Eldorado Gold - Q1 2023

Transcript

Operator (participant)

Thank you for standing by. This is the conference operator. Welcome to the Eldorado 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 one 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 Gould, Vice President, Investor Relations. Please go ahead, Ms. Gould.

Lynette Gould (VP of Investor Relations)

Thank you, operator, 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's 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 SEDAR and EDGAR. All dollar figures discussed today are US 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.

George Burns (President and CEO)

Thanks, Lynette Gould. 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 Yee to go through the financials and Joe Dick to review our operational performance. We will open the call to questions from our analysts. On April 5th, we were pleased to close the Skouries project financing of EUR 680 million, with the initial drawdown of EUR 32 million 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 Eldorado. 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%-6% on current six-month EURIBOR, 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 Skouries project in Q2 and Q3 of 2023. This is a major milestone for the company and transitions us to full execution mode on 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, Skouries 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 Lamaque 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 Kışladağ HPGR, the Triangle-Sigma Decline Project at Lamaque, we are confident that we have the expertise and team, which includes our EPCM contractor, Fluor, in place to deliver Skouries 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 oz to 515,000 oz. Additionally, we are maintaining our capital expenditure guidance of $394 million to $437 million, including $240 million to $260 million towards the advancement of Skouries 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-in sustaining costs are in line with our guidance ranges, driven by steady production across the portfolio.

Phil will speak to our cost and financial position in more detail later on the call. At Skouries, 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 Skouries is expected to be $240 million 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. Yesterday we received approval of the Ministry of Energy and Environment for the modified EIA for the Kassandra Mines. This modification will allow for the expansion of the Olympias mine and processing facility to 264,650 tons per annum and improvements to the Stratoni Port. 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.

Phil Yee (EVP and CFO)

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 Türkiye, 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 Kışladağ and at Skouries, 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 US 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 Türkiye. The current tax expense included $5.5 million withholding tax on earnings repatriated from Türkiye in the 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 Türkiye's earthquake relief efforts. 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 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 concentrate inventory at Olympias. 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 Skouries project financing, the availability under the $250 million revolving credit facility was reduced by $209 million.

This is equivalent to EUR 190 million as Eldorado's investment undertaking for the Skouries 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.

Joe Dick (EVP and COO)

Thanks, Phil, and good morning, everyone. I'd like to start by congratulating our team in Türkiye, 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 Efemçukuru and Kışladağ, who attended the earthquake zone in Eastern Türkiye 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 lost-time injury frequency rate decreased to 0.87 per million hours worked, 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 oz 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 oz and 515,000 oz, with production weighted to the second half of the year. Slide nine. Slide nine looks at our operations in more detail.

Starting in Türkiye, at Kışladağ first quarter production was 37,160 oz, 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 a first change of the HPGR rolls. Commissioning of the agglomeration circuit is now underway and progressing well.

Q1 work also focused on the north heap leach pad, which is expected to be operational, with stacking to commence early in the third quarter. 2023, Kışladağ's production guidance is 160,000 oz to 170,000 oz 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 Efemçukuru, first gold, first quarter gold production was 19,928 oz at cash operating costs of $869 per ounce sold. Gold production throughput and average gold grade at Efemçukuru were in line with plan for the quarter.

For 2023, Efemçukuru's production guidance is forecast to be 80,000 oz to 90,000 oz 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. Moving to Lamaque. Following a strong finish to 2022, first quarter gold production was 37,884 oz at cash operating costs of $721 per ounce sold. Q1 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 4.5-day routine shutdown for maintenance. At the end of March, we released an updated exploration results on our Ormaque 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 Ormaque in 2024. In 2023, Lamaque's production guidance is 170,000 oz to 180,000 oz of gold. For the second quarter, processing rates will increase slightly, coupled with consistent grade. Production for the second half of the year is expected to be stronger than the first half, with stable throughput in the 2,400 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 hauled and lowering our greenhouse gas emissions. Finally, moving to Greece. At Olympias, first quarter gold production was 17,561 oz, and cash operating costs were $898 per ounce sold, which represents an approximate 95% increase in production and 40% reduction in cash costs over Q1 2022. Our cash cost 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 the 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 per blasted round for both development and production. We also reached 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, Olympias production guidance is 60,000 oz to 75,000 oz 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.

George Burns (President and CEO)

Thanks, team. Looking forward, 2023 is a milestone year for us as we transition to execution mode at Skouries that will deliver significant production growth over the next 5 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. I'll start with Kışladağ. At Kışladağ, 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.

As we continue to work through commissioning, our focus is on additional opportunities for growth. Crushing the ore finer, agglomerating the ore effectively, and debottlenecking the plant for potential higher throughput are all opportunities to increase value at Kışladağ. Kışladağ's got a long mine life and a lot of value to be acquired from this asset. Moving over to Efemçukuru, it's been our steady performer throughout its life. You know, 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 Lamaque, 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. Here again, we have a bright future. Our focus this year is on infill drilling the Lamaque 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. Spinning over to Greece, you know, 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. 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 gonna increase significantly, and that really is what's required to support continued growth in our production profile.

Olympias will be a significant asset for Eldorado, and our focus here is to sustain these improvements and to set us up for the expansion that's planned for 2026. Skouries. You know, 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 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. Skouries is gonna transform Eldorado in terms of our ability to generate free cash flow. We'll be producing a significant amount of copper that will support the planet in terms of energy transformation.

We're well-positioned 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 the call to questions from our analysts.

Operator (participant)

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 Chiu from CIBC. Please go ahead.

Cosmos Chiu (Executive Director and Precious Metals Institutional Equity Research)

Thank you, George, Phil, Joe, and welcome, Lynette. Good to hear from you. Maybe my first question is on Olympias. I guess overall, cost for the company was lower than expected in Q1. A key driver was clearly Olympias, 1,355 unsustaining cost in Q1. Last quarter, almost $2,000 an ounce. 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 emulsion coming, underground ventilation, whole bunch of other projects are coming as well. You know, what should we be expecting in terms of Olympias cost on a go-forward basis?

George Burns (President and CEO)

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. You know, they'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. You know, our confidence has risen. You know, 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.

Cosmos Chiu (Executive Director and Precious Metals Institutional Equity Research)

George, as a follow-up, 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 tons per annum. To be honest, I wasn't aware that the flat zone was that important. Maybe could you piece it all together for me? Has a decision been made in terms of the expansion? Does this help in terms of the, you know, transformational improvements that you've made so far? You know, again, reminding us of the importance here.

George Burns (President and CEO)

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 the mine are critical. Great achievement to have that finalized. It just removes any doubt around permitting. Then, you know, 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. I'd say, you know, we'll be bringing that decision through management and into our board late next year, depending on continued improvement at the operation. As I said, we believe we can sustain these sort of numbers, deliver our guidance. As we do, that'll give us the confidence to commit the additional capital to expand to 650.

You know, we're feeling really good about it right now, Cosmos.

Cosmos Chiu (Executive Director and Precious Metals Institutional Equity Research)

That's great. Maybe George, switching gears a little bit, Kışladağ. 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. Could you maybe talk a bit more about Kışladağ? Again, you know, these levels in terms of cost, the sustainability for the remainder of 2023.

George Burns (President and CEO)

Yeah, maybe I'll talk to the cost and let Phil follow up on. I'll talk to the production and Phil can follow up on cost. You know, if you look at last year, we had pretty consistent improvements in throughput through the crushing facility each quarter throughout the year. 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 debottlenecked the conveyance system, particularly with cement agglomerator ore. First quarter, you know, we were in good shape with the conveyor system. You know, we had all the learnings last year on belt agglomeration, we had a solid quarter. What's exciting about Q2 is we've got the drum agglomerator running.

You know, 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. That's gonna aid us. As I say, as we continue to commission, we'll be looking for opportunities to debottleneck 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 Kışladağ that's different from the rest of our operations, open pit, you know, we move a lot of waste to provide that 15-year mine life.

Diesel costs are significant. We saw a pretty significant drop in diesel costs relative to last year. 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.

Cosmos Chiu (Executive Director and Precious Metals Institutional Equity Research)

Great.

Phil Yee (EVP and CFO)

Hi, Cosmos, it's Phil.

George Burns (President and CEO)

Hi, Phil.

Phil Yee (EVP and CFO)

Just to give you some background on the cost. Definitely Kışladağ did see a reduction in both diesel and electricity costs in Q1.

You know, our average price in Q1 for diesel, for example, is about $0.81 per liter. It was a drop of about 13% from the previous quarter. Electricity costs for Kışladağ as well dropped about 16% from the previous quarter. That all contributed to the lower, to the lower costs.

Cosmos Chiu (Executive Director and Precious Metals Institutional Equity Research)

Great. Then maybe one follow-up here. You know, George, as you mentioned, the north heap 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, I guess, getting kind of late. It almost sounded like you were moving all the stacking from the main sort of heap leach pad to north heap leach pad. Is that correct? 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, you know, summarize it for me once again?

George Burns (President and CEO)

You know, if you look at the history so far at Kışladağ, it's all been in the so-south leach pad. We've basically built, you know, a mountain basically out of crushed material and we're near the end of its life. We've built basically a new leach pad, a little bit further away from the plant, and that. 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 doré. We're on track to completing that project on budget and on our schedule.

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 agglomerator ore. 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. 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. There again, a little bit of upside as we operate that new leach facility. It's an exciting time at Kışladağ.

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. You know, and the last piece is just the stripping. You know, 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 leach pad really finishes up this year. It's the beginning of a, you know, an improved cash flow generation period for Kışladağ beginning next year.

Cosmos Chiu (Executive Director and Precious Metals Institutional Equity Research)

Understood. Thanks, George, Phil and team for answering my questions. That's all I have, and have a good weekend.

George Burns (President and CEO)

Thanks, Cosmos.

Operator (participant)

The next question comes from Tanya Jakusconek from Scotiabank. Please go ahead.

Tanya Jakusconek (Metals and Mining Research Analyst)

Yes. Good morning, everyone. Thanks a lot for taking my questions. Just wanted to follow up. 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, you know, valid?

George Burns (President and CEO)

Yes.

Tanya Jakusconek (Metals and Mining Research Analyst)

Okay, perfect. Thank you. I just wanted to ask also on these costs. You think that the costs at Olympias are very sustainable. Obviously costs at Kışladağ are going well. I just wanted to understand. We've had this lower fuel price and electricity costs that have really helped costs at Kışladağ. You said $0.81, I think, is what for diesel is what Phil had mentioned. Can you remind me what was in your budget for diesel pricing? Was it $0.90? Or was it over $0.90?

Phil Yee (EVP and CFO)

Yeah. It was over $0.90. I think it's closer to $1.00.

Tanya Jakusconek (Metals and Mining Research Analyst)

You're seeing like 20% lower than what you have in your guidance for us on cost. 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, you know, 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?

Phil Yee (EVP and CFO)

Yeah, Tanya, it's Phil. In Turkey, we've actually negotiated some new electricity contracts in 2023 for both Kışladağ and Efemçukuru. That's a bit of a change from last year. Based on those new contracts, I would expect the rates to continue for the rest of the year. In Greece, you know, the Greece situation with electricity costs is it's subsidized by government subsidies. The government has set a target, I think it's between EUR 0.15 and EUR 0.18. So far we're tracking, you know, within that range. I would expect that would continue as well.

Tanya Jakusconek (Metals and Mining Research Analyst)

Okay. All right. Looks like then, the electricity prices, at least for Kışladağ is, you know, 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 for our all-in sustaining costs, obviously we're positively impacted by the lower costs. I just wanna 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?

Phil Yee (EVP and CFO)

Yeah. Our, our sustaining capital in Q1, Tanya, was approximately $25 million. A large chunk of that was at Lamaque with underground development and equipment rebuilds. You know, I think at Kışladağ and Efemçukuru and Olympias, it's pretty consistent, you know, around $2 million-$2.5 million. I think in terms of Lamaque, you know, with the mine plan, a lot of that underground development's gonna continue. I would suspect, you know, that that amount would be consistent.

George Burns (President and CEO)

Yeah. I'd just add one thing. At Lamaque, our tailings lifts, you know, are seasonal. We do it summer into the fall. You know, you do see higher sustaining costs on the quarters while we're doing construction and things like that.

Tanya Jakusconek (Metals and Mining Research Analyst)

Should I expect the same thing, the 45, 55 first half, second half, or is that not a good way to look at it?

George Burns (President and CEO)

Yeah, it's gonna be slightly higher in the second half because of that Lamaque. I don't know. It's probably not quite 45, 55, as it's just Lamaque that has that seasonal impact.

Tanya Jakusconek (Metals and Mining Research Analyst)

Okay. I was just trying to make sure that, because I said, like, you know, we were definitely positively surprised by both your cash costs and your all-in sustaining costs. Maybe just another, like, larger picture. You know, besides just the fuel and the electricity that you saw at Kışladağ, 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?

George Burns (President and CEO)

Yeah. I would say generally, other than those commodities, things have remained fairly consistent. I mean, we talked about the positive things. The one thing that's slightly negative is cyanide costs have escalated for the industry. You know, we talked about our working capital fluctuation. We think cyanide's gonna come up a bit higher. One of the inventory issues, we bought some additional cyanide in Q1 to hopefully help us with what we believe will be a bit higher cyanide costs. What drives that is, you know, energy input into making the cyanide.

Tanya Jakusconek (Metals and Mining Research Analyst)

Yeah. No, got it.

George Burns (President and CEO)

Just on your last question, Tanya, I mean, I gave you some additional thoughts on Lamaque, and definitely the tailings construction pushes up their sustaining during that construction season. Overall, Phil gave you the right answer. It's pretty flat first half to second half across the portfolio on sustaining capital.

Tanya Jakusconek (Metals and Mining Research Analyst)

Okay. Then just on the cyanide cost, what sort of increases have you seen, just for ourselves to just understand? Not buying cyanide very often, George.

George Burns (President and CEO)

Yeah. I don't have that number off the top of my head, I would say it's not that significantly material.

Tanya Jakusconek (Metals and Mining Research Analyst)

Like under 5%?

George Burns (President and CEO)

Yeah. Hang on. About 10% is what we're anticipating in terms of potential increases in cyanide. It's about $3,200 a ton.

Tanya Jakusconek (Metals and Mining Research Analyst)

Okay. Thank you very much for that. I'll leave it there. Thank you very much. Good quarter, and have a great weekend, everyone, and welcome, Lynette.

Operator (participant)

Thanks, Tanya. The next question comes from Mike Parkin from National Bank. Please go ahead.

Mike Parkin (Head of Mining Research)

Thanks, guys, congrats on the good quarter. Could you just speak to. You also posted a pretty impressive improvement in refining costs at Olympias quarter-over-quarter. Can you just speak to what's driving that?

Phil Yee (EVP and CFO)

George? You wanna take that?

George Burns (President and CEO)

Sure, George. I think, you know, a couple of things. First off, I, you know, treatment charges are down a bit for lead and zinc. Secondly, we've worked hard to find, you know, alternatives to paying the 13% VAT on our pyrite concentrate and have been, you know, moderately successful, I think, or maybe more than moderately. About 60, maybe a little bit more than 60% of our pyrite cons are now not subject to VAT through, you know, alternative alternative smelters or brokers to China. You know, as you may recall, Mike, that's 13%. We are seeing, you know, other costs in addition to that. The net out is, you know...

I think it's about, you know, 3% we pay in additional charges when we're not paying VAT. Overall, you know, that's probably driving as much as anything. We see that less in that we see it more in payable gold. I hope that answers your question, better friends than blood and fame, you know.

Phil Yee (EVP and CFO)

Yeah, Mike, it's Bill here. 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 till early April. There was lower sales effectively in Q1, and that contributes to the lower refining costs as well.

Mike Parkin (Head of Mining Research)

Okay. That could actually come up a little bit then quarter-over-quarter. Still probably.

Phil Yee (EVP and CFO)

Yeah, that's a timing issue. Yeah, it's a timing issue. You know, that's part of the reason as well that we have an increase in receivables at the end of Q1. You know, the large percentage of those receivables we received in early April.

Mike Parkin (Head of Mining Research)

Okay.

Phil Yee (EVP and CFO)

From the delayed concentrate sales.

Mike Parkin (Head of Mining Research)

Okay. Just switching over to Kışladağ, 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 lightest quarter at Kışladağ?

George Burns (President and CEO)

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. We really don't expect any hiccups in terms of, you know, production relative to that movement from south to north.

Mike Parkin (Head of Mining Research)

I know it's like 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 Kışladağ, is it flat up, down with the agglomeration drum? Recognizing, obviously, you're probably still very much in the fine-tuning of it. Just some overall kind of general thoughts in terms of where your cement usage was last year versus kind of is today.

George Burns (President and CEO)

Yeah. We're in the 4 kg to 5 kg per ton of ore placed. Really, it's dependent on the different rock types that are going through the ore and 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. Also offering the opportunity to have finer ore expose more gold and drive recovery beyond our assumed 56%. Yeah, the cement is gonna be pretty consistent, and the cement offsets the amount of lime that we actually consume. You know, there is a net increase in cement versus what we used to do. I would say consistent results expected going forward compared to last year.

Mike Parkin (Head of Mining Research)

You could be potentially tightening up your gap on your high-pressure grinding rolls because extra fines, to your point, you know, having a better mix would allow for that. 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?

George Burns (President and CEO)

Yeah. That's exactly the opportunity in front of us, and we're gonna focus hard on it.

Mike Parkin (Head of Mining Research)

Okay, cool. Looking forward to the results. Congrats again.

George Burns (President and CEO)

Thanks.

Operator (participant)

The next question comes from Kerry Smith from Haywood Securities. Please go ahead.

Kerry Smith (Mining Analyst)

Hey, operator. George, can you just remind me or perhaps Joe, what is the undersize from the HPGR now at Kışladağ? What is the predicted recovery from that crush size with the drum agglomerator?

George Burns (President and CEO)

Well, I'll answer high level to describe what we're doing here. 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. The edge product is going to be a coarser product. That product gets recycled basically for a second pass. The middle product has more fines in it. After the screen, we take a split of the product coming out of the HPGR over to the new drum agglomerator. There, we're trying to get some of the small pebbles that will be in that feed to be the core and nucleus of building a good agglomerate that comes out of the end of the drum. That stream comes back to the mainstream, and it's advanced out to the pad.

For the coarser material that's getting put back through the HPGR, it's getting a second opportunity to remake, 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. The second thing is the amount of material that we recycle for a second pass. We have two levers to pull to try to crush finer, but we don't wanna crush so fine that we cause ourself a permeability issue up on the pad. The drum we think, it was acquired, and we believe it's the opportunity to further optimize size and maintain good permeability.

As we've said, we're confident about the 56% recovery assumed in our technical studies, assumed in our 5-year guidance. The opportunity this year is to optimize the HPGR and this new drum to be able to drive recoveries beyond 56%. You know, we'll have a better picture of that opportunity at the end of the year after we've run the circuit for 6, 9 months. Did that answer your question? No?

Kerry Smith (Mining Analyst)

What I was trying to get at was, you know, what's the rough crush size you're sending to the pad now? How much finer do you think you could make it if you were able to optimize the circuit with the drum agglomerator? What sort of % improvement do you think you could get in recovery? I mean, I presume you must have done those tests early on with when you did the test work on the HPGR. I was just trying to understand, you know, your 56% now, is it reasonable to think that you could maybe pick up a 2-3 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.

George Burns (President and CEO)

Specifically on size, about 80% of the material passes 6 millimeters. We're not thinking that's going to change significantly. Where the opportunity is the -2 mm. What we're thinking right now is we'll move from about 40% to 60%. We're creating more of those very fine materials that will expose more gold, and with effective agglomeration, we'll be successful then at getting better recoveries. I don't want to guide to the potential here. You know, I, you know, as you would imagine, if we expose more gold, we're going to get better recovery. We want to have test work to be able to guide ourselves and the market to what they could expect.

Kerry Smith (Mining Analyst)

Okay. Okay, no, that's fine. You have capacity, obviously, in the drum. You can the more fine, the better really. You can just agglomerate it up and kill it on the pad.

George Burns (President and CEO)

Exactly.

Kerry Smith (Mining Analyst)

Right. Okay. Okay. That's helpful. Thanks. Just on Olympias, on the 650,000 TPA expansion then, George. Is the intention then to kind of dovetail that project into the wind down of construction at Skouries? If Skouries is kind of finished construction in mid-2025, and that would be when you kind of notionally think to start the construction at for this mill expansion at Olympias?

George Burns (President and CEO)

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, to the plant. I, you know, it's a pretty small project on Olympias. We're, 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, you know, we're waiting for Skouries. It's more about setting up the underground expansion where we've got confidence in making that investment, and then proceeding with it.

Kerry Smith (Mining Analyst)

Okay. Then how long is that project to get to the 650,000 tons? Is that like eight months, nine months?

George Burns (President and CEO)

Yeah. It's probably a year of work. You know, the two major things that we'll be doing in the plant will be adding a regrind mill so that we can, you know, maintain the right grind and recoveries at that higher throughput, and we'll be adding a thickener. Those are main pieces, some other modest.

Kerry Smith (Mining Analyst)

Gotcha. Okay, that's good. Then just lastly on Skouries, 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. Far, have you seen any issues with, you know, 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, I'm just wondering just generally how you're seeing it.

George Burns (President and CEO)

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 Skouries 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. 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. You know, no concerns on it. As you just said, we ordered the filters for dry stack tailings. We got a delivery date of Q1 2025, you know, ahead of our commissioning midyear.

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. Really, I sleep well at night. I'm not concerned about deliveries, and we're laser focused on the ramp up.

Kerry Smith (Mining Analyst)

Okay. Okay, that's great. Thanks very much. I appreciate it.

George Burns (President and CEO)

Thanks, Kerry.

Operator (participant)

The next question comes from Harman Puri from Bank of America Securities. Please go ahead.

Harman Puri (Analyst)

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. At Lamaque, 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?

George Burns (President and CEO)

Yeah. There'll be a ramp up of improved grades over the year. you know, Q1 obviously was lower than a quarter of the annual guidance, but it really was sequencing driven. Yeah, you can expect to see great improvements eventually over the year and still good with guidance.

Harman Puri (Analyst)

Okay. That's it for me. Thank you.

Operator (participant)

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.