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.
Disclosure 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 join.
Joining me on the call today, we have George Burns, President and Chief Executive Officer, Bill <unk> Executive Vice President and Chief Financial Officer, Joe <expletive> 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 of 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.
We have also been filed on SEDAR plus 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 will open the call to questions from our analysts.
Turning to slide four 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 dropdowns 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 in.
To El Dorado by European Bank of reconstruction and development.
These funds will be invested in construction that scurries and will be credited against the Companys, 20% project funding commitment.
In addition to our Greek banks Syndicate <unk> 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 <unk> now contributed we do not expect any further funding for <unk> will be required from El Dorado. In 2023 is a 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.
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 tons per annum, bringing the remark discovery into production and exploration opportunities in Turkey 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 consolidated production across the portfolio came in slightly below our expectations for the quarter as a result of extra ordinary rainfall. It gets set up for a fire forest fires near La <unk> and lower grade and recoveries at Olympias due to mine sequencing as we.
<unk> 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 515000 ounces.
Additionally, we are maintaining our capital expenditure guidance of $394 to $437 million, including 240 to 260 million towards the advancement of <unk> project for 2023.
Turning to <unk>, we continue to be focused on project execution in order to deliver the project by the end of 2025 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 cost 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 in the environment category at the 2023, Quebec Mining Association Convention.
The team was recognized as an innovative project in partnership with MRC.
De La Ley de vore aimed at the progressive restoration of the Sigma tailings pond using combos produced locally.
Award 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 <unk> 10 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 reevaluation of new derivative instruments.
Primarily on gold callers entered into during the quarter and.
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 <unk> 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.
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 <unk> today, and I was curious where we continued to advance procurement and the projects.
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 and.
Turkey enacted a change to its corporate tax rate, increasing it from 20% to 25% for 2023 and subsequent years.
This change reverts to tax rate back to the 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 the 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 Thats 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.
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 the Sirius 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 30 was $112 million.
As the company invest further into the project the letter of credit will be reduced euro for euro.
To protect the down 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 of $2700 per ounce with a ceiling price of 2700 $36 per ounce.
<unk> 2024 is a floor price of 800, and a ceiling price of $27 65 and.
And for 2025, we have locked in a floor price of 9800 and assumed 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's 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 with PSM across all of our international operations speaks to the integrity of our teams and the results support our strategic commitment to sustainability.
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 and con.
Tractors.
At serious activity.
Q2 continued we advanced engineering and procurement and initiated the transition to full construction with the Finalization of project financing during April .
General works, we're focused on <unk>.
Site preparation relocation of temporary facilities re commissioning of the noncore contact water reinjection, well system and the whole issue of aggregates for construction purposes. Additionally.
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 other major earthworks is progressing well with with work on several fronts planned milestones in the second half of the year include finalizing of the awards of the remaining major procurement and contract packages, including.
An additional two major earthworks contracts to.
Two major civil contracts for piling and concrete.
Sure 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 $240 million 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 yet to see material impacts from this activity. Thus for we see the keys to ongoing success is maintaining or improving our pace of contract awards and to continue meeting the productivity levels is estimated in the December 2021 feasibility study plan as the construction ramp up progressed.
Yes.
With several major contracts expected to be awarded during the third quarter, we will be updating from the.
The 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 was slightly below our expectations for the quarter. We do remain on track to meet our guidance.
Pass it over to Simon can review the second quarter performance at our operations in Turkey and Canada.
Thanks, Chad studying <unk> in slide 11 at <unk> second quarter production was 34100 <unk>.
And cash operating costs.
$687 per ounce sold.
Which represents a 22% increase in production and a 14% reduction in cash cost as of Q2.
2022.
Extraordinary rainfall may and into early June at levels nearly equivalent to annual averages negatively.
<unk> negatively impact keys to that production.
The enriched gold solution was diluted with the excess volumes recirculated through the pad.
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 <unk> circuit.
The furnace rotation of the <unk>.
And replacement of 1800 meters about for the major overland conveyor.
Following the time, we then commission the final 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 operating is limited we are progressing well, we have an 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.
The new fund or Oklahoma system, a new leach pad and ongoing improvement in mine performance and we expect to meet our 10th price target during Q3 and the balance of the year. We are maintaining <unk> guidance between 160000 170000 ounces at <unk> for the full year of <unk>.
2023.
On slide 12 at <unk>.
Second quarter Gold production was 22644 answers at cash operating cost.
$697 per ounce sold gold production.
And average gold grade of <unk> were in line with the plan for the quarter development.
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, SMT production guidance remains at 80 that.
To 90000 ounces of gold.
And now moving onto our market slide 15.
Second quarter Gold production was 38745 ounces at cash operating cost of $676 per ounce sold.
The attainment of our Mac has done a remarkable job given the challenges that have faced provided to the forest fires in Quebec, and the air quality impact they have had in the <unk> area.
As a result of the air quality issues, 25% of the junior underground collection, chief cancelled and some surface activity suspended.
We maintained mill throughput.
Low grade stockpile material paint prices.
And and.
And when the stockpiles were depleted.
Forward scheduled maintenance from July into June to offset the unplanned downtime with a reduction in future planned downtime.
The team was able to safely regime underground operations by waterflood in da Vinci license intake to achieve normal AG quality for mine activity and by providing an alternative routes to safely transport employees to the mine with at utilizing <unk> guidance.
During July the air 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.
That's all lines.
While surface exploration work was halted due to the closure of forest exits rides, we continued underground drilling and remain on track to complete our infill drilling program targeted targeting the upper two thirds at the <unk>.
<unk> deposit in 2023.
To take a bulk sample and announce all making overall reserves 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 track Sandvik model T. H $5 58, and you can see PTT here with the team taking part of the official ribbon cutting ceremony to commemorate the event.
<unk> is the first to apply the Sante grant technology in Cutbank.
With a 50 ton capacity and increase rents this equipment will play a key role.
Moving production efficiency, reducing diesel particulate matter and mitigating that 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 at grades higher than in process. During the first half of the year.
We are maintaining what Max 2023 production guidance of 170000 to 190000 ounces of gold.
I'll hand that call back to Joe to review the second quarter results at Lindsay.
Thanks, I mean, moving to Olympias on slide 14 second quarter Gold production was 13866 sentences and cash operating costs were working $139 per ounce sold.
Mined and processed tonnes were up from the prior quarter and a 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 the 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 milestone was the transition to mechanical building a drill ground with the bulk of emulsion blasting agent a first time application of this.
Methodology in Greece.
Dissipated improvement of approximately 15% per blasted ground is now being achieved as it is phased into the operation.
We'll transition to both emulsion system is expected to be complete.
<unk> over the balance of the year.
The second milestone was the mechanical completion of a major upgrade to the olympias ventilation system, which we commissioned during the first week of July <unk>.
Ventilation system startup was enabled by completion and <unk> of the new Olympia is 150 kv substation during June the <unk>.
Substation not only powers the ventilation system. It provides for greater dewatering capacity from the pump station can be should last year.
Proving the overall power factor related to.
The new substation and our ongoing progress towards ventilation on demand both impacted power demand in favor of bookings.
So both the motion and ventilation projects were scheduled for early Q1 completion, there delete delay has affected mine plan sequent incentives.
And has delayed lower mine development, both of which are contributing to.
The factors contributing factors to the byproduct and grade variances outlined earlier.
These projects now online we expect to increase production from our Gladstone shown in green on the slide.
Which is expected to improve our bright product 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 the low 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 optimization optimization phase after completing these construction projects.
And olympias, yes for.
For Q2, <unk> was high but it was largely 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.
And leading shareholder returns versus our peers.
Thank you for your time I will now turn it over to the operator for questions from our analysts.
Thank you.
<unk> 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 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.
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 your income statement.
I guess, there seems to be some debate today on.
Foreign exchange gain of.
2014 $681 million.
Should it be.
Adjusted how should it be included.
I guess my question is I think Phil you kind of touched on it but what's the nature of <unk>.
Net foreign exchange gain which seems to be larger than previous quarters.
And.
Is it one of those things that could reverse later on in Q3 or are we going to see like.
Something like that 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.
Hi, Phil.
So maybe I can start.
But just talking about.
The background behind the FX gain so.
El Dorado operates as you know in multiple jurisdictions, which exposes us to the <unk>.
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.
Okay.
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.
<unk>.
A large portion of that FX up 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 onetime occurrences that are nonrecurring.
And I would say like our foreign exchange gain.
Report foreign exchange gains or losses every quarter it is a.
Irregular.
I guess the regular reporting a feature of our operations.
So thats.
I think that would explain that.
The context behind whether the foreign exchange gain whether it's the realized portion of unrealized that that should be adjusted.
Okay, understood and I agree as well.
And then I guess looking into Q3 I'm seeing that the Turkish lira continues to weaken like 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, but.
If it continues to kind of trend in this direction.
Is this something that we should again be aware of in Q3.
Yes, I think thats a good question.
I would say that the way.
We have looked at it.
With the results of the recent.
The elections in June .
Runoff elections in Turkey, we were expecting.
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 have an impact on <unk>.
On the lira, and we expect that the lira would weaken further in the summer.
Some are for example, it's tourism season, a week a week earlier does support tourism it does support exports which supports.
Helps them with their balance of payments, so we're expecting a weakening.
In the summer.
The forecast at this point based on information that we've we've looked at is that there will likely still be some.
Some weakening not expecting there would be significant it is currently sitting about 'twenty six 'twenty seven.
Lira to the U S dollar we're expecting it to perhaps.
Go down to 30.
Which would be less significant than what we incurred in Q2.
But at some point here, we expect with some of the changes that are that are taking place the increase in interest rates and some of the other measures that the government is taking in Turkey.
We're hoping that.
<unk> will begin strengthening at some point.
Okay.
Maybe switching gears a little bit.
On scary.
As you talked about there's a number of contracts that will be finalized.
In Q3.
I guess my question is twofold number one it seems like there's still some firm wants to be done some concrete to be cord.
I'd like the Crusher the foundation with a crusher I seem to remember.
But its already have built and so just wanted to make sure that some of this.
Fourth works and concrete cores and major contracts are in addition to what's been done in the past and indeed.
Scary as more than half built.
My understanding.
Number two.
I guess youre talking Theres, an update coming up in terms of.
Budget control versus the feasibility study.
Clearly you might not be able to tell us too much today, but overall are you seeing costs sort of abating.
Overall cost pressures are abating in terms of inflationary pressures and how is it negotiating with these contractors. This time around versus the last go around on it when you lost.
Built scarious over five years ago.
Cosmos. This is Joe I'll take the question Hi, Joe.
So.
The first part is squeezed have built so.
The process plant.
Is.
He is.
Well advance so in the process plant concrete or structural steel is up.
And all major equipment is set.
There are <unk>.
<unk> pieces or motors gearbox has other things to go in.
They are all procured and laid down at <unk>.
The major works for the plan to include.
Hygiene.
Electrical and 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 and in lay down.
So that kind of summarizes the plan so.
It is.
Roughly.
65, 70% complete a major works in addition to the plant.
Include.
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.
Needs to occur.
Dry stack tailings itself that facility for storage of price deck dry stack tailings need to be constructed which basically is an embankment pre strip of the pit needs to be completed which will feed that embankment.
And there are.
Water treatment plant.
Axillary 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.
Forecast silver or budgets Cosmos as you recall.
The feasibility study estimate was completed in December of 2021.
And we felt as though we were in good position, having already procured the or put vendor.
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 ago, there have been other things that are impacted and Thats 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 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 and 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.
Youll hear more when we complete the update of estimate following about the move.
Movement of the project from today at about 30% committed to about 60% to 70% committed.
<unk>.
Does that helpful. Cosmos, yes, yes that helps perfectly Joe.
And then maybe one last question.
Overall.
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.
Increased production at <unk> and also the Mark to hit your guidance for the year, but maybe focusing on <unk>.
It sounds like heavy rainfall did not impact stocking by impacting the leach kinetics. It sounds like some of that lower grade solution still needs to be extracted in Q3.
I'm just wondering in terms of we know that H, two it's going to be better than H one.
Weather related issues is that still going to impact Q3.
In terms of the improvement is it going to be Q4 better than Q.
At this point in time, we're not sure.
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 kits so that overall the way I'd put it as we deliver the projects. The system. As you said the placements are App 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 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 that's not likely to happen. We're expecting a very strong second half of <unk> 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 .
<unk> got a solid plan, we've got higher grade stopes coming we 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 the last piece of the puzzle you Didnt mentioned was olympias, but again.
Hi, great 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 in.
We believe we're in a good position to deliver our guidance.
For the year.
Great. Thanks, again, George and team and 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 have been answered, but just circling back on the cash flow that you've got the new pad.
<unk> solution of the new pad.
Our report to.
A different on that was.
Versus upon that was diluted with the rainfall.
Hi, Mike its that its Simon here.
Correct.
The collection system for the SaaS equally 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.
In any way from the rainfall event.
Certainly okay.
Okay.
It's nice to hear that Youre expecting the.
Have the impact of the heavy rain pretty much behind you by the end of this quarter.
Just a follow up causes question is it fair to assume kind of Q3's better in Q2, but probably a pretty stellar Q4, given youre going to have quite a bit of gold and solution to be pulling from in the fourth quarter.
Yes.
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 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 of the larger grasshoppers that conveyor we're in a strong position.
For the second half.
And I guess the other thing was the agglomeration 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 well.
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 going to be better that solution inventory is going to come out.
We're going to 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 additional solution correct.
Yes, I mean, our second half remains as planned we'll be testing how fine we can crush.
Or with horsepower and recycled through the HP Jr.
In combination with the success with the agglomeration. So we have to maintain good permeability.
We go to fine you lose in the end so the second half is all about optimizing.
Throughput.
Crush size and agglomeration to get optimum cash.
Cash out of part of the future or placements. So yes, we remain optimistic focus on the upside that <unk> will have more to talk about early next year. When we have that data in front of us.
Okay.
And.
More familiar with kind of rainy season impacts and heap leaches.
In Mexico, where you typically see like a shocking of the Pat on the back of the rainy season. There is that something you had to do in June and.
And therefore, it's already in your operating costs or is that something that you don't necessarily due because of the longer leach cycle that cash today.
That's correct.
And we don't have to be as dramatic as what happens in other places intensive reagent addition.
We have.
Up at that point, if you like within.
The <unk>.
Back half of June and early July to ensure that we had sufficient.
Cyanide concentration, but not to the level that it would be.
Familiar we could have 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 seeing directionally without getting into specifics, but directionally.
That estimate could be revised higher based on.
Labor productivity, how the contracts are awarded.
Stationary pressures over the past few years.
No. What we're saying is that we will have a number of major contracts.
Finally, <unk> and that will inform the cost estimate so we will 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.
As the construction ramps up 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.
Again to do some road work.
For some concrete for the primary crusher.
There is some data coming in but 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 will take a fresh look at the estimate and informed but you shouldnt be reading in that we're concerned about anything right now.
Is going to 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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Okay.
Okay.