Eldorado Gold : Fourth Quarter 2023 Transcript

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Operator:

Welcome to the Eldorado Gold 2023 Q4 and Full Year 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 * then 1, on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing *, then 0.

I would now like to turn the conference over to Lynette Gould, Vice President, Investor Relations. Please go ahead, Ms Gould.

Lynette Gould:

Thank you Operator, and good morning everyone. I'd like to welcome you to our fourth quarter and year-end 2023 results conference call.

Before we begin, I would like to remind you that we will be making forward-looking statements and referring to non-IFRS measures during the call. Please refer to the cautionary statements included in the presentation and the disclosure on non-IFRS measures and risk factors in our Management's Discussion and Analysis.

Joining me on the call today we have George Burns, President and Chief Executive Officer; Paul Ferneyhough, Executive Vice President and Chief Financial Officer; Joe Dick, Executive Vice President and Chief Operating Officer; and Simon Hille, Executive Vice President, Technical Services and Operations.

Our release yesterday detailed our fourth quarter and year-end 2023 financial and operating results. This should be read in conjunction with our Year-End 2023 Financial Statements and Management's Discussion and Analysis, both of which are available on our website. They have also both been filed on SEDAR+ and EDGAR.

All dollar figures discussed today are U.S. dollars, unless otherwise stated.

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We will be speaking to the slides that accompany this webcast and you can download a copy of these slides from our website. After the prepared remarks, we will open the call for Q&A. At this time, we will invite analysts to queue up for questions.

I will now turn the call over to George.

George Burns:

Thanks Lynette, and good morning everyone.

First, we'd like to pass on our condolences to everyone affected by the SSR tragedy in Türkiye. Our in- country team provided services to the response efforts, and we await key findings from the investigation.

We are pleased to have Paul Ferneyhough, our recently appointed Executive Vice President and Chief Financial Officer, step into the role following Phil Yee's retirement. Paul joined us in 2021 as part of our CFO succession plan and was key in negotiating the project financing on the Skouries project, and worked closely with Phil and the Finance team since joining Eldorado. The transition has gone smoothly, and for those who have not yet met Paul, I'm sure over the coming months you will have the opportunity to do so.

I would also like to take this opportunity to acknowledge Joe Dick, as this will be his last formal conference call with us. At the end of March, he will retire his role as COO and move into a consultant role to support us in delivering the Skouries project. Joe, I would like to thank you for everything you've contributed to the organization, and on behalf of everyone at Eldorado we wish you all the best in your semi-retirement.

As Joe moves into this new role, we have welcomed Louw Smith as the Executive Vice President, Development, Greece. Louw is responsible for our Greek assets, including Skouries and Olympias. He will join us on our first quarter call for 2024 in April to review the Greek assets. Louw brings to the role over 30 years of international experience in the industry. We are pleased to have him join Eldorado.

Here's the outline for today's call. I'll provide a brief overview of Q4 and 2023 results and highlights, updated 2024 production and cost guidance, and our four-year production outlook. I will then pass the

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call over to Paul to go through our financials and then Joe and Simon to review our operational performance. Then we'll open the call to questions from our analysts.

Turning to Slide 4, 2023 was a successful year at Eldorado marked with many accomplishments. We delivered increasing production while lowering our cost profile over 2022, resulting in a very strong financial year. This accomplishment demonstrates our team's dedication and hard work. The fourth quarter was the strongest quarter of the year with safe production of 143,166 ounces. We finished the year with gold production of 485,139 ounces, in line with our guidance range and a 7% increase over 2022. Production benefited from Olympias' infrastructure and productivity improvements and Kişladağ from our upgraded materials handling systems and the commissioning of the North Heap leach pad.

On the cost side, our cash costs and our all-in sustaining costs decreased by 6% and 4%, respectively, compared to 2022, in an environment where the industry cost base is rising. We saw slightly lower unit cost per key consumables including energy and fuel, and lower sustaining capital expenditures. Also in Türkiye, we benefited from the depreciating lira that more than offset inflation. In addition, our continuous improvement initiatives across the sites also contributed to declining costs. Our full year 2023 cash costs and all-in sustaining costs were in line with our guidance range as we issued in October. Paul will touch on the costs in more detail later in the call.

Turning to Slide 5, in the fourth quarter we recorded 1 lost-time injuries with a frequency rate of 0.42, which was consistent with the LTIFR in Q4 2022. In 2023, the LTIFR was 0.65, a 45% improvement over 1.19 in 2022. While we are proud of our safety performance and our employees' commitment to safe operations, we know there's a lot more to be done. Our safety and health journey will continue in 2024 with a focus on preventing high potential incidents and further empowerment of our employees to promote a positive health and safety culture.

On sustainability, we take pride in our consistently strong performance and are pleased to have been recently recognized for our continued efforts. We were ranked first in the materials sector and 27th overall in the Globe & Mail's 2023 Board Games, which rate Canadian corporate boards on the S&P and TSX Composite Index for the quality of their governance practice and disclosure. In addition, at the Resourcing Tomorrow Conference in London, we took home the Project Financing of the Year Award for the Skouries Project financing. We also received an honourable mention for ESG Producer of the Year.

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Moving to Slide 6, in conjunction with our financial release yesterday, we published our 2024 guidance and four-year production outlook. Looking forward towards 2024, we expect a 9% increase in gold production over 2023 with gold production expected to be between 505,000 and 555,000 ounces. The increase in gold production over 2023 will be primarily driven by higher expected production at Kişladağ and Olympias following the productivity improvements that were implemented last year.

As in previous years, production is expected to be second half weighted. Production in Q1 and Q2 of this year is expected to be lower than Q4 2023 as a result of winter conditions at Kişladağ and planned ore grade variability at Kişladağ, Lamaque and Efemcukuru.

Total cash costs are expected to be between $840 and $943 per ounce sold. All-in sustaining costs are expected to be between $1,190 and $1,290 per ounce sold. Both total cash costs and all-in sustaining costs are expected to be in line compared to 2023.

Sustaining capital in our operations is expected to be between $135 million and $160 million. The increase over 2023 is primarily the result of an increase at Lamaque for underground development and tailings storage facility upgrades and Olympias for underground development and infrastructure. Growth capital at our operating mines is expected to be between $122 million and $144 million, which has increased over 2023, primarily the result of an increase at Lamaque for the planned Ormaque bulk sample development and at Olympias as we take a phased approach to increasing throughput to 650,000 tonnes per annum, which is expected in 2026.

Growth capital at Skouries is expected to be $375 million to $425 million. Skouries capital has significantly increased over 2023 as we are in the peak of the construction due to delays in finalizing key contracts and some of the 2023 spend was moved into 2024, as we previously indicated.

Our four-year outlook is a compelling story of near-term,high-quality production growth. The primary growth engine is Skouries, which is expected to be commissioning in the third quarter of next year. Our gold production is expected to increase 45% from 2023 through 2027.

In addition to the gold production, copper becomes a significant component of Eldorado's overall production and revenue profile. Within our guidance this year, we have included the copper production at Skouries starting in 2025.

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Moving to Slide 7, we announced in yesterday's release a 9% or $75 million increase in the capital estimate at Skouries. The higher capital estimate was a result of increased labour costs. During 2023, negotiated contracts finalized were consistent with the feasibility study. The recent bids in 2024 that are being finalized or will be finalized in the first half of 2024 are associated with the mill facility and the tailings filtration plant that are coming in above the feasibility study estimate. The largest factor is higher labour rates for trade workers, and to a lesser degree slightly lower productivity assumed, and to an even lesser degree an increase in quantity of work being recognized from detailed engineering versus the feasibility study engineering. These new market and engineering realities are being included in the remaining contracts still being finalized.

As a result, we believe the updated cost estimate is largely derisked in terms of labour cost, procurement risk and engineering risk. We also believe this modest 9% increase in capital cost estimate in light of the global inflationary pressure since the December 2021 feasibility study is a positive outcome.

Our focus, as we finalize these remaining contracts, turns to mobilization of contractors and safe execution of the work to deliver start of commissioning in Q3 2025 and operational readiness to deliver commercial production by the end of 2025. With solid project financing and a robust balance sheet, we remain fully funded to complete the construction at Skouries.

Time we invested in diligently in negotiating these key contracts has increased our execution confidence with a modest effect on the production schedule. First production of the high-quality copper gold concentrate is now expected in Q3 of 2025 from prior guidance of mid-2025, and we remain on track for commercial production at the end of 2025. For the back-end weighted operations ramp-up curve, we have lowered the Skouries 2025 gold production range to between 50,000 and 60,000 ounces of pre-production ounces from the prior guidance of 80,000 to 90,000 ounces. In 2025, we also have guided on copper production and expect to produce between 15 million and 20 million pounds that year.

For the subsequent years 2026 and 2027, we are maintaining the previous gold production guidance ranges and have provided copper production. We are assessing our plans with the goal of increasing our 2026 production profile at Skouries.

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I'll stop there and turn the call over to Paul for a review of our financial results.

Paul Ferneyhough:

Thank you, George, and good morning everyone.

Slide 8 provides a summary of our fourth quarter and full year results. Twenty twenty-three was a strong year for us. As George mentioned, we delivered in line with our production guidance and in line with our guidance range on operating costs. Increasing production and lowering costs compared to 2022 have resulted in strong financial results for the full year.

Eldorado reported net earnings attributable to shareholders from Continuing Operations of $92 million or $0.45 per share in the fourth quarter, positively impacted by higher revenue and a higher income tax recovery over the comparative period in 2022.

For the full year, net earnings attributable to shareholders from Continuing Operations was $106 million or $0.55 per share compared to a net loss of $49 million or $0.27 loss per share in 2022. Net earnings increased in 2023, primarily due to higher revenue and lower mine standby costs, lower write-downs of assets and lower income taxes. After adjusting for one-time nonrecurring items, adjusted net earnings were $49 million or $0.24 per share for the quarter and $111 million or $0.57 per share for the year.

Within adjusted net income, we've reversed the one-off $59 million deferred income tax recovery due to a mandatory Türkiye hyperinflationary tax basis adjustment. The deferred income tax recovery applied to all of our non-monetary Türkiye balance sheet items.

Our free cash flow in the quarter was $29 million or $82 million, excluding capital investment in the Skouries project. For the full year, free cash flow was negative $47 million or $113 million positive, excluding the Skouries project, a significant improvement over 2022 which was negative $69 million.

Cash flow generated by operating activities before changes in working capital in the quarter was $138 million and for 2023 was $411 million compared to $240 million in 2022.

Fourth quarter cash operating cost was $716 per ounce sold and all-in sustaining cost was $1,207 per ounce sold. For the full year on a per ounce sold basis, cash operating costs was $743, total cash cost

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was $850, and all-in sustaining cost was $1,220 per ounce. Our costs decreased compared to the prior year as a result of higher production and slightly lower unit costs for key consumables, including energy and fuel.

Capital expenditures were $137 million in the fourth quarter, including investment in growth projects at Kişladağ focused on waste stripping, North Heap leach pad and upgraded materials handling systems, and at Skouries where we continue to advance construction and procurement for the project. Overall, 2023 capital expenditures were $411 million.

Current tax expense of $22 million for the fourth quarter increased from $10 million compared to the same period in 2022. Current tax expense totalled $86 million for the full year, an increase from $70 million in 2022. The increase in 2023 was primarily related to the operations in Türkiye. The increase reflects higher sales volumes combined with a tax rate increase in Türkiye from 20% to 25% that was enacted on July 15 that was retroactive to the beginning of the year. This was partially offset by Turkish investment tax credits.

Third, income tax recoveries of $68 million in the fourth quarter and $28 million for the full year compared to recoveries of $34 million and $8.5 million, respectively, in 2022.

Turning to Slide 9, our financial position remains robust as we move into 2024. We ended the year with total liquidity of $652 million, including $542 million of cash, cash equivalents and term deposits, and $110 million of available capacity on our revolving credit facility. We continue to focus on maintaining a solid financial position, which provides flexibility to respond to opportunities and fund our growth strategy to unlock value across our global business.

With that, I'll now turn the call over to Joe to go through the operational highlights.

Joseph Dick:

Thanks Paul, and good morning. Starting on Slide 10 at Skouries, we have made significant progress since restarting construction. Activity has continued to ramp up on site with project progress at 38% at the end of December 2023. Overall project progress stands at 70%, including work completed before putting the project into care and maintenance in 2017. Since giving the last update, detailed engineering has progressed to 61% from 56% and procurement is 82% complete, up from 73%.

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Mobilization of the earthworks contractor for embankment facility within the integrated extractive waste management facility, the IEWMF, started in the second quarter along with critical underground power service updates. Additionally, the construction team made positive headway on the crusher building, mill and flotation building, and underground development. We have some more detailed photos to share in the coming slides.

Moving to Slide 11, as we continue to ramp up construction activities, our 2024 capital is expected to be between $375 million and $425 million. The capital will be focused on continuing to advance construction of the major earthworks, including haul roads, IEWMF construction, low-grade stockpile, water management and process facilities and the crusher and filter buildings. In addition, work will focus on underground development to support the test stoping program scheduled for 2025.

Mechanical, piping and electrical installations will progress in in-process and infrastructure areas. On the critical path is the filter plant, which continues to advance with the piling work having commenced. We expect to award the filter building contract early in Q2. The contract will include the building structure, assembly of equipment within the building including air compressors, conveyors, filter presses and other ancillary equipment in addition to the piping and electrical work. The filter plates arrived on site in January, with the remaining components, assemblies and fabricated frames expected to ship in the second quarter. Preassembly is expected to start following delivery.

Work for the mill/flotation building is in progress with commissioning on overhead cranes, installation of construction lighting and scaffolding, and the commencement of structural steel work.

Mechanical, piping and electrical work for the process plant are mobilizing with work commencing this quarter. By the end of 2024, we expect to have completed the IEWMF coffer dam and significantly advance the IEWMF earthworks, water management facilities and the process and filter plants.

The next set of slides show how much work is already underway on three critical areas. Since we hosted a contingent of analysts and investors on the site in October, you may be impressed by how fast things have advanced through the winter months, specifically on the crusher plant foundation and preparation of the filter plant area.

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On Slide 12, the top photo gives you a good view of the amount of pre-stripping that has already been completed in the pit. In the bottom photo, you can see the trucks on site that are employed on the open pit pre-stripping to support construction of the haul roads and water management ponds.

On Slide 13, you can see the area for the crusher building. The piles have been driven and poured and the next stage of civil construction has begun.

Over at the filter plant on Slide 14, this shows the significant amount of excavation work that has been done with the piling work underway.

Shown on Slide 15 are the first four company-owned45-tonne CAT 745 trucks. These trucks will be used once Skouries is in operation to build the lifts that will be required on the dry stack embankment. During construction of the civil works, these trucks will be used as part of an integrated fleet with the earthworks contractor for construction of the IEWMF facilities. We expect to take delivery of 15 additional trucks through the end of Q2 2024.

The photo on the right shows the first phase of the underground development, advancing the West Decline and access to the test stopes. The second underground development contract proposals are in the final evaluation stage and awarding of the contract is planned for the second quarter. This contract includes test stope work as well as additional development and services work to support the Development Phase 1 of the underground mine. We expect to complete about 2,200 metres of underground development by the end of 2024. As a reminder, is it expected that Skouries will be mined predominantly via open pit for the first nine years in conjunction with the ramp-up of the underground. We look forward to providing updates as progress continues.

I'll turn it over to Simon for a review of operations.

Simon Hille:

Thanks Joe. Starting in Türkiye on Slide 16, at Kişladağ fourth quarter production was 46,291 ounces with cash operating costs of $623 per ounce sold, which represents a 24% increase in production on a similar cash operating cost compared to the prior quarter. Production during the quarter was driven by continued optimization of the material handling systems and the commissioning of the North Heap leach pad, which has increased the ore tonnes placed and increased irrigation flow rates. Overall, in

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