Eldorado Gold Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
February 23, 2024

There are 8 speakers on the call.

Operator

Thank you for standing by. This is the conference operator. Welcome to the Eldorado Gold 2023 Q4 and Full Year Results Conference Call. As a reminder, all participants are in listen only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions.

Operator

I would now like to turn the conference over to Lynette Gould, Vice President, Investor Relations. Please go ahead, Ms. Gould.

Speaker 1

Thank you, operator, and good morning, everyone. Like to welcome you to our Q4 year end 2023 results conference call. Before we begin, I would 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 and risk factors in our management's discussion and analysis. Joining me on the call today, we have George Burns, President and Chief Executive Officer Paul Berney Howe, Executive Vice President and Chief Financial Officer Joe Dick, Executive Vice President and Chief Operating Officer and Simon Hilly, Executive Vice President, Technical Services and Operations.

Speaker 1

Our release yesterday detailed our Q4 year end 2023 financial and operating results. This should be read in conjunction with our year end 2023 financial statements and management's discussion and analysis, both of which are available on our website. They have also both been filed on SEDAR Plus and EDGAR. All dollar figures discussed today are U. S.

Speaker 1

Dollars unless otherwise stated. We will be speaking to the slides that accompany this webcast, and you can download a copy of these slides from our website. After their prepared remarks, we will open the call for Q and A. At this time, we will now invite analysts to take your questions.

Speaker 2

Thanks, Lynette, and good morning, everyone. First, we'd like to pass on our condolences to everyone affected by the SSR strategy in Turkey A. Our in country team provided services to the response efforts and we await key findings from the investigation. We are pleased to have Paul Fournio, our recently appointed Executive Vice President and Chief Financial Officer step into the role following Phil Yee's retirement. Paul joined us in 2021 as part of our CFO succession plan and was key in negotiating the project financing on the finance team since joining Eldorado.

Speaker 2

The transition has gone smoothly and for those who have not yet met Paul, I'm sure over the coming months you will have the opportunity to do so. I would also like to take this opportunity to acknowledge Joe Dick, as this will be his last formal conference call with us. At the end of March, he will retire his role as COO and move into a consultant role to support us in delivering the Skouries project. Joe, I would like to thank you for everything you've contributed to the organization. And on behalf of everyone at Eldorado, we wish you all the best in your semi retirement.

Speaker 2

As Joe moves into this new role, we have welcomed Lo Smith as the Executive Vice President Development, Greece. Lo is responsible for our Greek assets including Skouries and Olympias. He will join us on our Q1 call for 2024 in April to review the Greek assets. Lo brings to the role over 30 years of international experience in the industry. We are pleased to have him join Eldorado.

Speaker 2

Here's the outline for today's call. I'll provide a brief overview of Q4 and 2023 results and highlights, updated 2024 production and cost guidance and our 4 year production outlook. I will then pass the call over to Paul to go through our financials and then 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

2023 was a successful year at Eldorado marked with many accomplishments. We delivered increasing production while lowering our cost profile over 2022, resulting in a very strong financial year. This accomplishment demonstrates our team's dedication and hard work. 4th quarter was the strongest quarter of the year with safe production of 143,166 ounces. We finished the year with coal production of 485,139 ounces, in line with our guidance range and a 7% increase over 20 22.

Speaker 2

Production benefited from Olympias infrastructure and productivity improvements and At Kisladag from our upgraded materials handling systems and the commissioning of the North heap leach pad. On the cost side, our cash cost and our all in sustaining cost decreased by 6% and 4% respectively compared to 2022 in an environment where the industry cost base is rising. We saw slightly lower unit cost per key consumables including energy and fuel and lower sustaining capital expenditures. Also in Turkiye, we benefited from the depreciating lira that more than offset inflation. In addition, our continuous improvement initiatives across the sites also contributed to declining costs.

Speaker 2

For full year 2023 cash cost and all in sustaining costs, we're in line with our guidance ranges we issued in October. Paul will touch on the cost in more detail later in the call. Turning to Slide 5. In the Q4, we recorded one lost time injury with a frequency rate of 0.42, consistent with the LTIFR in Q4 2022. In 2023, the LTIFR was 0.65, a 45% improvement over 1.19% in 2022.

Speaker 2

While we are proud of our safety performance and our employees' commitment to safe operations, we know there's a lot more to be done. Our safety and health journey will continue in 2024 with a focus on preventing high potential incidents and further empowerment of our employees to promote a positive health and safety culture. On sustainability, we take pride in our consistently strong performance and are pleased to have been recognized for our continued efforts. We were ranked 1st in the materials sector and 27th overall in The Globe and Mail's 2023 board games, which rate Canadian corporate boards on the S and P and TSX Composite Index for the quality of their governance practice and disclosure. In addition, at the Resourcing Tomorrow Conference in London, we took home the Project Financing of the Year award for the STIRRIS project financing.

Speaker 2

We also received an honorable mention for ESG Producer of the Year. Moving to Slide 6, in conjunction with our financial release yesterday, we published our 2024 guidance and 4 year production outlook. Looking forward towards 2024, we expect a 9% increase in gold production over 2023 with gold production expected to be between 505,555,000 ounces. The increase in gold production over 2023 will be primarily driven by higher expected production at Kisladag and Olympias following the productivity improvements that were implemented last year. As in previous years, production is expected to be second half weighted.

Speaker 2

Production in Q1 and Q2 of this year is expected to be lower than Q4 2023 as a result of winter conditions at Kisladag and planned ore grade variability at Kisladag, Lamaque and Efemcukuru. Total cash costs are expected to be between $8.40 $9.43 per ounce sold. All in sustaining costs are expected to be between $119.09 $12.90 per ounce sold. Both total cash cost and all in sustaining costs are expected to be in line compared to 2023. Sustaining capital of our operations is expected to be between $135,000,000 $160,000,000 increase over 2023 is primarily the result of an increase at Lamaque for underground development and tailing storage facility upgrades and Olympias for underground development and infrastructure.

Speaker 2

Growth capital of our operating mines is expected to be between $122,000,000 $144,000,000 which has increased over 2023, primarily the result of an increase at Lamaque for the planned or mock bulk sample development and at Olympias as we take a phased approach to increasing throughput to 650,000 tons per annum, which is expected in 2026. Growth capital at Sturey's is expected to be $375,000,000 to $425,000,000 Skouries capital has significantly increased over 2023 as we are in the peak of the construction. Due to delays in finalizing key contracts and some of the 2023 spend was moved into 2024 as we previously indicated. Our 4 year outlook is a compelling story of near term high quality production growth. The primary growth engine gold production is expected to increase 45% from 2023 through 2027.

Speaker 2

In addition to the gold production, copper becomes a significant component of Eldorado's overall production and revenue profile. Within our guidance this year, we have included the copper production at Skouries starting in 2025. Moving to Slide 7, we announced in yesterday's release a 9% or $75,000,000 increase in the capital estimate at Skouries. Higher capital estimate was a result of increased labor cost. During 2023, negotiated contracts finalized were consistent with the feasibility study.

Speaker 2

The recent bids in 2024 that are being finalized or will be finalized in the first half of twenty twenty four are associated with the mill facility and the tailings filtration plant that are coming in above the feasibility study estimate. The largest factor is higher labor rates for trade workers and to a lesser degree slightly lower productivity assumed and to an even lesser degree an increase in quantity of work being recognized from detailed engineering versus the feasibility study engineering. These new market and engineering realities are being included in the remaining contracts still being finalized. As a result, we believe the updated cost estimate is largely derisked in terms of labor cost, procurement risk and engineering risk. We also believe this modest 9 percent increase in capital cost estimate in light of the global inflationary pressure since the December 2021 feasibility study is a positive outcome.

Speaker 2

Our focus as we finalize these remaining contracts turns to mobilization of contractors and safe execution of the work to deliver start up commissioning in Q3 2025 and operational readiness to deliver commercial production by the end of 2025. With solid project financing and a robust balance sheet, we remain fully funded to complete the construction at Skouries. Time we invested in diligently negotiating these key contracts has increased our execution confidence with a modest effect on the production schedule. 1st production of the high quality in copper gold concentrate is now expected in Q3 of 2025 from prior guidance of mid-twenty 25 and we remain on track for commercial production at the end of 2025. With the back end weighted operations ramp up curve, we have lowered the Stiry's 2025 gold production range to between 5,060000 ounces of preproduction ounces from the prior guidance of 80,000 to 90,000 ounces.

Speaker 2

In 2025, we also have guided on copper production and expect to produce between £15,000,000 £20,000,000 that year. For the subsequent years 20 262027, we are maintaining the previous gold production guidance ranges and have provided copper production. We are assessing our plans with a goal of increasing our 2026 production profile at Skouries. I'll stop there and turn the call over to Paul for a review of our financial results.

Speaker 3

Thank you, George, and good morning, everyone. Slide 8 provides a summary of our Q4 and full year results. 2023 was a strong year for us. As George mentioned, we delivered in line with our production guidance and in line with our guidance range on operating costs. Increasing production and lowering costs compared to 2022 have resulted in strong financial results for the full year.

Speaker 3

Eldorado reported net earnings attributable to shareholders from continuing operations of $92,000,000 or $0.45 per share in the 4th quarter, positively impacted by higher revenue and a higher income tax recovery over the comparative period in 2022. For the full year, net earnings attributable to shareholders from continuing operations was $106,000,000 or $0.55 per share compared to a net loss of $49,000,000 or $0.27 loss per share in 2022. Net earnings increased in 2023, primarily

Speaker 4

due to the

Speaker 3

timing of our mine status or $82,000,000 excluding capital investment in the Scurius project. For the full year, free cash flow was negative $47,000,000 or $113,000,000 positive excluding the Scuris project, a significant improvement over 20 22, which was negative $69,000,000 Cash flow generated by operating activities before changes in working capital in the quarter was 135 sorry, dollars 138,000,000 and for 2023 was $411,000,000 compared to $240,000,000 in 20.20 2. 4th quarter cash operating cost was $7.16 per ounce sold and all in sustaining cost was $1207 per ounce sold. For the full year on a per ounce sold basis, cash operating cost was $7.43 total cash cost was $8.50 and all in sustaining cost was $12.20 per ounce. Our cost decreased compared to the prior year as a result of higher production and slightly lower unit costs for key consumables including energy and fuel.

Speaker 3

Capital expenditures were $137,000,000 in the 4th quarter including investment in growth projects at Kisladag focused on the waste stripping, North Sea leach pad and upgraded materials handling systems and Asgures where we continue to advance construction and procurement for the project. Overall, 2023 capital expenditures were $411,000,000 Current tax expense of $22,000,000 for the 4th quarter increased from $10,000,000 compared to the same period in 2022. Current tax expense totaled $86,000,000 for the full year an increase from $70,000,000 in 2022. The increase in 2023 was primarily related to the operations in Turkey. The increase reflects higher sales volumes combined with a tax rate increase in Turkey from 20% to 25% that was enacted on July 15 that was retroactive to the beginning of the year.

Speaker 3

This was partially offset by Turkish investment tax credits. 3rd, income tax recoveries of $68,000,000 in the 4th quarter $28,000,000 for the full year compared to recoveries of $34,000,000 $8,500,000 respectively in 2022. Turning to Slide 9, our financial position remains robust as we move into 2024. We ended the year with total liquidity $652,000,000 including $542,000,000 of cash, cash equivalents and term deposits and $110,000,000 of available capacity on our revolving credit facility. We continue to focus on maintaining a solid financial position which provides flexibility to respond to opportunities and fund our growth strategy to unlock value across our global business.

Speaker 3

With that, I'll now turn the call over to Joe to go through the operational highlights.

Speaker 2

Thanks, Paul, and good morning.

Speaker 5

Starting on Slide 10 at Scorius. We have made significant progress since restarting construction. Activity has continued to ramp up on-site with project progress at 38% at the end of December 2023. Overall project progress stands at 70%, including work completed before putting the project into care and maintenance in 2017. Since giving the last update, detailed engineering has progressed to 61% from 56% and procurement is 82% complete, up from 73%.

Speaker 5

Mobilization of the earthworks contractor for embankment facility within the integrated extractive waste management facility, the IEWMF started in the Q2 along with critical underground power service updates. Additionally, the construction team made positive headway on the crusher building, Millman flotation building and underground development. We have some more detailed photos to share in the coming slides. Moving to Slide 11, as we continue to ramp up construction activities, our 2020 4 capital is expected to be between $375,000,000 $425,000,000 The capital will be focused on continuing to advance construction of the major earthworks, including haul roads, IEWMF construction, low grade stockpile, water management and process facilities and the crusher and filter buildings. In addition, work will focus on underground development to support the test stoping program scheduled for 2025.

Speaker 5

Mechanical, piping and electrical installations will progress in process and infrastructure areas. On the critical path is the filter plant, which continues to advance with the piling work having commenced. We expect to award the filter building contract early in Q2 with the contract will include the building structure, assembly of equipment within the building, including air compressors, conveyors, filter presses and other ancillary equipment in addition to the piping and electrical work. The filter plates arrived on-site in January with the remaining components, assemblies and fabricated frames expected to ship in the Q2. Pre assembly is expected to start following delivery.

Speaker 5

Work for the mill, flotation building is in progress with commissioning on overhead cranes, installation of construction lighting and scaffolding and the commencement of structural steel work. Mechanical, piping and electrical work for the process plant are mobilizing with work commencing this quarter. By the end of 2024, we expect to have completed the IEWMF copper dam and significantly advanced the IEWMF earthworks, water management facilities and the process and filter plants. The next set of slides show how much work is already underway on 3 critical areas. Since we hosted a contingent of analysts and investors on the site in October, you may be impressed by how fast things have advanced through the winter months, specifically on the crusher plant foundation and preparation of the filter plant area.

Speaker 5

On slide 12, the top photo gives you a good view of the amount of pre stripping that has already been completed in the pit. In the bottom photo, you can see the trucks on-site that are employed on the open pit pre stripping to support construction of the haul roads and water management ponds. On Slide 13, you can see the area for the crusher building. The piles have been driven and poured and the next stage of civil construction with the piling work underway. Shown on Slide 14, this shows the significant amount of excavation work that has been done with the piling work underway.

Speaker 5

Shown on Slide 15 are the first four company owned 45 ton Cat 745 trucks. These trucks will be used once Scurius is in operation to build the lift that we required on the dry stack embankment. During construction of the civil works, these trucks will be used as part of an integrated fleet with the Earthworks contractor for construction of the IDWMF facilities. We expect to take delivery of 15 additional trucks through the end of Q2, 2024. The photo on the right shows the first phase of the underground development advancing the west decline and access to the test stopes.

Speaker 5

The 2nd underground development contract proposals are in the final evaluation stage and awarding of the contract is planned for the Q2. This contract includes test work as well as additional development and services work to support the development phase 1 of the underground mine. We expect to complete about 2,200 meters of underground development by the end of 2024. As a reminder, is it expected that Curias will be mined predominantly be an open pit for the 1st 9 years in conjunction with the ramp up of the underground. We look forward to providing updates as progress continues.

Speaker 5

I'll turn it over to Simon for a review of operations.

Speaker 6

Thanks, Joe. Starting in Turkey A on Slide 16. At Kishida, 4th quarter production was 46,291 ounces with cash operating costs of $6.23 per ounce sold, which represents a 24% increase in production on a similar cash operating cost compared to the prior quarter. Production during the quarter was driven by continued optimization of the materials handling systems and the commissioning of the Northeast Leach Pad, which has increased the ore tons placed and increased irrigation flow rates. Overall, in 2023 production was below guidance due to slower than expected inventory drawdown at the Southeast Leach Pad.

Speaker 6

Cash operating costs were significantly lower than guidance as a result of the lower prices of fuel and electricity. Looking ahead to 2024, Kichadar's production guidance is between 180,000 and 195,000 ounces of gold. To achieve this, Kichadar is expected to mine and place on leach pad approximately 13,200,000 to 13,700,000 tons of ore at an average gold grade of between 0.7 0.8 grams per tonne. The production range has been revised from the guidance issued in 2023 this is primarily due to inventory buildup within the ore stacked in the leach facility following the residual impacts of the high precipitation event 2023. We continue to optimize our on down agglomeration process and stacking processes to improve quality Slide 17, at FN2Cree, 4th quarter gold production was 22,374 ounces at a cash operating cost of 8.16 dollars per ounce sold.

Speaker 6

Gold production throughput and average gold grade at FM2 Crew were in line with plan for the quarter. Overall, 2023 production and cash costs were in line with guidance. For the year ahead, FM2 crew's production is between 75,085,000 ounces of gold and the site is expected to process approximately 530,000 to 5 and 50,000 tonnes of ore at an average gold grade of between 5 5.5 grams per tonne. Production is expected to be relatively consistent quarter over quarter with the Q1 expected to be the lowest. And now moving to the Lamaque Complex on Slide 18.

Speaker 6

The Lamaque Complex delivered record gold production both in the Q4 and for the year. 4th quarter gold production was 56,619 ounces, a 29% increase over the prior quarter driven by productivity improvements in the Triangle Mine and higher grade, which allowed the mill to perform at capacity. Cash operating costs were $5.80 per ounce sold. Additionally, in 2023, we announced the conversion of a portion of the inferred resources into indicated resources at the Olmec deposit. During 2024, we will continue to advance in field drilling program targeting the upper 2 thirds of the Olmec deposits and we remain on track to take the bulk sample.

Speaker 6

We did a pre feasibility study and announced the Olmec inaugural reserves by the end of 2024. For the year, Lamex production guidance is between 175,000 190,000 ounces of gold and this is expected to the site is expected to mine and process approximately 870,000 to 910,000 tons of ore at an average gold grade between 6.3 grams and 6.8 grams per tonne. The production range has been widened slightly compared to the guidance issued in 2023 to reflect an updated mine plan that supports mine sequencing optionality and optimization as we move lower in the deposit. I'll hand the call back to Joe to review the Q4 results for Olympias.

Speaker 5

Thanks, Simon. Moving to Olympias on Slide 19. The mine delivered record annual production and the mill delivered record throughput by leveraging operating initiatives implemented during the year. 4th quarter gold production was 17,882 ounces and cash operating costs were $12.24 per ounce sold. Overall, 2023 production was in line with guidance.

Speaker 5

Costs were higher than expected because of a delay in the completion of the bulk emulsion and ventilation projects scheduled for early Q1 2023 completion and were commissioned mid year that affected mine plan sequence and delayed lower mine development, both of which contributed to the byproduct and grade variances, which in turn affected unit costs. At Olympias, in 2024, we expect to see continued improvement as we advance the underground development and increase metal production from the flat zone. Production is expected to be relatively steady through the year, delivering between 7,500,85,000 ounces of gold. Total cash costs are expected to benefit from the increased byproduct metal production within the flat zone, which is expected to result in higher byproduct credits, driving down the operating costs. Total cash costs are expected to be between 9.80 $10.80 per ounce sold and all in sustaining costs are expected to be between $12.80 $13.80 per ounce sold.

Speaker 5

Timing of byproduct shipments and subsequent recognition of sales per quarter may result in quarter over quarter total cash cost variability over the course of the year. I'll stop there and turn it back to George for closing remarks.

Speaker 2

Thanks, team. In summary, 2023 was a fantastic year operationally and financially, and I would like to acknowledge the dedication and hard work of our teams across the sites. We were able to deliver increasing production, hitting annual production records at both Lamaque and Olympias, while lowering our cost profile over 2022, a testament to the strength and commitment across the organization. We are in solid shape with a lot of momentum going forward. We are fully funded to execute on Skouries and bring into production next year.

Speaker 2

Additionally, each of our sites have ongoing continuous improvement initiatives with the assets expected to provide growing safe production year over year and a disciplined management in addition to Skouries bringing on high quality copper gold production, we expect to generate significant free cash flow generation. It's an amazing time to be at Eldorado. Thank you for your time. Will now turn it over to the operator for questions from our analysts.

Operator

Thank you. First question comes from Cosmos Hsu with CIBC. Please go ahead.

Speaker 4

Thanks, George and Simon. Congrats, Paul, and all the best, Joe. Maybe my first question is on SKIRIUS, the CapEx increase. As you mentioned, a lot of it is due to labor costs. A part of it is due to productivity.

Speaker 4

And certainly productivity was a point of discussion where we're on-site back in October. But can you give us a bit more color in terms of productivity? What kind of assumptions did you make previously? What kinds of assumptions are you making today in terms of productivity? Maybe as it relative to say Turkey or Canada or other parts of the world as well?

Speaker 2

Thanks for the question Cosmos. Maybe I'll take a helpful review and pass it on to Joe. I mean, the way I would describe it overall, when you look at last year's work, we well, even the year before, we put up the frame around the mill and the pebble pressure building, installed the cranes, put the cladding on the building and all that work came in consistent with our productivity assumptions. And overall that work came in line with the feasibility study. We've been doing additional work last year in getting the primary crusher moving some preliminary work around the filter building for the tailings and some preliminary work inside the mill building.

Speaker 2

And again, all that work was consistent with our estimates. And then we moved into the civil works, which is roads, open pit, mining and beginning to put the infrastructure in for the tailings and bank. And again, those bids and that work has come in consistent with sort of higher end labor. And what we found in the bids that we're just now finalizing and have projected into the remaining bids for that type of work is the rates have gone up. And I guess not a big surprise relative to what's happening globally, but higher than the other type of work that we've been conducting so far.

Speaker 2

So I tell you we're feeling confident now that we've got the right estimates for labor as we move forward to finish this project and I think that largely derisks us. And I'll pass it over to Joe to maybe give you a little color on the various components that led to this $75,000,000 increase all labor related.

Speaker 5

Thanks, George. First Cosmos, maybe I'll give you a little reminder on the FAS side. We use the Gulf Coast factor labor rate for productivity of 1.35. And as George said, that held consistently through 2022, 2023. As we've gotten into the trades, In the proposals and contracts that we have entered into, that's closer to 1.5, slightly under 1.5 is where the productivity factor would calculate.

Speaker 5

So it's up a bit. We also had modest increase in quantities moving from feasibility level engineering to detail engineering and that's a smaller factor than productivity. But as George said, we're feeling pretty comfortable that through diligent work through these contracts with these proposals and working to contract with contractors, we are doing diligent review of their work plans, making certain there's solid understanding and that we understand where they've gotten to their productivities, how they've gotten to their labor, how they expect to deliver. So we're quite confident that the time taken in doing that leads us to an executable plan. So I'll just echo what George said, our confidence level is up for execution moving forward, albeit at a higher labor rate.

Speaker 4

Great. Thanks, Joe. And maybe if you can help me with the numbers here. I just want to make sure my numbers are correct. As you said, CapEx has increased to a total of 920 $1,000,000 I know you said you spent $153,800,000 in 2023, an additional 375,000,000 dollars to $425,000,000 in 2024.

Speaker 4

I'm just trying to figure out how much has been spent so far, I'm just curious. And how much of the $920,000,000 is going to be spent in 2024 and how much of that is going to be spent in 2025?

Speaker 2

Yes, Cosmos. So the new total is $920,000,000 through the end of last year we've spent $184,000,000 and we have $7.35 left to spend against that $920,000,000 and then we've given you a guidance range for this year.

Speaker 4

Understood. Great. I mean, maybe one last question, George, to start off the presentation today, you mentioned the unfortunate event that happened at SSR Mining at the heap leach, the slip. Your operations are in a separate part of the country, so fully understand that. I'm just wondering if you've seen any kind of indirect impact to your operations.

Speaker 4

I know at least there's an indirect impact to your share price, but other than that, any other indirect impacts? And have you seen any kind of changes the overall sort of regulatory environment?

Speaker 2

Thanks for that question. Yes, I mean, as you would expect when a tragedy of this sort occurs, the regulators are going to be paying attention. So we get regular inspections at both of our operations throughout the year. And reviews since the tragedy. We've had no impacts from our operations.

Speaker 2

I would tell you, I take great comfort and pride in the oversight and the way we operate and maintain our facilities. Regarding the heap leach itself, we've been operating for 15 years. Our operators and maintenance employees do routine inspections throughout the day as we operate and maintain the facility. We do routine inspections throughout the year. Our engineering firms have provided us with designs to reviews each year.

Speaker 2

And we've got a very capable technical services group here at head office. And so we do our own reviews overall the technical and operating risks that you face in a mining business like ours. And so and I'd say one other thing that we do, we have an independent technical group and these aren't the engineers that design and our operations, but an independent group that comes through periodically and does an independent review. And so we have a lot of layers of protection to manage the critical risk that any mining operation face. And so I feel like we're in good shape here.

Speaker 2

We stand ready to understand any key learnings that will come out of the strategy and deploy the appropriate reactions if there are any pertinent to our business. So no impact on our business today. Regulators as you expect are taking a look at all the mines and we don't expect any impact to our business.

Speaker 4

Great. Thanks, George. That perfectly answers my questions and have a good weekend. That's all I have.

Speaker 3

Thanks, Cosmos.

Operator

The next question comes from Tanya Jakusconek with Scotiabank. Please go ahead.

Speaker 7

Great. Good morning, everyone. Thank you so much for taking my question. Maybe just someone can help me on the progression of the year first. I think Simon gave us some details on and George as you saw fit on the first half is going to be weaker.

Speaker 7

Q1 is going to be weaker at FM Chukuru. I think Olympias is even. So can we just get an idea on Lamaque and Kislodag? And then just overall, am I looking at that 48% in the first half, 52% in the second half? I know it's an art, not a science.

Speaker 3

Yes. Thanks for that question, Tanya.

Speaker 2

Yes, I mean, at a high level, we're softer in the first half with Kislak just due to winter issues that impact the heap leach as you would expect. And then the bulk of the rest of the variability has to do with ore grades. And I'll see if Simon can provide you some details on.

Speaker 6

Yes. Thanks, George. The yes, so we typically have with winter conditions, slightly slower conditions at Kishida sort of in the Q1. As we said, Efemcukuru generally fairly steady through the year. The Q1 will be its lowest.

Speaker 6

We are back half weighted in terms of grades coming into Lamaque with sort of a 4th quarter being at the higher end of our range that we said in the sort of 6.5 to 7 range where the 1st part of the year is in the 6 to 6.5 range. So does that help?

Speaker 7

Yes, it does help. I just was just thinking from an overall perspective, without having done all of these numbers, are we looking at that $48,000,000 $52,000,000 or am I not getting that right?

Speaker 6

Yes. So probably more like a it's probably up $45,000,000 in the first half to 55% in the second half. But Tanya, that's what we're probably seeing on a portfolio basis, if that helps to balance your books. Yes.

Speaker 7

No, it's just thank you for that, Byron. It's just trying to get this right because as you know, divide by 4 isn't how most of these mines are going through this year because of grade variability and weather and other. So that's very helpful. Thank you. My second question is maybe to George.

Speaker 7

I just wanted to understand you've got this has to do with stories. You mentioned that we've got these contracts, 2 outstanding that are going to be finalized in Q2. So my question is, how comfortable are you updating the capital in Q1 when you haven't really finalized these contracts until Q2? Wondered why you did it now and not waited till these contracts were done?

Speaker 2

Yes. I'd just say we have really good confidence in estimating the contracts that aren't finalized, but we have all the bids in. We've been having questions with the various contractors and we do understand through all of the bids submitted so far that these trades associated work is at a higher cost than we assumed in the FS. And I don't know, I think part of that may be driven on there's an uptick in work happening in Greece period. And so the availability of people and contractors are having to pay a bit higher rates than we assumed 3 years ago when we put this estimate together for that type of work.

Speaker 2

So, I mean, our confidence is basically we're through negotiations on a few of the contracts and the remaining contracts we've got good visibility from the bids and we still have to finalize which contractor and dot the I cross the T, but we got good visibility of where we're going to land.

Speaker 7

Okay. And those are the 2 major contractors and you have 80% you've secured 80% of that spend, right?

Speaker 2

Yes, we have. And then maybe, Devita, just a little bit clearer. So the bids that we have that we're basing this estimate are firm bids. We haven't signed the contracts and necessarily awarded it, but that's why we're feeling confident these are firm bids.

Speaker 7

Okay. And maybe just to come back to Joe and thank you for giving us the productivity numbers. And for a layman, like myself, I just am trying to understand that 1.35% going to close to 1.5%, that's 11% increase. So should I be thinking that your productivity has declined by you've assumed a 10% decline in productivity in the numbers going forward? I'm just trying to understand how to use that information you provided me.

Speaker 5

The 10% is not unreasonable, Kenya. As George stated, for the overall project, it's less than that because of the earthworks and early awards were more in line with feasibility assumptions, but the later work and the crafts are a bit lower productivity than we saw. But I think generally, we're comfortable that execution within those productivities is quite reasonable. And we're working as well around performance management through target prices and productivity incentives. So I think there are we're quite comfortable that will come in.

Speaker 5

And I also would just mention that we do have good price protection in the contracts that we have and will have in those to be awarded as well. So there's no escalation of labor of any kind in the for the duration of the project.

Speaker 7

Okay. So if we were to would we be assuming correctly if we said, okay, so that you're comfortable in these contracts because these are sort of final bids, price protected on these 2 larger ones. And then the assumptions on the productivity is something less, you've declined it by or reduced it by something just slightly under 10%. Would that be a correct assumption?

Speaker 5

Correct. That would be reasonably accurate.

Speaker 7

Okay. And can I ask just one final question before I let someone else out? I'm interested in how you're progressing on you've got to increase employment on-site from now until you go into production. Can I just ask how that is going? And I know I asked that on-site when I was there in October, but I'm just trying to see how that is going and how labor costs are looking on that front as well.

Speaker 2

Go ahead, Joe.

Speaker 5

Thanks, Tanya. So where we stand today, Tanya, we have mobilized the leadership team for Scurius operations. We have about 40 people onboarded to date and we'll continue with that progress. We basically broke it into 4 phases and the first phase to be completed by the end of 'twenty three was to get the leadership team on board. We've completed that through Q2.

Speaker 5

We will be bringing in the 2nd level of management and let's call it key technical people and we're advancing on that front as well and that's in the range of another 30, 35 people. Phase 3 starts us into supervision and that's about another 50 and then we'll begin the direct hire process in Phase 4. And we have about right now, 500 applicants on file and working through those each and every day. So feeling reasonably good about that. We have also completed a good operational readiness review and we're looking to kind of turn over assets sequentially as available.

Speaker 5

So the open pit and underground works, we anticipate those operationalizing in 2024, taking a bit of pressure off and as far as labor and the labor available for open pit is good. We'll be contracting the underground. And then, as we move into 2025, we'll be hiring remaining staff for process facilities, filter plant, the rest of it and that is about in the range of 200. So feeling pretty good about all of it as far as costs. We don't anticipate it to be materially different in any way from what our current labor rates for operations are in Greece.

Speaker 7

Okay. And so Joe, it's about maybe 100 people from now until you have to hire the additional 200 people starting in 2025. So maybe another 100 people or so in 2024?

Speaker 5

Yes, that's reasonable.

Speaker 7

Okay. Great. Thank you so much for explaining it to me. Appreciate it.

Speaker 2

Thanks,

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Eldorado Gold Q4 2023
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