Eldorado Gold Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
April 28, 2023

There are 10 speakers on the call.

Operator

Welcome to the Eldorado Gold First Quarter 2023 Financial and Operational Results Conference Call. As a reminder, all participants are in a listen only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. Then one on your telephone keypad. I would now like to turn the conference over to Lynette Gold, Vice President, Investor Relations.

Operator

Please go ahead, Ms. Gold.

Speaker 1

Thank you, operator, and good morning, everyone. I'd like to welcome you to our Q1 2023 results conference call. Before we begin, I'd like to remind you that we will be making forward looking statements and referring to non IFRS measures during the call. Please refer to the cautionary statements included in the presentation and the disclosure on non IFRS measures in our management's discussions and analysis as well as the risk factors set out in our annual information form. Joining me on the call today, we have George Burns, President and Chief Executive Officer Phil Yee, Executive Vice President and Chief Financial Officer and Joe Dyck, Executive Vice President and Chief Operating Officer.

Speaker 1

Other members of the senior leadership team will also be available for the Q and A session. Our release yesterday details our Q1 2023 financial and operating results. This should be read in conjunction with our Q1 Financial Statements and Management's Discussion and Analysis, both of which are available on our website. They have also been filed on SEDAR and EDGAR. All dollar figures discussed today are U.

Speaker 1

S. Dollars unless otherwise stated. We will be speaking to the slides that accompany this webcast. You can download a copy of these slides from our website. After the prepared remarks, we will open the call for Q and A.

Speaker 1

At this time, we will invite analysts Q4. I will now turn the call over to George.

Speaker 2

Thanks, Lynette, and good morning, everyone. Here is the outline for today's call. I'll provide a brief overview of Q1 results and highlights before passing it to Phil to go through the financials and Joe to review our operational performance. Then we will open the call to questions from our analysts. On April 5, we were pleased to close the Skouries project financing of €680,000,000 with the initial drawdown of EUR 32,000,000 completed mid month subsequent to quarter end.

Speaker 2

This financing funds 80% of the remaining capital required to complete this world class asset. The remaining 20% of the project Funding will be fully covered by Eldorado. The financing package includes well aligned strategic partners, including 2 Greek banks, National Bank of Greece and Piraeus Bank, in addition to funding through recovery and resilience facility provided by the European Union. Additionally, the estimated blended interest rate is approximately 5% to 6% on current 6 month EuroBorrow, representing competitive terms given the current interest rate environment. We have spent approximately $34,000,000 since January 2022 in early worked activities that will count as a credit towards the 20% Equity Commitment.

Speaker 2

We therefore expect the project financing package to fund a significant portion of construction of Skouries project in Q2 and Q3 of 2023. This is a major milestone for the company and transitions us is expected by the end of 2025. Alongside Eldorado's existing operating portfolio, Screeze is expected to generate strong cash flow, further strengthening our financial position and will help establish an exciting future for growth and value creation for our stakeholders, including contributing to the global supply chain for critical minerals. Having completed the construction of Lamaque in just over 2 years from the time we acquired the asset, a successful track record of on several organic growth projects, including the Kisladag HPGR, the Triangle Sigma decline project at Lamaque. We are confident that we have the expertise and team, which includes our EPCM contractor floor in place to deliver Skouries on time and within budget.

Speaker 2

In addition, 50% of the construction is completed. And in Q2 2022, we executed a purchase order for the filter press, which is a long lead item with delivery scheduled in Q1 2025. Starting with production, consolidated production across the global portfolio came in line with our expectations for the quarter, A significant improvement over the Q1 of 2022. As mentioned on our last conference call in February, we expect 2nd half production to be higher than first half production and maintain our 2023 production guidance range of 475,000 to 515,000 ounces. Additionally, we are maintaining our capital expenditure guidance of 39 $437,000,000 including $240,000,000 to $260,000,000 towards the advancement of Skouries project for 2023.

Speaker 2

Joe will speak to the operations in more detail later on the call. Shifting to cost. 1st quarter cash operating cost per ounce Sold and all in sustaining costs are in line with our guidance ranges driven by steady production across the portfolio. Phil will speak to our cost and financial position in more detail later on the call. At Skouries, activity in Q1 focused on early construction works, Engineering and Procurement.

Speaker 2

Towards the end of the quarter, drilling and blasting commenced on the first phase of underground development. Upcoming milestones in 2023 include the mobilization of major construction contracts for earthworks and concrete and finalizing the awards of the remaining major procurement and contract packages. As previously disclosed, Project spending at Skouries is expected to be $240,000,000 to $260,000,000 in 2023. The spending is focused on finalizing detailed engineering, which is 43% complete and forecasted to be 70% to 75% complete for full construction mobilization in the second half of twenty twenty three. Procurement of fixed plant and tagged items is currently 42% complete and expected to be approximately 90% complete by year end.

Speaker 2

Additionally, Yesterday, we received approval of the Ministry of Energy and Environment for the modified EIA for the Cassandra Mines. This modification will allow for the expansion of the Olympias mine and processing facility to 265,000 650,000 tons per annum and improvements to the Straconi port. Finally, I would also like to congratulate the team in Greece where our Hellas Gold subsidiary once again named 1 of the most sustainable companies in Greece for 2023. This is confirmation to our commitment to responsible practices and sustainable development. I'll stop there and turn the call over to Phil to review our financial results.

Speaker 3

Thank you, George. Good morning, everyone. Starting with Slide 6, which provides a summary of our Q1 results. Eldorado reported net earnings attributable to shareholders of $21,300,000 or $0.12 per share in the Q1. After adjusting for one time non recurring items, including a current tax and a non cash gain on the revaluation of the derivative related to redemption options on our debt, Adjusted net earnings were $20,500,000 or $0.11 per share in the Q1.

Speaker 3

Free cash flow in the quarter was negative $34,400,000 primarily due to continued capital spend and partly as a result of changes in non cash working capital. Cash flow generated by operating activities before changes in working capital totaled 94,500,000 1st quarter cash operating costs averaged $7.66 per ounce sold and all in sustaining costs averaged $11.84 per ounce sold. In Q1, direct operating costs were below plan, primarily due to lower than expected Fuel and Electricity Prices. Steady production combined with lower direct operating costs resulted in Q1 2023 cash operating costs per ounce sold and all in sustaining cost per ounce sold being near the lower end of the annual guidance ranges for 2023. Capital expenditures on a cash basis were $83,400,000 in the Q1, which included continued investment in growth projects at Kisladag and at Scurius, where we commenced mobilization procurement and advancement of projects.

Speaker 3

In the first recovery related to net movements against the U. S. Dollar of local currencies, primarily the lira and the euro. Current tax expense was higher in the quarter compared to Q1 2022, primarily related to operations in Turkey. The current tax expense included $5,500,000 withholding tax on earnings repatriated from Turkiye in the quarter as well as a $4,300,000 one time expense due to a tax law change introduced in March 2023 to reverse a portion of tax credits and deductions previously granted in 2022.

Speaker 3

The tax law change was enacted to help fund Turkey A's earthquake relief efforts and the amount will be paid in equal installments in April August of 2023. Turning to Slide 7. At quarter end, we had unrestricted cash, cash equivalents and term deposits of $262,000,000 The decrease of $52,500,000 from last quarter was primarily a result of temporary working capital movements, which included an increase in receivables, which were largely received in early April and buildups of concentrate inventory at Olympias. In addition, continued investment in growth capital impacted the cash position With production expected to sequentially improve quarter over quarter, we expect to see our cash balance further improving as the year progresses. Following the closing of the Scurrias project financing, the availability under the $250,000,000 revolving credit facility was reduced by €209,000,000 This is equivalent to €190,000,000 as Eldorado's investment undertaking for the Scurius project is fully backstopped by a letter of credit from the company's revolving credit facility.

Speaker 3

The letter of credit will be reduced year over year as a company invests further in the project. We continue to focus on maintaining a solid financial position, which provides flexibility to unlock value across our business. With that, I will now turn it over to Joe to go through the operational highlights.

Speaker 4

Thanks, Phil, and good morning, everyone. I'd like to start by congratulating our team in Turkey who recently received the 2023 Euro Mine's Silver Safety Award, which recognizes innovation and best practices for mitigating safety risks in the industry. Well done to the team for this recognition. We would also like to recognize our mine rescue teams from Efemcukuru and Kisladag, who attended the earthquake zone in Eastern Turkey for over 10 days and were instrumental in the rescuing of tree lives. On behalf of the team, I want to express my thanks to them for their dedication to the people of their country.

Speaker 4

In the Q1, our lost time injury frequency rate decreased to 0.87 per 1000000 hours worked, an improvement from Q1 2022. We continue to take proactive steps to improve workplace safety and ensure a safe working environment for our employees and contractors. Now moving to our operating results. We produced 112,533 ounces of gold in the 1st quarter with a cash operating cost of $7.66 per ounce sold in line with our expectations. For 2023, we are maintaining our gold production guidance of between 475,515,000 ounces with production weighted to the second half of the year.

Speaker 4

Slide 9 looks at our operations in more detail. Starting in Turkey, at Kisladag, 1st quarter production was 37,160 ounces and cash operating costs were $708 per ounce sold, which represents a 25% increase in production and an almost 18% reduction in cash costs over Q1 twenty Quarter, we reached mechanical completion of the fine ore agglomeration circuit, which treats a split of the HPGR product to improve quality, consistency and permeability of the ore products stacked on the leach pad. Early in the second quarter, we successfully completed a 6 day shutdown commissioning of the up agglomeration circuit is now underway and progressing well. Q1 work also focused on the North Sea Bleach Pad, which is expected to be operational with stacking to commence early in the Q3. For 2023, PizarroDAD's production guidance is 160,000 to 170,000 ounces of gold.

Speaker 4

Production is expected to improve over the course of the Q2 as we realize full effectiveness from the upgraded materials handling and Agglomeration Equipment. Our optimization efforts will continue to drive increased stacking rates through the second half of the year. At Efemcure Group, 1st quarter gold production was 19,928 ounces at cash operating cost of $8.69 per ounce sold. Gold production throughput and average gold grade at FM Cooper were in line with plan for Quarter. For 2023, Efemcukuru's production guidance is forecast to be 80,000 to 90,000 ounces of gold.

Speaker 4

Production in the Q2 is expected to be consistent with the Q1 with the second half slightly higher as grades improve. Now moving to Lamaque. Following a strong finish to 2022, 1st quarter gold production was 37,884 ounces cash operating cost of $7.21 per ounce sold. Q1 performance was in line with our expectations as we mined lower grades this quarter due to stope access and mine sequencing. Production in the quarter was also impacted by a planned 4.5 day routine shutdown for maintenance.

Speaker 4

At the end of March, we released an updated exploration results on our OMAQ deposit. We have seen numerous high grade intercepts to the east of and below the current resource area, some representing extensions to known mineralized zones and some related to newly identified mineralized zones. Our new results continue to demonstrate the potential to increase resources. Partial results from our ongoing resource conversion drilling will be incorporated in a resource update later this year and we expect a maiden reserve on Lamaque in 2024. In 2023, Lamaque's production guidance is 170,000 to 180,000 ounces of gold.

Speaker 4

For the Q2, processing rates will increase slightly coupled with consistent grade. Production for the Second half of the year is expected to be stronger than the first half with stable throughput in the 2,400 ton per day range. Additionally, we are excited for the delivery of the 1st electric haul truck in Q2 and the 2nd truck in the 4th quarter, which are expected to enhance our haulage capabilities along with reducing our diesel consumption per ton hauled and lowering our greenhouse gas emissions. Finally, moving to Greece. At Olympias, 1st quarter gold production was 17,561 ounces and cash operating costs were $8.98 per ounce sold, which represents an approximate 95% increase in production and 40% reduction in cash costs over Q1 2022.

Speaker 4

Our cash Costs benefited from tangible productivity improvements from the mine operation along with the low plan electrical costs to drive productivity propelled by the momentum from the Q1. Several key projects are underway, including the implementation of a bulk emulsion blasting system, which improves explosive distribution in the drill holes, yielding greater advance for blasted round for both development and production. We also reached completion of the underground ventilation system upgrade designed to provide safe access to lower areas of the mine, Increasing the number of development headings we can effectively work. Both projects support our 2023 guidance and continued transformation objectives. This year, Olympia's production guidance is 60,000 to 75,000 ounces of gold.

Speaker 4

Gold production is expected to be relatively consistent quarter over quarter. I'll stop there and turn it back to George for closing remarks.

Speaker 2

Thanks, team. Looking forward, 2023 is a milestone year for us as we transition to execution mode at Skouries that will deliver significant production growth over the next 5 years. We also remain laser focused on our current operations to drive through operational efficiencies with a focus on generating free cash flow to maximize the value for all stakeholders. That concludes our prepared remarks. I'd like to take a couple of minutes to share with you my excitement about where we're at and how we're positioned for a bright future.

Speaker 2

And I'll start with Kisladag. At Kisladag, we successfully completed the HPGR investment. Last year saw the benefits of agglomerating the ore with cement, And we kicked off Q2 by commissioning beginning commissioning on the drum agglomeration circuit. Already we can tell the quality of the product we're agglomerating has improved significantly. And so as we continue to work through commissioning, Our focus is on additional opportunities for growth.

Speaker 2

Crushing the ore finer, agglomerating the ore effectively And debottlenecking the plan for potential higher throughput are all opportunities to increase value at Kisladag. So that's got a long mine life and a lot of value to be acquired from this asset. Moving over to FM Chukuru, it's been our steady performer throughout its life. We can count on the production and cost performance consistently from that operation. Our focus here is on infill drilling to create additional reserves to extend mine life.

Speaker 2

That work is progressing well and I'm confident we'll have some good news to share in that regard. Moving over to Lamaque, our newest asset. It's been another fantastic steady producer, 4 years of production and cost that were at the top end of our guidance from a production perspective. And here again, we have a bright future. Our focus this year is on infill drilling in our mock deposit.

Speaker 2

That drilling is going well. Next year's focus will be a bulk sample and completion of a maiden reserve that will extend mine life and increased value. And then spinning over to Greece, we had a very good quarter at our Olympias operation. A lot of hard work over the last year to position us for that good quarter. And here our focus is to sustain that improvement.

Speaker 2

When you look at the catalyst that Joe mentioned, we've got emulsion blasting as we speak. We've got ventilation is going to increase significantly and that really is what's required to support continued growth in our production profile. Olympias will be a significant asset for Eldorado, and our And then scurry's. We've been working very hard over the last couple of years to put strategic measures in place to be able to complete this Fantastic investment. We've got great partners alongside us now that are providing the bulk of the financing.

Speaker 2

We've got a great team up site site that's focused on delivering a ramp up in growth from about 250 people on the ground today, peaking at about 900 later this year. Skouries is going to transform Eldorado in terms of our ability to generate free cash flow. We'll be producing a Significant amount of copper that will support the planet in terms of energy transformation. And so we're well positioned to out deliver our peers in terms of value, and I'm extremely excited about the bright future we have in front of us. With that, I'll open it up the call to questions from our analysts.

Operator

The first question comes from Cosmos Chiu from CIBC. Please go ahead.

Speaker 5

Thank you, George, Bill, Joe, and welcome, Lynette. Good to hear from you. Maybe my first question is on Olympias. I guess overall Cost for the company was lower than expected in Q1. A key driver was clearly Olympias $13.55 all in sustaining cost in Q1, last quarter almost $2,000 an ounce.

Speaker 5

My question is The $13.55 is that a sustainable level or could it go even lower because George as you mentioned You've gone through all these different transformation objectives and it sounds like bulk emulsion is coming, underground ventilation, whole bunch of other projects are coming as well. So what should we be expecting in terms of Olympias cost on a go forward basis?

Speaker 2

Yes, it was a really good Q1 at Olympias, and I'd say it's consistent with the guidance that we've put out for the year. There'll obviously be volatility across our portfolio as we unfold quarters. But I would say it was a turning point. We're expecting to Sustain good operating results consistent with our guidance at Olympias. So our confidence has risen.

Speaker 2

We've been marketing and talking about our belief in transforming Olympias to generate free cash flow, and I'd say we're delivering on that journey now.

Speaker 5

And George, as a follow-up, so does this help you with the decision to go ahead with the expansion, I guess? When I was reading the MD and A yesterday, I guess I was trying to piece everything together. You've now received the amended EIA For the expansion to, as you said, 650,000 tonnes per annum. To be honest, I wasn't aware that the flat zone was that important. So maybe could you piece it all together for me?

Speaker 5

Has a decision been made in terms of expansion? Does it help in terms of the transformational improvements that you've made so far and again, reminding us of the important

Speaker 2

Yes. I mean, I'd just start with the EIA. In every jurisdiction, getting the environmental approvals to be able to start up, build or expand the mine are critical. So great achievement to have that finalized. It just removes that any doubt around permitting.

Speaker 2

And then in terms of our commitment to that expansion, it really is the first step in giving us the confidence To deploy additional capital for the expansion. And I'd say, we'll be bringing that decision Through management and into our Board late next year, depending on continued improvement at the operation. So As I said, we believe we can sustain these sort of numbers, deliver our guidance. And as we do, that will give us the confidence To commit the additional capital to expand to $650,000,000 So, we're feeling really good about it right now, Cosmos.

Speaker 5

That's great. Maybe George, switching gears a little bit, kiss an egg. Another one that outperformed in Q1 against at least my expectations and my estimates. If I look at it compared to last quarter, production actually was down, but costs were also down quarter over quarter. So could you maybe talk a bit more about Just to add, again, these levels in terms of cost, the sustainability for the remainder of 2023?

Speaker 3

Yes, maybe I'll talk to

Speaker 2

the cost and let Phil follow-up on I'll talk to the production and Phil can follow-up on cost. So If you look at last year, we had pretty consistent improvements in throughput through the crushing facility each quarter throughout the year. And really that was learning how to agglomerate the ore on the conveyors. It was supported by deployment of additional Large grasshopper conveyors that kind of debottleneck the conveyance system, particularly with cement agglomerated ore. So in the Q1, we were in good shape with the conveyor system.

Speaker 2

And we had All the learnings last year on belt agglomeration. So we had a solid quarter. What's exciting about Q2 is we've got the drum agglomerator running. And they're early days. The quality of that product coming out of the end of the drum is significantly improved over just using the conveyor belts.

Speaker 2

Additionally, we'll be deploying some additional larger grasshopper conveyors. All that was part of the North Leach pad expansion. So that's going to aid us. And as I say, as we continue to commission, we'll be looking for opportunities to debottleneck the plant and hopefully be able to prove we can exceed throughput expectations in the current design. On the cost side, just from a general perspective, yes, a good quarter.

Speaker 2

I'd say the one significant item at Kisladag that's different from the rest of our operations, open pit, We move a lot of waste to provide that 15 year mine life. So diesel costs are significant and we saw a pretty significant drop and diesel costs relative to last year. And that's good for Q1, but it's probably good for the foreseeable future if we can see oil prices at or even below where they are

Speaker 3

today. Great. Hi, Cosmos, it's Phil. Just to give you some background on the cost. So definitely Kisladag did see a reduction in both diesel and electricity costs in Q1.

Speaker 3

Our average price in Q1 for diesel, for example, is about $0.81 per liter. It was a drop of about 13% from the previous quarter and electricity costs for Kisladag as well dropped about 16% from the previous quarter. So that all contributed to the lower costs.

Speaker 5

Great. And then maybe one follow-up here. George, as you mentioned, the North Keep Leach pad should be operational for stacking by mid-twenty 23. Could you remind me in terms of the logistics here? I was reading the MD and A last night.

Speaker 5

It was just Getting kind of late. But it almost sounded like you were moving all the stacking from the main sort of heap leach pad To North Leach pad, is that correct? And how do all those conveyors work? Are we moving these conveyors to the North leach pad and all this new infrastructure that you've put in. Could you maybe summarize it for me once again?

Speaker 2

Yes. So if you look at the history so far at Kisladag, it's all been in the south leach pad. And we basically built Mountain basically out of crushed material, and we're near the end of its life. So we've built Basically, a new leach pad, a little bit further away from the plant. And that the pad and ponds are all ready to go.

Speaker 2

This year, we'll be completing the ADR plant. That's the plant where we move the gold out of solution on the carbon and then out of carbon and into So we're on track to completing that project on budget and on our schedule. And so really on the conveyance system, all we're doing We're extending the overland conveyor from the south leach pad to the north leach pad and we've acquired Larger equipment, larger conveyors to be able to run at a higher throughput to accommodate the belt cement agglomerated ore. And so that new leach pad sets us up for success and supports the 15 year mine life we have. And so It's basically just an extension to a new leach pad that's a little bit further away.

Speaker 2

Now there's still capacity remaining on the South leach pad. We'll have the advantage when we move conveyors from one cell to the next to be able to crush ore On the south leach pad. So there again, a little bit of upside as we operate that new leach facility. So it's an exciting time at Kisladag. It finalizes our investment in the plant infrastructure to support this new mine life.

Speaker 2

There will be modest sustaining capital to support extensions of liner throughout the mine life. And the last piece is just the stripping. So we're continuing to do the stripping to support the mine life. That will continue on beyond this year, but the initial capital investment for the North Leach pad really finishes up this year. So It's the beginning of an improved cash flow generation period for Quesodag beginning next year.

Speaker 5

Understood. Thanks, George, Phil and team for answering my questions. That's all I have, and have a good weekend.

Speaker 2

Thanks, Cosmos.

Operator

The next question comes from Tania Jack Kaczkonek from Scotiabank. Please go ahead.

Speaker 6

Yes, good morning, everyone. Thanks a lot for taking my questions. Just wanted to follow-up. First of all, congrats on a good quarter, especially on the cost front. I just wanted to follow-up on 2 questions.

Speaker 6

I know in the last conference call, we talked about a 45% first half production, 55% second half on your guidance. Is that still valid?

Speaker 2

Yes.

Speaker 6

Okay, perfect. Thank you. And I just wanted to ask also on these costs. So you think that the costs at Olympias are very sustainable, obviously costs at Kisladag are going well. I just wanted to understand, so we've had this lower fuel price and electricity costs that have really helped costs at Kisladag.

Speaker 6

You said $0.81 I think is what for diesel is what Phil had mentioned. Can you remind me what was in your budget for diesel pricing? Was it $0.90 Was it over $90?

Speaker 2

Yes. It was over $90. We think it's closer to $1

Speaker 6

Okay. So you're seeing like 20% lower than what you have in your guidance for us on cost? And what about electricity? I mean, this drop in electricity, are you still seeing this in April? Like, I just don't know what these prices because I also go to Europe a lot.

Speaker 6

I know Italy has very high pricing and that hasn't gone down. So I'm just wondering this electricity price, like what is it that has driven it down?

Speaker 3

Yes, Tanya, it's Phil. In Turkey, we've actually negotiated Some new electricity contracts in 2023 for both Gisabag and Efemcukuru. And that's a bit of a change from last year. So Based on those new contracts, I would expect the rates to continue for the rest of the year. And then in Greece, The Greece situation with electricity costs is subsidized by government subsidies.

Speaker 3

And the government has set a target, I think it's between 0.15 and 0.18. And so far we're tracking within that range. So I would expect that, that would continue as well.

Speaker 6

Okay. All right. So it looks like Then the electricity prices at least for Kisladag is just favorable for you with these new contracts. What about, Phil, the sustaining capital? How should I think about that going through the year?

Speaker 6

It's just for our all in sustaining costs obviously were positively impacted by the lower costs. I just want to make sure I understand how the sustaining capital develops through the year? Is it evenly distributed or how should I think of that? Capital growth is different, but how does the sustaining look?

Speaker 3

Yes. Our sustaining capital in Q1, Tanya, was approximately $25,000,000 A large chunk of that was at Lamaque With underground development and equipment rebuilds. I think at Kisladag and Efemcuk and Olympias, It's pretty consistent around $2,000,000 to $2,500,000 I think in terms of Lamaque With the mine plan, a lot of that underground development is going to continue. So I would suspect

Speaker 2

That amount would be consistent. Yes. I'd just add one thing. At Lamaque, our tailings lifts We're seasonal. We do it summer into the fall.

Speaker 2

And so you do see higher sustaining costs on the quarters.

Speaker 1

So should I

Speaker 6

the same thing, the $45,000,000 first half, second half? Or is that not a good way to look at it?

Speaker 2

Yes, it's going to be slightly higher in the second half because of that Lamaque. I don't know, it's probably not quite 45, 55, it's just Lamaque It has that seasonal impact.

Operator

Okay.

Speaker 6

I was just trying to make sure that because I said like we were Definitely positively surprised by both your cash costs and your all in sustaining costs. And maybe just another just like larger picture, besides just the fuel and the electricity that you saw at Kisladag, are you seeing anything else in terms of consumables, any other areas that you're starting to see even in April starting to see a relief and inflationary pressures?

Speaker 2

Yes, I would say generally other than those commodities things have remain fairly consistent. Probably, I mean, we talked about the positive things. The one thing that's slightly negative is Cyanide costs have escalated for the industry. So, we've talked about our working capital fluctuation. We think Cyanide is going to come up a bit higher.

Speaker 2

And so one of the inventory issues, we bought some additional cyanide in Q1 So hopefully help us what we believe will be a bit higher cyanide costs and what drives that is energy input into making cyanide.

Speaker 6

And now got it.

Speaker 2

Just on your last question, Tanya, I mean, I gave you some additional thoughts on Lamaque and definitely the tailings construction pushes up their sustaining during that construction season. But overall, Phil gave you the right answer. It's pretty flat first half to second half across the portfolio on sustaining capital.

Speaker 6

Okay. And then just on the cyanide cost, what sort of increases have you seen just for ourselves to just understand Not buying cyanide very often, George.

Speaker 2

Yes, I don't have that number off the top of my head, and I would say it's not that Significantly material.

Speaker 6

I got the 5%.

Speaker 2

Yes, hang on. About 10% is what we're anticipating in terms of potential increases in cyanide. It's about $3,200 a ton.

Speaker 6

Okay. Thank you very much for that. I'll leave it there and Thank you very much. Good quarter and have a great weekend everyone and welcome Lynette.

Speaker 1

Thanks Anja.

Operator

The next question comes from Mike Parkin from National Bank. Please go ahead.

Speaker 7

Thanks guys and congrats on the good quarter. Could you

Speaker 5

just speak to you also

Speaker 7

Pretty impressive improvement in refining costs at Olympias quarter over quarter. Can you just speak to what's driving that?

Speaker 3

Joe, you want to take that?

Speaker 4

Sure, George. I think a couple of things. First off, treatment charges are down a bit for lead and zinc. Secondly, we worked hard to find Alternatives to paying the 13% VAT on our Pyrite Con and have been Moderately successful, I think, or maybe more than moderately. About 60%, maybe a little bit more than 60% Percent of our pyrite cons are now not subject to VAT through Alternative smelters or brokers to China and as you may recall Mike that's 13%.

Speaker 4

We are seeing other costs In addition to that, so the net out is I think it's about 3% we pay in additional charges when we're not paying So overall, that's probably driving as much as anything. And we see that less in that that we see it more in payable gold. So I hope that answers your question. Better trends and resin

Speaker 3

Yes, Mike, it's Bill here. Just wanted to add another factor in So there is lower sales effectively in Q1 and that contributes to the lower refining costs as well.

Speaker 4

Okay. So that could actually come up

Speaker 7

a little bit then quarter over quarter? Still probably

Speaker 3

Yes, that's a timing issue. Yes, it's a timing issue. And that's part of the reason as well that we have an increase in receivables at the end of Q1. The large percentage of those receivables were received in early April from the delayed concentrate sales.

Speaker 7

Okay. And then just switching over to Kisladag, as you move from the South Pad to North Pad, I guess Actually having a longer leach cycle probably won't create much of a production dip because you'll be getting residual leach of the South Pad As you're starting an irrigation system on the north side, is that fair to assume? Or would there potentially be Q3 being kind of the latest quarter at Kisladag.

Speaker 2

No, Mike, those are good assumptions. We'll be putting Fresh ore on the new leach pad on liner. So it will be quick returns on the initial placements. And as you say, we'll have residual flows coming off the South Leach pad. So we really don't expect any hiccups in terms of production relative to that movement from South to North.

Speaker 7

Okay. And then I know it's like Grant, it's very early days here. So You might not be able to give me too much color, but sorry, I'm not. The cement usage at Kisladag, is it flat, up, down with the agglomeration drum and recognizing Obviously, you're probably still very much in the fine tuning of it. So just some overall kind of general thoughts in terms of where your cement usage was last year versus kind of is today?

Speaker 2

Yes. So we're in the 4 to 5 kilograms per ton of ore placed. And really, it's dependent on the different rock types that are going through the ore and exactly Where we're trying to target that cement level. We don't really see any change last year versus this year. Really, what we're looking for is better mixing in that drum, Making a better final product, supporting good permeability, that's an important factor in recovery, But also offering the opportunity to have finer ore, expose more gold and drive recovery beyond or assume 56%.

Speaker 2

So Yes, the cement is going to be pretty consistent and the cement offsets the amount of lime that we actually consume. There is a net increase in cement versus what we used to do, but I would say consistent results Expected going forward compared to last year.

Speaker 7

And you could be potentially tightening up your gap On your high pressure grinding rolls because extra fines to your point, having a better mix would allow for that. So you could actually be getting better exposure of the ore to cyanide while offsetting any impact of additional fines through better agglomeration through the drum. Is that fair to assume?

Speaker 2

Yes, that's exactly the opportunity in front of us and we're going to focus hard on it.

Speaker 7

Okay, cool. Looking forward to the results. Congrats, Ken.

Speaker 2

Thanks.

Operator

The next question comes from Kerry Smith from Haywood Securities. Please go ahead.

Speaker 8

Thanks, operator. George, can you just remind me or perhaps Joe, what was what is the under from HPGR now at Kishadeh. And what is the predicted recovery from that crush size with the drum agglomerator?

Speaker 2

Well, I'll answer high level to describe what we're doing here. So the product that comes out of the HPGR is split into 2 streams. We call it the Edge product and the Center product. So the Edge product is going to be a coarser product And that product gets recycled basically for a second pass. And the middle product has more fines in it.

Speaker 2

So after the screen, we take a split of the coming out of the HPGR over to the new drum agglomerator. And there, we're trying to get Some of the small pebbles that will be in that feed to be the core nucleus of building a good agglomerate that comes out of the end of the drum. And then that stream comes back to the mainstream and it's advanced out to the pad. And so for the coarser material, it's getting put back through the HPGR, it's getting a second opportunity to make fine. So What we're able to do, we have 2 opportunities to try to optimize size of the to maximize recovery.

Speaker 2

The first is the amount of horsepower we drive into the variable frequency drive on the drums themselves. And then the second thing is the amount of material that we recycle for a second pass. So we have 2 levers to pull to try to Fresh finer, but we don't want to cut fresh so fine that we cause ourselves a permeability issue up on the pad. So The DRAM, we think, was acquired and we believe it's the opportunity to further optimize size and maintain good permeability. And So as we said, we're confident about the 56% recovery assumed in our technical studies, assumed in our 5 year guidance.

Speaker 2

The opportunity this year is to optimize the HPGR in this new drum to be able to drive recoveries beyond 50 percent. And so I we'll have a better picture of that opportunity at the end of the year after we've run the circuit for 6, 9 months. Did that answer your question?

Speaker 8

What I was trying to get at was What's the rough crush size you're sending to the pad now? And how much finer do you think you could make it if you were able to Optimize the circle with the drum agglomerator and what sort of percentage improvement do you think you could get in recovery? I mean, I presume you must have done those tests early on with when you did the test work on the HPGR. So I was just trying to understand, you're 56% now, Is it reasonable to think that you could maybe pick up a couple of three points on recovery by optimizing the circuit or could it be more than that or less I guess, is what I was trying to get a sense for.

Speaker 2

So specifically on size, so about 80% of the material passes 6 Millimeters. We're not thinking that's going to change significantly. Where the opportunity is, is the minus 2 millimeters. And what we're thinking right now is we'll move from about 40% to 60%. So we're creating more of those very fine materials that will close more gold and with effective agglomeration, we'll be successful then at getting better recoveries.

Speaker 2

Now, I don't want to guide to the potential here. As you would imagine, if we expose more gold, we're going to get better recovery. So We want to have test work to be able to guide ourselves in the market to what they could expect.

Speaker 8

Okay. Okay. That's fine. And you have capacity, obviously, in the drum, you can the more fines, the better really. You can just agglomerate it up and throw it on the pad.

Speaker 2

Exactly.

Speaker 8

Right. Okay. Okay. That's helpful. Thanks.

Speaker 8

And then just on Olympias, on the 650,000 TPA expansion then, George. Is the intention then to kind of dovetail that project into The wind down of construction at Skouries. So if Skouries is kind of finished construction mid-twenty 25 and that would be when you kind of notionally think to Start the construction at for this new expansion at Olympus?

Speaker 2

I mean, coincidentally, I'd say that's the case. So It is 2025 that we expect to be doing the expansion and modifications to the plant. But it's a pretty small project on Olympias. We're adding some additional flotation capacity. There's no major challenging construction to be done here.

Speaker 2

So I wouldn't tie the 2 together that we're waiting for scurries. It's more about Setting up the underground expansion where we've got confidence in making that investment and then proceeding with it.

Speaker 8

Okay. And then how long is that project to get to the 650,000 tons? Is that like 8 months, 9 months?

Speaker 2

Yes, it's probably a year of work. And the 2 major things that we'll be doing in the plant will be adding some regrind mill, And we'll be adding a thickener. So those are main pieces, some other modest.

Speaker 8

Got you. Okay. That's good. And then just Lastly, on Screws, as you said, you had, I think, 250 people at the site and you plan to get to 900 by the end of the year. So far, have you seen any issues with Getting manpower or ordering equipment or any logistics issues that might impact the schedule.

Speaker 8

I know you said You had already ordered the filter press, but I'm just wondering just generally how you're seeing it.

Speaker 2

Yes. Mike, no concerns there. I mean, you've had no issues with the ramp up to date. I'd say our laser focus on Skouries is Letting the additional contracts over the next couple of quarters that really provides the ability to ramp up this Construction delivered on schedule. So it's really in our control.

Speaker 2

In terms of available labor and contractors, no concerns. In terms of equipment, all the major equipments installed with 2 exceptions. One is the primary crusher. It's sitting on-site. We're pouring concrete And so no concerns on it.

Speaker 2

And then as you just said, we ordered the filters for dry stack tailings. We got a delivery date of Q1 2025 ahead of our commissioning mid year. So we're very comfortable with Key equipment required and it's really about letting these contracts, advancing the engineering and executing on the productivities we need to Deliver this on budget and on schedule. So really, I sleep well at night. I'm not concerned about deliveries and we're laser focused on the ramp up.

Speaker 8

Okay. Okay, that's great. Thanks very much. I appreciate it.

Speaker 2

Thanks, Gary.

Operator

The next question comes from Harman Puri from Bank of America Securities. Please go ahead.

Speaker 9

Hi. Thank you for taking my question. Most of my questions that actually had have been answered. I think one last one, I don't know if you guys have On this yet, but at Lamaque, the grade profile for the rest of the year, do you guys have any color on when the grades might increase and go closer to perhaps the guidance range? Do you expect that to happen in Q2 or will that be later in the year?

Speaker 2

Yes. So there'll be a ramp up of improved grades over the year. Q1 obviously was Lower than a quarter of the annual guidance, but it really was sequencing driven. So yes, you can expect to see Great improvement potentially over the year and still good with guidance.

Operator

Okay. That's it for me. Thank you. Today's conference call. You may disconnect your lines.

Operator

Thank you for participating and have a pleasant day.

Remove Ads
Powered by Quartr
Earnings Conference Call
Eldorado Gold Q1 2023
00:00 / 00:00
Remove Ads