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Eldorado Gold (EGO four.94%)
Q2 2022 Earnings Name
Jul 29, 2022, 11:30 a.m. ET
Contents:
- Ready Remarks
- Questions and Solutions
- Name Members
Ready Remarks:
Operator
Thanks for standing by. That is the convention operator. Welcome to the Eldorado Gold second quarter 2022 monetary and operational outcomes convention name. As a reminder, all contributors are in listen-only mode and the convention is being recorded.
After the presentation, there shall be a possibility to ask questions. [Operator instruction]. I’d now like to show the convention over to Lisa Wilkinson, vice chairman, investor relations. Please go forward, Ms.
Wilkinson.
Lisa Wilkinson — Vice President, Investor Relations
Thanks. Operator. And good morning, everybody. I would wish to welcome you to our second quarter outcomes convention name.
Earlier than we start, I wish to remind you that we are going to be making ahead trying statements and referring to non-IFRS measures throughout the name. Please discuss with the cautionary statements included within the presentation and the disclosures on non-IFRS measures in our administration’s dialogue and evaluation, in addition to the danger elements set out in our annual info kind. Becoming a member of me on the decision as we speak, we’ve got George Burns, president and chief govt officer; Philip Yee Government Vice President and chief monetary officer; And Joe Dick, govt vice chairman, and chief working officer. Different members of the senior management staff may also be accessible for the Q&A session.
Our launch yesterday particulars our 2022 second quarter monetary and working outcomes. This needs to be learn at the side of our second quarter monetary statements and administration’s dialogue and evaluation, each of which can be found on our web site. They’ve additionally been filed on SEDAR and EDGAR. All greenback figures mentioned as we speak are U.S.
until in any other case said. We shall be talking to the slides that accompany this webcast. You’ll be able to obtain a duplicate of those slides from our web site. After the ready remarks, we are going to open the decision for Q&A.
At the moment, we’d invite analysts to queue for questions. I’ll now flip the decision over to George.
George Burns — President and Chief Government Officer
Thanks, Lisa, and good morning, everybody. Right here is the define for as we speak’s name. I am going to present a short overview of Q2 outcomes and highlights earlier than passing it to Phil to undergo the financials after which Joe to undergo our operational efficiency. And we’ll open it as much as questions from our analysts.
Our staff has labored arduous within the face of a number of challenges firstly of the 12 months, and I am happy to report that our efficiency improved within the second quarter. We had robust working outcomes from Lamaque [inaudible] with enchancment seen on Olympias. On the second quarter ounces positioned to the leach [inaudible] elevated considerably, which positively influence gold manufacturing within the third quarter. We preserve our unique 2022 manufacturing steerage vary of 460 thousand to 490 thousand ounces and are monitoring towards the decrease finish of that vary.
We proceed to count on full 12 months manufacturing to be weighted to the second half. Joe will converse to the operations in additional element later within the name. As we’ve got famous in earlier quarters, we proceed to face inflationary pressures much like the broader market. Throughout the first half of the 12 months, we skilled price will increase for key commodities and consumables because of inflationary pressures in Turkiye, world provide chain points, and impacts from sanctions imposed on Russia.
Greater labor prices in Turkey and Greece have been partially offset by weakening of the Turkish lira and the euro within the second quarter. We have been revising our 2022 consolidated price steerage ranges to replicate decrease than anticipated gold manufacturing within the first half of the 12 months. Continued inflationary pressures in consumables reminiscent of diesel, electrical energy and reagents, and extra prices related to the VAT. Import cost on olympias gold focus shipments into China.
Phil will converse to this in additional element later within the name. Within the second quarter, work progressed and scurries with exercise centered on metal erection, and enclosure of the processing services, execution readiness, and demanding path actions. The execution staff is basically in place and we’re properly positioned to advance entry to a prepared pool of labor within the native space for the development of the venture. Not too long ago we accomplished a purchase order order for the tailings filter press, one in every of our lengthy lead tools gadgets, which is according to the feasibility research price estimate.
This reiterates our confidence within the preliminary capital estimate of $845 million to carry the collection venture within the business manufacturing. Our collection financing discussions proceed to advance. We’re evaluating all accessible choices, together with three way partnership fairness companions, venture and debt financing via EU and Greek lenders, in addition to the EU Restoration and Resiliency Fund and medal streams. Our on choosing a financing package deal will proceed to be pushed by worth optimization and de-risking for the long run.
We look ahead to updating the market as we proceed to work towards financing and board approval for the restart of building and securities within the second half of 2022. As a bridge to completion of a financing package deal, we shall be allocating extra capital to the venture in 2022. Complete progress capital at [inaudible] will now be $60 to $80 million for the 12 months. We’ll adhere to the capital self-discipline up to now, and the scope will proceed to give attention to vital path and website mobilization for key actions to help a choice for building restart.
Lastly, I wish to contact on our 10th annual sustainability report was revealed within the second quarter. I am very happy with the staff for the progress we have made on ESG objectives and initiatives. Some highlights of the report are we obtain gender parity on our board with 56% of members figuring out as feminine as of January 2022. We launched our local weather change technique and set a goal to mitigate greenhouse gasoline emissions by 30% by 2030.
On a enterprise as normal foundation, enhancing our aggressive degree, and low emission depth relative to our friends. We demonstrated management in regard to native employment and procurement, with 81% of our workers from native communities surrounding our operations, and 99% of our workers from international locations by which we function. As we glance ahead, we are going to proceed to construct on our strong basis to problem the established order and discover methods of sustainable mining practices. I am going to cease there and switch issues over to Phil for a evaluate of our monetary outcomes.
Phil Yee
Thanks, George. Good morning, everybody. Slide 5 offers a abstract of our second quarter monetary outcomes. Eldorado reported Q2 2022 web loss attributable to shareholders of $23 million or lack of $zero.12 per share.
After adjusting for one time non-recurring gadgets together with, deferred tax expense associated to international trade translation and a loss on the non-cash reevaluation of the redemption possibility derivatives associated to our debt. Amongst different issues, Q2 adjusted web earnings have been $14 million or $zero.08 per share. Our operational efficiency recovered within the second quarter, leading to money working prices of $789 per ounce offered, and all in sustaining prices of $1270 per ounce offered. Nevertheless, free money move within the second quarter was -$63 million, primarily as a result of decrease gold manufacturing and gross sales within the first half of the 12 months.
Enhance metallic inventories, annual royalty funds, and mine standby prices. We count on free money move within the third quarter to be impacted by larger capital spending, together with the extra severe progress capital. Value efficiency in first half of the 12 months was largely pushed by decrease than deliberate manufacturing and gross sales ounces. We count on prices on a per console foundation to be decrease within the second half of the 12 months according to larger gold manufacturing.
We’re seeing larger prices at Olympus associated to the 13% VAT import cost and focus shipments into China, which was the first vacation spot within the second quarter as deliberate shipments from Russia have been halted in Q1 because of the imposed sanctions. We proceed to discover different markets in an effort to mitigate the Chinese language VAT import expenses. Electrical energy costs rose considerably in Greece, following market modifications in late 2021 and the Russia Ukraine battle Greek subsidies launched in 2020 to cut back the efficient common electrical energy worth at Olympias by 26% in Q2 in comparison with Q1. Numerous extra measures have been launched by the Greek authorities in Might and July of this 12 months to mitigate rising electrical energy costs, which stay risky.
As George talked about earlier, we’re revising our 2022 consolidated price steerage ranges, with money working prices anticipated to be $700 to $750 per ounce offered. Complete working prices within the vary of $792 to $840 per ounce offered, and all in sustaining prices between $1180 to $1280 per ounce offered. Capital expenditures on a money foundation have been $83 million in Q2. Together with continued funding in progress initiatives at [inaudible].
We proceed to actively evaluate our progress and sustaining capital expenditures and our give attention to important capital required to take care of manufacturing, asset integrity and our license to function. Earnings tax expense was $34 million in Q2, comprised of $28 million present tax expense, and $6 million deferred tax expense. Along with tax on our mining income in Turkey A, present tax expense included dividend withholding tax, taxable unrealized international trade positive factors, and Quebec mining duties. Deferred tax expense was pushed by the weakening of native currencies, primarily the lira and the euro.
At quarter finish, we had unrestricted money, money equivalents and time period deposits of $370 million. Our money within the first half of the 12 months was impacted by decrease money generated from operations because of decrease manufacturing, continued capital spending, annual royalty funds, and elevated ranges of consumables and components stock. Our web leverage ratio is at zero.33 occasions as of June 30th, 2022, in comparison with zero.89 occasions on the finish of Q1 2020. This displays a a lot improved credit score profile for the corporate during the last two years.
With that, I’ll now flip it over to Joe to undergo the operational highlights.
Joe Dick — Government Vice President and Chief Working Officer
Thanks, Phil, and good morning. I am going to begin with the well being and security highlights from our operations. Within the second quarter, we proceed to enhance our complete recordable harm frequency fee year-over-year from 6.46 to four.13. We’re centered on constructing a sustainable security tradition as a part of our dedication to a zero hurt office.
Additionally, I wish to congratulate our efforts to include for attaining over 4 and a half years with out misplaced time harm. Now shifting to working outcomes, we produced 113,462 ounces of gold within the second quarter, with money working prices of $789 per ounce offered. Our operational efficiency elevated within the second quarter, pushed by robust efficiency from Lamaque and significant enhancements at Olympia’s. Slide eight seems to be at our operations in additional element.
Beginning in Turkiye, I assume flat out manufacturing within the second quarter was 27,973 ounces and money working prices have been $798 per ounce offered. Oil manufacturing throughout the quarter was decrease than deliberate as fewer cans have been positioned on the leach pad within the first quarter. Throughout the second quarter, there was a major enhance in ounces positioned on the leach pad with larger common gold grades, which is anticipated to positively influence gold manufacturing within the third quarter. Accordingly, we anticipate manufacturing at Kisladag to be weighted to the second half of the 12 months.
Money working prices within the quarter have been impacted primarily by decrease ounces offered. Optimization of the excessive stress grinding roll and debottlenecking of the belt agglomeration circuit continued within the second quarter. The HGPR performing in accordance with the anticipated particle breakage mannequin, with restoration charges enhancing as anticipated with higher gold liberation. As a part of the Kisladag [inaudible] venture, we’re investing in the next capability supplies dealing with system.
These conveyors are anticipated to boost supplies dealing with within the belt agglomeration circuit, and permit us to extend throughput over the stability of the 12 months. You are additionally putting in an agglomeration drum which is able to deal with a high quality or break up of the HGPR product to enhance high quality, consistency, and permeability of the product. The Agglomeration Drum is anticipated to be commissioned within the first half of 2023. A Efemçukuru second quarter gold manufacturing was 22,793 ounces at money working price of $706 per ounce offered.
Gold manufacturing, throughput, and common gold graded Efemçukuru have been according to expectation. Value will increase and labor, electrical energy, and consumables, partially offset by the weakening lira. It’s value reemphasizing the excellent efficiency that from Efemçukuru. Not solely has the location demonstrated excellence in security for 4 and a half years, as I famous earlier, but additionally the location staff has delivered manufacturing to plan since 2014.
I am very happy with the Efemçukuru staff. Now shifting to Lamaque, the place we’re additionally seeing the identical degree of strong operational efficiency. Second quarter gold manufacturing at Lamaque was 46,917 ounces, and money working prices have been $657 per ounce offered. Lamaque groups robust efficiency within the second quarter was pushed by mine and steady enchancment efforts.
Underground growth of excessive grade strokes progressed properly, and gold manufacturing was larger than deliberate because of larger throughput and better grades. Value will increase for consumables have been partially offset by a barely weaker Canadian greenback. Within the second quarter, useful resource conversion drilling began on the Ormaque deposit from the brand new exploration journey, which was accomplished as deliberate in early Q3. It’s nonetheless within the very early levels, however the drilling is validating our fashions and we’re very excited concerning the future potential on the Ormaque deposit.
Lastly, let’s transfer to Greece. An Olympias second quarter gold manufacturing was 15,779 ounces and money working prices have been $1446 per ounce offered. Olympia transformation initiatives are displaying optimistic outcomes on the mine continues to enhance productiveness with higher gold grade ensuing from blasting initiatives with the dilution management focus. Value will increase ensuing from blast ensuing price will increase and VAT, Import expenses, electrical energy, gasoline, and different consumables have been partially offset by a weaker euro within the quarter.
I am going to cease there and switch it again to George for closing remarks.
George Burns — President and Chief Government Officer
Thanks, staff. I am happy with the robust efficiency within the second quarter throughout our world operations. As we look ahead to the rest of 2022, we proceed to be centered on delivering protected working outcomes and de-risking the securities venture as we execute on our progress technique. We imagine collection may have a transformative influence on Eldorado working profile and maximize worth for our shareholders.
Thanks in your time. I’ll now flip it over to the operator for questions from our analysts.
Questions & Solutions:
Operator
Thanks. [Operator instruction] The primary query comes from the Fahad Tariq with Credit score Suisse. Please go forward.
Fahad Tariq — Credit score Suisse — Analyst
Hello. Good morning. Only one for me. On the [inaudible] financing package deal, are you able to possibly give some extra element on whether or not there’s possibly some hurdles or simply why the method appears to be taking a bit longer? And by way of expectations, are you hoping to announce one full financing package deal or will or not it’s in levels, for instance, starting with the Greek banks after which possibly adopted by different types of financing? Thanks.
Phil Yee
Hello, Fahad. It is Philip right here. Good to listen to from you. When it comes to the the [inaudible] financing package deal, I imply, we have been actively in discussions with two Greek banks that we’re trying to do have lead the financing package deal.
The Greek banks are on the level of actively working towards acquiring credit score committee approval, and we hope to acquire that pretty quickly. And as soon as we have had the Greek financial institution credit score committee approval, then we will begin the the RF course of. I believe by way of the method. I imply, we have been speaking that we count on that most definitely in Q3.
I’d say that we’re fairly superior and discussions are going properly. So it is progressing. It is a course of, however I believe it is a properly superior course of.
Joe Dick — Government Vice President and Chief Working Officer
Yeah, it Joe right here. It is simply complement that you realize clearly the low price financing could be very enticing from the Greek banks, and the EU are funding. And there is major effort on that, however we’re persevering with to give attention to the opposite alternate options. And by way of timing, our public steerage is to get financing in place and restart securities building by the top of the 12 months.
Clearly, all pending board approval for each. We stay assured we’ll be capable of ship that, however we’ll replace the market as this factor unfolds.
Fahad Tariq — Credit score Suisse — Analyst
OK. That is useful. After which possibly only a observe up. Are you able to give a share of what quantity of the whole financing you count on from the Greek banks? And is there any urge for food to possibly like fund the remaining quantity yourselves?
George Burns — President and Chief Government Officer
So the Greek financial institution financing package deal is concentrated on as much as 80% of the venture capital. From time to time the remaining 20%. It could come from Eldorado Fairness or a possible JV companion. The 80% that the Greek banks are funding would then be taken to the following step to probably carry into the European Union covertly funding, which might then be allocate a portion of that of that 80%.
Joe Dick — Government Vice President and Chief Working Officer
Effectively, once more, I simply complement that. We imagine we have got the stability sheet to help the capital and any determination to herald a three way partnership companion could be depending on valuation, and the energy it could carry to the safety of the funding over the multi-decade mine life. So we proceed to give attention to these alternate options, however imagine we’ve got the stability sheet with the venture financing to to have the ability to put it into building.
Fahad Tariq — Credit score Suisse — Analyst
Okay. Thanks.
Operator
[Operator signoff]
Period: zero minutes
Name contributors:
Lisa Wilkinson — Vice President, Investor Relations
George Burns — President and Chief Government Officer
Phil Yee
Joe Dick — Government Vice President and Chief Working Officer
Fahad Tariq — Credit score Suisse — Analyst
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