Filed by Eldorado Gold Corporation

Pursuant to Rule 425 under the United States Securities Act of 1933, as amended

 

Subject Company: Frontier Pacific Mining Corporation

Commission File No.: 132-02644

Date: May 8, 2008

 

ELDORADO GOLD CORPORATION

FORM 51-102F3

MATERIAL CHANGE REPORT

 

Eldorado Gold Corporation (“Eldorado” or the "Company")

Suite 1188 – Bentall 5

550 Burrard Street

Vancouver, British Columbia

V6C 2B5

May 1, 2008

 

The Company filed its news release #08-09 dated May 1, 2008 on SEDAR and disseminated the same via CCN Matthews.

 

 

The Company announced their first quarter 2008 financial and operational results.

 

Paul N. Wright, President and Chief Executive Officer of Eldorado Gold Corporation is pleased to report on the Company's financial and operational results for the first quarter ended March 31, 2008. “This was an excellent quarter for us, thanks to record sales at our Tanjianshan mine in China, a successful and smooth resumption of production from our Kisladag mine in Turkey, strong gold prices and lower production cost,” said Wright. “Looking ahead, we plan to commence construction at Efemçukuru in Turkey in Q2; we’re on track for commissioning the Vila Nova Iron Ore project in Brazil and our exploration work plans for 2008 are underway.”

 

2008 Highlights

 

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Financial Results

 

Our consolidated net income for Q1 2008 was $20.7 million or $0.06 per share compared with net income of $12.6 million or $0.04 per share in Q1 2007. The increase in net income resulted from record sales from our Tanjianshan mine, higher gold prices, lower costs and strong production and sales in March from our restarted Kisladag mine. In Q1 2008, we sold 73,604 ounces of gold at an average price of $933 per ounce, compared to 64,177 ounces at an average price of $647 per ounce in Q1 2007.

 

Operating Performance

 

Kisladag

 

We reopened the Kisladag mine on March 6, 2008 and quickly achieved full mine production. In the month of March we placed 529,480 tonnes of ore on the leach pad at an average grade of 1.18 g/t of gold. We produced 27,228 ounces of gold at a cash operating cost of $217 per ounce in Q1 2008 and sold 23,219 ounces of gold at an average price of $965 per ounce. We continue to forecast 2008 production of approximately 190,000 ounces at a cash cost of $222 per ounce.

 

Tanjianshan

 

We produced 40,006 ounces of gold at a cash cost of $211 per ounce in Q1 2008 and sold 50,475 ounces of gold at an average price of $919 per ounce. We spent $6.6 million on capital expenditures, primarily relating to the sulfide ore processing project to treat ore from the newly opened Jinlonggou pit. The construction has progressed with 500,000 man hours worked without a lost time accident. During the quarter, we also made the transition to contractor mining, which will lower our overall unit mining costs. We forecast 2008 production of approximately 109,000 ounces at a cash cost of $289 per ounce.

 

Development

 

Efemçukuru

 

With the forestry permit approvals in place, the Company is now positioned to commence construction activities and plans to begin access road development and site clearing. We expect to acquire all the remaining privately owned land required for the project in a timely manner.

 

Vila Nova Iron Ore

 

We continued construction activities at the Vila Nova Iron Ore project in anticipation of shipping lump ore and sinter fines in Q1 2009. We signed a Memorandum of Understanding with BHP Billiton for the sale of all lump ore and sinter fines for the first three years of production and are negotiating the terms of the Long Term Supply Agreement with BHP Billiton.

 

Exploration

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Exploration expense for Q1 2008 was $2.2 million (Q1 2007 – $2.8 million). Our exploration activities focused on our properties in Turkey, Brazil and China.

 

Exploration –Turkey

 

At Efemçukuru we began a soil sampling program designed to generate targets outside the main ore zone. Permits for drill roads have been obtained and we are designing a drilling program that will target the North Ore Shoot, which currently has only inferred resources and limited drilling. Best results from the North Ore Shoot in 2007 included 5.02 meters (true width) at 12.52 g/t Au.

 

A drill program (+13,000 meters) has been planned for Kisladag and will start in Q2 2008. This program is designed to follow up on results obtained in 2007 that saw significant increases to both the resources and reserves at the mine. The focus of the 2008 program will be to convert inferred resources to measured and indicated and to explore areas in which the mineralization is still open at depth and on the flanks of the deposit.

 

We obtained four new licenses through the auction process during the quarter and conducted additional mapping and soil sampling on the Biga Peninsula properties. Regional reconnaissance work is continuing in other parts of Turkey to identify and acquire new targets.

 

Exploration –Brazil

 

Exploration in Brazil consisted of support for the Vila Nova Iron Ore project and project evaluations in various prospective areas.

 

Exploration –China

 

During Q1 2008, our geologists from the Beijing regional exploration office evaluated projects in northern and western China. At Tanjianshan, preparation for a busy field season has begun. We commenced detailed mapping on several areas, including north and south of the current Qinlongtan pit, to identify extensions to the high grade ore zone that will be drill targets during the upcoming drilling campaign. A structural review is underway on the targets in the vicinity of the Jinlonggou pit; we drilled some of these targets in 2007 and will continue drilling in 2008. These targets are peripheral to the currently designed pit in Jinlonggou and are a high priority in the upcoming program.

 

Acquisitions

 

On April 21, 2008, we announced the intention to make an offer to acquire all of the outstanding shares of Frontier Pacific Mining Corporation (“FRP”). The proposed transaction is valued at approximately C$148 million (or C$157 million on a fully diluted basis). FRP shareholders will receive 0.122 common shares of Eldorado for every common share FRP.

 

Eldorado is a gold producing and exploration company actively growing businesses in Brazil, Turkey, China and surrounding regions. With our international expertise in mining, finance and project development, together with highly skilled and dedicated staff, we believe that Eldorado is well positioned to grow in value as we create and pursue new opportunities.

 

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PRODUCTION HIGHLIGHTS¹

 

 

 

 

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Notes attached form part of this release.

 

 

 

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Item 6.

Reliance on 7.1(2) or (3) of National Instrument 51-102

Not applicable.

Not applicable.

May 5, 2008.

 

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1.        Nature of operations and basis of presentation

Eldorado Gold Corporation (“Eldorado”, “the Company” or “we”) is a gold exploration, development, mining and production company. Eldorado has ongoing exploration and development projects in Brazil, China and Turkey. On July 1, 2006, Eldorado began production in Turkey and on February 1, 2007, Eldorado began production in China. Production at the Kisladag mine in Turkey was suspended in August 2007 as a result of a court injunction and the mine remained shut down throughout the remainder of 2007. The court injunction was removed in February 2008 and the mine restarted production on March 6, 2008. Production operations at the São Bento mine in Brazil ceased in the second quarter of 2007 and the mine is in reclamation.

 

With the exception to changes in accounting policies as outlined in note 2 below, these unaudited interim consolidated financial statements have been prepared by Eldorado in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”) consistent with those used in the preparation of Eldorado’s audited consolidated financial statements for the year ended December 31, 2007. As these unaudited interim consolidated financial statements do not contain all of the disclosures required by Canadian GAAP, they should be read in conjunction with the notes to the Company’s audited consolidated financial statements for the year ended December 31, 2007.

 

In the opinion of Management, Eldorado has made all adjustments necessary to present fairly the consolidated financial position as at March 31, 2008 and the consolidated results of operations, cash flows and comprehensive income for the three-month period then ended. These interim results are not necessarily indicative of the results for a full year.

 

 

Capital Disclosure – Section 1535

 

Effective January 1, 2008, the Company adopted Section 1535 “Capital Disclosures”, which requires disclosure of qualitative and quantitative information that enables the users to evaluate the Company’s objectives, policies and processes for managing capital as well as the implications of non-compliance. Disclosures required by this standard are included in note 7.

 

Inventories – Section 3031

 

Effective January 1, 2008, the Company adopted Section 3031 “Inventories”. This Section prescribes the accounting treatment for inventories and provides guidance on the determination of costs and its subsequent recognition as an expense, including any write-down to net realizable value. It also provides guidance on the cost formulas that are used to assign costs to inventories. The adoption of this new accounting policy did not have any impact on the Company’s consolidated financial statements.

 

 

Financial Instruments – Disclosures, Section 3862

 

Effective January 1, 2008, the Company adopted Section 3862 “Financial Instruments – Disclosures”. This Section requires entities to provide disclosure of quantitative and qualitative information in their financial statements that enable users to evaluate (a) the significance of financial instruments for the entity's financial position and performance; and (b) the nature and extent of risks arising from financial instruments to which the entity is exposed during the period and at the balance sheet date, and management’s objectives, policies and procedures for managing such risks. Disclosures required by this standard are included in note 8.

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Eldorado Gold Corporation

Unaudited Consolidated Statements of Comprehensive Income

For the three months ended March 31,

Goodwill and intangible assets – Section 3064

 

In February 2008, the CICA issued Section 3064, “Goodwill and Intangible Assets”, which replaces Section 3062, “Goodwill and Other Intangible Assets”. This new standard provides guidance on the recognition, measurement, presentation and disclosure of goodwill and intangible assets and is effective beginning January 1, 2009. Concurrent with the adoption of this standard, EIC-27, “Revenues and Expenditures in the Pre-operating Period”, will be withdrawn. This will result in a change to the Company’s accounting for the start-up of mining operations, as pre-commercial production costs will no longer be capitalized as an asset. We are currently assessing the impact of this standard on our consolidated financial statements.

 

Restricted cash

Restricted cash represents short-term interest-bearing money market securities and funds held on deposit as collateral:

The environmental guarantee deposit is held on account with a Turkish bank under environmental and pollution guarantees required by the Turkish Ministry of the Environment. The funds are invested at prevailing bank rates. Interest earned on these deposits is included in interest and other income as presented in the Consolidated Statements of Operations.

 

Shareholders’ equity

Authorized share capital

The Company’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, 2008, there were no non-voting common shares outstanding.

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Stock-based compensation

Share option plans

The continuity of share purchase options outstanding is as follows:

 

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Eldorado Gold Corporation

 

 

Stock-based compensation expense

Stock-based compensation expense incurred to March 31, 2008 has been included in the undernoted expenses in the consolidated statement of earnings and deficit as follows:

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Eldorado Gold Corporation

Unaudited Consolidated Statements of Comprehensive Income

For the three months ended March 31,

Bonus Cash Award Units plan

As of March 31, 2008, the Company had awarded 587,500 Bonus Cash Award Units (“BCAUs”) with a vesting date of February 8, 2008 and 587,500 BCAUs with a vesting date of February 8, 2009. All BCAUs were unexercised at March 31, 2008. The carrying value of BCAUs at March 31, 2008 was $1,703, and is reflected in accrued liabilities on the balance sheet. The related cost in the amount of $1,225 is reflected in “general and administrative expense” in the Consolidated Statements of Operations and Deficit.

 

Supplementary cash flow information

 

 

Capital disclosure

Eldorado’s objectives when managing capital are as follows:

 

 

The Company monitors capital based on the debt to adjusted capital ratio. Debt is total debt shown on the balance sheet. Adjusted capital comprises all components of shareholders’ equity, which includes accumulated comprehensive income, share capital, contributed surplus and deficit.

 

Eldorado’s strategy is to keep the debt to adjusted capital ratio below 40%. The debt to adjusted capital ratio at March 31, 2008 and December 31, 2007 was 14.99% and 14.60% respectively.

 

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Eldorado Gold Corporation

Unaudited Consolidated Statements of Comprehensive Income

For the three months ended March 31,

 

 

 

The Company’s activities expose it to a variety of financial risks, including credit risk, foreign exchange risk, interest rate risk, liquidity risk and gold price risk.

 

Credit risk

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. Financial instruments that potentially subject the Company to credit risk consist of cash and cash equivalents, restricted cash and accounts receivable. Eldorado deposits its cash and cash equivalents, including restricted cash, with high credit quality financial institutions as determined by ratings agencies.

 

Currency risk

The Company operates in numerous countries, including Canada, Turkey, China and Brazil, and is therefore exposed to foreign exchange risk arising from transactions denominated in a foreign currency.

 

Eldorado’s cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities are held in several currencies (mainly Canadian dollars, Turkish liras, Chinese renminbi and Brazilian real) and are therefore subject to fluctuation against the US dollar.

 

We had the following balances in foreign currency as at March 31, 2008:

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Eldorado Gold Corporation

Unaudited Consolidated Statements of Comprehensive Income

For the three months ended March 31,

 

 

Based on the balances as at March 31, 2008, a 1% increase (decrease) in the exchange rates on that date would have resulted in a (decrease) increase of approximately $167 in earnings before income. There would be no effect in other comprehensive income.

Our cash flows from our Chinese operations are exposed to foreign exchange risk, as commodity sales are set in US dollars and the majority of operating expenses are in Chinese renminbi.

Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate due to changes in market interest rates. Current financial assets and financial liabilities are generally not exposed to interest rate risk because of their short-term nature. Eldorado’s debt is not exposed to interest rate cash flow risk as the interest rate has been fixed at the time of each drawdown.

Gold price risk and other price risk

Eldorado is subject to price risk for fluctuations in the market price of gold. Gold prices are affected by numerous factors beyond our control, including central bank sales, producer hedging activities, the relative exchange rate of the US dollar with other major currencies, global and regional demand and political and economic conditions. Worldwide gold production levels also affect gold prices, and the price of gold is occasionally subject to rapid short-term changes due to speculative activities. We have elected not to actively manage our exposure to gold price risk at this time. From time-to-time, we may use commodity price contracts to manage our exposure to fluctuations in gold price.

Other price risk is the risk that the value of a financial instrument will fluctuate as a result of changes in market prices. Eldorado’s other price risk includes equity price risk and energy price risk, whereby the Company’s investments in trading and available for sale securities and derivative contracts, respectively, are subject to market price fluctuation.

Liquidity risk  

Liquidity risk is the risk that an entity will encounter difficulty in raising funds to meet commitments associated with financial instruments. The Company manages liquidity by maintaining adequate cash and cash equivalent balances, and by appropriately using its lines of credit. Our treasury department monitors and reviews both actual and forecasted cash flows, and also matches the maturity profile of financial assets and liabilities.

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Eldorado Gold Corporation

Unaudited Consolidated Statements of Comprehensive Income

For the three months ended March 31,

As at March 31, 2008, Eldorado had $55,501 of purchase obligations with respect to its normal course of business for the remainder of 2008.

 

Segmented information

During the period ended March 31, 2008, the Company had four reporting segments. The Brazil reporting segment includes the reclamation activities of the São Bento mine and exploration activities in Brazil. The Turkey reporting segment includes the operations of the Kisladag mine and exploration and development activities in Turkey. The China reporting segment includes the operations of the TJS mine and exploration activities in China. The corporate reporting segment includes the operations of the Company’s corporate office.

 

		March 31, 2008
		Turkey $		China $		Brazil $		Corporate $		Total $
Net mining interests
Producing or under construction		179,500		147,620		7,816		921		335,857
Non-producing		39,838		-		6,255		-		46,093
		219,338		147,620		14,071		921		381,950

 

Operations

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Eldorado Gold Corporation

Unaudited Consolidated Statements of Comprehensive Income

For the three months ended March 31,

 

 

Subsequent event

On April 21, 2008, we announced the intention to make an offer to acquire all of the outstanding shares of Frontier Pacific Mining Corporation (“FRP”). The proposed transaction is valued at approximately C$148 million (or C$157 million on a fully diluted basis). FRP shareholders will receive 0.122 common shares of Eldorado for every common share of FRP.

 

In the event that a consensual transaction cannot be reached, Eldorado will take its proposal directly to FRP’s shareholders by commencing a takeover bid to acquire 100% of the outstanding shares of FRP. Eldorado has executed a lock-up agreement with FRP’s largest shareholder, Dundee Precious Metals, Inc., under which Dundee has agreed to tender 41,942,800 shares, or approximately 25.5% of FRP’s outstanding common shares, pursuant to the proposed takeover bid of FRP by Eldorado.

 

Full details of the offer will be included in a formal offer and the takeover bid circular to be filed with securities regulatory authorities and mailed to FRP shareholders. The offer will be open for acceptance for at least 35 days following the start of the offer. The offer will be subject to certain conditions, including receipt of all necessary regulatory clearances in Greece, absence of material adverse changes and acceptance of the offer by FRP shareholders owning not less than 66 2/3% of the FRP common shares on a fully diluted basis. Once the 66 2/3% acceptance level is met, Eldorado intends, but is not required, to take steps to acquire all of the outstanding FRP common shares.

 

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