MD Filed by Filing Services Canada Inc. (403) 717-3898

0001137171-11-000149.txt : 20110318 0001137171-11-000149.hdr.sgml : 20110318 20110318172541 ACCESSION NUMBER: 0001137171-11-000149 CONFORMED SUBMISSION TYPE: 6-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20101231 FILED AS OF DATE: 20110318 DATE AS OF CHANGE: 20110318 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ELDORADO GOLD CORP /FI CENTRAL INDEX KEY: 0000918608 STANDARD INDUSTRIAL CLASSIFICATION: GOLD & SILVER ORES [1040] IRS NUMBER: 000000000 STATE OF INCORPORATION: A1 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 6-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-31522 FILM NUMBER: 11699191 BUSINESS ADDRESS: STREET 1: SUITE 1188 - BENTALL 5 STREET 2: 550 BURRARD STREET CITY: VANCOUVER STATE: A1 ZIP: V6C 2B5 BUSINESS PHONE: (604) 687-4018 MAIL ADDRESS: STREET 1: SUITE 1188 - BENTALL 5 STREET 2: 550 BURRARD STREET CITY: VANCOUVER STATE: A1 ZIP: V6C 2B5 FORMER COMPANY: FORMER CONFORMED NAME: ELDORADO CORP LTD /FI DATE OF NAME CHANGE: 19960701 FORMER COMPANY: FORMER CONFORMED NAME: ELDORADO GOLD CORP /FI DATE OF NAME CHANGE: 19940203 6-K 1 eldorado6k03182011.htm ELDORADO GOLD CORPORATION 6-K MD Filed by Filing Services Canada Inc. (403) 717-3898

FORM 6-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934

For the month of March, 2011

Commission File Number 001-31522

Eldorado Gold Corporation
(Translation of registrant's name into English)

1188-550 Burrard Street

Bentall 5

Vancouver, B.C.

Canada V6C 2B5
(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F....[ ]..... Form 40-F...[.X.]...

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ____

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ____

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant's "home country"), or under the rules of the home country exchange on which the registrant's securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant's security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes [ ] No [ X ]

If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- ________

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: March 18th, 2011

ELDORADO GOLD CORPORATION

/s/ Dawn Moss

Dawn Moss, Corporate Secretary

Exhibits

99.1 Consolidated Financial Statements for December 31, 2010 and 2009

99.2 Management's Discussion & Analysis for December 31, 2010 and 2009

99.3 Management's Discussion & Analysis for December 31, 2010 and 2009 - Amended

EX-99.1 2 financials.htm CONSOLIDATED FINANCIAL STATEMENTS FOR DECEMBER 31, 2010 AND 2009 MD Filed by Filing Services Canada Inc. (403) 717-3898

Consolidated Financial Statements

December 31, 2010 and 2009

(Expressed in thousands of U.S. dollars)

Management’s Responsibility for Financial Reporting

The management of Eldorado Gold Corporation is responsible for the integrity and fair presentation of the financial information contained in this annual report. Where appropriate, the financial information, including financial statements, reflects amounts based on management’s best estimates and judgments. The financial statements have been prepared in accordance with accounting principles generally accepted in Canada. Financial information presented elsewhere in the annual report is consistent with that disclosed in the financial statements.

Management is responsible for establishing and maintaining adequate internal control over financial reporting. Management has established and maintains a system of internal accounting control designed to provide reasonable assurance that assets are safeguarded from loss or unauthorized use, financial information is reliable and accurate and transactions are properly recorded and executed in accordance with management’s authorization. This system includes established policies and procedures, the selection and training of qualified personnel and an organization providing for appropriate delegation of authority and segregation of responsibilities. Any system of internal control over financial reporting, no matter how well designed, has inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Management has a process in place to evaluate internal control over financial reporting based on the criteria established by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control – Integrated Framework. Based on this assessment, management has concluded that as at December 31, 2010, the Company’s internal control over financial reporting was effective.

The Board of Directors oversees management’s responsibility for financial reporting and internal control systems through an Audit Committee, which is composed entirely of independent directors. The Audit Committee meets periodically with management, the Company’s outside advisors and the independent auditors to review the scope and results of the annual audit and to review the financial statements and related financial reporting and internal control matters before the financial statements are approved by the Board of Directors and submitted to the Company’s shareholders.

KPMG, an independent registered public accounting firm, appointed by the shareholders, has audited the Company’s financial statements in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States) and has expressed its opinion in the auditors’ report. The effectiveness of the Company’s internal control over financial reporting as at December 31, 2010 has also been audited by KPMG, and their opinion is included in their report.

(Signed) Paul N. Wright

(Signed) Edward Miu

Paul N. Wright

Edward Miu

President and Chief Executive Officer

Chief Financial Officer

March 16, 2011

Vancouver, British Columbia, Canada

KPMG LLP

Chartered Accountants

PO Box 10426 777 Dunsmuir Street

Vancouver BC V7Y 1K3
Canada

Telephone (604) 691-3000
Fax (604) 691-3031
Internet www.kpmg.ca

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of Eldorado Gold Corporation

We have audited the accompanying consolidated financial statements of Eldorado Gold Corporation, which comprise the consolidated balance sheets as at December 31, 2010 and 2009, the consolidated statements of operations, cash flows, shareholders’ equity and comprehensive income for the years then ended, and notes, comprising a summary of significant accounting policies and other explanatory information.

Management's Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with Canadian generally accepted accounting principles, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Eldorado Gold Corporation as at December 31, 2010 and 2009 and its consolidated results of operations and its consolidated cash flows for the years then ended in accordance with Canadian generally accepted accounting principles.

KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity.
KPMG Canada provides services to KPMG LLP.

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Eldorado Gold Corporation
Page 2

Other Matter

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Eldorado Gold Corporation's internal control over financial reporting as of December 31, 2010, based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 16, 2011 expressed an unmodified opinion on the effectiveness of Eldorado Gold Corporation’s internal control over financial reporting.

KPMG LLP (signed)

Chartered Accountants

Vancouver, Canada

March 16, 2011

KPMG LLP

Chartered Accountants

PO Box 10426 777 Dunsmuir Street

Vancouver BC V7Y 1K3
Canada

Telephone (604) 691-3000
Fax (604) 691-3031
Internet www.kpmg.ca

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of Eldorado Gold Corporation

We have audited Eldorado Gold Corporation’s (the Company) internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Controls and Procedures. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

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Eldorado Gold Corporation
Page 2

The Company acquired Brazauro Resources Corporation (Brazauro) during the year ended December 31, 2010, and management excluded from its assessment of the effectiveness of the Company’s internal controls over financial reporting as of December 31, 2010, Brazauro’s internal controls over financial reporting associated with $160.0 million of total assets and nil revenue included in the consolidated financial statements of the Company as of and for the year ended December 31, 2010. Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of Brazauro.

We also have audited, in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of the Company as of December 31, 2010 and 2009, and the related consolidated statements of operations, cash flows, shareholder’ equity, and comprehensive income for each of the years in the two-year period ended December 31, 2010, and our report dated March 16, 2011 expressed an unqualified opinion on those consolidated financial statements.

KPMG LLP (signed)

Chartered Accountants

Vancouver, Canada

March 16, 2011

Eldorado Gold Corporation

Consolidated Balance Sheets

(Expressed in thousands of U.S. dollars)


	December 31,	December 31,
	2010	2009
	$	$
Assets

Current assets
Cash and cash equivalents	314,344	265,369
Restricted cash (note 5 and 12(e))	52,425	50,000
Marketable securities (note 6)	8,027	13,951
Accounts receivable and other (note 7)	42,437	26,434
Inventories (note 8)	147,263	129,197
Derivative contract (note 10)	-	-
Future income taxes (note 15)	606	-
	565,102	484,951
Inventories (note 8)	29,627	31,534
Investment in significantly influenced company (note 4(c))	6,202	-
Restricted assets and other (note 9)	19,328	13,872
Mining interests (note 10)	2,793,722	2,580,816
Goodwill (note 11)	365,928	324,935
	3,779,909	3,436,108

Liabilities

Current liabilities
Accounts payable and accrued liabilities	152,781	157,250
Debt - current (note 12)	98,523	56,499
Future income taxes (note 15)	2,915	4,264
	254,219	218,013
Debt - long-term (note 12)	68,140	134,533
Contractual severance obligations	-	-
Asset retirement obligations (note 13)	24,275	26,566
Future income taxes (note 15)	430,020	390,242
	776,654	769,354

Non-controlling interests	36,021	26,144

*Shareholders Equity**

Share capital (note 16(b))	2,814,679	2,671,634
Contributed surplus	22,967	17,865
Accumulated other comprehensive income	998	2,227
Retained earnings (deficit)	128,590	(51,116)
	2,967,234	2,640,610
	3,779,909	3,436,108
Subsequent events (note 12)
Commitments and contingencies (note 19)

See accompanying notes to consolidated financial statements.

Eldorado Gold Corporation

Consolidated Statements of Operations

For the years ended December 31,

(Expressed in thousands of U.S. dollars except per share amounts)


	2010	2009
	$	$
Revenue
Gold sales	782,850	358,467
Iron ore sales	8,325	-
	791,175	358,467

Expenses
Operating costs	282,465	132,464
Depletion, depreciation and amortization	106,791	38,658
General and administrative	59,769	32,530
Exploration	23,181	11,970
Mine standby costs	1,335	2,580
Accretion of asset retirement obligations (note 13)	1,564	291
Foreign exchange loss (gain)	14,792	(2,966)
	489,897	215,527

Gain on disposal of assets	(592)	(854)
Gain on marketable securities	(6,572)	(1,689)
Interest and financing costs	8,089	824
Interest and other income	(12,937)	(2,262)
Writedown of assets	-	-
	477,885	211,546
Income before income taxes and non-controlling interests	313,290	146,921

Income tax (expense) recovery (note 15)
Current	(95,022)	(44,862)
Future	5,252	2,972
	(89,770)	(41,890)

Non-controlling interests in income	(17,457)	(2,627)

Net income for the year	206,063	102,404


Weighted average number of shares outstanding
Basic	542,861	389,384
Diluted	545,850	391,707

Earnings per share
Basic income per share	0.38	0.26
Diluted income per share	0.38	0.26

See accompanying notes to the consolidated financial statements.

Eldorado Gold Corporation

Consolidated Statements of Cash Flows

For the years ended December 31,

(Expressed in thousands of U.S. dollars)


	2010	2009
	$	$
Cash flows generated from (used in):

Operating activities
Net earnings for the year	206,063	102,404
Items not affecting cash
Accretion on asset retirement obligations	1,564	291
Contractual severance expense	-	-
Depletion, depreciation and amortization	106,791	38,658
Unrealized foreign exchange loss (gain)	17,974	281
Future income taxes (recovery) expense	(5,252)	(2,972)
Gain on disposal of assets	(592)	(854)
Gain on marketable securities	(6,572)	(1,689)
Stock-based compensation (note 17(b))	16,557	9,091
Fair value of bonus cash award units	-	(2,543)
Pension expense (note 14)	2,517	1,689
Non-controlling interest	17,457	2,627
	356,507	146,983
Changes in non-cash working capital (note 18)	(64,432)	45,059
	292,075	192,042

Investing activities
Acquisition of subsidiaries net of cash received (note 4)	(6,083)	54,179
Mining interests
Capital expenditures	(226,296)	(106,614)
Sales and disposals	23,756	35
Marketable securities
Purchases	(11,983)	(3,967)
Proceeds on disposals	15,611	42,770
Equity investment puchase	(6,727)	-
Pension plan contributions (note 14)	-	(1,856)
Value added taxes recoverable on mining interests	-	-
Restricted cash	(2,463)	-
Restricted asset and other	(7,007)	1,877
	(221,192)	(13,576)

Financing activities
Capital stock
Share issuance costs		-
Issuance of common shares for cash	35,907	25,201
Dividend paid to non-controlling interest	(1,287)	(149)
Dividend paid to shareholders	(26,357)	-
Long-term and bank debt
Proceeds	59,839	4,983
Repayments	(90,010)	(4,983)
	(21,908)	25,052
Net increase in cash and cash equivalents	48,975	203,518
Cash and cash equivalents - beginning of year	265,369	61,851
Cash and cash equivalents - end of year	314,344	265,369

Supplementary cash flow information (note 18)

See accompanying notes to the consolidated financial statements.

Eldorado Gold Corporation

Consolidated Statements of Shareholders’ Equity

For the years ended December 31,

(Expressed in thousands of U.S. dollars)


	2010	2009
	$	$

Share capital
Balance beginning of year	2,671,634	931,933
Shares issued upon exercise of share options,
for cash	35,895	25,201
Estimated fair value of share options exercised	12,020	10,045
Share issued in consideration for interests
acquired	95,118	1,704,455
Shares issued for cash upon exercise of warrants	12	-
Balance end of year	2,814,679	2,671,634

Contributed surplus
Balance beginning of year	17,865	19,378
Non-cash stock-based compensation	16,557	8,532
Non-cash stock-based compensation on
Brazauro warrants & options converted	565	-
Options exercised, credited to share capital	(12,020)	(10,045)
Balance end of year	22,967	17,865

Retained earnings (deficit)
Balance beginning of year	(51,116)	(153,520)
Dividends paid	(26,357)	-
Net income for the year	206,063	102,404
Balance end of year	128,590	(51,116)

Accumulated other comprehensive income (loss)
Balance beginning of year	2,227	(5,971)
Other comprehensive (loss) income	(1,229)	8,198
Balance end of year	998	2,227

Total shareholders' equity	2,967,234	2,640,610

See accompanying notes to the consolidated financial statements.

Eldorado Gold Corporation

Consolidated Statements of Comprehensive Income

For the years ended December 31,

(Expressed in thousands of U.S. dollars)


	2010	2009
	$	$

Net earnings for the year ended December 31,	206,063	102,404

Other comprehensive income
Unrealized gains on available-for-sale investments	13,480	129,418
Reversal of unrealized gains on available-for-sale investments on acquisition of subsidiary (note 4 (a)(b))	(11,424)	(122,617)
Realized (gains) losses on available-for-sale investments transferred to net income	(3,245)	1,717
Future income taxes on changes in available-for-sale investments	(40)	(320)
Other comprehensive (loss) income	(1,229)	8,198

Comprehensive income for the year ended December 31,	204,834	110,602

See accompanying notes to the consolidated financial statements.

Eldorado Gold Corporation

Notes to the Consolidated Financial Statements

December 31, 2010 and 2009

(Expressed in thousands of U.S. dollars, unless otherwise stated)

Nature of operations

Eldorado Gold Corporation (“Eldorado” or the “Company”) is a gold exploration, development, mining and production company. The Company has ongoing exploration and development projects in Turkey, China, Greece and Brazil. The Company acquired control of Sino Gold Mining Ltd. (“Sino Gold”) in December 2009, along with its two producing mines, Jinfeng and White Mountain, as well as the Eastern Dragon development project. It also completed in July 2010 the acquisition of Brazauro Resources Corporation (“Brazauro”), whose main asset is the Tocantinzinho exploration and development project in Tapajós, Brazil.

Significant accounting policies

(a)

Basis of presentation and principles of consolidation

These consolidated financial statements are prepared in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”) and presented in United States dollars. As disclosed in note 23, Canadian GAAP differs in certain material respects from accounting principles generally accepted in the United States (“US GAAP”). The consolidated financial statements include the wholly owned and partially owned subsidiaries of the Company, the most significant of which are presented below:


Subsidiary	Location	Ownership interest	Status	Operations and development projects owned
Qinghai Dachaidan Mining Ltd (QDML)	China	90%	Consolidated	TJS Gold Mine
Tüprag Metal Madencilik Sanayi ve Ticaret AS	Turkey	100%	Consolidated	Kişladağ Gold Mine
				Efemcukuru Project
Unamgen Mineração e Metalurgia S/A	Brazil	100%	Consolidated	Vila Nova Iron Ore Mine
Thracean Gold Mining SA	Greece	100%	Consolidated	Perama Hill Project
Sino Guizhou Jinfeng Mining Limited	China	82%	Consolidated	Jinfeng
Sino Gold Jilin BMZ Mining Limited	China	95%	Consolidated	White Mountain
Heihe Rockmining Limited	China	95%	Consolidated	Eastern Dragon

All material inter-company balances and transactions have been eliminated.

(b)

Use of estimates

The preparation of financial statements in accordance with Canadian GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Significant areas requiring the use of management estimates include assumptions and estimates relating to determining defined ore bodies, value beyond proven and probable reserves, fair values for purposes of purchase price allocations for business acquisitions, asset impairment analysis, valuation of derivative contracts, determination of recoverable metal on leach pads, reclamation obligations, non-cash stock-based compensation and warrants, pension benefits, valuation allowances for future income tax assets, the provision for income tax liabilities, future income taxes and assessing and evaluating contingencies. Actual results could differ from these estimates.

Eldorado Gold Corporation

Notes to the Consolidated Financial Statements

December 31, 2010 and 2009

(Expressed in thousands of U.S. dollars, unless otherwise stated)

Significant accounting policies (continued)

(c)

Cash and cash equivalents

Cash and cash equivalents consist of cash and highly liquid investments that are readily convertible to cash and that have maturity dates of three months or less from the date of acquisition. Cash and cash equivalents and restricted cash are designated as held-for-trading and measured at fair value.

(d)

Inventories

Product inventory consists of stockpiled ore, ore on leach pads, crushed ore, in-circuit material at properties with milling or processing operations, doré awaiting refinement and unsold bullion, all of which are valued at the lower of average cost and net realizable value. Product inventory costs consist of direct production costs including mining, crushing and processing; site administration costs; and allocated indirect costs, including depreciation, depletion and amortization of mining interests.

Inventory costs are charged to operations on the basis of ounces of gold sold. The Company regularly evaluates and refines estimates used in determining the costs charged to operations and costs absorbed into inventory carrying values based upon actual gold recoveries and operating plans.

Inventories for which processing and sale is not expected to complete within one year is classified as non-current.

ii.

Materials and supplies inventory consists of consumables used in operations, such as fuel, chemicals, reagents and spare parts, which are valued at the lower of average cost and replacement cost and, where appropriate, less a provision for obsolescence.

(e)

Investments

Marketable securities and investments in equity securities held for the purpose of trading are classified as held-for-trading and those that are not held for the purpose of trading are classified as available-for-sale.

Investments classified as available-for-sale are reported at fair value with unrealized gains or losses excluded from earnings and reported as other comprehensive income or loss until such gains or losses are realized or until a decline in fair value is determined to be other than temporary. Factors that contribute to an other than temporary decline include a significant and prolonged period during which fair value is below cost, and the existence of a significant adverse change in the market and economic environment in which the Company operates, which indicate the prospects for recovery in the fair value of the investment are compromised in the near term.

Investments classified as held-for-trading are reported at fair value with unrealized gains or losses included in earnings in “Gain on marketable securities”.

Eldorado Gold Corporation

Notes to the Consolidated Financial Statements

December 31, 2010 and 2009

(Expressed in thousands of U.S. dollars, unless otherwise stated)

Significant accounting policies (continued)

Investments in significantly influenced companies are accounted for using the equity method. Under the equity method, the original cost of the shares is adjusted for the Company’s share of post-acquisition earnings or losses less dividends.

(f)

Deposits

Deposits, such as those required by governmental authorities for possible environmental liabilities, are classified as held-for-trading and measured at fair value.

(g)

Financial instruments

Fair value estimates are made at the balance sheet date, based on relevant market information and other information about the financial instruments.

Derivative financial instruments are reported at fair value with unrealized gains or losses included in earnings. 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 the markets.

(h)

Mining interests

Mining interests include acquisition costs, development expenditures and property, plant and equipment recorded at cost. Cost includes expenditures incurred on properties under development and the estimated fair value of any related asset retirement obligation at the time the obligation is originally recorded. Significant payments related to the acquisition of land and mineral rights are capitalized as incurred.

Mineral properties, buildings, plant and equipment, and other assets whose estimated useful life is the same as the remaining life of the mine are depreciated, depleted and amortized over the mine’s estimated life using the units of production method calculated based on proven and probable reserves. Capitalized development costs related to a multi-pit operation are amortized on a pit-by-pit basis over the pit’s estimated life using the unit of production method calculated based on proven and probable reserves related to each pit. Furniture and fixtures, vehicles, computers and other plant and equipment whose estimated useful lives are less than the remaining life of the mine are depreciated on a straight-line basis over the estimated useful life of the assets.

When events or changes in circumstances suggest impairment of long-lived assets, estimated undiscounted future net cash flows are calculated using estimated future gold prices, proven and probable reserves, value beyond proven and probable reserves, and estimated net proceeds from the disposition of assets on retirement less operating, sustaining capital and reclamation costs.

If projected undiscounted future cash flows are less than the carrying value, the estimated fair value is calculated using discounted future net cash flows and the asset is written down to fair value with an impairment charge to operations. Management assesses the asset for impairment by comparing its fair value, determined using best estimates of fair value based on the information available.

Eldorado Gold Corporation

Notes to the Consolidated Financial Statements

December 31, 2010 and 2009

(Expressed in thousands of U.S. dollars, unless otherwise stated)

Significant accounting policies (continued)

(i)

Goodwill

Goodwill is the excess of the cost of an acquired business over the net amounts assigned to assets acquired and liabilities assumed. Goodwill is not amortized. It is tested for impairment annually or more frequently if events or changes in circumstances indicate that it is impaired. Goodwill is allocated to a reporting unit and any potential goodwill impairment is identified by comparing the carrying amount of the reporting unit with its fair value. If any potential impairment is identified, the impairment loss is quantified by comparing the carrying amount to its fair value and is recognized in earnings.

(j)

Exploration and development

Exploration costs are charged against operations as incurred until a mineral resource having economic potential is identified on a property, from which time a property is considered to be a development project and such expenditures are capitalized as development costs. After the property is placed into production, costs incurred that increase production volume or extends the life of the mine are capitalized.

A mineral resource is considered to have economic potential when it is expected that proven and probable reserves can be economically developed considering long-term metal prices. Therefore, prior to capitalizing such costs, management determines that the following conditions have been met:

There is a probable future benefit that will contribute to future cash inflows;

ii.

The Company can obtain the benefit and control access to it, and;

iii.

The transaction or event giving rise to the benefit has already occurred.

(k)

Deferred financing charges

Deferred financing costs represent the issuance costs of the Company’s long-term debt. Deferred costs are netted against the carrying value of long-term debt on the consolidated balance sheet and amortized using the effective interest rate method over the expected term of the related liability.

(l)

Foreign currency translation

Monetary assets and liabilities denominated in currencies other than the United States dollar are translated into United States dollars using rates of exchange in effect at the balance sheet date. Revenue and expense items denominated in foreign currencies are translated at average rates. Non-monetary items are translated at historical rates. Any gains and losses are reflected in earnings.

Eldorado Gold Corporation

Notes to the Consolidated Financial Statements

December 31, 2010 and 2009

(Expressed in thousands of U.S. dollars, unless otherwise stated)

Significant accounting policies (continued)

(m)

Capital lease obligations

Leases that transfer substantially all of the benefits and risks of ownership to the Company are accounted for as capital leases. Assets recorded under capital leases are amortized on a straight-line basis over the lesser of the term of the lease and the life of the asset. Obligations recorded under capital leases are reduced by lease payments net of imputed interest.

(n)

Asset retirement obligations

Asset retirement obligations (“AROs”) represent the estimated net present value of statutory, contractual or other legal obligations relating to site reclamation and restoration costs that the Company will incur on the retirement of assets and abandonment of mine and exploration sites.

The carrying value of property, plant, equipment and mining interests are increased by the same amount as the ARO liability recognized as such obligations are incurred. The amount is amortized to income over the useful life of the related asset. AROs are determined in compliance with recognized standards for site closure and mine reclamation established by government regulation.

Over the life of the asset, imputed interest on the ARO liability is charged to operations as “accretion of asset retirement obligations” using the discount rate used to establish the ARO. The offset of accretion expense is added to the balance of the ARO.

Where information becomes available that indicates a recorded ARO is not sufficient to meet, or exceeds, anticipated obligations, the ARO obligation is adjusted accordingly and the adjustment is added to, or deducted from, the carrying value of property, plant and equipment and mining interest. In the event that the adjustment occurs after the mine in question has closed, the adjustment is included in earnings.

(o)

Stock-based compensation

Stock-based compensation is measured at the estimated fair value of the consideration received or the estimated fair value of the equity instruments issued or liabilities incurred, whichever estimate is more reliable. Compensation expense is recognized on the graded method over the stock option vesting period. The fair values recognized attributable to unvested stock options that are forfeited are credited to earnings as they occur.

Bonus cash award units are considered liability awards and are measured at the amount by which the quoted market value of the shares covered by the grant exceeds the option price. Deferred share units are liability awards recorded at the quoted market price at the grant date. The corresponding liability is marked to market at each reporting date.

Eldorado Gold Corporation

Notes to the Consolidated Financial Statements

December 31, 2010 and 2009

(Expressed in thousands of U.S. dollars, unless otherwise stated)

Significant accounting policies (continued)

(p)

Income taxes

Future income taxes are recognized for the future income tax consequences attributable to differences between the carrying values of assets and liabilities and their respective income tax bases. Future income tax assets and liabilities are measured using income tax rates expected to apply in the years in which temporary differences are expected to be recovered or settled. The effect on future tax assets and liabilities of a change in rates is included in operations. A future income tax asset is recorded when the probability of realization is more likely than not.

(q)

Revenue recognition

Revenue from the sale of bullion is recognized when persuasive evidence of an arrangement exists, the bullion has been shipped, title has passed to the purchaser, the price is fixed or determinable, and collection is reasonably assured.

(r)

Earnings (loss) per share

Basic earnings per share is computed by dividing net income or loss by the weighted average number of outstanding common shares for the year.

The computation of diluted earnings per share reflects the dilutive effect of the exercise of stock options and warrants outstanding as at year-end using the treasury stock method.

(s)

Capitalization of interest

Where the Company has secured debt financing to finance the cost of specific capital projects, interest is capitalized on the related construction and development project until the project begins commercial operation or the development ceases.

(t)

Stripping costs

Stripping costs incurred during the production phase of a mine are considered production costs and are included in the cost of inventory produced during the period in which stripping costs are incurred, unless the stripping activity can be shown to be a betterment of the mineral property, in which case the stripping costs are capitalized. Betterment occurs when stripping activity increases future output of the mine by providing access to additional reserves. Stripping costs incurred to prepare the ore body for extraction are capitalized as mine development costs (pre-stripping). Capitalized stripping costs are amortized on a unit-of production basis over the economically recoverable proven and probable reserves to which they relate. Production is deemed to have commenced when saleable minerals are extracted from an ore body.

Eldorado Gold Corporation

Notes to the Consolidated Financial Statements

December 31, 2010 and 2009

(Expressed in thousands of U.S. dollars, unless otherwise stated)

Significant accounting policies (continued)

(u)

Mine standby and restructuring costs

Mine standby costs and costs related to restructuring a mining operation are charged directly to expense in the period incurred. Examples of mine standby costs are labour, maintenance and mine support costs during temporary shutdowns of a mine. Examples of restructuring costs are severance payments to employees laid off as a result of outsourcing the mining function.

(v)

Defined benefit pension plan

Defined benefit pension plan obligations and expense are based on actuarial determinations. The projected benefit method prorated on service is used to determine the accrued benefit obligation and expense. Actuarial assumptions used to determine defined benefit pension plan liabilities are based upon best estimates of expected plan investment performance, salary escalation rates and retirement dates of employees. The expected return on plan assets is estimated based on the fair value of plan assets, asset allocation and expected long-term returns on these components.

Past service costs are amortized on a straight-line basis over the expected average remaining service period of active members at the time of the past service event.

Differences between the actuarial liabilities and the amounts recorded in the financial statements will arise from changes in plan assumptions, changes in benefits or through experience as results differ from actuarial assumptions. Cumulative differences that are greater than 10% of either the fair value of the plan assets or the accrued benefit obligation, whichever is greater, are amortized over the expected average remaining service period of active members.

(w)

Comparative figures

Certain comparative figures have been reclassified to conform to the current year’s presentation.

Changes in accounting policies and new accounting developments

Business Combinations (Section 1582)

In January 2009, the Canadian Institute of Chartered Accountants (“CICA”) issued Section 1582, Business Combinations, which requires that all assets and liabilities of an acquired business be recorded at fair value at acquisition. Obligations for contingent consideration and contingencies will also be recorded at fair value at the acquisition date. The standard also requires that acquisition-related costs be expensed as incurred and that restructuring charges be expensed in the periods after the acquisition date. The Section applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period on or after January 1, 2011. The Company has not yet adopted this standard.

Eldorado Gold Corporation

Notes to the Consolidated Financial Statements

December 31, 2010 and 2009

(Expressed in thousands of U.S. dollars, unless otherwise stated)

Changes in accounting policies and new accounting developments (continued)

Consolidations (Section 1601) and Non-Controlling Interest (Section 1602)

In January 2009, the CICA issued Section 1601, Consolidations, and Section 1602, Non-Controlling Interests. Section 1601 establishes standards for preparing consolidated financial statements and Section 1602 establishes standards for accounting for a non-controlling interest in a subsidiary in consolidated financial statements subsequent to a business combination. These standards apply to interim and annual consolidated financial statements relating to fiscal years beginning on or after January 1, 2011. The Company has not yet adopted these standards.

International Financial Reporting Standards

Canadian public companies will be required to prepare their financial statements in accordance with IFRS, as issued by the International Accounting Standards Board, for financial years beginning on or after January 1, 2011. Effective January 1, 2011, the Company will adopt IFRS as the basis for preparing its consolidated financial statements. The Company will issue its financial results for the quarter ended March 31, 2011 prepared on an IFRS basis and provide comparative data on an IFRS basis as required.

Acquisitions

(a)

Sino Gold

Eldorado acquired all of the outstanding Sino Gold Securities not previously held by Eldorado on December 15, 2009, pursuant to a Scheme Implementation Deed dated August 26, 2009, as amended October 27, 2009 (the “Scheme Deed”), with Sino Gold, by way of schemes of arrangement (the “Schemes”) under the laws of Australia (the “Transaction”).

Pursuant to the Schemes, Eldorado acquired all of the outstanding ordinary shares of Sino Gold (“the Sino Gold Shares”) not previously held by Eldorado that, together with the Sino Gold Shares already held by Eldorado, constituted 100% of the issued and outstanding Sino Gold Securities following the implementation of the Transaction. All outstanding options to purchase Sino Gold Shares were cancelled pursuant to the Schemes in connection with the implementation of the Transaction.

Consideration for the Sino Gold Shares acquired was common shares of Eldorado (“Eldorado Shares”), with the number issued based on a share exchange ratio of 0.55 Eldorado Share for each Sino Gold Share. Consideration for cancellation of Sino Gold Options was Eldorado Shares, with the number issued calculated with reference to the share exchange ratio, the exercise price and time value for such Sino Gold Options and whether the Sino Gold Options were “in the money” or not.

Eldorado issued an aggregate of 131,772,777 common shares in the capital of Eldorado, either directly or indirectly as CHESS Depository Interests (“CDIs”), through CHESS Depository Nominees Pty Limited, to former shareholders and option holders of Sino Gold pursuant to the Scheme Deed in connection with the implementation of the Schemes.

Eldorado Gold Corporation

Notes to the Consolidated Financial Statements

December 31, 2010 and 2009

(Expressed in thousands of U.S. dollars, unless otherwise stated)

4. Acquisitions (continued)

Eldorado previously acquired 57,968,029 Sino Gold Shares (19.8%) on July 27, 2009, pursuant to a Share Purchase and Sale Agreement (the “Share Purchase Agreement”) dated June 3, 2009, as amended on July 10, 2009, with Gold Fields Australasia (BVI) Limited (“GFA”) in consideration for 27,824,654 Eldorado Shares and a purchase price adjustment right. In connection with the implementation of the Schemes, Eldorado has issued a further 4,057,762 Eldorado Shares to GFA pursuant to the purchase price adjustment provisions of the Share Purchase Agreement. A total of 135,830,539 Eldorado Shares (including those issued to GFA) were issued in connection with the implementation of the Schemes.

The business combination has been accounted for as a purchase transaction, with Eldorado being identified as the acquirer and Sino Gold as the acquiree. For accounting purposes, Eldorado acquired control of Sino Gold on December 4, 2009 and these consolidated financial statements include the results of Sino Gold from December 4, 2009.

The cost of acquisition comprises the fair value of Eldorado shares issued, based on the issuance of 135,830,539 Eldorado shares at $10.61 per share based on the share price around the announcement date of the Transaction, for a total of $1,441,162, the original cost of the Sino Gold common shares previously acquired of $263,293 based on the share price at their acquisition date of July 27, 2009, which amount is net of the reversal of the unrealized gain of $122,617 included in other comprehensive income, plus Eldorado’s transaction costs of $24,010, for total consideration of $1,728,465.

Eldorado received net cash proceeds from the Sino Gold Transaction of $53,771. Net cash proceeds result from the cash balance acquired of $77,781 less acquisition costs incurred of $23,602 in the year 2009 and $408 in the year 2010 for total acquisition costs incurred of $24,010.

The allocation of the purchase price is as follows:

	$
131,772,777 common shares of Eldorado issued as CDIs	1,398,109
4,057,762 common shares of Eldorado issued to GFA	43,053
27,824,654 common shares of Eldorado issued to GFA, being the cost of 57,968,029 Sino Gold shares previously acquired	24,010
Transaction costs	24,010
	1,728,465

Eldorado Gold Corporation

Notes to the Consolidated Financial Statements

December 31, 2010 and 2009

(Expressed in thousands of U.S. dollars, unless otherwise stated)

4. Acquisitions (continued)

The above purchase price has been allocated as follows:


Fair value of net assets acquired			$

Cash			77,781
Restricted cash			50,000
Accounts receivable and other			21,171
Inventory			38,791
Mining interests and property, plant and equipment,
including value beyond proven and probable reserves			1,799,377
Goodwill			363,690
Accounts payable and accrued liabilities			(74,737)
Asset retirement obligations			(19,249)
Debt			(191,121)
Future income taxes			(319,386)
Non-controlling interests			(17,852)
			1,728,465

The acquired goodwill of $363,690 relates to the China reporting segment (note 22) and none of it is expected to be deductible for tax purposes.

The preliminary purchase price allocation was finalized as at December 31, 2010. Changes from that originally reported include a reduction of $58,523 to mining interest, an increase of $40,993 to goodwill, a reduction of $1,464 to accounts payable and accrued liabilities, a reduction of $16,474 to future income taxes and an increase in the purchase price of $408.

Sino Gold is a gold exploration and mining company in China. The Company operates the Jinfeng and White Mountain Gold Mines in the Guizhou Province and Jilin Province respectively. The Company also has a major development project, Eastern Dragon, which is planned to commence commercial production in 2011.

(b)

Brazauro

Eldorado completed the acquisition of all of the issued and outstanding common shares of Brazauro that it did not already own on July 20, 2010. As a result, Eldorado acquired a 100% interest in the Tocantinzinho exploration and development project in Tapajós, Brazil as well as the option agreements on two early-stage exploration projects, Piranhas and Água Branca, also located in the Tapajós district of Brazil.

Under the terms of the arrangement, former Brazauro shareholders received 0.0675 of an Eldorado common share for each Brazauro share held, as well as 1/3 of a share of TriStar Gold Inc. (“TriStar”), a new exploration company that Eldorado agreed to fund with C$10 million. TriStar holds certain exploration properties owned by Brazauro prior to the arrangement.

The Company issued 5,993,898 common shares and paid the C$10 million in connection with this transaction. Eldorado incurred acquisition costs of $3,474.

Eldorado Gold Corporation

Notes to the Consolidated Financial Statements

December 31, 2010 and 2009

(Expressed in thousands of U.S. dollars, unless otherwise stated)

4. Acquisitions (continued)

As at the date of the transaction, Eldorado held 14,326,000 common shares of Brazauro with a total cost of $7,071, net of the reversal of the unrealized gain of $11,424 included in other comprehensive income at the date of the acquisition.

This transaction has been accounted for as an acquisition of assets and liabilities because Brazauro was in the development stage. These consolidated financial statements include 100% of Brazauro results commencing July 20, 2010.

The allocation of the purchase price to the assets and liabilities of Brazauro is as follows:


Purchase price:		$
Share consideration Brazauro warrants and options converted Brazauro warrants previously held		95,118 565 294
Cash consideration		9,479
Cost of shares previously acquired		7,071
Transaction costs		3,474
Total purchase price		116,001

Fair value of net assets acquired:
Cash		7,278
Accounts receivables and other		73
Mining interests		155,964
Liabilities		(560)
Future income taxes payable		(46,754)
		116,001

Eldorado paid net cash of $5,675 as a result of the Brazauro transaction. This net reduction of cash was a result of an acquired cash balance of $7,278 less cash consideration of $9,479 and transaction costs of $3,474.

(c)

Serabi Mining Plc (“Serabi”)

In June 2010, the Company acquired 120,000,000 common shares of Serabi for $5,375. This represents a 26.8% interest in Serabi. The investment in Serabi is being accounted for under the equity method as follows:


		$

Original purchase		5,375
Additional purchase during the year		1,352
Equity loss		(525)
Balance at December 31, 2010		6,202

Eldorado Gold Corporation

Notes to the Consolidated Financial Statements

December 31, 2010 and 2009

(Expressed in thousands of U.S. dollars, unless otherwise stated)

4. Acquisitions (continued)

Additionally, the Company acquired 2,500,000 special warrants for $1,352 in December 2010 in order to maintain its 26.8% ownership percentage. Each special warrant is convertible to one ordinary common share and one half of one purchase warrant with no further action by the Company upon Serabi obtaining a share listing on the TSX or TSX-V. If those conditions are not met by March 31, 2011, each special warrant is automatically convertible to 1.1 of an ordinary common share and 0.55 of one purchase warrant with no further action by the Company.

The Company initially purchased 120,000,000 common shares of Serabi, however, in anticipation of a listing application to a Canadian stock exchange Serabi consolidated the existing ordinary shares on the basis of 1 New Ordinary Share for every 10 Existing Ordinary Shares. Therefore, the Company’s investment was revised to 12,000,000 new ordinary shares at the date of consolidation.

Serabi is a gold mining company that is focused on the Tapajos region of Northern Brazil.

(d)

Vila Nova Iron Ore project

On August 5, 2009, the Company acquired the remaining 25% interest in its Vila Nova Iron Ore Project ("Vila Nova") from Mineração Amapari SA (“Amapari”), a Brazilian private company, in exchange for a Net Profits Interest royalty of 10% plus a sliding scale royalty based on the operating margin of the project.

Restricted cash

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


	December 31, 2010 $	December 31, 2009 $
Eastern Dragon CMB standby letter of credit loan – (note 12 (e))	52,425	-
Eastern Dragon CCB loan – (note 12 (e))	-	50,000
	52,425	50,000

Marketable securities


	December 31, 2010 $	December 31, 2009 $
Marketable securities – Available-for-sale	8,027	13,470
Marketable securities – Held-for-trading	-	399
Warrants – Held-for-trading	-	82
	8,027	13,951

Eldorado Gold Corporation

Notes to the Consolidated Financial Statements

December 31, 2010 and 2009

(Expressed in thousands of U.S. dollars, unless otherwise stated)

Accounts receivable and other


	December 31, 2010 $	December 31, 2009 $

Value added and other taxes recoverable	4,196	5,956
Other receivables and advances	16,223	9,123
Prepaid expenses and deposits	22,018	11,355
	42,437	26,434

Inventories


	December 31, 2010 $	December 31, 2009 $

Current:
Ore stockpiles	39,483	37,503
In-process inventory including doré	62,366	56,098
Materials and supplies	45,414	35,596
	147,263	129,197
Non-current: ⁽¹⁾
Ore stockpiles	15,659	15,987
In-process inventory	13,968	15,547
	29,627	31,534

⁽¹⁾

Non-current inventories represent material not scheduled for processing within the next twelve months at the Company’s TJS mine.

Restricted assets and other


	December 31, 2010 $	December 31, 2009 $

Restricted long-term asset – SERP (note 14)	7,872	7,066
Restricted credit card deposits	656	618
Restricted marketable securities long-term	-	156
Accounts receivable long-term	352	2,477
Environmental guarantee deposit	10,448	3,442
Accrued pension benefit asset (note 14)	-	113
	19,328	13,872

Eldorado Gold Corporation

Notes to the Consolidated Financial Statements

December 31, 2010 and 2009

(Expressed in thousands of U.S. dollars, unless otherwise stated)

10.

Mining interests


	December 31, 2010
	Cost $	Accumulated depreciation, depletion and amortization $	Net book value $

Producing properties	1,671,989	263,982	1,408,007
Properties under development	1,319,358	867	1,318,491
Iron ore property	49,588	2,828	46,760

	3,040,935	267,677	2,773,258

Other mineral interests	24,511	4,047	20,464

	3,065,446	271,724	2,793,722


	December 31, 2009
	Cost $	Accumulated depreciation, depletion and amortization $	Net book value $

Producing properties	1,616,794	159,361	1,457,433
Properties under development	1,021,981	516	1,021,465
Iron ore property	47,464	252	47,212

	2,686,239	160,129	2,526,110

Other mineral interests	57,496	2,790	54,706

	2,743,735	162,919	2,580,816

Included in producing properties and other mineral interest is $473,495 (2009 – $339,242) and $16,975 (2009 – $52,163) respectively, related to assets that are not being depreciated, including value beyond proven and probable, and construction in progress.

The amount of capitalized interest during the year ended December 31, 2010 included in mining interest was $2,897 (2009 – nil).

Eldorado Gold Corporation

Notes to the Consolidated Financial Statements

December 31, 2010 and 2009

(Expressed in thousands of U.S. dollars, unless otherwise stated)

11.

Goodwill


	December 31, 2010 $	December 31, 2009 $

Balance at beginning of year	324,935	2,238
Acquisitions during the year (note 4 (a))	-	322,697
Adjustments to preliminary purchase price allocation (note 4 (a))	40,993	-
Balance at end of year	365,928	324,935

12.

Debt


	December 31, 2010 $	December 31, 2009 $
Current:
Jinfeng construction loan (a)	21,139	-
White Mountain fixed asset project loan (c)	9,749	3,633
White Mountain working capital project loan (c)	6,176	5,991
White Mountain working capital loan (d)	7,549	-
Eastern Dragon CMB standby letter of credit loan (e)	48,317	-
Eastern Dragon HSBC revolving loan facility (f)	5,593	-
Eastern Dragon CCB loan (e)	-	46,875
	98,523	56,499

Long-term:
Jinfeng construction loan (a)	52,951	97,867
White Mountain fixed asset project loan (c)	15,189	24,214
Jinfeng working capital loan (b)	-	12,452
	68,140	134,533

Principal debt repayments are as follows:


	2011 $	2012 $	2013 $	2014 $	Total $

Jinfeng construction loan (a)	21,139	21,139	21,139	12,079	75,496
White Mountain fixed asset project loan (c)	9,749	9,981	5,208	-	24,938
White Mountain working capital project loan (c)	6,176	-	-	-	6,176
White Mountain working capital loan (d)	7,549	-	-	-	7,549
Eastern Dragon CMB standby letter of credit loan (e)	48,317	-	-	-	48,317
Eastern Dragon HSBC revolving loan facility (f)	5,593	-	-	-	5,593
	98,523	31,120	26,347	12,079	168,069

Eldorado Gold Corporation

Notes to the Consolidated Financial Statements

December 31, 2010 and 2009

(Expressed in thousands of U.S. dollars, unless otherwise stated)

12.

Debt (continued)

(a)

Jinfeng construction loan

In 2009, Guizhou Jinfeng Mining Ltd. (“Jinfeng”), our 82% owned subsidiary, entered into a RMB 680.0 million ($102,674) construction loan facility (“the construction loan”) with China Construction Bank (“CCB”).

The construction loan has a term of 6 years commencing from February 27, 2009 and is subject to a floating interest rate adjusted annually at the prevailing lending rate stipulated by the People’s Bank of China for similar loans with a 5% discount. The applicable interest rate as at December 31, 2010 is 6.08% (after 5% discount). The construction loan is secured against the following:

Sino Gold corporate guarantee;

ii.

pledge of 82% shares held by Sino Gold in Jinfeng;

iii.

mortgage on all fixed assets of Jinfeng with a value above $100;

iv.

mortgage on Jinfeng mining license and exploration license; and

mortgage on land use right.

While the construction loan is outstanding, Jinfeng is required to obtain written consent from CCB before transferring funds to Sino Gold or any of its subsidiaries and must have a leverage ratio of 64% or lower in order to distribute dividends to its shareholders.

Principal repayment of this loan is as follows: for the years 2011, 2012 and 2013 – quarterly payments of RMB 35.0 million ($5,285); for the year 2014 – quarterly payments of RMB 32.5 million ($4,907); and for the year 2015 a final payment of RMB 130.0 million ($19,626). Any pre-payments are applied to reduce future payments starting from the final payment. During 2010, Jinfeng pre-paid RMB 180.0 million ($27,178) on the outstanding balance of this loan, leaving a balance owing of RMB 500.0 million ($75,496) at December 31, 2010.

Deferred financing costs in the amount of $1,743 have been included as an offset in the balance of the loan in the financial statements and are being amortized using the effective interest method for net deferred financing costs at December 31, 2010 of $1,406.

(b)

Jinfeng working capital loan

In 2009, Jinfeng entered into a RMB 85.0 million ($12,834) working capital loan (“the working capital loan”) with CCB.

The working capital loan has a term of 3 years and was due on August 17, 2012. This loan was subject to a floating interest rate adjusted annually at 95% of the prevailing lending rate stipulated by the People’s Bank of China for similar loans.

Eldorado Gold Corporation

Notes to the Consolidated Financial Statements

December 31, 2010 and 2009

(Expressed in thousands of U.S. dollars, unless otherwise stated)

12.

Debt (continued)

While the working capital loan was outstanding, Jinfeng was required to obtain written consent from CCB before transferring funds to Sino Gold or any of its subsidiaries and was required to have a leverage ratio of 64% or lower in order to distribute dividends to its shareholders.

During 2010, Jinfeng pre-paid the full amount on this loan.

(c)

White Mountain project loan

In 2008, Sino Gold Jilin BMZ Mining Limited (White Mountain”), our 95% owned subsidiary, entered into a project loan (“project loan”) with CCB. The project loan has two components:

A fixed asset loan of RMB 190.1 million ($28,703) with final payment due on September 2013; and

ii.

a working capital loan of RMB 40.9 million ($6,176) due in November 2010.

The interest rate on the project loan is the prevailing lending rate stipulated by the People’s Bank of China, adjusted annually for the fixed asset loan and twice a year for the working capital loan. The applicable interest rates as at December 31, 2010 are 5.76% and 5.81% respectively.

The project loan is secured by a Sino Gold corporate guarantee and White Mountain’s fixed assets with a value above $100.

Principal repayment of the fixed asset loan is as follows: September 2010 – RMB 24.8 million ($3,765) (paid); September 2011 – RMB 64.5 million ($9,749); September 2012 – RMB 66.1 million ($9,981); September 2013 – RMB 34.7 million ($5,208).

During 2010, White Mountain made the first payment on the fixed asset loan and extended the working capital loan for one additional year to November 15, 2011.

(d)

White Mountain working capital loan

In 2010, White Mountain entered into a RMB 50.0 million ($7,549) working capital loan with China Merchants Bank (“CMB”).

The working capital loan has a term of one year and is due on September 1, 2011. This loan is subject to a floating interest rate adjusted annually to the prevailing lending rate stipulated by the People’s Bank of China for similar loans. The applicable interest rate as at December 31, 2010 is 5.31%.

This loan is secured by a letter of guarantee issued by Eldorado.

In January 2011, White Mountain pre-paid the full amount of this loan.

Eldorado Gold Corporation

Notes to the Consolidated Financial Statements

December 31, 2010 and 2009

(Expressed in thousands of U.S. dollars, unless otherwise stated)

12.

Debt (continued)

(e)

Eastern Dragon facilities

CCB loan

In 2008, Heihe Rock Mining Industry Development Company Limited (“Eastern Dragon”), our 95% owned subsidiary, entered into a RMB 320.0 million ($48,317) Standby letter of credit loan (“LC loan”) with CCB. The interest rate on this loan as at December 31, 2009 was 5.40%.

The LC loan was collateralized by way of irrevocable letter of credit drawn on CCB. The letter of credit is collateralized by Sino Gold’s funds held by Bank of China Sydney Branch as restricted cash.

During the 2010 year, the LC loan was repaid and the restricted cash was released.

China Merchants Bank – project-financing loan

In 2009, Eastern Dragon entered into a RMB 450.0 million ($67,946) project-financing loan (“project-financing loan”) with China Merchants Bank (“CMB”). The project-financing loan has three components:

A 5 year term, RMB 320.0 million ($48,317) long term loan (“the long term loan”) to replace the LC loan with CCB;

ii.

a 4 year term RMB 100.0 million ($15,099) fixed asset loan (“the fixed asset loan”); and

iii.

a one year term RMB 30.0 million ($4,530) working capital loan (“the working capital loan”).

The project-financing loan is subject to a floating interest rate adjusted quarterly to 90% of the prevailing lending rate stipulated by the People’s Bank of China for similar loans. The applicable interest rates as at December 31, 2010 are 5.60% for the long term loan and 5.23% for the fixed asset loan after discount.

The project-financing loan is secured by an irrevocable letter of Guarantee issued by Sino Gold. Under the terms of the agreement, the following conditions are required to be met before the first drawdown:

Obtain project approval from the Heilongjiang Provincial Development and Reform Commission;

Sino Gold to open an offshore banking business bank account with CMB and deposit $40,000;

The aggregate of the amount deposited in the offshore account, Eastern Dragon registered capital and shareholder loan is at least $84,660 (this threshold has been reached as at December 31, 2009).

In addition, before the drawdown on the fixed asset loan, Eastern Dragon should obtain the gold operation permit.

The working capital loan can be drawn down once the following conditions are satisfied:

The project obtains the mining license;

ii.

the project has been developed and in production;

iii.

the gold operation permit has been granted; and

iv.

the safety production permit and environmental protection permit have been granted.

Eldorado Gold Corporation

Notes to the Consolidated Financial Statements

December 31, 2010 and 2009

(Expressed in thousands of U.S. dollars, unless otherwise stated)

12.

Debt (continued)

The project-financing loan requires Eastern Dragon to maintain a liability to asset ratio of 70% or lower, excluding shareholder loan and total banking debt cannot exceed RMB 550.0 million ($83,045).

The project-financing loan is subject to an annual management fee of 10% of the annual interest on the drawn down amount.

No amounts were drawn down under the project-financing loan as at December 31, 2010.

CMB Standby letter of Credit loan

In January 2010, Eastern Dragon entered into a RMB 320.0 million ($48,317) Standby letter of credit loan with CMB. This loan has a one year term and is subject to a floating interest rate adjusted quarterly at 90% of the prevailing lending rate stipulated by the People’s Bank of China for working capital loans. This loan is collateralized by way of a $52,200 irrevocable letter of credit issued by Sino Gold to CMB.

On February 5, 2010, Eastern Dragon made a drawdown on this loan which was used to repay the LC loan with CCB.

In February 2011, this loan was extended for another year.

This loan is to be repaid when Eastern Dragon obtains the required project approval that will allow it to complete the first drawdown on the project-financing loan. This loan is subject to an annual management fee of 10% of the interest accrued on the drawn down and outstanding amount. This management fee is paid in advance quarterly. The interest rate on this loan as at December 31, 2010 is 5.23%.

(f)

HSBC revolving loan facility

In May 2010, Eastern Dragon entered into a RMB 80.0 million ($12,079) revolving facility (“the Facility) with HSBC Bank (China). The Facility can be drawn down in minimum tranches of RMB 1.0 million ($151) or its multiples. Each drawdown bears interest fixed at the prevailing lending rate stipulated by the People’s Bank of China on the date of drawdown. The Facility has a term of up to one year.

In December 2010, the Facility was reviewed by the bank and was extended to November 30, 2011.

The Facility is secured by a letter of Guarantee issued by Eldorado. Eldorado must maintain at all times a security coverage ratio of 110% of the amounts drawn down. As at December 31, 2010, the security coverage is $6,141.

As at December 31, 2010, RMB 37.0 million ($5,593) had been drawn under this Facility.

This Facility is to be repaid when Eastern Dragon obtains the required project approval that will allow it to complete the second drawdown on the project-financing loan.

Eldorado Gold Corporation

Notes to the Consolidated Financial Statements

December 31, 2010 and 2009

(Expressed in thousands of U.S. dollars, unless otherwise stated)

12.

Debt (continued)

Subsequent to December 31, 2010, Eastern Dragon drew RMB 11.6 million ($1,752) under this Facility and the security coverage was increased to $8,080.

(g)

Entrusted loan

In November 2010, Eastern Dragon, HSBC Bank (China) and QDML, entered into a RMB 12.0 million ($1,812) entrusted loan agreement.

Under the terms of the entrusted loan, QDML with its own funds entrusts HSBC Bank (China) to provide a loan facility in the name of QDML to Eastern Dragon.

The entrusted loan can be drawn down in tranches. Each drawdown bears interest fixed at the prevailing lending rate stipulated by the People’s Bank of China on the date of drawdown. Each draw down has a term of three months and can be rolled forward at the discretion of QDML.

As at December 31, 2010, RMB 7.9 million ($1,193) has been drawn under the entrusted loan.

Subsequent to December 31, 2010, the entrusted loan was increased to RMB 50.0 million ($7,550) and an additional RMB 21.1 million ($3,186) was drawn down.

The entrusted loan has been recorded on a net settlement basis.

13.

Asset retirement obligations


	December 31, 2010

	Brazil $	China $	Turkey $	Total $

Balance at beginning of year	1,062	20,560	4,944	26,567
Accretion during the year	53	1,264	247	1,564
Revisions to estimate of final obligation	1,129	(9,216)	4,232	(3,856)

Balance at end of year	2,244	12,608	9,423	24,275

Estimated undiscounted amount	3,805	22,127	39,533	65,465

Eldorado Gold Corporation

Notes to the Consolidated Financial Statements

December 31, 2010 and 2009

(Expressed in thousands of U.S. dollars, unless otherwise stated)

13.

Asset retirement obligations (continued)


	December 31, 2009

	Brazil $	China $	Turkey $	Total $

Balance at beginning of year	753	1,286	2,773	4,812
Additions resulting from acquisition (note 4 (a))	-	19,249	-	19,249
Accretion during the year	51	71	169	291
Revisions to estimate of final obligation	258	(46)	2,002	2,214

Balance at end of year	1,062	20,560	4,944	26,566

Estimated undiscounted amount	1,730	77,758	14,687	94,175

The net present values are computed using credit-adjusted risk-free interest rates of between 5% and 7%.

Revisions to the estimate of the discounted obligations in 2010 include $1,129 related to Vila Nova, $1,073 related to TJS, ($3,257) related to Jinfeng, ($3,425) related to White Mountain, ($3,608) related to Eastern Dragon, $3,423 related to Kişladağ and $809 related to Efemçukuru. Revisions for 2009 include $258 related to Vila Nova, ($80) related to TJS, $34 related to Jinfeng, $1,972 related to Kişladağ and $30 related to Efemçukuru.

14.

Defined benefit plans

During the year ended December 31, 2008, the company implemented a defined benefit pension program with two components: a registered pension plan (“the Pension Plan”) and a non-registered supplementary pension plan (“the SERP”). These plans, which are only available to certain qualifying employees, provide benefits based on an employee’s years of service and final average earnings at retirement. There are no indexation features. Annual contributions to these plans are actuarially determined and made at or in excess of minimum requirements prescribed by legislation.

The Company’s plans are actuarially evaluated for funding purposes on a three-year cycle. The Pension Plan and the SERP were last actuarially evaluated on January 1, 2008 and January 1, 2009 respectively for funding purposes and the next required valuation will be as of January 1, 2011 for the Pension Plan and January 1, 2012 for the SERP. The measurement date used to determine all of the accrued benefit obligation and plan assets for accounting information was December 31, 2010 and 2009.

The SERP is designed to provide supplementary pension benefits to qualifying employees affected by the maximum pension limits under the Income Tax Act and the Company is not required to pre-fund any benefit obligation under the SERP.

Total cash payments

Total cash payments for pension benefits for 2010, including cash contributed to the Pension Plan and the SERP and payments made directly to beneficiaries were $167 (2009 – $1,856). Based on minimum funding requirements, the Company may not need to make a contribution to the Pension Plan or to the SERP in 2011.

Eldorado Gold Corporation

Notes to the Consolidated Financial Statements

December 31, 2010 and 2009

(Expressed in thousands of U.S. dollars, unless otherwise stated)

14.

Defined benefit plans (continued)

The estimated future pension payments for the next five years and thereafter are as follows:


	2011 $	2012 $	2013 $	2014 $	2015 $	2016 and later $

Estimated future pension payments	211	820	820	820	820	4,966

The details of the Company’s benefit plans are as follows:


	December 31, 2010			December 31, 2009
	Pension Plan	SERP		Pension Plan	SERP
	$	$		$	$
Accrued benefit obligation
Balance at beginning of year	1,263	7,652		753	4,037
Benefits paid	-	(167)		-	-
Current service cost	122	681		102	484
Past service costs (net of qualifying transfer)	-	-		-	-
Qualifying transfer	-	-		-	-
Interest cost	81	483		69	369
Actuarial losses (gains)	62	2,483		219	2,121
Foreign exchange	132	740		120	641
Balance at end of year	1,660	11,872	-	1,263	7,652


	December 31, 2010			December 31, 2009
	Pension Plan	SERP		Pension Plan	SERP
Plan assets	$	$		$	$
Fair value at beginning of year	1,137	-		848	-
Actual return on plan assets	76	-		48	-
Employer's contribution⁽¹⁾	-	-		-	-
Qualifying transfer	-	-		107	-
Foreign exchange	126	-		134	-
Fair value at end of year	1,339	-	-	1,137	-

Funded status
Fair value of plan assets	1,339	-		1,137	-
Accrued benefit obligation	1,660	11,872		1,263	7,652
Plan (deficit) surplus	(321)	(11,872)		(126)	(7,652)
Unamortized actuarial losses (gains)	60	4,426		17	1,995
Unamortized past service cost	166	1,805		222	2,418
Net accrued benefit asset (liability)	(95)	(5,641)		113	(3,239)

Eldorado Gold Corporation

Notes to the Consolidated Financial Statements

December 31, 2010 and 2009

(Expressed in thousands of U.S. dollars, unless otherwise stated)

14.

Defined benefit plans (continued)

The Company has $7,872 (2009 – $7,066) in an investment account to fund its SERP obligation. The breakdown of the investment is provided in note 23(g). This amount is included in restricted assets and other (note 9).

The accrued benefit asset (liability) is included in the Company’s balance sheet as follows:


	December 31, 2010		December 31, 2009
	Pension Plan	SERP	Pension Plan	SERP
	$	$	$	$
Restricted assets and other (note 9)	-	-	113	-
Accounts payable and accrued liabilities	(95)	(5,641)	-	(3,239)
Total	(95)	(5,641)	113	(3,239)

The net expense recognized for the Company’s defined benefit plans is as follows:


	December 31, 2010		December 31, 2009
	Pension Plan	SERP	Pension Plan	SERP
	$	$	$	$
Current service cost	122	681	94	445
Interest cost	81	483	63	340
Expected gains on plan assets	(76)	-	(62)	-
Amortization of net actuarial gains	-	269	(54)	-
Amortization of past service costs	80	877	72	791
Net pension expense	207	2,310	113	1,576

Plan Assets

The assets of the Pension Plan and the amounts deposited in the SERP account are managed by a major investment management company and are invested only in conformity with the investment requirements of applicable pension laws.

The following table summarizes the defined benefit plans’ weighted average asset allocation percentages by asset category at December 31:


	December 31, 2010		December 31, 2009
	Pension Plan	SERP	Pension Plan	SERP
Cash and equivalents	4%	4%	1%	3%
Fixed income	96%	51%	99%	49%
Equity	-	45%	-	48%
Total	100%	100%	100%	100%

Eldorado Gold Corporation

Notes to the Consolidated Financial Statements

December 31, 2010 and 2009

(Expressed in thousands of U.S. dollars, unless otherwise stated)

14.

Defined benefit plans (continued)

Significant assumptions

The significant assumptions used are as follows:


	December 31, 2010		December 31, 2009
	Pension Plan	SERP	Pension Plan	SERP

Expected long term rate of return on plan assets	6.50%	6.50%	6.50%	6.50%
Discount rate beginning of year	6.00%	6.00%	7.50%	7.50%
Discount rate end of year	5.50%	5.50%	6.00%	6.00%
Rate of salary escalation	4.50%	4.50%	4.50%	4.50%
Average remaining service period of active employees expected to receive benefits	5 years	5 years	5 years	5 years

The assumptions for the expected long-term rate of return on plan assets for the purposes of the actuarial valuation are based on the asset mix of the portfolio, historical data from similar plans and the review of projected returns by asset class.

15.

Income taxes

The significant components within the Company’s future tax liability are as follows:


	December 31, 2010 $	December 31, 2009 $
Future income tax assets
Mining interests	9,972	10,800
Loss carry forwards	68,179	46,240
Other	3,250	3,156
Liabilities	10,241	9,394
	91,642	69,590
Valuation allowance	(71,368)	(54,885)
	20,274	14,705

Future income tax liabilities
Mining interests	443,287	397,076
Unrealized gains on foreign exchange translation and other	9,316	12,135
	452,603	409,211
Net future income tax liabilities	432,329	394,506

Eldorado Gold Corporation

Notes to the Consolidated Financial Statements

December 31, 2010 and 2009

(Expressed in thousands of U.S. dollars, unless otherwise stated)

15.

Income taxes (continued)

This is represented on the balance sheet as:


	December 31, 2010 $	December 31, 2009 $

Current future income tax assets	(606)	-
Current future income tax liabilities	2,915	4,264
Long-term future income tax liabilities	430,020	390,242
	432,329	394,506

Income tax expense differs from the amount that would result from applying the combined statutory Canadian federal and provincial tax rates to income before income taxes. These differences result from the following items:


	2010 $	2009 $

Net income before taxes	313,290	146,921
Statutory tax rate	28.50%	30.00%

Tax expense at the statutory income tax rate	89,288	44,076

Tax effect of:
Losses not recognized	9,859	8,455
Difference in foreign tax rates	(23,532)	(16,135)
Foreign exchange	3,316	(3,895)
Withholding tax	3,278	-
Adjustment due to change in tax rates	-	5,638
Non-deductible expense and other items	7,561	3,751
	89,770	41,890

At December 31, 2010, the Company had available losses for income tax purposes of approximately $111,014 (2009 – $83,185) in Canada and Greece expiring in various years from 2011 to 2030.

The Company’s Australian subsidiaries have losses for income tax purposes of $26,384 that do not expire.

In addition, the Company’s Brazilian subsidiaries have losses of $60,842 (December 31, 2009 – $41,702) that can be used to offset taxable income, and $74,913 (December 31, 2009 – $41,600) that can be used to offset income for social contribution tax. These losses have no expiry date and can be used to offset 30% of taxable income in any one year.

Eldorado Gold Corporation

Notes to the Consolidated Financial Statements

December 31, 2010 and 2009

(Expressed in thousands of U.S. dollars, unless otherwise stated)

16.

Shareholders’ equity

(a)

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 December 31, 2010 there were no non-voting common shares outstanding.

(b)

Issued and outstanding share capital


Voting common shares	Number of shares	Amount $

Balance, January 1, 2009	368,278,029	931,933

Shares issued upon exercise of share options, for cash	5,203,013	25,201
Estimated fair value of share options exercised	-	10,045
Shares issued for acquisition of Sino Gold	163,655,193	1,704,455

Balance, December 31, 2009	537,136,235	2,671,634

Shares issued upon exercise of share options, for cash	5,056,216	35,895
Estimated fair value of share options exercised	-	12,020
Shares issued for acquisition of Brazauro	5,993,898	95,118
Shares issued for cash upon exercise of warrants	843	12

Balance, December 31, 2010	548,187,192	2,814,679

(c)

Accumulated other comprehensive income (loss)

Accumulated other comprehensive income includes the following:


	2010 $	2009 $

Balance, beginning of year	2,227	(5,971)
Unrealized gains on available-for-sale investments	13,480	129,418
Reversal on acquisition of subsidiary (note 4 (a) and (b))	(11,424)	(122,617)
Realized losses (gains) on sale of available-for-sale investments transferred to net income	(3,245)	1,717
Future income tax on changes in available-for-sale investments	(40)	(320)

Balance, end of year	998	2,227

Eldorado Gold Corporation

Notes to the Consolidated Financial Statements

December 31, 2010 and 2009

(Expressed in thousands of U.S. dollars, unless otherwise stated)

17.

Stock-based compensation

(a)

Share option plans

The Company has two share option plans (“Plans”) approved by the shareholders under which share purchase options (“Options”) can be granted to directors, officers, employees and consultants.

The Company’s Employee Plan, as amended from time to time, was established in 1994. Subject to a 10-year maximum, Employee Plan Options generally have a five-year term. Employee Plan Options vest at the discretion of the Board of Directors at the time an Option is granted, typically in three separate tranches over two years. As at December 31, 2010, a total of 5,424,669 Options (December 31, 2009 – 4,810,000) were available to grant to employees, consultants or advisors under the Employee Plan.

The Company’s Directors and Officers Plan (“D&O Plan”) was established in 2003 and amended in 2005. Subject to a 10-year maximum, D&O Plan Options generally have a five-year term. D&O Options vest at the discretion of the Board of Directors at the time an Option is granted, typically in three separate tranches over two years. As at December 31, 2010, a total of 4,990,394 Options (December 31, 2009 – 4,760,000) were available to grant to directors and officers under the D&O Plan.

The continuity of share purchase options outstanding is as follows:


	Weighted average exercise price Cdn$	Number of options	Contractual weighted average remaining life (years)

Balance, December 31, 2008	5.71	13,438,914	3.9
Granted	9.80	748,000
Exercised	5.59	(5,203,013)
Forfeited	6.46	(55,000)

Balance, December 31, 2009	6.11	8,928,901	3.3
Granted	13.30	5,448,842
Exercised	7.37	(5,056,216)
Forfeited	11.76	(601,003)

Balance, December 31, 2010	9.49	8,720,524	3.5

At December 31, 2010, 5,423,758 share purchase options (December 31, 2009 – 5,528,557) with a weighted average exercise price of Cdn$7.32 (December 31, 2009 – Cdn$6.16) had vested and were exercisable.

Eldorado Gold Corporation

Notes to the Consolidated Financial Statements

December 31, 2010 and 2009

(Expressed in thousands of U.S. dollars, unless otherwise stated)

17.

Stock based compensation (continued)

Options outstanding at December 31, 2010 are as follows:


	December 31, 2010
	Total options outstanding			Exercisable options
Range of exercise price Cdn$	Shares	Weighted average remaining contractual life (years)	Weighted average exercise price Cdn$	Shares	Weighted average exercise price Cdn$

$4.00 to $4.99	2,584,473	3.1	4.88	2,584,473	4.88
$5.00 to $5.99	97,500	1.9	5.26	97,500	5.26
$6.00 to $6.99	866,000	2.4	6.44	866,000	6.44
$7.00 to $7.99	570,900	1.8	7.26	570,900	7.26
$9.00 to $9.99	403,200	3.5	9.61	237,199	9.69
$11.00 to $11.99	30,000	3.5	11.40	20,000	11.40
$12.00 to $12.99	251,000	4.4	12.67	97,667	12.53
$13.00 to $13.99	3,683,845	4.3	13.23	738,817	13.23
$15.00 to $15.99	200,000	2.1	15.53	200,000	15.53
$16.00 to $16.99	33,606	1.4	11.40	11,202	19.16

	8,720,524	3.5	9.49	5,423,758	7.32

(b)

Stock-based compensation expense

The exercise prices of all Options granted during the period were at or above the market price at the grant date. Stock-based compensation expense is calculated using a Black-Scholes option pricing model to determine the estimated fair values of all Options granted. The value determined on the date an Option is granted is recorded over the vesting period of each respective option.

This expense has been included in the undernoted expenses in the Consolidated Statements of Operations as follows:


	2010 $	2009 $

Operating costs	4,491	1,830
Exploration	680	958
Administrative	11,386	5,744

	16,557	8,532

Eldorado Gold Corporation

Notes to the Consolidated Financial Statements

December 31, 2010 and 2009

(Expressed in thousands of U.S. dollars, unless otherwise stated)

17.

Stock based compensation (continued)

The assumptions used to estimate the fair value of Options granted during the years ended December 31, 2010 and 2009 were:


	2010	2009

Risk-free interest rate (range)	1.69% – 1.99%	1.40% – 2.11%
Expected volatility (range)	38% – 73%	64% – 76%
Expected life (range)	0.8 - 2.8 years	1.5 - 3.8 years
Expected dividends	Nil	Nil

The weighted average fair value per stock option (CAD$) was $4.12 (2009 – $4.80).

(c)

Bonus Cash Award Units plan

In August 2007, the directors adopted a Bonus Cash Award Units (“BCAU”) plan with an effective date of August 2, 2007. The plan provides for the Board of Directors (the “Directors”) to grant BCAUs to officers, employees and consultants subject to vesting and other conditions as determined by the Directors; however, the vesting period may not exceed five years from the grant date, but may be accelerated at the discretion of the Directors. The settlement of BCAUs must be made in cash and is calculated as the excess of trading price of Eldorado shares traded on the Toronto Stock Exchange (“TSX”) on the trading day on which the designated participant elects to exercise their BCAU over the trading price of Eldorado shares traded on the TSX on the grant day.

As of December 31, 2009, all Bonus Cash Award Units (“BCAUs”) awarded by the Company were exercised. The Company paid $2,543 in bonus cash award units in the 2009 year. The related expense in the amount of $559 is included in general and administrative expense in the Consolidated Statements of Operations.

(d)

Deferred Share Units plan

On July 15, 2010 the Company adopted the Independent Directors Deferred Share Unit (“DSU”) Plan under which DSU’s will be granted by the Board from time to time to independent directors (“participants”). The performance period of each DSU commences on the Grant Date and expires on the Termination Date of the participant. On redemption each unit entitles the participant to receive a cash payment equal to the market value of the Company’s shares on the date of redemption. At December 31, 2010, 29,970 DSU’s were outstanding with a value of $573, which is included in accounts payable and accrued liabilities.

Eldorado Gold Corporation

Notes to the Consolidated Financial Statements

December 31, 2010 and 2009

(Expressed in thousands of U.S. dollars, unless otherwise stated)

18.

Supplementary cash flow information


	2010 $	2009 $
Changes in non-cash working capital
Accounts receivable and other	(14,307)	25,386
Inventories	(12,452)	(19,799)
Accounts payable and accrued liabilities	(37,673)	39,472

	(64,432)	45,059

Supplementary cash flow information
Income taxes paid	93,056	46,317
Interest paid	10,415	839

Non-cash investing and financing activities
Shares, options and warrants issued on acquisition of subsidiaries	95,683	1,704,455
Increased in mineral interest financed by accounts payable	-	750

19.

Commitments and contingencies

Commitments

The Company’s contractual obligations, not recorded on the balance sheet, at December 31, 2010, include:


	2011 $	2012 $	2013 $	2014 $	2015 and later $

Operating leases and property expenditures	2,921	3,208	2,639	673	-
Purchase obligations	114,487	23,853	1,467	1,501	-

Totals	117,408	27,061	4,106	2,174	-

Contingencies

Due in part to the size, complexity and nature of the Company’s operations, various social, political, environmental, land title, legal, permitting and tax matters are outstanding from time to time. In the opinion of management, these matters are not expected to have an adverse effect on the Company’s consolidated financial position or operations.

Eldorado Gold Corporation

Notes to the Consolidated Financial Statements

December 31, 2010 and 2009

(Expressed in thousands of U.S. dollars, unless otherwise stated)

20.

Capital disclosure

Eldorado’s objectives when managing capital are to:

safeguard our ability to continue as a going concern,

have sufficient capital to develop our mining projects and take them into production, and

meet external capital requirements on our credit facilities.

The Company monitors capital based on the debt to adjusted capital ratio. Debt is defined as the total of current and long-term debt shown on the balance sheet. Adjusted capital includes 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 December 31, 2010 and December 31, 2009 was 5.62% and 7.23% respectively.

21.

Financial instruments

Recognition, measurement and presentation

Financial instruments are either measured at amortized cost or fair value. Held-to-maturity investments, loans and receivables and other financial liabilities are measured at amortized cost. Held-for-trading financial assets and available-for-sale financial assets are measured on the balance sheet at fair value.

Fair value

The following table provides the carrying value and the fair value of financial instruments at December 31, 2010 and December 31, 2009:


	December 31, 2010		December 31, 2009
	Carrying amount	Fair value	Carrying amount	Fair value
	$	$	$	$
Financial Assets

Held-for-trading
Cash and cash equivalents	314,344	314,344	265,369	265,369
Restricted cash	52,425	52,425	50,000	50,000
Marketable securities	-	-	481	481
Restricted assets and other	19,328	19,328	13,603	13,603

Available-for-sale
Marketable securities	8,027	8,027	13,626	13,626

Loans and receivables	38,241	38,241	20,478	20,478

Financial Liabilities

Accounts payable and accrued liabilities	147,045	147,045	154,011	154,011
Debt	166,663	166,663	191,032	191,032

Eldorado Gold Corporation

Notes to the Consolidated Financial Statements

December 31, 2010 and 2009

(Expressed in thousands of U.S. dollars, unless otherwise stated)

21.

Financial instruments (continued)

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 fair value hierarchy established by CICA Handbook Section 3862 – Financial Instruments – Disclosures

(‘‘Section 3862’’) establishes three levels to classify the inputs to valuation techniques used to measure fair value and is harmonized with disclosure requirements included in ASC Subtopic 820-10 on financial instruments under US GAAP. 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).

Assets and liabilities measured at fair value on a recurring basis as at December 31, 2010 include:


	Balance at December 31, 2010	Quoted Prices in Active Markets for Identical Assets	Other Observable Inputs	Unobservable inputs
	$	$	$	$
		(Level 1)	(Level 2)	(Level 3)
Financial Assets

Held for trading
Cash and cash equivalents	314,344	314,344	-	-
Restricted cash	52,425	52,425	-	-
Marketable securities	-	-	-	-
Restricted asset and other	19,328	19,328	-	-

Available for sale
Marketable securities	8,027	7,871	-	156

The table below sets forth a summary of changes in the fair value of the Company’s Level 3 financial assets and liabilities for the year ended December 31, 2010.

Eldorado Gold Corporation

Notes to the Consolidated Financial Statements

December 31, 2010 and 2009

(Expressed in thousands of U.S. dollars, unless otherwise stated)

21.

Financial instruments (continued)


Assets	Marketable Securities
	Held-for-trading	Available-for-sale	Total
	$	$	$
Beginning balance	174	344	518
Total gains or losses (realized/unrealized)
Included in earnings (or changes in net assets)	-	-	-
Included in other comprehensive income	-	-	-
Purchases, issuances and settlements	(174)	-	(174)
Transfers in and/or out of Level 3	-	(188)	(188)
Ending Balance	-	156	156

Financial risk management

Eldorado’s activities expose it to a variety of financial risks, including credit risk, foreign exchange risk, interest rate risk, gold price risk and liquidity 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 and environmental guarantee deposit. Eldorado deposits its cash and cash equivalents, including restricted cash, with high credit quality financial institutions as determined by rating agencies. As at December 31, 2010, approximately 44% of the Company’s cash and cash equivalents, including restricted cash, are held with one financial institution. The Company considers this to be its only significant credit risk exposure.

The Company sells its gold bullion exclusively to large international financial institutions or on the Istanbul and Shanghai Gold Exchanges. Payment is normally in advance or within one week of receipt of shipment. The historical level of customer defaults is negligible which reduces the credit risk associated with trade receivables at December 31, 2010.

Foreign exchange risk

The Company operates principally in Canada, Turkey, China, Brazil and Greece, and is therefore exposed to foreign exchange risk arising from transactions denominated in foreign currencies.

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

As a result of the Company’s acquisitions, Eldorado has recorded $424,239 of future income tax liabilities on mining interests which are recorded in local currencies. The future income tax liabilities are monetary items that are revalued each period-end at current exchange rates, with the gain or loss recorded in net earnings in the period.

Eldorado Gold Corporation

Notes to the Consolidated Financial Statements

December 31, 2010 and 2009

(Expressed in thousands of U.S. dollars, unless otherwise stated)

21.

Financial instruments (continued)

The Company is exposed to currency risk through the following financial assets and liabilities, value added tax and other taxes recoverable and future income tax asset and liabilities denominated in currencies other than US dollars at December 31, 2010:


	Canadian dollar	Australian dollars	Euro	Turkish lira	Chinese renminbi	Brazilian real

Cash and cash equivalents	24,587	134	102	1,386	536,644	1,269
Marketable securities	7,984	-	-	-	-	-
Accounts receivable and other	2,078	-	516	16,837	137,174	10,898
Future income tax receivable	-	-	-	659	1,192	-
Accounts payable and accrued liabilities	(13,682)	(13)	(124)	(36,940)	(567,629)	(6,548)
Loan	-	-	-	-	(1,103,790)	-
Future income tax liabilities	-	-	(26,334)	(16,851)	(2,211,552)	(85,188)
Net balance	20,967	121	(25,840)	(34,909)	(3,207,961)	(79,569)

Equivalent in US dollars	$ 21,081	$ 125	$ (34,601)	$ (22,581)	$ (484,373)	$ (47,755)

Based on the balances as at December 31, 2010, a 1% increase/decrease in the exchange rates on that date would have resulted in a decrease/ increase of approximately $5,681 in earnings before income taxes. There would be no effect in other comprehensive income.

Our cash flows from our operations are exposed to foreign exchange risk, as commodity sales are set in US dollars and a certain amount of our operating expenses are in the currency of the country in which our mining operations take place. We have elected not to actively manage our exposure to currency risk at this time.

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 exposed to interest rate risk as it is subject to floating interest rates. As at December 31, 2010 the average interest rate in Eldorado’s debt was 5.94%. A 1% increase or decrease in the interest rate on debt held at December 31, 2010 would result in a $48 decrease or increase in the Company’s after-tax net earnings.

The approximate average interest rate earned by the Company in 2010 on its cash and cash equivalents was 0.51% (2009 – 0.83%). A 1% increase or decrease in the interest earned from financial institutions on deposits and money market investments held at December 31, 2010 would result in a $28 increase or decrease in the Company’s after-tax net earnings.

We have elected not to actively manage our exposure to interest rate risk at this time.

Metal price risk and other price risk

Eldorado is subject to price risk for fluctuations in the market price of gold and iron ore. Gold and iron ore 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.

Eldorado Gold Corporation

Notes to the Consolidated Financial Statements

December 31, 2010 and 2009

(Expressed in thousands of U.S. dollars, unless otherwise stated)

21.

Financial instruments (continued)

Worldwide gold and iron ore production levels also affect their prices, and the prices of these metals are occasionally subject to rapid short-term changes due to speculative activities. We have elected not to actively manage our exposure to metal price risk at this time. From time to time, we may use commodity price contracts to manage our exposure to fluctuations in the price of gold and iron ore.

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, whereby the Company’s investments in marketable securities 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 using its lines of credit as required. Our treasury department monitors and reviews both actual and forecasted cash flows, and also matches the maturity profile of financial assets and liabilities. Contractual maturities relating to debt are included in note 12.

22.

Segmented information

During the year ended December 31, 2010, Eldorado had five reporting segments. The Brazil reporting segment includes the development activities of Vila Nova, Tocantinzinho and exploration activities in Brazil. The Turkey reporting segment includes the operations of the Kişladağ mine, development activities of the Efemçukuru development project and exploration activities in Turkey. The China reporting segment includes the operations of the Tanjianshan mine, Jinfeng mine, White Mountain mine, the Eastern Dragon development project and exploration activities in China. The Greece reporting segment includes development activities on the Perama Hill development project. The Other reporting segment includes the operations of the Company’s corporate office and exploration activities in other countries.

Interest and other income for the year 2010 of $1,173 (2009 – $981) pertaining to the center of domicile are reflected in the “Other” segment of operations.


	2010
	Turkey $	China $	Brazil $	Greece $	Other $	Total $

Net mining interests
Producing properties	246,039	1,161,968	-	-	-	1,408,007
Properties under development	170,555	754,754	181,406	211,776	-	1,318,491
Iron ore property	-	-	46,760	-	-	46,760
Other mining interests	11,580	5,150	245	-	3,489	20,464

	428,174	1,921,872	228,411	211,776	3,489	2,793,722


Goodwill		-		365,928		-		-		-	365,928

Eldorado Gold Corporation

Notes to the Consolidated Financial Statements

December 31, 2010 and 2009

(Expressed in thousands of U.S. dollars, unless otherwise stated)

22.

Segmented information (continued)


	2009
	Turkey $	China $	Brazil $	Greece $	Canada $		Total $
Net mining interests
Producing properties	196,066	1,261,367	-	-	-		1,457,433
Properties under development	96,275	715,782	-	209,408	-		1,021,465
Iron ore property	-	-	47,212	-	-		47,212
Other mining interests	7,214	29,405	15,544	-	2,543		54,706

	299,555	2,006,554	62,756	209,408	2,543		2,580,816
Goodwill	-	324,935	-	-	-	324,935


Operations	2010
	Turkey $	China $	Brazil $	Greece $	Other $	Total $
Revenue
Gold sales	339,151	443,699	-	-	-	782,850
Iron ore sales	-	-	8,325	-	-	8,325
	339,151	443,699	8,325	-	-	791,175
Expenses except the undernoted	102,498	212,638	7,952	(2,274)	39,293	360,107
Depletion, depreciation and amortization	14,419	89,938	1,031	-	1,403	106,791
Exploration	13,181	3,464	3,063	-	3,473	23,181
Mine standby costs	-	-	1,335	-	-	1,335
Interest and other (income) expense	(10,271)	(1,887)	(8)	-	(771)	(12,937)
Gain on disposal of assets	-	(384)	(206)	-	(2)	(592)

Income (loss) before tax	219,324	139,930	(4,842)	2,274	(43,396)	313,290
Income tax expense	(45,790)	(43,708)	-	-	(272)	(89,770)
Non-controlling interest	-	(17,457)	-	-	-	(17,457)

Net income (loss)	173,534	78,765	(4,842)	2,274	(43,668)	206,063


Operations	2009
	Turkey $	China $	Brazil $	Greece $	Other $	Total $
Revenue
Gold sales	233,133	125,334	-	-	-	358,467
	233,133	125,334	-	-	-	358,467
Expenses except the undernoted	71,902	68,643	169	519	20,221	161,454
Depletion, depreciation and amortization	12,015	25,665	73	-	905	38,658
Exploration	6,074	1,001	2,284	-	2,611	11,970
Mine standby costs	-	-	2,580	-	-	2,580
Interest and other income	(999)	(278)	(2)	-	(983)	(2,262)
Loss (gain) on disposal of assets	-	501	-	-	(1,355)	(854)

Income (loss) before tax	144,141	29,802	(5,104)	(519)	(21,399)	146,921
Income tax (expense) recovery	(29,752)	(12,362)	-	(96)	320	(41,890)
Non-controlling interest	-	(2,627)	-	-	-	(2,627)

Net income (loss)	114,389	14,813	(5,104)	(615)	(21,079)	102,404

Eldorado Gold Corporation

Notes to the Consolidated Financial Statements

December 31, 2010 and 2009

(Expressed in thousands of U.S. dollars, unless otherwise stated)

23.

Differences between Canadian and United States GAAP

These consolidated financial statements have been prepared in accordance with Canadian GAAP.

The material differences between Canadian GAAP and US GAAP affecting the Company are summarized below:


	2010 $	2009 $
Statement of operations
Net earnings reported under Canadian GAAP	206,063	102,404
Add (deduct) items subject to US GAAP
Exploration costs (a)	(8,814)	(7,768)
Capitalized interest expense (e)	-	228
Depreciation on capitalized interest (e)	(402)	(418)
Bonus cash award units (f)	-	198
Depreciation related to start-up period (b)	125	225
Loss on fair value of warrants issued on acquisition of Brazauro (i)	(81)	-
Transaction costs on Sino Gold acquisition (j)	(408)	(23,602)
Sino Gold step acquisition gains (j)	-	110,644
Depreciation related to recording 100% of fair value of Sino Gold assets (j)	(4,898)	(304)
Foreign exchange loss on future income taxes increment relating to Sino (j)	(1,464)	-
Future income taxes (c)	(5)	343
Non-controlling interest (h)	17,457	2,627

Net earnings under US GAAP attributable to the Company	207,573	184,577
Attributable to non-controlling interest	12,559	2,323
Attributable to common shareholders	195,014	182,254

Other comprehensive income (loss) for the year under Canadian GAAP	(1,229)	8,198
Add (deduct) items subject to US GAAP:
Pension plans (net of tax) (g)	(1,805)	(1,916)

Comprehensive income under US GAAP attributable to the Company	191,980	188,536
Attributable to non-controlling interest	-	-
Attributable to common shareholders	191,980	188,536

Basic and diluted earnings per share - US GAAP	0.36	0.47


	2010 $	2009 $

Accumulated other comprehensive income (loss)
Balance under Canadian GAAP	998	2,227
Pension plans (net of tax) (g)	(6,457)	(4,652)

Balance under US GAAP	(5,459)	(2,425)

Eldorado Gold Corporation

Notes to the Consolidated Financial Statements

December 31, 2010 and 2009

(Expressed in thousands of U.S. dollars, unless otherwise stated)

23.

Differences between Canadian and United States GAAP (continued)


	2010 $	2009 $
Assets
Total assets reported under Canadian GAAP	3,779,909	3,436,108
Exploration costs (a)	(46,714)	(37,900)
Future income taxes (c)	4,879	4,884
Pension plan (g)	-	(113)
Depreciation related to start-up period (b)	(876)	(1,001)
Capitalized interest expense – net (e)	3,733	4,135
Adjust non-controlling interest to fair value on Sino Gold acquisition (j)	165,039	182,247
Goodwill adjustments related to Sino Gold acquisition (j)	530,232	533,411
Deferred financing costs (k)	1,406	1,743

Total assets under US GAAP	4,437,608	4,123,514

Liabilities
Total liabilities reported under Canadian GAAP	776,654	769,354
Financial liability of warrants issued on acquisition of Brazauro (i)	431	-
Future income taxes related to Sino Gold acquisition (j)	41,259	45,562
Foreign exchange loss on future income taxes increment relating to Sino (j)	1,464	-
Pension plans (g)	6,457	4,539
Deferred financing costs (k)	1,406	1,743

Total liabilities under US GAAP	827,671	821,198

Shareholders’ equity
Shareholders’ equity reported under Canadian GAAP	2,967,234	2,640,610
Cumulative adjustments to shareholders’ equity:
Exploration costs (a)	(46,714)	(37,900)
Future income taxes (c)	6,512	4,985
Depreciation related to start-up period (b)	(876)	(1,001)
Accumulated other comprehensive income - pension plans (g)	(6,457)	(4,652)
Financial liability of warrants issued on acquisition of Brazauro (i)	(431)	-
Transaction costs on Sino Gold acquisition (j)	(24,010)	(23,602)
Sino Gold step acquisition gains (j)	110,644	110,644
Share capital (j)	400,706	400,706
Adjust non-controlling interest to fair value on Sino Gold acquisition (j)	165,039	182,247
Foreign exchange loss on future income taxes increment relating to Sino (j)	(1,464)	-
Interest expense capitalized – net (e)	3,733	4,135

Shareholders’ equity under US GAAP attributable to Company	3,573,916	3,276,162

Non-controlling interest (h)	36,021	26,144

Total shareholders’ equity	3,609,937	3,302,316

Eldorado Gold Corporation

Notes to the Consolidated Financial Statements

December 31, 2010 and 2009

(Expressed in thousands of U.S. dollars, unless otherwise stated)

23.

Differences between Canadian and United States GAAP (continued)


	2010 $	2009 $

Cash flows (used in) generated from:
Operating activities under Canadian GAAP	292,075	192,042
Exploration costs (a)	(8,814)	(7,768)
Transaction costs on Sino Gold acquisition (j)	(408)	(23,602)
Capitalized interest expense (e)	-	228

Operating activities under US GAAP (l)	282,853	160,900

Investing activities under Canadian GAAP	(221,192)	(13,576)
Exploration costs (a)	8,814	7,768
Transaction costs on Sino Gold acquisition (j)	408	23,602
Capitalized interest expense (e)	-	(228)

Investing activities under US GAAP	(211,970)	17,566

Financing activities under Canadian and US GAAP	(21,908)	25,052

Net increase (decrease) in cash and cash equivalents for Canadian and US purposes	48,975	203,518
Cash and cash equivalents – beginning of year	265,369	61,851

Cash and cash equivalents – end of year	314,344	265,369

A description of US GAAP that results in differences from Canadian GAAP is as follows:

(a)

Exploration costs

Exploration costs are accounted for in accordance with Canadian GAAP as disclosed in note 2(j). For US GAAP purposes, exploration costs relating to unproven mineral properties are expensed as incurred until completion of an economic feasibility study, after which exploration and development costs are capitalized.

A difference in classification on the cash flow also arises as expenditures associated with capitalized exploration costs under Canadian GAAP are treated as an investing activity whereas under US GAAP, such exploration costs are expensed and shown in the operating section of the cash flow statement.

(b)

Deferred start-up costs and revenues

US GAAP requires that operating profits and losses from newly commissioned operations be recorded at the time the first product is shipped. Canadian GAAP records operating profits and losses from the date commercial production commences. Under Canadian GAAP, deferred start-up costs and revenues are amortized over the life of the project.

Eldorado Gold Corporation

Notes to the Consolidated Financial Statements

December 31, 2010 and 2009

(Expressed in thousands of U.S. dollars, unless otherwise stated)

23.

Differences between Canadian and United States GAAP (continued)

(c)

Future income taxes

Under US GAAP, the Company would record an decrease of $5 (2009 – increase of $343) in future income tax recovery related to the reconciliation items described under items (a), (b), (e) and (i) of this note.

(d)

Tax uncertainties

US GAAP requires that the tax effect(s) of a tax position be recognized only if it is “more-likely-than-not” to be sustained based solely on its technical merits as of the reporting date. The more-likely-than-not threshold represents a positive assertion by management that a company is entitled to the economic benefits of a tax position. If a tax position is not considered more-likely-than-not to be sustained based solely on its technical merits, no benefits of the tax position are to be recognized. The more-likely-than-not threshold must continue to be met in each reporting period to support continued recognition of a benefit.

As a result of this adoption, the Company did not recognize any further increases or decreases in the liability for unrecognized tax benefits from that recorded under Canadian GAAP. A reconciliation of the beginning and ending amount of the unrecognized tax benefits is as follows:


	2010 $	2009 $

Balance at January 1,	11,110	6,930
Additions based on tax positions related to the current year	276	87
Reductions based on tax positions related to the current year	-	(266)
Additions for tax positions of prior years	443	1,059
Reductions for tax positions of prior years	(2,857)	-
Additions on acquisition of Sino Gold	-	3,300
Balance at December 31,	8,972	11,110

As at December 31, 2010, the Company had $8,972 unrecognized tax benefits (2009 – $11,110). If recognized, none of the unrecognized tax benefit would materially affect the effective tax rate.

The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income taxes. During the years ended December 31, 2010 and 2009, the Company recognized approximately $nil and $209 in interest and penalties, respectively. The Company had approximately $209 and $209 accrual for paying interest and penalties at December 31, 2010 and 2009, respectively.

The Company is subject to taxes in Canada, Brazil, China, Turkey and Australia. The tax years that remain subject to examination as of December 31, 2010 for these jurisdictions are:

Eldorado Gold Corporation

Notes to the Consolidated Financial Statements

December 31, 2010 and 2009

(Expressed in thousands of U.S. dollars, unless otherwise stated)

23.

Differences between Canadian and United States GAAP (continued)

Canada

2001 to the present

Brazil

2006 to the present

China

2008 to the present

Turkey

2006 to the present

Australia

2001 – 2002 and 2007 to the present

(e)

Interest expense

Under Canadian GAAP, where the Company has secured debt financing to finance the cost of specific projects, interest is capitalized on the related construction and development project until the project begins commercial operation or development ceases, at which time the interest is charged to operations. Under US GAAP, interest is capitalized on an interest avoidance basis. Under this method, regardless of the application of the loan proceeds, any interest incurred is capitalized to the cost of any development or construction project to the extent of the lesser of the interest cost incurred or the amount that can be attributed to the cost of any capital development or construction costs and any uncapitalized interest is charged to operations.

(f)

Bonus cash award units

Under Canadian GAAP, bonus cash award units are measured at the amount by which the quoted market value of the shares covered by the grant exceeds the option price. US GAAP requires that awards classified as liabilities be measured at fair value at each reporting date. The fair value is estimated using an option pricing model.

(g)

Pension plans

For US GAAP purposes, the Company is required to report the overfunded net asset or underfunded net liability of its defined benefit pension plans on its consolidated balance sheet. Changes in the funded status are recorded through other comprehensive income. The information set out below should be read in conjunction with the information disclosed under Canadian GAAP requirements for pension plans provided in note 14.

The funded status at the end of the year and the related amounts recognized on the statement of financial position for US GAAP purposes are as follows:


	2010		2009
	Pension Plan	SERP	Pension Plan	SERP
	$	$	$	$
Funded status as at December 31,
Fair value of plan assets	1,339	-	1,137	-
Benefit obligations	1,660	11,872	1,263	7,652
Funded status	(321)	(11,872)	(126)	(7,652)

Eldorado Gold Corporation

Notes to the Consolidated Financial Statements

December 31, 2010 and 2009

(Expressed in thousands of U.S. dollars, unless otherwise stated)

23.

Differences between Canadian and United States GAAP (continued)


	2010		2009
	Pension Plan	SERP	Pension Plan	SERP
	$	$	$	$
Amounts recognized in the balance sheet:
Non-current assets	-	-	-	-
Current liabilities	-	-	-	-
Non-current liabilities	321	11,872	126	7,652
Funded status	(321)	(11,872)	(126)	(7,652)


	2010		2009
	Pension Plan	SERP	Pension Plan	SERP
	$	$	$	$
Amounts recognized in other comprehensive income:
Net actuarial loss (gain)	60	4,426	17	1,995
Past service cost (credit)	166	1,805	222	2,418
Funded status	226	6,231	239	4,413

The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for pension plans with an accumulated benefit obligation in excess of plan assets at December 31, 2010 are as follows:


	2010 $	2009 $
Accumulated benefit obligation in excess of plan assets
Projected benefit obligation at end of year	13,532	8,915
Accumulated benefit obligation at end of year	12,193	7,778
Fair value of plan assets at end of year	1,339	1,137

The Company has $7,872 in an investment account to fund its SERP obligation. This amount is included in restricted assets and other (note 9).

The estimated amounts that will be amortized from accumulated other comprehensive income into net periodic benefit cost in 2011 are as follows:


	Pension Plan	SERP
	$	$
Net actuarial loss (gain)	-	871
Past service cost (credit)	82	898
Total	82	1,769

Eldorado Gold Corporation

Notes to the Consolidated Financial Statements

December 31, 2010 and 2009

(Expressed in thousands of U.S. dollars, unless otherwise stated)

23.

Differences between Canadian and United States GAAP (continued)

Pension plan asset information

Investment objective and strategies

The investment objectives are to satisfy the plans’ financial liabilities, and to achieve the highest long-term investment return that can be obtained within a below average degree of risk.

Target asset allocations for aggregate of the plans’ assets, which were established in 2010, are 40% public equity investments and 60% fixed income investments. For tax efficiency, the registered plan assets are invested in fixed income securities.

The investment objectives for the plan assets have been reviewed with regard to the risk tolerance of the Company and characteristics of the plans, and their financial condition.

All assets are externally managed and invested in actively managed pooled funds. Managers are not permitted to invest outside of the asset classes outlined in the written agreements. Investment policies are established to ensure investment managers invest solely within the investment context they have been retained.

Derivatives are permitted investments as efficient substitutes for traditional securities and to manage exposure to risks, in accordance with the investment policies of the investment manager’s pooled funds.

ii.

Significant concentration of risk

Significant concentration of risk in the plans’ assets relate to equity, interest rate, and operating risk. In order to increase investment return to satisfy contribution requirements, a portion of plans assets is allocated to equity investments that are expected to earn higher returns with more volatility than fixed income investments over time. Within equities, risk is mitigated by constructing a portfolio that is broadly diversified by geography, industry and market capitalization.

In order to reduce asset volatility relative to the liabilities, a higher portion of the plans’ assets is allocated to fixed income investments that are exposed to interest rate risk. Rate increases generally will result in decline in fixed income assets while reducing the present value of liabilities.

Operating risks include the risks of inadequate diversification and weak controls. To mitigate these risks, the external fund manager’s investments are diversified across and within asset classes in support of investment objectives. Policies to address operating risks include ongoing manager oversight, investment guideline, and periodic compliance reviews to ensure adherence.

Eldorado Gold Corporation

Notes to the Consolidated Financial Statements

December 31, 2010 and 2009

(Expressed in thousands of U.S. dollars, unless otherwise stated)

23.

Differences between Canadian and United States GAAP (continued)

iii.

Expected long-term rate of return on assets.

The long-term return assumption at year-end 2010 is 6.5% for the plans and was developed based primarily inputs from advisors for long-term capital market returns, inflation, bond yields and other variables, adjusted for specific aspects for our investment strategy. Historical returns were considered where appropriate.

At December 31, 2010, actual one-year annual rate of return on pension plan assets was 6.5% (2009 – 6.8%) for the registered plan and 8.0% (2009 – 15.4%) for the supplemental retirement plan.

Fair value of plan assets

The fair value of our pension benefits plan assets at December 31, 2010 by asset category is as follows:

	Balance at December 31, 2010	Level 1	Level 2	Level 3
Pension Plan	$	$	$	$
Fixed Income
Canadian Government	752	752	-	-
US Government	77	77	-	-
Corporate Bonds (a)
Investment Grade	441	441	-	-
High Yield	14	14	-	-
	1,284	1,284	-	-
Bond Fund	17,289.15	17,289.15
CDA EQUITY FUND	-	-
INT EQUITY FUND	-	-
U.S. EQUITY FUND	-	-
Cash and Cash Equivalents (b)	55	55	-	-
	1,339	1,339	-	-
SERP
Equity
Canadian Companies	1,610	1,610	-	-
U.S. Companies	979	979	-	-
International Companies	948	948	-	-
	3,537	3,537	-	-
Fixed Income
Canadian Government	2,355	2,355	-	-
US Government	240	240	-	-
Corporate Bonds (a)
Investment Grade	1,383	1,383	-	-
High Yield	42	42	-	-
	4,020	4,020	-	-
Cash and Cash Equivalents (b)	315	315	-	-
	7,872	7,872	-	-

(a) "Investment Grade" bonds are those rated Baa3/BBB or higher by at least two rating agencies; "High Yield" bonds are those rated below investment grade; "Other Credit" refers to non-rated bonds.
(b) Primarily short-term investment funds to provide liquidity to plan investment managers.

Eldorado Gold Corporation

Notes to the Consolidated Financial Statements

December 31, 2010 and 2009

(Expressed in thousands of U.S. dollars, unless otherwise stated)

23.

Differences between Canadian and United States GAAP (continued)

(a)

“Investment Grade” bonds are those rated Baa3/BBB or higher by at least two rating agencies; “High Yield” bonds are those rated below investment grade.

(b)

Primarily short-term investment funds to provide liquidity to plan investment managers.

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).

(h)

Non-controlling interest

For US GAAP purposes, non controlling interest, previously referred to as minority interest, should be reported as part of equity in the consolidated financial statements; losses should be allocated to the non controlling interest even when such allocation might result in a deficit balance, reducing the losses attributed to the controlling interest; changes in ownership interests should be treated as equity transactions if control is maintained and, upon a loss of control, any gain or loss on the interest disposed of should be recognized in earnings.

(i)

Fair value of warrants

Under Canadian GAAP, share purchase warrants are accounted for as equity and recorded at their historical cost. For US GAAP purposes, Eldorado’s share purchase warrants issued as part of the Brazauro acquisition, which are priced in Canadian dollars, must be classified as liabilities at their fair value with any resulting gains or losses being included in the calculation of US GAAP earnings. In these circumstances, a loss (gain) would be recorded by the Company when the fair value of the share purchase warrants increases (decreases).

(j)

Business combination

The Company has accounted for the 2009 acquisition of Sino Gold in accordance with Section 1581 of the CICA Handbook as disclosed in note 4(a). For US GAAP purposes, the Company adopted ASC805 (SFAS No. 141R – Business Combinations). The effect of adopting the new requirements is outlined below with respect to the Sino Gold acquisition. Adoption of the new requirements in 2009 had no effect on prior year numbers.

Eldorado Gold Corporation

Notes to the Consolidated Financial Statements

December 31, 2010 and 2009

(Expressed in thousands of U.S. dollars, unless otherwise stated)

23.

Differences between Canadian and United States GAAP (continued)

The following provides an analysis of the significant accounting and disclosure differences between Section 1581 and ASC 805 on the Sino Gold acquisition (refer to note 4(a)):

Purchase price allocation

The allocation of the purchase price of the shares of Sino Gold based on final estimates is summarized as follows:


			US GAAP
Final purchase price			$

131,772,777 common shares of Eldorado issued as CDIs			1,786,842
4,057,762 common shares of Eldorado issued to GFA			55,026
Fair value of the Sino Gold shares originally acquired in July 2009			373,937
			2,215,805


Fair value of net assets acquired based on final allocation			$

Cash			77,781
Restricted cash			50,000
Accounts receivable and other			21,171
Inventory			38,791
Mining interests and property, plant and equipment,
including value beyond proven and probable reserves			1,970,948
Goodwill			893,922
Accounts payable and accrued liabilities			(74,737)
Asset retirement obligations			(19,249)
Debt			(191,121)
Future income taxes			(362,279)
Non-controlling interests			(189,422)
			2,215,805

ii.

Acquisition consideration and costs

Under existing Canadian GAAP, the value of shares issued in a business combination is determined based on the announcement date. Under US GAAP the value of shares issued in a business combination is determined based on the fair value of the shares at the date of closing. The effect of this difference is to increase share capital by $400,706 and increase goodwill by a similar amount.

Eldorado Gold Corporation

Notes to the Consolidated Financial Statements

December 31, 2010 and 2009

(Expressed in thousands of U.S. dollars, unless otherwise stated)

23.

Differences between Canadian and United States GAAP (continued)

Under Canadian GAAP, step acquisitions are accounted for at original cost subject to equity accounting adjustments. Under US GAAP, acquisitions of equity interests prior to acquisition of control are included in the business combination accounting at fair value at the date of acquisition with any gain or loss being included within the determination of net income. Under US GAAP, net income and goodwill would be higher by $110,644 in 2009.

Under Canadian GAAP, non-controlling interests are carried at the pro-rata value of the underlying assets and liabilities based on carrying values. Under US GAAP, non-controlling interests at the date of the business combination are recorded at fair value.

Under Canadian GAAP, transaction costs are included as a cost of an acquisition. Under US GAAP, transaction costs, including restructuring costs, are expensed in the statement of earnings. Under US GAAP, expenses would increase and goodwill arising on the business combination would be $24,010 lower.

iii.

Goodwill

The $893,922 of goodwill resulting from the acquisition is currently assigned to the China operating segment. The goodwill recognized is attributable primarily to the exposure to sustained increases in gold prices, over the long term price expectations used in the Company’s fair value estimates and other factors. None of the goodwill is expected to be deductible for income tax purposes.

iv.

Deferred tax liabilities

The deferred tax liabilities of $362,279 recognized upon acquisition under US GAAP are related primarily to the difference between the book basis and fair value of identifiable tangible assets.

Pro forma information

The following supplemental pro forma information presents the financial results as if the acquisition of Sino Gold had occurred January 1, 2009 for the year ended December 31, 2009. This supplemental pro forma information has been prepared for comparative purposes and does not purport to be indicative of what would have occurred had the acquisition of Sino Gold been completed on January 1, 2009, nor are they indicative of any future results.

Eldorado Gold Corporation

Notes to the Consolidated Financial Statements

December 31, 2010 and 2009

(Expressed in thousands of U.S. dollars, unless otherwise stated)

23.

Differences between Canadian and United States GAAP (continued)

Pro forma consolidated results, in thousands except per share date:


	Year ended
	2009
	$

Revenue – gold sales	529,387
Net income	(63,327)
Basic net (loss) income per shares	(0.12)
Diluted net (loss) income per share	(0.12)

These amounts have been calculated after applying the Company’s accounting policies and adjusting the results of Sino Gold to reflect the additional depreciation and amortization that would have been charged assuming the fair value adjustments to property, plant and equipment and mineral interests, had been applied on January 1, 2009, as applicable, together with the consequential tax effects.

(k)

Deferred financing costs

Deferred financing costs represent legal, other professional and bank underwriting fees incurred in connection with the issuance of debt. Under Canadian GAAP, unamortized deferred financing costs are included as an offset to debt in liabilities. Under US GAAP such costs are included in assets as a deferred asset. Such fees are amortized over the life of the related debt using the interest method. Amortization of deferred financing costs is included in interest expense, net.

(l)

Presentation of statement of cash flows

Under Canadian GAAP, the presentation of the statement of cash flows includes a subtotal in the operating activities section that is not allowed under US GAAP.

(m)

Adoption of new United States accounting pronouncements

Fair value accounting

In January 2010, ASC guidance for fair value measurements and disclosure was updated to require additional disclosures related to transfers in and out of level 1 and 2 fair value measurements. The guidance was amended to clarify the level of disaggregation required for assets and liabilities and the disclosures required for inputs and valuation techniques used to measure the fair value of assets and liabilities that fall in either level 2 or level 3. The updated guidance was effective for the Company’s fiscal year beginning January 1, 2010. The adoption had no impact on the Company’s consolidated balance sheets, statement of operations or cash flows. Refer to note 21 for further details regarding the Company’s assets and liabilities measured at fair value.

Eldorado Gold Corporation

Notes to the Consolidated Financial Statements

December 31, 2010 and 2009

(Expressed in thousands of U.S. dollars, unless otherwise stated)

23.

Differences between Canadian and United States GAAP (continued)

(n)

Recently issued accounting pronouncements

Business combinations

In December 2010, the ASC guidance for business combinations was updated to clarify existing guidance which requires a public entity to disclose pro forma revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual period only. The update also expands the supplemental pro forma disclosures required to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. The updated guidance is effective for the Company’s fiscal year beginning January 1, 2011. The Company is evaluating the potential impact of adopting this guidance on the Company’s consolidated financial statements.

ii.

Fair value accounting

In January 2010, the ASC guidance for fair value measurements and disclosure was updated to require enhanced detail in the level 3 reconciliation. The updated guidance is effective for the Company’s fiscal year beginning January 1, 2011. The Company expects minimal impact from adopting this guidance.

EX-99.2 3 mda.htm MANAGEMENT'S DISCUSSION & ANALYSIS FOR DECEMBER 31, 2010 AND 2009 MD Filed by Filing Services Canada Inc. (403) 717-3898

MANAGEMENT'S DISCUSSION and ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A)

for the year ended December 31, 2010

Throughout this MD&A, Eldorado, we, us, our and the company mean Eldorado Gold Corporation.

This year means 2010. All dollar amounts are in United States dollars unless stated otherwise.

The information in this MD&A is as of March 17, 2011. You should also read our audited consolidated financial statements for the year ended December 31, 2010. We prepare our consolidated financial statements in accordance with Canadian GAAP and file them with appropriate regulatory authorities in Canada and the United States. You can find more information about Eldorado, including our annual information form, on SEDAR at www.sedar.com.


What's inside

About Eldorado	1

2010 highlights, corporate developments and outlook
Highlights and outlook	2
Corporate developments	2

Annual updates
Operations	5
Development projects	7
Exploration	8

Annual results
Financial results	11
Results of operations	11
Non-GAAP Measures	14

Financial condition	15

Capital resources	15

Risk	20

Other information
Critical accounting policies and estimates	23
Changes in accounting policies	26
New accounting developments	26
Disclosure controls and procedures	32
Internal controls over financial reporting	32
Forward-looking information and risks	33

MANAGEMENT'S DISCUSSION and ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

December 31, 2010

About Eldorado

Based in Vancouver, Canada, Eldorado owns and operates gold mines around the world. Its activities involve all facets of the gold mining industry including exploration, development, production and reclamation.

Operating gold mines:

Kişladağ, in Turkey (100%)

Tanjianshan, in China (90%)

Jinfeng, in China (82%)

White Mountain, in China (95%)

Development gold projects:

Eastern Dragon, in China (95%)

Efemçukuru, in Turkey (100%)

Tocantinzinho, in Brazil (100%)

Perama Hill, in Greece (100%)

Iron ore mine:

Vila Nova, in Brazil (100%)

Jinfeng, White Mountain and Eastern Dragon were included in the acquisition of Sino Gold Ltd. (Sino Gold) in December 2009. Tocantinzinho was included in the acquisition of Brazauro Resources Corporation in July 2010.

Eldorado is listed on the following exchanges:

Toronto Stock Exchange (TSX) under the symbol ELD

New York Stock Exchange (NYSE) under the symbol EGO

ELD is part of the S&P/TSX Global Gold Index. EGO is part of the AMEX Gold BUGS Index.

Eldorado Chess Depositary Interests (CDIs) trade on the Australian Securities Exchange (ASX) under the symbol EAU.

MANAGEMENT'S DISCUSSION and ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

December 31, 2010

2010 Highlights, corporate developments and 2011 outlook

Production was 74% higher than 2009, due to the addition of Jinfeng and White Mountain, and solution processing improvements at Kışladağ.

Gold sales (in ounces) were up 78%, as a result of higher production and drawing down on gold-in-circuit inventories. Our average realized price was $1,223 per ounce of gold, an increase of 23% over last year.

Earnings per share increased 46% over last year to $0.38 per share.

Cash generated from operating activities before changes in non-cash working capital increased 140% over last year. This is a non-GAAP measure. See page 12 for more information.

Paid our first dividend of Cdn$0.05 per share on June 4, 2010.

Kişladağ's reserves increased 50% compared to year end 2009.

Completed our acquisition of Brazauro Resources Corporation (Brazauro) on July 20, 2010, for 5,993,898 Eldorado common shares and other consideration.

Acquired the exploration licence for Xiaoshiren Central (20 km southeast of White Mountain).

Sold our interest in Beyinhar on February 6, 2010 for $20 million.

2011 production is expected to be 715,000 to 770,000 ounces of gold, at a cash operating cost of $375 to $395 per ounce.

2011 capital expenditures are expected to be approximately $230 million.

Corporate developments

Brazauro acquisition

On July 20, 2010, Eldorado acquired, through a court approved plan of arrangement under the laws of British Columbia (the arrangement), all the issued and outstanding securities of Brazauro Resources Corporation (Brazauro) that we did not already own for total consideration of 5,993,898 common shares of Eldorado.

Under the terms of the arrangement, former Brazauro shareholders other than Eldorado received 0.0675 of an Eldorado common share for each Brazauro share held, as well as 1/3 of a share of TriStar Gold Inc. (TriStar), a new exploration company that Eldorado funded with Cdn$10 million on July 19, 2010 as part of the Arrangement. TriStar will hold certain exploration properties previously owned by Brazauro.

Brazauro's principal asset, the Tocantinzinho Project in Tapajos, Brazil, is a late stage exploration project with current measured and indicated resources of 2.1 million ounces of gold. Eldorado also acquired option agreements to earn into 100% of the Água Branca and Piranhas properties, located in the Tapajos District immediately adjacent to the Tocantinzinho Project.

Investment in Serabi Mining plc

Eldorado acquired 12,000,000 common shares and 2,500,000 special warrants of Serabi Mining Plc (Serabi) in 2010, for a total price of approximately $6.8 million. This represents a 26.8% interest in Serabi. We are accounting for the investment in Serabi using the equity method.

MANAGEMENT'S DISCUSSION and ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

December 31, 2010

Serabi is a gold mining company whose main asset is 100% of the Palito Gold property in the Tapajos region of Brazil. The Palito deposit consists of high grade, narrow gold-copper veins, with considerable exploration potential.

Disposition of Beyinhar

On April 27, 2010 Eldorado completed the disposition of its interest in the Beyinhar joint venture in Inner Mongolian Autonomous Region, China, through the sale of its wholly owned subsidiary Golden China Nei Men Gold Exploration Corporation for $20.0 million. Beyinhar was included in the acquisition of Sino Gold but considered to be a non-core asset. The sale did not have an impact on our earnings as the fair value of the property at the date of acquisition was equal to the sale price.

MANAGEMENT'S DISCUSSION and ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

December 31, 2010

Operating highlights and outlook^1,5


	2010	2009	2011 outlook⁷
Total
Gold ounces produced	632,539	363,509	715,000 to 770,000
Ounces sold	639,949	360,226
Cash operating costs ($ per ounce)³	382	309	375 to 395
Total cash cost ($ per ounce)^2,3	423	337
Kışladağ
Gold ounces produced	274,592	237,210	270,000 to 285,000
Ounces sold	279,025	237,363
Cash operating costs ($ per ounce)³	329	279	350 to 365
Total cash cost ($ per ounce)^2,3	339	281
Tanjianshan
Gold ounces produced	113,864	105,610	110,000 to 120,000
Ounces sold	116,765	102,710
Cash operating costs ($ per ounce)³	383	350	410 to 430
Total cash cost ($ per ounce)^2,3	485	435
Jinfeng⁴
Gold ounces produced	181,950	14,541	175,000 to 185,000
Ounces sold	182,026	14,554
Cash operating costs ($ per ounce)³	425	471	445 to 465
Total cash cost ($ per ounce)^2,3	480	515
White Mountain⁴
Gold ounces produced	62,133	6,148	70,000 to 75,000
Ounces sold	62,133	5,599
Cash operating costs ($ per ounce)³	487	400	485 to 500
Total cash cost ($ per ounce)^2,3	522	439
Efemçukuru
Gold ounces produced	n/a	n/a	70,000 to 80,000
Cash operating costs ($ per ounce)³	n/a	n/a	285 to 300
Eastern Dragon
Gold ounces produced	n/a	n/a	20,000 to 25,000
Cash operating costs ($ per ounce)^3,6	n/a	n/a	40 to 45
Vila Nova
Iron ore tonnes sold	89,074	n/a	440,000 to 480,000
Cash operating costs ($ per tonne sold)	41	n/a	40 to 45

We calculate costs according to the Gold Institute Standard.

Total cash cost is cash operating costs plus royalties and off-site administration costs.

Cash operating costs and total cash cost are non-GAAP measures. See page 14 for more information.

⁴

We acquired Jinfeng, White Mountain and Eastern Dragon in December 2009.

⁵

We recalculated cash operating costs and total cash costs for 2009 based on ounces sold.

⁶

Eastern Dragon cash operating costs are net of silver by-product credits.

⁷ Outlook uses the following assumptions:

Gold price: $1,250 per ounce

Exchange rates:

Oil price: $80 per barrel (Kişladağ only)

Cdn$1.05 = $1.00

Turkish Lira 1.50 = $1.00
Brazilian Real 1.75 = $1.00

Chinese RMB 6.50 = $1.00

MANAGEMENT'S DISCUSSION and ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

December 31, 2010

Annual updates – Operations

Kişladağ


	2010	2009
Ore mined (tonnes)	10,046,503	10,550,764
Total material mined (tonnes)	27,299,803	24,034,645
Strip ratio	1.72:1	1.28:1
Ore to pad (tonnes)	10,372,719	10,716,556
Gold grade (g/t)	1.06	1.11
Gold production (ounces)	274,592	237,210

In 2010 we increased the column size in the ADR plant and instigated intermediate leaching. The combination of these two changes resulted in an inventory drawdown of gold in the leach pad of approximately 40,000 ounces, accounting for the favourable variance from our initial guidance for 2010 of 240,000 ounces.

Cash operating cost of $329 per ounce (this is a non-GAAP measure; see page 14 for more information) was within our initial guidance of $310 to $330 per ounce. The increase in cash operating cost per ounce from the previous year (2009 - $279 per ounce) was due to higher fuel costs as well as higher strip ratios and slightly lower head grade. In 2011 we expect to produce 270,000 to 285,000 ounces of gold at a cash operating cost $350 to $365 per ounce.

In 2010, we continued to work on the Phase III expansion of the crushing circuit. This is designed to increase the crushing capacity to more than 12 million tonnes per annum. This equipment will be commissioned in Q1 2011.

We spent $54.9 million on capital projects at Kişladağ in 2010. The majority of this was to complete the Phase III crusher expansion. Other capital costs included the installation of six new leach pads (pads
16-21) and continued resource delineation drilling.

Tanjianshan


	2010	2009
Ore mined (tonnes)	1,178,293	1,566,379
Total material mined (tonnes)	4,155,030	11,847,818
Strip ratio	2.53:1	6.56:1
Ore processed (tonnes)	1,049,952	974,498
Gold grade (g/t)	4.20	5.31
Gold production (ounces)	113,864	105,610

Gold production was higher than our initial guidance of 105,000 ounces due to higher than planned mill throughput and head grade. The cash operating cost, $383 per ounce, was lower than our guidance of $435 per ounce due to higher than planned production related to the higher head grade. The increase in cash operating cost per ounce from the previous year (2009 - $350 per ounce) was due to lower head grade. In 2011 we expect to produce 110,000 to 120,000 ounces of gold at a cash operating cost $410 to $430 per ounce.

MANAGEMENT'S DISCUSSION and ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

December 31, 2010

The process plant continued to perform well. Various metallurgical improvements were completed during the year with the installation of a flash float circuit and extra flotation tank cells. Also during 2010, a major roaster shutdown was completed to coincide with an extended power outage. The roaster was inspected and found to be in good condition. An upgrade was completed at this time with improvements to the roaster cyclones to reduce the fine dust that has been overloading the Electrostatic Precipitator (ESP).

We spent $17.1 million in capital at Tanjianshan in 2010, for delineation drilling on identified resources and process plant upgrades, as well as an expansion of the tailings dam.

Jinfeng


	2010	2009¹
Ore mined – underground (tonnes)	405,015	34,744
Ore mined – open pit (tonnes)	1,432,278	118,778
Total material mined - open pit (tonnes)	17,832,838	2,604,277
Strip ratio	11.45:1	20.9:1
Ore processed (tonnes)	1,557,199	136,054
Gold grade (g/t)	4.24	3.97
Gold production (ounces)	181,950	14,541

¹2009 numbers only from date of acquisition on December 4, 2009.

Gold production at Jinfeng for 2010 was within our initial guidance, while cash operating costs of $425 per ounce were below our initial guidance of $450 per ounce, due to lower than planned waste mining costs. In 2011 we expect to produce 175,000 to 185,000 ounces of gold at a cash operating cost $445 to $465 per ounce.

A cutback will be completed in the open pit in 2011 to allow further pit development.

The process plant continued to perform well.

We spent $15.1 million in capital at Jinfeng in 2010, on underground equipment and development, and tailings dam improvements.

White Mountain


	2010	2009¹
Ore mined – underground (tonnes)	624,723	52,077
Ore processed (tonnes)	622.418	58,074
Gold grade (g/t)	3.98	4.26
Gold production (ounces)	62,133	6,148

¹2009 numbers only from date of acquisition on December 4, 2009.

Gold production at White Mountain for 2010 was within our initial guidance, while cash operating costs of $487 per ounce were above our initial guidance of $460 per ounce due to higher mining costs related to stope development and dewatering, as well as lower than planned recovery rates. In 2011 we expect to produce 70,000 to 75,000 ounces of gold at a cash operating cost of $485 to $500 per ounce.

Mining issues, including water inflow and cavities in the ore zone are being addressed by increasing underground development and stope availability.

MANAGEMENT'S DISCUSSION and ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

December 31, 2010

We spent $16.4 million in capital at White Mountain in 2010, mainly on underground equipment and development. A mercury removal plant was also installed and commissioned to remove mercury vapour from the electrowinning and carbon regeneration circuits.

Annual updates – Development projects

Eastern Dragon

Permitting issues delayed the start of construction at Eastern Dragon to the fourth quarter of the year. We made the decision to enter into a specialized winter works program to complete critical path items on the implementation schedule. Due to the extremely cold weather in the region, construction activity is normally very restricted in the winter. The work program we prepared focused on providing safe working conditions for all contractors and employees. We took special precautions to ensure workers were provided with suitable clothing to work outside, working hours were restricted, there were regularly scheduled rest periods in heated areas, and special training was provided for those working in snowy conditions, particularly at height. As a result, we were able to carry out installations of critical machinery foundations and erect structural steel for the concentrator building enclosure. In addition, we were able to complete infrastructure projects to support the winter work program, such as worker housing, the electrical substation, sewage treatment infrastructure and limited road works. This effort will position the project for completion in late 2011.

We spent $10.9 million on capital projects at the Eastern Dragon project in 2010.

Efemçukuru

We continued with all aspects of the implementation phase of the Efemçukuru project this year. The main concentrator plant was advanced from civil foundation installations early in the year, through mechanical and electrical installations, to dry commissioning in the fourth quarter. Major infrastructure installations were also advanced, including preparing the tailings impound area, ancillary buildings and services and preparation of the rock dump area to receive development rock from underground. We also constructed a major water dam on site following design changes brought on by permitting issues. Construction of the tailings filtration and backfill plants was initiated mid-year with planned commissioning of the circuits in the first quarter of 2011.

Engineering and procurement of major equipment and steel work for the concentrate treatment plant at Kişladağ was nearing completion at year end. With receipt of the modified Kişladağ environmental impact assessment, civil and mechanical construction will begin in mid-2011. The plant is expected to be complete in the fourth quarter of 2011.

Start up of underground preproduction development was delayed while we were waiting for legislative changes in the Turkish mining law. The contractor was able to start development mid-year and completed approximately 45% of the contract by year end. With completion of the mine infrastructure and continued good performance from the mine contractor, we expect production at Efemçukuru to be at full capacity by mid-2011.

We spent $69.0 million on capital projects at Efemçukuru in 2010.

Vila Nova

During 2010 we sold 89,074 dry metric tonnes of iron ore as part of a trial mining program designed to test the project logistics, processing plant, and mining capacity. We expect to ramp up production to between 440,000 and 480,000 dry metric tonnes in 2011.

MANAGEMENT'S DISCUSSION and ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

December 31, 2010

Tocantinzinho

With the purchase of Brazauro and acquisition of the Tocantinzinho project in 2010, we initiated additional work on defining the ore body, completing approximately 5,600 meters of diamond drilling and preparing a prefeasibility study to define what will be an open pit mining operation. Various engineering studies have examined metallurgical response and the process design for gold recovery, geotechnical stability of the pit, hydrology and hydrogeology of the area and major infrastructure needs such as the incoming power line and the access road to the site. This work has been carried out while preparing the environmental impact assessment, which will be submitted to the Ministry of Environment in the first quarter of 2011, and issuing the prefeasibility study and declaration of resources and reserves at Tocantinzinho.

We spent $9.6 million on capital projects at the Tocantinzinho project in 2010.

Perama Hill

We continue to work closely with the Greek government and local agencies to advance the project through the permitting stage. Our dialogue with the local communities and stakeholders has focused on informing and educating them about both the technical aspects and benefits of the project and we are encouraged by the level of support we have received.

We spent $2.4 million on capital projects at the Perama Hill project in 2010.

Annual updates – Exploration

Exploration drilling in 2010 totalled 107,088 metres at eighteen projects worldwide.

Turkey

Kişladağ

Two phases of infill and resource extension drilling totalling 75 diamond drillholes (40,825m)

were completed. Notable results include:

Delineation of a new contiguous high-grade gold zone within Intrusion 2A, in areas of the deposit that were originally modelled to contain low gold grades and waste.

Definition of the southeast margin high-grade zone, which was traced over an east-west strike length of approximately 300 metres, and lies just outside the boundary of the 2009 design pit.

Identification of high-grade zones along the Intrusion 3-Intrusion 1 contact in the northwest deposit area.

Discovery of ore-grade gold values in the basement schist adjacent to a late-stage intrusive dyke. This highlights the prospectivity of relatively unexplored areas to the west of the current deposit.

Efemçukuru

Six diamond drillholes (1,907m) testing the Kokarpinar vein were completed in 2010. The vein was intersected at or near the projected depth in all drillholes, with four of the six holes returning significant mineralized intervals. Additional planned drilling on the Kokarpinar and Kestane Beleni veins was deferred until early 2011 due to delays in obtaining the required forestry permits.

Reconnaissance programs

At the MH iron-oxide copper-gold project, results of detailed geological mapping, soil geochemistry, and geophysical surveys provided several large-scale drill targets. Eight diamond drill holes were completed for a total of 3,066 metres, testing the Köskale, Karakaya, and Kuşkayasi targets. The best results to date are from the Köskale target, a structurally controlled breccia zone with strong hematite alteration.

At the Sizma project, 22 short reverse circulation holes (1,146m) tested structurally-controlled, phyllite-hosted gold mineralization. Several of the holes intersected low-grade gold values over several tens of metres.

MANAGEMENT'S DISCUSSION and ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

December 31, 2010

Six diamond drillholes were completed at the AS project for a total of 2,745 metres. Drilling targeted newly defined porphyry targets based on alteration mapping, geochemistry, and magnetic data. All holes intersected variably altered and mineralized rocks, including zones of weak porphyry-style copper, molybdenum, and gold mineralization.

At the Sayaçik project, we completed five reverse circulation holes (986m) and two diamond drill holes (866m) targeting geophysical and geochemical anomalies. No significant mineralized intervals were encountered.

Reconnaissance fieldwork including rock chip sampling, geological mapping, and soil geochemical surveys were completed at the Catak, Dolek, and Atalan projects.

China

Tanjianshan

A total of 52 diamond drill holes were completed at the 323 zone for a total of 9,838 metres. Geological modeling of the mineralization defined to date has delineated a preliminary Inferred Resource of 160,000 ounces gold at 2.75 g/t. Mineralization remains open down-plunge to the south.

At the ZXS prospect area, 40 shallow RC/RAB holes (4,418m) were completed. These were designed to test covered areas and delineate targets for follow up diamond drilling

Jinfeng

At the Jinfeng Mine, 15,318 metres of underground and surface drilling focussed on upgrading zones of inferred resources.

At the Bannian prospect, approximately 20 km southwest of the Jinfeng mine, 12 diamond drill holes (1,146m) targeted near-surface zones of structurally controlled gold mineralization. Results were mixed, highlighting the erratic nature of mineralization along the target F207 zone.

At Lintan and Yaojiatan, immediately north of the mine, 13 diamond drill holes were completed, targeting the F14 and F70 structures. Mineralized intercepts were generally narrow and low grade, and future drilling will be directed towards conceptual targets where larger tonnage deposits may be possible.

White Mountain

Drilling at the White Mountain mine focused on down-dip and along-strike extensions to known mineralization on the F100 zone. A new lens of high-grade mineralization was intersected approximately 200 metres down-dip of the known deposit in drillhole 337 (24.7m @ 8.7 g/t Au). This intercept is completely open along-strike and down-dip and will be followed up with additional drilling.

At Xiaoshiren, approximately 20 km southeast of the mine, surface mapping, rock chip sampling and soil geochemistry led to late season diamond drilling on the #4 and #5 zones. Seven holes (1,223m) were completed, several of which intersected significant mineralized breccia zones with the most significant interval grading 7.8 g/t Au over 6.5 metres.

At Dongdapo, along strike immediately northeast of the mine, geological mapping and soil geochemical surveys were completed and drill targets defined.

Three diamond drill holes were completed at the Caijiagou project (983m). No significant mineralization was encountered and the project has been dropped.

Eastern Dragon

Field activities this year included a detailed ground magnetic survey, float and outcrop sampling, and prospecting within the EL53 license area. Results of these surveys have been incorporated into our geological interpretation of the area and drill targets defined. Of note is the newly identified high-grade gold in outcrop along the river valley north of the Lode 5 deposit, which is being evaluated as a potential drill target.

MANAGEMENT'S DISCUSSION and ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

December 31, 2010

Four exploration diamond drill holes (719m) were completed at the Sanjianfang exploration licence immediately south of EL53. The drilling intersected veins in several locations, but did not encounter any significant gold grades.

Brazil

Tocantinzinho

Exploration efforts at Tocantinzinho included 5,598 metres of diamond drilling and 635 metres of reverse circulation drilling. These programs included infill drilling at the Tocantinzinho deposit (15 holes), geotechnical drilling within and peripheral to the deposit (6 holes), and exploratory drilling outside the known deposit (9 diamond holes and 7 RC holes).

In addition to drilling, the soil geochemical grid was significantly expanded and a 38.5 line kilometre induced polarization geophysical survey was completed. Several zones of anomalous chargeability/resistivity response were identified and will be drill tested.

Reconnaissance

At the Agua Branca project, three diamond drill holes (584m) were completed, finishing the program started by Brazauro before we assumed control of the project. Results were encouraging in that similar lithologies and alteration styles to those associated with the Tocantinzinho deposit were intersected; however gold grades were generally low. We have subsequently begun a program of property-wide geochemical sampling designed to identify possible additional drill targets on the property.

At Piranhas, work has focussed on rehabilitation of the airstrip and camp facilities so that exploration crews can begin reconnaissance work in 2011.

A stream sediment and rock sampling program was completed at the Triguiero project in northeast Brazil. Several isolated anomalies were defined, however follow-up work failed to identify significant mineralization and the project was subsequently dropped.

Nevada

A controlled source audio magnetotelluric (CSAMT) geophysical survey was completed at the Cathedral Well project which defined several drill targets in covered areas adjacent and down-dip from known mineralization. A reverse circulation drill program designed to test these targets began in December.

Geological mapping and rock sampling programs were completed at the Buffalo Canyon project and defined several distinct styles of mineralization and drill targets. We plan to test these targets early in 2011.

Geological and alteration mapping, soil sampling, rock sampling, and a CSAMT geophysical survey were completed at the Richmond Mountain project. Two reverse circulation holes were completed (815m) testing a conceptual target beneath cover. Results were generally disappointing and the project has been dropped.

We dropped the option on the Green Monster project due to continued permitting delays.

MANAGEMENT'S DISCUSSION and ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

December 31, 2010

Annual results

Financial results


$ thousands	2010	2009
Total revenue	791,175	358,467
Net income (loss)	206,063	102,404
Earnings per share
- basic	0.38	0.26
- diluted	0.38	0.26

Net income

Our consolidated net income for the year increased by 102% over last year – from $102.4 million or $0.26 per share in 2009 to $206.1 million or $0.38 per share in 2010. The increase was driven by higher results from gold mining operations partially offset by higher income tax, general and administrative, and exploration expenses.

Revenue

Total revenues this year included $782.9 million in gold revenues and $8.3 million in iron ore sales.

Gold revenues this year were 121% higher than last year mainly for two reasons:

selling prices increased by 23%

sales volumes were up 78%: sales from Kişladağ and Tanjianshan increased by 55,717 ounces, and Jinfeng and White Mountain increased by 224,006 ounces. Jinfeng and White Mountain sales in 2009 were for the month of December.


	2010	2009
Gold ounces sold	639,949	360,226
- Kişladağ	279,025	237,363
- Tanjianshan	116,765	102,710
- Jinfeng	182,026	14,554
- White Mountain	62,133	5,599
Average selling price per ounce	$1,223	$995
Gold revenue (000s)	$782,850	$358,467

Iron ore revenues were derived from two shipments totalling 89,074 dry metric tonnes of iron ore sold in the fourth quarter at an average price of $93.50 per dry metric tonne.

Results of gold mining operations

Results from gold mining operations before taxes were up 113% over last year for three main reasons:

the addition of Jinfeng and White Mountain

higher sales volumes at Kışladağ

higher gold prices overall.

MANAGEMENT'S DISCUSSION and ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

December 31, 2010

Earnings from gold mining operations before taxes


$ millions	2010	2009
Total
Gold sales	782.9	358.5
Operating costs	278.2	132.7
Depletion, depreciation and amortization	104.0	37.6
Earnings from mine operations	400.7	188.2
Kışladağ
Gold sales	339.1	233.1
Operating costs	98.1	67.7
Depletion, depreciation and amortization	14.1	12.0
Earnings from mine operations	226.9	153.4
Tanjianshan
Gold sales	144.0	102.5
Operating costs	58.9	45.7
Depletion, depreciation and amortization	25.5	20.5
Earnings from mine operations	59.6	36.3
Jinfeng
Gold sales	222.0	16.5
Operating costs	88.3	14.5
Depletion, depreciation and amortization	45.4	4.3
Earnings (loss) from mine operations	88.3	(2.3)
White Mountain
Gold sales	77.8	6.4
Operating costs	32.9	4.8
Depletion, depreciation and amortization	19.0	0.8
Earnings from mine operations	25.9	0.8

Operating costs

Operating costs rose 110% this year for two main reasons:

volume was higher at all our mines

unit operating costs were higher at Tanjianshan and Kışladağ

Unit operating costs were higher than 2009:

Kışladağ's cash operating costs per ounce increased 18% because of higher fuel costs, stripping ratios and slightly lower head grade

Tanjianshan's unit operating costs rose 9% because of lower head grade

Depletion, depreciation and amortization from gold mining operations

Depletion, depreciation and amortization expense was $104.0 million this year, 177% higher than 2009, mainly because of the additional expense at Jinfeng and White Mountain, including amortization of the excess purchase price allocated to proven and probable reserves at Jinfeng and White Mountain.

MANAGEMENT'S DISCUSSION and ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

December 31, 2010

Other expenses


$ thousands	2010	2009
General and administrative	59.8	32.5
Income tax	89.8	41.9
Exploration	23.2	12.0
Foreign exchange	14.8	(3.0)
Interest and other	(12.9)	(2.3)
Gains on sales of marketable securities	(6.6)	(1.7)
Non-controlling interest and other	17.5	2.6

General and administrative expense

We incur general and administrative costs at our head office in Vancouver, Canada and in the countries where we conduct our business.

General and administrative expense increased $27.3 million or 84% over 2009 due to higher stock based compensation expense as well as higher headquarters costs in both Vancouver and China due to the increase in the size of our company. Stock based compensation expense increased over 2009 because there were no significant option grants in 2009.

Income taxes

Income tax expense increased $47.9 million or 114% over 2009 as a result of higher taxable income from our gold mining operations in Turkey and China. The effective tax rate of 29% was unchanged from 2009.

Foreign exchange gain/loss

We reported $14.8 million in foreign exchange losses this year, mainly related to unrealized losses on future income tax liabilities originating from the Sino acquisition denominated in Chinese renminbi. In 2009 we reported $3.0 million in foreign exchange gains, mainly related to realized gains on cash deposits denominated in Canadian dollars.

Interest and other income

Interest and other income of $12.9 million in 2010 included $7.5 million related to the sale of our Turkish subsidiary's Agi Dagi royalty interest, and $2.6 million from the sale of silver byproduct, mainly from Kişladağ.

Non-controlling interest

Non-controlling interest was $17.5 million - an increase from 2009 because of the addition of Jinfeng and White Mountain.

Exploration expense

Exploration expense increased by $11.2 million over 2009 as a result of increasing exploration activities. See Exploration on page 8 for more information.

MANAGEMENT'S DISCUSSION and ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

December 31, 2010

Non-GAAP measures

Throughout this document, we have provided measures prepared in accordance with Canadian GAAP, as well as some non-GAAP performance measures as additional information for investors who also use them to evaluate our performance.

Since there is no standard method for calculating non-GAAP measures, they are not a reliable way to compare us against other companies. Non-GAAP measures should be used with other performance measures prepared in accordance with Canadian GAAP.

We have defined our non-GAAP measures below and reconciled them with the GAAP measures we report.

Cash operating cost

The table below reconciles cash operating cost to operating costs. We calculate costs according to the Gold Institute Standard.


$ thousands (except for gold ounces sold)	2010	2009
Operating costs – excluding Vila Nova (from consolidated statements of operations)	278,194	132,464
Less:
Royalty expense and production taxes	(26,734)	(10,025)
By-product credits and other adjustments¹	(7,306)	(4,172)
Sino Gold inventory fair value adjustment	-	(6,957)
Cash operating cost	244,154	111,310
Gold ounces sold	639,949	360,226
Cash operating cost per ounce	382	309

¹Stock-based compensation expense allocated to operating expense.

Cash flow from operations before changes in non-cash working capital

We use cash flow from operations (or operating activities) before changes in non-cash working capital to supplement our consolidated financial statements, and calculate it by not including the period to period movement of non-cash working capital items, like accounts receivable, advances and deposits, inventory, accounts payable and accrued liabilities.

We believe this provides a better indication of our cash flow from operations and may be meaningful in evaluating our past performance or future prospects. It is not meant to be a substitute for cash flow from operations (or operating activities), which we calculate according to Canadian GAAP.

MANAGEMENT'S DISCUSSION and ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

December 31, 2010

Financial condition

Operating activities before changes in non-cash working capital generated $356.5 million in cash this year, compared to $147.0 million in 2009.

Capital expenditures

We invested $226.3 million in capital expenditures, mine development, mining licences and other assets this year.

Mine development expenditures totalled $91.9 million:

$69.0 million at Efemçukuru

$10.9 million at Eastern Dragon

$9.6 million at Tocantinzinho

$2.4 million at Perama Hill.

Spending at our producing mines totalled $103.5 million:

$54.9 million at Kişladağ, mostly related to the Phase III expansion

$15.1 million at Jinfeng, mostly related to tailings dam construction and underground mine development

$16.4 million at White Mountain, mainly related to underground mine development exclude Xiaoshiren

$17.1 million at Tanjianshan, mainly related to processing plant upgrades.

We also spent $16.0 million on Eastern Dragon joint venture buy-in payments, $10.4 million on land acquisition costs in Turkey, and $1.5 million to acquire the Xiaoshiren Central exploration licence in China. The remaining $3.04 million related to fixed assets for our corporate offices in Canada and China.

Capital resources


$ thousands	2010	2009
Cash and cash equivalents	314.3	265.4
Working capital	310.9	266.9
Restricted collateralized accounts	52.4	50.0
Debt	166.7	191.0

Chinese regulations governing cash movements within and injected into the country require that our existing debt only be paid from cash flows generated from our Chinese operations that are party to the loan.

Management believes that the working capital at December 31, 2010, together with future cash flows from operations, is sufficient to support our planned and foreseeable commitments.

MANAGEMENT'S DISCUSSION and ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

December 31, 2010

Contractual obligations

as at December 31, 2010


$ thousands	2011 $	2012 $	2013 $	2014 $	2015 and later $	Total $
Debt	98,523	31,120	26,347	12,079	-	168,069
Capital leases	63	51	51	32	6	203
Operating leases	2,921	3,208	2,639	673	1	9,442
Purchase obligations	114,487	23,853	1,467	1,501	-	141,308
Totals	215,994	58,232	30,504	14,285	7	319,022

The table does not include interest on debt.

Debt

Eastern Dragon

Standby line of credit

In 2008, Eastern Dragon entered into a RMB 320.0 million ($48.3 million) standby letter of credit with China Construction Bank.

The interest rate was 5.4%, and the loan was collateralized by an irrevocable letter of credit drawn on China Construction Bank, which was collateralized by Sino Gold funds held by Bank of China Sydney Branch as restricted cash.

Eastern Dragon repaid the loan on February 5, 2010 and Sino Gold's restricted cash was released.

Project financing loan

In 2009, Eastern Dragon entered into a RMB 450.0 million ($67.9 million) project financing loan with China Merchants Bank. No amounts had been drawn down at December 31, 2010.

The loan has three components:

a long-term loan of RMB 320.0 million ($48.3 million), with a five-year term, to replace the $48.3 million standby letter of credit with China Construction Bank

a fixed asset loan of RMB 100.0 million ($15.1 million) with a four-year term

a working capital loan of RMB 30.0 million ($4.5 million) with a one-year term

Interest is floating at the prevailing lending rate stipulated by the People's Bank of China for similar loans with a 10% discount, adjusted quarterly. The applicable interest rates as at December 31, 2010 are 5.60% for the long term loan and 5.23% for the fixed asset loan after discount.

the project receives approval from the Heilongjiang Provincial Development and Reform Commission

Sino Gold opens an offshore banking business bank account with CMB and deposit $40.0 million

The total of the amount deposited in the offshore account, Eastern Dragon registered capital and shareholder loan is at least $84.7 million (this threshold had been reached as at December 31, 2009)

In addition, before the drawdown on the fixed asset loan, Eastern Dragon should obtain the gold operation permit.

The working capital loan can be drawn down once the following conditions are satisfied:

the project obtains the mining license

the project has been developed and is in production

the gold operation permit has been granted

the safety production permit and environmental protection permit have been granted.

MANAGEMENT'S DISCUSSION and ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

December 31, 2010

The project-financing loan requires Eastern Dragon to maintain a liability to asset ratio of 70% or lower, not including shareholder loan. Its total banking debt cannot exceed RMB 550.0 million ($83.0 million).

The project-financing loan is subject to an annual management fee of 10% of the annual interest on the drawn down amount.

No amounts were drawn down under the project-financing loan as at December 31, 2010.

Standby letter of credit

In January 2010, Eastern Dragon entered into a RMB 320.0 million ($48.3 million) Standby letter of credit loan with CMB. This loan has a one year term and is subject to a floating interest rate adjusted quarterly at 90% of the prevailing lending rate stipulated by the People's Bank of China for working capital loans. It is collateralized by way of a $52.2 million irrevocable letter of credit issued by Sino Gold to CMB.

On February 5, 2010, Eastern Dragon made a drawdown on this loan which was used to repay the LC loan with CCB.

In February 2011, this loan was extended for another year.

This loan is to be repaid when Eastern Dragon obtains the required project approval that will allow it to complete the first drawdown on the project-financing loan. The loan is subject to an annual management fee of 10% of the interest accrued on the drawn down and outstanding amount. This management fee is paid in advance quarterly. The interest rate on this loan as at December 31, 2010 is 5.23%.

HSBC revolving loan facility

In May 2010, Eastern Dragon entered into a RMB 80.0 million ($12.1 million) revolving facility with HSBC Bank (China). The facility can be drawn down in minimum tranches of RMB 1.0 million ($0.2 million) or its multiples. Each drawdown bears interest fixed at the prevailing lending rate stipulated by the People's Bank of China on the date of drawdown. The facility has a term of up to one year.

In December 2010, the facility was reviewed by the bank and extended to November 30, 2011.

The facility is secured by a letter of Guarantee issued by Eldorado. Eldorado must maintain at all times a security coverage ratio of 110% of the amounts drawn down. As at December 31, 2010, the security coverage is $6.1 million.

As at December 31, 2010, RMB 37.0 million ($5.6 million) had been drawn under this facility.

This facility is to be repaid when Eastern Dragon obtains the required project approval that will allow it to complete the second drawdown on the project-financing loan.

After December 31, 2010, Eastern Dragon drew RMB 11.6 million ($1.8 million) under the facility and the security coverage was increased to $8.1 million.

Entrusted loan

Eastern Dragon, HSBC Bank (China) and QDML entered into an RMB 12.0 million ($1.8 million) entrusted loan agreement in November 2010.

Under the terms of the loan, QDML uses its own funds to entrust HSBC Bank (China) to provide a loan facility to Eastern Dragon in QDML's name.

The loan can be drawn down in tranches. Each drawdown has a term of three months, bears interest fixed at the prevailing lending rate stipulated by the People's Bank of China on the date of drawdown, and can be rolled forward at QDML's discretion. As at December 31, 2010, RMB 7.9 million ($1.2 million) has been drawn.

MANAGEMENT'S DISCUSSION and ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

December 31, 2010

The loan was increased to RMB 50.0 million ($7.6 million) subsequent to year end, and an additional RMB 21.1 million ($3.2 million) drawn down. It is recorded on a net settlement basis.

Jinfeng

Jinfeng construction loan

In 2009, Jinfeng entered into a RMB 680.0 million ($102.7 million) construction loan facility with China Construction Bank (CCB).

The construction loan has a term of 6 years commencing from February 27, 2009 and is subject to a floating interest rate adjusted annually at the prevailing lending rate stipulated by the People's Bank of China for similar loans with a 5% discount. The applicable interest rate as at December 31, 2010 is 6.08% (after 5% discount). The construction loan is secured against the following:

Sino Gold corporate guarantee

pledge of 82% Jinfeng shares held by Sino Gold

mortgage on all fixed assets of Jinfeng with a value above $0.1 million

mortgage on Jinfeng mining license and exploration license

mortgage on land use right.

While the construction loan is outstanding, Jinfeng is required to obtain written consent from CCB before transferring funds to Sino Gold or any of its subsidiaries, and must have a leverage ratio of 64% or lower in order to distribute dividends to its shareholders.

Principal repayment of this loan is as follows:

in 2011, 2012 and 2013 – quarterly payments of RMB 35.0 million ($5.3 million)

in 2014 – quarterly payments of RMB 32.5 million ($4.9 million)

Any pre-payments are applied to reduce future payments starting from the final payment. In 2010, Jinfeng pre-paid RMB 180.0 million ($27.2 million) on the outstanding balance of this loan, leaving a balance owing of RMB 500.0 million ($75.5 million) at December 31, 2010.

$1.7 million in deferred financing costs have been included as an offset in the balance of the loan in the financial statements, and are being amortized using the effective interest method for net deferred financing costs at December 31, 2010, $1.4 million.

Jinfeng working capital loan

In 2009, Jinfeng entered into a RMB 85.0 million ($12.8 million) working capital loan with CCB.

In 2010, Jinfeng pre-paid the full amount on this loan.

MANAGEMENT'S DISCUSSION and ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

December 31, 2010

White Mountain

Project loan

In 2008, White Mountain entered into a project loan with CCB. The project loan has two components:

a fixed asset loan of RMB 190.1 million ($28.7 million) with final payment due on September 2013

a working capital loan of RMB 40.9 million ($6.2 million) due in November 2010.

The interest rate on the project loan is the prevailing lending rate stipulated by the People's Bank of China, adjusted annually for the fixed asset loan and twice a year for the working capital loan. The applicable interest rates as at December 31, 2010 are 5.76% for the fixed asset loan and 5.81% for the working capital loan.

The project loan is secured by a Sino Gold corporate guarantee and White Mountain's fixed assets with a value above $0.1 million.

Principal repayment of the fixed asset loan is as follows:

September 2010 – RMB 24.8 million ($3.8 million) (paid)

September 2011 – RMB 64.5 million ($9.7 million)

September 2012 – RMB 66.1 million ($10.0 million)

September 2013 – RMB 34.7 million ($5.2 million).

In 2010, White Mountain made the first payment on the fixed asset loan and extended the working capital loan for one additional year to November 15, 2011.

Working capital loan

In 2010, White Mountain entered into a RMB 50.0 million ($7.5 million) working capital loan with China Merchants Bank (CMB).

The working capital loan has a term of one year and is due on September 1, 2011. The loan is subject to a floating interest rate adjusted annually to the prevailing lending rate stipulated by the People's Bank of China for similar loans. The applicable interest rate as at December 31, 2010 is 5.31%.

This loan is secured by a letter of guarantee issued by Eldorado.

In January 2011, White Mountain pre-paid the full amount of this loan.

Defined benefit plans

We have a defined benefit pension program with two components: a registered pension plan and a non-registered supplementary pension plan (SERP). These plans, which are only available to certain qualifying employees, provide benefits based on an employee's years of service and final average earnings at retirement. Our annual contributions are actuarially determined, and are at or above the minimum requirements prescribed by legislation. We are not required to pre-fund any benefit obligation under the SERP.

Total cash payments for pension benefits for 2010, including cash contributed to the pension plan and the SERP, were $0.2 million. Based on minimum funding requirements, we may not need to make a contribution to the pension plan or to the SERP in 2011.

MANAGEMENT'S DISCUSSION and ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

December 31, 2010

Equity

This year we received net proceeds of $35.9 million for issuing 5,056,216 common shares related to stock options being exercised.

We may make minor accounting adjustments to these figures before they are presented in future consolidated financial statements.

Common shares outstanding

- as of March 17, 2011

- as of December 31, 2010

548,438,799

548,187,192

Share purchase options

- as of March 17, 2011

(Weighted average exercise price per share: $11.40 Cdn)

11,761,753

Managing risk

This section describes the types of risks we are exposed to and our objectives and policies for managing them (please read the Company's Annual Information Form for additional information).

We manage risk using our risk management review process. Management prepares a risk assessment report every quarter outlining our operational and financial risks. The Board reviews the report to evaluate and assess the risks we are exposed to in various markets, and discusses the steps management takes to protect the company against them.

Financial risk

Liquidity risk

Liquidity risk is the risk that we cannot meet our financial obligations. We use a rigorous planning, budgeting and forecasting process to help determine the funds we will need to support our ongoing operations and our expansion plans. We believe that expected cash flows from operations and current cash and cash equivalents will provide enough cash to meet our financial obligations in 2011 and beyond.

Credit risk

Credit risk is the risk that the counterparty to a financial instrument will not meet its obligations. To mitigate exposure to credit risk on financial assets, we have policies that require counterparties demonstrate minimum creditworthiness, and ensure liquidity of available funds. We also monitor our concentrations of credit risk and closely monitor our financial assets.

We sell our products exclusively to large international financial institutions and other organizations with strong credit ratings, and payment is normally in advance or within one week of receipt of shipment. Customer default to date has been negligible, so we consider the credit risk associated with trade receivables at December 31, 2010 to be minimal.

We invest our cash and cash equivalents in major financial institutions and in government issuances, according to our short-term investment policy. The credit risk associated with these investments is considered to be low, but many financial institutions have gone into bankruptcy or been rescued by government authorities over the past few years. That makes us subject to the risk of loss of the deposits we have with financial institutions. As at December 31, 2010, approximately 44% of our cash and cash equivalents, including restricted cash, were with one financial institution.

MANAGEMENT'S DISCUSSION and ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

December 31, 2010

Currency risk

We sell gold in US dollars, but our costs are mainly in US dollars, Canadian dollars, Turkish lira, Brazilian real and Chinese renminbi. An increase in the value of any of these currencies against the US dollar can increase our production costs and capital expenditures, which can affect future cash flows.

The table below shows our assets and liabilities denominated in currencies other than the US dollar at December 31, 2010. We recognized a loss of $14.8 million on foreign exchange this year, compared to gain of $3.0 million in 2009.


$ thousands	Canadian dollar	Australian dollar	Euro	Turkish lira	Chinese renminbi	Brazilian real
Cash and cash equivalents	24,587	134	102	1,386	536,644	1,269
Marketable securities	7,984	-	-	-	-	-
Accounts receivable and other	2,078	-	516	16,837	137,174	10,898
Future income tax receivable	-	-	-	659	1,192	-
Accounts payable and accrued liabilities	(13,682)	(13)	(124)	(36,940)	(525,951)	(6,548)
Future income tax liabilities	-	-	-	-	(2,211,552)	-
Debt	-	-	(26,334)	(16,851)	(1,103,790)	(85,188)
Net balance	20,967	121	(25,840)	(34,909)	(3,207,961)	(79,569)
Equivalent in US dollars	21,081	125	(34,601)	(22,581)	(484,373)	(47,755)

Accounts receivable and other current and long-term assets relate to goods and services taxes, income taxes, value-added taxes and insurance receivables.

We recorded $424.2 million in future income tax liabilities resulting from our acquisitions, which were valued in local currencies. We revalue these liabilities at the end of each reporting period at the exchange rate at that time, and record the non-cash gain or loss in that period's net earnings.

Interest rate risk

Interest rates determine how much interest we pay on our debt, and how much we earn on our cash and cash equivalents, which can affect future cash flows.

Much of our debt has a floating interest rate. The average interest rate on our debt at December 31, 2010 was 5.94%, compared to 5.45% at the end of 2009. We earned an average of approximately 0.51% in interest on our cash and cash equivalents this year, compared to 0.83% in 2009.

We don't actively manage our exposure to changes in interest rates.

Price risk

Our profitability depends on the price of gold, which is affected by many things, including the sale or purchase of gold by central banks and financial institutions, interest rates, exchange rates, inflation or deflation, fluctuations in the value of the US dollar and foreign currencies, global and regional supply and demand, and the political and economic conditions of the world's major gold-producing countries. We don't hedge against changes in the price of gold.

MANAGEMENT'S DISCUSSION and ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

December 31, 2010

The cost of production, development and exploration varies depending on the market prices of certain mining consumables, including diesel fuel and electricity. We are evaluating a hedge against changes in the price of diesel fuel.

Electricity is regionally priced in Turkey and China and semi-regulated by the federal governments of those countries, which reduces the risk of price fluctuations. We don't hedge against changes in the price of electricity.

Sensitivity analysis for key variables


	A change of	Would change our after-tax net earnings by
Currency values against the US dollar	1%	$5.6 million
Price of gold (based on the expectations and assumptions we used in our 2010 outlook)	10%	$66.8 million
Interest rate on debt	10%	$0.5 million
Interest earned on cash and cash equivalents	10%	$0.3 million
Price of diesel fuel	10%	$1.8 million

Other risks and uncertainties

Exploration and development

The cost and results of our exploration and development programs affect our profitability and value. The life of a mine is fixed based on its mineral reserves, so we actively seek to replace and expand our reserves, mainly through exploration, acquisition and the development of our existing operations. Exploring for minerals involves many risks and may not lead to new economically viable mining operations or yield new reserves to replace and expand current reserves. Our reserve estimates are based on certain assumptions and affected by the inherent limitations of the estimation process.

Acquiring title to mineral properties is a detailed and time-consuming process. We take steps, in accordance with industry standards, to verify and secure legal title to mineral properties that we have, or are seeking, an interest in. Although we take every precaution to ensure that legal title to our properties is properly recorded in our name, there can be no assurance we will ultimately secure title on every property. Legal title to our properties depends on the laws in the countries we operate in, and their appropriate and consistent application.

Operations

The business of gold mining involves many operational risks and hazards. We work to reduce the risks associated with our projects by setting high operational standards, hiring and training appropriately skilled personnel, and making improvements to our operations. We maintain adequate insurance to cover normal business risk. We rely on a number of key employees. Our success depends on attracting and retaining qualified personnel in a competitive labour environment.

Environment

Our activities are subject to extensive federal, provincial, state and local laws and regulations that govern environmental protection and employee health and safety. We are also subject to various reclamation-related conditions imposed under federal, state or provincial air, water quality and mine reclamation rules and permits. While we have budgeted for future capital and operating expenditures to maintain compliance with environmental laws and permits, any future changes to these laws could adversely affect our financial condition, liquidity or results of operations.

MANAGEMENT'S DISCUSSION and ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

December 31, 2010

Permits

We are required to obtain and maintain a wide range of government permits for our projects and operations. There is no assurance that we will be able to get them on a timely basis, or at all.

Laws and regulations

Our mining operations and exploration activities are subject to extensive federal, provincial, state and local laws and regulations that govern prospecting, development, production, exports, taxes, labour standards, occupational health and safety, mine safety and other matters. These laws and regulations are subject to change, which may restrict our ability to operate. We draw on the expertise and commitment of our management team, advisors, employees and contractors to ensure compliance with current laws, and we foster a climate of open communication and co-operation with regulatory bodies.

Litigation

All industries, including mining, are subject to legal claims that can be with and without merit. Defence and settlement costs can be substantial, even for claims that have no merit. We describe the legal status of our worldwide projects and operations in our annual information form.

The litigation process is inherently uncertain, so there can be no assurance that the resolution of a legal proceeding will not have a material adverse effect on our future cash flow, results of operations or financial condition.

Political risk

We operate in four countries outside of North America: Turkey, China, Brazil and Greece. Our operations in these countries may be subject to political, economic and other risks that may affect our future operations and financial position.

Other information

Critical accounting policies and estimates

We are required to make estimates that affect the amount of assets, liabilities, contingent liabilities revenue and expenses we report. We have identified the following critical accounting policies and estimates. You can find all of our significant account policies in note 2 of our 2010 consolidated financial statements.

Inventories

We value finished goods, work-in-process, heap leach ore and stockpiled ore at the average production cost or its net realizable value – whichever is lower.

We consider ore stacked on our leach pads and in process at our mines as work-in-process inventory and record their value in earnings, and include them in the cost of sales on based on ounces of gold recovered, using the following assumptions in our estimates:

the amount of gold we estimate is in the ore stacked on the leach pads

the amount of gold we expect to recover from the stacks

the amount of gold in the mill circuits

the gold price we expect to realize when the gold is recovered.

If our estimates or assumptions are inaccurate, we could be required to write down the value we have recorded on our work-in-process inventories, which would reduce our earnings and working capital. At December 31, 2010, the average cost of inventory was significantly below its net realizable value.

Reserves and resources

Our estimates for Kişladağ, Efemçukuru, Tanjianshan, Jinfeng, White Mountain, Perama, Tocantinzinho, Eastern Dragon, and Vila Nova are based on the definitions adopted by the Canadian Institute of Mining, Metallurgy and Petroleum, and in compliance with Canadian National Instrument 43-101 – Standards of Disclosure for Mineral Projects (NI 43-101), developed by the Canadian Securities Administrators.

MANAGEMENT'S DISCUSSION and ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

December 31, 2010

You will not be able to compare the mineral reserve and resources information in this report with similar information from U.S. companies. The United States Securities & Exchange Commission (SEC) defines a mineral reserve as the part of a mineral deposit that can be economically and legally extracted or produced. It does not recognize the terms measured, indicated and inferred mineral resources

(mining terms under NI 43-101), and does not accept them in reports and registration statements. You should not assume that:

the mineral reserves defined in this report qualify as reserves under SEC standards

the measured and indicated mineral resources in this report will ever be converted to reserves

the inferred mineral resources in this report are economically mineable, or will ever be upgraded to a higher category.

Value beyond proven and probable reserves

On acquisition of a mineral property, we prepare an estimate of the fair value of the exploration potential of that property and record this amount as an asset, called value beyond proven and probable (VBPP), as at the date of acquisition. As part of our annual business cycle, we prepare estimates of proven and probable reserves for each mineral property. The change in reserves, net of production, is used to determine the amount to be converted from VBPP to proven and probable reserves subject to amortization.

Mining interests

We depreciated most of our mining properties, plant and equipment using the unit-of-production method, where the value of property is reduced as reserves are depleted. We base this on mining rates and our estimates of reserves. If these change, we could be required to write down the recorded value of our mining properties, plant and equipment, or to increase the amount of future depreciation, depletion and amortization expense, both of which would reduce our earnings and net assets.

At the end of every year, we assess whether there has been an impairment of our capitalized mining properties, plant and equipment. If there were an impairment, we would be required to write down the recorded value of our mining properties, plant and equipment, which would reduce our earnings and net assets.

For producing properties, we base our assessment on the future net cash flows we expect the property will generate. There will be an impairment if metal prices are lower, production costs have increased, or metal recoveries are lower than previously estimated.

For non-producing properties, we base our assessment on whether there are factors that might indicate the need for a write-down. There will be an impairment if we believe current economics or permitting issues will prevent us from recovering the costs we have deferred for the property.

At December 31, 2010, based on an average projected gold price for 2011 of $1,400 per ounce decreasing to a long-term price of $1,050 per ounce by 2014, the estimated undiscounted net cash flow from our mining properties, plant and equipment exceeded their carrying values.

Goodwill and impairment testing

We account for business combinations using the purchase method of accounting. We record the fair market value of assets acquired and liabilities assumed as of the date of acquisition, and record any excess of the purchase price over fair value as goodwill. The assumptions underlying fair value estimates are subject to significant risks and uncertainties.

We review and evaluate the carrying amount of goodwill every year by comparing the fair value of our reporting units to their carrying amounts. If a reporting unit's carrying value exceeds its fair value, we compare its carrying value to the implied fair value of its goodwill, and charge the amount the carrying value exceeds fair value to operations.

MANAGEMENT'S DISCUSSION and ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

December 31, 2010

At December 31, 2010, our consolidated balance sheet included $365.9 million in goodwill for Sino Gold ($363.7 million) and Tanjianshan ($2.2 million). We used a discount rate of 9% to calculate the net present value of cash flows from Tanjianshan to estimate its implied fair value. We used a discount rate of between 7% and 9% to calculate the net present value of cash flows from Sino Gold mines in order to estimate their fair values. There was no impairment of goodwill for either unit.

Operating costs

We calculate cash operating costs according to the Gold Institute Standard. Future operating costs include estimates of foreign currency exchange and inflation trends.

Stock-based compensation

We use the Black-Scholes Model to calculate the fair value of stock options that have been given to employees, officers and directors. This model uses assumptions of share price, volatility and expected life of options.

Asset retirement obligations

We estimate the mine closure date, the credit-adjusted risk-free rate, the inflation rate and the timing reclamation costs to determine the carrying value of an asset retirement obligation.

Income taxes

We record income taxes using income tax rates we expect to apply in the years we estimate the various temporary differences will be recovered or settled. Where the tax laws and regulations are unclear or subject to varying interpretations, these estimates could change, and materially affect the amount of income tax liabilities recorded at the balance sheet date.

Financial instruments

We report investments classified as held for trading or available for sale, and derivative financial instruments, at fair value, and include unrealized gains or losses in earnings. We use the published price in an active market when it's available, or calculate fair value using inputs observed from the market.

Pension plans

We use various actuarial assumptions to estimate our obligations and expenses, including a long-term estimate of the expected rate of return on plan assets, the discount rate, the rate of salary escalation and the average remaining service period of active employees expected to receive benefits.


Key assumptions – pension plans	December 31, 2010		December 31, 2009
Key assumptions – pension plans	Pension plan	SERP	Pension plan	SERP
Expected long term-rate of return on plan assets	6.50%	6.50%	6.50%	6.50%
Discount rate beginning of year	6.00%	6.00%	7.50%	7.50%
Discount rate end of year	5.50%	5.50%	6.00%	6.00%
Rate of salary escalation	4.50%	4.50%	4.50%	4.50%
Average remaining service period of active employees expected to receive benefits	5 years	5 years	5 years	5 years

MANAGEMENT'S DISCUSSION and ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

December 31, 2010

Changes in accounting policies

We adopted an accounting policy for long-term investments in the second quarter of this year. We use the equity method to account for Investments in significantly influenced companies, where we adjust the original cost of the shares for our share of post-acquisition earnings or losses, less dividends.

New accounting developments

Business combinations (Section 1582)

In January 2009, the Canadian Institute for Chartered Accountants (CICA) issued Section 1582, Business combinations, which requires that:

all assets and liabilities of an acquired business be recorded at fair value at acquisition

obligations for contingent consideration and contingencies be recorded at fair value at the acquisition date

acquisition-related costs be expensed as incurred

restructuring charges be expensed in the periods after the acquisition date.

The section applies prospectively to business combinations with an acquisition date on or after the beginning of the first annual reporting period on or after January 1, 2011. We have not yet adopted this standard.

Consolidations (Section 1601) and non-controlling interest (Section 1602)

In January 2009, the CICA issued Section 1601, Consolidations, and Section 1602, Non-Controlling Interests.

Section 1601 establishes standards for preparing consolidated financial statements. Section 1602 establishes standards for accounting for a non-controlling interest in a subsidiary in consolidated financial statements subsequent to a business combination.

These standards apply to interim and annual consolidated financial statements relating to fiscal years beginning on or after January 1, 2011. We have not yet adopted these standards.

International financial reporting standards (IFRS)

Canadian GAAP for publicly listed companies will be replaced with IFRS for fiscal years beginning on or after January 1, 2011.

We will begin reporting our financial statements in accordance with IFRS in the first quarter of 2011, and restate comparative information. Converting to IFRS will affect our accounting policies, information technology and data systems, internal controls over financial reporting, and disclosure controls and procedures. The transition may also affect business activities, such as foreign currency and certain contractual arrangements, debt covenants, capital requirements and compensation arrangements.

We have started the transition process from current Canadian GAAP to IFRS. We have established a project team that is led by finance management and have designated the appropriate resources to the project to develop an effective plan. We will continue to assess our resource and training requirements as the project progresses. The team makes regular progress reports to the Audit Committee of the Board of Directors on the status of our transition to IFRS.

MANAGEMENT'S DISCUSSION and ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

December 31, 2010

Our conversion has four phases:

Phase 1 – Scoping and planning (completed in 2008)

establish a project management team and organizational structure, including oversight of the process develop a project management plan, stakeholder analysis and communication strategy

carry out an initial assessment of the key areas where the IFRS transition may have a significant impact and present significant challenges

Phase 2 – Detailed assessment (substantially completed in the third quarter of 2010)

conduct in-depth technical analysis to understand potential impacts, make decisions on accounting policy choices and draft accounting policies

identify additional resource and training requirements and processes for preparing financial statements, establishing IT system requirements and preparing detailed transition plans

Phase 3 – Implementation (in progress)

identify and carry out the implementation requirements for management's accounting choices

develop sample financial statements, implement business and internal control requirements, calculate the opening balance sheet at January 1, 2010 and complete other transitional reconciliations and disclosure requirements.

This phase will be completed with our annual financial reporting under IFRS in 2011.

Phase 4 – Post-implementation

continuous monitoring of changes in IFRS throughout the implementation process

assessing their impacts on the company and our reporting

Progress update

We continued implementing Phase 3 of our plan in the fourth quarter of 2010, and made progress in the following areas:

identifying and amending internal controls over financial reporting and business processes affected by IFRS

determining and selecting accounting policies

development of Eldorado's IFRS Accounting Policy Manual

preparing draft annual mock-up financial statements and notes under IFRS

As we complete the implementation phase, and as changes to IFRS standards may continue to occur, the differences and impacts described below may be subject to change.

We have evaluated the options available under IFRS1, and expect to apply the following optional exemptions:

to apply IFRS 3, Business Combinations, prospectively from January 1, 2010 (the transition date)

to apply IFRS 2, Share-Based Payments, only to share-based payments granted after November 7, 2002 that had not vested as of the transition date

to apply the borrowing cost exemption and will apply IAS 23, Borrowing Costs, prospectively from the transition date

to elect to recognize all cumulative actuarial gains and losses for all defined benefit plans that exist at the transition date in opening retained earnings

to elect to apply IFRIC 1, Changes in Existing Decommissioning, Restoration and Similar Liabilities, for changes in these liabilities prospectively from the transition date.

These may have a significant impact on our results.

MANAGEMENT'S DISCUSSION and ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

December 31, 2010

Significant accounting differences

We have identified the following areas where the accounting differences between Canadian GAAP and existing IFRS may have an impact on our consolidated financial statements. This is not, however, a complete list of changes that will result from the transition to IFRS. It is intended to highlight the areas we believe to be most significant.

The International Accounting Standards Board (IASB) has significant ongoing projects that are expected to result in new and/or revised accounting standards. We can measure the final impact of IFRS on our consolidated financial statements only when we know all of the standards that will apply at the conversion date. The differences we describe below are based on existing Canadian GAAP and IFRS at December 31, 2010.

Impairment of assets

Canadian GAAP generally uses a two-step approach to impairment testing:

first, compare asset carrying values with undiscounted future cash flows to determine whether there is an impairment

if so, measure it by comparing asset carrying values with fair values.

International Accounting Standard (IAS) 36, Impairment of Assets, uses a one-step approach for both testing for and measuring impairment:

compare asset carrying values directly with the higher of fair value less costs to sell and value in use (which uses discounted future cash flows).

This can result in more write-downs if the carrying values of assets were previously supported under Canadian GAAP on an undiscounted cash flow basis but could not be supported on a discounted cash flow basis.

IAS 36 also requires any previous impairment losses to be reversed if circumstances change and the impairments are reduced. Canadian GAAP does not allow impairment losses to be reserved.

Provision for reclamation and rehabilitation

The key areas of difference between IFRS and Canadian GAAP include:

the discount rate used

the re-measurement requirements

the constructive obligation concept.

Under IFRS, a liability must be recognized at the time the entity becomes legally or constructively obliged to rehabilitate disturbance resulting from mining activities. Under Canadian GAAP, a liability is only recognized when the entity is legally bound.

Discount rates should reflect the risks specific to the decommissioning provision. Unlike IFRS, discount rates for asset retirement obligations under Canadian GAAP are based on the entity's credit-adjusted risk-free rate. IFRS requires re-measurement of the liability at each reporting date, whereas Canadian GAAP requires re-measurement of the liability in the event of changes in the amount or timing of cash flows required to settle the obligation.

The use of the current discount rate for all changes in estimates combined with the requirement to re-measure the liability at each reporting date under IFRS, will significantly simplify the process required to measure any restoration liabilities because there will no longer be a need to record separate layers for the original liability and each subsequent upward revision in estimated cash flows. Under IFRS, accretion must be presented as an interest expense and included in Interest and financing costs on the statement of earnings. There is no prescribed presentation for asset retirement obligation accretion under Canadian GAAP.

MANAGEMENT'S DISCUSSION and ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

December 31, 2010

Business combinations

There are certain differences between IFRS and Canadian GAAP when accounting for business combinations.

Canadian GAAP requires share-based consideration to be valued based on the announcement date share price. Under IFRS, share-based consideration must be valued based on its fair value at the acquisition date.

Under IFRS, restructuring costs and other transactions costs are expensed on acquisition. They are included in the purchase consideration under Canadian GAAP.

Under Canadian GAAP, after a business combination, we record non-controlling interest at the historical carrying value of the assets and liabilities of the acquired entity. Under IFRS, we record non-controlling interest based on its share of the fair value of the assets and liabilities of the acquired entity.

Income taxes

Existing IFRS requires the recognition of deferred taxes in situations not required under Canadian GAAP. Specifically, a deferred tax liability (asset) is recognized for exchange gains and losses relating to foreign non-monetary assets and liabilities that are re-measured into the functional currency using historical exchange rates.

Similar timing differences are also recognized for the difference in tax bases between jurisdictions as a result of intra-group transfer of assets. Future tax liabilities for temporary tax differences on asset acquisitions are not recognized.

Property, plant and equipment

Separate accounting for components of property, plant and equipment is more rigorously applied and broader under IFRS. Costs are allocated to significant parts of an asset if the useful lives differ, and each part is then separately depreciated.

MANAGEMENT'S DISCUSSION and ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

December 31, 2010

Opening balance sheet as at January 1, 2010

This draft opening balance sheet as at January 1, 2010 reflects our estimates of the most significant differences between Canadian GAAP and IFRS earnings, and our first-time adoption elections. It is preliminary and unaudited and may be adjusted for new IFRS pronouncements or other changes identified after the date of this MD&A.


January 1, 2010 $ thousands	(see note)	Canadian GAAP	Effect of transition to IFRS	IFRS
Assets
Cash and cash equivalents		265,369	-	265,369
Restricted cash		50,000	-	50,000
Marketable securities		13,951	-	13,951
Accounts receivable and other		32,041	-	32,041
Inventories		129,197	-	129,197
Total current assets		490,558		490,558
Inventories		31,534	-	31,534
Restricted assets and other		8,265	-	8,265
Mining interests	(ai) (c)	2,580,816	(52,934)	2,527,882
Goodwill		324,935	-	324,935
Total non-current assets		2,945,550	(52,934)	2,892,616
Total assets		3,436,108	(52,934)	3,383,174
Liabilities
Accounts payables and accrued liabilities		154,124		154,124
Debt – current		56,499	-	56,499
Future income taxes	(aii)	4,264	(4,264)	-
Total current liabilities		214,887	(4,264)	210,623
Debt – long term		134,533	-	134,533
Pension fund obligation	(b)	3,126	4,870	7,996
Asset retirement obligations	(c)	26,566	429	26,995
Future income taxes	(a)	390,242	(34,967)	355,275
Total non-current liabilities		554,467	(29,668)	524,799
Total liabilities		769,354	(33,932)	735,422
Equity
Share capital		2,671,634	-	2,671,634
Contributed surplus		17,865	-	17,865
Accumulated other comprehensive income		2,227	-	2,227
Deficit		(51,116)	(19,002)	(70,118)
Total equity attributable to equity holders of the Company		2,640,610	(19,002)	2,621,608
Non-controlling interest	(d)	26,144	-	26,144
Total equity		2,666,754	(19,002)	2,647,752
Total liabilities and equity		3,436,108	(52,934)	3,383,174

MANAGEMENT'S DISCUSSION and ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

December 31, 2010

Explanatory notes – all amounts in $1,000's

Under IFRS, we no longer recognize deferred income taxes on an asset acquisition. Reversing the deferred income tax liability recognized on our acquisition of Frontier results in the following adjustments at January 1, 2010: a $51,440 decrease in mineral interest, a $37,582 decrease in deferred income tax liabilities and a $13,858 increase in deficit.

ii)

Under IFRS, we calculate deferred income tax in the functional currency by translating the asset's tax basis using historical rates. Under Canadian GAAP, we calculated deferred income tax in the local currency, and then translated it into the functional currency at the period end rate. Adopting IFRS results in the following adjustments at January 1, 2010: an $1,864 decrease in mineral interest, a $4,264 decrease in current deferred income tax liability, a $2,615 increase deferred income tax liability and a $215 increase in deficit.

Under IFRS, we recognize actuarial gains and losses arising from the re-measurement of employee future benefit obligations in other comprehensive income as they arise. Under Canadian GAAP, we applied the corridor method of accounting for these gains and losses, and recognized them only if they exceed specified thresholds. Adopting IFRS increases the carrying value of the net liability for employee future benefit obligations and deficit by $2,095 to recognize cumulative net actuarial gains and losses as at January 1, 2010. We did not recognize any actuarial gains and losses under Canadian GAAP using the corridor approach.

ii)

Under IFRS, we expense the cost of past service benefits awarded to employees under postemployment benefit plans over the periods in which the benefits vest, which usually corresponds to the period in which the benefits are granted. Under Canadian GAAP, we expensed past service costs over the weighted average service life of active employees remaining in the plan. Adopting IFRS increases account payables, accrued liabilities and deficit for employee future benefits in the statement of financial position by $2,775 at January 1, 2010.

Under IFRS, a change in the current market-based discount rate changes the measurement of our provision for asset retirement obligations. Under Canadian GAAP, a change in the discount rate alone did not result in a re-measurement.

We have performed an analysis of the discount rate used to calculate the present value of our asset retirement obligations at January 1, 2010, re-measured it using the discount rate in effect at that date, and recorded an adjustment to the corresponding asset. This adjustment increases mining interest by $370, increased asset retirement obligations by $429 and increased deficit by $59 at January 1, 2010.

Under IFRS, we include a subsidiary's non-controlling interest in the joint venture's net assets in equity, and allocate its share of the joint venture's comprehensive income directly to equity. Under Canadian GAAP, we presented the subsidiary's non-controlling interest as a separate item in its statement of financial position, between liabilities and equity, and deducted its non-controlling interest in the joint venture's net income and comprehensive income from its net income and comprehensive income. We reclassified non-controlling interest of $26,144 at January 1, 2010, as determined under Canadian GAAP, to equity.

We have chosen to apply IFRS relating to business combinations prospectively from January 1, 2010, in accordance with IFRS transitional provisions, and have carried forward Canadian GAAP balances relating to business combinations entered into before that date, including goodwill, without adjustment.

MANAGEMENT'S DISCUSSION and ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

December 31, 2010

The following is a summary of adjustments to our retained earnings on transition from

Canadian GAAP to IFRS:


$ thousands	January 1, 2010
Retained earnings as reported under Canadian GAAP	(51,116)
Employee future benefits – actuarial gains and losses (b i)	(2,095)
Employee future benefits – past service costs (b ii)	(2,775)
Deferred income tax (a)	(14,073)
Asset retirement obligation (c)	(59)
	(19,002)
Retained earnings as reported under IFRS	(70,118)

Disclosure controls and procedures

Disclosure controls and procedures are designed to provide reasonable assurance that material information is gathered and reported to senior management, including the CEO and CFO, as appropriate to allow for timely decisions about public disclosure.

Management, including the CEO and CFO, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as at December 31, 2010, as defined in the rules of the U.S. Securities and Exchange Commission and Canadian Securities Administration. Based on this evaluation, they concluded that our disclosure controls and procedures are effective in providing reasonable assurance that the information required to be disclosed in reports we filed or submitted under United States and Canadian securities legislation was recorded, processed, summarized and reported within the time periods specified in those rules.

We acquired Brazauro on July 20, 2010. As permitted by applicable rules of certification, we excluded, solely to the extent it overlaps with internal control, Brazauro's operations from our annual assessment of disclosure controls and procedures for the year ended December 31, 2010.

Internal controls over financial reporting

Management, including the CEO and CFO, is responsible for establishing and maintaining adequate internal control over financial reporting, and used the framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) to evaluate the effectiveness of our controls in 2010. Based on this evaluation, management concluded that our internal control over financial reporting was effective as at December 31, 2010 and provided a reasonable assurance of the reliability of our financial reporting and preparation of the financial statements.

No matter how well it's designed, however, any system of internal control has inherent limitations. Even systems determined to be effective can provide only reasonable assurance of the reliability of financial statement preparation and presentation.

On July 20, 2010, we completed our acquisition of Brazauro. We consider the acquisition of Brazauro non-material to our results of operations, financial position and cash flows from the date of acquisition through December 31, 2010, and believe that the internal controls and procedures at Brazauro have a non-material effect on our internal control over financial reporting. We are in the process of integrating the Brazauro operations and will be expanding our internal control over financial reporting compliance program to include Brazauro over the next year.

MANAGEMENT'S DISCUSSION and ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

December 31, 2010

We excluded Brazauro in our annual assessment of internal control over financial reporting for the year ended December 31, 2010, as permitted by the Sarbanes-Oxley Act and applicable rules relating to business acquisitions. The Brazauro operations represented $160.0 million of total assets and none of our consolidated revenues as at and for the year ended December 31, 2010.

KPMG LLP, an independent registered public accounting firm, has audited management's assessment of the effectiveness of internal control over financial reporting, and has expressed their opinion in their report included with our annual consolidated financial statements in Form 40-F.

Changes in internal control over financial reporting

There have been no changes in our internal control over financial reporting during the year ended December 31, 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, except for the following.

We completed the integration of the Sino Gold operations in 2010, and expanded our internal controls over financial reporting compliance program to include those operations. We also implemented a new ERP system in Vancouver and at our Turkish operations. Management used appropriate procedures to ensure internal controls were in place during and after the implementation.

Forward-looking information and risks

This MD&A includes statements and information about what we expect to happen in the future. When we discuss our strategy, plans and future financial and operating performance, or other things that have not yet happened in this review, we are making statements considered to be forward-looking information or forward-looking statements under Canadian and United States securities laws. We refer to them in this document as forward-looking information.

Key things to understand about the forward-looking information in this document:

•

It typically includes words and phrases about the future, such as: plan, expect, forecast, intend, anticipate, estimate, budget, scheduled, may, could, would, might, will.

•

Although it represents our current views, which we consider to be reasonable, we can give no assurance that the forward-looking information will prove to be accurate.

•

It is based on a number of assumptions, including things like the future price of gold, anticipated costs and spending, and our ability to achieve our goals.

•

It is also subject to the risks associated with our business, including

•

the changing price of gold and currencies,

•

actual and estimated production and mineral reserves and resources,

•

the speculative nature of gold exploration,

•

risks associated with mining operations and development,

•

regulatory and permitting risks,

•

acquisition risks, and

•

other risks that are set out in our annual information form and MD&A.

•

If our assumptions prove to be incorrect or the risks materialize, our actual results and events may vary materially from what we currently expect.

We recommend that you review our annual information form, which include a more detailed discussion of material risks that could cause actual results to differ significantly from our current expectations.

Forward-looking information is designed to help you understand management's current views of our near and longer term prospects, and it may not be appropriate for other purposes. We will not necessarily update this information unless we are required to by securities laws.

EX-99.3 4 mdaamended.htm MANAGEMENT'S DISCUSSION & ANALYSIS FOR DECEMBER 31, 2010 AND 2009 - AMENDED MD Filed by Filing Services Canada Inc. (403) 717-3898

AMENDED

MANAGEMENT'S DISCUSSION and ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A)

for the year ended December 31, 2010

Throughout this MD&A, Eldorado, we, us, our and the company mean Eldorado Gold Corporation.

This year means 2010. All dollar amounts are in United States dollars unless stated otherwise.


What's inside

About Eldorado	1

2010 highlights, corporate developments and outlook
Highlights and outlook	2
Corporate developments	2

Annual updates
Operations	5
Development projects	7
Exploration	8

Annual results
Financial results	11
Results of operations	11
Non-GAAP Measures	14

Financial condition	15

Capital resources	15

Risk	20

Other information
Critical accounting policies and estimates	23
Changes in accounting policies	26
New accounting developments	26
Disclosure controls and procedures	32
Internal controls over financial reporting	32
Forward-looking information and risks	33


Summary of quarterly results	34