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The skouries mine in the Halkidiki region of northern Greece.


Eldorado Gold Corp.’s plans to build a new gold and copper mine in Europe got a shot in the arm on Wednesday, after it received a favourable arbitration ruling in Greece. But questions remain over the timing of when the junior gold company might get the project into production and how it will fund the operation.

Last September, Eldorado’s ambitions to develop the Skouries high-grade gold and copper project was cast in doubt after the Greek government objected to its treatment plan for metal concentrates, as outlined in a prior technical report. The country’s ministry of environment and energy, and its ministry of finance, alleged the Vancouver-based company was in contract violation, kicking off an arbitration process.

In November, Vancouver-based Eldorado put development plans for Skouries on hold.

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In a news release on Wednesday, Eldorado said a Greek arbitration panel had ruled in its favour, upholding the validity of the 2014 technical report.

“We believe this decision provides a foundation to allow us to advance dialogue with the Greek government,” George Burns, chief executive officer of Eldorado, said in a statement on Wednesday.

“We look to the Greek state to fulfil its obligations … including issuing the outstanding permits for the Skouries project.”

Greece’s ministry of environment and energy did not respond to a request for comment on Wednesday.

“The positive ruling should reduce the level of perceived political risk related to the company’s Greek build-out, which has been a key headwind for Eldorado shares the last few years,” Dan Rollins, analyst with RBC Dominion Securities Inc., wrote in a note to clients.

Kerry Smith, analyst with Haywood Securities Inc., sounded a note of caution to investors in his report, also published on Wednesday.

“The Greek government has been overruled several times in the past by the Supreme Court, and now by this arbitration panel, and we doubt this decision will miraculously open the door to permit approvals,” he wrote.

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“We expect the Greek government will continue to drag their feet in issuing permits, and a change in government is likely the key catalyst to get this project back into construction.”

Prior to Wednesday’s announcement, shares in Eldorado had lost about 75 per cent of their value over the past year, partly based on uncertainty in Greece, and worries over its high debt load. The company’s total debt stood at US$594-million as of the end of last year.

Shares in Eldorado rose 2.6 per cent on the Toronto Stock Exchange on Wednesday.

Eldorado plans to develop the Skouries project by using an open pit and an underground mine. The ore body is located in the Halkidiki Peninsula in northern Greece. Eldorado estimates a mine life of 23 years, with 3.7 million ounces of proven and probable gold reserves.

While the company had about US$485-million of cash on hand as of the end of last year, its future capital expenditure requirements far exceed that.

Total development costs for Skouries alone are projected at US$689-million. Apart from its operations in Greece, Eldorado also has assets in a number of other jurisdictions including, Turkey, Romania, Brazil and Canada, some of which are also in need of capital.

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“Financing risks remain,” Mr. Rollins said.

In an e-mail to The Globe and Mail, Eldorado spokesperson Louise Burgess said the company is “examining finance options,” but it is in no immediate rush, as its liquidity supports near-term requirements.

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