Eldorado Gold Corp (EGO) 2016 Q1 法說會逐字稿

Good morning, my name is Blair and I'll be your conference operator today. At this time, I would like to welcome everyone to Eldorado Gold Corporation First Quarter Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be question-and-answer session. (Operator Instructions)

Thank you. Paul Wright, President and CEO of Eldorado Gold, you may begin.

Thank you, Operator. And good morning and thank you all for joining us and welcome to our first quarter 2016 financial and operating results call. I'm joining the teleconference from London, while we have Fabiana Chubbs, Chief Financial Officer, Paul Skayman, Chief Operating Officer, Krista Muhr, Vice President of Investor Relations, all in Vancouver.

As always, we have provided detailed financial and operational information in the press release from yesterday evening. Before I begin, I need to remind you that any projections and objectives included in our discussion today are likely to involve risks which are detailed in our 2015 AIF and in the forward-looking statement disclaimer at the end of the news release.

Today, I will be changing the format our call slightly. I will not be reviewing any operational and financial highlights. Rather I will leave these entirely to Paul and Fabi and the details in the press release. I do want however to preempt some of your questions on China and Greece, while adding some additional color on Eldorado's strategy and plans going forward.

Late in 2014, we announced that we were evaluating the merits of a potential listing of our Chinese assets on the Hong Kong Stock Exchange. As I stated during last quarter's call, we have had numerous approaches by companies looking to acquire these high-quality assets. We announced a few weeks ago that we reached an agreement with China National Gold Group to sell our 82% interest in the Jinfeng Mine for $300 million. This transaction is expected to close in three months to four months. As we have previously disclosed, the Company activity continues to advance the process of monetizing its remaining Chinese assets and we will update to all stakeholders as appropriate.

In Greece, we had an eventful start to the first quarter with the announced shutdown of Skouries project due to the permitting challenges we're facing at the time. Skouries was placed into care and maintenance during the quarter, Olympias completed the Phase I tailings retreatment and continued with the Phase II mine development.

The installation permit for Olympias Phase II was granted on March 22 and Phase II construction began early in the second quarter. Our team here is now focused on completing detailed designs for Phase II, demolition of existing footings and the initial concrete pores are underway. We remain on schedule for commissioning Phase II for early 2017. We received the outstanding building permit for Skouries on February 25, on the back of the Council of State's positive decision in our favor. I am pleased to say that on May 9, we also received the approval of the updated technical study, this time not under the direction of the courts but through the normal course of permitting.

I am confident that we are now on the right track with the Ministry of Environment and Energy in Greece, as we continue to have more constructive engagement with the Ministry and their technical services group. Our teams in both Canada and Greece are working together to finalize outstanding engineering design necessary to complete construction at Skouries.

That said, at this point I do not have the final updated CapEx numbers for you today nor do I have the updated timeline. Please bear in mind that we only in April just finished the shutdown of the Skouries project. We expect to have updated guidance within the next few months as we bring our construction teams back to work. Despite ongoing capital spend on growth projects, our balance sheet remains very strong with total liquidity of $611 million including $236 million in cash and cash equivalents and $375 million in undrawn lines of credit.

Looking at the balance of the year, our mines remain on track to produce between 565,000 and 630,000 ounces of gold at an average cash cost ranging between $585 per ounce and $620 per ounce, and all in sustaining costs between $940 per ounce and $980 per ounce. We will continue to advance our development projects in Brazil and Romania, while remaining financially prudent in today's challenging metal price environment.

With that, I will let Paul and Fabi dive into the operations and the financials in detail. Over to you, Paul.

Thanks, Paul. Good morning, everyone. Today, I'd like to comment briefly on the operations for the first quarter of 2016. We produced nearly 141,000 ounces from our operations including a small contribution from Olympias of 3,300 ounces. Generally, the operations performed reasonably well over the first quarter, mainly performing to budget with the exception of Tanjianshan, which had a slow start to the quarter due to lower grade material we mined and removed from stockpile along with slightly lower recoveries for this material.

To start in Turkey, both Kisladag and Efemcukuru performed well during the quarter with 53,000 and 28, 000 ounces respectively for the quarter. These were approximately in line with budgeted ounce production and at lower cash costs than originally budgeted. Just as a reminder for Kisladag, first quarter is traditionally the slowest quarter. Also the guidance for this year is lower than last year's actual, and last year we were moving gold out of inventory compared to this year, when we've effectively pulled it down already.

In China for Q1, production totaled 58, 000 ounces. As previously indicated, Tanjianshan had a slow quarter with lower grade material being treated, lower ounce production and higher costs. Jinfeng had a reasonable quarter doing better than budget on ounce production and costs. And White Mountain was slightly behind on tons but ahead on costs for the quarter. Having said that, we still expect to maintain our original guidance for the year on these assets.

On the development side, work continues on the construction of Olympias Phase II. At this stage, structural and mechanical disassembly is complete, in the key areas concrete demolitions well advanced. As Paul indicated, expect to be commissioning early in 2017. As you'll all be aware, we received approval of the revised technical study just last week for the Skouries project. We placed a project in care and maintenance, and used the first quarter of this year to wind down construction and place everything in a safe state. We'll now work on putting elements of the team back to work to utilize the summer season, for important earth works and building construction.

We are working on updated schedules and capital cost estimates to complete both the open pit and underground places, and we'll have that available in the third quarter. As with any project there are still some minor routine permits required to complete construction and we are confident that these will be received in a timely manner and will not further affects the schedule. Both Certej and Tocantinzinho, we continued with optimization studies during the quarter. And at Eastern Dragon, we continue to work with the government on the conversion of the exploration license and the mining license. In March, we received formal notice that the application has been accepted, and we'll continue to update as things progress.

During the quarter, we completed 7,500 meters made of exploration drilling at the Company's operations and exploration projects in Romania, Turkey and China. In Romania, drilling was conducted at the early stage Brad project located about 20 kilometers Northwest of Certej, testing out cropping alteration zones for potential epithermal gold mineralization. In Turkey, we continued testing the Kokarpinar target at the Efemcukuru mine and establishing the continuity of mineralized shoots in the vein system.

And at White Mountain in China, we completed underground drilling and testing stepouts at the North and Far North ore zones encountering several high-grade intersections.

And with that, I'll turn over to Fabi.

Thank you, Paul, and good morning everyone. I will go through the financial statements highlighting changes in significant accounts. We ended the quarter with cash, cash equivalent and term deposit balance of $236 million compared to $289 million at the end of 2015. The decrease in cash balance is mainly the result of $25 million generated from operations before change in the working capital, net of $60 million usage of cash for capital program. On the income statement, we have a net loss attributable to shareholders of the Company of $2.5 million compared to a loss of $8.2 million in the first quarter of 2015.

Revenues for the quarter of $164 million and gross profit of $38 million are lower year-over-year due to lower gold sales volumes, which fell 27% and increased cash operating cost per ounce. In comparison with 2015, there were a number of items that partially offset the impact of the fall in gross profit. Foreign exchange moment contributed favorable to the bottom line as the Company reported a foreign exchange gain of $3.2 million as compared with the foreign exchange loss of $10.2 million in the first quarter of 2015. General and administrative expenses fell 28% or $4.7 million as a result of cost cutting measures and foreign currency movements.

Those are my comments on the financial statements. I will turn the call back to Paul.

Well, thanks, Fabi and thanks, Paul. Operator, we will open up for questions now please.

(Operator Instructions) John Bridges, JPMorgan.

Good morning, Paul and everybody. Congratulations for the results. It's really great to hear the permits came along. You may hate me for the question, but Perama Hill, that one still stalled. Just wondered if there is any sort of read through from this permit to Perama?

I would say not immediately, John. I think what we have in the bigger picture is we have an alignment in terms of what the Company's objectives are or what the society wishes for and what the government wishes to see in terms of investment. So, I would say that we're certainly better positioned than we were a few months ago as it relates to Perama, but there is nothing to report on that at this point in time.

Okay, thanks for that. And then I see you're going ahead with the drilling down at Stratoni. What sort of indications do you have for that potential mineralization? Do you have a few holes into it, or is it totally unknown?

Paul, do you want to handle this please.

Yes, it's pretty well open. We've sort of drilled up to the edge of that and this continued mineralization. So pretty positive on it, just need to get some drill holes in there.

Okay. What's the resource potential then, how far before the geology changes?

Well, it doesn't obviously, John, because it is on the same basis as the same mineralizing structure that extends all the way to Piavitsa.

Yes. My answer was two kilometers, Paul. (multiple speakers)

The challenge there, John, is we need to get some -- we can poke away at it from the existing workings, but we need to get a parallel drift out so that we have a decent platform to drill from.

Anita Soni, Credit Suisse.

Good morning, guys. My question is with regards to Kisladag, just the run of mine work. Could you give us a split between the run of mine and the crushed material that you had?

I don't actually have that in front of me, Anita. There has being run of mine in the first quarter. I would guess a little over a million tons, but that's shooting from the hip a little bit. I will give you those exact numbers after the call, I guess.

Sure. And can you just let me know whether or not you guys are continuing on with, I think the somewhat original plan which was about two million tons of run of mine, now that we've had a run-up in gold price and it seems like your unit costs are coming in pretty well. Did you go back to potentially putting on more run of mine materials this year?

We haven't -- we budgeted at the beginning of the year to phase at write-down, and we're actually still placing some material on there, but that was scheduled to finish pretty well now. We're going to have another look at that, I guess over the -- next little while and just reassess that given changing prices.

That's it -- actually my strip ratio question, what was the stripping? I always got to ask. So what was the strip at Kisladag this quarter?

Q1, we're running about 1:1. And for the whole year, it's a little bit higher than that of about 1.1, but pretty well in line.

(Operator Instructions) Kerry Smith, Haywood Securities.

I had a couple questions. One just on Greece generally. What's changed over there to allow the dialog to improve, like has there been a change-out with some of the bureaucrats and the ministry (technical difficulty) hello?

Yes, okay. I'm not quite sure where the music came from.

It was pleasing, but I don't where it came from. It wasn't my end.

Was it going to be a tricky question, Kerry?

Were you able to catch my question, Paul, or did it get cut off?

Look, what's changed. I think number of factors have changed. The dialog has been ongoing. I think over the calls through the last few years, as we've been working through this, I've always believed that if there was sufficient engagement that we would see as the government matured, as the government, the recognition of the relevance of this investment, and I think certainly there was no lack of dialog from ourselves and dialog frankly from the society, whether they be the unions or the local employees or the local community. And clearly, the government recognizes the importance and relevance of an investment for the country. I'd say just a process of a portion that we have to go through.

Okay. So it hasn't been sort of turn of events with people leaving ministry and --?

No.

Okay. And maybe just if I could quickly, just kind of an update generally on Eastern Dragon?

Paul, do you want to provide this?

Well, I mean, we're continuing to work. It's coming pretty well as I indicated, continue to work on converting the EL to the ML. It seems to be moving forward, but it's pretty hard to sort of pin down exact timing I guess. We've got feedback that it's moving forward.

Okay. And what is the sort of [date that you believe to have] that in place in order to be able to complete the civil works before (inaudible) had to be pushed back to next year, right? Is that sort of end of August or when would that be?

It's probably the end of June to get enough done. I mean, we are expecting that ML in the second quarter, and hopefully satisfy our requirements for the end of June.

And there are no further audio questions at this time. I will turn the call back over to the presenters for closing remarks.

Alright, well thank you, Operator, and thank you, everybody, for being on the call. Looking forward to speaking on the next quarter. Thank you.

This concludes today's conference call. You may now disconnect.