Eldorado Gold's (EGO) Corp. Family Rating Cut to 'B1' by Moody's; Outlook Remains Negative

Moody's Investors Service ("Moody's") downgraded Eldorado Gold Corporation's (NYSE: EGO)(Eldorado) Corporate Family rating (CFR) to B1 from Ba3, Probability of Default Rating to B1-PD from Ba3-PD and senior unsecured note ratings to B1 from Ba3. Eldorado's Speculative Grade Liquidity Rating ("SGL") rating was lowered to SGL-3 from SGL-2. The rating outlook is negative.

"The downgrade of Eldorado's rating reflects an expectation of continued cash consumption driven by spending on growth projects", said Jamie Koutsoukis, Moody's Vice-President, Senior Analyst. "We also see increased execution risk with its key projects in Greece where government actions have delayed development" she added.

This rating action resolves a rating placed under review pursuant to Moody's review of the global mining sector, parts of which have undergone a fundamental downward shift. While gold has not experienced the same magnitude of recent price reductions seen in base metals, it is nevertheless a volatile commodity, the price of which is very hard to predict as it is not driven by normal industrial supply and demand factors. Moody's expects this price risk to be tempered with a focus on cost efficiency, prudent project development and low financial risk, in terms of leverage, coverage and robust liquidity.

Downgrades:

..Issuer: Eldorado Gold Corporation

.... Probability of Default Rating, Downgraded to B1-PD from Ba3-PD

.... Corporate Family Rating, Downgraded to B1 from Ba3

....Senior Unsecured Regular Bond/Debenture, Downgraded to B1(LGD4) from Ba3(LGD4)

.... Speculative Grade Liquidity Rating, lowered to SGL-3 from SGL-2.

Outlook Actions:

..Issuer: Eldorado Gold Corporation

....Outlook, Changed To Negative From Rating Under Review

RATINGS RATIONALE

Eldorado's B1 corporate family rating is driven by its modest scale, significant exposure to the volatile price of gold, relatively high geopolitical risks, limited mine diversity, and execution risks related to its development projects, particularly in Greece. The company has experienced delays on its mining projects in Greece largely driven by setbacks in receiving permits and licenses, reflecting the risk of operating in a jurisdiction with higher political risk. Additionally, we expect 2016 leverage to increase to over 3.0x from 2.3x at year-end 2015 as the company increases debt to fund its cash consumption driven by project development spending. Eldorado however, has a below average cost position, large reserves, and growing production after 2016 that should support deleveraging.

Eldorado has adequate liquidity (SGL-3), with a cash balance of $288 million at Dec 2015 to fund estimated free cash flow consumption of about $250 million in 2016. However, unless the company can either renew its unused $375 million revolver which expires in November 2016, or cut its planned development capex to maintain liquidity, liquidity could become inadequate later this year. Eldorado's funded debt matures in 2020.

The negative outlook reflects our expectations that Eldorado will continue to face challenges bringing its projects to production in Greece where the current government has hampered mine development and concerns regarding continued cash consumption associated with these projects. It also incorporates the company's need to address liquidity issues later this year.

Upward rating movement would occur should Eldorado achieves commercial production at some of its key development projects to improve its geographic and mine diversity. This would need to be accompanied by adjusted leverage sustained below 3x and adequate liquidity.

Downward rating movement could occur should liquidity become inadequate or if uncertainty increases over the ability of Eldorado to get its development projects completed and producing cash flow, particularly in Greece. A ratings downgrade would also result should adjusted leverage exceed 4x.

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