March 31, 2018 Unaudited Condensed Consolidated Financial Statements
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Eldorado Gold Corporation
Unaudited Condensed Consolidated Balance Sheets
(Expressed in thousands of U.S. dollars except per share amounts)
Note | March 31, 2018 | December 31, 2017 | |||||
$ | $ | ||||||
ASSETS | |||||||
Current assets | |||||||
Cash and cash equivalents | 454,200 | 479,501 | |||||
Term deposits | 5,524 | 5,508 | |||||
Restricted cash | 318 | 310 | |||||
Marketable securities | 4,104 | 5,010 | |||||
Accounts receivable and other | 79,587 | 78,344 | |||||
Inventories | 180,268 | 168,844 | |||||
724,001 | 737,517 | ||||||
Restricted cash and other assets | 18,525 | 22,902 | |||||
Defined benefit pension plan | 9,611 | 9,919 | |||||
Property, plant and equipment | 4,243,803 | 4,227,397 | |||||
Goodwill | 4 | 92,591 | 92,591 | ||||
5,088,531 | 5,090,326 | ||||||
LIABILITIES & EQUITY | |||||||
Current liabilities | |||||||
Accounts payable and accrued liabilities | 101,276 | 110,541 | |||||
Current portion of asset retirement obligation | 2,682 | 3,489 | |||||
103,958 | 114,030 | ||||||
Debt | 5 | 594,332 | 593,783 | ||||
Other non-current liability | 1,664 | 110 | |||||
Defined benefit pension plan | 13,854 | 13,599 | |||||
Asset retirement obligations | 96,863 | 96,195 | |||||
Deferred income tax liabilities | 546,728 | 549,127 | |||||
1,357,399 | 1,366,844 | ||||||
Equity | |||||||
Share capital | 3,007,924 | 3,007,924 | |||||
Treasury stock | (11,056) | (11,056) | |||||
Contributed surplus | 2,618,323 | 2,616,593 | |||||
Accumulated other comprehensive loss | (22,080) | (21,350) | |||||
Deficit | (1,939,851) | (1,948,569) | |||||
Total equity attributable to shareholders of the Company | 3,653,260 | 3,643,542 | |||||
Attributable to non-controlling interests | 77,872 | 79,940 | |||||
3,731,132 | 3,723,482 | ||||||
5,088,531 | 5,090,326 |
Approved on behalf of the Board of Directors
(Signed)John Webster Director (Signed)George Burns Director
Date of approval:April 26, 2018
The accompanying notes are an integral part of these consolidated financial statements.
Eldorado Gold Corporation
Unaudited Condensed Consolidated Income Statements
(Expressed in thousands of U.S. dollars except per share amounts)
For the quarter ended March 31 | Note | 2018 | 2017 | |||
$ | $ | |||||
Revenue | ||||||
Metal sales | 6 | 131,905 | 111,880 | |||
Cost of sales | ||||||
Production costs | 67,235 | 50,688 | ||||
Depreciation and amortization | 29,188 | 18,064 | ||||
96,423 | 68,752 | |||||
Gross profit | 35,482 | 43,128 | ||||
Exploration expenses | 4,148 | 5,247 | ||||
Mine standby costs | 2,706 | 1,031 | ||||
Other operating items | - | 2,133 | ||||
General and administrative expenses | 8,225 | 11,614 | ||||
Defined benefit pension plan expense | 1,083 | 831 | ||||
Share based payments | 8 | 1,318 | 5,128 | |||
Write-down of assets | 4,024 | 1,054 | ||||
Foreign exchange loss | 1,142 | 88 | ||||
Operating profit | 12,836 | 16,002 | ||||
Gain (loss) on disposal of assets | 86 | (307) | ||||
Gain on derivatives and other investments | 788 | 34 | ||||
Other income | 3,097 | 2,349 | ||||
Asset retirement obligation accretion | (510) | (523) | ||||
Interest and financing costs | (3,564) | (1,110) | ||||
Profit from continuing operations before income tax | 12,733 | 16,445 | ||||
Income tax expense | 7,084 | 10,776 | ||||
Profit from continuing operations | 5,649 | 5,669 | ||||
Loss from discontinued operations | - | (3,000) | ||||
Profit for the period | 5,649 | 2,669 | ||||
Attributable to: | ||||||
Shareholders of the Company | 8,718 | 3,834 | ||||
Non-controlling interests | (3,069) | (1,165) | ||||
Profit for the period | 5,649 | 2,669 | ||||
Profit (loss) attributable to shareholders of the Company | ||||||
Continuing operations | 8,718 | 6,834 | ||||
Discontinued operations | - | (3,000) | ||||
8,718 | 3,834 | |||||
Weighted average number of shares outstanding (thousands) | ||||||
Basic | 794,011 | 716,600 | ||||
Diluted | 794,011 | 717,283 | ||||
Profit per share attributable to shareholders | ||||||
of the Company: | ||||||
Basic profit per share | 0.01 | 0.01 | ||||
Diluted profit per share | 0.01 | 0.01 | ||||
Profit per share attributable to shareholders | ||||||
of the Company - continuing operations: | ||||||
Basic profit per share | 0.01 | 0.01 | ||||
Diluted profit per share | 0.01 | 0.01 |
The accompanying notes are an integral part of these consolidated financial statements.
Eldorado Gold Corporation
Unaudited Condensed Consolidated Statements of Comprehensive Income
(Expressed in thousands of U.S. dollars)
For the quarter ended March 31 | 2018 | 2017 | ||
$ | $ | |||
Profit for the period | 5,649 | 2,669 | ||
Other comprehensive income: | ||||
Change in fair value of available-for-sale financial assets | (739) | 16,864 | ||
Income tax on change in fair value of available-for-sale financial assets | - | (2,144) | ||
Actuarial losses on defined benefit pension plans | 9 | 105 | ||
Total other comprehensive income for the period | (730) | 14,825 | ||
Total comprehensive profit for the period | 4,919 | 17,494 | ||
Attributable to: | ||||
Shareholders of the Company | 7,988 | 18,659 | ||
Non-controlling interests | (3,069) | (1,165) | ||
4,919 | 17,494 |
The accompanying notes are an integral part of these consolidated financial statements.
Eldorado Gold Corporation
Unaudited Condensed Consolidated Statements of Cash Flows
(Expressed in thousands of U.S. dollars)
For the quarter ended March 31 | Note | 2018 | 2017 | |
$ | $ | |||
Cash flows generated from (used in): | ||||
Operating activities | ||||
Profit for the period from continuing operations | 5,649 | 5,669 | ||
Items not affecting cash: | ||||
Asset retirement obligation accretion | 510 | 523 | ||
Depreciation and amortization | 29,188 | 18,064 | ||
Unrealized foreign exchange loss (gain) | 249 | (74) | ||
Deferred income tax recovery | (2,399) | (2,713) | ||
(Gain) loss on disposal of assets | (86) | 307 | ||
Write-down of assets | 4,024 | 1,054 | ||
Gain on marketable securities and other investments | (788) | (34) | ||
Share based payments | 1,318 | 5,128 | ||
Defined benefit pension plan expense | 1,083 | 831 | ||
38,748 | 28,755 | |||
Property reclamation payments | (807) | (591) | ||
Changes in non-cash working capital | 10 | (15,055) | 22,610 | |
Net cash provided by operating activities of continuing operations | 22,886 | 50,774 | ||
Net cash used by operating activities of discontinued operations | - | (3,000) | ||
Investing activities | ||||
Purchase of property, plant and equipment | (66,986) | (73,837) | ||
Proceeds from the sale of property, plant and equipment | 61 | 1 | ||
Proceeds on pre-commercial production sales | 13,382 | - | ||
Value added taxes related to mineral property expenditures, net | 6,214 | 23,584 | ||
Investment in term deposits | (16) | (225,966) | ||
Increase in restricted cash | (842) | (4) | ||
Net cash used by investing activities of continuing operations | (48,187) | (276,222) | ||
Financing activities | ||||
Issuance of common shares for cash | - | 554 | ||
Dividend paid to shareholders | - | (10,610) | ||
Purchase of treasury stock | - | (2,049) | ||
Net cash used by financing activities of continuing operations | - | (12,105) | ||
Net decrease in cash and cash equivalents | (25,301) | (240,553) | ||
Cash and cash equivalents - beginning of period | 479,501 | 883,171 | ||
Cash and cash equivalents - end of period | 454,200 | 642,618 |
The accompanying notes are an integral part of these consolidated financial statements.
Eldorado Gold Corporation
Unaudited Condensed Consolidated Statements of Changes in Equity
(Expressed in thousands of U.S. dollars)
For the quarter ended March 31, | 2018 | 2017 | ||
$ | $ | |||
Share capital | ||||
Balance beginning of period | 3,007,924 | 2,819,101 | ||
Shares issued upon exercise of share options, for cash | - | 554 | ||
Transfer of contributed surplus on exercise of options | - | 166 | ||
Balance end of period | 3,007,924 | 2,819,821 | ||
Treasury stock | ||||
Balance beginning of period | (11,056) | (7,794) | ||
Purchase of treasury stock | - | (2,049) | ||
Shares redeemed upon exercise of restricted share units | - | 1,843 | ||
Balance end of period | (11,056) | (8,000) | ||
Contributed surplus | ||||
Balance beginning of period | 2,616,593 | 2,606,567 | ||
Share based payments | 1,730 | 4,497 | ||
Shares redeemed upon exercise of restricted share units | - | (1,843) | ||
Transfer to share capital on exercise of options | - | (166) | ||
Balance end of period | 2,618,323 | 2,609,055 | ||
Accumulated other comprehensive loss | ||||
Balance beginning of period | (21,350) | (7,172) | ||
Other comprehensive loss for the period | (730) | 14,825 | ||
Balance end of period | (22,080) | 7,653 | ||
Deficit | ||||
Balance beginning of period | (1,948,569) | (1,928,024) | ||
Dividends paid | - | (10,610) | ||
Profit attributable to shareholders of the Company | 8,718 | 3,834 | ||
Balance end of period | (1,939,851) | (1,934,800) | ||
Total equity attributable to shareholders of the Company | 3,653,260 | 3,493,729 | ||
Non-controlling interests | ||||
Balance beginning of period | 79,940 | 88,786 | ||
Loss attributable to non-controlling interests | (3,069) | (1,165) | ||
Increase during the period | 1,001 | - | ||
Balance end of period | 77,872 | 87,621 | ||
Total equity | 3,731,132 | 3,581,350 |
The accompanying notes are an integral part of these consolidated financial statements.
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 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.
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, 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 April 26, 2018.
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.
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 were the same as those that applied to the consolidated financial statements as at and for the year ended December 31, 2017.
3. | 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)
3. | 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. |
As a result of the adoption of this standard, the Company has changed its accounting policy for financial assets retrospectively, for assets that were recognized at the date of application. 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 for the year ended December 31, 2017 are unaffected:
3.7 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 and transaction costs are 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.
(c) Financial assets at amortized cost
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)
3. | 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. |
3.8 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)
3. | 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.
3.10 Trade Receivables
Trade receivables are amounts due from customers for the sale of bullion 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:
3.19 Revenue recognition |
Revenueisgeneratedfromthesaleofsale of bullion and metals in concentrate.TheCompanyproducesdoré, gold concentrate and other metal concentrates.TheCompany’sperformance 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)
3. | Adoption of new accounting standards and upcoming changes(continued) |
i) Metals in Concentrate
Controlovermetals inconcentratesistransferredtothecustomerandrevenueis recognizedupon 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 Istanbul Gold Exchange.Control overtherefinedgold orsilverproducedfrom doréistransferredtothecustomerandrevenuerecognizedupondeliverytothecustomer’sbullionaccount on the Istanbul Gold Exchange.
Refined metals are sold at spot prices on the Istanbul Gold Exchange. 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. IFRS 16 is effective for annual reporting periods beginning on or after January 1, 2019, with early adoption permitted. |
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 working on the development of its implementation plan 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)
4. | Acquisition of Integra |
On May 15, 2017, the Company announced that it had entered into a definitive agreement with Integra, pursuant to which Eldorado agreed to acquire 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”). The acquisition was finalized on July 10, 2017. |
Under the terms of the Arrangement former Integra shareholders were entitled to receive, at their option, for each Integra share they own either (i) 0.2425 Eldorado shares plus C$0.0001 in cash, (ii) C$1.2125 in cash, in both (i) and (ii) subject to pro ration, or (iii) 0.18188 of an Eldorado share and C$0.30313 in cash. Eldorado issued 77,180,898 common shares pursuant to the Arrangement 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. |
A preliminary allocation of the purchase price, which is subject to final adjustments, is as follows: |
77,180,898 common shares of shares of Eldorado at C$3.14/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 |
For the purpose of these consolidated financial statements, the purchase consideration has been allocated on a preliminary basis to the fair value of assets acquired and liabilities assumed based on management’s best estimates taking into account all available information at the time of acquisition as well as applicable information at the time these consolidated financial statements were prepared. The Company is in the process of preparing a more detailed assessment of Integra’s asset retirement obligation and will continue to review information and perform further analysis with respect to these assets, prior to finalizing the allocation of the purchase price.
(6) |
Eldorado Gold Corporation
Notes to the unaudited condensed consolidated financial statements
(Expressed in thousands of U.S. dollars, unless otherwise stated)
5. | 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 $5,668 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 March 31, 2018 is $572 million.
6. | Revenues |
For the quarter ended March 31, 2018, revenue by metal was as follows:
March 31, 2018 | March 31, 2017 | ||||||
$ | $ | ||||||
Gold revenue | 115,473 | 90,541 | |||||
Zinc revenue | 7,574 | 10,288 | |||||
Lead revenue | 5,552 | 5,617 | |||||
Silver revenue | 3,000 | 1,858 | |||||
Iron revenue | - | 2,530 | |||||
Revenue from contracts with customers | 131,599 | 110,834 | |||||
Gain on revaluation of derivatives in trade receivables | 306 | 1,046 | |||||
131,905 | 111,880 |
For the quarter ended March 31, 2018, revenue from contracts with customers by product and segment was as follows:
Turkey | Brazil | Greece | Total | ||
$ | $ | $ | $ | ||
Gold revenue - dore | 71,738 | - | - | 71,738 | |
Gold revenue - concentrate | 36,073 | - | 7,662 | 43,735 | |
Silver revenue - dore | 322 | - | - | 322 | |
Silver revenue - concentrate | 877 | - | 1,801 | 2,678 | |
Lead concentrate | - | - | 5,552 | 5,552 | |
Zinc concentrate | - | - | 7,574 | 7,574 | |
109,010 | - | 22,589 | 131,599 |
(7) |
Eldorado Gold Corporation
Notes to the unaudited condensed consolidated financial statements
(Expressed in thousands of U.S. dollars, unless otherwise stated)
6. | Revenues(continued) |
For the quarter ended March 31, 2017, revenue from contracts with customers by product and segment was as follows:
Turkey | Brazil | Greece | Total | ||
$ | $ | $ | $ | ||
Gold revenue - dore | 64,374 | - | - | 64,374 | |
Gold revenue - concentrate | 26,167 | - | - | 26,167 | |
Silver revenue - dore | 522 | - | - | 522 | |
Silver revenue - concentrate | 527 | - | 809 | 1,336 | |
Lead concentrate | - | - | 5,617 | 5,617 | |
Zinc concentrate | - | - | 10,288 | 10,288 | |
Iron ore concentrate | - | 2,530 | - | 2,530 | |
91,590 | 2,530 | 16,714 | 110,834 |
7. | Share capital |
Eldorado’s authorized share capital consists of an unlimited number of voting common shares without par value and an unlimited number of non-voting common shares without par value. At March 31, 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.
8. | Share-based payments |
(a) Share option plans
As at March 31, 2018, 29,722,573 share options were outstanding with a weighted average exercise price of Cdn$6.04. There were no movements in the number of share options outstanding during the quarter ended March 31, 2018.
As at March 31, 2018, 24,223,574 share options (March 31, 2017 – 19,457,178) with a weighted average exercise price of Cdn$6.50 (March 31, 2017 – Cdn$7.51) had vested and were exercisable.
Share based compensation expense related to share options for the quarter ended March 31, 2018 was $803.
Subsequent to March 31, 2018, 5,345,911 options at an exercise price of Cdn$1.24 were granted under the plan.
(b) Restricted share unit plan
There were no restricted share units (“RSUs”) granted, redeemed or forfeited during the quarter ended March 31, 2018 under the Company’s RSU plan. As at March 31, 2018, 1,706,096 RSUs remain outstanding.
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.
At the end of the period, 996,064 RSUs had fully vested and were exercisable. As at March 31, 2018, 1,706,096 common shares purchased by the Company remain held in trust in connection with this plan. These shares purchased and held in trust have been included in treasury stock in the balance sheet.
Restricted share units expense for the quarter ended March 31, 2018 was $303.
Subsequent to March 31, 2018, 1,894,846 RSUs were granted and 712,258 RSUs were redeemed under the plan.
(8) |
Eldorado Gold Corporation
Notes to the unaudited condensed consolidated financial statements
(Expressed in thousands of U.S. dollars, unless otherwise stated)
8. | Share-based payments(continued) |
(c) Deferred units plan
At March 31, 2018, 596,836 deferred units (“DUs”) were outstanding with a value of $500, which is included in accounts payable and accrued liabilities.
Compensation income related to the DU’s was $412 for the quarter ended March 31, 2018.
Subsequent to March 31, 2018, 748,308 DUs were granted under the plan.
(d) Performance share units plan
There were no performance share units (“PSUs”) granted during the quarter ended March 31, 2018 under the Company’s PSU plan. 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.
During the quarter ending March 31, 2018, 592,600 PSUs expired. As at March 31, 2018, 1,313,944 PSUs remain outstanding. The current maximum number of common shares authorized for issuance from treasury under the PSU plan is 3,130,000.
Compensation expense related to PSUs for the period ended March 31, 2018 was $624.
Subsequent to March 31, 2018, 1,270,003 PSUs were granted under the plan.
9. | Fair value of financial instruments |
Fair values are determined directly by reference to published price quotations in an active market, when available, or by using a valuation technique that uses inputs observed from relevant markets.
The three levels of the fair value hierarchy are described below:
· | Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. |
· | Level 2 – Inputs that are observable, either directly or indirectly, but do not qualify as Level 1 inputs (i.e. quoted prices for similar assets or liabilities). |
· | Level 3 – Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity). |
The assets and liabilities measured at fair value as at March 31, 2018 are marketable securities and derivatives related to the Company’s settlement receivables and metal hedge positions on lead and zinc. Both derivatives are considered level 2. The Company’s derivative asset of $500 and derivative liability of $381, related to our metal hedge positions, are included in Other assets and Accounts payable and accrued liabilities respectively in the balance sheet. The net gain related to hedge derivatives of $956 is presented in Gain on derivatives and other investments in our consolidated income statement. A summary of our metal hedging position as of March 31, 2018 is as follows:
Metal | Hedged Amount (Tonnes) | PUT ($/tonne) | CALL ($/tonne) | Maturity |
Lead | 3,834 | $2,300 | $2,625 | Apr 2018 – Jun 2018 |
Lead | 7,668 | $2,300 | $2,735 | Jul 2018 – Dec 2018 |
Zinc | 6,354 | $2,850 | $3,470 | Apr 2018 – Jun 2018 |
Zinc | 12,708 | $2,850 | $3,600 | Jul 2018 – Dec 2018 |
(9) |
Eldorado Gold Corporation
Notes to the unaudited condensed consolidated financial statements
(Expressed in thousands of U.S. dollars, unless otherwise stated)
9. | Fair value of financial instruments(continued) |
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 FVTOCI securities.
With the exception of the fair market value of the Company’s senior notes (note 5), which are included in level 2, all carrying amounts of other financial instruments approximate their fair value.
10. | Supplementary cash flow information |
March 31, 2018 $ | March 31, 2017 $ | |||
Changes in non-cash working capital | ||||
Accounts receivable and other | (2,128) | 14,923 | ||
Inventories | (10,955) | (3,796) | ||
Accounts payable and accrued liabilities | (1,972) | 11,483 | ||
Total | (15,055) | 22,610 | ||
Supplementary cash flow information | ||||
Income taxes paid | 7,616 | 16,241 | ||
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 March 31, 2018, Eldorado had six reportable segments based on the geographical location of mining and exploration and development activities.
11.1 Geographical segments
Geographically, the operating segments are identified by country and by operating mine or mine under construction. The Turkey reporting segment includes the Kişladağ and the Efemçukuru mines and exploration activities in Turkey. The Brazil reporting segment includes the Vila Nova mine, Tocantinzinho project and exploration activities in Brazil. The Greece reporting segment includes the Stratoni 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. 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.
(10) |
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 March 31, 2018 | |||||||
Turkey | Brazil | Greece | Romania | Other | Canada | Total | |
$ | $ | $ | $ | $ | $ | $ | |
Information about profit and loss | |||||||
Revenues | 109,010 | - | 22,895 | - | - | - | 131,905 |
Production costs | 48,741 | - | 18,494 | - | - | - | 67,235 |
Depreciation | 23,735 | - | 5,370 | - | 83 | - | 29,188 |
Gross profit (loss) | 36,534 | - | (969) | - | (83) | - | 35,482 |
Other material items of income and expense | |||||||
Write-down of assets | 459 | - | 1,876 | 1,689 | - | - | 4,024 |
Exploration costs | 290 | 759 | 1,731 | 889 | 479 | - | 4,148 |
Income tax expense (recovery) | 12,431 | (108) | (1,363) | (2,115) | - | (1,761) | 7,084 |
Additions to property, plant and | |||||||
equipment during the period | 12,583 | 1,673 | 28,715 | 2,487 | 393 | 22,142 | 67,993 |
Information about assets and liabilities | |||||||
Property, plant and equipment (*) | 824,628 | 198,139 | 2,368,602 | 415,918 | 1,062 | 435,454 | 4,243,803 |
Goodwill | - | - | - | - | - | 92,591 | 92,591 |
824,628 | 198,139 | 2,368,602 | 415,918 | 1,062 | 528,045 | 4,336,394 | |
Debt | - | - | - | - | 594,332 | - | 594,332 |
For the three months ended March 31, 2017 | ||||||
Turkey | Brazil | Greece | Romania | Other | Total | |
$ | $ | $ | $ | $ | $ | |
Information about profit and loss | ||||||
Revenues | 91,590 | 2,530 | 17,760 | - | - | 111,880 |
Production costs | 36,848 | 1,312 | 12,528 | - | - | 50,688 |
Depreciation | 17,818 | - | 128 | - | 118 | 18,064 |
Gross profit (loss) | 36,924 | 1,218 | 5,104 | - | (118) | 43,128 |
Other material items of income and expense | ||||||
Write-down of assets | 237 | - | 817 | - | - | 1,054 |
Exploration costs | 336 | 1,231 | 1,486 | 1,764 | 430 | 5,247 |
Income tax expense (recovery) | 14,557 | (1,066) | 66 | (637) | (2,144) | 10,776 |
Additions to property, plant and | ||||||
equipment during the period | 10,014 | 1,954 | 60,410 | 2,260 | 123 | 74,761 |
(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(continued) |
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.
11.2 | Seasonality/cyclicality of operations |
Management does not consider operations to be of a significant seasonal or cyclical nature. |
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