5

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3rd Quarter ended September 30, 2004 and 2003 (in thousands of U.S. dollars except per share and per ounce amounts)

1.

Nature of Operations

Eldorado Gold Corporation (“Eldorado”, “the Company”) is engaged in gold mining and related activities, including exploration and development, extraction, processing, and reclamation. Gold, the primary product, is produced in Brazil. Exploration activities are carried on in Brazil, Turkey and China.

The Company has not determined whether all its development properties contain ore reserves that are economically recoverable.  The recoverability of the amount shown for mineral properties and deferred development is dependent upon the existence of economically recoverable reserves, the ability of the Company to obtain the necessary financing, licenses and permits to complete the exploration and development of its properties, and upon future profitable production or proceeds from the disposition of the properties.  The amounts shown as mineral properties and deferred development represent net costs to date, less amounts amortized and/or written off and do not necessarily represent present or future values.

2.

Significant Accounting Policies

Basis of presentation

These interim financial statements do not conform in all respects to the requirements of generally accepted accounting principles for annual financial statements.  These interim financial statements should be read in conjunction with the most recent annual financial statements of the company.

These financial statements follow the same accounting policies and methods of application as the most recent annual financial statements of the Company.

Earnings (loss) per share

Earnings or loss per common share is calculated using the weighted average number of common shares outstanding during each period. Diluted earnings or loss per common share is calculated using the treasury stock method which assumes that stock options are only exercised when the exercise price is below the average market price during the period, and that the Company will use the proceeds to purchase its common shares at their average market price during the period.                                       
 

3.

Share Capital

(a)        Authorized and Issued Share Capital

Eldorado’s authorized share capital consists of an unlimited number of voting and non-voting common shares with no par value.  The details of the common shares issued and outstanding are as follows:

(b)      Share option plan

As at September 30, 2004, the Company has a share option plan as described in the most recent annual financial statements of the Company. The Company accounts for its grants under those plans in accordance with the fair value based method of accounting for stock based compensation. Compensation costs charged against net income in 2004 for the plans  was $3,567.

In accordance with the terms of the Employee Incentive Stock Option Plan (the “Plan”) the Board of Directors and the Toronto Stock Exchange approved an amendment to the Plan increasing the reserve of Common Shares for issuance pursuant to the Plan from 10,200,000 to 12,741,463, effective May 13, 2004.

6

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3rd Quarter ended September 30, 2004 and 2003 (in thousands of U.S. dollars except per share and per ounce amounts)

A summary of the terms and status of Company’s outstanding options at September 30, 2004 and the changes for the period ending on that date is presented below:

3.  Share Capital (continued)

The following table summarizes information about share options outstanding as at September 30, 2004.

The following table summarizes information about the warrants outstanding as at September 30, 2004.

On August 16, 2004 the expiry date of the warrants issued in connection with the completed financing of August 25, 2003  was extended from August 25, 2004 to August 25, 2005.

7

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3rd Quarter ended September 30, 2004 and 2003 (in thousands of U.S. dollars except per share and per ounce amounts)

4.

Segmented Information

All of Eldorado’s operations are related to the gold mining industry. Eldorado had one producing mine, São Bento, and has assets located in South America, Turkey and Australia. In 2003, the Company began exploration activities in China.

8

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3rd Quarter ended September 30, 2004 and 2003 (in thousands of U.S. dollars except per share and per ounce amounts)

4.

Segmented Information (continued)

5.

Subsequent event

On October 27, 2004, the Company entered into a bought deal agreement with a syndicate of underwriters.  The syndicate has purchased 18,000,000 common shares of the Company at a price of CDN$3.75 per common share for a gross proceeds of CDN$67,500.  The Company will grant the underwriters an option, to purchase up to an additional 2,700,000 common shares (CDN$10,275), exercisable at the offering price for a period of 30 days from the closing date.  The offering is expected to close on or about November 12, 2004.

9

MANAGEMENT DISCUSSION AND ANALYSIS

3rd Quarter ended September 30, 2004 and 2003

Expressed in thousands of U.S. dollars except per share and per ounce amounts

Please review this report with the Consolidated Financial Statements and accompanying Notes. All monetary amounts are in United States dollars unless otherwise noted.

This Management’s Discussion and Analysis (“MD&A”) has been prepared effective October 27, 2004 and contains certain “Forward-Looking Statements” within the meaning of section 21E of the United States Securities Exchange Act of 1934, as amended. All statements, other than statements of historical fact, included herein, including without limitation statements regarding potential mineralization and reserves, exploration results and future plans and objectives of Eldorado Gold Corporation (“Eldorado” or the “Company”) are forward-looking statements that involve various risks and uncertainties. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements.

The MD&A is comprised of ten key sections.  The Overview provides a high level summary of Eldorado’s financial results, operating performance and financial condition.  The Critical Accounting Policy section details the Company’s key accounting policies.  The Critical Estimate section details the key estimates the Company utilizes in determining key financial information.  The financial Results of Operations section provides a detailed analysis of key financial components.  The Review of Operations and Development section provides a detailed analysis of the Company’s operating results at the São Bento mine and a detailed report on the development of the Kisladag Gold Project.  The Summary of Quarterly Results and 3rd Quarter Discussion details the revenue and net income (loss) figures for the past eight reporting quarters with a brief discussion summarizing the 3rd Quarter results. The Liquidity and Capital Resources section describes the Company’s cash position and details the significant factors affecting Eldorado’s operating, investing and financing results.  In the Risks and Uncertainties section, the risks associated with the business are identified, and the risk management programs in place to manage and mitigate exposures are discussed.  The Outlook section outlines Eldorado’s key financial and operating plans for the remainder of 2004 and beyond.  Finally the Non-GAAP Measures sections provide definitions for non-GAAP performance measures to reported GAAP measures.

MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

The MD&A reviews the business of Eldorado Gold Corporation and compares its financial results for Q3 of 2004 with those of Q3 of 2003. In order to obtain a comprehensive understanding of the Company’s financial condition and results of operations, it is best to read the MD&A together with the consolidated financial statements and accompanying Notes starting on page 6.

Eldorado’s Consolidated Financial Statements are expressed in United States (“U.S.”) dollars. All monetary amounts in this report are in U.S. dollars except where otherwise indicated.

The Company’s Consolidated Financial Statements are prepared in accordance with Canadian generally accepted accounting principles (“GAAP”) and filed with appropriate regulatory authorities in Canada and the United States.

10

MANAGEMENT DISCUSSION AND ANALYSIS

3rd Quarter ended September 30, 2004 and 2003

Expressed in thousands of U.S. dollars except per share and per ounce amounts

1.  Overview

Eldorado is a North American based gold producer. The Company owns and operates the São Bento Gold Mine (“São Bento”) in Brazil, develops gold mineralized properties into mines and explores for and/or acquires precious mineral properties for exploration.

The Company continues to be in a strong financial position. At September 30, 2004 it had $82,574 in cash and short-term deposits. Cash is available to fund the construction of the $63 million Kisladag Gold Project in Western Turkey (“Kisladag Project”) and carry out planned exploration. The Company is debt free and production remains unhedged.  Eldorado’s consolidated cash from operations for Q3 2004 was ($156) compared to $1,815 in Q3 2003.  The negative cash flow from operations in Q3 is a direct result of lower gold sales and higher operating costs, offsetting higher gold prices when compared to Q3 2003.

On October 27, 2004, the Company entered into a bought deal agreement with a syndicate of underwriters.  The syndicate has purchased 18,000,000 common shares of the Company at a price of CDN$3.75 per common share for a gross proceeds of CDN$67,500.  The Company will grant the underwriters an option, to purchase up to an additional 2,700,000 common shares (CDN$10,275), exercisable at the offering price for a period of 30 days from the closing date. The offering is expected to close on or about November 12, 2004.

In 2004, the Company achieved two significant milestones at its Kisladag Project, acquisition of all of the private lands required for development of the Kisladag Project and receipt of the Construction Permit  from the Directorate of Public Works – Usak.  The Company had previously purchased all necessary Treasury Land and secured access to Forestry Land.  Successful completion of the private land purchase and receipt of the Construction Permit enables the Company to remain on schedule to commence production late in 2005.  Site activities are underway with road construction, contractors mobilizing to site, water well drilling and electrical powerline construction.

Kisladag will commence production at an annualized rate of 164,000 ounces for its first year increasing in year two to 240,000 oz. annually at a cash operating cost of $165 per ounce for a planned mine life of 14 years.

The following table summarizes the planned performance derived from the updated Feasibility Study completed in May 2004:

With Kisladag construction underway, the permitting and engineering expertise in the Company will be focused on  work required to progress our Efemcukuru Project to a construction decision.  Specifically, we intend to complete and submit the Environmental Impact Assessment Report to the Ministry of Environment and Forestry in Q4 2004.

The Shaft Deepening Project (“Shaft Deepening”) continues at the São Bento Mine. Production in Q3 2004 continued to be negatively impacted by the high level of waste handling, poor ground conditions and the presence of the metabasite intrusive that intersects the orebody in the area scheduled for mining.  

11

MANAGEMENT DISCUSSION AND ANALYSIS

3rd Quarter ended September 30, 2004 and 2003

Expressed in thousands of U.S. dollars except per share and per ounce amounts

The intrusive has also altered the local mineralogy of the ore which is causing higher oxygen and cyanide consumption.  Revised estimates of ore production are 85,000 ounces of gold produced at a cash cost of $290 per ounce for 2004 improving to 94,000 ounces at $265 per ounce in 2005.

2.  Critical Accounting Policies

Eldorado’s accounting policies are described in Note 2 to the Consolidated Financial Statements.  Management considers the following policies to be critical in understanding the judgments that are involved in preparing Eldorado’s Consolidated Financial Statements and the uncertainties that could impact its results of operations, financial condition and cash flows.

Use of Estimates

In preparing the Company’s financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.  The most significant estimates are related to the physical and economic lives of mineral assets, their recoverability, site restoration costs and related obligations.

Revenue Recognition

Eldorado recognizes revenue under the sales method.  The sales method recognizes gold sales when delivery is made and title to the refined gold passes to the purchaser.

Property, Plant and Equipment / Exploration and Development

In accordance with its accounting policies in these areas, Eldorado capitalizes costs incurred on a property after it has been established that there is a mineral resource on a property.  Upon commencement of production, capitalized costs for assets in use are subject to depreciation and depletion over their estimated useful lives.

Management’s estimates of mineral prices, recoverable proven and probable reserves, resources, operating capital and reclamation costs are subject to risks and uncertainties, which may affect the assessment of recoverability of mineral property costs. Although management has made its best estimate of these factors, it is possible that changes in these factors could occur, which could adversely affect management’s estimate of the net cash flow to be generated from its properties.

Asset Retirement Obligations

The fair value of a liability for an asset retirement obligation is recognized in the period in which it is incurred.  A liability is recorded for the present value of estimated closure costs and is added to the related asset.  The related asset is then amortized over the remaining life of the asset and accretion expense relating to the liability is recognized using a credit-adjusted risk-free interest rate. The Company regularly reviews the adequacy of Eldorado’s asset retirement obligations based on Eldorado’s current estimates of future costs.

Stock Based Compensation

The Company uses the fair value accounting based method for stock options.  

12

MANAGEMENT DISCUSSION AND ANALYSIS

3rd Quarter ended September 30, 2004 and 2003

Expressed in thousands of U.S. dollars except per share and per ounce amounts

3.

Critical Accounting Estimates

The Company, in assessing the carrying values of its properties, utilizes three critical accounting estimates as follows:

Reserves and Resources

Proven and probable reserves are determined in accordance with National Instrument 43-101 (“NI 43-101”).

Gold Price

The Company estimates the future price of gold based on historical trends and published forecasted estimates.  Presently the Company’s five-year plan assumes the following prices:

The resulting average price is $385 per ounce.

Operating Costs

The Company reports its operating costs in accordance with the Gold Institute Standard. Future operating costs however include estimates of currency foreign exchange and inflation trends.

4.  Consolidated Financial Results of Operations

Net income (loss)

The net loss reported by the Company in Q3 2004 results primarily from lower sales volumes, higher operating costs per ounce and higher gold prices for Q3 2004 compared to Q3 2003.

Revenues

The Company’s revenues consist of sales of gold bullion. Gold bullion is sold to a number of financial and trading institutions.

13

MANAGEMENT DISCUSSION AND ANALYSIS

3rd Quarter ended September 30, 2004 and 2003

Expressed in thousands of U.S. dollars except per share and per ounce amounts

Gold production decreased by 8.3% compared to Q3 2003.  This is due to the continued interference with production as a result of the shaft deepening activities and infrastructure development at depth. The Company expects this trend to continue through 2004 at which time ramp development will be completed allowing for reduced waste haulage and repositioning of equipment to mining activities.  It is expected upon completion of the Shaft Deepening that production will increase.

In 2001, the Company liquidated its gold hedge position and remains unhedged. The Company continues to sell its gold production at spot prices and anticipates a strong gold price throughout fiscal 2004. The Company is forecasting an average gold price of $400 per ounce. in 2004.

Revenue includes a hedging gain in Q3 2003 of $560. The hedging gain results from the liquidation of a portion of the Company’s hedge book in the years 1998 through 2001. The hedging amortization was completed in Q1 2004.

Interest and Other Income

Interest and other income for Q3 2004 was $454, compared with $392 in Q3 2003 and results primarily from investment of the Company’s cash holdings.  

Expenses

Operating costs are all related to São Bento.

14

MANAGEMENT DISCUSSION AND ANALYSIS

3rd Quarter ended September 30, 2004 and 2003

Expressed in thousands of U.S. dollars except per share and per ounce amounts