of share-based payment transactions. These amendments deal with variations in the final settlement arrangements including: (a) accounting for cash-settled share-based payment transactions that include a performance condition, (b) classification of share-based payment transactions with net settlement features, and (c) accounting for modifications of share-based payment transactions from cash-settled to equity. At January 1, 2018, the Company adopted this standard and there was no impact on its unaudited condensed interim consolidated financial statements.

(1)

Eldorado Gold Corporation

Notes to the unaudited condensed consolidated financial statements

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

Adoption of new accounting standards and upcoming changes (continued)

●

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 new general hedge accounting requirements. Most of the requirements in IAS 39 for classification and measurement of financial liabilities were carried forward in IFRS 9, so our accounting policy with respect to financial liabilities is substantially unchanged. The Company has adopted this standard effective January 1, 2018.

As a result of the adoption of this standard, the Company has changed its accounting policy for financial assets that were recognized at the date of transition. The change did not impact the carrying value of any financial assets on the transition date.

The following are new accounting policies for financial assets under IFRS 9. All other aspects of our accounting policies for financial instruments as disclosed in note 3.7, 3.8, 3.10, 3.11, 3.13 and 3.14 to the consolidated financial statements as at and for the year ended December 31, 2017 are unaffected:

Financial assets

(i) Classification and measurement

The Company classifies its financial assets in the following categories: at fair value through profit or loss (“FVTPL”), at fair value through other comprehensive income (“FVTOCI”) or at amortized cost. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.

The classification of debt instruments is driven by the business model for managing the financial assets and their contractual cash flow characteristics. Debt instruments are measured at amortized cost if the business model is to hold the instrument for collection of contractual cash flows and those cash flows are solely principal and interest. If the business model is not to hold the debt instrument, it is classified as FVTPL. Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payments of principal and interest.

Equity instruments that are held for trading (including all equity derivative instruments) are classified as FVTPL, for other equity instruments, on the day of acquisition the Company can make an irrevocable election (on an instrument-by-instrument basis) to designate them as at FVTOCI.

(a) Financial assets at FVTPL

Financial assets carried at FVTPL are initially recorded at fair value with all transaction costs expensed in the income statement. Realized and unrealized gains and losses arising from changes in the fair value of the financial asset held at FVTPL are included in the income statement in the period in which they arise. Derivatives are also categorised as FVTPL unless they are designated as hedges.

(b) Financial assets at FVTOCI

Investments in equity instruments at FVTOCI are initially recognized at fair value plus transaction costs. Subsequently they are measured at fair value, with gains and losses arising from changes in fair value recognized in other comprehensive income. There is no subsequent reclassification of fair value gains and losses to profit or loss following the derecognition of the investment.

Financial assets at amortized cost are initially recognized at fair value and subsequently carried at amortized cost less any impairment. They are classified as current assets or non-current assets based on their maturity date.

(2)

Eldorado Gold Corporation

Notes to the unaudited condensed consolidated financial statements

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

Adoption of new accounting standards and upcoming changes (continued)

(ii) Impairment of financial assets at amortized cost

The Company recognizes a loss allowance for expected credit losses on financial assets that are measured at amortized cost. At each reporting date, the loss allowance for the financial asset is measured at an amount equal to the lifetime expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition. If at the reporting date, the financial asset has not increased significantly since initial recognition, the loss allowance is measured for the financial asset at an amount equal to twelve month expected credit losses. For trade receivables the Company applies the simplified approach to providing for expected credit losses, which allows the use of a lifetime expected loss provision.

Impairment losses on financial assets carried at amortized cost are reversed in subsequent periods if the amount of the loss decreases and the decrease can be objectively related to an event occurring after the impairment was recognized.

(iii) Derecognition of financial assets

Financial assets are derecognized when they mature or are sold, and substantially all the risks and rewards of ownership have been transferred. Gains and losses on derecognition of financial assets classified as FVTPL or amortized cost are recognized in the income statement. Gains or losses on financial assets classified as FVTOCI remain within accumulated other comprehensive income.

The Company completed an assessment of its financial instruments as at January 1, 2018. The following table shows the original classification under IAS 39 and the new classification under IFRS 9:

	Original classification New classification IAS 39	New classification IFRS 9
Financial assets
Cash and cash equivalents	Amortized cost	Amortized cost
Term deposit	Amortized cost	Amortized cost
Restricted cash	Amortized cost	Amortized cost
Trade receivables	Amortized cost	Amortized cost
Settlement receivables	Embedded derivative separately identified as FVTPL	FVTPL
Marketable securities	Available-for-sale	FVTOCI
Derivatives	FVTPL	FVTPL

Financial liabilities
Accounts payable and accrued liabilities	Amortized cost	Amortized cost
Debt	Amortized cost	Amortized cost

Upon adoption of IFRS 9, the Company made an irrevocable election to classify marketable securities as FVTOCI since they are not held for trading and are held for strategic reasons.

Derivative financial instruments and hedging activities

Derivatives are recognized initially at fair value on the date a derivative contract is entered into. Subsequent to initial recognition, derivatives are remeasured at their fair value. The method of recognising any resulting gain or loss depends on whether the derivative is designated as a hedging instrument and, if so, the nature of the item being hedged.

Changes in the fair value of any derivative instruments that do not qualify for hedge accounting are recognised immediately in the income statement.

(3)

Eldorado Gold Corporation

Notes to the unaudited condensed consolidated financial statements

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

Adoption of new accounting standards and upcoming changes (continued)

(a) Fair value hedge

Changes in the fair values of derivatives that are designated and qualify as fair value hedges are recorded in the income statement, together with any changes in the fair values of the hedged assets or liabilities that are attributable to the hedged risk.

(b) Cash-flow hedge

The effective portions of changes in the fair values of derivatives that are designated and qualify as cash-flow hedges are recognised in equity. The gain or loss relating to any ineffective portion is recognised immediately in the income statement.

Amounts accumulated in the hedge reserve are recycled in the income statement in the periods when the hedged items will affect profit or loss (for instance when the forecast sale that is hedged takes place). If a forecast transaction that is hedged results in the recognition of a non-financial asset (for example, inventory) or a liability, the gains and losses previously deferred in the hedge reserve are included in the initial measurement of the cost of the asset or liability.

When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in the hedge reserve at that time remains in the reserve and is recognised when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in other comprehensive income is immediately transferred to the income statement.

The Company has not designated any derivative contracts as hedges and therefore has not applied hedge accounting in these financial statements.

Trade Receivables

Trade receivables are amounts due from customers for the sale of bullion and metals in concentrate in the ordinary course of business.

Trade receivables are recognized initially at fair value and subsequently at amortized cost using the effective interest rate method. Trade receivables are recorded net of lifetime expected credit losses.

Settlement receivables arise from the sale of metals in concentrate. Settlement receivables are classified as fair value through profit and loss and are recorded at fair value at each reporting period. Changes in fair value of settlements receivable are recorded in revenue.

●

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. The Company has adopted this standard effective January 1, 2018, with a modified retrospective approach.

The following is the new accounting policy for revenue recognition under IFRS 15:

Revenue recognition

Revenue is generated from the sale of sale of bullion and metals in concentrate. The Company produces doré, gold concentrate and other metal concentrates. The Company’s performance obligations relate primarily to the delivery of these products to customers, with each shipment representing a separate performance obligation.

Revenue from the sale of bullion and metals in concentrates is recognized at the point the customer obtains control of the product. Control is transferred when title has passed to the purchaser, the product is physically delivered to the customer, the customer controls the risks and rewards of ownership and the Company has a present right to payment for the product.

(4)

Eldorado Gold Corporation

Notes to the unaudited condensed consolidated financial statements

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

Adoption of new accounting standards and upcoming changes (continued)

i) Metals in Concentrate

Control over metals in concentrates is transferred to the customer and revenue is recognized upon the placing of the material on board the vessel for shipment which is when the product is considered to be physically delivered to the customer under the customer contract.

Metals in concentrate are sold under pricing arrangements where final prices are determined by market prices subsequent to the date of sale (the “quotational period”). Revenue from concentrate sales is recorded based on the estimated amounts to be received. Adjustments are made to settlements receivable in subsequent periods based on fluctuations in market prices until the date of final metal pricing. These subsequent changes in the fair value of the settlements receivable are recorded in revenue separate from revenue from contracts with customers.

Provisional invoices for metals in concentrate sales are typically issued for 80 – 90% of the estimated total value shortly after or on the passage of control of the product to the customer. Additional invoices are issued as final product weights and assays are determined over the quotational period. Provisionally invoiced amounts are generally collected promptly.

ii) Metals in doré

The refiners who receive doré from the Company, refine the materials on the Company’s behalf and arrange for sale of the refined metal on the Precious Metal Market of the Borsa Istanbul, formerly “Istanbul Gold Exchange”. Control over the refined gold or silver produced from doré is transferred to the customer and revenue recognized upon delivery to the customer’s bullion account on the Precious Metal Market of the Borsa Istanbul.

Refined metals are sold at spot prices on the Precious Metal Market of the Borsa Istanbul. Sales proceeds are collected within several days of the completion of the sale transaction.

The following standard has been published and is mandatory for Eldorado’s annual accounting periods beginning January 1, 2019:

●

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.

The Company plans to apply this standard at the date it becomes effective and expects that, under this standard, the present value of most lease commitments will be shown as a liability on the balance sheet together with an asset representing the right of use, including those classified as operating leases under the existing standard. This implies higher amounts of depreciation expense and interest on lease liabilities that will be recorded in the Company’s profit and loss results. Additionally, a corresponding reduction in general and administrative costs and/or production costs is expected. The extent of the impact of adopting the standard has not yet been determined.

The Company is currently identifying and collecting data relating to existing agreements that may qualify under the standard and expects to report more detailed information, including estimated quantitative financial impacts, if material, in its consolidated financial statements as the effective date approaches.

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.

(5)

Eldorado Gold Corporation

Notes to the unaudited condensed consolidated financial statements

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

Acquisition of Integra

On July 10, 2017, the Company acquired all of the issued and outstanding common shares of Integra that it did not already own, by way of a plan of arrangement (the “Arrangement”). Pursuant to the Arrangement, Eldorado issued 77,180,898 common shares with a fair value of $188,061 and paid $99,823 in cash to the former Integra shareholders. Integra is a resource company engaged in the exploration of mineral properties. It is focused on its high-grade Lamaque gold project located in Val-d’Or, Quebec.

As part of the consideration, the Company included advances to Integra for $27,046 and the fair value of the existing available-for-sale Integra investment that it previously owned for $41,968.

The fair value of the common shares issued as part of the consideration paid for Integra was based on the closing share price on July 7, 2017 on the Toronto Stock Exchange. The foreign exchange rate used at time of acquisition was CDN$1 = US$0.776.

The goodwill of $92,591 resulting from the acquisition arises mainly on the recognition of deferred income tax liabilities and represents, among other things, the exploration potential within the assets acquired and future variability in the price of minerals. None of the goodwill is deductible for tax purposes.

The allocation of the purchase price is as follows:

77,180,898 common shares of share of Eldorado at C$4.14/share	$188,061
Cash consideration including advances	126,869
Fair value of existing available-for-sale investment in Integra by Eldorado	41,968
Total Consideration	$356,898

Net assets acquired:

Cash and cash equivalents	$5,205
Marketable securities	2,857
Accounts receivable and other	5,920
Inventories	2,471
Other assets	3,495
Property, plant and equipment	393,647
Goodwill	92,591
Accounts payable and accrued liabilities	(8,028)
Flow-through share premium liability	(4,722)
Other liabilities	(9,635)
Deferred income taxes	(126,903)
	$356,898

The purchase price allocation was finalized as at June 30, 2018. There were no changes from the preliminary allocation as it was reported in the Company’s annual financial statements for the year ended December 31, 2017.

(6)

Eldorado Gold Corporation

Notes to the unaudited condensed consolidated financial statements

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

Debt

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 $5,120 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, 2018 is $580 million.

Revenues

Revenue by metal was as follows:

	Three months ended		Six months ended
	June 30		June 30
	2018	2017	2018	2017
	$	$	$	$

Gold revenue	121,306	72,190	236,781	162,731
Zinc revenue	15,976	5,365	23,550	15,653
Lead revenue	10,521	3,712	16,070	9,328
Silver revenue	4,805	1,750	7,806	3,609
Iron revenue	-	(279)	-	2,250
Revenue from contracts with customers	152,608	82,738	284,207	193,571
Gain on revaluation of derivatives in trade receivables	563	(2)	869	1,045
	153,171	82,736	285,076	194,616

For the three-month period ended June 30, 2018, revenue from contracts with customers by product and segment was as follows:

	Turkey	Brazil	Greece	Total
	$	$	$	$

Gold revenue - dore	72,597	-	-	72,597
Gold revenue - concentrate	30,578	-	18,131	48,709
Silver revenue - dore	375	-	-	375
Silver revenue - concentrate	950	-	3,480	4,430
Lead concentrate	-	-	10,521	10,521
Zinc concentrate	-	-	15,976	15,976
	104,500	-	48,108	152,608

(7)

Eldorado Gold Corporation

Notes to the unaudited condensed consolidated financial statements

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

Revenues (continued)

For the three-month period ended June 30, 2017, revenue from contracts with customers by product and segment was as follows:

	Turkey	Brazil	Greece	Total
	$	$	$	$

Gold revenue - dore	48,516	-	-	48,516
Gold revenue - concentrate	23,674	-	-	23,674
Silver revenue - dore	377	-	-	377
Silver revenue - concentrate	882	-	491	1,373
Lead concentrate	-	-	3,712	3,712
Zinc concentrate	-	-	5,365	5,365
Iron ore concentrate	-	(279)	-	(279)
	73,449	(279)	9,568	82,738

For the six-month period ended June 30, 2018, revenue from contracts with customers by product and segment was as follows:

	Turkey	Brazil	Greece	Total
	$	$	$	$

Gold revenue - dore	144,334	-	-	144,334
Gold revenue - concentrate	66,651	-	25,796	92,447
Silver revenue - dore	697	-	-	697
Silver revenue - concentrate	1,828	-	5,281	7,109
Lead concentrate	-	-	16,070	16,070
Zinc concentrate	-	-	23,550	23,550
	213,510	-	70,697	284,207

For the six-month period ended June 30, 2017, revenue from contracts with customers by product and segment was as follows:

	Turkey	Brazil	Greece	Total
	$	$	$	$

Gold revenue - dore	112,890	-	-	112,890
Gold revenue - concentrate	49,841	-	-	49,841
Silver revenue - dore	899	-	-	899
Silver revenue - concentrate	1,409	-	1,301	2,710
Lead concentrate	-	-	9,328	9,328
Zinc concentrate	-	-	15,653	15,653
Iron ore concentrate	-	2,250	-	2,250
	165,039	2,250	26,282	193,571

(8)

Eldorado Gold Corporation

Notes to the unaudited condensed consolidated financial statements

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

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, 2018 there were 794,010,680 (December 31, 2017 – 794,010,680) voting common shares and no non-voting common shares (December 31, 2017 – nil) outstanding.

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:

	2018
	Weighted average exercise price Cdn$	Number of options
At January 1,	6.04	29,722,573
Granted	1.24	5,345,911
Expired	10.32	(4,311,574)
Forfeited	5.37	(2,220,858)
At June 30,	4.54	28,536,052

As at June 30, 2018, 18,195,962 share options (June 30, 2017 – 18,872,222) with a weighted average exercise price of Cdn$5.66 (June 30, 2017 – Cdn$7.39) had vested and were exercisable.

Share based compensation expense related to share options for the quarter ended June 30, 2018 was $848 (2017 – $1,636) and for the six months ended June 30, 2018 was $1,651 (2017 – $4,264).

(b) Restricted share unit plan

The Company has a Restricted Share Unit plan (“RSU Plan”) whereby restricted share units may be granted to senior management of the Company. The current maximum number of common shares authorized for issue under the RSU plan is 5,000,000. At the end of the period, 2,540,718 common shares purchased by the Company remain held in trust in connection with this plan and have been included in treasury stock within equity on the balance sheet.

Currently, the Company has two types of RSUs:

RSU with no performance criteria

These RSUs are exercisable into one common share once vested, entitling the holder to receive the common share for no additional consideration. They vest as follows: one third on the first anniversary of the grant date, one third on the second anniversary of the grant date and one third on the third anniversary of the grant date. RSUs with no performance criteria terminate on the third anniversary of the grant date. All vested RSUs which have not been redeemed by the date of termination are automatically redeemed. Such RSUs may be redeemed in shares or cash, cash redemptions are subject to the approval of the Board. RSU redemptions are subject to withholding tax, withholding tax is paid by the RSU holder to the Company prior to receipt of the resultant shares or cash. Cash settlements are issued net of withholding tax. The Company is responsible for remittance of the withholding tax to the appropriate tax authority.

A total of 1,054,950 RSUs with no performance criteria at a grant-date fair value of Cdn$1.1748 per unit were granted during the six months ended June 30, 2018 under the Company’s RSU plan. The fair value of each RSU issued is determined as the closing share price at grant date.

(9)

Eldorado Gold Corporation

Notes to the unaudited condensed consolidated financial statements

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

Share-based payments (continued)

A summary of the status of the RSUs with no performance criteria and changes during the six months ended June 30, 2018 is as follows:

	Total RSUs
Balance at December 31, 2017	1,706,096
Granted	1,054,950
Redeemed	(907,508)
Forfeited	(152,716)
Balance at June 30, 2018	1,700,822

As at June 30, 2018, 146,851 RSUs are fully vested and exercisable.

Compensation expense related to RSUs with no performance criteria for the quarter ended June 30, 2018 was $383 (2017 – $464) and for the six months ended June 30, 2018 was $686 (2017 – $1,730).

ii.

RSU with performance criteria

RSUs with performance criteria vest on the third anniversary of the grant date, subject to achievement of pre-determined performance criteria. When fully vested, the number of RSUs redeemed will range from 0% to 200% of the target award, subject to the performance of the share price over the 3 year period.

A total of 839,896 RSUs with performance criteria were granted during the six months ended June 30, 2018 under the Company’s RSU plan.

Compensation expense related to RSUs with performance criteria for the quarter ended Jun 30, 2018 was $62 (2017 – $nil) and for the six months ended June 30, 2018 was $62 (2017 – $nil).

The Company has an independent directors Deferred Unit plan (“DU Plan”) under which DUs are granted by the Board from time to time to independent directors and may be redeemed only on retirement of the independent director from the Board by following specified procedures. The Company will withhold income tax on redeemed DUs and is responsible for submission of the withholding tax to the tax authority.

At June 30, 2018, 1,501,804 DUs were outstanding with a value of $1,517, which is included in accounts payable and accrued liabilities.

Compensation expense related to the DUs was $999 for the quarter ended June 30, 2018 (2017 – income of $821) and for the six months ended June 30, 2018 was $587 (2017 – income of $190).

(d) Performance share units plan

The Company has a Performance Share Unit plan (the “PSU” Plan) whereby PSUs may be granted to senior management of the Company at the discretion of the Board of Directors. Under the plan, PSUs granted 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. PSU’s are redeemable, at the option of the Company, as a cash payment equal to the market value of the vested PSUs as of the Redemption Date, common shares of the Company equal to the number of vested PSUs, or a combination of cash and shares equal to the market value of the vested PSUs. The current maximum number of common shares authorized for issuance from treasury under the PSU plan is 3,130,000.

As at June 30, 2018, 2,386,959 PSUs remain outstanding.

Compensation expense related to PSUs for the quarter ended June 30, 2018 was $552 (2017 – $711) and for the six months ended June 30, 2018 was $1,176 (2017 – $1,314).

(10)

Eldorado Gold Corporation

Notes to the unaudited condensed consolidated financial statements

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

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 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.

The assets measured at fair value as at June 30, 2018 are marketable securities and derivatives related to the Company’s settlement receivables and metal positions on lead and zinc. Instruments included in Level 1 comprise primarily publicly-traded equity investments classified as FVTOCI securities. Both derivatives are considered level 2. The Company’s derivative asset related to our metal positions of $1,527 is included in Other assets in the balance sheet. The net gain related to our metal derivative positions of $1,408 (YTD – $2,364) is presented in Gain on derivatives and other investments in our consolidated income statement.

A summary of our metal derivative position as of June 30, 2018 is as follows:

Metal	Amount (Tonnes)	PUT ($/tonne)	CALL ($/tonne)	Maturity
Lead	7,668	$2,300	$2,735	Jul 2018 – Dec 2018

Zinc	12,708	$2,850	$3,600	Jul 2018 – Dec 2018

With the exception of the fair market value of the Company’s senior notes (note 5), which is included in level 2, all carrying amounts of other financial instruments approximate their fair value.

10.

Supplementary cash flow information

	Three months ended June 30,		Six months ended June 30,
	2018 $	2017 $	2018 $	2017 $
Changes in non-cash working capital
Accounts receivable and other	(3,763)	(4,590)	(5,891)	10,333
Inventories	25,664	(15,114)	14,709	(18,910)
Accounts payable and accrued liabilities	(8,738)	(25,131)	(10,710)	(13,649)
Total	13,163	(44,835)	(1,892)	(22,226)

Supplementary cash flow information
Income taxes paid	7,984	10,097	15,601	26,338
Interest paid	18,375	18,375	18,375	18,375

(11)

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, 2018, Eldorado had six reportable segments based on the geographical location of mining and exploration and development activities.

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 and Olympias mines, the Skouries, Perama Hill and Sapes projects and exploration activities in Greece. The Romania reporting segment includes the Certej project and exploration activities in Romania. The Canada reporting segment includes the Lamaque project and exploration activities in Canada. The 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, 2018	Turkey	Brazil	Greece	Romania	Other	Canada	Total
	$	$	$	$	$	$	$
Information about profit and loss
Revenues	104,500	-	48,671	-	-	-	153,171
Production costs	52,191	-	33,653	-	-	-	85,844
Depreciation	23,368	-	10,992	-	122	-	34,482
Gross profit (loss)	28,941	-	4,026	-	(122)	-	32,845

Other material items of income and expense
Write-down of assets	390	-	2,999	1,094	-	-	4,483
Exploration costs	329	378	1,465	3,219	451	1,007	6,849
Income tax expense (recovery)	19,982	3,837	(1,601)	1,079	-	(1,718)	21,579

Additions to property, plant and
equipment during the period	14,166	2,046	26,268	2,034	377	28,721	73,612

(12)

Eldorado Gold Corporation

Notes to the unaudited condensed consolidated financial statements

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

11.

Segmented information (continued)

For the three months ended June 30, 2017	Turkey	Brazil	Greece	Romania	Other	Canada	Total
	$	$	$	$	$	$	$
Information about profit and loss
Metal sales from external customers	73,449	(279)	9,566	-	-	-	82,736
Production costs	30,003	697	8,733	-	-	-	39,433
Depreciation	15,432	-	80	-	44	-	15,556
Gross profit (loss)	28,014	(976)	753	0	(44)	0	27,747

Other material items of income and expense
Write-down of assets	456	-	1,721	-	-	-	2,177
Exploration costs	341	736	2,094	2,009	1,944	-	7,124
Income tax expense (recovery)	2,595	815	(2,740)	(2,912)	(451)	-	(2,693)

Additions to property, plant and
equipment during the period	12,338	2,463	55,280	4,700	300	-	75,081

For the six months ended June 30, 2018	Turkey	Brazil	Greece	Romania	Other	Canada	Total
	$	$	$	$	$	$	$
Information about profit and loss
Revenues	213,510	-	71,566	-	-	-	285,076
Production costs	100,932	-	52,147	-	-	-	153,079
Depreciation	47,103	-	16,362	-	205	-	63,670
Gross profit (loss)	65,475	-	3,057	-	(205)	-	68,327

Other material items of income and expense
Write-down of assets	849	-	4,875	2,783	-	-	8,507
Exploration costs	619	1,137	3,196	4,108	930	1,007	10,997
Income tax expense (recovery)	32,413	3,729	(2,964)	(1,036)	-	(3,479)	28,663

Additions to property, plant and
equipment during the period	26,749	3,719	54,982	4,521	772	50,863	141,606

Information about assets and liabilities
Property, plant and equipment (*)	817,214	200,185	2,380,399	416,184	1,316	459,966	4,275,264
Goodwill	-	-	-	-	-	92,591	92,591
	817,214	200,185	2,380,399	416,184	1,316	552,557	4,367,855

Debt	-	-	-	-	594,880	-	594,880

(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 (continued)

For the six months ended June 30, 2017	Turkey	Brazil	Greece	Romania	Other	Canada	Total
	$	$	$	$	$	$	$
Information about profit and loss
Metal sales from external customers	165,039	2,250	27,327	-	-	-	194,616
Production costs	66,852	2,008	21,261	-	-	-	90,121
Depreciation	33,251	-	208	-	161	-	33,620
Gross profit (loss)	64,936	242	5,858	-	(161)	-	70,875

Other material items of income and expense
Write-down of assets	693	-	2,538	-	-	-	3,231
Exploration costs	678	1,967	3,581	3,773	2,372	-	12,371
Income tax expense (recovery)	17,152	(251)	(2,674)	(3,549)	(2,595)	-	8,083

Additions to property, plant and
equipment during the period	22,352	4,418	115,690	6,960	422	-	149,842

For the year ended December 31, 2017	Turkey	Brazil	Greece	Romania	Other	Canada	Total
	$	$	$	$	$	$	$

Information about assets and liabilities
Property, plant and equipment (*)	835,422	196,467	2,362,107	415,856	750	416,795	4,227,397
Goodwill	-	-	-	-	-	92,591	92,591
	835,422	196,467	2,362,107	415,856	750	509,386	4,319,988

Debt	-	-	-	-	593,783	-	593,783

* Net of revenues from sale of pre-commercial production

The Turkey segment derives its 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 gold, zinc, lead and silver concentrates.

(14)