07/16/2013 10:23 EDT | Updated 09/15/2013 05:12 EDT

Eldorado lowers capital expenditure, cuts exploration budget on low gold prices

VANCOUVER - Eldorado Gold Corp. (TSX:ELD) said Tuesday it was reducing its 2013 capital budget by $240 million and delaying work on some projects to adjust to declines in gold prices.

The move was well received by the markets, which reacted by pushing the company's stock up more than four per cent or 30 cents to $7.07 on the Toronto Stock Exchange.

The Vancouver-based miner cut its overall capital plan for this year to US$430 million from US$670 million, and said it would focus on mine site and brown fields exploration.

It also announced it would delay a full expansion of its Kisladag project in Turkey until prices strengthened, and set a new exploration budget of US$51 million for 2013 instead of the planned US$98.5 million.

Chief executive Paul Wright said the company revised the plan to ensure it can develop its business based on a gold price of $1,250 an ounce for the foreseeable future, adding he expects 2014 exploration spending to be at or below the new level.

"With the company's strong balance sheet and low production costs, the company remains well equipped to grow its high quality business, albeit at a slower pace than previously envisaged," he said in a statement.

"The company's mines continue to deliver in accordance with plan, in terms of both production and costs underpinning Eldorado's ability to progress its development projects."

John Ing, president of Maison Placements Canada in Toronto, called the reductions a smart move, noting they are part of a shift toward profitability throughout the entire sector.

"Cutting back, slowing down Kisladag, are the moves that he should (be making)," said Ing.

"It's a recognition of the reality that capital is scarce and the fact that the stock has reacted favourably is positive."

Over the past few years, the emphasis in the gold mining industry has been on growth, he added, but that growth came "at any cost."

"What we saw was near $20 billion worth of writeoffs in just a matter of weeks because a lot of those acquisitions turned out to be not only overpriced and overvalued," Ing said.

"The mining executives just tried to over achieve."

With the collapse of the gold price, the industry itself has realized the focus should be on profitably, he said.

Eldorado said it still plans to replace the existing mining fleet at Kisladag with larger loading and haulage equipment and continue with the electrification of the mine. It will also continue work on an amended Environmental Impact Assessment application for the full expansion, which it expects to get approval for by year end.

But it will delay its Skouries, Perama and Certej projects by about a year.

Its year-end production guidance remains at 745,000 ounces of gold with cash costs of $520 and ounce, which is in line with original guidance provided of 705,000 to 760,000 ounces at cash costs of $515 to 530 an ounce.

Wright said the company's dividend policy will be reviewed by its board of directors at an upcoming quarterly board meeting to ensure it "fits the company's current development spending plans."

Eldorado is a gold producing, exploration and development company with operations in Turkey, China, Greece, Brazil and Romania.

— By Romina Maurino in Toronto.