Eldorado to run Greek gold mines

December 23, 2011

Eldorado Gold, a Canadian gold producer, announced that it plans to invest C$1.3 billion to develop two sites in northern Greece. It will be a test of whether the debt-stricken country can overcome a historic reluctance to allow foreign-backed mining projects, according to the Financial Times.

Eldorado Gold gave details of the projects after agreeing to acquire European Goldfields, the current concession-holder for the Olympias and Skouries mines in the Halkidiki region, which has been carrying out preparatory work at both sites.

Together the two mines would produce about 9.8 t/a (350,000 ozpy) of gold when they enter full production in 2015, making Greece one of Europe’s largest gold producers.

“This is an opportunity that will show whether an international mining company with high-profile institutional shareholders is able to work in Greece,” Paul Wright, Eldorado’s president and chief executive, said in an interview with the Financial Times.

The Eldorado investment, if fully implemented, would be the largest by a foreign company in more than a decade, according to analysts.

European Goldfields, a small Canadian company with Greek and Qatari shareholders, won permits to work in Halkidiki last July after five years of delays.

Previous government policy put tourism development ahead of mining. Several attempts to develop the Halkidiki sites ended in failure after senior Greek politicians backed local environmental groups running protest campaigns.  However, Greece’s deteriorating economy, now in its fifth year of recession, has forced politicians to review their priorities.

The Halkidiki projects would create 1,800 jobs in a region where unemployment is close to 20 percent. The Olympias project involves refurbishing an abandoned underground mine, while an open pit mine would operate at Skouries.

Wright said Eldorado would finance the project from its own balance sheet, with a $400 million cash reserve available to cover start-up costs.

Companies operating in Greece have lost access to bank financing for new projects because of a liquidity squeeze, while fears of a sovereign default have cut funding by foreign lenders.

Eldorado is still waiting for permits to open a separate mine at Perama in Thrace, a project that has been delayed for almost three years amid sustained opposition by local government officials and environmental groups. It could produce 4.1 t/a (150,000 ozpy) of gold.

“Greece has the potential to become a serious gold producer, but more exploration needs to be done – very little has happened over the past 20 years,” Wright said.



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