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June 30, 2014 Unaudited Condensed Consolidated Financial Statements
Suite 1188, 550 Burrard Street
Vancouver, British Columbia
V6C 2B5
Phone: (604) 687-4018
Fax: (604) 687-4026
1
Eldorado Gold Corporation
Unaudited Condensed Consolidated Balance Sheets
(Expressed in thousands of U.S. dollars)
Note | June 30, 2014 | December 31, 2013 | |||||||||
$ | $ | ||||||||||
ASSETS | |||||||||||
Current assets | |||||||||||
Cash and cash equivalents | 559,498 | 589,180 | |||||||||
Term deposits | 25,026 | 34,702 | |||||||||
Restricted cash | 262 | 262 | |||||||||
Marketable securities | 4,637 | 4,387 | |||||||||
Accounts receivable and other | 82,822 | 89,231 | |||||||||
Inventories | 233,531 | 244,042 | |||||||||
905,776 | 961,804 | ||||||||||
Investment in associate | - | 10,949 | |||||||||
Deferred income tax assets | 1,601 | 997 | |||||||||
Restricted assets and other | 55,581 | 37,330 | |||||||||
Defined benefit pension plan | 15,398 | 13,484 | |||||||||
Property, plant and equipment | 5,806,914 | 5,684,382 | |||||||||
Goodwill | 526,296 | 526,296 | |||||||||
7,311,566 | 7,235,242 | ||||||||||
LIABILITIES & EQUITY | |||||||||||
Current liabilities | |||||||||||
Accounts payable and accrued liabilities | 171,775 | 211,406 | |||||||||
Current debt | 5 | 16,253 | 16,402 | ||||||||
188,028 | 227,808 | ||||||||||
Debt | 5 | 586,104 | 585,006 | ||||||||
Other non-current liability | 4(b) | 47,711 | - | ||||||||
Asset retirement obligations | 86,423 | 85,259 | |||||||||
Deferred income tax liabilities | 852,575 | 842,305 | |||||||||
1,760,841 | 1,740,378 | ||||||||||
Equity | |||||||||||
Share capital | 6 | 5,314,813 | 5,314,589 | ||||||||
Treasury stock | (14,845 | ) | (10,953 | ) | |||||||
Contributed surplus | 37,197 | 78,557 | |||||||||
Accumulated other comprehensive loss | (16,450 | ) | (17,056 | ) | |||||||
Deficit | (80,965 | ) | (143,401 | ) | |||||||
Total equity attributable to shareholders of the Company | 5,239,750 | 5,221,736 | |||||||||
Attributable to non-controlling interests | 310,975 | 273,128 | |||||||||
5,550,725 | 5,494,864 | ||||||||||
7,311,566 | 7,235,242 |
Approved on behalf of the Board of Directors
(Signed) Robert R. Gilmore | Director | (Signed) Paul N. Wright | Director |
The accompanying notes are an integral part of these consolidated financial statements.
2
Eldorado Gold Corporation
Unaudited Condensed Consolidated Income Statements
(Expressed in thousands of U.S. dollars except per share amounts)
Three months ended | Six months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
$ | $ | $ | $ | |||||||||||||
Revenue | ||||||||||||||||
Metal sales | 265,497 | 266,929 | 545,367 | 604,997 | ||||||||||||
Cost of sales | ||||||||||||||||
Production costs | 122,524 | 116,133 | 257,309 | 246,501 | ||||||||||||
Depreciation and amortization | 44,095 | 35,234 | 89,667 | 72,348 | ||||||||||||
166,619 | 151,367 | 346,976 | 318,849 | |||||||||||||
Gross profit | 98,878 | 115,562 | 198,391 | 286,148 | ||||||||||||
Exploration expenses | 3,890 | 10,240 | 7,785 | 17,864 | ||||||||||||
General and administrative expenses | 19,099 | 18,239 | 34,943 | 34,725 | ||||||||||||
Defined benefit pension plan expense | 413 | 619 | 816 | 1,248 | ||||||||||||
Share based payments | 5,281 | 3,291 | 12,275 | 12,168 | ||||||||||||
Foreign exchange loss (gain) | (1,553 | ) | 5,920 | (2,914 | ) | 5,818 | ||||||||||
Operating profit | 71,748 | 77,253 | 145,486 | 214,325 | ||||||||||||
Loss (gain) on disposal of assets | 1,819 | (51 | ) | 1,825 | (15 | ) | ||||||||||
Loss (gain) on marketable securities and other investments | 550 | - | 1,322 | (21 | ) | |||||||||||
Loss on investments in associates | - | 214 | 102 | 1,123 | ||||||||||||
Other income | (3,631 | ) | (3,138 | ) | (2,847 | ) | (5,114 | ) | ||||||||
Asset retirement obligation accretion | 581 | 386 | 1,163 | 725 | ||||||||||||
Interest and financing costs | 7,916 | 11,061 | 16,321 | 21,562 | ||||||||||||
Profit before income tax | 64,513 | 68,781 | 127,600 | 196,065 | ||||||||||||
Income tax expense | 24,999 | 24,550 | 57,443 | 195,802 | ||||||||||||
Profit for the period | 39,514 | 44,231 | 70,157 | 263 | ||||||||||||
Attributable to: | ||||||||||||||||
Shareholders of the Company | 37,632 | 43,274 | 68,900 | (2,189 | ) | |||||||||||
Non-controlling interests | 1,882 | 957 | 1,257 | 2,452 | ||||||||||||
Profit for the period | 39,514 | 44,231 | 70,157 | 263 | ||||||||||||
Weighted average number of shares outstanding | ||||||||||||||||
Basic | 716,249 | 715,038 | 716,239 | 714,739 | ||||||||||||
Diluted | 716,249 | 715,426 | 716,239 | 715,256 | ||||||||||||
Earnings per share attributable to shareholders of the Company: | ||||||||||||||||
Basic earnings per share | 0.05 | 0.06 | 0.10 | 0.00 | ||||||||||||
Diluted earnings per share | 0.05 | 0.06 | 0.10 | 0.00 |
The accompanying notes are an integral part of these consolidated financial statements.
3
Eldorado Gold Corporation
Unaudited Condensed Consolidated Statements of Comprehensive Income
(Expressed in thousands of U.S. dollars)
Three months ended | Six months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
$ | $ | $ | $ | |||||||||||||
Profit for the period | 39,514 | 44,231 | 70,157 | 263 | ||||||||||||
Other comprehensive gain (loss): | ||||||||||||||||
Change in fair value of available-for-sale financial assets | 336 | (918 | ) | (153 | ) | (1,400 | ) | |||||||||
Realized gains on disposal of available-for-sale financial assets | - | - | 759 | (17 | ) | |||||||||||
Total other comprehensive gain (loss) for the period | 336 | (918 | ) | 606 | (1,417 | ) | ||||||||||
Total comprehensive income (deficit) for the period | 39,850 | 43,313 | 70,763 | (1,154 | ) | |||||||||||
Attributable to: | ||||||||||||||||
Shareholders of the Company | 37,968 | 42,356 | 69,506 | (3,606 | ) | |||||||||||
Non-controlling interests | 1,882 | 957 | 1,257 | 2,452 | ||||||||||||
39,850 | 43,313 | 70,763 | (1,154 | ) |
The accompanying notes are an integral part of these consolidated financial statements.
4
Eldorado Gold Corporation
Unaudited Condensed Consolidated Statements of Cash Flows
(Expressed in thousands of U.S. dollars)
Three months ended | Six months ended | ||||||||||||||||||
June 30, | June 30, | ||||||||||||||||||
Note | 2014 | 2013 | 2014 | 2013 | |||||||||||||||
$ | $ | $ | $ | ||||||||||||||||
Cash flows generated from (used in): | |||||||||||||||||||
Operating activities | |||||||||||||||||||
Profit for the period | 39,514 | 44,231 | 70,157 | 263 | |||||||||||||||
Items not affecting cash: | |||||||||||||||||||
Asset retirement obligation accretion | 581 | 386 | 1,163 | 725 | |||||||||||||||
Depreciation and amortization | 44,095 | 35,234 | 89,667 | 72,348 | |||||||||||||||
Unrealized foreign exchange loss (gain) | (508 | ) | 403 | (124 | ) | 524 | |||||||||||||
Deferred income tax expense | 471 | 560 | 9,667 | 136,448 | |||||||||||||||
Loss (gain) on disposal of assets | 1,819 | (51 | ) | 1,825 | (15 | ) | |||||||||||||
Loss on investments in associates | - | 214 | 102 | 1,123 | |||||||||||||||
Loss (gain) on marketable securities and other investments | 550 | - | 1,322 | (21 | ) | ||||||||||||||
Share based payments | 5,281 | 3,291 | 12,275 | 12,168 | |||||||||||||||
Defined benefit pension plan expense | 413 | 619 | 816 | 1,248 | |||||||||||||||
92,216 | 84,887 | 186,870 | 224,811 | ||||||||||||||||
Changes in non-cash working capital | 9 | (29,383 | ) | (63,433 | ) | (54,600 | ) | (36,265 | ) | ||||||||||
62,833 | 21,454 | 132,270 | 188,546 | ||||||||||||||||
Investing activities | |||||||||||||||||||
Net cash used on acquisition of subsidiary | 4(a) | - | - | (30,318 | ) | - | |||||||||||||
Purchase of property, plant and equipment | (107,917 | ) | (116,549 | ) | (188,347 | ) | (217,763 | ) | |||||||||||
Proceeds from the sale of property, plant and equipment | 92 | 136 | 176 | 192 | |||||||||||||||
Proceeds on production from tailings retreatment | 11,765 | 10,900 | 20,557 | 15,228 | |||||||||||||||
Purchase of marketable securities | (852 | ) | - | (852 | ) | - | |||||||||||||
Proceeds from the sale of marketable securities | 243 | - | 865 | 332 | |||||||||||||||
Investments in associates | - | - | - | (6,357 | ) | ||||||||||||||
Redemption of (investment in) term deposits | (20,000 | ) | (62,514 | ) | 9,676 | (221,441 | ) | ||||||||||||
Decrease in restricted cash | (24 | ) | 15 | 2 | 5 | ||||||||||||||
(116,693 | ) | (168,012 | ) | (188,241 | ) | (429,804 | ) | ||||||||||||
Financing activities | |||||||||||||||||||
Issuance of common shares for cash | - | 179 | - | 1,601 | |||||||||||||||
Investment by non-controlling interest | 4(b) | - | - | 40,000 | - | ||||||||||||||
Dividend paid to shareholders | - | - | (6,464 | ) | (50,241 | ) | |||||||||||||
Dividends paid to non-controlling interest | (815 | ) | (815 | ) | |||||||||||||||
Purchase of treasury stock | (9 | ) | (168 | ) | (6,413 | ) | (6,462 | ) | |||||||||||
Long-term and bank debt proceeds | - | - | 16,363 | 12,412 | |||||||||||||||
Long-term and bank debt repayments | - | - | (16,382 | ) | (10,354 | ) | |||||||||||||
Loan financing costs | - | 90 | - | (383 | ) | ||||||||||||||
(824 | ) | 101 | 26,289 | (53,427 | ) | ||||||||||||||
Net decrease in cash and cash equivalents | (54,684 | ) | (146,457 | ) | (29,682 | ) | (294,685 | ) | |||||||||||
Cash and cash equivalents - beginning of period | 614,182 | 668,615 | 589,180 | 816,843 | |||||||||||||||
Cash and cash equivalents - end of period | 559,498 | 522,158 | 559,498 | 522,158 | |||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
5
Eldorado Gold Corporation
Unaudited Condensed Consolidated Statements of Changes in Equity
(Expressed in thousands of U.S. dollars)
Three months ended | Six months ended | ||||||||||||||||||
June 30, | June 30, | ||||||||||||||||||
Note | 2014 | 2013 | 2014 | 2013 | |||||||||||||||
$ | $ | $ | $ | ||||||||||||||||
Share capital | |||||||||||||||||||
Balance beginning of period | 5,314,813 | 5,303,095 | 5,314,589 | 5,300,957 | |||||||||||||||
Shares issued upon exercise of share options, for cash | - | 179 | - | 1,601 | |||||||||||||||
Transfer of contributed surplus on exercise of options | - | 273 | - | 989 | |||||||||||||||
Transfer of contributed surplus on exercise of deferred | |||||||||||||||||||
phantom units | - | 3,400 | 224 | 3,400 | |||||||||||||||
Balance end of period | 5,314,813 | 5,306,947 | 5,314,813 | 5,306,947 | |||||||||||||||
Treasury stock | |||||||||||||||||||
Balance beginning of period | (17,357 | ) | (12,307 | ) | (10,953 | ) | (7,445 | ) | |||||||||||
Purchase of treasury stock | (9 | ) | (168 | ) | (6,413 | ) | (6,462 | ) | |||||||||||
Shares redeemed upon exercise of restricted share units | 2,521 | 700 | 2,521 | 2,132 | |||||||||||||||
Balance end of period | (14,845 | ) | (11,775 | ) | (14,845 | ) | (11,775 | ) | |||||||||||
Balance beginning of period | 35,424 | 71,827 | 78,557 | 65,382 | |||||||||||||||
Share based payments | 5,035 | 3,935 | 11,750 | 12,528 | |||||||||||||||
Shares redeemed upon exercise of restricted share units | (2,521 | ) | (700 | ) | (2,521 | ) | (2,132 | ) | |||||||||||
Recognition of other non-current liability and related costs | 4(b) | (741 | ) | - | (50,365 | ) | - | ||||||||||||
Transfer to share capital on exercise of options and deferred | |||||||||||||||||||
phantom units | - | (3,673 | ) | (224 | ) | (4,389 | ) | ||||||||||||
Balance end of period | 37,197 | 71,389 | 37,197 | 71,389 | |||||||||||||||
Accumulated other comprehensive loss | |||||||||||||||||||
Balance beginning of period | (16,786 | ) | (25,034 | ) | (17,056 | ) | (24,535 | ) | |||||||||||
Other comprehensive loss for the period | 336 | (918 | ) | 606 | (1,417 | ) | |||||||||||||
Balance end of period | (16,450 | ) | (25,952 | ) | (16,450 | ) | (25,952 | ) | |||||||||||
Retained earnings (deficit) | |||||||||||||||||||
Balance beginning of period | (118,597 | ) | 499,172 | (143,401 | ) | 594,876 | |||||||||||||
Dividends paid | - | - | (6,464 | ) | (50,241 | ) | |||||||||||||
Profit (loss) attributable to shareholders of the Company | 37,632 | 43,274 | 68,900 | (2,189 | ) | ||||||||||||||
Balance end of period | (80,965 | ) | 542,446 | (80,965 | ) | 542,446 | |||||||||||||
Total equity attributable to shareholders of the Company | 5,239,750 | 5,883,055 | 5,239,750 | 5,883,055 | |||||||||||||||
Non-controlling interests | |||||||||||||||||||
Balance beginning of period | 312,503 | 285,595 | 273,128 | 284,100 | |||||||||||||||
Profit attributable to non-controlling interests | 1,882 | 957 | 1,257 | 2,452 | |||||||||||||||
Dividends declared to non-controlling interests | (3,410 | ) | - | (3,410 | ) | - | |||||||||||||
Increase during the period | 4(b) | - | - | 40,000 | - | ||||||||||||||
Balance end of period | 310,975 | 286,552 | 310,975 | 286,552 | |||||||||||||||
Total equity | 5,550,725 | 6,169,607 | 5,550,725 | 6,169,607 |
The accompanying notes are an integral part of these consolidated financial statements.
6
Eldorado Gold Corporation
Notes to the unaudited condensed consolidated financial statements
(Expressed in thousands of U.S. dollars, unless otherwise stated)
1. | General Information |
Eldorado Gold Corporation (“Eldorado” or the “Company”) is a gold exploration, development, mining and production company. The Company has operations and ongoing exploration and development projects in Turkey, China, Greece, Brazil and Romania. The Company acquired Glory Resources Ltd (“Glory”) in March 2014. Glory has the Sapes project in Thrace, Greece.
Eldorado is a public company which is listed on the Toronto Stock Exchange and New York Stock Exchange and is incorporated and domiciled in Canada.
2. | Basis of preparation |
a) | Statement of compliance |
These unaudited condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard 34 ‘Interim Financial Reporting’. They do not include all of the information and footnotes required by the International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board for full annual financial statements and should be read in conjunction with the Company’s annual financial statements for the year ended December 31, 2013.
The same accounting policies are used in the preparation of these unaudited condensed consolidated interim financial statements as for the most recent audited annual financial statements and reflect all the adjustments necessary for fair presentation in accordance with IFRS for the interim periods presented.
b) | Judgement and estimates |
The preparation of these unaudited condensed consolidated interim financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.
The significant judgements made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 31 December 2013.
3. | Adoption of new accounting standards |
The following interpretation of a standard has been adopted by the Company commencing January 1, 2014:
· | IFRIC 21 ‘Levies’ – This interpretation of IAS 37, ‘Provisions, Contingent Liabilities and Contingent Assets’, applies to the accounting for levies imposed by governments. IAS 37 sets out criteria for the recognition of a liability, one of which is the requirement for the entity to have a present obligation as a result of a past event (“obligating event”). IFRIC 21 clarifies that the obligating event that gives rise to a liability to pay a levy is the activity described in the relevant legislation that triggers the payment of the levy. There was no impact on these unaudited condensed consolidated interim financial statements as a result of the adoption of this standard. |
The following standards have been published and are mandatory for Eldorado’s annual accounting periods no earlier than January 1, 2017:
· | IFRS 9 ‘Financial Instruments: Classification and Measurement’ – This is the first part of a new standard on classification and measurement of financial assets that will replace IAS 39, ‘Financial Instruments: Recognition and Measurement’. IFRS 9 has two measurement categories: amortized cost and fair value. All equity instruments are measured at fair value. A debt instrument is recorded at amortized cost only if the entity is holding it to collect contractual cash flows and the cash flows represent principal and interest. Otherwise it is measured at fair value with changes in fair value through profit or loss. In addition, this new standard has been updated to include guidance on financial liabilities and derecognition of financial instruments. The Company is currently evaluating the extent of the impact of the adoption of this standard. |
7
Eldorado Gold Corporation
Notes to the unaudited condensed consolidated financial statements
(Expressed in thousands of U.S. dollars, unless otherwise stated)
3. | Adoption of new accounting standards (continued) |
· | 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 fiscal years ending on or after December 31, 2017. The Company does not expect this standard to have a material impact on its financial statements. |
4. | Acquisitions and other transactions |
a) | Acquisition of Glory |
Eldorado completed the acquisition of all of the issued and outstanding common shares of Glory that it did not already own on March 14, 2014. As a result, Eldorado acquired a 100% interest in the Sapes project in Thrace, Greece. Prior to the transaction, Eldorado owned 19.9% interest in Glory and the investment was accounted for as an investment in associate.
Total consideration of $39,219 included cash for 179,504,179 shares in the amount of $27,583, an option buy-out payment of $1,590 to holders of Glory options, and $10,046 related to the 44,595,920 shares of Glory that Eldorado had purchased prior to the off-market takeover bid. A total of $1,229 was incurred as transaction costs and was capitalized as property, plant and equipment.
This transaction has been accounted for as an acquisition of assets and liabilities as Glory did not constitute a business, as defined in IFRS 3. Other than a small working capital amount the remainder of the value for this transaction was assigned to property, plant and equipment.
Eldorado paid net cash of $30,318 as a result of the transaction. This net reduction of cash was a result of an acquired cash balance of $84 less cash consideration of $29,173 and transaction costs of $1,229.
b) | Eastern Dragon agreement |
In March 2014, the Company, through one of its subsidiaries, entered into a Subscription and a Shareholders agreement (“Agreements”) with a third party (“Third Party”).
As a result of these Agreements, Third Party acquired 21.5% of the total ordinary shares of Sino Gold Tenya (HK) Limited (“Tenya”), a subsidiary of the Company, and indirectly a 20% interest in the Eastern Dragon Project.
Under the terms of the Agreements, Third Party has the right to require Eldorado to purchase or procure the purchase by another party of Third Party’s shares in Tenya at a fixed price (“Put Option”) for 90 days following the second anniversary of the Agreements.
The Agreements include other rights and obligations of the Company and Third Party associated with the advancement of the Eastern Dragon Project.
This transaction has been accounted as an equity transaction with the recognition of a non-controlling interest in the amount of $40,000 representing the consideration received. A liability in the amount of $46,970 has been recorded at the transaction date, representing the present value of the redemption amount of the Put Option and $2,654 of transaction costs were recorded against equity. Future changes in the present value of the redemption amount of the Put Option are being charged against equity. The present value of the liability representing the Put Option as of June 30, 2014 is $47,711.
8
Eldorado Gold Corporation
Notes to the unaudited condensed consolidated financial statements
(Expressed in thousands of U.S. dollars, unless otherwise stated)
5. | Debt |
June 30, 2014 $ | December 31, 2013 $ | |||||||
Current: | ||||||||
Jinfeng China Merchant Bank (“CMB”) working capital loan (a) | 16,253 | 16,402 | ||||||
Non-current: | ||||||||
Senior notes (b) | 586,104 | 585,006 | ||||||
Total debt | 602,357 | 601,408 |
(a) | Jinfeng CMB working capital loan |
On January 16, 2013, Jinfeng entered into a RMB 100.0 million ($16,253) working capital loan with CMB. Each drawdown bears fixed interest at the prevailing lending rate stipulated by the People’s Bank of China on the date of drawdown. The Facility had a term of up to one year, from January 16, 2013 to January 14, 2014. In January 2014, the term of the facility was extended to January 28, 2015. This facility is unsecured.
As at June 30, 2014, Jinfeng has drawn down the full amount under this facility and has used the proceeds to fund working capital obligations. All tranches of the loan have a term of six months and a fixed interest rate of 5.6%.
Subsequent to June 30, 2014, Jinfeng repaid RMB 13.0 million ($2,113) on this loan.
(b) | Senior notes |
On December 10, 2012, the Company completed an offering of $600.0 million senior notes (“the notes”) at par value, with a coupon rate of 6.125% due December 15, 2020. The notes pay interest semi-annually on June 15 and December 15. Net deferred financing costs of $13,896 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, 2014 was $609.0 million.
(c) | Entrusted loan |
In November 2010, Eastern Dragon, HSBC Bank (China) and Qinghai Dachaidan Mining Ltd (“QDML”), our 90% owned subsidiary, entered into a RMB 12.0 million ($1,950) entrusted loan agreement, which has been increased to RMB 720.0 million ($117,020) through a series of amendments.
Under the terms of the entrusted loan, QDML with its own funds entrusts HSBC Bank (China) to provide a loan facility in the name of QDML to Eastern Dragon. The loan can be drawn down in tranches. Each drawdown bears interest fixed at the prevailing lending rate stipulated by the People’s Bank of China on the date of drawdown. Each draw down has a term of three months and can be rolled forward at the discretion of QDML. The interest rate on this loan as at June 30, 2014 was 4.59%.
As at June 30, 2014, RMB 643.2 million ($104,530) had been drawn under the entrusted loan.
The entrusted loan has been recorded on a net settlement basis.
9
Eldorado Gold Corporation
Notes to the unaudited condensed consolidated financial statements
(Expressed in thousands of U.S. dollars, unless otherwise stated)
6. | 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, 2014 there were no non-voting common shares outstanding (December 31, 2013 – none).
Voting common shares | Number of Shares | Total $ | ||||||
At January 1, 2014 | 716,216,690 | 5,314,589 | ||||||
Common shares issued for deferred phantom units | 31,920 | 224 | ||||||
At June 30, 2014 | 716,248,610 | 5,314,813 |
7. | 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:
2014 | ||||||||
Weighted average exercise price Cdn$ | Number of options | |||||||
At January 1, | 13.20 | 16,753,421 | ||||||
Granted | 7.82 | 6,210,824 | ||||||
Exercised | - | - | ||||||
Forfeited | 12.25 | (845,322 | ) | |||||
At June 30, | 11.72 | 22,118,923 |
At June 30, 2014, 16,040,895 share options (June 30, 2013 – 12,914,273) with a weighted average exercise price of Cdn$12.89 (June 30, 2013 – Cdn$13.17) had vested and were exercisable.
Share based compensation expense related to share options for the quarter ended June 30, 2014 was $2,096 (YTD – $7,077).
(b) | Restricted share unit plan |
A total of 877,753 restricted share units (“RSUs”) at a grant-date fair value of Cdn$7.84 per unit were granted during the period ended June 30, 2014 under the Company’s RSU plan and 292,137 RSUs were exercisable as at June 30, 2014.
The fair value of each RSU issued is determined as the closing share price at grant date. The current maximum number of common shares authorized for issue under the RSU plan is 5,000,000.
10
Eldorado Gold Corporation
Notes to the unaudited condensed consolidated financial statements
(Expressed in thousands of U.S. dollars, unless otherwise stated)
7. | Share-based payments (continued) |
A summary of the status of the restricted share unit plan and changes during the quarter ended June 30, 2014 is as follows:
Total RSUs | ||||
Balance at December 31, 2013 | 774,845 | |||
RSUs Granted | 877,753 | |||
Redeemed | (364,140 | ) | ||
Forfeited | - | |||
Balance at June 30, 2014 | 1,288,458 |
As at June 30, 2014, 1,288,458 common shares purchased by the Company remain held in trust in connection with this plan. At the end of the period, 460,885 restricted share units are fully vested and exercisable. These shares purchased and held in trust have been included in treasury stock in the balance sheet.
Restricted share units expense for the period ended June 30, 2014 was $2,939 (YTD – $4,673).
(c) | Deferred share units plan |
At June 30, 2014, 246,655 deferred share units (“DSUs”) were outstanding with a value of $1,886, which is included in accounts payable and accrued liabilities.
Compensation expense related to the DSUs was $246 for the period ended June 30, 2014 (YTD – $525).
8. | 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 – Inpts that are observable, either directly or indirectly, but do not qualify as Level 1 inputs (i.e., quoted prices for similar assets or liabilities). |
· | Level 3 – Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity). |
The only assets measured at fair value as at June 30, 2014 are marketable securities. No liabilities are measured at fair value on a recurring basis as at June 30, 2014.
The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis. The quoted market price used for financial assets held by the group is the current bid price. These instruments are included in Level 1. Instruments included in Level 1 comprise primarily publicly-traded equity investments classified as held-for-trading securities or available-for-sale securities.
With the exception of the fair market value of our senior notes (note 5b), all carrying amounts of financial instruments approximate their fair value.
11
Eldorado Gold Corporation
Notes to the unaudited condensed consolidated financial statements
(Expressed in thousands of U.S. dollars, unless otherwise stated)
9. | Supplementary cash flow information |
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2014 $ | 2013 $ | 2014 $ | 2013 $ | |||||||||||||
Changes in non-cash working capital | ||||||||||||||||
Accounts receivable and other | (4,449 | ) | (20,586 | ) | (11,055 | ) | (5,691 | ) | ||||||||
Inventories | (4,975 | ) | (12,693 | ) | 4,365 | (1,906 | ) | |||||||||
Accounts payable and accrued liabilities | (19,959 | ) | (30,154 | ) | (47,910 | ) | (28,668 | ) | ||||||||
Total | (29,383 | ) | (63,433 | ) | (54,600 | ) | (36,265 | ) | ||||||||
Supplementary cash flow information | ||||||||||||||||
Income taxes paid | 28,981 | 29,951 | 40,333 | 57,269 | ||||||||||||
Interest paid | 17,156 | 16,923 | 17,360 | 17,356 |
10. | Segment 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, 2014, Eldorado had six reportable segments based on the geographical location of mining and exploration and development activities.
10.1 Geographical segments
Geographically, the operating segments are identified by country and by operating mine or mine under construction as follows:
· | The Turkey reporting segment includes the Kişladağ and the Efemçukuru mines and exploration activities in Turkey. |
· | The China reporting segment includes the Tanjianshan (“TJS”), Jinfeng and White Mountain mines, the Eastern Dragon project and exploration activities in China. |
· | The Brazil reporting segment includes the Vila Nova mine, Tocantinzinho project and exploration activities in Brazil. |
· | The Greece reporting segment includes the Stratoni mine, the Olympias, Skouries, Perama Hill and Sapes projects and exploration activities in Greece. |
· | The Romania reporting segment includes the Certej project and exploration activities in Romania. |
· | Other reporting segment includes operations of Eldorado’s corporate office and exploration activities in other countries. |
Financial information about each of these operating segments is reported to the CODM on at least a monthly basis.
12
Eldorado Gold Corporation
Notes to the unaudited condensed consolidated financial statements
(Expressed in thousands of U.S. dollars, unless otherwise stated)
10. | Segment information (continued) |
For the three months ended June 30, 2014
Turkey | China | Brazil | Greece | Romania | Other | Total | ||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
Information about profit and loss | ||||||||||||||||||||||||||||
Metal sales from external customers | 127,946 | 120,963 | 3,851 | 12,737 | - | - | 265,497 | |||||||||||||||||||||
Production costs | 49,704 | 56,356 | 5,943 | 10,521 | - | - | 122,524 | |||||||||||||||||||||
Depreciation | 13,179 | 27,783 | 928 | 2,030 | - | 175 | 44,095 | |||||||||||||||||||||
Gross profit (loss) | 65,063 | 36,824 | (3,020 | ) | 186 | - | (175 | ) | 98,878 | |||||||||||||||||||
Other material items of income and expense | ||||||||||||||||||||||||||||
Exploration costs | 566 | 654 | 1,526 | 255 | 68 | 821 | 3,890 | |||||||||||||||||||||
Income tax expense (recovery) | 13,655 | 9,517 | (406 | ) | 2,855 | - | (622 | ) | 24,999 | |||||||||||||||||||
Additions to property, plant and | ||||||||||||||||||||||||||||
equipment during the period | 23,160 | 12,995 | 517 | 69,944 | 2,317 | 52 | 108,985 |
For the three months ended June 30, 2013
Turkey | China | Brazil | Greece | Romania | Other | Total | ||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
Information about profit and loss | ||||||||||||||||||||||||||||
Metal sales from external customers | 141,454 | 103,653 | 8,680 | 13,142 | - | - | 266,929 | |||||||||||||||||||||
Production costs | 41,467 | 54,696 | 6,060 | 13,910 | - | - | 116,133 | |||||||||||||||||||||
Depreciation | 8,967 | 21,436 | 871 | 3,447 | - | 513 | 35,234 | |||||||||||||||||||||
Gross profit (loss) | 91,020 | 27,521 | 1,749 | (4,215 | ) | - | (513 | ) | 115,562 | |||||||||||||||||||
Other material items of income and expense | ||||||||||||||||||||||||||||
Exploration costs | 2,791 | 1,602 | 3,208 | 26 | 97 | 2,516 | 10,240 | |||||||||||||||||||||
Income tax expense | 20,345 | 5,608 | 859 | - 2,370 | 108 | - | 24,550 | |||||||||||||||||||||
Additions to property, plant and | ||||||||||||||||||||||||||||
equipment during the period | 50,815 | 26,580 | 1,935 | 36,465 | 7,338 | 36 | 123,169 |
13
Eldorado Gold Corporation
Notes to the unaudited condensed consolidated financial statements
(Expressed in thousands of U.S. dollars, unless otherwise stated)
10. | Segment information (continued) |
For the six months ended June 30, 2014
Turkey | China | Brazil | Greece | Romania | Other | Total | ||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
Information about profit and loss | ||||||||||||||||||||||||||||
Metal sales from external customers | 251,972 | 245,792 | 22,496 | 25,107 | - | - | 545,367 | |||||||||||||||||||||
Production costs | 97,521 | 119,841 | 19,028 | 20,919 | - | - | 257,309 | |||||||||||||||||||||
Depreciation | 26,017 | 56,004 | 3,071 | 4,160 | - | 415 | 89,667 | |||||||||||||||||||||
Gross profit (loss) | 128,434 | 69,947 | 397 | 28 | - | (415 | ) | 198,391 | ||||||||||||||||||||
Other material items of income and expense | ||||||||||||||||||||||||||||
Exploration costs | 1,114 | 1,119 | 2,170 | 646 | 1,121 | 1,615 | 7,785 | |||||||||||||||||||||
Income tax expense (recovery) | 33,695 | 19,553 | (805 | ) | 5,000 | - | - | 57,443 | ||||||||||||||||||||
Additions to property, plant and | ||||||||||||||||||||||||||||
equipment during the period | 41,039 | 20,478 | 1,879 | 120,036 | 5,673 | 270 | 189,375 | |||||||||||||||||||||
Information about assets and liabilities | ||||||||||||||||||||||||||||
Property, plant and equipment (*) | 869,346 | 1,433,258 | 200,308 | 2,679,303 | 622,578 | 2,121 | 5,806,914 | |||||||||||||||||||||
Goodwill | - | 52,514 | - | 473,782 | - | - | 526,296 | |||||||||||||||||||||
869,346 | 1,485,772 | 200,308 | 3,153,085 | 622,578 | 2,121 | 6,333,210 | ||||||||||||||||||||||
Debt | - | 16,253 | - | - | - | 586,104 | 602,357 |
For the six months ended June 30, 2013
Turkey | China | Brazil | Greece | Romania | Other | Total | ||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
Information about profit and loss | ||||||||||||||||||||||||||||
Metal sales from external customers | 339,596 | 215,468 | 23,840 | 26,093 | - | - | 604,997 | |||||||||||||||||||||
Production costs | 100,367 | 106,083 | 14,561 | 25,490 | - | - | 246,501 | |||||||||||||||||||||
Depreciation | 22,080 | 41,585 | 2,107 | 5,577 | - | 999 | 72,348 | |||||||||||||||||||||
Gross profit (loss) | 217,149 | 67,800 | 7,172 | (4,974 | ) | - | (999 | ) | 286,148 | |||||||||||||||||||
Other material items of income and expense | ||||||||||||||||||||||||||||
Exploration costs | 4,965 | 2,974 | 4,481 | 914 | 483 | 4,047 | 17,864 | |||||||||||||||||||||
Income tax expense | 52,797 | 15,436 | 1,704 | 125,701 | 108 | 56 | 195,802 | |||||||||||||||||||||
Additions to property, plant and | ||||||||||||||||||||||||||||
equipment during the period | 95,491 | 49,634 | 7,524 | 57,415 | 11,843 | 877 | 222,784 |
For the year ended December 31, 2013
Turkey | China | Brazil | Greece | Romania | Other | Total | ||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
Information about assets and liabilities | ||||||||||||||||||||||||||||
Property, plant and equipment (*) | 854,893 | 1,461,592 | 201,791 | 2,546,935 | 616,906 | 2,265 | 5,684,382 | |||||||||||||||||||||
Goodwill | - | 52,514 | - | 473,782 | - | - | 526,296 | |||||||||||||||||||||
854,893 | 1,514,106 | 201,791 | 3,020,717 | 616,906 | 2,265 | 6,210,678 | ||||||||||||||||||||||
Debt | - | 16,402 | - | - | - | 585,006 | 601,408 |
* Net of revenues from sale of production from tailings retreatment
14
Eldorado Gold Corporation
Notes to the unaudited condensed consolidated financial statements
(Expressed in thousands of U.S. dollars, unless otherwise stated)
10. | Segment information (continued) |
The Turkey and China segments derive their revenues from sales of gold. The Brazil segment derives its revenue from sales of iron ore. The Greece segment derives its revenue from sales of zinc, lead and silver concentrates.
The measure of total debt represents the current and long-term portions of debt.
10.2 | Economic dependence |
At June 30, 2014, each of our Chinese mines had one major customer, to whom each sells its entire production, as follows:
TJS Mine | Henan Zhongyuan Gold Smelter Factory Co. Ltd.of Zhongjin Gold Holding Co. Ltd. |
Jinfeng Mine | China National Gold Group |
White Mountain Mine | Refinery of Shandong Humon Smelting Co. Ltd. |
10.3 | Seasonality/cyclicality of operations |
Management does not consider operations to be of a significant seasonal or cyclical nature. |
15