Eldorado Gold : First Quarter 2024 Transcript

Eldorado Gold Corporation

Q1 2024 Results Conference Call

Transcript

Date:	Friday, April 26th, 2024
Time:	8:30 AM PT
Speakers:	Lynette Gould
	Vice President, Investor Relations, Communications & External Affairs
	George Burns
	President and Chief Executive Officer
	Paul Ferneyhough
	Executive Vice President and Chief Financial Officer
	Louw Smith
	Executive Vice President, Development - Greece
	Simon Hille
	Executive Vice President, Technical Services and Operations

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Operator:

Welcome to the Eldorado Gold First Quarter 2024 Results Conference Call.

As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there'll be an opportunity to ask questions. To join the question queue, you may press star, then one on your telephone keypad. Should you need assistance during the conference call, you may signal an Operator by pressing star, then zero.

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

Lynette Gould:

Thank you, Operator, and good morning, everyone. I'd like to welcome you to our first quarter 2024 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 Ferneyhough, Executive Vice President and Chief Financial Officer, Louw Smith, Executive Vice President, Development, Greece, and Simon Hille, Executive Vice President, Technical Services and Operations.

Our news release yesterday details our first quarter 2024 financial and operating results. This should be read in conjunction with our first quarter 2024 financial statements and Management's Discussion and Analysis, both of which are available on our website. They have also both been filed on SEDAR+ and EDGAR. All dollar figures discussed today are U.S. dollars, unless otherwise stated.

© 2024 Eldorado Gold Corporation

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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&A. At this time, we will invite analysts to queue for questions.

I am now happy to turn the call over to George.

George Burns:

Thanks, Lynette, and good morning, everyone.

We are pleased to have Louw Smith, our Executive Vice President, Development, Greece, join us on the call. With Joe Dick recently retiring from his COO role and moving into a consulting role, Louw will review our Greek assets.

Our Board and Management team spent this week at our Lamaque complex in Val-d'Or, Quebec, celebrating its fifth operating anniversary. We acquired Lamaque in 2017, shortly after I joined the Company. Within two years, we had announced an initial maiden reserve, refurbished the old Sigma mill, and began operations, on time and on budget. In the first five years, we have produced approximately 850,000 ounces of gold, exceeding the prefeasibility expectation of 644,000 ounces by 32%, with the remaining 877,000 ounces in reserves, as of September 30, 2023. With Ormaque expected to announce an initial reserve later this year, and a number of exploration targets on our large land package, this operation has exceeded our expectation and it has a bright future ahead of it.

Here is the outline for today's call. I will provide a brief overview of the Q1 results and highlights. I will then pass the call over to Paul to go through our financial results, and then onto Louw and Simon to review our operational performance. We will then open the call to questions from our analysts.

Turning to Slide 4, the first quarter was consistent with guidance, delivering safe production of 117,111 ounces of gold. Historically, production is lower in the first quarter of the year as winter conditions at Kışladağ slowed down leach kinetics. This is combined with expected ore grade variability across the operations. Looking ahead, we continue to expect increased production in the second quarter and a stronger second half of the year, remaining on track with our guidance to produce between 505,000 and 555,000 ounces of gold for 2024.

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Total cash costs and all-in sustaining costs were $922 per ounce sold and $1,262 per ounce sold, respectively. Cost increased as a result of higher royalties, labour costs and consumables. With the higher gold prices, royalty costs increased in Greece and Türkiye as royalty structures calculated are on a sliding scale linked to the gold price. Detailed royalty tables are available in our recently filed technical reports for Olympias and Efemçukuru. While we see higher costs this quarter, they are in line with our 2024 guidance ranges. Paul will touch on the cost in more detail later in the call.

Turning to Slide 5, in the first quarter, our lost time frequency rate increased to 1.63 recorded incidents per million person hours worked, compared to 0.87 in Q1 2023. Our commitment to a safe workplace is unchanged, and recognize this is a continuous journey of improvement, and we expect to return to our trend of improving frequency rates. Our health and safety focus in 2024 is based on preventing high potential incidents and further empowering our employees to promote a positive and healthy safety culture.

In sustainability, we were pleased to be the only non oil sands mining company named as one of the 30 companies in The Globe and Mail's Road to Net Zero, recognizing our progress against our corporate climate targets. This was including within The Globe's Report on Business Magazine and utilizes research from Sustainalytics. We continue to advance our target to mitigate our greenhouse gas emissions through operational efficiencies and continuous improvement, technologies, processes, energy generation, grid de-carbonization, mine planning, and operational changes. These actions also deliver operational and safety benefits.

In government relations, we were proud to support the strengthening ties between the Canadian and Greek governments and business communities in March, as Prime Minister Kyriakos Mitsotakis became the first sitting Greek Prime Minister to visit Canada since 1983. During his remarks at one of the events, Mr. Mitsotakis spoke enthusiastically to Eldorado Gold's journey in Greece and the positive impact from investments by the Company as a leading Canadian operator in Greece.

I'll stop there and turn the call over to Paul for a review of our financial results.

Paul Ferneyhough:

Thank you, George.

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Slide 6 provides a summary of our first quarter results. Our operations delivered a steady quarter, as George mentioned, in line with our expectations and aligned with our guidance, which remains unchanged across all operational and financial metrics.

Continued high gold prices drove strong financial results for the quarter. Eldorado reported net earnings attributable to shareholders from continuing operations of $35.2 million or $0.17 per share in the first quarter, positively impacted by higher revenue due to volumes sold and prices realized compared to the first quarter in '23.

After adjusting for one-time nonrecurring items, adjusted net earnings were $55.2 million or $0.27 per share for the quarter. Adjusted net earnings in Q1 2024 accounted for the reversal of three principal items. Firstly, a $5.3 million loss on foreign exchange due to the translation and deferred tax balances net of Turkish inflation accounting; secondly, a $16.9 million unrealized loss on the mark-to-market of derivative instruments; and finally, a $2.1 million gain on the noncash revaluation of the embedded derivative related to the redemption option in our senior notes.

Our free cash flow in the quarter was negative $30.9 million, or positive $33.7 million excluding capital investment in our Skouries project. Cash flow generated by operating activities before changes in working capital in the quarter was $108.3 million, compared to $93.2 million in Q1 2023. As previously noted, the increase principally related to higher sales volumes and realized prices.

First quarter total cash costs were $922 per ounce sold, and all-in sustaining cost was $1,262 per ounce sold. Our cost increased compared to Q1 2023 as a result of higher labour costs and consumables such as fuel driven by production volumes, as well as higher royalty expenses primarily due to higher metal prices. In addition, increased sustaining capital investment contributed to higher ASIC for the quarter, compared to the same period in the prior year.

Capital expenditures were $122 million in the first quarter, including investment in growth projects at Kışladağ, focused on waste stripping the North heap leach pad, and related infrastructure. At Skouries, we continue to advance major earthworks and infrastructure construction for the project, investing approximately $53 million in the period.

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Current tax expense of $12.4 million for the first quarter decreased from $20.5 million compared to the same period in 2023, primarily due to the net reduction in Turkish taxes after accounting for increased investment tax credits and inflation accounting adjustments.

Deferred income tax expense increased to $3.6 million in Q1 2024 versus a recovery of $7.8 million in Q1 2023. In the quarter, deferred tax included a $19.3 million expense related to the weakening of the lira and the euro against the U.S. dollar, partially offset by a $14 million recovery from the application of Turkish inflation accounting.

Turning to Slide 7, our balance sheet remains well-funded to meet our investment requirements. We ended the quarter with total liquidity of $628 million, including $515 million of cash and cash equivalents, and $113 million of available capacity on our revolving credit facility.

Cash declined over the quarter due to high levels of capital investment. We expect this trend to reverse over the remainder of 2024 as we benefit from strong gold prices and further draw down our project finance funding for the Skouries development. We continue to focus on maintaining a solid financial position that provides flexibility to respond to opportunities and fund our growth strategy to unlock value across our global business.

With that, I'll now turn the call over to Louw to go through the Greek asset highlights.

Louw Smith:

Thanks, Paul, and good morning.

Starting on Slide 8 at our Skouries copper-gold project; we continued to progress major earthworks and infrastructure construction. Overall project progress is 73% when including the first phase of construction, and we remain on track for the first production in Q3 2025, and commercial production at the end of 2025. Detailed engineering has advanced and is now 67% complete, and procurement is substantially completed. Mobilization of contractors and commencement of work on the tailings filtration infrastructure earthworks and pilings started during the quarter, with the earthworks expected to be substantially completed in Q2 2024. Additionally, the construction team made positive headway on the crusher building, mill and flotation building, and underground development.

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On the critical path is the filter plant building, which continues to advance, with the piling work having commenced in Q1 2024. The filter building construction contract is on track to be awarded in Q2 2024, which 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, filter press plates arrived on-site in Q1 2024, and preassembly has now commenced, with the frames for the supporting-the filter press plates already fabricated, and expected to ship in Q2 2024. On this slide, you can see the photo on the right-hand side showing one of the 588 filter press plates that will be preassembled. We have some more detailed photos to share on the coming slides.

Moving onto Slide 9, during the first quarter, the capital spend was $52.5 million. This is in line with our expectations, as the spend is expected to ramp up significantly as mobilization and site labour increases. We remain on track to meet our guidance estimates for investment in Skouries in 2024 of between $375 million and $425 million.

Work for the mill flotation building is in progress, with commissioning work on overhead cranes, installation of construction lighting and scaffolding, and the commencement of structural steelwork. Commissioning of the three overhead cranes are completed and operational. Construction lighting, scaffolding, and steel are progressing on plan, and mobilization of mechanical piping and electrical work is in progress. For the underground, we expect to award the second contract in Q2, which includes the test stope work, as well as additional development and services work to support the development of the underground mine.

We remain on track with expected completion of the IEWMF copper dam and we have significantly advanced the IEWMF earthworks, water management facilities, process plant, and filter plants by the end of 2024. For the next couple of slides, we'll show you the advancement of the work underway.

Turning to Slide 10, on the left-hand side is the primary crusher. Excavations and slope stabilization are progressing in all areas, and the excavation and backfill for the conveyor alignment is in progress. On the right-hand side is the filter plant area where you can see four drills are working. For the filter plant building, 50% of the total 187 piles are completed. We expect to start installing rebar late this month. The concrete will be completed in two parts, with the first part starting in early May.

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On Slide 11, the picture on the left-hand side is where we are excavating topsoil from the base of the low-grade ore stockpile, before the fill will be brought in. On the picture on the right-hand side of this slide, you can see the pad work that has been started. Once the geotechnical and drainage work is done, the open pit and underground workshops paste plant and warehouse will be built. We will continue to provide progress updates as we advance towards first production in the third quarter of 2025.

Moving to Olympias on Slide 12, first quarter gold production was 18,788 ounces, and total cash costs were $1,287 per ounce sold. Production was positively impacted by the productivity improvements that have been implemented over the past year, while total cash cost has been impacted by increased labour cost and royalties during the quarter. For 2024, production guidance at Olympias is forecast to be 75,000 to 85,000 ounces of gold. Production in the second quarter is expected to be consistent with the first quarter. Through the year, we expect to see continued improvement as we advance the underground development and increase metal production from the Flats zone.

I'll stop there and hand it over to Simon to discuss the Turkish and Canadian operations.

Simon Hille:

Thanks, Louw, and welcome.

Starting in Türkiye on Slide 13, at Kışladağ, first quarter production was 37,523 ounces, with cash costs of $820 per ounce sold. Production was in line with our expectations and we included a six-day plant shutdown for maintenance in the quarter. Total cash costs were impacted by higher fuel prices and increased royalties. For 2024, production guidance at Kışladağ is 180,000 to 195,000 ounces of gold. Production is expected to increase over the course of the second quarter, as we realize increased stacking rates and normal leach kinetics. Work also continues on optimizing our on-belt agglomeration and materials handling transition points to improve quality and consistency of stacked ore.

On Slide 14, at Efemçukuru, first quarter gold production was 18,501 ounces at total cash costs of $1,154 per ounce sold. Gold production throughput and average gold grade at Efemçukuru were in line with the plan for the quarter. For 2024, production guidance at Efemçukuru is 75,000 to 85,000

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ounces of gold. Production in the second quarter is expected to be slightly higher, benefiting from higher grade.

Now moving to the Lamaque complex on Slide 15, the Lamaque complex delivered first quarter production of 42,299 ounces at a total cash cost of $779 per ounce sold. Production was in line with expectations. Total cash costs were impacted by higher royalties. Additionally, higher costs were incurred for labour contracted and equipment rentals to increase productivity, with a focus on ramping up development rates during the quarter. We were pleased to take delivery of our second Sandvik electric truck during the first quarter. Our battery-electric truck was delivered in Q2 of 2023 and is currently working to specifications. Lamaque was the first to apply the underground technology in Quebec. These trucks have 50 tonne capacity and increased ramp speed, and are playing a key role in improving production efficiency, reducing diesel particulate matter, and mitigating our greenhouse gas emissions.

During the first quarter, we continued to advance the infill drilling program targeting the upper two- thirds of the Ormaque deposit, and we remain on track to take a bulk sample, complete our prefeasibility study, and announce the Ormaque inaugural reserve by the end of 2024. In 2024, production guidance at Lamaque complex is 175,000 to 190,000 ounces of gold. Production is expected to increase in the second quarter as we realize higher grades.

I'll stop there and turn the call back to George for his closing remarks.

George Burns:

Thanks, team.

About five years ago, we shifted our philosophy from a focus on multiple jurisdictions to focus on Canada, Greece, and Türkiye, and with that focus, we updated a feasibility study on Tocantinzinho, and later divested that asset to G Mining. This was done to bring forward returns to our shareholders at a time when our focus was on higher-quality assets, i.e. Skouries and Perama Hill. That strategy has been unfolding very well over the last couple of years, with the reinvestment at Kışladağ and extended mine life, the exploration focus on Efemçukuru extending mine life, acquisition of Lamaque, and increasing production and exploration success, and moving to Greece, getting Skouries back into construction and delivering operational improvements on Olympias.

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We're off to a good start this year, which reflects our ongoing commitment to driving through operational efficiencies at each of our operations. We are in a unique position amongst the mid-cap mining companies, with high-quality growth production over the next four years, the addition of copper production to our portfolio, a robust balance sheet to fully fund our growth initiatives, and a cost profile that is expected to decline. It's a great time to be at Eldorado, where we are positioned with higher metal prices, along with increasing production and reducing costs, which is a distinct advantage compared to most of our peers. We expect this to continue to deliver significant value for our stakeholders.

Thank you for your time. I will now turn the call over to the Operator for questions from our analysts.

Operator:

Thank you. We will now begin the question-and-answer session. To join the question queue, you may press star, then one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then two. We will pause for a moment as callers join the queue.

Our first question comes from Cosmos Chiu of CIBC. Please go ahead.

Cosmos Chiu:

Thank you, George and team, for the call and the presentation.

Maybe my first question is on CapEx at Skouries. As you mentioned, the $52.5 million spent in Q1 was as expected, certainly not 25% of your full-year guidance of $375 million to $425 million. On that, George, I don't know how much you can share with us. What's your expectation in terms of your CapEx for Q2, your CapEx spend for Q3, Q4, or if that's too much detail, at least maybe could you tell us what percentage, how is it going to ramp up for the subsequent quarters?

George Burns:

Thanks, Cosmos.

© 2024 Eldorado Gold Corporation