Q4 2020 Eldorado Gold Corp Earnings Call
Yeah.
Okay.
Hum.
Yeah.
Oh.
Okay.
Okay.
Thank you for standing by this is the conference operator, welcome to the Eldorado Gold Corp, Q4, and 2020 at year end financial and operational results Conference call. As a reminder, all participants are in listen only mode and the conference is being recorded.
After the presentation, there will be an opportunity to ask questions to join the question queue. You May Press Star then one on your telephone keypad should you need assistance during the conference call you may signal, an operator by pressing star zero.
I would now like to turn the conference over to Jeff Wilhoit interim head of Investor Relations. Please go ahead.
Thank you operator, and thanks, everyone for taking the time to dial into our conference call today.
On the line with me are George Burns, President and CEO, Phil Yee Executive Vice President and CFO, Joe Dick Executive Vice President and COO, and Jason Cho Executive Vice President and Chief Strategy Officer, and Peter Lewis Vice President exploration.
Our release yesterday details, our 2024th quarter and year end financial and operating results.
This should be read in conjunction with our fourth quarter and year end financial statements and management's discussion and analysis, both of which are available on our website.
We have also 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 you can download a copy of these slides from our website.
Before we begin I would like to remind you that any projections, including included in our discussion today are likely to involve risks which are detailed in our 2019.
And in the cautionary note on slide one.
I will now turn the call over to George.
Thanks, Jeff and good morning, everyone.
Here's the outline for today's call.
Ill provide a brief overview of Q4 and 2020 before touching on some of the milestone developments that have taken place since the end of the year that are positively altered the outlook for Eldorado and this young year.
Then I'll pass it to Phil to go through the financials.
Joe will follow by reviewing operational performance.
Then we'll open it up for questions.
Okay.
I am very pleased with the strong operational and financial results in Q4 and over 2020.
We delivered on many fronts, including maintaining and achieving our original 2020 guidance and achieving our highest quarterly production in nearly five years.
Production totaled almost 529000 ounces for the year amid an improving cost profile.
We finished the year and our solid capital position with over $500 million in cash and equivalents, which increases our financial flexibility to fund our growth.
And we did this all amid an historically challenging year I am.
Extremely proud of our teams as they continue to show courage in the face of adversity, while working together to deliver on our key catalyst and drive value for stakeholders.
Yes.
Speaking of catalysts, we have had a tremendous start to the year with a major milestone of signing the amended investment agreement in Greece, the pending acquisition of <unk> in Quebec, and this week's announcement of a maiden resource at a remark that demonstrates our continued exploration success in the region.
Our strategy of prudent reinvestment in high quality opportunities within our portfolio continues to take shape.
Chief among these is the advancing the world class <unk> project in Greece, and our landmark operations in Quebec.
I'll talk more on both of these in a moment.
Over to slide four.
Many of you have seen our early February news of signing as amended investment agreement and the Hellenic Republic.
This is a huge achievement for us as.
As well as for the government and is a testament to the dedication of all involved.
The agreement delivers a commercial framework that sets the stage for a productive and mutually beneficial relationship with the government.
It also provides a path to unlock transformational value from the Cassandra mines as our development plan of these assets as part of the agreement.
It was an honor to be able to attend the signing ceremony in person alongside CHRISTUS Velasquez, our VP and general manager of Greece.
Also present, where the minister of energy and environment, The Minister of finance and the minister of development and investment.
The attendance of the Canadian and U S. Ambassadors also added support for increased trade and investment between North America and Greece.
Perhaps a bit of a refresher on the agreement itself.
The modernized agreement amends the 18 year old contract that was put in place by a previous owner under vastly different economic circumstances.
At the time the contract was a simple asset transfer agreement that reflected the distressed nature of the Cassandra mines.
This modernized agreement now reflects the use of updated technologies, such as dry stack tailings and improved water management and the needs of an investment of this size.
It also maximizes value for all stakeholders, while bringing about significant economic and environmental improvements.
It's a mutually beneficial agreement, we can all be proud of.
As you are aware investor protection mechanisms in permitting assurances were important parts of our ongoing discussions with the Greek government. These.
These are included in the agreement and are similar to clauses offered to other foreign direct investors.
The agreement also outlines enhanced fiscal revenues for the Greek state job creation community development opportunities in various environmental benefits.
<unk> and Olympias are world class assets, and we believe it's important that all stakeholders benefit from their development.
A bit more detail on the fiscal revenues for the Greek state, particularly the royalty increase of 10% for all metals contained in concentrate.
Clarify the current 2% royalty at $1300 gold now becomes a two 2% royalty.
Over to the next slide that sets out the next steps in Greece, and specifically at Securities.
As we've mentioned previously the investment agreement now needs to be ratified by Parliament we.
We expect this to occur by the end of Q1.
With the publication and the government is that shortly thereafter.
The arrows here show the stage gates to resumed construction at <unk>.
It will be a busy year with the approval of the permit to use dry stack tailings expected in Q2 and commencement of Preconstruction activities thereafter.
We aim to complete a feasibility study in Q3, while concurrently evaluating funding alternatives.
We expect a potential investment decision by year end and thereafter look to restart construction in 2022.
Back to this side of the Atlantic I want to say a few words on key catalysts delivered this quarter in Quebec.
First the friendly.
<unk> acquisition of QM ex strengthens Eldorado position in the World Class Abitibi Greenstone district by increasing our land holdings by approximately 550%.
Scheduled to close early April.
This would add a pipeline of organic exploration opportunities proximal to our existing infrastructure at <unk>, including about 690000 ounces of existing mineral inventory.
Under the second catalyst.
Our recent announcement of the 803000 ounce maiden inferred resource at a remark.
This early exploration success highlights the outstanding growth potential at La <unk>.
The strike continuity vein orientation and dimensions of Vermaak deposit exhibit important similarities to parts of the nearby historically mined Sigma deposit and mine too.
As you can see from the map here. It is ideally positioned along the ore haulage decline now under construction connecting the Lamarck triangle underground mine with the Sigma mill.
We will be conducting an infill and expansion drilling throughout the course of the year as the deposit remains open in multiple directions.
So very encouraging initial results.
Taken together these two catalysts underscore eldorado commitment to Quebec, and Canada is a core jurisdiction in our portfolio.
They also support our strategy in the region of developing a pipeline of additional ore sources within and proximal to the remark triangle mine.
Which could leverage existing infrastructure and optimize the Sigma mill, which has a permitted capacity of 5000 tonnes per day.
I'll stop there over to you Phil.
Thank you George.
Good day everyone.
Before getting into our Q4 2020 performance I would like to highlight the operational and financial turnaround for the company over the last year.
Slide eight exhibits the improved quarterly financial performance in 2020.
With adjusted net earnings of $170 9 million and free cash flow generation of $236 $2 million per year.
Over to our Q4 and full year financial results on slide nine.
Eldorado strong finish in the fourth quarter caps, a dramatic year over year improvement in virtually every key area area of our business in 2020.
Gold production total 138220 ounces in Q4, 2020, a sizeable increase compared to 118955 ounces in Q4 2019.
Annual production totaled 528874 ounces in 2020 or 34% increase from 395 331 ounces in 2019.
Despite impacts related to COVID-19 during the year annual guidance was maintained throughout the year and achieved.
Compared to the prior quarter Q4 saw increased gold production, partially offset by lower realized metal prices.
Eldorado generated $278 5 million in total metal revenue in the quarter compared to $191 9 million in Q4 2019.
For the year Eldorado's metal revenue exceeded $1 billion for the first time since 2014.
Gold revenue in Q4, 2020 totaled $253 7 million, an increase of 44% over Q4 2019.
Gold revenue comprised over 91% of the total metal revenue in 2020, increasing 77% to $938 3 million versus $530 9 million in 2019.
This increase resulted from higher gold sales volumes of 137523 ounces sold in Q4 2020 compared to 118902 ounces sold in the fourth quarter of 2019 the.
The increase in revenue was also the result of a higher average realized gold price in Q4 of 2020 of <unk> hundred $45 per ounce as compared to <unk> hundred $75 per ounce in the comparative quarter in 2019.
The company reported net earnings to shareholders in Q4, 2020 of $22 8 million or <unk> 13 earnings per share.
After adjusting for onetime nonrecurring items, including a $40 million noncash write down related to capital works in progress.
And the $3 $4 million provision associated with the write down.
Adjusted net earnings for Q4, 2020 increased to $58 million or <unk> 33, adjusted net earnings per share this compared to $19 3 million or 12, adjusted net earnings per share in the same quarter one year ago.
Full year 2020, adjusted net earnings also increased significantly compared to the prior year totaling $170 9 million or $1 adjusted net earnings per share compared to $2 4 million or <unk> <unk> adjusted net earnings per share in 2019, the increased net earnings and adjusted net earnings.
Higher gold prices and higher gold sales in 2020 relative to the previous year.
EBITDA totaled $95 1 million in Q4, 2020, and increased to $144 2 million and adjusted EBITDA for the quarter.
After adjusting for among other things the previously mentioned $40 million onetime noncash write down related to capital works in progress.
In comparison, Q4, 2019, EBITDA totaled $158 7 million and after adjusting for a reversal of impairment in 2019, adjusted EBITDA was $80 3 million for Q4 2019.
For the full year adjusted EBITDA totaled $534 million for 2020 our.
A significant increase from $235 6 million for 2019.
We also saw increased capital spend in the fourth quarter as efforts were made to advanced projects.
El Dorado is entering a growth phase and capital will be higher in 2021, as we position our producing assets for future production growth.
At <unk>, we are in year two of a multiyear pre stripping phase that will position the mine for a sustained period of enhanced free cash flow over an increase mine life.
In addition completion of the high pressure grinding roll circuit at the end of Q3.
And the North Leach pad expansion at the end of the year will substantially bring to a close the project process capital associated with the successful mine life extension, we announced in early 2020.
At La <unk>. The capital is focused on underground development as we continue to grow the relatively new mine and the underground decline connecting the triangle deposit directly to the Sigma mill is expected to be completed by the end of the year.
Olympias will similarly see higher capital in 2021 focused on increased underground development and improvements to position the mine for greater productivity and efficiencies.
Depreciation.
<unk> and amortization totaled $70 4 million in Q4, 2020 versus two versus $52 million in Q4 2019.
Reflecting the higher production in the quarter as a significant portion of our property plant and equipment Depreciates over mine life on a unit of production basis calculated based on mineral reserves.
We believe that continued exploration success of the sort that George mentioned at the outset should continue to add meaningfully to mine life and to the overall production profile at our operating mines.
There were no significant changes in finance cost in Q4 2020 for the year finance costs increased to $50 9 million from $45 3 million in 2019, primarily due to $6 3 million of premiums paid upon the early redemption of $66 1 million of the $300 million senior secured.
Notes during 2020.
Q4, 2020 reported a $4 6 million tax recovery compared to a $9 8 million tax expense in Q4 2019.
Q4, 2020 tax reflected the receipt of a $21 $7 million investment tax credit in Turkey related to the Kiss a day heap Leach project, including among other things the installation of the HP Jr.
The investment tax credit received reduces the effective tax rate in Turkey in Q4 2020.
I am pleased to report that we ended 2020 and a net cash position. We finished the quarter with $511 million in cash cash equivalents and term deposits and approximately $29 million available under the revolving credit facility.
Perhaps most importantly, Q4 2020 free cash flow totaled $48 4 million significantly higher than the $5 5 million for Q4 2019.
This was lower than the previous quarters due to a lower effective gold price in the quarter and the timing of capital spend as previously mentioned this brought our total free cash flow generation to $236 $2 million per the year.
Sure.
Subsequent to the end of the year, we have also added to our overall liquidity position.
Our revolving credit facility has $70 8 million in credit allocated to cover non financial letters of credit that were issued to secure certain obligations in connection with our operations.
In February 2021, and amendment was completed such that the non financial letters of credit no longer reduce credit availability under the revolving credit facility.
And $100 million in Undrawn credit is now available to the company.
Prepayment of 11 1 million of principal on the term loan was made in conjunction with this amendment.
In addition to this liquidity boost Eldorado also continued to reduce debt with an additional $7 $5 million payment in December reducing the balance of the senior notes outstanding to $233 9 million as of the end of the year.
In addition, the scheduled principal payment of $33 3 million was completed in December.
The term loan balance to $133 4 million at the end of the year.
Net leverage is at 0.00 0.04 times EBITDA at the end of Q4 2020. This is a significant reduction from net leverage at one five times EBITDA at the end of Q4, 2019 and reflects a much stronger balance sheet compared to a year ago.
As George discussed earlier entering 2021 with this increased level of financial strength increased liquidity and improved credit profile provides added flexibility to take advantage of the many compelling opportunities before us.
Against the backdrop of our recent positive news in Greece, and in Quebec, We entered 2021, a significantly stronger more financially flexible company.
With that I will now turn it over to Joe to go through the operational highlights.
Sure.
Thanks, Joe and good morning, everyone.
Amid an unprecedented operating environment over the last year I'm very pleased to please that our mines achieved 2020 production and cost guidance. It's.
It is important to point out that our guidance remained unchanged throughout 2020.
Even as global commercial activities slowed to a crawl last spring is the extent of the pandemic became more fully known.
We produced a 138220 ounces of gold in the quarter at cash operating cost of $536 per ounce sold and all in sustaining cost of $959 per ounce sold.
I am proud of our team's accomplishments across our mines and projects.
<unk> Mark deserve particular recognition for outperforming against plan and what was essentially a 49 week year due to government mandated shutdown of operations in Quebec last spring.
Reviewing the five year outlook, we released in January 2014, the midpoint of our new production guidance for 2021 increased by 10000 ounces compared to the guidance, we issued a year ago due primarily to higher production expectations at <unk> as mining continues and see for.
Looking over the five year guidance horizon, a substantial period of outperformance of a mock coupled with an improved operating outlook at kiss, let Ed has enhanced our overall five year production per.
Profile compared to a year ago.
Correus Paramo Hill, and <unk> represent potential upside.
Turning to current operations <unk> ended the year better positioned to deliver on our planned project work going forward.
The team on site has progressed on a number of critical initiatives, including the completion of the process pond that will allow us to store more pregnant solution.
The installation of two additional CIC trains is on track for the end of the current quarter, which is expected to increase our solution processing capacity from 3200, 50 to 3700 50 cubic meters per hour.
The installation of a new carbon column regeneration kiln was on track for scheduled completion during the second quarter of 2021.
<unk> commissioning remains on track for the third quarter, and we expect to have indicative recovery information by year end.
Phase one of the north heap Leach pad expansion.
Pictured here on the slide is expected to be ready for stacking by year end. We are also progressing well on our multiyear pre stripping campaign, which is back on track after the Covid slowdown.
Cash flow that is expected to mine in place under Leach in excess of 11 million tonnes in 2021 at an average gold grade of six nine grams per tonne.
The flotation columns.
Installed at <unk> have been successfully commissioned and are now online. This will have a positive effect in 2021 and beyond on the quality of our gold concentrate in the transportation savings related to reduced tons shipped.
I am pleased to report that this project was completed on schedule and on budget.
In 2020, and 2021 <unk> is expected to mine and process almost 520000 tonnes of ore at an average gold grade of six six grams per tonne.
<unk> continues to be a steady and safe performer.
With stable production and over three years without a lost time incident.
We also continue to have success through the drill bit that may allow for meaningful mine life extension through resource conversion at co Carpenter.
At Newmont underground mining in the <unk> zone began in earnest in the fourth quarter and our results there to date have been better than expected with positive grade reconciliation on the first two stopes taken.
We expect to average approximately 2000 tonnes per day of the Mark during 2021 at an average gold grade of six six grams per tonne.
Our underground crews and contractors are now advancing.
The decline from both ends between triangle in the Sigma mill on schedule.
As of February 24th we have completed 1100 40 meters of advance and we expect to be in the proximity of <unk>. During September on the way to connection of the decline by year end.
Completion of the decline is expected to reduce operating cost as surface always cost are eliminated and the current triangle haulage ramp is replaced with straight line haulage to the Sigma mill with reduced emissions, providing an important environmental benefit as well.
Our focus in 2021 is continuing to work to optimize below Mark operation. During 2020, we advanced the technical work for further mill expansion.
Paste backfill tailings alternatives and declined materials handling. We've also had success debottlenecking the mill to 220.
2020 to 100 tonnes per day and look to improve upon that work in the year ahead.
During 2021, we will combine that technical work with our exploration program to better incorporate the regional potential and moving.
Our plans forward in a disciplined manner.
Truly exciting times at the moc over to Olympias.
I am pleased to report that the mine minutes full year production plan in 2020 mining is expected to reach 443000 tons in 2021 at average grades.
Seven three grams per ton gold 104 grams per tonne silver, 3% lead and 4% zinc underground development along with continued operational efficiency improvements remain the focus at olympias as we continue to ramp up the mine, we expect to see declining cash operating cost as a result.
As elsewhere throughout the portfolio there is a compelling opportunity for improvement and we look forward to sharing our progress with you in the year ahead.
With that I'll turn it over to George for closing remarks.
Okay.
Thanks, Joe.
Before wrapping up I'd like to again recognize the contributions of George Albino, who stepped down as our share of the board at the beginning of this year and welcome Steve Reed to the role.
George remains as the board on the board of directors.
I'd also like to mention the following new appointments to our leadership team.
We have a lot of project work ahead of us and I'm excited to leverage the skill set of these individuals to deliver our growth plans.
Simon Hilli joined Eldorado as Vice President Technical services in November 2020.
He is responsible for technical projects and fostering innovation throughout the company.
So the who was promoted to vice President and general manager of Quebec in early December.
We will continue to oversee all mine operations in Quebec, while also taking on increased responsibilities as an ambassador for Eldorado and the region.
Barack Gill will join our senior Vice President projects and transformation in March.
Previously with BHP, Rockville, Oversea development engineering activities.
<unk> delivery of major capital projects and transformation through business improvement initiatives at El Dorado.
With several key catalysts already delivered or underway and this year 2021 is shaping up to be a pivotal year for Eldorado.
We expect this positive momentum to continue as we deliver on our guidance and growth plans.
Our focus in 2021 is unlocking the compelling value at <unk> and throughout our portfolio, while continuing to put safety sustainability and good governance at the core of our business.
I am excited for the dynamic year ahead, and look forward to updating the market with all of our exciting progress.
Thank you everyone, we'll now turn it over to the operator for questions.
Thank you we will now begin the question and answer session.
The question queue. You May Press Star then one on your telephone keypad Youll hear a tone acknowledging your request if youre using a speakerphone. Please pick up your handset before pressing any keys to withdraw your question. Please press Star then two.
We will pause for a moment as callers join the queue.
Okay.
First question is from Cosmos <unk> from CIBC. Please go ahead.
Alright, Thanks, George So Joe and team. Thanks for the conference call and great to see the revised agreement in Greece and also the resource update.
Mark.
Maybe my first question is off of our Mac.
Could you remind me what kind of drill spacing you need it to get back into inferred and then eventually what kind of drill spacing, what you need to get it into <unk> and then eventually into reserves.
Yes, Thanks Cosmos, it's Peter here I'll answer that question.
Yes, given that this is <unk>.
Blind deposit that we cant directly observe at surface.
We're fairly aggressive in our initial drill spacing before we are comfortable going to inferred so.
Net resource that we announced is based on an average euro spacing.
Of the mineralized lenses.
Around 70 to 80 meters through most of the of the deposit and it is a bit tighter in areas, where we wanted some additional confidence.
In addition to that we trim, we trimmed the mineralized shapes. So that we don't include anything that's more than that more than 50 meters from us from a drill intercepts. So we're pretty conservative on our approach at the inferred level in.
In terms of next steps and converting to indicated resources, we're still working on that and the program that we're initiating right now actually.
As to go back into.
Into the inferred tighten up the drill spacing and just give us a little bit more.
Basically verify the geological model that the inferred resources based on and then in addition to that.
With our haulage decline will actually have.
Direct underground exposure part the upper part or Mac.
Or the early 2022, possibly even late 2021 and that in addition will help us define our strategy going forward. So we haven't defined the drill spacing for conversion yet we need that additional information before we're comfortable doing it and then of course, the step that would be true.
Defining reserves as well.
Great. Thanks, Peter and to follow up I guess looking at the geometry of Nokia.
It looks to be a fairly flat lying structure.
I seem to remember previously.
Explored men rail as a potential method.
Mining it.
It didn't really work out I think there were some technical challenges.
Then have you given it some more thought in terms of how you might tackle in mind us deposit.
Cost.
Cosmos. This is Joe we're at early we're in early days of that and we'll need a bit more information, but we've looked at it.
More of a conventional drift and fill or a.
Our room and pillar and so at this point.
It's too flat for men rail and.
So I would say at this time it is harder determined but as we get a little more understanding of great continuity in that kind of thing will will begin methods selection.
But those are two things that we've done the preliminary zone.
Great.
And then.
Youre talking about the decline here as you mentioned.
Get fairly close to our Mac by Q3 2021.
Do you anticipate doing any kind of work any kind of development on it at this point in time or is it still too early.
Well, we'll get a bit more information before we make that decision from the current drill program.
And we will get an engineer started on potential.
Potential options and we'll make that decision as soon as practical but it's a bit early just yet cosmos.
And then Joe could you remind me whats the potential capacity.
Decline is.
In what respect in Hollywood.
Yes, yes haulage capacity.
Yes.
Have difficulty, giving you that right now.
Hi.
We think were well in excess of 3000 3500 tonnes per day.
Perhaps a bit more than that but.
Right now depending on what we ultimately do I think that capacity is still remains to be determined.
Okay, and then maybe one last question here just wrapping it all together.
George as you mention general alumni previously there is capacity and potential to get it up to 5000 tonnes per day given.
Given what you have today at our Mac given that on top of automatic there is actually a lot of inferred ounces.
At this point in time, do you think theres enough to potentially support.
5000 tons per day or do you really have to see what you have at <unk> and wait for that to close a day kind of see more regional basis, what you have.
Okay.
Yeah.
Thanks Cosmos.
It's completely dependent on our exploration success and you can see we've got a number of targets at landmark.
And with QM ex potentially closing at the end of the quarter just going to open up.
The field for Peter and our team at La <unk>.
To find additional feed for that plant. So we don't currently have that in front of us but.
When you contemplate the current exploration targets in and the direction, we're headed to expand those over the longer haul I'm confident we're going to be pushing that.
Net throughput level up its just right now we're not far enough advance to be able to identify exactly where it's going to come from.
Great.
Those are all the questions I have looking forward to the rest of 2021 and have a good weekend.
Thanks.
The next question is from Fahad Tariq from Credit Suisse. Please go ahead.
Hi, Thanks for taking my question, maybe first per sale in the quarter. In Q4 can you talk about it looks like cash taxes were quite a bit higher.
In the quarter is there anything of note there.
While the cash.
Hi Fi the cash.
Cash taxes are really tied to.
To Turkey and two.
The federal tax in Turkey in the Quebec mining duties at <unk>.
And in Turkey.
In Q4.
The taxes were offset.
By the receipt of a.
Almost I think it was $27 1 million an investment tax credit.
So that offset.
The cash taxes.
And also there was.
Adjustment from from a foreign exchange tax as well that we got we got a refund so that reduced the effective tax rate in Turkey.
In.
Related to La Mark it's all tied to.
But quebec mining duties and because of the higher production in Q4, our Quebec mining duties increased from Q4.
Got it okay.
And then just on the investment agreement in Greece is there any risk that.
It does not pass the parliamentary ratification is that something we should even be thinking about at this stage.
I would say no.
We've been working really hard with.
With the Greek government on putting together this mutually beneficial agreement.
As I stated three key ministers.
The agreement with us.
Democracy has a majority in parliament.
They wouldn't have signed the agreement if third party wasn't intent on passing the agreement into law. So.
A very high confidence that's going to happen shortly.
Okay, Great and then just the last question kind of related to that I know.
You said that previously that you are looking for a funding partner for us to reach but.
With an improving balance sheet. It is possible that you could do the project alone maybe give us your latest thoughts on how youre thinking about.
Moving forward with the project.
Okay.
Well for sure our balance sheets much better positions, we've made tremendous progress over the last year and a half in that vein.
From our perspective, it puts us in more of a driver's day to come up with an optimum financing <unk>.
Our strategy still remains to look at to put in place a joint venture partnership.
And partly for funding partly to have another voice.
To have influence over the multi decade life of these assets.
So at the end of the day, it's going to be a balance between the various options we have.
From a joint venture perspective, as well as other funding alternatives that we continue to evaluate and.
Boil down to certainty of getting the return on investment.
Derisking. The project. However, we can and at the same time getting the best returns for Eldorado shareholders. So it's tough for us at this point too.
Pretty clear about where we land on that end and from my perspective, the catalyst that we've outlined which is ratification.
Provable, a dry stack permitting.
And advancing the engineering to feasibility.
A feasibility level by Q3, all of that's going to underpin certainty on the investment and position sell and Jason to optimize the financing strategy for it. So in summary, I would tell you we're in a better position from a flexibility perspective, but we're pursuing all alternatives.
Okay got it that's it from me thank you.
Thank you.
The next question is from Kerry Smith from Haywood Securities. Please go ahead.
Thank you Phil for the 25% royalty increase in Turkey was that all cash <unk> was retroactive to January one of last year was that all cash settled in Q4 then.
Hi, Kerry that was all cash settled in Q3, because it was announced in Q3.
And it was retroactive to the start of the year. So you would have seen a higher royalty impact for the full year come through our Q3 numbers and Q4 would just reflect the incremental amount for Q4.
Okay Gotcha, Okay can you just.
<unk> just to make sure that was what is the actual royalty island as it is.
<unk> can you just remind me what the rate is and how it works.
It's a sliding scale.
I'm just do we have the actual I don't have the actual scale in front of me carry but it is a sliding scale.
Okay. Okay, maybe you can just listen Golden Eagle and offline loans okay.
Paul.
The decline at Lamar.
It was completed by one how much equipment is able to do in other work to do before that <unk> would actually be functional and be able to mark up to the plans.
Can you repeat that Cary I missed the end of the question. This is Joe.
So I was just wondering if continues to decline by the end of the year is at at that point in time is it fully ready to wear the golar relative to be utilized from a college or just the incremental work to be done and if so when would it be ready for a lower transport okay.
There'll be a little bit of incremental work to be to be completed I think we could use it but.
We made connection by year end and then we work out the road surfaces and.
All of that prior to prior to utilization, but it's.
It's not a very long time period.
One.
Six weeks post connection we're ready to haul.
Okay.
And George perhaps could you just remind me again your rough estimate as to what it would cost per capital to expand the Sigma mill.
So for a 5000 tonnes a day April 5000 tonnes a day.
Yes, I mean, we've been.
Public was about $50 million in that that capital level envisions, putting in a sag mill.
<unk> was in the circuit originally but was sold by our predecessor company.
I mean physically what has to happen we need additional grinding capacity and we'd have to upgrade the remaining leach tanks.
And we.
We're doing further engineering on that and looking at incremental analysis and depending on how our exploration success unfolds.
We will make will make the appropriate decision for the next level of expansion.
Okay.
So first one based on what you see today at all Mark with those Flatlining excited I can say.
Separate loans is there.
Well, Bob Paul geometric configuration support so 15 Henry tonnes, a day would that be a reasonable expectation for what kind of what you may be able to pull from that operation.
Kerry This is Joe I'll answer based on current.
Current knowledge into end.
The inferred resource in the book very very preliminary work that we've done were more in that.
700, 800 tonnes per day sustained however.
Given the step out.
Capacity, we don't see that that is.
Unrealistic based on how exploration per seats.
Okay. Okay. That's helpful. Thank you Joe.
Just just reminds us what was the $40 million that you had stumbled olympias.
What was that for that we canceled.
Kerry it's Phil here. So you are referring you are referring to the write down.
That was.
That was part of the original.
The original.
Original agreement and plan that was in place.
So that was related to tunnel that was being developed.
Moving I can jump in.
In the original business plan.
I think it's like more than 10 years old now.
The idea was to run the olympias for a phase and then to build the new flotation circuit.
In the next valley.
So this decline would have been put in place to deliver the ore from the underground at olympias into the next valley into what was.
Perceived to be the Madam <unk> flotation facility and that that plant was going to be as I recall around 900010 capacity.
So with our new.
New business plan, our public disclosure of the plan is to expand.
The Olympias plant.
And then run that plant through the life of mine. So it has better return on investment which is good for Eldorado and our investors. It's also maximizes value to the Greek state so.
Carey essentially by getting the agreement signed.
The tunnel longer has a potential future use and as a result was written down.
Gotcha, Okay, Okay Thats helpful.
I guess, Paul just last question from me the realized price was 30 Bucks an ounce below the average I guess that was just timing of sales growth.
That's one of the opportunities and challenges of having concentrated in the portfolio as well.
Depending on the timing of the shipments.
And from the time, we market shift and so on.
We.
We get the final closing from the smelter the processes that you see ups and downs and this quarter happened to be down in comparative price to.
For the quarter.
Right right.
Okay. That's great. That's all my questions. Thanks very much.
Thank you Carrie.
The next question is from Josh Wolfson from RBC capital markets. Please go ahead.
Thanks.
Two the funding aspect for <unk>.
What I recall historically is streaming.
Option had been a low priority.
Just kind of looking again, where the commodity prices are.
I understand there is a large base metals component is there any sort of higher consideration for that option now versus the past.
I'd say streaming has a place in terms of how we're looking at.
All of the alternatives related to funding Securities I think were trying to keep an open mind to it and understanding that relative cost of capital on pressures maybe versus base metals streaming.
Its advantages as well.
But short answer to your question is yes, we would be keeping an open mind generally two to funding alternatives, including including streaming.
Great. Thank you and then I may have missed this earlier.
Questions on our market sounds like in terms of.
Timelines for when that volume will be able to be mined and incorporated in the plan.
With the with the decline I guess, meaning that by the third quarter is what sort of what sort of timeframe could you look ex for that.
It's a bit preliminary to put a timeframe on it I think we have to.
First you kind of it complete complete the exploration program in place now.
Gain access.
Through the ore body to get to get to.
Reach out and touch it understand that it's what we think it is and.
And all the while while we're doing that working on kind of extraction options.
No.
I hate to put a timeframe on it but.
It's.
No.
A year a year later, perhaps somewhere in that general range, but I think it's too preliminary interest yet.
Yes, Josh Josh as Peter if I can jump in quickly just in terms of our plans, we are going to be hitting or Mac pretty hard work. We're quite excited about the potential there, but we are still at the resource definition net expansion stage.
We're not even planning.
We're not even to the point, yet where we can play.
Plan, our resource conversion program in detail. So the emphasis over the next six months is going to be to to get a better sense for the overall resource potential there.
What that conversion program looks like so that would be the next news from US is once we have a better understanding of that.
And yes supplemental.
This is George I'd, just supplement all of that.
As Joe said, we will be able to touch the deposits and break some rock and that's going to give us a lot of information Peter outline or for a portion of the deposit we're going to do some more detailed drilling that will give us another indication and after touching it and seeing it there'll be able to nail down the appropriate drill spacing and dipped.
Pending on that.
That will impact how long it will take to get the confidence we need to to put it into production. So it's still fairly early days to put.
To put a definitive timeline on it but it took us a year from discovery to this inferred resource.
And I remain optimistic with the capability of our team that is.
It won't be we won't take that long just looks pretty good to us, yes, and one final comment.
Is the bulk of the resource has been defined at fifth it's relatively shallow its within the upper 400 meters.
So we have the option of doing the delineation drilling the conversion drilling from surface ore from underground once we get access there. So it's something we can advance quite quite rapidly.
Got it and then.
One last question, which im sure youre not going to like because it's the on timelines again book.
As it relates to the updated <unk>.
Sorry for full of Mac is there any sort of idea of when we could see that incorporating or Mac and maybe to simplify this is that something that we would expect in 2021 or is this going to be still it's still a ways off.
The preliminary view as is towards the end of the year and I think.
As we learn more we're certainly going to want to be as inclusive as we can with that pega. So we will update on a quarterly basis, but what our present thinking is.
At or near year end.
Okay. That's great. Thank you very much.
The next question is from Mike Parkin from National Bank. Please go ahead.
Alright, guys. Thanks for taking my questions most of them in <unk>.
Answered, but in terms of.
Farmer Mac is there.
What's the timeline in terms of metallurgical work on that or do you feel confident that the existing milling.
Setup is suitable for it.
Okay.
Yes.
Yes.
Yes.
Here you can start yes.
I'll start I'll just comment on.
The geological aspect of it in <unk>.
In terms of mineralogy.
It's very similar to what we already have a triangle. So we don't foresee any any significant metallurgical issues in terms of more detailed test work just to confirm that that's not currently scheduled.
And certainly once we get access underground, we will have the opportunity to do a more comprehensive program as well.
And I think the other thing that gives us confidence is that these plotline veins, we're very similar too.
Or that was mined at mine too and Paul.
The Sigma.
Between the historical mining a similar flatlining veins in the geology that Peter described where we have pretty high confidence that it's going to be very similar metallurgy.
So what we've seen in the camp.
Okay Thats it from me guys.
Thanks, Mike.
The next question is from Mike <unk> of Bank of America. Please go ahead.
Hey, George I know Phil I just.
On a bigger picture question Gold 17, 25 down 45 today.
A question forgotten ex breaker.
Some dealers conference I've heard about.
Just wondering capital allocation I've got you guys now led to a negative free cash flow. This year, let me Paul.
Numbers disagree with mine, but.
When do you start if gold stays down.
Push out projects are slow down spending or anything like that or you are just happy to follow the plan you have now with coal price stayed depressed.
Thanks.
So maybe I'll just.
To start out and then Phil can follow up so.
I would say the answer is no I mean, our growth focused on high quality high return investment opportunities.
So even at vastly lower metal prices these projects.
It makes sense.
And.
From my perspective, particularly when you look discourage it is going to change the baseline of our company, our asics going to drop dramatically.
Securities can be a cash flow generating machine at current spot prices, but even at depressed metal prices, it's a fantastic assets, so I can't see.
In my view of any downside potential in metal prices that that our growth opportunities would make sense and obviously all of those comments are tied to successful financing that we will have clarity around before the end of the year and maybe Phil on the cash flow question.
Yes, Hi, Mike.
So we prepared our budget.
A $17 50 gold price and we're expecting to generate.
Positive free cash flow in 2021.
Not going to be at the level that we.
That we've reported for 2020, because our capital has increased as I outlined earlier.
But obviously theres priorities.
We are in growth mode, and it's important for the company to continue to grow our assets.
And then generate value if if gold was to take a significant nosedive, obviously theres other things that we would have to.
We'd have to reconsider, but I think given where market forecast consensus are.
It looks to remain in this area and as we in this in this range.
At this point.
And where it is right now like I said were.
We still expect to be in a good financial position.
Okay, Mike Thanks, sorry charge, alright, yes, I was just.
Can add on that.
Obviously, the drop yesterday and today is not great news, but I think when you look at the impacts that Covid has had across the planet.
All of the challenges that countries youre going to be dealing with to get economies back in track.
And our way of thinking we're going to be seeing a pretty solid gold price and there'll be volatility around it but.
Our outlook remains positive.
Okay. Thanks for that.
Next week at the Triple net hotel volume here in the lobby bar.
Okay.
Thanks, Mike Thanks, Mike.
This concludes the question and answer session I would like to turn the conference back over to Mr. George Burns for any closing remarks.
Well, thanks, everybody for dialing in its Ben.
The last two years at El Dorado has been pretty darn successful in terms of return to our shareholders. I think this will be another breakout year for us. We're excited about the opportunities in front of us and look forward to keeping you updated thank you.
<unk>.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
[music].
Yeah.
[music].