Eldorado Gold Corporation (EGO) Q1 2022 Earnings Report, Transcript and Summary

Thank you for standing by. This is the conference operator. Welcome to the Eldorado Gold First Quarter 2022 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’d like to welcome you to our Q1 2022 results 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 Form. Joining me today on the call, we have George Burns, President and Chief Executive Officer; Phil Yee, Executive Vice President and Chief Financial Officer; and Joe Dick, Executive Vice President and Chief Operating Officer. Other members of the senior leadership team will also be available for the Q&A session. Our release yesterday details our 2022 first quarter financial and operating results. This should be read in conjunction with our first quarter financial statements and Management’s Discussion and Analysis, both of which are available on our website. They’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 morning, everyone. Here’s the outline for today’s call. I’ll provide a brief overview of Q1 results and highlights before passing it to Phil to go through the financials, and Joe to review our operational performance. Then, we’ll open the call to questions from our analysts. Over the past two years, COVID-19 has been one of the most severe tests of our safety systems, and emergency response capabilities in memory. As we entered 2022, the Omicron variant of COVID-19 was rapidly spreading across the globe, causing concerns in business and operating environments. We have continued to prioritize monitoring and adapting our controls to prevent the spread of the virus and keep our people, their families and local communities safe. As we enter the third year of the pandemic, I am continually inspired by the resilience of our global teams, who remain energized and focused on delivering safe operating results. We faced several challenges at the start of the year that impacted our operating and financial results. In the first quarter, we produced over 93,200 ounces of gold. During January and February, all operations were impacted by higher than anticipated absenteeism, related to the surge of COVID-19 cases. We were also impacted by a government mandated power outage in Turkey, and severe weather in both, Turkey and Greece. Despite these challenges, we’re seeing a recovery at our operations. As we mentioned on our last conference call in February, we expect first half production to be lower than second half production, and we maintain our 2022 production guidance range of 460,000 to 490,000 ounces. Joe will speak to the operations in more detail later in the call. As we noted in previous quarters, we continue to face inflationary pressures similar to the wider market, which has been intensified by the Russian-Ukraine crisis. Principle cost increases are in electricity, fuel and reagents. We continue to monitor our supply chains to ensure our sites have the necessary equipment and supplies to safely operate. We have not experienced any significant disruptions related to availability of supplies. We also continue to monitor our concentrate shipments including redirecting shipments as required. We have not experienced any disruptions with respect to refining of doré or fulfillment of concentrate shipments. In the first quarter, we continued to see inflation in Turkey, however, cost increases dominated in local currency, primarily labor, were mostly offset by the continued weakening of the Turkish lira. In the Abitibi region at Quebec, increased activity in the mining sector has impacted the availability of contractors and labor. This year, we have completed two-year collective bargaining agreements with our labor unions in both, Turkey and Greece. In Greece, we strengthen our relationship with our labor partners by incorporating technology and flexibility into our labor agreements, which helps us to move forward with our productivity and efficiency agenda. These labor agreements are instrumental in allowing us to focus on delivering safe operating results. During the quarter, we progressed at Skouries with activity focused on finishing steel erection and closing of the mill building, commencement of basic engineering, continued preservation of site facilities and equipment. Our Skouries financing discussions continue to advance. We are evaluating all available options including joint venture equity partners, project and debt financing through EU and Greek lenders, as well as the EU recovery and resilience fund and metal streams. Our focus in selecting a financing package will continue to be driven by value optimization, and derisking for the future. Following financing and Board approval, we expect to restart full construction at Skouries in the second half of 2022. Finally, I would like to highlight a sustainability reporting milestone for the quarter. In March, we published our second Responsible Gold Mining Principles report, providing independent assurance that the year two requirements have been achieved with an impressive level of conformance against the principles demonstrated ahead of the 2023 deadline. We continue to work towards full conformance with the RGMPs across four operating mines to produce our year three report, which will summarize this achievement forthcoming in 2023. I’ll stop there and turn things over to Phil for a review of our financial results.

Thank you, George. Good morning, everyone. Slide 5 provides a summary of our Q1 2022 financial results. As result of the operational challenges and lower production this quarter, our Q1 cash operating cost was $835 per ounce sold, and all-in sustaining costs were $1,347 per ounce sold. Free cash flow in the first quarter was a negative $26.8 million. In Q2, we expect cash flow to be impacted by the timing of annual royalty payments in Turkey and Greece. And the timing of capital spend. Eldorado reported a Q1 2022 net loss attributable to shareholders of $317 million or lost $1.74 per share. After adjusting for onetime nonrecurring items, including the $365 million noncash impairment of Certej, our noncore asset in Romania and a $20 million noncash write down of decommissioned equipment at Kisladag, among other things, the Q1 adjusted net loss was $19 million or loss of $0.10 per share. Q1 cash operating costs and all-in sustaining costs were higher in the quarter due to operational challenges that resulted in lower gold ounces produced and sold. We are seeing higher prices in the quarter for diesel, electricity and reagents. Yet, total direct operating costs, primarily in mining, processing and related costs, on a U.S. dollar basis, were slightly lower in Q1 2022 compared to the previous quarter, due in part to the weakening Turkish lira, despite higher tons placed on pad at Kisladag in Q1 2022 compared to Q4 2021. In light of these significant increases in prices for electricity, fuel, reagents and other consumables required for operations, we are closely monitoring the impact on expected full year direct operating costs and will provide an update next quarter. Capital expenditures were $61 million in Q1, of which $25 million was related to sustaining capital, including underground development, processing upgrades and equipment replacements and rebuilds and $32 million was related to growth capital including waste stripping and construction of the North leach pad at Kisladag. We are actively reviewing our growth and sustaining capital expenditures given inflationary pressures and volatility. We are practicing sound capital discipline by focusing on non-discretionary capital required to maintain production, asset integrity and our license to operate. Income tax expense was $5.1 million in Q1, comprised of $16 million current tax expense, partially offset by $10 million deferred tax recovery. The current tax expense related to $4 million in dividend withholding tax, $5 million in investment tax credits received related to the Kisladag heap leach improvements, Quebec mining duties and corporate tax and operations in Turkey. In Q1, Turkey announced a reduction in the 2022 corporate tax rate from 23% to 22%, and reduction in the 2023 corporate tax rate from 20% to 19%. The deferred tax recovery of $10 million in Q1 was primarily related to the deferred tax impact of the impairment on the Certej project, partially offset by the impact of further weakening of local currencies. At quarter-end, we had unrestricted cash, cash equivalents and term deposits of $435 million. Our net leverage ratio is at 0.31 times as of March 31st, compared to 0.89 times at the end of Q1 2020. This reflects a much improved credit profile for the Company over the last two years. With that, I will now turn it over to Joe to go through the operational highlights.

Thanks, Phil and good morning, everyone. I’ll start with an important health and safety highlight from our operations. In the first quarter, we improved our total recordable injury frequency rate year-over-year from 8.1 to 4.7. Our focus on leading indicators such as leadership, engagements and risk assessment, is building a sustainable safety culture. Also, I would like to congratulate the Lamaque team for achieving 3.5 years without a lost-time injury. Moving to our operating results, we produced 93,209 ounces of gold in the first quarter, with cash operating costs of $835 per ounce sold. Slide 8 looks at our operations in more detail. Starting in Turkey, Kisladag’s production in the first quarter was 29,779 ounces, and cash operating costs were $861 per ounce sold. Gold production during the quarter was lower than planned, as a result of COVID-related absenteeism, severe weather and a government mandated power outage. Lower production was also related to the reduction of tons placed on the heap leach pad, in Q4, during the commissioning of the high-pressure grinding rolls circuit. The severe weather and freezing temperatures in Q1 led to lower ton stacked on leach pad, which is expected to negatively impact gold production in Q2. We anticipate production at Kisladag to be weighted to the second half of the year and maintain full year production guidance. We continue to balance agglomeration and throughput with leach kinetics to obtain optimal performance. So far, the performance of the HPGR circuit is meeting our expectations, and we are seeing recovery rates as expected. At Efemcukuru, first quarter gold production was 21,057 ounces at cash operating costs of $648 per ounce sold. Gold production, throughput and average gold grade at Efemcukuru were in line with expectations. The operations were minimally impacted by COVID absenteeism during the quarter, and Efemcukuru continues to be high-performing asset with solid results. Current exploration at Efemcukuru is focused on the Kokarpinar and Bati vein systems. Resource expansion drilling at Kokarpinar South has indicated a high grade footwall splay to the principal vein and has potential for further resource expansion through step-out drilling. Moving to our Canadian operations, first quarter gold production and Lamaque was 33,377 ounces and cash operating costs were $763 per ounce sold. At Lamaque, reduced workforce due to COVID early in the quarter delayed the underground development of high-grade stopes, which led to lower than planned gold grades. Mine development progressed and planned gold grade and tonnage were achieved in March. Full year gold production at Lamaque is expected to be in line with guidance. In late March, we released exploration results which included new step-out drilling at the Ormaque deposit that identified extensions to the known mineralized zones, both laterally and at depth. The Ormaque deposit has now been extended to a depth of about 800 meters from surface and remains open in multiple directions. With the Triangle-Sigma decline completed, we are focused on an exploration drift and resource conversion drilling at Ormaque which is expected to commence this quarter. Finally, let’s move to Greece. At Olympias, first quarter gold production was 8,996 ounces and cash operating costs were $1,449 per ounce sold. In the early part of the quarter, gold production at Olympias was impacted by COVID absenteeism, power outages related to severe weather in the region, but operations resumed mining to plan and achieved planned tonnage and grade from the mine in March. Plant throughput in the second quarter is expected to be impacted by planned processing tie-ins to improve water treatment plant efficiency and capacity. Recent approval of an extended surface or stockpile will allow mine improvements to continue as the water treatment plant upgrades are implemented. As a result, we expect production at Olympias to be weighted to the second half of 2022. Underground resource expansion drilling at Olympias identified a new mineralized lens, representing the western extension of the Flat zone, which remains open to both the south and the west. Further step-out drilling is planned for the second half of 2022. I’ll stop there and turn it back to George for closing remarks.

Thanks, team. Despite the challenges we faced in the first quarter, we are already seeing improvements at our operations in the second quarter. We remain focused on delivering safe operating results and executing our strategy to maximize value for our shareholders. Thank you for your time. I will now turn it over to the operator for questions from our analysts.

[Operator Instructions] The first question comes from Cosmos Chiu with CIBC. Please go ahead.

Hi. Thanks, George, Bill, Joe, for the presentation. It was certainly a tough Q1. Maybe my first question is on your cost guidance. I appreciate that, as you mentioned, volatility and prices, you’re closely monitoring it, we’ll get an update in Q2. But I guess the guidance of $1,075 to $1,175 an ounce all-in sustaining costs. Is that -- should we no longer rely on it? Is that now kind of like, let’s call it like, previous guidance? Is that how they should look at it?

When you look at Q1, dominantly production impacted us. And so, you saw an uptick in our costs. Phil will give you some more color around the cost in Q1 relative to our expectations. The way we’re looking at it right now, is we don’t have any indication from our Q1 results that the inflationary pressures are going to have an impact on the year. Now, there’s no doubt we’re paying more for electricity in Europe, there’s no doubt our diesel costs are up. So, although we’re a dominantly an underground miner, so it’s really Kisladag that has the volume on diesel consumption. And we are seeing some higher reagent costs. But overall, when you look at our spend in Q1 relative to Q4 or last year’s run rate for mining, processing, G&A, we’re not seeing an impact on our costs to-date. So, Q1 was all about the issues related to lower production, and no indication yet that our overall costs are being impacted. And that’s why our release talks about we’ll continue to monitor this. And we’ll give you a further update in Q2 as to how well are we combating the higher costs from power, diesel and reagents with other measures we’re taking. So, so far, we didn’t update our guidance, because we don’t have the indicators on the bottom line yet to say it’s here. But we can’t hide from the fact that there are cost pressures coming in some parts of the business and some of the commodities. Maybe Phil, you can add some further color there.

So, I think, George has summed it up pretty well. From a cost perspective, there’s a number of, there’s no doubt that, for example, we did have increases in electricity, specifically in Greece, and we had increase in diesel prices in Turkey. But there’s other factors that are also moving as well, for example, in Turkey, the lira continues to weaken, and that has offset. And if you look at the total direct operating cost in Q1, specifically our mining costs or processing, and other related costs. Even though Kisladag for example, in Q1, our tons placed on pad was higher than Q4. Our costs in Q1 2022, compared to those mining, processing and related costs in Q4 were actually lower. So, we recognize that there are price increases. We’re trying to get a -- just get more information in terms of the trend. And we’re monitoring it, as we say. And we continue to look for opportunities as well to be more efficient and offset those costs increases as well.

Of course. And then, to wrap up this part of the question here, Phil or George. Could you remind us what kind of year-over-year cost inflation assumption did you factor into your 2022 cost guidance? Is that -- and is that consistent with what you’re seeing so far?

Maybe I can answer that Cosmos. So, for example, our biggest impact of inflation that we expected in our plan for 2022 was in Turkey. The published inflation rates at the end of 2021 going into 2022 was -- I think it’s between 50% and 60%. And we’ve factored that all in. But, at the same time, the impact of those -- of inflation has been offset primarily by the impact of the weakening lira. So, we haven’t seen -- when you convert it to U.S. dollar operating costs in Turkey for both our operations combined, throughout 2021, Q1 all the way through to Q4, our U.S. dollar operating costs are pretty flat and that continues to be the case for Q1 2022.

Got it. Thanks, Phil. Maybe switching gears a little bit. Looking at Kisladag, I noticed that you did about a little bit less than 30,000 ounces in the quarter. You’ve reiterated 145,000 to 165,000 ounces for the year. Just want to get a better understanding of how you’re going to improve on your operations for the rest of the year? Maybe on two points, I guess, grade decreased to 0.61 gram per ton in Q1. Are you seeing that improve now? And then, the other point is, as you mentioned, cold temperatures in Turkey impacted some of the conveyor systems. And so, -- but now the HPGR sounds like it’s coming up, ramping up as expected. So, could you maybe comment on recovery? So, first on grade and how that’s going to improve? And also comment on recovery. What are you targeting for the rest of the year?

Cosmos, this is Joe. Maybe I’ll start with kind of the production numbers or kind of the trend that we’re seeing. So, you’re right. As in Q1, as we were using Delta agglomeration and the cold temperatures that kept us from going to stacking the planned number of tons. But we did see good agglomeration which has resulted in a couple of things. One, we’re seeing higher leach -- or solution application rates than pre-HPGR with the agglomeration that we have done. And that kind of speaks well to potential improvement in leach kinetics, which we have indications that that’s headed in the right direction. As well, we have looked at the mine plan and grade. And as we have stacked in the beginning of Q2 through the month of April, we’re about 10% ahead in ounces to pad so far this quarter. And we see that trend continuing. And we are meeting budget tons placed on pad at slightly better than budget grades at present. So, Kisladag, all those things look pretty good, and we’re optimistic. As we look at recovery, total, we’re targeting 56% and we don’t see any indication of anything less than that. And in fact, we’re optimistic.

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

Great. Good morning, everyone. Thank you for taking my questions. I do have a few. And I just wanted to start with just on the quarterly performance. Just trying to get a handle, you’ve got stronger performance coming out of both, Olympias and Kisladag for the second half. So, how should we think about Q2? Is it going to be similar to Q1? And then, we have this huge bump up in the second half, or do we have improvement quarter-over-quarter? I’m just trying to understand whether that is 60-40, 55-45, how should we think about that?

Tanya, this is Joe. We see a bit stronger performance in Q2, but still a bit challenged as the lower tons placed in Q1 at Kisladag, even though we are seeing favorable indicators on recovery and leach kinetics. It’ll come up in Q2, but it’d still be weighted to the second half. And at Olympias, we took the opportunity in Q1 to set ourselves up for the second half, the mentions in the -- or we spoke earlier about water treatment plant and efficiency and quantity. So, given the fact that we knew we were lower tons in Q1, we decided to make some adjustments to allow us to increase capacity of the water treatment facilities and do some different tie-ins with how we’re using our thickeners. So, we set the mill up to be able to run a bit higher than plan in the second half. And as mining has progressed reasonably well over the past four quarters and continues into Q1, we also have a stockpile arrangement now where we can continue in Q2 to make a few more adjustments in water treatment and have the capacity to run those tons off the stockpile before the end of the year. So, we’re reasonably comfortable in both of those that they will be more second half weighted. At Lamaque, we got a little bit of a slow start on development. And as we were transitioning from longitudinal, long haul methods in C4 to transfers requires a little bit more development. And a slow start to development in the year cost us a bit of grade. However, we are running ahead of the budget development rates now and see Lamaque coming back reasonably well in Q2 and continuing for the balance of the year.

Maybe I jump in with a little more clarity on Kisladag. So, because it’s a heap leach pad, you kind of have to look at two sets of numbers. And so, as Joe described in his earlier comments, we had a tough Q1 due to weather. And we were ramping up the agglomeration of the ore on the conveyor belt. And we’re seeing, we expect to see a strong Q2 on recoverable ounces placed on the pad and even a stronger second half. So we’re ramping up recoverable ounces placed on the pad and we’re comfortable with our guidance. Then when you look at ounces produced, because there’s a delay between placing the ounces and pouring the gold, Q2 will ramp up over Q1. But it’s going to be a significantly stronger second half just due to the delay between placing the ounces and then the ounces coming out on the pond. So, the trend will be up both, on placements and production, but weighted to the second half on ounces poured.

Yes. I’m just trying to understand, like, so Q2 overall for the company will be better than Q1 and then it’s Q3 better than Q2 and then Q4 the best, or are Q3 and Q4 the same?

Q3 and Q4 will be similar with Q4 maybe slightly better.

And that’s mainly driven by Kisladag?

Correct.

Okay. That’s helpful. Thank you. And then just, if I could ask, Phil, we were kind of really low on our care and maintenance cost to specifically Stratoni in Q1, and that was our biggest miss. Can you give us some guidance on what these care and maintenance costs are going to be? It was like $9 million or something in the quarter?

Yes. It’s George. So, our overall care and maintenance costs on an annualized run rate are around $2.5 million, $3 million, I believe. In terms of the quarter, we had a heavy impact as we’re transitioning from the shutdown of the underground and then the transition of the plant. So, it’s, I’d say, an extraordinary impact on the quarter.

Coupled with that we had some early retirements that we had to cost in Q1, as well any other kind of departures that we saw, those were accumulated in Q1 costs. And we may see a bit more of that, in Q2, before we normalize to the numbers that George mentioned.

Hey Tanya, it’s Phil.

Yes [Technical Difficulty] use them for -- look Stratoni separately from Skouries because we’re assuming Skouries start construction in the second half, so it won’t have care and maintenance costs.

That’s correct. But just to summarize, I think, the future quarters will be lower than -- we expect to be lower than what we had in Q1.

So, if we use a $10 million a year for Stratoni, is that reasonable?

I think that’s a reasonable number.

Yes.

Like we had some -- for example, like Joe mentioned, we had some labor costs at Stratoni that may still have some of that come through in Q2, but I think most of that has come through in Q1. So, we expect that future quarters will be less than what we experienced in Q1.

Okay. And then maybe just on the CapEx and OpEx review that you’re looking at, and then I’ll get to my final question, which is inflation. When you’re looking at all of your operations, are we also to assume that you’re going to review Skouries again?

Could you repeat that?

Will you also be reviewing the CapEx and OpEx for Skouries again? You just did the feasibility study in December, but is that under review also in your review process?

So, on the initial capital costs, maybe just to reiterate where we’re at on the project, you got the main body of the plants in place. We believe the overall capital costs is largely reduced relative to other projects that are starting from scratch. So, all of grinding, crushing, flotation, concentrate handling, all that measure here’s actually set in place. In fact, we’re putting the building up around it. The exception in the processing area is just the filters. And we went out for competitive bids in the first quarter for the filters. And those bids have come in slightly below what we budgeted, in spite of the higher inflationary pressures on steel. So, that I think was a pretty good indicator, and that’s essentially the biggest piece of equipment yet to be procured. And when you look at what’s left to be done, there’s a lot of civil work. There’s a lot of plumbing and piping and wiring to be done in the plant. But at this stage, we’re pretty comfortable with those capital costs. We have civil works to do and construction of the dam. Obviously, diesel prices are up. And during the construction phase, we’re not consuming a lot of electricity. So, we don’t see those issues having a major impact, or a material impact on that capital cost estimate. Obviously, we’ll continue to monitor that. But, Tanya, I think we’re in a pretty good position still on our capital estimate of December.

Okay. And just on the inflationary pressures, I guess, would you say it’s -- you’re seeing it at all of your operation? Or is it more localized to Turkey and Greece because of it’s closer to the Ukraine-Russia situation where other companies are feeling more exposures on consumables and other?

Well, I’d say that unique thing in our situation is that our two operations in Europe are seeing higher electric energy costs, and it’s being driven by the natural gas crisis. And so, costs are up materially in both countries now. And in Turkey, we’re having some benefit from the currency, as Phil denoted. But we don’t have that sort of counterbalance effect in Greece. So, I think our electric power costs are up -- they’re double what we budgeted in Greece. And we’re not seeing that kind of impact in Turkey due to the FX counter impact.

And maybe -- sorry, go ahead.

Just a comment, Tanya. So, just to add on to what George has indicated. I think, I would say, the most significant impact of inflation is in Turkey. As I mentioned, the published rate was quite high, between 50% and 60%, at the end of 2021. But, we’re not seeing that come through to the bottom-line, because of the lira. But in Turkey, probably the most significant cost is the diesel impact, at Kisladag. But it’s not a huge amount. It’s like probably around less than 5% of our consolidated direct costs. It’s really, really just the use at Kisladag, because it is an open pit mine, all the other mines are underground. In Turkey, the biggest impact, as George has outlined, has been the electricity. And at the same time, electricity on a consolidated basis is about 10% of our total direct operating costs. So, again, it’s not a huge -- huge percentage.

Maybe Phil can remind us what oil price or diesel price that you use in your guidance for 2022, and what’s the sensitivity for a $10 a barrel or a $0.10 change in diesel price?

So, in terms of diesel, the current price is about $1.25 a liter in Turkey. And everywhere else in terms of diesel at Efemcukuru, Greece and in Quebec, it’s really not significant. So, again, diesel is about 3% of our total costs, and the impact on our costs, based on our 2022 guidance for sales is probably around $13 an ounce. It’s not huge.

I’ll take it offline. Thank you. I’ll let someone else ask.

Thank you, Tanya.

[Operator Instructions] The next question comes from Kerry Smith with Haywood Securities. Please go ahead.

Phil, maybe you can answer this or maybe Joe. What is the grade profile like at Kisladag quarter-over-quarter this year? Is the grade expected to be pretty flat? And you’re getting more ounces on the pad because you’re getting more tons to the pad or is the grade profile actually going up as well?

The grade profile is relatively flat, Kerry, maybe slightly better later in the year. I don’t have it in front of me. But I think we’re right around 6.65 6.66 [ph] quarter-over-quarter. But it’s really about getting tons on the pad at mine grade. So, what we saw in Q1 a bit though is that when we had, we picked up some tons above cutoff that were in the lower end of grade that kind of pushed us down. So, as we look forward in managing grade, those marginal tons above cutoff, we will not bring the pad, which will help us with grade for the balance of the year. But, we are stockpiling that lower grade for later placement.

Okay. And when you start putting tons onto the North pad, when is that actually available to be receiving tonnage? Because that’ll obviously help the leach curve, too.

Well, I think there’s two answers to that question. One of them is that, we did place additional inner lift plastic on the South leach pad or the early placement of HPGR tons as we work through what we expected to be getting our agglomeration right. And we’re going to extend that a little bit. We will be available for placement, probably mid-Q3. But one of our concerns is just making certain that we’re really confident on agglomeration quality before we go to the north leach pad since that’s the foundation, but we will be on clean plastic nonetheless, even on South. And I would say that we’ll have that -- we’ll know that more clearly by midyear as to how we wish to deploy that going forward. But you’re right that North leach pad is really attractive.

And then, just going back to Tanya’s question on the Stratoni [ph] standby cost to $9.4 million in Q1. So, if it’s to $2.5 million to $3 million a quarter on a go forward basis, in Q2, we’ll still have some residual costs in there sort of one time things. What number are you expecting in Q2 then? Like, is it going to be $5 million maybe or $6 million? Can you give any guidance?

Yes. Kerry, it’s Phil here. So, I think, based on where -- what we had in Q1, I would say probably less than $5 million, but I think it’s probably in that ballpark per quarter.

And then, by Q3, you would be back to sort of this $2.5 million to $3 million run rate, then you’d have all the one time things out of the way, is that right?

By Q3, assuming we get some Skouries reconstruction started, then the care and maintenance costs related to Skouries would end.

Yes. Okay. But I’m talking, Stratoni though.

Kerry, this is Joe. By end of year, we should be normalized fully. But, the start of construction at Skouries offsets any residual labor that we’re -- that’s still on the books if we choose to maintain that be full and move it over to contract labor at the start of construction.

Okay. Just so I’m clear, that $2.5 million to $3 million run rate is with Skouries, not contributing any care and maintenance costs to that number, right? That’s just Stratoni?

Correct.

And then, Phil, just going back to your comment about you’re not really seeing any -- in U.S. dollar terms any real cost inflation in Turkey. But, are your unit cost per ton all in for mining, milling and G&A, let’s say on a per ton basis? They seem like they’re going up -- well, they went up a lot at Olympias, based on what I calculated and it seems like Kisladag has gone up a significant amount as well, it was like 14.5 a ton in Q1, and last year was slightly below $11. So, how should we think about your unit cost per ton at Olympias on a go forward?

So, Kerry, just to be clear, your question is specifically to Olympias, or Kisladag?

Yes. So, like if I look at your total cost for mining at Olympias from your Q1 in U.S. dollars, the ounces sold, it’s like $350 a ton. That number last year was like -- was well below that, it was $270 or something. So, I’m just wondering about the all-in cost per ton going forward at both Olympias and Kisladag.

Kisladag tons in Q1 2022, as I mentioned, were lower than Q4 -- sorry, higher than Q4. But they were lower than the first three quarters of 2021. So, tons were down compared to the first few quarters of 2021, and we expect those tons will increase.

Kerry, this is Joe. Are you thinking in total ton strip plus ore or are you thinking in just ore tons? So, we’re giving you the numbers...

I think -- all-in cost divided by tons processed, tons milled, tons leach.

We can get back on the consolidated number, but just for your information, total tons moved in Q1 was higher than Q4 or Q3.

At Kisladag?

At Kisladag.

At Kisladag. Yes, yes. Yes. So, in my numbers, in Q4 at Kisladag your cost per ton to the pad was about $19 a ton; in Q1, it was about $14.5. But last year average was less than $11. So, I’m just wondering about that number on a go forward basis. Is it going to get back to around $11 bucks a ton? And then, I have the same issue with Olympias with the cost per ton milled is quite a bit higher in Q1 than it was in -- well, it was higher in Q4 as well, but it was certainly higher than last year. And last year was kind of a year when every quarter you kind of incrementally were doing better on the cost side as you got more tons up but then obviously Q1 was pretty tough for you. So, that’s what I was trying to get a handle on.

Yes. Kerry, it’s Phil. So, tons in Q1 2022 were just over 2 million ton for Kisladag. In Q4 of last year, the tons were below 2 million tons. So, that’s why you had a higher cost per ton in Q4. But then, the previous three quarters were over 3 million tons. So, you had a much lower cost per ton. So, that’s why you see that fluctuation. And I think going forward in 2022, we expect to be over 3 million tons, probably approaching on a quarterly basis, above that placement rate in per quarter. So, you should see the cost per ton drop again.

Okay. So, 3 million ton a quarter and the cost should come down. And then, what about Olympias, just on the costs, and the total cash costs guidance? I was looking at the grade, in Q1, obviously, it was pretty low. Your guidance was 7.4 grams. It seems like, based on the orebody, it’d be pretty tough to average 7.4 grams this year. But what will the grade look like at Olympias this year? And is it going to probably be more in the 7-gram range which is kind of what I was thinking?

So, Q2 to-date, Kerry, we’re placing at 7.4 -- or we’re mining at 7.4. And for the full year, we’re working to maintain the grade as close to that as possible, but we will be -- in forecast, we’re 7.3, 7.4. So, we’re looking to maintain that exact grade rate as we have at the start of Q2.

Kerry, it’s George. One of the other issues in Q1, because we have significant byproduct credits at Olympias, you see lumpiness in our costs. And it’s dependent on the lead and zinc con. But those shipments occur when we’ve got a full shipment to ship. And sometimes those costs are also impacted just by timing. You get tough storms at the end of the quarter. We can’t get a ship out and it moves to the next quarter. So, when you look at Q1, we had a lot lower byproduct credits against our cost relative to Q4, just due to lumpiness and timing in byproduct sales. So, it’s only a part of the story. The COVID impacts were part of it. We also ended Q1 with ore stockpile on the ground, which is not typical at Olympias. So, it’s kind of positioned us a bit better to start Q2. So, a number of factors that don’t show up in the bottom line that I think help give you an indication of why we’re confident we’re going to improve performance out of Olympias as quarters unfold.

And George or Phil, are your TCRCs, have they gone up significantly in Q1 from what you were paying last year for the concentrate, because you don’t produce a lot of cons. So, you’re probably not getting grade terms. But have the TCRCs gone up significantly in Q1, or should we expect them to be much higher going forward? I know you’ve talked about it a little bit in the commentary.

Yes. So, Kerry, so last year, there was a new Chinese VAT that was introduced for concentrate from Olympias, that was being shipped to Chinese smelter. So, that was a 13% VAT. Now, we have planned offset a big chunk of that. And part of the plan was to ship that -- I think it was up to 50% of the production to Russian -- to a Russian smelter. And unfortunately, with the sanctions that have been imposed recently, because of the ongoing conflict, we’re redirecting some of that, and we’re -- we’ve managed to redirect a small portion of that at this point. But we will continue to look for opportunities to redirect it to different smelters and avoid the 13% VAT imposed by the Chinese smelters.

Just to be clear, we’re no longer shipping anything to Russia. And so, some of that now is going to China, but some of its going elsewhere and avoiding that VAT. So, right now, that’s a negative against what we budgeted. No shipments going to Russia. And so, part of that we’re paying that VAT in the China and part of it, we have found another customer that’s testing the concentrate. Hopefully, we’ll be able to ramp that up.

And Kerry, just -- the impact of not being able to ship to Russia is about $5 million.

Okay. That was in Q1...

No, total year.

That’s total year.

Okay. Total year. Okay, got you. Okay. Yes. So, you’re not really seeing any significant increases in the treatment charges. Generally, it’s just this tax that’s causing you a bit of problem then. Okay, I got it.

Yes.

[Operator Instructions] The next question comes from Fahad Tariq with Credit Suisse. Please go ahead.

Hi. Good morning. Thanks for taking my question. It’s a pretty quick. On Skouries, can you just remind us -- you mentioned the snowfall impact on some of the other operations. Was there any impact on Skouries? Thanks.

We did have snow at Skouries, but it didn’t impact us anyway. And as far as critical path for project, we were able to slow down the steel erection and building cladding during that time period. And we have since picked up without any type of penalties. So, really, no impact and no significant impact on the water systems or drainage or collection or that kind of thing.

That is 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.