This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk08: Thank you for standing by. This is the conference operator. Welcome to the El Dorado Gold First Quarter 2023 Financial and Operational 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. To join the question queue, you may press star then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Lynette Goad, Vice President, Investor Relations. Please go ahead, Ms. Goad.
spk00: Thank you, Operator, and good morning, everyone. I'd like to welcome you to our first quarter 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 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, Phil Yee, Executive Vice President and Chief Financial Officer, and Joe Dick, Executive Vice President, and Chief Operating Officer. Other members of the senior leadership team will also be available for the Q&A session. Our release yesterday details our first quarter 2023 financial and operating results. This should be read in conjunction with our first quarter financial statements and management's discussion and analysis, both of which are available on our website. They have also been filed on CDER and EDCIR. All dollar figures discussed today are U.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&A. At this time, we will invite analysts to queue for questions. I will now turn the call over to George.
spk05: Thanks, Lynette, and good morning, everyone. Here is the outline for today's call. I'll provide a brief overview of Q1 results and highlights before passing it to Phil to go through the financials and Joe to review our operational performance. Then we will open the call to questions from our analysts. On April 5th, we were pleased to close the Scurries project financing of 680 million euros with the initial drawdown of 32 million euros completed mid-month subsequent to quarter end. This financing funds 80% of the remaining capital required to complete this world-class asset. The remaining 20% of the project funding will be fully covered by El Dorado. The financing package includes well-aligned strategic partners, including two Greek banks, National Bank of Greece and Piraeus Bank, in addition to funding through recovery and resilience facility provided by the European Union. Additionally, the estimated blended interest rate is approximately 5% to 6% on current six-month year of borrow, representing competitive terms given the current interest rate environment. We have spent approximately $34 million since January 2022 in early work activities that will count as a credit towards the 20% equity commitment. We therefore expect the project financing package to fund a significant portion of construction of Scuri's project in Q2 and Q3 of 2023. This is a major milestone for the company and transitions us to full execution mode of what will be a transformational asset for our global portfolio once in commercial production, which is expected by the end of 2025. Alongside Eldorado's existing operating portfolio, Scuri's is expected to generate strong cash flow further strengthening our financial position, and will help establish an exciting future for growth and value creation for our stakeholders, including contributing to the global supply chain for critical minerals. Having completed the construction of Lamoc in just over two years from the time we acquired the asset, a successful track record of executing on several organic growth projects, including the Quesada HPGR, the Triangle Sigma Declined Project at Lamarck, we are confident that we have the expertise and team, which includes our EPCM contractor floor, in place to deliver scurries on time and within budget. In addition, 50% of the construction is completed, and in Q2 2022, we executed a purchase order for the filter press, which is a long lead item with delivery scheduled in Q1 2025. Starting with production, consolidated production across the global portfolio came in line with our expectations for the quarter, a significant improvement over the first quarter of 2022. As mentioned on our last conference call in February, we expect second half production to be higher than first half production and maintain our 2023 production guidance range of 475,000 to 515,000 ounces. Additionally, we are maintaining our capital expenditure guidance of $394 to $437 million, including $240 to $260 million towards the Advancement of Securities Project for 2023. Joe will speak to the operations in more detail later on the call. Shifting to cost, first quarter cash operating costs per ounce sold and all unsustaining costs are in line with our guidance ranges. driven by steady production across the portfolio. Bill will speak to our cost and financial position in more detail later on the call. At Scurries, activity in Q1 focused on early construction works, engineering, and procurement. Towards the end of the quarter, drilling and blasting commenced on the first phase of underground development. Upcoming milestones in 2023 include the mobilization of major construction contracts for earthworks and concrete. and finalizing the awards of the remaining major procurement and contract packages. As previously disclosed, project spending at Scurries is expected to be $240 to $260 million in 2023. The spending is focused on finalizing detailed engineering, which is 43% complete and forecasted to be 70% to 75% complete for full construction mobilization in the second half of 2023. Procurement of fixed plant and tagged items is currently 42% complete and expected to be approximately 90% complete by year-end. Additionally, yesterday we received approval of the Ministry of Energy and Environment for the modified EIA for the Cassandra Mines. This modification will allow for the expansion of the Olympias Mine and processing facility to 264 650,000 tons per annum and improvements to the Strattoni pork. Finally, I would also like to congratulate the team in Greece for our Hellas Gold subsidiary once again named one of the most sustainable companies in Greece for 2023. This is confirmation to our commitment to responsible practices and sustainable development. I'll stop there and turn the call over to Phil to review our financial results.
spk04: Thank you, George. Good morning, everyone. Starting with slide six, which provides a summary of our first quarter results, Eldorado reported net earnings attributable to shareholders of $21.3 million, or $0.12 per share, in the first quarter. After adjusting for one-time non-recurring items, including a current tax expense related to the tax law change to fund earthquake relief efforts in Turkey, a deferred tax expense related to foreign exchange translation, and a non-cash gain on the revaluation of the derivative related to redemption options on our debt. Adjusted net earnings were $20.5 million, or $0.11 per share, in the first quarter. Free cash flow in the quarter was negative $34.4 million, primarily due to continued capital spend and partly as a result of changes in non-cash working capital. Cash flow generated by operating activities before changes in working capital totaled $94.5 million. First quarter cash operating costs averaged $766 per ounce sold, and all in sustaining costs averaged $1,184 per ounce sold. In Q1, direct operating costs were below plan. Excuse me. primarily due to lower than expected fuel and electricity prices. Steady production combined with lower direct operating costs resulted in Q1 2023 cash operating costs per ounce sold and all-in sustaining costs per ounce sold being near the lower end of the annual guidance ranges for 2023. Capital expenditures on a cash basis were $83.4 million in the first quarter, which included continued investment in growth projects at KISSEDAG, and at Scurius, where we commenced mobilization, procurement, and advancement of projects. In the first quarter, we recorded a deferred income tax recovery of 7.8 million, which included a 3.5 million recovery related to net movements against the U.S. dollar of local currencies, primarily the lira and the euro. Current tax expense was higher in the quarter compared to Q1 2022, primarily related to operations in Turkey A. The current tax expense included 5.5 million withholding tax on earnings repatriated from Turkey in a quarter, as well as a 4.3 million one-time expense due to a tax law change introduced in March 2023 to reverse a portion of tax credits and deductions previously granted in 2022. The tax law change was enacted to help fund Turkey's earthquake relief efforts, and the amount will be paid in equal installments in April and August of 2023. Turning to slide 7, at quarter end, we had unrestricted cash, cash equivalents, and term deposits of $262 million. The decrease of $52.5 million from last quarter was primarily a result of temporary working capital movements, which included an increase in receivables, which were largely received in early April, and buildups of concentrated inventory at Olympias. In addition, continued investment in growth capital impacted the cash position. With production expected to sequentially improve quarter over quarter, we expect to see our cash balance further improving as the year progresses. Following the closing of the Scurrius project financing, the availability under the 250 million revolving credit facility was reduced by 209 million. This is equivalent to 190 million euros as Eldorado's investment undertaking for the Scurrius project is fully backstopped by a letter of credit from the company's revolving credit facility. The letter of credit will be reduced Euro for Euro as the company invests further in the project. We continue to focus on maintaining a solid financial position which provides flexibility to unlock value across our business. With that, I will now turn it over to Joe to go through the operational highlights.
spk06: Thanks, Phil, and good morning, everyone. I'd like to start by congratulating our team in Turkey, who recently received the 2023 EuroMines Silver Safety Award, which recognizes innovation and best practices for mitigating safety risks in the industry. Well done to the team for this recognition. We would also like to recognize our mine rescue teams from FM2 Group in Kisleda, who attended the earthquake zone in eastern Turkey for over 10 days and were instrumental in the rescuing of three lives. On behalf of the team, I want to express my thanks to them for their dedication to the people of their country. In the first quarter, our last time injury frequency rate decreased to 0.87 per million hours work, an improvement from Q1 2022. We continue to take proactive steps to improve workplace safety and ensure a safe working environment for our employees and contractors. Now moving to our operating results. We produced 112,533 ounces of gold in the first quarter with a cash operating cost of $766 per ounce sold in line with our expectations. For 2023, we are maintaining our gold production guidance of between 475,000 and 515,000 ounces with production weighted to the second half of the year. Slide 9 looks at our operations in more detail. Starting in Turkey, at Kisledad, first quarter production was 37,160 ounces and cash operating costs were $708 per ounce sold, which represents a 25% increase in production and an almost 18% reduction in cash costs over Q1 2022. During the first quarter, we reached mechanical completion of the final agglomeration circuit, which treats a split of the HPGR product to improve quality, consistency, and permeability of the ore product stacked on the leach pad. Early in the second quarter, we successfully completed a six-day shutdown to tie in the new agglomeration circuit, perform routine annual maintenance, and complete the first change of the HPGR rules. Commissioning of the agglomeration circuit is now underway and progressing well. Q1 work also focused on the North Heat Leach Pad, which is expected to be operational with stacking to commence early in the third quarter. For 2023, PSPDAD's production guidance is 160 to 170,000 ounces of gold. Production is expected to improve over the course of the second quarter as we realize full effectiveness from the upgraded materials handling and agglomeration equipment. Our optimization efforts will continue to drive increased stacking rates through the second half of the year. At FM Peer Group, first quarter gold production was 19,928 ounces at cash operating costs of $869 per ounce sold. Gold production, throughput, and average gold grade at FM Peer Group were in line with plan for the quarter. For 2023, FM3's production guidance is forecast to be 80,000 to 90,000 ounces of gold. Production in the second quarter is expected to be consistent with the first quarter, with the second half slightly higher as grades improve. Now moving to Lamarck. Following a strong finish to 2022, first quarter of gold production was 37,884 ounces. at cash operating costs of $721 per ounce sold. 2-1 performance was in line with our expectations as we mined lower grades this quarter due to stope access and mine sequencing. Production in the quarter was also impacted by a planned four and a half day routine shutdown for maintenance. At the end of March, we released an updated exploration results on our OMAC deposit. We have seen numerous high-grade intercepts to the east of and below the current resource area, some representing extensions to known mineralized zones and some related to newly identified mineralized zones. Our new results continue to demonstrate the potential to increase resources. Partial results from our ongoing resource conversion drilling will be incorporated in a resource update later this year, and we expect a maiden reserve on ORMAC in 2024. By 2023, LAMOC's production guidance is 170,000 to 180,000 ounces of gold. For the second quarter, processing rates will increase slightly, coupled with consistent growth. Production for the second half of the year is expected to be stronger than the first half, with stable throughput in the 2400 ton range. Additionally, we are excited for the delivery of the first electric haul truck in Q2 and a second truck in the fourth quarter, which are expected to enhance our haulage capabilities, along with reducing our diesel consumption per ton haul and lowering our greenhouse gas emissions. Finally, moving to Greece, at Olympia's first quarter, gold production was 17,561 ounces, and cash operating costs were $898 per ounce sold. which represents an approximate 95% increase in production and 40% reduction in cash costs over T1 2022. Our cash costs benefited from tangible productivity improvements from the mine operation along with the low plan electrical costs due to a warmer than expected winter in Europe. We look to continue to implement operation initiatives to drive productivity propelled by momentum from the first quarter several key projects are underway including the implementation of a bulk emulsion blasting system which improves explosive distribution in the drill holes yielding greater advance for blasted round for both development and production we also reach mechanical completion of the underground ventilation system upgrade designed to provide safe access to lower areas of the mine, increasing the number of development headings we can effectively work. Both projects support our 2023 guidance and continued transformation objectives. This year, Olympia's production guidance is 60,000 to 75,000 ounces of gold. Gold production is expected to be relatively consistent quarter over quarter. I'll stop there and turn it back to George for closing remarks.
spk05: Thanks, team. Looking forward, 2023 is a milestone year for us as we transition to execution mode at Scurries that will deliver significant production growth over the next five years. We also remain laser focused on our current operations to drive through operational efficiencies with a focus on generating free cash flow to maximize the value for all stakeholders. That concludes our prepared remarks. I'd like to take a couple of minutes to share with you my excitement. about where we're at and how we're positioned for a bright future. And I'll start with Quesada. At Quesada, we successfully completed the HPGR investment. Last year saw the benefits of agglomerating the ore with cement, and we kicked off Q2 by beginning commissioning on the drum agglomeration circuit. Already we can tell the quality of the product we're agglomerating has improved significantly. And so as we continue to work through commissioning, our focus is on additional opportunities for growth. Crushing the ore finer, agglomerating the ore effectively, and de-bottlenecking the plant for potential higher throughput are all opportunities to increase value at Kisada. Kisada has got a long mine life and a lot of value to be acquired from this asset. Moving over to FM Chukaru. It's been our steady performer throughout its life. We can count on the production and cost performance consistently from that operation. Our focus here is on infill drilling to create additional reserves to extend mine life. That work's progressing well, and I'm confident we'll have some good news to share in that regard. Moving over to Lamarck, our newest asset. It's been another fantastic steady producer. Four years of production and cost that were at the top end of our guidance from a production perspective. And here again, we have a bright future. Our focus this year is on infill drilling in our mock deposit. That drilling is going well. Next year's focus will be a bulk sample and completion of a maiden reserve that will extend mine life and increase value. And then spinning over to Greece, we had a very good quarter at our Olympias operation. A lot of hard work over the last year to position us for that good quarter, and here our focus is to sustain that improvement. When you look at the catalyst that Joe mentioned, we've got emulsion blasting. As we speak, we've got ventilation that's going to increase significantly, and that really is what's required to support continued growth in our production profile. Olympias will be a significant asset for El Dorado. And our focus here is to sustain these improvements and to set us up for the expansion that's planned for 2026. And then scurries. We've been working very hard over the last couple of years to put strategic measures in place to be able to complete this fantastic investment. We've got great partners alongside us now that are providing the bulk of the financing. We've got a great team up site at site that's focused on delivering a ramp up in growth from about 250 people on the ground today peaking at about 900 later this year scurries is going to transform el dorado in terms of our ability to generate free cash flow we'll be we'll be producing a significant amount of copper that will support the planet in terms of energy transformation and so we're well positioned to to out-deliver our peers in terms of value, and I'm extremely excited about the bright future we have in front of us. With that, I'll open it up to call to questions from our analysts.
spk08: 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're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then two. We'll pause for a moment as callers join the queue. The first question comes from Cosmos Chu from CIBC. Please, go ahead.
spk03: Thank you, George, Bill, Joe, and welcome, Lynette. Good to hear from you. Maybe my first question is on Olympus. I guess overall cost for the company was lower than expected in Q1. A key driver was clearly Olympus, $1,355, almost the same cost in Q1. Last quarter, almost $2,000 announced. My question is, the $1,355, is that a sustainable level, or could it go even lower? Because, George, as you mentioned, you've gone through all these different transformation objectives, and it sounds like bulk emotions coming, underground ventilation, a whole bunch of other projects are coming as well. So, you know, what should we be expecting in terms of Olympia's costs on the GoPro, basically?
spk05: Yeah, it was a really good Q1 at Olympias, and I'd say it's consistent with the guidance that we've put out for the year. There'll obviously be volatility across our portfolio as we unfold quarters, but I would say it was a turning point. We're expecting to sustain good operating results consistent with our guidance at Olympias, so our confidence has risen. We've been marketing and talking about our belief in transforming Olympias to generate free cash flow, and I'd say we're delivering on that journey now.
spk03: And, George, as a follow-up, so does this help you with the decision to go ahead with the expansion, I guess? When I was reading the MD&A yesterday, I guess I was trying to piece everything together. You've now received the amended EIA for the expansion to, as you said, 650,000 ton per annum. To be honest, I wasn't aware that the flat zone was that important. So maybe could you piece it all together for me? Has a decision been made in terms of expansion? Does this help in terms of the transformational improvements that you've made so far? And again, reminding us of the importance here.
spk05: Yeah, I mean, I'd just start with the EIA. In every jurisdiction, getting the environmental approvals to be able to start up, build, or expand a mine are critical. So great achievement to have that finalized. It just removes any doubt around permitting. And then in terms of our commitment to that expansion, it really is the first step in giving us the confidence to deploy additional capital for the expansion. And I'd say we'll be bringing that decision through management and into our board late next year. depending on continued improvement at the operation. So, as I said, we believe we can sustain these sort of numbers, deliver our guidance, and as we do, that'll give us the confidence to commit the additional capital to expand to 650. So, you know, we're feeling really good about it right now, Cosmos.
spk03: That's great. Maybe, George, switching gears a little bit, another one that outperformed in Q1 against at least my expectations and my estimates. If I look at it, you know, compared to last quarter, production actually was down, but costs were also down quarter over quarter. So could you maybe talk a bit more about, again, you know, these levels in terms of costs, the sustainability for the remainder of 2023?
spk05: Yeah, maybe I'll talk to the cost and let Phil follow up on that. I'll talk to the production and Phil can follow up on cost. So if you look at last year, we had pretty consistent improvements in throughput through the crushing facility each quarter throughout the year. And really that was learning how to agglomerate the ore on the conveyors. It was supported by deployment of additional large grasshopper conveyors that kind of de-bottlenecked the conveyance system, particularly with cement agglomerated ore. So first quarter, we were in good shape with the conveyor system, and we had all the learnings last year on belt agglomeration, so we had a solid quarter. What's exciting about Q2 is we've got the drum agglomerator running, and the early days, the quality of that product coming out of the end of the drum is significantly improved over just using the conveyor belts. Additionally, we'll be deploying some additional larger grasshopper conveyors. All that was part of the north leach pad expansion. So that's going to aid us. And as I say, as we continue to commission, we'll be looking for opportunities to de-bottleneck the plant and hopefully be able to prove we can exceed throughput expectations in the current design. On the cost side, just from a general perspective, yeah, a good quarter. I'd say the one significant item at Kissadag that's different than the rest of our operations, open pit, you know, we move a lot of waste to provide that 15-year mine life. So diesel costs are significant. And we saw a pretty significant drop in diesel costs relative to last year. And that's good for Q1, but it's probably good for the foreseeable future if we can see oil prices at or even below where they are today.
spk04: Hi, Cosmos. It's Phil. Just to give you some background on the cost. So definitely Kissadag did see a reduction in both diesel and electricity costs in Q1. Our average price in Q1 for diesel, for example, is about $0.81 per litre. It was a drop of about 13% from the previous quarter. And electricity costs for Kissadag as well dropped about 16%. from the previous quarter. So that all contributed to the lower costs.
spk03: Great. And then maybe one follow-up here. You know, George, as you mentioned, the north heat leach pad should be operational for stacking by mid-2023. Could you remind me in terms of the logistics here? I was reading the MD&A last night. It was getting kind of late. But it almost sounded like you were moving all the stacking from the main sort of heat leach pad to north Is that correct? And how do all those conveyors work? Are we moving these conveyors to the north leach pad and all this new infrastructure that you've put in? Could you maybe summarize it for me once again?
spk05: Yeah, so if you look at the history so far at Kisada, it's all been in the south leach pad. And we basically built a mountain, basically, out of crushed material And we're near the end of its life. So we've built basically a new leach pad a little bit further away from the plant. And the pad and ponds are all ready to go. This year we'll be completing the ADR plant. That's the plant where we move the gold out of solution on the carbon, and then out of carbon and into dore. So we're on track to completing that project on budget. and on our schedule. And so really on the conveyance system, all we're doing is we're extending the overland conveyor from the south leach pad to the north leach pad, and we've acquired larger equipment, larger conveyors to be able to run at a higher throughput to accommodate the belt cement agglomerated ore. And so that new leach pad sets us up for success and supports the 15-year mine life we have. It's basically just an extension to a new leach pad that's a little bit further away. Now, there's still capacity remaining on the south leach pad. We'll have the advantage when we move conveyors from one cell to the next to be able to crush ore on the south leach pad. So, there again, a little bit of upside as we operate that new leach facility. So, it's an exciting time at Kisadag. You know, it finalizes our investment in the plant infrastructure. to support this new mine life. There'll be modest sustaining capital to support extensions of liner throughout the mine life. And the last piece is just the stripping. So we'll continue to do the stripping to support the mine life. That will continue on beyond this year, but the initial capital investment for the North Leech Pad really finishes up this year. So it's the beginning of an improved cash flow generation period. for Kisada beginning next year.
spk03: Understood. Thanks, George, Phil, and team for answering my questions. That's all I have, and have a good weekend. Thanks, Cosmos.
spk08: The next question comes from Tanya Jakoskonek from Scotiabank. Please, go ahead.
spk01: Yes, good morning, everyone. Thanks a lot for taking my questions. Just wanted to follow up, but first of all, congrats on a good quarter, especially on the cost front. I just wanted to follow up on two questions. I know in the last conference call, we talked about a 45 first half production, 55% second half on your guidance. Is that still valid?
spk05: Yes.
spk01: Okay, perfect. Thank you. And I just wanted to ask also on these costs, though, You think that the costs at Olympias are very sustainable, obviously costs at Kisledag are going well. I just wanted to understand, so we've had this lower fuel price and electricity costs that have really helped costs at Kisledag. You said 81 cents, I think, for diesel is what Phil had mentioned. Can you remind me what was in your budget for diesel pricing? Was it 90 cents? Was it over 90?
spk05: Yeah, it was over 90. I think it's closer to a dollar.
spk01: Okay, so you're seeing like 20% lower than what you have in your guidance for us on cost. And what about electricity? I mean, this drop in electricity, are you still seeing this in April? Like, I just don't know with these prices because, you know, I also go to Europe a lot. I know Italy has very high pricing and That hasn't gone down. I'm just wondering this electricity price, like what is it that has driven it down?
spk04: Yeah, Tanya, it's Phil. In Turkey, we've actually negotiated some new electricity contracts in 2023 for both Gizideg and Ebrimçukuru. And that's a bit of a change from last year. So based on those new contracts, I would expect the rates to continue for the rest of the year. And then in Greece, the Greece situation with electricity costs, it's subsidized by government subsidies. And the government has set a target, I think it's between 0.15 and 0.18. And so far we're tracking within that range. So I would expect that that would continue as well.
spk01: Okay. Okay. All right, so it looks like then the electricity prices, at least for Kisledag, is just favorable for you with these new contracts. What about, Phil, the sustaining capital? How should I think about that going through the year? It's just we're all in sustaining costs. Obviously, we're positively impacted by the lower costs. I just want to make sure I understand how the sustaining capital develops through the year. Is it evenly distributed or – How should I think of that? Capital growth is different, but how does the sustaining look?
spk04: Yeah, our sustaining capital in Q1, Tonya, was approximately $25 million. A large chunk of that was at Lamarck with underground development and equipment rebuilds. You know, I think at Kissadag and FM Troop in Olympias, it's pretty consistent, you know, around $2 to $2.5 million. I think in terms of Lamarck, you know, with the mine plan, a lot of that unground development is going to continue. So I would suspect, you know, that that amount would be consistent.
spk05: Yeah, I'd just add one thing. At Lamarck, our tailings lifts, you know, are seasonal. We do it summer into the fall. And so, you know, you do see higher sustaining costs on the quarters.
spk01: So should I do the same thing, the 45-55, first half, second half? Or is that not a good way to look at it?
spk05: Yeah, it's going to be slightly higher in the second half because of that Lamarck. I don't know. It's probably not quite 45-55. It's just Lamarck that has that seasonal impact.
spk01: Okay. I was just trying to make sure, because I said, like, you know, we were – definitely positively surprised by both your cash costs and your all-in sustaining costs. And maybe just another larger picture, besides just the fuel and the electricity that you saw at Kisledag, are you seeing anything else in terms of consumables, any other areas that you're starting to see, even in April, starting to see a relief in inflationary pressures?
spk05: I would say generally, other than those commodities, things have remained fairly consistent. We talked about the positive things. The one thing that's slightly negative is cyanide costs have escalated for the industry. We talked about a working capital fluctuation. We think cyanide is going to come up a bit higher. One of the inventory issues, we bought some additional cyanide in Q1 to the hopefully helpless, what we believe will be a bit higher cyanide costs. And what drives that is energy input into making the cyanide.
spk01: Yeah, no, got it.
spk05: And just on your last question, Tanya, I mean, I gave you some additional thoughts on Lamarck and definitely that the tailings construction pushes up their sustaining during that construction season. But overall, Bill gave you the right answer. It's pretty flat. first half to second half across the portfolio on sustaining capital.
spk01: Okay. And then just on the cyanide cost, what sort of increases have you seen just for ourselves to just understand? I'm not buying cyanide very often, George.
spk05: Yeah, I don't have that number off the top of my head, and I would say it's not that significantly material. Like under 5%? Yeah, hang on. I'm About 10% is what we're anticipating in terms of potential increases in cyanide. It's about $3,200 a ton. Okay.
spk01: Thank you very much for that. I'll leave it there, and thank you very much. Good quarter, and have a great weekend, everyone, and welcome, Lynette.
spk00: Thanks, Danielle.
spk08: The next question comes from Mike Barkin from National Bank. Please go ahead.
spk07: Thanks, guys, and congrats on a good quarter. Can you speak to, you also posted a pretty impressive improvement in refining costs at Olympias for over a quarter. Can you just speak to what's driving that?
spk05: Joe, you want to take that?
spk06: Sure, George. I think a couple of things. First off, treatment charges are down a bit for lead and zinc. Secondly, we've worked hard to find alternatives to paying the 13% VAT on our pyrite con and have been moderately successful, I think, or maybe more than moderately, About 60, maybe a little bit more than 60% of our high-rate cons are now not subject to VAT through alternative smelters or brokers to China. As you may recall, Mike, that's 13%. We are seeing other costs in addition to that, so the net out is, I think it's about you know, 3% we pay in additional charges when we're not paying the AT. So overall, you know, that's probably driving as much as anything. And we see that less in that we see it more in payable gold. So I hope that answers your question. Better trends and less insane.
spk04: Yeah, Mike, it's Phil here. Just want... Just wanted to add another factor in addition to what Joe's outlined. We had sales at the end of the quarter that, from a timing perspective, basically didn't get completed until early, early April. So there was lower sales effectively in Q1, and that contributes to the lower refining costs as well.
spk07: Okay, so that could actually come up a little bit. than quarter over quarter?
spk04: Yeah, that's a timing issue. Yeah, it's a timing issue. And, you know, that's part of the reason as well that we have an increase in receivables at the end of Q1. You know, a large percentage of those receivables were received in early April from the delayed concentrate sales.
spk07: Okay. And then just switching over to Kishler Day, As you move from the south pad to the north pad, I guess actually having a longer leach cycle probably won't create much of a production dip because you'll be getting residual leach of the south pad as you're starting an irrigation system on the north side. Is that fair to assume? Or would there potentially be Q3 being kind of the latest quarter at Kishladeg?
spk05: No, Mike, those are good assumptions. We'll be putting fresh ore on the new leach pad on liner so you know it'll be quick returns on the initial placements and as you say we'll have residual flows coming off the south leach pad so we really don't expect any hiccups in terms of you know production relative to that movement from south to north.
spk07: Okay and then I know it's like a grant it's very early days here so You might not be able to give me too much color, but sorry about that. The cement usage at Kishladeg, is it flat up down with the agglomeration drum and recognizing obviously you're probably still very much in the fine tuning of it. So just some overall kind of general thoughts in terms of where your cement usage was last year versus kind of is today.
spk05: Yeah, so we're in the four to five kilograms per ton of ore placed. And really, it's dependent on the different rock types that are going through the ore on exactly where we're trying to target that cement level. We don't really see any change last year versus this year. Really, what we're looking for is better mixing in that drum, making a better final product, supporting You know, good permeability, that's an important factor in recovery, but also offering the opportunity to have finer ore, expose more gold, and drive recovery beyond or assume 56%. So, you know, the cement is going to be pretty consistent, and the cement offsets the amount of lime that we actually consume. So, you know, there is a net increase in cement versus what we used to do But I would say consistent results expected going forward compared to last year.
spk07: And you could be potentially tightening up your gap on your high-pressure crowning rolls because extra fines, to your point, having a better mix would allow for that. So you could actually be getting better exposure of the ore to cyanide while offsetting any impact. of additional fines through better agglomeration through the drum. Is that fair to assume?
spk05: Yeah, that's exactly the opportunity in front of us, and we're going to focus hard on it. Okay, cool. Looking forward to the results.
spk07: Congrats, Ken.
spk05: Thanks.
spk08: The next question comes from Carrie Smith from Haywood Securities. Please, go ahead.
spk09: Thanks, operator. George, can you just remind me, or perhaps Joe, what is the undersized from the HPGR now at Kishidae, and what is the predicted recovery from that crush size with the drum agglomerator?
spk05: Well, I'll answer high level to describe what we're doing here. So, you know, the product that comes out of the HPGR is split into two streams. We call it the edge product and the center product. So the edge product is going to be a coarser product. And that product gets recycled basically for a second pass. And the middle product has more fines in it. So after the screen, we take a split of the product coming out of the HPGR over to the new drum agglomerator. And there we're trying to get some of the small pebbles that will be in that feed to be the core nucleus of building a good agglomerate that comes out of the end of the drum. And then that stream comes back to the main stream and it's advanced out to the pad. And so for the coarser material that's getting put back through the HPGR, it's getting a second opportunity to make fines. What we're able to do, we have two opportunities to try to optimize size of the material to maximize recovery. The first is the amount of horsepower we drive into the variable frequency drive on the drums themselves. And then the second thing is the amount of material that we recycle for a second pass. So we have two levers to pull to try to crush finer, but we don't want to cut pressed so fine that we caused ourselves a permeability issue up on the pad. So the drum, we think, was acquired, and we believe it's the opportunity to further optimize size and maintain good permeability. And so, as we've said, we're confident about the 56% recovery assumed in our technical studies, assumed in our five-year guidance. The opportunity this year is to optimize the HPGR in this new drum and to be able to drive recoveries beyond 56%. We'll have a better picture of that opportunity at the end of the year after we've run the circuit for six, nine months. Did that answer your question?
spk09: What I was trying to get at was what's the rough crush size you're sending to the pad now and how much finer do you think you could make it if you were able to optimize the circuit with the drum agglomerator, and what sort of percentage improvement do you think you could get in recovery? I mean, I presume you must have done those tests early on when you did the test work on the HPGR. So I was just trying to understand, you know, you're 56% now. Is it reasonable to think that you could maybe pick up a couple of three points on recovery by optimizing the circuit, or could it be more than that or less than that? I guess is what I was trying to get a sense for.
spk05: So specifically on size, so about 80% of the material passes six millimeters. We're not thinking that's going to change significantly. Where the opportunity is, is the minus two millimeters. And what we're thinking right now is we'll move from about 40 to 60%. So we're creating more of those very fine materials that will expose more gold and with effective agglomeration. will be successful then at getting better recoveries. Now, I don't want to guide to the potential here. You know, as you would imagine, if we expose more gold, we're going to get better recoveries. So we want to have test work to be able to guide ourselves and the market to what they could expect.
spk09: Okay. Okay, that's fine. And you have capacity, obviously, in the drum. The more finds, the better, really. You can just agglomerate it up and kill it on the pad.
spk05: Exactly.
spk09: Right. Okay. Okay. That's helpful. Thanks. And then just on Olympias, on the 650,000 TPA expansion in Georgia, the intention then to kind of dovetail that project into the wind down of construction at Skouries. So if Skouries is kind of finished construction in mid-2025, then that would be when you kind of notionally think to start the construction for this this mill expansion at Olympias?
spk05: I mean, coincidentally, I'd say that's the case. It is 2025 that we expect to be doing the expansion and modifications to the plant. But, you know, it's a pretty small project on Olympias. We're adding some additional flotation capacity. There's no major challenging construction to be done here. I wouldn't tie the two together that we're waiting for scurries. It's more about setting up the underground expansion where we've got confidence in making that investment and then proceeding with it.
spk09: Okay. And then how long is that project to get to the 650,000 times? Is that like eight months, nine months?
spk05: Yeah, it's probably a year of work and You know, the two major things that we'll be doing in the plant, we'll be adding a regrind mill so that we can maintain the right grind and recoveries at that higher throughput, and we'll be adding a thickener. So those are the main pieces, some other modest.
spk09: Gotcha. Okay, that's good. And then just lastly on screws, as you said, you had, I think, 250 people at the site, and you plan to get to 900 by the end of the year. So far, have you seen any issues with getting manpower or ordering equipment or any logistics issues that might impact the schedule? I know you said you had already ordered the filter press, but I'm just wondering just generally how you're seeing it.
spk05: Yeah, Mike, no concerns there. I mean, we've had no issues with the ramp-up to date. I'd say our laser focus on scurries is letting the additional contracts over the next couple of quarters that really provides the ability to ramp up this construction, deliver it on schedule. So it's really in our control in terms of available labor and contractors, no concerns. In terms of equipment, you know, all the major equipment's installed with two exceptions. One's the primary crusher. It's sitting on site. We're pouring concrete for that. And so... no concerns on it. And then, as you just said, we ordered the filters for dry stack tailings. We got a delivery date of Q1 2025 ahead of our commissioning mid-year, so we're very comfortable with key equipment required, and it's really about letting these contracts, advancing the engineering, and then executing on the productivities we need to deliver this on budget and on schedule. So, Really, I sleep well at night. I'm not concerned about deliveries, and we're laser-focused on the ramp-up.
spk09: Okay. Okay, that's great. Thanks very much. I appreciate it.
spk05: Thanks, Kerry.
spk08: The next question comes from Harmon Puri from Bank of America Securities. Please, go ahead.
spk10: Hi, thank you for taking my question. Most of my questions I actually had have been answered. I think one last one. I don't know if you guys have touched on this yet, but at Lamarck, the grade profile for the rest of the year, do you guys have any color on when the grades might increase and go closer to perhaps the guidance range? Do you expect that to happen in Q2 or will that be later in the year?
spk05: Yeah, so there'll be a ramp-up of improved grades over the year. Q1 obviously was lower than a quarter of the annual guidance, but it really was sequencing-driven. So, yeah, you can expect to see grade improvements potentially over the year and still good with guidance.
spk10: Okay, that's it for me. Thank you.
spk08: That is all the time that 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.
Disclaimer