Eldorado Gold(EGO) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics - Gold production in Q3 2024 was 125,195 ounces, aligning with full-year guidance [8] - Total cash costs were $953 per ounce sold, and all-in sustaining costs (AISC) were$1,335 per ounce sold, driven by higher royalties and labor costs [9] - Year-to-date production increased by 7% compared to 2023 and 12% compared to 2022 [10] - Gold production guidance tightened to 505,000-530,000 ounces, down from 505,000-555,000 ounces, due to inventory buildup at Kisladag and work stoppages at Olympias [11] - Total cash cost guidance tightened to $910-$940 per ounce sold, and AISC to $1,260-$1,290 per ounce sold, reflecting higher royalties and lower production [12] - Depreciation guidance lowered to $250-$260 million from $280-$290 million due to lower depreciation at Kisladag and Olympias [13] - Sustaining capital guidance tightened to $135-$145 million, primarily due to deferred projects at Olympias [13] - Skouries capital investment guidance lowered to $350-$380 million from $375-$425 million due to rescheduled non-critical work and slower contractor mobilization [14] - Growth capital at operating mines increased to $145-$160 million, driven by waste stripping and accelerated spending at Kisladag [15] Business Line Performance - Olympias: Q3 gold production was 21,211 ounces with total cash costs of $1,210 per ounce sold, impacted by higher labor costs and royalties [44] - **Kisladag**: Q3 production was 41,084 ounces with total cash costs of$899 per ounce sold, slightly below plan due to maintenance issues and slower leach cycles [46] - Efemcukuru: Q3 production was 19,794 ounces with total cash costs of $1,325 per ounce sold, in line with plan [50] - **Lamaque**: Q3 production was 43,106 ounces with total cash costs of$728 per ounce sold, slightly lower than the prior year due to lower gold prices [50] Market and Regional Performance - Greece (Skouries): Overall project progress reached 79%, with detailed engineering 78% complete, and first production expected in Q3 2025 [33][34] - Turkey (Kisladag and Efemcukuru): Production and costs were impacted by higher royalties due to increased gold prices [46][50] - Canada (Lamaque): Strong production and development rates, with a focus on productivity improvements [50] Strategic Direction and Industry Competition - The company is focused on maintaining disciplined cost control and capital allocation, with elevated gold prices driving margin expansion and free cash flow growth [53] - Skouries remains on track for first production in Q3 2025, with significant derisking achieved through major contract signings and operational readiness [16] - The company is managing labor market challenges by rescheduling non-critical work and integrating additional personnel to maintain productivity levels [17] Management Commentary on Operating Environment and Future Outlook - Management highlighted the positive impact of record-high gold prices on margins and cash flow, with expectations of continued margin expansion [53] - The company remains committed to responsible mining and maintaining a safe workplace, with ongoing health and safety initiatives [18][19] - Management expressed confidence in achieving tightened production and cost guidance for 2024, with strong momentum heading into Q4 [52] Other Important Information - The company ended Q3 with total liquidity of $885 million, including$677 million in cash and $208 million in available credit capacity [31] - Free cash flow in Q3 was negative$4.8 million, or positive $98.3 million excluding Skouries capital investment, reflecting strong operating performance [25] - The company recognized a$50 million gain on deferred consideration from the sale of the Tocantinzinho mine, contributing to adjusted net earnings of 71 million [24] Q&A Session Summary Question: Impact of Skouries Underground Development Delays on Ramp-Up - The underground development delay at Skouries is not expected to impact the timing of first production in Q3 2025, as the underground mine is not a critical part of the initial production profile [56][57] - The delay is due to transitioning from a Greek contractor to a Finnish contractor, with productivity improvements expected as more workers are deployed [57] Question: Skouries Capital Expenditure Timing - The company remains confident in the 920 million total capital expenditure for Skouries, with significant spending expected in Q4 2024 and Q1 2025 [59] - Some non-critical infrastructure work may spill into 2025, but it will not impact the ability to operate [60] Question: Drivers of Q4 Production Increase - Strong production at Lamaque and Efemcukuru, along with improved performance at Olympias, are expected to drive a 10% quarter-over-quarter increase in Q4 production [63] Question: Inflation and Labor Costs - Labor costs account for 27% of total costs, with inflation averaging 3% annually under the new collective bargaining agreement at Olympias [77][80] - Contractors face similar inflationary pressures, though timing may differ [79] Question: Royalty Sensitivity to Gold Prices - Royalty costs increased by $105 per ounce in Q3 due to a$600 increase in realized gold prices compared to the budgeted $1,900 per ounce [82] Question: Reserve Cutoff Grades and Gold Price Assumptions - The company plans to update its reserve statements by the end of 2024, with no material change expected in the$1,400 gold price assumption [84][85] Question: Dividend Reinstatement and M&A Strategy - The company plans to focus on reinstating a sustainable dividend in 2026 after Skouries reaches commercial production [89] - While M&A is not a primary focus, the company remains opportunistic and open to exceptional opportunities [90]