Release Date: July 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Eldorado Gold Corp (EGO, Financial) reported safe gold production of 122,319 ounces in Q2, aligning with their full-year production guidance.
- The company achieved a significant decrease in lost time frequency rate to 0.40 incidents per million person-hours worked, compared to 1.32 in Q2 2023.
- Eldorado Gold Corp (EGO) received multiple awards for health and safety, sustainability, and finance, including a silver award from the Hellenic Institute for Occupational Health and Safety.
- The Skouries project is progressing well, with overall progress at 76% and first production expected in Q3 2025.
- The company maintains a strong balance sheet with total liquidity of $810 million, including $595 million in cash and cash equivalents.
Negative Points
- Production at Olympias was impacted by 17 days of labor-initiated work stoppages, affecting Q2 output.
- Total cash costs increased to $940 per ounce sold, and all-in sustaining costs rose to $1,331 per ounce sold, driven by higher royalties, labor, and fuel costs.
- Free cash flow in Q2 was negative $32 million, although it was positive $33.9 million excluding capital investment in the Skouries project.
- Higher royalty expenses in Greece and Turkey due to increased gold prices impacted overall costs.
- Capital expenditures were high at $133 million in Q2, with significant investment in growth projects, particularly at Kisladag and Skouries.
Q & A Highlights
Q: Congrats on the good quarter. Starting with Kisladag. The CapEx trend that we're seeing, I guess, we could is it still fair to assume that growth capital will be in and around how you're kind of trending in the last 12 months on a go-forward basis? Or are you still running at modestly elevated capital? Like when I look back a year or two ago, it was generally growth around $20 ish million. It's been more kind of mid- to high 20s, $32 million in Q2. How should we think about that kind of going forward?
A: Well, I mean, at a high level, Mike, I would say we've gone through most of the growth capital involved with the HPGR, or heap leach pad and agglomeration. This year, we're completing construction on the ADR plant. So you remember, we put the absorption part of the plant in last year. That's where we pulled the solution, the gold out of solution on the carbon. During the past year, we've been using the south leach pad to strip to gold out that carbon and the poured gold. So anyway, we're advancing now to add the absorption and recovery plant to the north leach plant pad. So it's not a lot of capital for that piece, but it's the last piece of that expansion for leaching. I mean the rest of our growth capital primarily is around stripping, and that will continue for the next six years or so, at which point, there will be a big drop off in stripping requirements for the remaining life of mine and inflection point in free cash flow.
Q: And on production, are you getting all the production from the new pad now? Or is it still a blend? And if it is, do you have like -- can you give us an idea of like what percentage is coming from the new pad versus the old pad?
A: Thanks, Mike. It's Simon. We, through the course of 2024 and 2025, are still utilizing both the south and the north heap leach pad. As you know, we have a long lead cycle at Kisladag, so we need to ensure we have sufficient leach space to allow for that leach cycle to run to its full cycle. The percentage, we have to get back to you on the exact numbers, but we would see north heap leach pad being more dominant moving forward in '25 and beyond that.
Q: Is that what's kind of spurring this review in optimization? You talked about exceeding your budget on the sites over last fall. I am just kind of wondering what's your thoughts there? Like I know the technical report had yet 56%, are you still seeing that as ultimately achievable? Or do you feel like there's maybe a need for additional tweaks beyond what that technical report called for?
A: Thanks for the question, Mike. Maybe I will frame into the high level and Simon can add some color. So when you go back to the original studies, we have six different rock types that we looked at recoveries and impact of the HPGR investment and then later the agglomeration, and those recoveries are variable. They run from low 50s to low 60s. And so part of the recoveries is just a matter of which ore types are we processing. And then beyond that, how fine we crush it, how well we agglomerate it also has implications on recovery for every one of those rock types. So it's a pretty complex geometallurgical situation. We've got quite a bit of data now since we started up the circuit. And so we're just leveraging off that information to say, all right. What can we do to further improve the circuit? So we'll be looking at debottlenecking the plant. We'll be looking at additional agglomeration impacts on recovery and maybe even debottlenecking the entire plant. So we're taking now that the circuit's up and running, we've got lots of data. We're going to take a wholesome full look at how the circuit is performing and what the opportunities are to make further improvement to NAV for ore at Kisladag. So I mean, high level, we're comfortable with that 56% but we're going to do study work and we're going to look to see where we have opportunities to improve.
Q: And then switching over to Olympias one last question. You kind of started off the call there that the labor agreement is still work in progress. Have you had any operational disruptions in July? Or do you -- is there any indication that you might still see some daily kind of disruptions while you finalize that? And do you have a sense of. I know it's kind of a tough question to ask you, but do you have a sense of like maybe when you'll be able to have like a signed agreement with them? And is that a three-year contract, two-year contract, five-year contract? What's the term on it?
A: Thank you for the question. No further interruptions in the month of July in terms of concluding the discussions, and we're looking at doing that over the next two weeks and beyond. So we are approaching the end of very much approaching the end of these discussions. It will be a three-year contract.
Q: Just on the Olympias contract. Just for ourselves without getting into the nitty-gritty, but can we just assume in terms of wage increases to be in line with what has been sort of the inflation rate in the global mining sector, about 5% for labor? We're just trying to benchmark ourselves here.
A: Yes, Tanya, I don't want to get into the specifics, but I would tell you there will be no surprises or expected on the cost side, and it's -- we negotiated a contract that's a win-win for the workforce and the company. So there's productivity initiatives that we're focused on, and obviously, the union is looking to have wage increases. So no surprises expected and we're expecting this to be overall good news for both parties.
Q: On the Skouries, on the contracts left to be awarded. It's really only the filter plant contract that needs to be put in place, which you said is coming in the next couple of weeks. And is that really it? We've got all the contracts we need. We've got the underground, hopefully, this filter tailings contracts in place. So we have everything we need and that just sort of getting the got all the items on site that we need and it's just getting the labor aspect of getting that into place and training. Is that how I should think. I mean it sounds very high level. Obviously, you've got to continue building, but I am just trying to understand from a higher level that we have, the critical items.
A: Yeah, I would love to tell you every contract's been signed other than the filter plant, but really it's all of the material contracts. There are smaller contracts for ancillary buildings and so forth. Like G&A
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
