Q2 2023 Eldorado Gold Corporation Earnings Call
[music].
Thank you for standing by this is the conference operator, welcome to the Eldorado Gold's second 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'll 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 then zero I would now like to turn the conference over to Lynette Gould Vice President Investor Relations.
Please go ahead.
Thank you operator, and good morning, everyone I'd like to welcome you to our second 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 ifr S measures. During the call. Please refer to the cautionary statements included in the presentation and the risk.
Closure on non Ifr's measures and 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 E Executive Vice President and Chief Financial Officer, Joe, Nick Executive Vice President and Chief Operating Officer, and Simon Hilli Senior Vice President Technical services and operations.
Other members of the senior leadership team will also be available for the Q&A session.
Our release yesterday details, our second quarter 2023 financial and operating results. This should be read in conjunction with our second quarter financial statements and management's discussion and analysis, both of which are available on our website.
I have also been filed on SEDAR and.
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.
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.
Thanks, Lynn and good morning, everyone.
Here's the outline for today's call.
I'll provide a brief overview of Q2 results and highlights before passing it to Phil to go through the financials.
And then to Joe and Simon to review our operational performance.
Then we'll open the call to questions from our analysts.
Turning to slide four as.
As we mentioned on our Q1 quarterly call. We closed the <unk> project financing of 680 million euros in early Q2.
Subsequently, we have completed two drawdowns in April and May for a total of $65 9 million euros.
On June 14th we were pleased to complete and $81 5 million Canadian strategic investment into El Dorado by European Bank of reconstruction and development.
These funds will be invested in construction it scurries and will be credited against the company's 20% project funding commitment.
In addition to our Greek banks Syndicate E. B R. A D provides another well aligned strategic partner for the <unk> project.
The investment by E. B R. D was a culmination of a three year rigorous process, which included completion of an environmental and social impact assessment consistent with our commitment to high environmental and social standards.
With the proceeds from E. B R. D. Now contributed we do not expect any further funding for <unk> will be required from El Dorado in 2023.
The project financing facility is expected to cover remaining spending until Q1 2024.
During the quarter. We also completed a bought deal offering for gross proceeds of $135 2 million Canadian dollars East.
These funds are expected to be used for the.
To fund growth initiatives across store.
Mobile portfolio, including some not currently contemplated within our five year plan.
The growth initiatives may include but are not limited to <unk> Hill, where we expect to start community consultations later this year the expansion of Olympias to 650 million tonnes per annum, bringing the remark discovery into production and exploration opportunities in Turkey, a and Quebec.
We anticipate we will be able to provide more detailed information around the cost priority and timing of each opportunity with our updated 2020 for guidance in the first part of next year.
Moving to slide five starting with production.
Solidago production across the portfolio came in slightly below our expectations for the quarter as a result of extra ordinary rainfall of kits at all for a fire forest fires near La Marc and lower grade and recoveries at Olympias due to mine sequencing as we advanced productivity improvements.
As we are expecting stronger production in the second half of the year, we are well positioned to meet our 2023 production guidance of between 475 and 515000 ounces.
Additionally, we are maintaining our capital expenditure guidance of 394% to $437 million, including 240 to 260 million towards the advancement of Scurries project for 2023.
Turning to <unk>, we continue to be focused on project execution in order to deliver the project by the end of 'twenty 'twenty five as planned.
During the quarter, we advanced a number of early works projects and continued to award key contracts.
We are pleased with the progress to date and continue to ramp up personnel with 350 people on site, which will increase to approximately 900 by year end.
Joe will talk about the progress in operations in more detail later in the call.
Shifting to cost first half cash operating costs per ounce sold and all in sustaining costs were in line with our annual guidance ranges driven by continued lower input costs.
Phil will speak to our cost and financial position in more detail later in the call.
Finally, I'd like to congratulate the team at Lamar who were awarded the pre distinction award an environment category at the 'twenty two 'twenty three Quebec Mining Association convention.
Team was recognized as an innovative project in partnership with MRC.
De la Bob Le de Vore aimed at the progressive restoration of the Sigma tailings pond using combos produced locally.
Word highlights our commitment to continued innovation in the area of sustainable development.
I'll stop there and turn the call over to Phil for a review of our financial results.
Thank you George good morning, everyone.
Slide six provides a summary of our second quarter results.
Eldorado reported net earnings attributable to shareholders of $1 5 million or one cents per share in the second quarter.
After adjusting for onetime nonrecurring items adjusted net earnings were $16 1 million or <unk> <unk> per share in the second quarter.
These onetime nonrecurring items included.
A noncash deferred tax expense of $21 4 million due to foreign exchange translation related to the lira.
Adding back a noncash gain of $8 4 million on the revaluation of new derivative instruments.
Primarily on gold color then entered into during the quarter.
And the loss of $1 6 million on redemption option derivatives related to the senior notes.
Free cash flow in the quarter was negative $21 7 million. However.
However, excluding the capital investment in Sirius free cash flow generation in the quarter was a positive $13 2 million.
Cash flow generated by operating activities before changes in working capital totaled $82 4 million compared to the first quarter of $94 5 million.
Primarily due to higher income taxes paid during the quarter.
Second quarter cash operating costs averaged $791 per ounce sold and all in sustaining cost averaged $296 per ounce sold.
All in sustaining cost per ounce sold in the second quarter were higher than expected.
With consolidated gold production expected to be weighted to the second half of the year, we expect decreasing unit costs in the second half and are maintaining our annual cost guidance for 2023.
In Turkey during the quarter, we continued to see lower fuel and electricity prices in line with the first quarter. However.
However, there were increasing royalty expenses as a result of the higher realized gold price.
Over the second half of the year, we expect to see lower unit costs across the portfolio and remain on track to be within our guidance of 1100 90 to $290 per ounce sold for 2023.
Capital expenditures on an accrual basis were $99 4 million in the second quarter, which included an investment in growth projects at kit today, and I was curious where we continued to advance procurement in the project.
In the second quarter, we recorded a deferred income tax expense of $17 million.
Which included a 21 million expense related to net movements of local currencies against the U S. Dollar.
Primarily the Turkish lira.
Current tax expense of $21 8 million was lower in the quarter compared to Q2 of 2022, primarily related to operations in Turkey.
Subsequent to the quarter.
Subsequent to the quarter end.
Turkey enacted a change to its corporate tax rate, increasing it from 20% to 25% for 2023 and subsequent years.
This change reverts to the tax rate back to levels last seen in 2021.
This change was enacted into law on July 15th.
And is retroactive to January one 2023.
As a result of a 5% rate increase the estimated impacts related to net earnings for the six months ended June 30th 2023 or $7 million of additional cash based current tax expense and $30 million of additional noncash deferred tax expense both of which will be recorded.
As changes to net earnings during the three and nine months ended September 32023.
Turning to slide seven.
At quarter end, we had unrestricted cash cash equivalents and term deposits of $456 6 million.
Excluding the impact of the equity funding and it's curious growth capital during the quarter. The second quarter, ending cash balance was $272 million, an increase compared to Q1, 2020, threes ending cash balance of $262 million.
With production expected to improve over the second half of the year, we expect to see our cash from operations improving further.
With the closing of this curious project financing in April availability under El Dorado is $250 million revolving credit facility was reduced as eldorado's funding commitment for the <unk> project is fully backstopped by a letter of credit under that revolving credit facility.
The availability under the facility as of June 30th was $112 million.
As the company invest further into the project the letter of credit will be reduced euro or euro.
To protect the doubt protect the downside on the gold price, while we build scarious, we locked in zero cost collars for approximately 32% of our overall gold production.
Which amounts to about 16667 ounces per months for the next two five years that commenced in June of 2023.
For 2023, the floor price is seven $700 per ounce with a ceiling price of 2700 $36 per ounce.
'twenty 'twenty four is a floor price of 800, and a ceiling price of $27 65.
And for 2025, we have locked in a floor price of 1900, and assuming price of 26 67.
We continue to focus on maintaining a solid financial position, which provides flexibility to unlock value across our global business.
With that I will now turn it over to Joe to go through the operational highlights.
Thanks, Phil and good morning, starting on slide eight.
I'd like to start by congratulating our team in Greece were completing their first verification against the mining Association of Canada is towards sustainable mining protocols.
Of note, we achieved AAA scores across all indicators for tailings management and biodiversity underlining eldorado's commitment to responsible mining practices.
As a Canadian company voluntarily implementing a globally recognized program like PSA them across all of our international operations speaks to the integrity of our teams and the results support our strategic commitment to sustainability and.
In the second quarter, our lost time injury frequency rate rose slightly to 1.08 per million man hours work from zero point 96 in quarter. Two of 2022, we continue to take proactive steps to improve workplace safety and to ensure a safe working environment for our employees in karnes.
Tractors.
As Korea's activity.
Q2 continued we advanced engineering and procurement and initiated the transition to full construction with the Finalization of project financing during April Jeremy.
General works, we're focused on prepay.
Site preparation relocation of temporary facilities re commissioning of the noncore contact water reinjection, well system and a whole bunch of aggregates for construction purposes.
Additionally, the first phase of underground development continues to advance the west decline and the foundation work for the primary crusher is underway.
Mobilization of the first major earthworks contractor for haul roads needed to undertake all the other major earthworks is progressing well with with work on several fronts planned.
Millstones in the second half of the year include finalizing of the awards have been remaining major procurement and contract packages, including.
An additional two major earthworks contracts.
Two major civil contracts for piling and concrete a major contract for mechanical and piping and a major contract for electrical and instrumentation.
As previously stated project spending it's curious is expected to be 200 working to $260 million.
2023.
Spending is focused on finalizing detailed engineering, which is now 48% complete and forecasted to be 90% complete by the end of this year.
As of June 30, procurement is that 62% complete and is also expected to be in the 90% range complete range by year end.
Economic activity in Greece is increasing so moving through the commitment phase of the project is important to mitigate potential cost and schedule pressures.
Have you yet to see material impacts from this activity thus far.
See the keys to ongoing success is maintaining or improving our pace of contract awards and to continue meeting their productivity levels is estimated in the December 2021 feasibility study plan as the construction ramp up progresses.
With several major contracts expected to be awarded during the third quarter, we will be updating spring.
Feasibility study estimate to the project control budget.
Throughout the quarter and expect to provide further information by the end of Q3.
Now moving on to slide 10 on our operating results we produced 109.
435 ounces of gold in the second quarter with cash operating cost of $791 per ounce sold.
While slightly below our expectations for the quarter, we do remain on track to meet our guidance.
Pass it over assignment to review the second quarter performance at our operations in Turkey and Canada.
Thanks, Chad studying <unk> in slide 11.
Second quarter production.
34180 ounces.
Cash operating cost of.
$687 per ounce sold.
Which represents a 22% increase in production and a 14% reduction in cash costs.
Q2.
2022.
Extraordinary rainfall may and into early June at levels nearly equivalent to <unk>.
Average is next.
Negatively impact keeps it out of production.
And which go solution was debated with Exa's volumes recirculated through the pad.
And the lower than planned solution grades reporting to the gold recovery techniques.
The Leach circuit board of balance is stabilizing.
TB.
Normal operating volumes by the end of the quarter.
And production is expected to improve accordingly.
During the quarter, we conducted a six day process facility shutdown.
And throughout that period successfully achieved some key milestones, including the time for the new final Oklahoma Racing circuit.
It finished rotation of the H D G arrows.
And replacement of 1800 meters about for the major overland conveyor.
Following the time, we think commission that fine or Oklahoma license ticket and it is currently performing as expected.
The north heap Leach pad, which sets the remaining life of mine is now operational with stacking having commenced in mid July as planned.
Alright.
Timing of pricing is limited we are progressing well, we have met and expected and expect to sustain the target targeted stacking right in August .
We expect the positive impact from the combined effect of the fully now fully upgraded materials handling system.
Do you find more Oklahoma system, a new leach pad and ongoing improvement in mine performance and we expect to meet our tons priced target during Q3 and the balance of the year, we are maintaining keys to that guidance between 160000 70000 ounces of gold produced for the full year of 2000.
23.
On slide 12 at FMT Cree.
Second quarter Gold production was 22644 ounces at cash operating cost of $697 per ounce out gold production for the fourth.
Every school graduate that's inkjet group were in line with the plan for the quarter.
Development towards that kind of caught up in that area is on track.
And it's expected to continue to extend mine life.
For 2023 gets into group production guidance remains at 80000 ounces to 90000 ounces of gold.
And now moving on to our market slide 13.
Second quarter Gold production was 38745 ounces at cash operating cost of $676 per ounce sold.
Attainment of a Mac has done a remarkable job given the challenges they had sites related to the forest fires in Quebec, and the equity impact they have had in the Val Dor area.
As a result of the air quality issues, 25% do you mean under grant action sheets cancelled and some severance activities suspended.
We maintained meals Shreveport.
But low grade stockpile material being priced at.
And then.
When they start possibly depleted we brought forward scheduled maintenance from July into June .
Offset the unplanned downtime with the reduction in Egypt plant downtime.
The team was able to safely regime underground operations by water flooding the ventilation intake to achieve normal air quality for mine activities and by providing an alternative routes to safely transport employees to the mine without utilizing forestry rights.
During July the a quality has improved and we have operated and continue to walk right normally.
I'd like to thank the team for putting people first.
Through this event.
All right.
Well its surface exploration work was how did you didn't pleasure first access rides, we continued underground drilling and remain on track to complete our infill drilling program targeted.
You're getting the upper teeth at the <unk> deposit in 2023.
Our plan to take a bulk sample and then that's all making overall was said during the fourth quarter of 2024 is also remains on track.
In June we were pleased to take the delivery of the first electric whole truck Sandvik Moto G. H 558, and you can see here with the team taking part of the official ribbon cutting ceremony to commemorate the event.
Well I think he's the first to apply these underground technology in Quebec.
With a 50 ton capacity increase French state. This equipment will play a key role in improving production efficiency, reducing the diesel particulate matter and mitigating our greenhouse gas emissions, we expect to take delivery of the second track in early 2020 full during.
During the second half of the year, we expect to see continued stable pricing right.
It's higher than that probably states during the first half of the year.
We are maintaining what Max 2023 production guidance of 170000 to 190000 ounces of gold.
Oh, I'll hand that Quebec to judge to review the second quarter results at Lindsay.
Thanks Simon.
Moving to Olympias on slide 14 second quarter Gold production was 13866 ounces.
Cash operating costs were working $139 per ounce sold.
Mined and processed tonnes were up from the prior quarter and at record levels for Olympias. However, production was lower in cash costs higher due primarily to lower byproduct credits and lower pay ability.
Zinc concentrate revenue was lower than planned due to lower zinc price and pay your ability.
$435 per ounce gold sold.
Lead concentrate revenue was lower than planned due to silver grade.
At $230 per ounce sold.
Pyrite concentrate revenue was slightly favorable with higher gold price offset by lower gold pay ability.
Some positive milestones accomplished during the quarter and expect are expected to mitigate those impacts along with our continued trend of higher mine output through efficiency. The first.
No stone was the transition to mechanical loading a drill ground with a bulk of emulsion blasting agent a first time application of this new methodology in Greece, we anticipated an improvement of approximately 15% per plastic round is now being achieved as it is phased into the operation the full transition to both of them.
So the system is expected to be.
Completed over the balance of the year.
The second milestone was the mechanical completion of the nature of the Olympias ventilation system, which we commissioned during the first week of July .
Ventilation system startup was enabled by completion and <unk> of the new Olympia is 150 kv substation during June .
Substation not only powers the ventilation system. It provides for greater dewatering capacity from the pump station Commission last year.
Proving the overall power factor for labor is.
The new stuff state substation, and our ongoing progress toward ventilation on demand both impact our demand in favor of it.
But both promotion and ventilation projects were scheduled for early Q1 completion, there delete delay has affected mine planning sequence centers.
And has delayed lower mine development, both of which are contributing to.
The factors contributing factors to the byproduct and grade variances outlined earlier.
Projects now online we expect to increase production from the Gladstone shown in green on the slide.
Which is expected to improve our byproduct metal byproduct metal production, resulting in higher byproduct credits and in turn lower operating costs.
We are maintaining the guidance of 60 to 75000 ounces of gold at Olympias for 2023, I'll stop there and turn it back to George for closing remarks. Thanks.
Thanks team.
As part of closing I'd like to first thing is always a little mark and kissed a lot of teams for their proactive work in mitigating weather related risks.
<unk> extreme rain during the quarter did not get in the way of completing our construction projects, which are operating at or above design criteria.
Mark we protected our people first but our team was able to limit production impacts that were caused by the wildfires.
And the second thing I'd like to emphasize is we are at a major inflection point in El Dorado.
<unk> is fully financed ramping up and on track with schedule and cost.
So that moves to an optimized optimization phase after completing these construction projects.
And the Olympias, yes for.
For Q2, <unk> was high but it was largely different driven by sequencing delayed access to high grade stopes, which are going to come out in the second half and also from what we're seeing prices out of our control.
However, we are on track to deliver guidance at Olympias in 2023.
And the biggest thing is we've delivered these transformational projects as Joe outlined emulsion blasting new substation energize expanded ventilation. It supports the ramp up is much stronger second half results.
And it also gives us the ability to ramp up production coming out of the flat zone, which are larger stopes.
Yielding better productivity.
If you look at Olympias, one year ago, we were operating in a 380000 tonne per annum rate from underground and now we're operating at a 480000 tonne per annum rate.
This positions Eldorado in a good position to deliver production growth.
Cash flow growth.
And leading shareholder returns versus our peers.
Thank you for your time I'll now turn it over to the operator for questions from our analysts.
Thank you.
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 are 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.
Our first question comes from Cosmos <unk> of CIBC. Please go ahead.
Great. Thanks, George Phil Joe assignment and whatnot.
Maybe my first question is on on your income statement I guess, there seems to be some debate today on foreign exchange.
Change gain or.
$14.681 billion.
Should it be adjusted out should it be included.
I guess my question is I think Phil you kind of touched on it but what's the nature of.
That's a foreign exchange gain which seems to be larger than previous quarters.
And you know is it one of those things that could reverse later on in Q3 are we going to see like you know something like the same magnitude in Q3, but in a different direction I'm just trying to see understand today and also what we should expect.
Hi Cosmos.
Phil.
So maybe I can start.
Just talking about.
The background behind the FX gain so you know Eldorado operates as you know in multiple jurisdictions, which exposes us to different currencies other than the U S dollar and.
I think the most notable impact in Q2 was the weakening further weakening of the Turkish lira.
At the end of Q1, the Turkish lira was around.
20, and at the end of Q2 was around 26 so.
That in itself create it.
Yeah.
A large portion of the of that FX of that FX gain.
So in terms of the issue in terms of weather if I understand your question correctly, you should that FX gain be adjusted in our adjusted EPS.
When you go from earnings to adjusted earnings normally you try to back out.
Items that are unique that are one time occurrences that are nonrecurring.
And I would say like our foreign exchange gain.
Report foreign exchange gains or losses every quarter it is a.
Our regular.
I guess regular reporting a feature of our operations.
So that's you know I think that would explain.
The the context behind whether the foreign exchange gain whether it's the realized portion of unrealized that that should be adjusted.
Understood and I agree as well and then I guess looking into Q3, and what I've seen that the Turkish lira continues to weaken.
Are we going to see kind of the same sort of.
Potential foreign exchange gain in Q3, as well again, it depends where only July 28.
If it continues to kind of trend in this direction is this something that we should again be aware of in Q3.
Yeah, I think that's a good question.
I would say that the way.
We have looked at it.
You know with the results of the recent elections.
Elections and.
Runoff elections in Turkey, we were expecting.
That you know with the with the continuation of the current current government that they would likely be.
We'd like to take some time for changes to to have an impact on on the lira and we expect that the lira would weaken further in the summer.
Some are for example, you know the tourism season, a week a week earlier it does support tourism. It does support exports, which supports helps them with their balance of payments. So we were expecting a weakening them.
In the summer.
The forecast at this point you know based on information that we've we've looked at is that there will likely still be some.
Some weakening not expecting there'd be significant it's currently sitting about 'twenty six 'twenty seven.
You know layer to the U S dollar we're expecting it to perhaps.
No go down to 30.
Would you be less significant than what we incurred in Q2.
But at some point here, we expect you know with some of the changes that are that are taking place.
Kris and interest rates and some of the other measures that the government is taking in Turkey that you know, we're hoping that the leer will begin strengthening at some point.
Okay.
Maybe switching gears a little bit.
Scary.
No as you talked about there's a number of contracts that will be finalized in Q3.
I guess my question is twofold number one you know it seems like there's still some firm wants to be done some concrete to be poured.
Like the Crusher the foundation with a crusher I seem to remember you know, but it's already heartfelt and so I just want to make sure that some of this you know the fourth.
Fourth works and concrete cores and major contracts are in addition to you know what's been done in the past and indeed.
No scary is it's more than half built.
Understanding and number two I guess, you're talking you know, there's an update coming up in terms of the budget control versus just a feasibility study.
Uh huh.
Clearly you might not be able to tell us too much today, but overall are you seeing cost you know sort of abating.
Overall cost pressures abating in terms of inflationary pressures and how is it you know negotiating with these contractors. This time around versus the last go around when you lost you know.
Scarious over five years ago.
Cosmos. This is Joe I'll take that question Hi, Joe.
So.
The first part is squeezed Hatfield so.
The process plant.
He is.
Well advance so in the process plant.
Creek or structural steel is up and.
And all major equipment is set.
There are.
Additional.
Pieces of or motors gearboxes other things to go in.
They are all procured and laid down at square yes.
The major works for the plan to include.
Hygiene.
[noise] trickle in instrumentation.
Associated with the plant the primary crusher.
Has to be.
The foundation of has to be built and the crusher set.
The crusher is on site.
Lay down.
So that kind of summarizes the plan so you know.
It is rough.
Roughly.
65, 70% complete a major works in addition to the plant.
Include the.
The filter plant so from prior construction to now we have.
Modified the project to go from conventional slurry tailings to dry stack requiring the filter plant. So the filter plant has been procured.
And.
The construction from foundation up through setting of the equipment needs.
It needs to occur.
Dry stack tailings itself that facility for storage or price decks dry stack tailings need to be constructed which basically is an embankment.
Trip of the pit needs to be completed which will feed that embankment.
And there are.
Water treatment plant.
Accelerate facilities and a few other things so.
Characterizing it is half built overall, probably in the range of 40% complete.
On a total basis at this point and when we as we look at updating them.
Forecasts or budgets Cosmos as you recall the feasibility study estimate was completed.
December of 2021.
And we felt as though we were in good position, having already procured the or put better.
Early procurement and for the filter plant.
Most of the.
Other equipment already laid down so we felt like we're pretty insulated from inflationary pressures sand and that remains true today.
That is 18 months old there have been other things that are impacted and that's primary primarily labor.
Bulk purchase type cable that kind of thing, which is happening now so we would anticipate kind of the normal.
Inflationary pressures that others have seen.
That period 2021 to know.
And that covers everything labor engineering through completion of project.
So to summarize all of that yes, we feel really good the plant is well advanced.
I haven't been on many projects where the plant is in this position at this time, we will have an early can actually have it available for commissioning well in advance of startup which is not common.
That gives me great relief secondly.
We think about the installation that we have from the inflationary pressures what we see.
We're going to experience some of that but we feel pretty good about where we sit.
Having delivered the project reasonably in line with the feasibility study estimate project to date.
So.
All things good.
Normal conditions for projects exist in.
Youll hear more when we complete the update of estimate following about the movement of the project from today at about 30% committed to about 60% to 70% committed.
Quarter.
Does that help Cosmo yep Yep that helps perfectly Joe and then maybe one last question John .
Overall, our weather related issues in Q2.
Looking at full year guidance and looking at what you've done so far in the first half.
Clearly you'll need a.
Increased production I kissed a dog and also like Mark to hit your guidance for the year, but maybe focusing on kiss the dog.
It sounds like a heavy rainfall did not impact stocking, but impacted each kinetics. It sounds like some of that lower grade solution still needs to be extracted in Q3.
I'm just wondering you know in terms of we know that you know H two it's got to be better than H one.
The weather related issues is that still going to impact Q3, and you know in terms of the improvement is it going to be Q4 better than sort of Q3.
At this point in time, we're not sure.
Well, we're expecting Q3 to be stronger than we would've thought three months ago, and it's simply because that excess solution, we expect to be processed during Q3. So.
And when you look at kids, so that overall the way I'd put it as we delivered the projects. The system. As you said the placements are at design already and we just commissioned the north Leach pad in early July so we're in a really good position to put the tonnes up there and we're in a good position to get that's the diluted solution.
Through the plant in Q3, and I say that all of that in the context, if we cut another unexpected rain event when things happen, but yeah. That's that's not likely to happen, we're expecting a very strong second half of kits.
And at La Mark I mean, it was already second half loaded just sequencing and grades.
What happened in Q2 with the wildfires and as Simon pointed out we lost quite a few shifts in June .
We've got a solid plan, we've got higher grade stopes coming.
Expect to deliver a strong second half so I'd say, we're in a really good position right now to deliver the guidance and then the last piece of the puzzle you Didnt mentioned was olympias, but.
Again, the delay in high grade access to stopes, both pulp grades and particularly silver those stopes are coming out in the next quarter. We had a second half planned to be stronger supporting with with all of this capital that we've invested and we believe we're in a good position to deliver our guidance.
For the year.
Great. Thanks, again, George and team that have a good weekend.
Thank you.
Our next question comes from Mike Parkin of National Bank. Please go ahead.
Hey, guys. Thanks for taking my questions. Most of it's been answered, but just circling back and catch the day, you've got the new pad.
That solution of a new pad.
Port to.
A different on that was.
Versus the pawn that was diluted with the rainfall.
Hi, Mike it's that it's Simon here that's correct.
The collection system for the southeast Willy Chad is separate from the North heap Leach pad site.
Any of the stacking and solution that will put through on the north heap Leach pad will be isolated from the SaaS and so.
That might be and does it in any way from the mindful of that so that is.
Certainly Oh peaked out.
Okay, and it's nice to hear that you're expecting to.
The impact of the heavy rain pretty much behind you by the end of this quarter.
Just to follow up on causes question is it fair to assume kind of Q3's better in Q2, but probably.
Pretty stellar Q4, given youre going to have quite a bit of gold in solution to be pulling from the fourth quarter.
Yeah, the way I'd look at it.
We're expecting a strong second half and that the catalyst partly as the solution inventory that's going to come out in Q3, but the rest of it is we've been at the top of the pyramid on the South Leach pad.
And you know limited for space, we now have the north Leach pad were placements or are ongoing we will have both sets of those solutions reporting the independent ponds and and we're ramping up the production as planned coming out of the new circuit. So all the larger grasshoppers that conveyor we're in a strong position.
For the second half.
And I guess, the other thing with their collaboration drum.
What we wanted to get out of that system was.
Get those fines combine and get good permeability through the heap and it is performing so you know predicting Q2 versus Q3, and how theyre going to Pan out.
It is tough to say on this call right now I'd just tell you stronger second half Leach kinetics or are gonna be better that solution inventory is going to come out and we're gonna have solutions coming out of both heap. So we're pretty confident about the second half.
That sounds good.
And I guess also going back to the high pressure grinding rolls.
Still even in that optimization optimization phase, there, where youre able to tweak things and boost recoveries going forward a bit.
On top of that you know additional solution correct.
Yeah, I mean, our second half remains as planned we'll be testing.
Fine we can crush.
Or with horsepower and recycled through the H P. G. R O.
In combination.
Nation with the success with the agglomeration. So we have to maintain good permeability. If we go to fine you lose in the end. So yeah. The second half is all about optimizing.
Throughput.
<unk> size and agglomeration to get optimum cash.
Cash out of the future or placements. So yeah, we remain optimistic focus on the upside it kill Saddam we'll have more to talk about early next year. When we have that data in front of us.
Okay.
And I'm more familiar with kind of rainy season impacts and heap leaches.
In Mexico, where you typically see like a shocking off the Pat them on the back of the rainy season. There is that something you had to do in June and therefore, it is already in your operating costs or is that something that you don't necessarily do because of the longer leach cycle that particular day.
That's correct.
We we we don't have to be as dramatic as what happens in other places intensive Reg in addition.
And we have you know.
At that point, if you like within.
The.
Back half of June and early July to ensure that we had sufficient.
Cyanide concentration, but not to the level that you would be familiar with it out of the place.
Okay. Thanks, very much guys.
Thank you.
Once again, if you have a question. Please press Star then one our next question comes from Fahad Tariq of Credit Suisse. Please go ahead.
Hi, Thanks for taking my question I, just wanted to circle back on Securitas and the update in Q3, I just want make sure I'm understanding it correctly based on the comments are you, saying directionally without getting into specifics, but directionally that.
That estimate could be revised higher based on.
Labor productivity, how the contracts are awarded.
Inflationary pressures over the past few years.
No. What we're saying is that we will have a number of major contracts finalized.
And that will inform the cost estimate so we'll update the market as to any changes there.
And in terms of productivity to date the productivity, we're seeing on construction are consistent with the estimate.
So we will have another quarter worth of activities on the ground to take a look at but I wouldn't say, we're going to be in a position where we've got a lot of Intel on productivity. So far things are as expected.
And you know.
As the construction ramps up you know as we said we're going to be approaching 900 people next year is when we're really going to get a taste of the productivity versus the feasibility study, but last year, we did the cladding and building around the bill that came in as planned we've begun to do some road work.
Restart for some concrete for the primary crusher.
There is some data coming in but it's it's aligned with the estimates. So it is just simply another data point in Q3 with major contracts being let a little bit more construction activity on the ground and we'll take a fresh look at the estimate then for them, but you shouldn't be reading in that we're concerned about anything right now it's it's.
It's gonna be another normal data point in a construction project like this.
Got it okay. Thank you.
That's all the time, 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.
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