Eldorado Gold Corporation (EGO) Q3 2021 Earnings Report, Transcript and Summary

Thank you for standing by. This is the conference Operator. Welcome to the Eldorado Gold Corporation Q3 2021 Financial and Operational Results conference call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. [Operator Instructions]. I would now like to turn the conference over to Lisa Wilkinson, Vice President, Investor Relations. Please go ahead, Ms. Wilkinson.

Thank you, operator. And good morning, everyone. I would like to welcome you to our Third Quarter, 2021 Conference Call. Before we begin, I would like to remind you that we will be making forward-looking statements during the call. Please refer to the cautionary statements included in the presentation, as well as the risk factors set out in our annual information forum. Joining me on the call today, we have George Burns, President and Chief Executive Officer, Philip Yee, Executive Vice President and Chief Financial Officer, Joe Dick, Executive Vice President and Chief Operating Officer, and Jason Show, Executive Vice President and Chief Strategy Officer. Our release yesterday details our 2021 Third Quarter financial and operating results. These should be read in conjunction with our Third Quarter financial statements and management's discussion and analysis, both of which are available on our website. We've also been filed on SEDAR and EDGAR. All dollar figures discussed today are U.S. dollars, unless otherwise stated. We will be speaking to the slides that accompany this webcast. You can download a copy of these slides from our website. 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, Lisa. And good day, everyone. Here is the outline for today's call. I'll provide a brief overview of Q3 results and highlights before passing it to fill to go through the financials. Joe will follow by reviewing operational performance and then we will open it up for questions from analysts. I'm very pleased with our third quarter results. Production in Q3 was 8% higher than last quarter based on strong production and kiss it up. And we have increased our full-year 2021 production guidance by approximately 6% to 460,000 to 480,000 ounces, up from 430,000 to 460,000 ounces previously. We are working through our budgets right now and we are comfortable with our 2022 production guidance range, which takes into account commissioning of the HPGR in Q4. We will update the market on 2022 guidance in the New Year. Joe will speak more about our operational performance later in the call. I'm very proud of the operational teams for working safely and effectively to achieve robust production in the first 9 months of the year. Specifically, I would like to congratulate Kisladag team for delivering strong production year-to-date and successfully completing several operational improvements at the mine. During the quarter, we refinanced our senior secured notes. Phil will speak to this later in the call. Not only were we able to lower the cost of debt, but certain Eldorado subsidiaries in Greece were removed as guarantors, which will allow us to pursue a broader range of funding alternatives for the development of the Kassandra assets. We continue to see strong support in Greece for the Skouries project. The support from the Greek government has allowed us to sign an amended investment agreement and obtain the approval for dry-stack tailings permit early in the year. We're also seeing strong interest from Greek banks in EU COVID relief fund. This is a very encouraging as we accelerate the process of finalizing and funding and financing for the world-class project. In October, we made the decision to suspend mining operations at our non-core Stratoni Mavres Petres mine in Greece, and focused on exploration. The Mavres Petres mine currently lacks reserves to support sustained operations, and we expect to continue our exploration program in this highly prospective area, aiming at identifying and verifying new reserves. During this phase, the mine will be transitioned to care and maintenance. Operations could resume upon positive results for future, technical, and economic review. We will strive to either relocate employees to other Kassandra operations or offer training programs at a new technical training center under-development at Stratoni. This was a difficult decision, but necessary. A decision to ensure the viability of Kassandra assets and allow Eldorado to continue to invest in the region for the long term. We continue to monitor costs and capex inflation across our operations. In Turkey, inflationary pressures have been mostly offset by the weakening lira. In Canada, mining project activity has picked up in the Val-d'Or region, which is putting pressure on our contractor labor rates. And COVID-19 has impacted the supply chain causing minor shipment delays. Based on Q3 and year-to-date cost performance, we are not seeing any notable impact of inflation. At the end of October, we closed the previously announced sale of the Tocantinzinho Project in Brazil to G Mining Ventures. This sale provides Eldorado with immediate value for TZ, and allows us to retain meaningful exposure to future value creation through our equity stake in G Mining. TZ will be a cornerstone asset for G Mining. The team with a strong track record of building mines on-time and on-budget. We believe that G-Mining, which now includes our local Brazilian team, are the right group to responsibly advance the asset, and we look forward to following and supporting their success. Shifting over to ESG, I want to update you on the global sustainable integrated management system that we launched in Q1. SIMS integrates sustainability, responsibility, and accountability across Eldorado's core business functions at all levels of the organization. This internal management system is set of performance standards addressing occupational health and safety, environment, social and security, by which we will be able to better measure, track and drive our ESG performance. In Q3, we completed SIM self-assessments at our operating sites with positive results. We're now focused on creating action plans that will support our commitment to continuous improvement. One of the key pillars of our sustainability framework is to engage collaboratively with stakeholders to build positive relations and uphold our social license to operate. For example, during the quarter, our team Quebec announced a partnership with the Lak Simon Anishnabe nation to develop an adult education center in Val-d'Or to support skills and sustainable development of the community. We're also continuing discussions to work towards a long-term, collaborative and Sustainable Development Agreement with the Lak Simon nation. In Q3 in Greece, we continue a comprehensive stakeholder engagement process in preparation for environmental social impact studies with the goal to build a mutual understanding and support of a positive shared future in the region. With that, I will turn the call over to Phil, to review our third quarter financial results.

Thank you, George. Good day, everyone. Starting with Slide 4, we had another strong quarter of operational results. Production at Kisladag was higher than planned, which led us to revise and increase on our 2021 production guidance by 6%. Our costs remain in line with our 2021 annual guidance. Revenues were consistent with plan and expectations, supported by strong sales at an average realized gold price of $1769 per ounce. Free cash flow was $29 million in the quarter, and we are forecasting continued free cash flow generation through to the remainder of the year. Eldorado reported net earnings attributable to shareholders from continuing operations in Q3, 2021, of $8.5 million or $0.05 per share compared to net earnings attributable to shareholders of $46 million or 26% per share in the third quarter of 2020. After adjusting for onetime non-recurring items, including 31 million of financing costs related to the debt refinancing in Q3, among other things, adjusted net earnings, attributable to shareholders for Q3, 2021 increased to 40 million or $0.22 per share, up from 29.3 million or $0.16 per share last quarter. Cash operating costs in Q3 2021, averaged $646 per ounce sold, an increase from $537 per ounce in Q3 2020, the increase was primarily due to lower grade ore mined and processed at Kisladag and Lamaque, resulting in fewer ounces produced and sold, compared to Q3 of 2020. These increases were partially offset by modest reduction in cash operating cost per ounce sold at Olympias as a result of higher grades, combined with higher silver and base metal sales, which reduced cash operating costs as a byproduct credit. All-in sustaining costs per ounce sold average $1,133 per ounce in Q3, 2021, an increase from $918 per ounce in Q3 2020, primarily due to the increase in average cash operating cost per ounce sold and higher sustaining CaPex. Capital expenditures in Q3 2021 were 77 million compared to 52 million in Q3, 2020 and 72 million last quarter. This reflects a planned increase in growth capital spending at Kisladag with a new HPR project, and at Lamaque with the underground beacon project. Tax expense decreased to $5.6 million in Q3, 2021, from $40 million in Q3 2020, mainly driven by the investment tax credit received in Turkey in Q3 2021 related to Kisladag heap leach capital improvements, along with significantly lower FX and withholding taxes in the quarter. Depreciation expense totaled $50 million in Q3 2021, compared to $57 million in Q3 2020. The decrease in depreciation this quarter reflects lower sales volumes. We continue to expect full-year 2021 depreciation expense to be in the range of $200 to $215 million. Eldorado's Brazil segment has been presented as discontinued operation in Q3 2021 following the sale of the Tocantinzinho project, which closed this week. Net loss from discontinued operations of $60 million in Q3, 2021 reflects a reduction in fair value to the value of the upfront consideration only, less estimated costs of disposal. Deferred consideration of $60 million in cash is payable on the first anniversary of commercial production. At the end of Q3, we voluntarily changed our accounting policy to re-classify cash paid for interest on the statement of cash flows. Reclassified as a financing activity, rather than as an operating activity. Following the refinancing of our debt in August of 2021, the policy change more accurately reflects the nature of these cash flows, resulting in more relevant information to the Financial Statement users. The consolidated statements of cash flows reflect the retrospective application of this change in accounting policy. Turning to Slide 5, we continue to focus on maintaining a solid financial position which provides increased flexibility to unlock value for our Kassandra assets in Greece At quarter-end, we had unrestricted cash and cash equivalents of $439 million. On August 26, we completed an offering of 500 million senior notes with a coupon rate of 6.25% due September 1, 2029. Net proceeds from the senior notes were used in part to redeem the outstanding 9.5% senior secured second lien notes due 2024 and to repay the outstanding amounts under both the term loan facility and the revolving credit facility. On October 15th, we executed a 250 million amended and restated senior secured credit facility that we're referring to as, the Fourth Arca. It provides an option to increase the available credit by 100 million through an [Indiscernible] feature and has a maturity date of October 15th, 2025. Under the Fourth Arca, the revolving credit facility bears interest at [Indiscernible] plus a margin of 2.125% to 3.25%, depending on a net leverage ratio pricing grid. Both the senior notes issued in August and the fourth [Indiscernible] removed certain El Dorado subsidiaries in Greece as guarantors, which will allow us to pursue a broader range of funding alternatives for the development of the Kassandra assets. Our net leverage ratio is at 0.16 times as at September 30th, 2021 compared to 0.89 times at the end of Q1, 2020. This reflects a much-improved credit profile for the Company over the last year-and-a-half. With that, I will now turn it over to Joe to go through the operational highlights.

Thanks Phil and good day, everyone. I'd like to start by highlighting an important health and safety milestone for operations. In September, we achieved a triple zero month with no recordable incidents in three key areas. Medical treatment, modified work, and lost time. This is the first time we have reported a triple zero month since 2012, and I'm extremely proud of the team for this accomplishment. We produced 125,459 ounces of gold in the third quarter, an 8% increase from Q2 production of 116,066 ounces. Our third quarter operating performance continued to be strong. And as George mentioned, we have increased our 2021 production guidance range to between 460 and 480,000 ounces of gold up from between 430 and 460,000 ounces of gold. This is driven by stronger than planned performance at Kisladag. We remain focused on disciplined capital allocation across our operations. Specifically, we have been looking at the capital allocation more closely at our Kassandra mines in Greece as our transformation efforts continue to progress. As a result, we expect both sustaining and growth capital expenditures to be at the low end of guidance range for the year. Slide 7 looks at our operations in more detail. Starting in Turkey with Kisladag, our third quarter gold production totaled 51,040 ounces, a 16% increase over the last quarter. Cash operating costs were $612 per ounce. We achieved increased throughput at Kisladag in the third quarter related to several operational improvements that were implemented in the mine, leach pad, solution handling, and carbon regeneration earlier this year. The commissioning of the high-pressure grinding roll circuit is underway and nearing completion. We expect the HPGR to increase gold recovery by approximately 4% and enhance the already positive results achieved from the CIC trains and the new carbon regeneration kiln completed in the first half of the year. Our multiyear pre -stripping campaign continues to progress and studies are actively underway to assess the potential for accelerating this work, to bring forward value at Kisladag. We're continuous on the north heap leach pad construction, we continue to be on track for Phase 1 completion and stacking to begin in mid-2022. Over to F [Indiscernible]. Third quarter gold production totaled 23,305 ounces at cash operating costs of $552 per ounce. At [Indiscernible], we have a strong track record of extending mine life through exploration success. And in September, our exploration news release included drill results at Kokarpinar focused on both the conversion drilling with inferred resources and testing of the previously undrilled Northwest Splay. The results of the resource drilling were encouraging and have the potential to significantly extend the current reserve base and mine life of the asset. Turning to our Canadian operations, third-quarter gold production at Lamaque totaled 37,369 ounces, a 5% increase over last quarter. Cash operating costs were $646 per ounce. The decline between Triangle and the Sigma mill is on schedule and will complete in the fourth quarter. The decline will replace the current group with the straight-line haulage to the Sigma mill, eliminating surface haulage costs. At the end of September, we published an exciting exploration update, which included recent results from Ormat Infill Drilling. The results confirmed high-grade continuity within our lenses of the maiden inferred resource and expanded several lenses laterally. Through our host testing deeper levels identified new mineralized zones. These results showcase a high-quality and strong growth potential at our Mac. Preliminary mine planning studies are underway to assess the initial scope of the Ormat resource within the [Indiscernible] operation. Once completed, the underground decline will enable the team to drift over to the deposit and gain additional information to integrate the promising new discovery in our future mine plans. Over to Greece, at Olympias third quarter gold production totaled 13,745 ounces, a 6% increase over last quarter. Cash operating costs were $952 per ounce. Third quarter production at Olympias reflects some initiatives that were implemented in relation to the transformation efforts at the Kassandra assets. As we discussed on the 2Q conference call, we are implementing a wide ranging, sustained effort to optimize the Greece operations that touches on every part of the business. I would like to end with a brief update on our technical studies. The updated feasibility study for Skouries remains on track for completion in the fourth quarter. At this point, the study has not been complete, so we're not in position to disclose any details. But Lamaque PEA is expected to be completed in the first quarter of 2022, and an updated technical study at Perama Hill remains on track for completion in early 2022. With that, I'll turn it back to George for closing remarks.

Thanks, Phil and Joe. With continued strong operational results, a solid financial position, and numerous upcoming catalysts, Eldorado remains well-positioned to provide additional growth and value creation. Thank you for your time. We'll now turn it over to the Operator for questions.

Thank you. [Operators Instructions] We will pause for a moment as callers join the queue. The first question comes from Cosmos Chiu with CIBC. Please, go ahead.

Hi, thanks, George, Phil, Joe, and team. Thanks for the call and good to see that you've increased your production guidance for the year. Maybe my first question is on cost pressures in the industry and inflation. George, as you mentioned, you haven't seen -- you haven't really been impacted yet. However, clearly, when I go to grocery store, when I go in the costs are higher. So, in that case, George, as you said, you're working through your budget for 2022 right now. And as Joe mentioned, the feasibility study for Skouries is being finalized. Anything you can share with us in terms of how you're looking at it? How are you factoring in, maybe not so much what has happened so far, but as you foresee, next year, are you forecasting any kind of cost pressure into your forecasts, into your budget, into your Skouries technical report, anything that you can share with us?

Cosmos, thanks for the question. Yes, in a detailed level, for sure. There are some cost pressures that we're recognizing. Cost of steel is up. And when you look at our business, we got grinding media, we have wear materials on all of our equipment that we have to replace periodically. And so, if you looked at that particular item, there's definitely some cost pressure, and we'll anticipate that as we look at budgets in our longer-term plans. And when you talk about Skouries, one of the nice things about the project is the main part -- body of the plants constructed. So, we have lots of wiring and a building to put up. Much of the remaining construction materials from a steel perspective are on the ground. The exception would be the filter for dry stack tailings. We need to purchase the filters, we need to purchase the building materials, and there's definitely going to be some cost pressure just due to the cost of steel. So that's a specific example. The energy costs are up globally around the planet, and we're seeing some pressure on our fuel cost. But in the end, when we look at our overall cost structure, so if you looked at mining and processing, quarter-over-quarter this year, our spend is not up which tells us refining other areas of improvement that are counteracting so far, the impact from inflationary things, like steel and fuel. So bottom-line for us, that's a fact. And if you look at Q3, I think we've seen some comments about yeah, productions up, but we haven't changed our guidance or outlook on the year on our unit costs. A couple of things I mentioned there, 1, when you look at Lamaque, Lamaque's going to have a stronger fourth quarter. And it has to do with grade. We're moving more tons through the plant as expected and out of the underground. But from a great perspective, we're going to have a stronger fourth quarter. And so year-to-date, they're not -- their year-to-date performance is below what we expect their annual performance to end up on a unit cost basis. And then when you talk about Kisladag, the reason why we've been able to increase our guidance on Kisladag largely has to do with moving more tons. With the existing plant, we've been debottlenecking that plant in delivering increased ore through the plant and that set us up for a better year. And so, you see that in our guidance, but fact of the matter is, we still have to mine the ore, crush the ore, and so on that particular site, it's not free ounces. We had a new work to get them. It's going to create similar margins at a higher volume and deliver additional cash to the corporation. So, a way I would answer it, yes, we're seeing some cost pressure, but we can't really talk to the fact it's impacted our year-to-date performance. And as we worked through our budgets in the fourth quarter and land on final decisions on budget, we will bake in any of these cost pressures, but we remain pretty confident. We put out five-year guidance at the beginning of the year. We're still feeling good about next year's guidance. And we got a solid year and we're going to work really hard to be able to sustain higher throughput through Kisladag and I think that could have a meaningful impact on our five-year guidance over time. So, I'm -- all I can tell you is we're doing everything we can to mitigate the inflationary reality that's hitting the planet, and so far, so good for us.

Great. Thanks, George. I'll maybe dive deeper into the operations at Kisladag. The HPGRs are -- HPRG is almost completed, commissioning in November 2021. But as you mentioned in the MD&A, the impact on production sounds like there's going to be some down days in Q1 2022. Can you Walk me through that? Is it the impact -- are we talking about days or weeks, and why is the impact in Q1? And then, as Joe mentioned, 4% increase in recovery, is that 4% increase going to come over time? How long is that going to take in terms of improving on that recovery?

Maybe I'll speak high level to the impact of HPGR, and Joe can talk a little bit about the commissioning detail that might bring some clarity here. Where I'd start is that, when you look at the new Kisladag, our lead cycle from historic, the first decade and a half of operations, we had roughly a 90-day lead cycle and we got roughly 60% recovery. Looking forward with the new Kisladag, we're getting, with the HPGR, around 56% recovery, but we get that goal over a one-year period. So, it's a much slower lead cycle in the bottom part of this deposit. And that's what all the drilling and network we did over the last couple of years led us to these conclusions in a robust mine plan. So, this year, our productions is doing better than planned largely driven by tonnage, but the recoveries are as expected. So, this is good news for us. So, in terms of the detail, when you think about alright, we were at the beginning of the year expecting to be in commissioning in the third quarter, and that's slipped a little bit to the fourth-quarter. First thing I'd say is that's not too bad when you look at the impact COVID 's had on the planet. We've delivered a number of projects across our portfolio and dominantly Kisladag on budget and on schedule. And so, the HPGR is on budget. There was a slight slip in schedule due to delivery, but to me that's not bad news and the impact on production over 2021 and 2022, there is no impact. We've put that into our plan. So, there's a slight shift quarter-over-quarter, but it's a 1-year lease cycle. So yes, the impact will begin late Q4 and into next year, in terms of the downtime required to connect the HPGR and commission it. But overall, there's no negative impact here. We had a great year at Kisladag so far. We're going to finish strong. we're beating our guidance and we're set up to deliver what we promise for 2022. So high level, this is all positive. And maybe Joe can give a little color around the commission in detail.

Thanks, George. Any impacts due to commissioning were when we took the circuit offline to tie in or switchover to the HPGR, which started in early October and ended in later October. And that's when we weren't placing tons. And it's the timing of when those tons we didn't place shows up is where we'll see impact in production. As George said, that's just a matter of the schedule moving, not a change. So, it goes a little later. As far as overall recoveries, we are in wet commissioning on the HPGR now, and we're running a series of metallurgical tests as we go. We set up a portion on the south heap leach pad, on clean plastic to test various size fractions, various potential agglomeration tests. Other things to kind of dial in over the next couple of months as we bring the HPGR online, we want to do a lot of call it metallurgical framing so that we see which recipes work the best. And then we transfer all of that knowledge when we go on to the north heap leach pad mid-year next year. So, this time period of placement now gives us the information of how we want to start that new pad. And I don't think George [Indiscernible]. We're also separating the solutions from new pads. So, any of the solution issues we talked about in the past of solution contamination or complex solutions. We start clean on the north leach pad with the best metallurgical data that we can gather over the next 6 months in early placement, And we will be doing all of that in column proxies as well as pad as we go. So, we're pretty optimistic Cosmos that we'll dial that recovery in over the first six months. And as George said, we dial up the production from mine through the whole circuit, highly likely that we'll see more tons placed in 2022 than 2021.

Great, thanks Joe. It's good that you brought up the North leach pad. It sounds like it is on track, which is good as well. I would imagine, as we talked about recovery at Kisladag, part of the impact on recovery is the current leach pads are getting pretty high. Could you remind us how high are the current leach pads right now? And to be honest, it's been a while since I've been to Kisladag. It's been a while since I've been to anywhere, to be honest. Can you remind us at some point in time you're going to start stocking at the North leach pad mid-2022. Is there at some point where all the stocking will be at the North leach pad or how's that going to look?

[Indiscernible] the more leach pad better look next year but there may be instances where we still use the south. As you recall, Cosmos, we put in inner lift miners on the south leach pad, so we are -- I don't have the numbers right in front of me, basically, second lift off of the inner lift liner that was replaced or there was placed because we were so high. So, we have the opportunity after we stopped placing there to go not only clean up the inventory of maybe interconnecting, but also below. So, we can pierce that liner, we can do lots of things to take any residual inventory from the south leach pad over time. Did I answer your question, because I don't know, but I think it lifts above the inner lift at present across the whole pad.

Okay. Sounds good. And then maybe one last question for Phil. With the refinancing of the debt, it sounds like you're going to have different alternatives that will be open to you as a result of some of the Greek assets now not connected to the new debt. Phil, I guess two questions. Number one, could you maybe give us, I don't know if you can, give us an example of like an alternative that wouldn't have been possible in the past. And number two, as we heard, the Skouries feasibility study, or the new technical reports coming out in Q4, in terms of timing for finding a partner or some -- looking at financing options, are we still looking at Q1 - ish 2022 for -- to get a bit more clarity to get a final agreement or is that not the case?

Hi Cosmos. Good question. I think the key here with the refinancing, timing-wise, it was part of the strategy really geared towards de -risking our strategy towards the Greek assets. And I think overall there is -- we continue to look at all different alternatives that are available to us. We've talked in the past for financing as carriers, we've talked in the past about potential JV partners. It's more of a strategic view on that, having a partner alongside Eldorado that would be potentially beneficial moving forward. It is a multi-decade project. And we've talked in the past, potentially, for example, that an example of that would be the EBRD which we've talked with for quite a while. There are other alternatives as well. I mean, where, I think other alternatives that have come to light. There's Greece has been approved for European Union COVID relief funding, for example. Some of the financial institutions in Europe and Greece are also interested as well, so we're looking at all different avenues. We will want to make sure that we've considered all of them, and then we'll make the -- we'll make a choice as to which fits the strategy for the extender assets going forward, and which is the best solution for Eldorado and the shareholders.

I might supplement that Cosmos from my perspective, you've got -- on the one hand as Phil said, we've solidified our Balance Sheet. We've set up our debt. and our revolver in relationship with our new bank syndicate in a way that we have lots more flexibility. And really the last deliverable that we're completely in control of is getting that feasibility study out. That's on track to come out and be completed in November. And that really sets the stage for us to pursue all these various alternatives and land on something. So, we're still aggressively targeting a solution in Q1, but it's a negotiation and we're trying to make the best decision for the corporation in terms of that financing, and so full-speed ahead, we're on track with our objectives.

And Cosmos, it's Jason. The other thing --

Hi, Jason.

Just to mention here and I -- you're asking a question about what do the amendments or the refinancing allow us to do effectively that we couldn't do before. The amendments to the covenants and to the credit agreement effectively allows us to carve out crease, and sell equity to potential partners, and to consider credit-related alternatives to potential lenders. So, project financing would be one, and again, the ability to sell equity to the potential partners without having to seek consent from either bondholders or the senior lenders to the Company. And that was all effectively done with refinancing.

Great. Those are all the questions I have. Thanks, George and team. Have a good weekend, happy Halloween. Not sure if you're going to go trick or treating, George, but I'm sure you'll be dressed as usual as a Gold CEO. So better looking than me. I'll be dressed as a Gold Analyst. Once again, thanks a lot.

Thanks, Cosmos.

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

Thanks Operator. Perhaps you could put a little bit more color around Stratoni, just in terms of the holding costs now. I mean, you got I guess, 3,400 employees there and you're going to try and retrain some and rehire them into some of your other operations but I presume at some point there will be redundancies there. So, I'm just trying to understand what the holding cost might be for that asset on an all-in basis per quarter or 3 year on a go-forward basis while you're pursuing this exploration strategy.

I can take it.

Out to start off of that?

Sure.

Go ahead.

Well certainly, Kerry, where we look to care and maintenance, those numbers are in the $3.5 million to $4.5 million annual range, we're still preliminary on finalizing. And then -- so that's after we've reached full care and maintenance, and we'll look to optimize those certainly beyond that. Then the transitional cost of -- from A to B or from full operation to transition or to care and maintenance. Still working on it, but we're generally in the $10 million range, with some production offsets that we'll see between now and then. Those numbers are still very preliminary, but that's the order of magnitude that we're moving through, is $3.5 to $4.5 million care and maintenance with the transition costs.

Okay. And then that $10 million cost, Joe, would include all costs, like retraining and severance redundancy, whatever the numbers are that sets [Indiscernible] costs.

We're in that range.

Right. Okay. Perfect. And then, while I got you Joe, maybe just one second question on the HPGR. I mean, I know you're just starting to run it, but can you make any commentary at all about the size fractions that is delivering? Is it delivering the products that you expected from that piece of equipment or is it still need some tinkering and tuning to get to where you'd like to be?

We actually got what commissioning started on Monday and things went pretty well, the customary software glitches and things to get going, and we've got a couple of runs going as of Tuesday, Wednesday. Early on size fraction looks good and then we had some unfortunate news last night. One of our key commissioning people from [Indiscernible] had a family member killed in a car accident and had to pull out. So, we're regrouping and waiting until [Indiscernible] to get another commissioning person on site. But early indications are size fraction pretty good. We haven't even really gotten to the point where we are seeing how to manage recirculating load, that kind of thing. But happy with the initial pass fracture, at least at this point. It's probably too early to give you any kind of indication of how long will take us to dial that in at reasonable throughput rates, but I would expect another week or so we'll have pretty reasonable numbers on initial run report.

Are you thinking the wet commissioning will just only take another week or two then, it's not going to be that long?

But basically, through the end of November we'll ramp up, and then we'll continue ramping up from that point, but it is pretty early on to start getting any analytical data as yet, but I think by the end of the month we'll have that and we'll be at some level for turnover to operations around that time, Kerry. But I think what we wanted, we're certain in this white commissioning period that we get reasonable operating parameters set and those early metallurgical guideposts established, so we don't run too fast to handover. We handover with metallurgical guidance and operating parameters.

Right. Okay. That's helpful. Thank you very much, Joe and George and Jason, I appreciate it.

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

Great. Good morning, everyone. Thank you for taking my questions. Two questions. The first one, I just want to come back to something that you had in the MD&A. The changes to the concentrate sales terms that you did in October, can you talk about what those changes are, and what impacts on the Efemcukuru and Olympias costs are you projecting percentage-wise?

Hi Tanya, it's Phil. I think what's being alluded there is really the way some of the concentrate sales are being structured. In the past the payability on the concentrate was separate from refining and transport costs. And now those costs are blended in as part of the effective rate. So, you basically seeing the revenue side slightly lower because it's incorporating costs and you see the costs, in past, the costs have been reported separately and now they're blended. So, I think that's the change that's being referred to.

Nothing structurally, it's just how you're allocating them.

Exactly. It's part of the negotiation of the new contracts, There is no real impact on the bottom line. Its just revenues will be slightly lower because it's incorporating costs and the costs will be lower because they're no longer reflected as part of the effect to cost.

Okay. Thank you. And then I just wanted to check with you on your reserves and resources. I know the program after September is sort of what you're doing in terms of calculating your reserve and resources and you will be releasing those. I think it's usually early December. Can you talk about number 1, the pricing, we are seeing inflationary pressures. 1, are you changing any price forecasting for your pets and/ or other for reserve and resource assumptions. 2, what are you looking at? Like what mines can we expect additions and where are we struggling? Thank you.

You want to take that, Joe?

I can take it, George. Thank you, Tanya. Where we're sitting right now is we are looking through final numbers for MR and more related and you're right, we'll have the numbers calculated or ready for presentation in early November, early December. The ups and downs are relatively modest. We are expecting some improvements in [Indiscernible] (ph) and [Indiscernible] (ph), but our drilling cutoffs go back all the way to end of March for this release. So, the ups and downs are relatively modest across-the-board. So, we'll give you more information at the time of the release, but nothing major in either -- in either direction. But good news, generally.

Okay. So, it sounds that -- the reserve and resource base is, generally, not going to change too much. Just want to --

Yeah.

Correct. Yeah. And can I just confirm that are no -- you're not really changing how -- your parameters in terms of how you're calculating your reserves and resources? No change to cutoff, upgrade that or other?

Not significantly, no, no major cost changes due to price changes and no major changes on commodity prices from our long-term views.

That's also great. Thank you so much.

Thanks, Tanya.

That is all the time we have for stay. 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.