Eldorado Gold Corporation (NYSE:EGO) Q4 2023 Earnings Call Transcript
Eldorado Gold Corporation (NYSE:EGO) Q4 2023 Earnings Call Transcript February 23, 2024
Eldorado Gold Corporation isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Thank you for standing by. This is the conference operator. Welcome to the Eldorado Gold 2023 Q4 and Full Year Results Conference Call. [Operator Instructions] I would now like to turn the conference over to Lynette Gould, Vice President, Investor Relations. Please go ahead, Ms. Gould.
Lynette Gould: Thank you, operator, and good morning, everyone. I’d like to welcome you to our fourth quarter and year-end 2023 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; Joe Dick, Executive Vice President and Chief Operating Officer; and Simon Hille, Executive Vice President, Technical Services and Operations.
Our release yesterday details our fourth quarter and year-end 2023 financial and operating results. This should be read in conjunction with our year-end 2023 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. We will be speaking to the slides that accompany this webcast, and 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 [technical difficulty]. I will now turn the call over to George.
George Burns: Thanks, Lynette, and good morning, everyone. First we like to pass on our condolences to everyone affected by the SSR tragedy in Turkey. Our in-country team provided services to the response efforts, and we await key findings from the investigation. We were pleased to have Paul Ferneyhough, our recently appointed Executive Vice President and Chief Financial Officer, step into the role following Phil Yee's retirement. Paul joined us in 2021 as part of our CFO succession plan, and was key in negotiating the project financing on the Skouries project, and worked closely with Phil and the finance team since joining Eldorado. The transition has gone smoothly and for those who have not yet met Paul, I'm sure over the coming months you will have the opportunity to do so.
I would also like to take this opportunity to acknowledge Joe Dick, because this will be his last formal conference call with us. At the end of March he will retire his role as COO and move into a consultant role to support us in delivering Skouries project. Joe, I would like to thank you for everything you've contributed to the organization. And on behalf of everyone at Eldorado we wish you all the best in your semi retirement. As Joe moves into this new role we have welcomed Louw Smith as the Executive Vice President, Development, Greece. Louw was responsible for Greek assets including Skouries and Olympias. He will join us on our first quarter call for 2024 in April to review the Greek assets. Louw brings to the role over 3 years of international experience in the industry.
We are pleased to have him join Eldorado. Here's the outline for today's call. I'll provide a brief overview of Q4 and 2023 results and highlights, updated 2024 production and cost guidance and our 4-year production outlook. I will then pass the call over to Paul to go through our financials and then Joe and Simon to review our operational performance. Then we'll open the call to questions from our analysts. Turning to Slide 4, 2023 was a successful year at Eldorado, marked with many accomplishments. We delivered increasing production, while lowering our cost profile over 2022 resulting in a very strong financial year. This accomplishment demonstrates our team's dedication and hard work. Fourth quarter was the strongest quarter the year with safe production of 143,166 ounces.
We finished the year with gold production of 485,139 ounces, in line with our guidance range and a 7% increase over 2022. Production benefited from Olympias infrastructure and productivity improvements and at Kisladag from our upgraded materials handling systems and the commissioning of the north heap leach pad. On the cost side, our cash cost and our all-in sustaining costs decreased by 6% and 4%, respectively, compared to 2022 in an environment where the industry cost base is rising. We saw lightly lower unit costs for e-consumables including energy and fuel and lower sustaining capital expenditures. Also in Turkey, we benefited from the depreciating lira, that more than offset inflation. In addition, our continuous improvement initiatives across the sites also contributed to declining costs.
For full year of 2023 cash costs and all-in sustaining costs were in line with our guidance ranges we issued in October. Paul will touch on the cost in more detail later in the call. Turning to Slide 5, in the fourth quarter, we recorded one last time injury with the frequency rate of 0.42, which was consistent with the LTIFR in Q4 2022. In 2023, the LTIFR was .65, a 45% improvement over 1.19 in 2022. While we are proud of our safety performance, and our employees commitment to safe operations, we know there's a lot more to be done. Our safety and health journey will continue in 2024 with a focus on preventing high potential incidents and further empowerment of our employees to promote a positive health and safety culture. On sustainability, we take pride in our consistently strong performance and are pleased to have been recently recognized for our continued efforts.
We were ranked first in the material sector and 27 overall in the Globe & Mail's 2023 Board Games, which rate Canadian corporate Boards on the S&P and TSX Composite Index for the quality of their governance practice and disclosure. In addition at the Resourcing Tomorrow conference in London, we took hold the Project Financing of the Year Award for the Skouries Project Financing. We also received an honorable mention for ESG Producer of the year. Moving to Slide 6. In conjunction with our financial release yesterday, we published our 2024 guidance and full year production outlook. Looking forward towards 2024, we expect a 9% increase in gold production over 2023 with gold production expected to be between 505,000 and 555,000 ounces. The increase in gold production over 2023 will be primarily driven by higher expected production at Kisladag and Olympias following the productivity improvements that were implemented last year.
As in previous years, production is expected to be second half weighted. Production in Q1 and Q2 of this year is expected to be lower than Q4 2023 as a result of winter conditions at Kisladag and planned ore grade variability at Kisladag, Lamaque and Efemcukuru. Total cash costs are expected to be between $840 and $94 per ounce sold. All-in sustaining costs are expected to be between $1,190 and $1,290 per ounce sold. Both total cash cost and all-in sustaining costs are expected to be in line compared to 2023. Sustaining capital on our operations is expected to be between $135 million and $160 million. The increase over 2023 is primarily the result of an increase at Lamaque for underground development and tailings storage facility upgrades and Olympias for underground development and infrastructure.
Growth capital or operating mines is expected to be between $122 million and $144 million, which has increased over 2023 primarily the result of an increase at Lamaque for the planned or mothballed sample development and at Olympias, as we take a phased approach to increasing throughput to 650,000 tonnes per annum, which is expected in 2026. Growth capital at Skouries is expected to be 375 million to 425 million. Skouries capital has significantly increased over 2023 as we're in the peak of the construction. Due to delays in finalizing key contracts, and some of the 2023 spend, was moved into 2024 as we previously indicated. Our full year outlook is a compelling story of near-term, high quality production growth. The primary growth engine is Skouries which is expected to be commissioning in the third quarter of next year.
Our gold production is expected to increase 45% from 2023 through 2027. In addition to the gold production, copper becomes a significant component of Eldorado's overall production and revenue profile. Within our guidance this year, we have included the copper production at Skouries starting in 2025. Moving to Slide 7, we announced in yesterday's release a 9% or $75 million increase in the capital estimate at Skouries. Higher capital estimate was a result of increased labor cost. During 2023, negotiated contracts finalized were consistent with the feasibility study. The recent bids in 2024 that are being finalized or will be finalized in the first half of 2024 are associated with the mill facility and the tailings filtration plant that are coming in above the feasibility study estimate.
The largest factor is higher labor range for trade workers and to a lesser degree slightly lower productivity assumed and to an even lesser degree an increase in quantity of work being recognized from detailed engineering versus the feasibility study engineering. These new market and engineering realities are being included in the remaining contrast still being finalized. As a result, we believe the updated cost estimate is largely derisked in terms of labor cost, procurement risk and engineering risk. We also believe this modest 9% increase in capital cost estimate in light of the global inflationary pressure since December 2021 feasibility study. There's a positive outcome. Our focus as we finalize these remaining contracts turns to mobilization of contractors, and safe execution of the work to deliver startup commissioning in Q3, 2025, and operational readiness to deliver commercial production by the end of 2025.
The solid project financing and robust balance sheet we remain fully funded to complete the construction Skouries. [Indiscernible] invested and diligently negotiating these key contracts is increased our execution confidence with a modest effect on the production schedule. First production of the high-quality copper gold concentrate is now expected in Q3 of 2025 from prior guidance of mid 2025, and we remain on track for commercial production at the end of 2025. The back end weighted operations ramp up through we have lowered the series 2025 gold production range to between 50,000 and 60,000 ounces of pre-production ounces from the prior guidance of 80,000 to 90,000 ounces. In 2025, we also have guided on copper production and expect to produce between 15 million and 20 million pounds that year.
For the subsequent years 2026 and 2027, we are maintaining the previous gold production guidance ranges and have provided copper production. We are assessing our plans with the goal of increasing our 2026 production profile at Skouries. I'll stop there and turn the call over to Paul for your financial results.
Paul Ferneyhough: Thank you, George and good morning, everyone. Slide 8 provides a summary of our fourth quarter and full year results. 2023 was a strong year for us. As George mentioned, we delivered in line with our production guidance and in line with our guidance range on operating costs. Increasing production and lowering costs compared to 2022 have resulted in strong financial results for the full year. Eldorado reported net earnings attributable to shareholders from continuing operations of $92 million or $0.45 per share in the fourth quarter, positively impacted by higher revenue and a higher income tax recovery over the comparative period in 2022. For the full year, net earnings attributable to shareholders from continuing operations was $106 million or $0.55 per share, compared to a net loss of $49 million or $0.27 loss per share in 2022.
Earnings increased in 2023 [technical difficulty] $82 million excluding capital investment in the Skouries project. For the full year, free cash flow was negative $47 million or $113 million positive, excluding the Skouries project, a significant improvement over 2022 which was negative $69 million. Cash flow generated by operating activities before changes in working capital in the quarter was Sorry $138 million, and for 2023 was $411 million, compared to $214 million in 2022. Fourth quarter cash operating cost was $716 per ounce sold, and all-in sustaining cost was $1,207 per ounce sold. For the full year on a per ounce sold, cash operating costs was $743. Total cash costs was $850. And all-in sustaining cost was $1,220 pounds. Our cost decreased compared to the prior year as a result of high production and slightly lower unit costs for key consumables, including energy and fuel.
Capital expenditures were $137 million in the fourth quarter, including investment in growth projects at Kışladag focused on the waste stripping, North Heap Leach Pad of upgraded materials handling systems and at Skouries where we continue to advance construction and procurement for the project. Overall 2023 capital expenditures were $411 million. Current tax expense of $22 million for the fourth quarter increased from $10 million compared to the same period in 2022. Current tax expense totaled $86 million for the full year, an increase from $70 million in 2022. The increase in 2023 was primarily related to the operations in Turkey. Increased reflects higher sales volumes, combined with a tax rate increase in Turkey aid from 20% to 25%. That was enacted on July the 15th.
That was retroactive to the beginning of the year. This was partially offset by Turkish investment tax credits. [indiscernible] income tax recoveries of $68 million in the fourth quarter and $28 million for the full year compared to recoveries of $34 million and $8.5 million, respectively, in 2022. Turning to Slide 9, our financial position remains robust. As we move into 2024. We ended the year with a total liquidity of $652 million, including $542 million of cash, cash equivalents and term deposits, and $110 million of available capacity, our revolving credit facility. We continue to focus on maintaining a solid financial position, which 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 Joe to go through the operational highlights.
Joe Dick: Thanks, Paul. Good morning. Starting on Slide 10 at Skouries. We have made significant progress since restarting construction. Activity has continued to ramp up on site with project progress at 38% at the end of December 2023. Overall project progress stands at 70% including work completed before putting the project into care and maintenance in 2017. Since giving the last update, detailed engineering has progressed to 61% from 56% and procurement is 82% complete, up from 73%. Mobilization of the earthworks contractor for embankment facility within the integrated extractive Waste Management Facility. The ID i.e. WMF started in the second quarter along with critical underground power service updates. Additionally, the construction team made positive headway on the crusher building, milling, flotation, building and underground development.
We have some more detailed photos to share in the coming slides. Moving to Slide 11, as we continue to ramp up construction activities, or 2024 capital is expected to be between $375 million and $425 million. The capital will be focused on continuing to advance construction of the major earthworks including haul roads, i.e. WMF, construction, low grade stockpile, water management and process facilities and the crusher and filter buildings. In addition, work will focus on underground development to support the test doping program scheduled for 2025. Mechanical piping and electrical installations will progress in process and infrastructure areas. On the critical path is the builder plant which continues to advance with the piling work having commenced.
We expect to award the filter building contract early in Q2 with the contract 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. The filter plates arrived on site in January, with the remaining components assemblies and fabricated frames expected to ship in the second quarter. Pre assembly is expected to start following delivery. Work for the mail float. Quotation building is in progress with commissioning on overhead cranes installation of construction lighting, and scaffolding and the commencement of structural steel work. Mechanical piping and electrical work for the process plant are mobilizing with work commencing this quarter.
By the end of 2024. We expect to have completed the I.E. W M F cofferdam and significantly advanced the IBEW MF earthworks water management facilities and the process and filter plant area. On Slide, the top r The next set of slides show how much work is already underway on three critical areas. Since we hosted a contingent of analysts and investors on the site in October, you may be impressed by how fast things have advanced through the winter months, specifically on the crusher plant foundation and preparation of the filter plant area. On Slide 12 That top photo gives you a good view of the amount of pre stripping that has already been completed in the pit. In the bottom photo, you can see the trucks on site that are employed on the open pit pre stripping to support construction of the haul roads and water management ponds.
On Slide 13, you can see the area for the crusher building. The piles have been driven and poured and the next stage of civil construction has begun. Over at the filter plant on Slide 14, this shows the significant amount of excavation work that has been done with the piling work underway. Shown on Slide 15, or the first four company owned 45 ton stuffed Cat 745 trucks. These trucks will be used once glorious is in operation to build the lifts that but we required on the drive stack and [indiscernible] during construction of the Civil Works, these trucks will be used as part of an integrated fleet with the earthworks con with the earthworks contractor for construction of the IBEWMF facilities, we expect to take delivery of 15 additional trucks through the end of Q2 2024.
The photo on the right shows the first phase, the underground development, advancing the west of decline and access to the test stopes. The second underground development contract proposals are in the final evaluation stage, and awarding of the contract is planned for the second quarter. This contract includes test tube work as well as additional development and services work to support the development phase one of the underground mine. We expect to complete about 2,200 meters of underground development by the end of 2024. As a reminder is it expected that furious will be mined predominantly via open pit for the first 9 years in conjunction with a ramp up of the underground. We look forward to providing updates as progress continues. I'll turn it over to Simon for a review of operations.
Simon Hille: Thanks, Joe. Starting in Turkey on Slide 16. [Indiscernible] for the quarter production was 46,291 answers with cash operating costs of $623 per ounce sold, which represented 24% increase in production on a similar cash operating costs compared to the prior quarter. Production during the quarter was driven by continued optimization of the materials handling systems and the commissioning of the north heap beach pad, which has increased the or trans placed and increased irrigation flow rates. Overall in 2023 production was below guidance due to slower than expected inventory drawdown at the south heap leach pad. Cash operating costs were significantly lower in guidance as a result of the lower prices of fuel and electricity.
Looking ahead to 2024, Kışladag's production guidance is between 180,000 and 195,000 ounces of gold. To achieve this Kışladaq is expected to mine and place on leach pad approximately 13.2 to 13.7 million tons of all at an average gold grade of between .7 and .8 grams per ton. The production range has been revised from the guidance issued in 2023. And this is primarily due to inventory buildup within the oil state in the leach facility find the residual impacts of the high precipitation event 2023. We continue to optimize our unbound agglomeration process and staking processes to improve quality and consistency of the sector along with focus activities to enhance inventory drawdown. On Slide 17, [indiscernible]. Fourth quarter gold production was 22,374 ounces at a cash operating cost of $816 per ounce sold.
Gold production throughput and average gold greater depth into crew were in line with plans for the quarter. Overall 2023 production and cash costs were in line with guidance. For the year ahead, Efemçukuru increase production is between 75,000 and 85,000 ounces of gold, and the site is expected to process approximately 530,000 to 550,000 tons of ore and an average gold grade of between 5, 5.5 grams per ton. Production is expected to be relatively consistent quarter-over-quarter with the first quarter expected to be the lowest. And now moving to the Lamaque Complex on Slide 18. The Lamaque complex delivered record gold production in the fourth quarter and for the year. Fourth quarter gold production was 56,619 ounces, a 29% increase over the prior quarter driven by productivity improvements in the [indiscernible] and higher grade, which allowed the mills performing capacity.
Shockwaves costs were $580 per ounce sold. Additionally, in 2023, we announced the conversion of a portion of the inferred resources into indicator resources at the [indiscernible] deposit. During 2024, we will continue to advance infield drilling program targeting the upper two-thirds of the [indiscernible] deposits and we remain on track to take the bulk sample. Made a pre-feasibility study and announced the [indiscernible] inaugural reserves by the end of 2024. For the year, Lamaque max production guidance is between 175,000 and 190,000 ounces of gold, and is expected to decide is expected to mine and process approximately 170,000 to 910,000 tons of ore and an average folk rate between 6.3 and 6.8 grams per ton. The production range has been widened slightly compared to the guidance issued in 2023.
To reflect an updated mine plan that supports mine sequencing optionality and optimization as you move lower in the deposit. I will hand the call back to Joe to review the fourth quarter results for Olympias?
Joe Dick: Thanks, Simon. Moving to Olympias on Slide 19. The mine delivered record annual production and the mill delivered record throughput by leveraging operating initiatives implemented during the year. Fourth quarter gold production was 17,882 ounces and cash operating costs were $1,224 per ounce sold. Overall, 2023 production was in line with guidance. Costs were higher than expected because of a delay in the completion of the bulk of motion and ventilation projects scheduled for early Q1 2023 completion and were commissioned midyear that affected mine plan sequence and delayed lower mine development, both of which contributed to the byproduct and grade variances which in turn affected unit costs At Olympias, in 2024. We expect to see continued improvement as we advanced the underground development and increase metal production from the flat zone.
Production is expected to be relatively steady through the year delivering between 75,000 and 85,000 ounces of gold. Total cash costs are expected to benefit from the increased byproduct metal production within the flat zone, which is expected to result in higher byproduct credits, driving down the operating costs. Total cash costs are expected to be between $980 and $1,080 per ounce sold and all-in sustaining costs are expected to be between 1,280 and $1,380 per ounce sold. Timing of byproducts shipments and subsequent recognition of sales per quarter may result in quarter-over-quarter total cash costs variability over the course of the year. I'll stop there and turn it back to George for closing remarks.
George Burns: Thanks, team. In summary, 2023 was a fantastic year operationally and financially and I would like to acknowledge the dedication and hard work of our teams across the sites. We were able to deliver increasing production, getting annual production records of both the lock and Olympias while lowering our cost profile over 2022 a testament to the strength and commitment across the organization. We are in solid shape with a lot of momentum going forward. We're fully funded to execute on Skouries and bring into production next year. Additionally, each of our sites have ongoing continuous improvement initiatives, with the assets expected to provide growing safe production year-over-year and a disciplined management. In addition to Skouries bringing on high-quality copper gold production, we expect to generate significant free cash flow generation.
It's an amazing time to be at Eldorado. Thank you for your time. I will now turn it over to the operator for questions from our analysts.
Operator: [Operator Instructions] The first question comes from Cosmos Chiu with CIBC. Please go ahead.
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