Eldorado Gold Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
July 28, 2023

There are 10 speakers on the call.

Operator

Welcome to the Eldorado Gold Second Quarter 2023 Financial and Operational Results I would now like to turn the conference over to Lynette Gould, Vice President, Investor Relations. Please go ahead.

Speaker 1

Thank you, operator, and good morning, everyone. I'd like to welcome you to our Q2 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 discussion 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 Bill Yee, Executive Vice President and Chief Financial Officer with Joe Dyck, Executive Vice President and Chief Operating Officer and Simon Hilly, Senior Vice President, Technical Services and Operations.

Speaker 1

Other members of the senior leadership team will also be available for the Q and A session. Our release yesterday details our Q2 2023 financial and operating results. This should be read in conjunction with our Q2 financial statements and management's discussion and analysis, both of which are available on our website. They have also been filed on SEDAR Plus 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

Call. 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 Q2 results and highlights before passing it to Phil to go through the financials and then to Joe and Simon to review our operational performance. Then we'll open the call to questions from our analysts. Turning to Slide 4.

Speaker 2

As we mentioned on our Q1 quarterly call, We closed the Skouries project financing of €680,000,000 in early Q2. Subsequently, We have completed 2 drawdowns in April May for a total of €65,900,000 On June 14, we were pleased to complete an CAD 81,500,000 strategic investment into and will be credited against the company's 20% project funding commitment. In addition to our Greek bank syndicate, EBRD provides another well aligned strategic partner for the Skouries project. The investment by EBRD was a culmination of a 3 year rigorous process, which included completion of an environmental and social impact assessment consistent with our commitment to high environmental and social standards. With the proceeds from EBRD now contributed, we do not expect any further funding for Scurry's will be required from Eldorado in 20 During the quarter, we also completed a bought deal offering for gross proceeds of CAD135.2 million.

Speaker 2

These funds are expected to be used to fund growth initiatives across our global portfolio, including some not currently contemplated within our 5 year plan. The growth initiatives may include, but are not limited to, for Ama Hill, where we expect to start community consultations later this year, the expansion of Olympias to 650,000,000 tonnes per annum, call, bringing the Armagh discovery into production and exploration opportunities in Turkey A and Quebec. We anticipate we will be able to provide more detailed information around the cost, priority and timing of each opportunity with our updated 2024 guidance in the 1st part of next year. Moving to Slide 5, starting with production. Consolidated production across the portfolio came in slightly below our expectations for the quarter as a result of extraordinary rainfall at Kisladag, conference call.

Speaker 2

We are

Speaker 3

now seeing a number of factors that we have in place in the Q4 2023 financial and operational results conference call. We are now seeing a number of factors

Speaker 2

that we have in place in the Q4 2023 financial and operational results

Speaker 3

conference call.

Speaker 2

As we are expecting stronger production in the second half of the year, we are well positioned to meet our 2023 production guidance of between 475,005 and 15,000 ounces. Additionally, we are maintaining our capital expenditure guidance of $394,000,000 to 437,000,000 callers, including $240,000,000 to $260,000,000 towards the advancement of Skouries project for 2023. Turning to Skouries, we continue to be focused on project execution in order to deliver the project by the end of 2025 as planned. During the quarter, We advanced a number of early works projects and continued to award key contracts. We are pleased with the progress to date and continue to ramp up personnel with of 3 50 people on-site, which will increase to approximately 900 by year end.

Speaker 2

Joe will talk about the progress and operations in more detail later in the call. Shifting to cost. First half cash operating cost per ounce sold and all in sustaining costs were in line with our annual guidance ranges, driven by continued lower input costs. Phil will speak to our cost and financial position in more detail later in the call. Finally, I'd like to congratulate the team at Lamaque who were awarded the Prix Distinction Award in the Environment category at the 2023 of Quebec Mining Association Convention.

Speaker 2

The team was recognized as an innovative project in partnership with MRC, aimed at the progressive restoration of the Sigma tailings pond using compost produced locally. The award highlights our commitment to continued innovation in the area of sustainable development. I'll stop there and turn the call over to Phil for a review of our financial results.

Speaker 4

Thank you, George. Good morning, everyone. Slide 6 provides a summary of our 2nd quarter results. Eldorado reported net earnings attributable to shareholders of $1,500,000 or $0.01 per share in the 2nd quarter. After adjusting for one time non recurring items, adjusted net earnings were $16,100,000 or $0.09 per share in the 2nd quarter.

Speaker 4

These one time non recurring items included a non cash deferred tax expense of $21,400,000 due to foreign exchange translation related to the lira. Adding back a non cash gain of $8,400,000 on the revaluation of new derivative instruments, primarily on gold collars entered into during the quarter and a loss of $1,600,000 on redemption option derivatives related to the senior notes. Free cash flow in the quarter was negative $21,700,000 However, excluding the capital investment in Scurius, Free cash flow generation in the quarter was a positive $13,200,000 Cash flow generated by operating activities before changes in working capital totaled of $82,400,000 compared to the Q1 of $94,500,000 primarily due to higher income taxes paid during the quarter. 2nd quarter cash operating costs averaged $7.91 per ounce sold and all in sustaining cost averaged $12.96 per ounce sold. All in sustaining cost per ounce sold in the 2nd quarter were higher than expected.

Speaker 4

With consolidated gold production expected to be weighted to the second half of the year, We expect decreasing unit costs in the second half and are maintaining our annual cost guidance for 2023. In Turkey A, during the quarter, we continue to see lower fuel and electricity prices in line with the Q1. However, there were increasing royalty expenses as a result of the higher realized gold price. Over the second half of the year, We expect to see lower unit costs across the portfolio and remain on track to be within our guidance of $11.90 to $12.90 per ounce sold for 2023. Capital expenditures on an accrual basis were $99,400,000 in the 2nd quarter, which included an investment in growth projects at Kisladag at Scurius, where we continue to advance procurement and the project.

Speaker 4

In the second quarter, we recorded a deferred income tax expense of $17,000,000 which included a $21,000,000 expense related to net movements of local currencies against the U. S. Dollar, conference call, primarily the Turkish lira. Current tax expense of $21,800,000 was lower in the quarter compared to Q2 of 2022, call, primarily related to operations in Turkiye. Subsequent to the quarter end, Turkiye enacted a change to its corporate tax rate, increasing it from 20% to 25% for 2023 and subsequent years.

Speaker 4

This change reverts the tax rate back to the level last seen in 2021. This change was enacted into law on July 15 and is retroactive to January 1, 2023. As a result of the 5% rate increase, The estimated impacts related to net earnings for the 6 months ended June 30, 2023 are $7,000,000 of additional cash based will be recorded as changes to net earnings during the 3 9 months ended September 30, 2023. Turning to Slide 7. At quarter end, we had unrestricted cash, cash equivalents and term deposits of $456,600,000 Excluding the impact of the equity funding and the Scurius Growth Capital during the quarter, the 2nd quarter ending cash balance was $272,000,000 an increase compared to Q1 2023's ending cash balance of $262,000,000 With production expected to improve over the second half of the year, we expect to see our cash from operations improving further.

Speaker 4

With the closing of the Scurries project financing in April, availability under Eldorado's $250,000,000 revolving credit facility was reduced as Eldorado's funding commitment for the Scurries project is fully backstopped by a letter of credit under that revolving credit facility. The availability under the facility as of June 30 was $112,000,000 As the company invests further into the project, The letter of credit will be reduced euro for euro. To protect the downside on the gold price while we build spurious, We locked in 0 cost collars for approximately 32% of our overall gold production, which amounts to about 16,667 ounces per month. For the next 2.5 years that commenced in June of 2023. For 2023, the floor price is $1700 per ounce with a ceiling price of $2,736 per ounce.

Speaker 4

2024 has a floor price of $1800 and a ceiling price of $27.65 and for 2025, we have locked in a floor price of $1900 and assumed price of $26.67 We continue to focus on maintaining a solid financial position, which provides flexibility to unlock value across our global business. With that, I will now turn it over to Joe to go through the operational highlights.

Speaker 5

Thanks, Phil, and good morning. Starting on Slide 8, I'd like to start by congratulating our team in Greece for completing their first verification against the Mining Association of Canada's Towards Sustainable Mining Protocols. Callings. Of note, we achieved AAA scores across all indicators for tailings management and biodiversity underlining of El Dorado's commitment to responsible mining practices. As a Canadian company voluntarily implementing A globally recognized program like PSM across all of our international operations speaks to the integrity of our teams and the results support our strategic commitment to sustainability.

Speaker 5

In the Q2, our lost time injury frequency rate rose slightly to 1 call. 8 per 1000000 man hours worked from 0.96 in quarter 2 of 2022. We continue to take proactive steps to improve workplace safety and to ensure a safe working environment for our employees and contractors. At SCORIUS, activity in Q2 continued. We advanced engineering and procurement and initiated the transition to full construction with the finalization of project financing during April.

Speaker 5

General works were focused on creek cutting, and site preparation, relocation of temporary facilities, recommissioning of the non contact water re injection well system and the haulage of aggregates for construction purposes. Additionally, the first phase of underground development continues to advance the west decline and the foundation work for the primary crusher is underway. Mobilization of the 1st major earthworks contractor for Hall Rose needed to undertake all other major earthworks is progressing well with work on several fronts planned. Milestones in the second half of the year include finalizing of the awards of the remaining major procurement and contract packages, including call. And we will now turn the call over to Mr.

Speaker 5

President. Thank you, sir. Thank you, sir. Thank you, sir. Thank you, sir.

Speaker 5

Thank you, sir. Our first question comes from the line of John call. As previously stated, project spending at Scurius is expected to be of $240,000,000 to $260,000,000 in 2023. The spending is focused on finalizing detail engineering, which is now 48 conference call. As of June 30, Pierriment is at is 62% complete and is also expected to be in the 90% range complete range by year end.

Speaker 5

Economic activity in Greece is increasing, so moving through the commitment phase of the project is important to mitigate potential cost and schedule pressures. While we have yet to see material impacts from this activity thus far, we see the keys to ongoing success as maintaining or improving our pace contract awards and to continue meeting the productivity levels as estimated in the December 2021 and the construction ramp up progresses. With several major contracts expected to be awarded during the Q3, We will be updating from the feasibility study estimate to the project control budget throughout the quarter and expect to provide further information by the end of Q3. Now moving on to Slide 10 on our operating results. We produced 109,435 call.

Speaker 5

We're pleased to report that we're pleased to report that we're pleased to report that we're quarter, we do remain on track to meet our guidance. I'll pass it over to Simon to review the Q2 performance at our operations in Turkiye and Canada.

Speaker 6

Thanks Joe. Starting in Turkiye on Slide 11. At Kishalar, 2nd quarter production was 34,180 ounces and cash operating costs of $6.87 per ounce sold, which represents conference call. We have a 22% increase in production and a 14% reduction in cash costs over Q2 2022. Extraordinary rainfall in May and into early June at levels nearly equivalent to our annual averages negatively impacted Kisladag production.

Speaker 6

The enriched gold solution was diluted with the excess volumes recirculated through the pad and the lower than planned solution grades reporting to the gold recovery circuit. The leach circuit water balance is stabilizing and is expected to be normal operating volumes by the end of the quarter and production is expected to improve accordingly. During the quarter, we conducted a 6 day process facility shutdown and throughout that period successfully achieved some key milestones, including the tie in for the new final agglomeration circuit, the first rotation of the HPGR rolls and replacement of 1800 meters of belt for the major overland conveyor. Following the time, we then commissioned the final agglomeration circuit and it is currently performing as expected. The North East Leach pad, which serves the remaining life of mine, is now operational with stacking having commenced in mid July as planned.

Speaker 6

Call. Although time in operation is limited, we are progressing well. We have met and expect to sustain the targeted stacking rate in August. We expect the positive impact from the combined effect of the fully now fully and the new final evoloration system, the new leach pad and ongoing improvement in mine performance and we expect to meet our tons placed target during Q3 and the balance of the year. We are maintaining Kisladag's guidance between 160,000 and 170,000 ounces of gold produced for the full year of 2023.

Speaker 6

On Slide 12 at Efemcukuru, 2nd quarter gold production was 22,644 ounces at cash operating cost of $697 per ounce sold. Gold production, throughput and average gold grade at Efemcukuru were in line with the plan for the quarter. Development towards the Kokarpana area is on track and is expected to continue to extend mine life. For 2023, SM2 crude production guidance remains at 80,000 ounces to 90,000 ounces of gold. And now moving on to Lamaque and Slide 13.

Speaker 6

2nd quarter gold production was 38,745 ounces at cash operating cost of $6.76 per ounce sold. The team at Lamaque has done a remarkable job given the challenges they have faced related to the forest fires in Quebec and the air quality impact they have had in the Val d'Or area. As a result of the air quality issues, 25 percent of the June underground production shifts were canceled and some surface activity suspended. We maintained mill throughput by lower grade stockpile material being processed to offset the unplanned downtime with a reduction in future planned downtime. The team was able to safely resume underground operations by waterfogging the ventilation intake to achieve normal air quality for mine activities and by providing an alternative group to safely transport employees to the mine without utilizing forestry roads.

Speaker 6

During July, the air quality has improved and we have operated and continue to operate normally. I'd like to thank the team for putting people first through this event as always. While surface exploration work was halted due to the closure of forest access roads, we continued underground drilling and remain on track to complete our infill drilling program targeted targeting the upper 2 thirds of the Olmec deposit in 2020 3. Our plan to take a bulk sample and announce OMAC inaugural reserves during the Q4 of 2024 is also remains on track. In June, we were pleased to take the delivery of the 1st electric haul truck, Sandvik Model TH-550B, and you can see it pictured here with the team taking part of the official ribbon cutting ceremony to commemorate the event.

Speaker 6

Lamaque is the 1st to apply this underground technology in Quebec. With a 50 tonne capacity and increased ramp speed, this equipment will play a key role in improving production efficiency, reducing the on diesel particulate matter and mitigating our greenhouse gas emissions. We expect to take delivery of the second truck in early 2024. During the second half of the year, we expect to see continued stable processing rates at grades higher than processed during the first half of the year. We are maintaining Lamaque's 2023 production guidance of 170,000 to 180,000 ounces of gold.

Speaker 6

I'll hand the call back to Joe to review the 2nd quarter results at

Speaker 5

Olympias. Thanks, Simeon. Moving to Olympias on Slide 14. 2nd quarter gold production was 13,866 ounces and cash operating costs were $14.39 per ounce sold. Mine and processed tons were up from the prior quarter and at record levels for Olympias.

Speaker 5

However, production was lower and cash costs higher due primarily to lower byproduct credits and lower payability. Zinc concentrate revenue was lower than planned due to lower zinc price and pay capability at $4.35 per ounce gold sold. Lead concentrate revenue was lower than planned due to and the results of the quarter at $2.30 per ounce sold. Higher Ed concentrate revenue was slightly favorable with call higher gold price offset by lower gold payability. Some positive milestones accomplished during the quarter and are expected to mitigate those impacts along with our continued trend of higher mine output through efficiency.

Speaker 5

The first milestone was the transition to mechanical loading of drilled rounds with a bulk emulsion blasting agent, a first time application of this methodology in Greece The anticipated improvement of approximately 15% per blasted round is now being achieved as it is phased into the operation. The full transition to bulk emulsion system is expected to be completed over the balance of the year. The second milestone was mechanical completion of a major upgrade to the Olympias ventilation system, which we commissioned during the 1st week of July. Ventilation system startup was enabled by completion and energization of the new Olympia's 150 kilobytes substation during June. The substation not only powers the ventilation system, it provides for greater dewatering capacity from the pump station commissioned last year call improving the overall power factor for Lamps.

Speaker 5

The new substation and our ongoing progress toward ventilation on demand both impact power demand favorably. The bulk emulsion and ventilation projects were scheduled for early Q1 completion. Their delay has affected mine plan sequence and has delayed lower mine development, both of which are contributing to the factors contributing factors to the byproduct and grade variances outlined earlier. These projects now online, we expect to increase production from the plateau shown in green on the slide, which is expected to improve our byproduct metal production resulting in higher byproduct credits and in turn lower operating costs. We are maintaining the guidance of 60,000 to 75,000 ounces of gold at Olympias for 2023.

Speaker 5

I'll stop there and turn it back to George for closing remarks.

Speaker 2

Thanks, team. As part of closing, I'd like The first acknowledge of the Lamaque and Kisladag teams for their proactive work in mitigating weather related risks. Which are operating at or above design criteria. And at Lamaque, we protected our people first, but our team was able to limit production impacts that were caused by the wildfires. And the second thing I'd like to emphasize is we are at a major inflection point in Eldorado.

Speaker 2

After completing these construction projects. In Olympias, yes, the Q2 ASIC was high, conference call, but was largely driven by sequencing delayed access to high grade stopes, which are going to come out in the second half and also from lower zinc prices out of our control. However, we are on track to deliver guidance at Olympias in 2023. And the biggest thing is we've delivered these transformational projects as Joe outlined, emulsion blasting, new substation energized, expanded ventilation. It supports the ramp up as much stronger second half results and it also gives us ability to ramp up production coming out of the flat zone, which are larger stopes yielding better productivity.

Speaker 2

If you look at Olympias, 1 year ago, we were operating at a 380,000 ton per annum rate from underground, and now we're operating in a 480,000 ton per annum rate. This positions Eldorado in a good position to deliver production growth, cash flow growth and leading shareholder returns versus our peers. Thank you for your time. I'll now turn it over to the operator for questions from our analysts.

Operator

Thank you. We will now begin the question and answer session. Our first question comes from Cosmos Chiu of CIBC. Please go ahead.

Speaker 7

Great. Thanks, George, Phil, Joe, Simon and Lynette. Maybe my first question is on your income statement. I guess there seems to be some debate today on the foreign exchange gain of $14,681,000 Should it be adjusted out? Should it be included?

Speaker 7

I guess my question is, I think, Phil, you kind of touched on it, but what's the nature of that foreign exchange gain, which seems to be larger than and is it one of those things that could reverse later on in Q3? Are we going to see like Something like to the same magnitude in Q3, but in a different direction. I'm just trying to see understand today and also what's

Speaker 4

So maybe I can start by just talking about So Eldorado operates, as you know, in multiple jurisdictions, which exposes us to different currencies other than the U. S. Dollar. And I I think the most notable impact in Q2 was the weakening further weakening of the Turkish lira. At the end of Q1, The Turkish lira was around $20,000,000 and at the end of Q2, it was around $26,000,000 So that in itself created A large portion of that FX gain.

Speaker 4

So in terms of the issue in terms of whether If I understand your question correctly, should that FX gain be adjusted in our adjusted EPS? When you go from earnings to adjusted earnings, Normally, you try to back out items that are unique, that are one time occurrences that are non recurring. And I would say like our foreign exchange gain, we report foreign exchange gains or losses every quarter. It is a regular, I guess, a regular reporting feature of our operations. So that's I think that would explain the context behind whether the foreign exchange gain, whether it's the realized portion, unrealized that, that should be adjusted.

Speaker 7

Understood. And I agree as well. And then I guess looking into Q3, I'm seeing that the Turkish lira continues to weaken. Like are we going to see Kind of the same sort of potential foreign exchange gain in Q3 as well. Again, it depends.

Speaker 7

We're only July 28. But if it continues to kind of trend in this direction, Is this something that we should again be aware of in Q3?

Speaker 4

Yes. I think that's a good question. And I would say that the way we have looked at it, with the results of the recent Conference and runoff elections in Turkey. We're expecting that with the continuation of the on the Lyra, and we expect that the Lyra would weaken further in the summer. Summer, for example, it's tourism season, a week earlier does support tourism.

Speaker 4

It does support exports, which supports helps them with their balance of payments. So we're expecting a weakening in the summer. The forecast at this point based on information that we've looked at is that there will likely still be Weakening, not expecting to be significant. It's currently sitting about 26, 27 We're expecting it to perhaps go down to $30,000,000 which would be less significant than what we incurred in Q2. But at some point here, we expect with some of the changes that are taking place, the increase in interest rates and some of the other measures that the government is taking in Turkey that we're hoping that the lira will begin strengthening at some point.

Speaker 7

Maybe switching gears a little bit on SKIRUS. As you talked about, there's a number of contracts that will be finalized in Q3. I guess my question is twofold. Number 1, it seems like there's still some earthworks to be done, some concrete to be poured, I'd like to crusher, the foundation with the crusher. I seem to remember that it's already half built.

Speaker 7

I just want to make sure that some of this earthworks and concrete pores and major contracts are in addition to what's been done in the past and indeed, Skouries is more than half built from what my understanding. And number 2, I guess you're talking there's an update coming up in terms of the budget control versus the feasibility study. Clearly, you might not be able to tell us too much today, but overall, are you seeing costs sort of abating overall, cost pressures abating in terms of inflationary pressures And how is it negotiating with these contractors this time around versus the last go around at it when you last

Speaker 5

Cosmos, this is Joe. I'll take the question.

Speaker 7

Hi, Joe.

Speaker 5

So the first part is clearly as half built. So the process plant is well advanced. So in the process plant, concrete is poured, structural steel is up The major works for the plant include piping, electrical and instrumentation. Associated with the plant, the primary crusher has to be The foundation up has to be built and the crusher set. The crusher is on-site and in lay down.

Speaker 5

So that kind of summarizes the plan. So it is roughly conference call. The major works in addition to the plant include The filter plant. So from prior construction to now, we have modified the project to go from Conventional slurry tailings to dry stack requiring a filter plant. So the filter plant has been procured and the construction from foundation up through setting of the equipment needs to occur.

Speaker 5

The dry stack tailings itself, the facility for storage of dry stack tailings need to be constructed, which basically is an embankment. Pre strip of the pit needs to be completed, which will feed that embankment. And there are water treatment plant, Auxiliary Facilities and a few other things. So characterizing it as half built, overall, probably in range of 40% complete on a total basis at this point. And when we as we look at updating forecast or budgets.

Speaker 5

Cosmos, as you recall, the feasibility study estimate was completed in in December of 2021. And we felt as though we were in good position having already procured the or put an So we felt like we're pretty insulated from inflationary pressures and that remains true today. That is 18 months old. There have been other things that are impacted and that's primarily labor and bulk purchase of pipe cable that kind of thing which is happening now. So we would anticipate

Speaker 3

conference call. Kind of the

Speaker 5

normal inflationary pressures that others have seen for that period 2021 to now. And that covers everything labor, frunk and engineering through completion of project. So I mean to summarize all of that, Yes, we feel really good. The plant is well advanced. I haven't been on many projects where the plant is in this position at this time.

Speaker 5

We'll have it early and actually have it available for commissioning well in advance of startup, which is not common. That gives me great relief. Secondly, as we think about the insulation that we have from The inflationary pressures, what we see we're going to experience some of that, but we feel pretty good about where we sit Having delivered the project reasonably in line with the feasibility study estimate project to date. So all things good, Normal conditions for projects exist and you'll hear more when we complete the update of estimate following about movement of the project from today at about 30% committed to about 60% to 70% committed in the quarter. Does that help, Cosmos?

Speaker 7

Yes. That helps perfectly, Joe. And then maybe one last question. Overall, weather related issues in Q2, looking at full year guidance and looking at what you've done so far in the first half, clearly you need increased production at Kisladag and also Lamaque to hit your guidance for the year. But maybe focusing on Kistadog, sounds like heavy rainfall did not impact stacking but impact that you have reached kinetics.

Speaker 7

It sounds like some of that lower grade solutions still needs to be extracted in Q3. I'm just wondering in terms of we know that H2 is going to be better than H1. The weather related issues, is that still going to impact Q3? And in terms of the improvements, is it going to be Q4 better than sort of Q3 or at this point in time, we're not sure.

Speaker 2

We're expecting Q3 to be stronger than we would have thought of 3 months ago. And it's simply because that excess solution, we expect to be processed during Q3. So And when you look at Kisladag overall, the way I'd put it is we delivered the projects, the system, As you said, the placements are at design already, and we just commissioned the North Leach pad in early July. So we're in a really good position to put the tons up there. And we're in a good position to get that diluted solution through the plant in Q3.

Speaker 2

And I say it all that in the context, if we got another unexpected rain event, Things happen, but that's not likely to happen. We're expecting a very strong second half at Kisladag. And at Lamaque, I mean, it was already second half loaded, just sequencing and grades. What happened in Q2 with the wildfires and as Simon pointed out, we lost quite a few shifts in June. We've got a solid plan.

Speaker 2

We've got higher grade stopes coming. We expect to deliver a strong second half. So I'd say we're in a really good position right now to deliver the guidance. And the last piece of the puzzle you didn't mention was Olympias. But Again, delay in high grade access to stopes, both gold grades and particularly silver, those stopes are coming out in the next quarter.

Speaker 2

We had a second half planned to be stronger, supporting with all this capital that we've invested and We believe we're in a good position to deliver our guidance for the year.

Speaker 7

Great. Thanks again, George

Operator

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

Speaker 8

Hey, guys. Thanks for taking my questions. Most of it's been answered, but just circling back on the Kishida, you've got the new pad. Is that solution of a new pad report to a different pond that was Versus the pond that was diluted with the rainfall?

Speaker 6

Hi, Mike. It's Simon here. That's correct. So the collection system for the Southeast Leach pad is separate from the Northeast Leach pad. So Any of the stacking and solution that we'll put through on the Northeast Leach pad will be isolated from the South.

Speaker 6

And so conference call. That won't be diluted in any way from the Rainfall event. So that is certainly well picked up.

Speaker 8

Okay. And it's nice to hear that you're expecting to have the impact of the heavy rain pretty much behind you by the end of this quarter. Just to follow-up on Kaes' question, is it fair to assume kind of Q3 is Better than Q2, but probably pretty stellar Q4 given you're going to have quite a bit of gold in solution to be pulling from in the 4th quarter?

Speaker 2

Yes. The way I'd look at it, we're expecting a strong second half and that the catalyst partly is the solution inventory that's going to come out in Q3. But the rest of it is, we've been at the top of the pyramid on the South Leach pad and Limited for Space. We now have the North Leach pad where placements are ongoing. We'll have both sets of those solutions reporting to independent ponds and we're ramping up the production as planned coming out of the new circuit.

Speaker 2

So all the larger grasshoppers, the conveyor, we're in a strong position for the second half. And I guess the other thing with the agglomeration drum, What we wanted to get out of that system was get those fines combined and get good permeability through the heap and it is performing. So predicting Q2 versus Q3 and how we're going to pan out, It's tough to say on this call right now. I'd just tell you stronger second half, bleach kinetics are going to be better, that solution inventory is going to come out and We're going to have solutions coming out of both heaps. So we're pretty confident about the second half.

Speaker 8

That sounds good. And I guess Also going back to the high pressure grinding rules, you're still even in that optimization phase there where You're able to tweak things and boost recoveries going forward a bit on top of that additional solution, correct?

Speaker 2

Yes. I mean our second half remains as planned that we'll be testing how fine we can crush The success with the agglomeration. So we have to maintain good permeability. If we go too fine, you lose in the end. So, yes, the second half is all about optimizing throughput, crush size and agglomeration to get optimum We'll have more to talk about early next year when we have that date in front of us.

Speaker 8

Okay. And I'm more familiar with kind of rainy season impacts and heap leaches in Mexico where you typically see like a shocking of the pad on the back of the rainy Is that something you had to do in June and therefore is already in your operating costs? Or is it something you don't necessarily do Because of the longer leach cycle at Kisla Day?

Speaker 6

That's correct. We don't have to as dramatic as what happens in other places in terms of reagent addition. We have to ensure that we had sufficient cyanide concentration, but not to the level that we would be familiar with at other places.

Speaker 8

Okay. Thanks very much, guys.

Speaker 7

Thank you.

Operator

Our next question comes from Fahad Tariq of Credit Suisse. Please go ahead.

Speaker 9

Hi, thanks for taking my question. I just want to circle back on SKURIOUS and the update in Q3. I just want to make sure I'm understanding it correctly. Based on the comments, are you saying directionally without getting into specifics, but directionally that estimate could be revised higher based on

Speaker 2

What we're saying is that we'll have a number of major contracts finalized and that will inform the cost estimate. So we'll update the market as to any changes there. And in terms of productivities, to date, the Productivities we're seeing on construction are consistent with the estimate. So we'll have another quarter worth of activities on the ground to take a look at, but I wouldn't say we're going to be in a position where we've got a lot of intel on productivities. So far things are as expected.

Speaker 2

And as the construction ramps up, as we said, we're going to be approaching 900 people, Next year is when we're really going to get a taste of the productivities versus the feasibility study. But last year, we did the cladding and building around the mill that came in as planned. We've begun to do some roadwork. We're starting to pour some concrete for the primary crusher. There is some data coming in, but it's aligned with the estimates.

Speaker 2

So it's just simply another data point in Q3 with major contracts being led, a little bit more construction activity on the ground and we'll take a fresh look at the estimate and inform. But you shouldn't be reading in That we're concerned about anything right now. It's going to be another normal data point in a construction project like this.

Speaker 9

Got it. Okay. Thank

Speaker 3

you.

Operator

That's all the time we have for today and this concludes the question and answer session and today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.

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Earnings Conference Call
Eldorado Gold Q2 2023
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