Eldorado Gold Corp (EGO) 2022 Q1 法說會逐字稿

Thank you for standing by. This is the conference operator. Welcome to the Eldorado Gold First Quarter 2022 Financial and Operational Results Conference Call. (Operator Instructions) And the conference is being recorded. (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 have 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 is 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 2 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 are seeing the 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've noticed in -- as we've noted in previous quarters, we continue to face inflationary pressures similar to the wider market which has been intensified by the Russian-Ukraine crisis. Principal 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 continue to see inflation in Turkey. However, cost increases dominated in local currency, primary labor, were mostly offset by the continued weakening of the Turkish lira. In the Abitibi region of Quebec, increased activity in the mining sector has impacted the availability of contractors and labor.

This year, we have completed 2-year collective bargaining agreements with our labor unions in both Turkey and Greece. In Greece, we strengthened 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 the 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 2 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 4 operating lines to produce our year 3 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 a 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 a loss of $1.74 per share. After adjusting for onetime nonrecurring items, including a $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 a 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 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 tonnes 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 our operations, we are closely monitoring the impact on expected full year direct operating costs, and we'll 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 in sustaining capital expenditures given inflationary pressures and volatility. We are practicing sound capital discipline by focusing on nondiscretionary 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 0.31x as of March 31 compared to 0.89x at the end of Q1 2020. This reflects a much improved credit profile for the company over the last 2 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 assessments 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 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 tonnes placed on the heap leach pad in Q4 during the commissioning of the high-pressure grinding roll circuit. The severe weather and freezing temperatures in Q1 led to lower tonnes 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 a 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 at 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 grade. 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. 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 ore 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 has identified a new mineralized lens, representing the western extension of the Flats 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 on 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.

Certainly, a tough Q1. Maybe my first question is on your cost guidance. I appreciate that, as you mentioned, volatility in 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 we should look at it?

Cosmos, it's George. 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, although we're 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 cost 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 just 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.

Sure. Thanks, George. Cosmos, 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. 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 costs in Q1, specifically our mining costs, our processing and other related costs, even though at Kisladag, for example, in Q1, our tonnes 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 that, as we say, and we continue to look for opportunities as well to be more efficient and offset those cost 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 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 rate at the end of 2021 going into 2022 was -- I think it's between 50% and 60%. And we 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 we 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 were pretty flat, and that continues to be the case for Q1 2022.

Got it. 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, 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 2 points, I guess. Grade decreased to 0.61 gram per tonne in Q1. Are you seeing that improve now? And then the other part is, as you mentioned, cold temperatures in Turkey impacted some of the conveyor systems. And so -- and -- 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 belt agglomeration and the cold temperatures that kept us from stacking the planned number of tonnes, 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're -- 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 for 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 tonnes 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 were 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.

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 a huge bump-up in the second half? Or do we have improvement quarter-over-quarter? I'm just trying to understand whether I do 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 tonnes placed in Q1 at Kisladag, even though we are seeing favorable indicators on recovery and leach kinetics, it will come up in Q2 but -- and still be weighted to the second half.

And at Olympias, we took the opportunity in Q1 to set ourselves up for the second half. As I mentioned in the -- or we spoke earlier about the water treatment plant and efficiency in quantity. So given the fact that we are lower tonnes 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 planned in the second half. And as mining has progressed reasonably well over the past 4 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 tonnes off the stockpile before the end of the year. So we're reasonably comfortable in both of those that they will be second -- 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 transverse, it 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 budget development rates now and see Lamaque coming back reasonably well in Q2 and continuing for the balance of the year.

Maybe I'll jump in with a little more clarity on Kisladag. So because of the heap leach pad, you kind of have to look at 2 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 of 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 is Q3 better than Q2 and then Q4 the best? Or are Q3 and Q4 the same?

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

Okay. And that's mainly driven by Kisladag?

Correct.

Okay. That's helpful. And then just if I could ask, Phil, we were kind of really low on our care and maintenance costs, specifically at 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 were -- 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.

Tanya, it's Phil. Just...

Yes. So we use them for -- look Stratoni separately from Skouries because we're assuming Skouries starts 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 like $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?

Can you repeat that?

Will you also be reviewing the CapEx and OpEx of 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 that the overall capital cost has largely reduced relative to other projects that are starting from scratch. So all of grinding, crushing, flotation, concentrate handling, all that major gear is actually set in place. And 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 a 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 the unique thing in our situation is that our 2 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 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 had budgeted in Greece. And we're not seeing that kind of impact in Turkey due to the FX counter impact.

And maybe just -- sorry, go ahead.

Sorry. Just to 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 just the use at Kisladag because it is an open pit mine. All the other mines are on the ground. In Turkey, the biggest impact, as George outlined, has been the electricity. And -- but at the same time, electricity on a consolidated basis is about 10% of our total direct operating cost. So again, it's not a huge, huge percentage.

Maybe Phil can remind us what's some oil price or diesel price that you use in your guidance for 2022 and what's the sensitivity for $10 a barrel or a 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.

(Operator Instructions) The next question comes from Kerry Smith with Haywood Securities.

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 tonnes 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 -- 0.65, 0.66 quarter-over-quarter, but it's really about getting tonnes on the pad at mine grade.

So what we saw in Q1 a bit, though, is that when we had -- we picked up some tonnes above cutoff that were on the lower end of grade that kind of pushed us down. So as we look forward in managing grade, those marginal tonnes above cutoff, we will not bring to pad, which will help us with grade for the balance of the year. But we are stockpiling that lower grade for later placement.

Okay, okay. And when you start putting tonnes on to the north pad, when is that actually available to be receiving tonnage? Because that will obviously help the leach curve, too.

Well, I think there's 2 answers to that question. One of them is that we did place additional inter-lift plastic on the south leach pad or the early placement of HPGR tonnes as we work through what we expected to be getting our agglomeration right. And we're going to extend that a little bit.

The -- 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, north leach pad is really attractive.

Right, right. Okay. And then just going back to Tanya's question on the Stratoni standby cost of $9.4 million in Q1. So if it's $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 onetime 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 onetime things out of the way. Is that right?

By Q3, assuming we get 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 were -- that's still on the books if we choose to maintain that before and move it over to contract labor at the start of construction.

Okay. And 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.

Got you. Okay. Okay. And then, Phil, just going back to your comment about you're not really seeing any -- in U.S. dollar terms anyhow, any real cost inflation in Turkey. But are your unit cost per tonne all in for mining, milling and G&A, let's say, on a per tonne basis? They seem like they're going up at -- well, they were not 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 tonne in Q1, and last year, it was slightly below $11. So how should we think about your unit cost per tonne at Kisladag and Olympias on a go forward?

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

Yes, 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 tonne. 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 tonne going forward at both Olympias and Kisladag.

Well, Kisladag tonnes in Q1 2022, as I mentioned, were lower than Q4 -- sorry, higher than Q4, but they were lower than the first 3 quarters of 2021. So tonnes were down compared to the first few quarters of 2021, and we expect those tonnes will increase.

Kerry, this is Joe. Are you thinking in total tonnes strip plus ore? Or are you thinking in just ore tonnes? So we're giving you the numbers back (inaudible).

All-in costs divided by tonnes processed, tonnes milled, tonnes leached.

We can get back on the consolidated number. But just for your information, total tonnes 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 tonne to the pad was about $19 a tonne. 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 a tonne?

And then I have the same issue with Olympias since the cost per tonne 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 tonnes 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 tonnes in Q1 2022 were just over 2 million tonnes for Kisladag. In Q4 of last year, the tonnes were below 2 million tonnes. So that's why you had a higher cost per tonne in Q4. But then the previous 3 quarters were over 3 million tonnes. So you had a much lower cost per tonne. So that's why you see that fluctuation. And I think going forward, in 2022, we expect to be over 3 million tonnes, probably approaching on a quarterly basis above that placement rate per quarter. So you should see the cost per tonne drop again.

Right. Okay, okay. So -- okay. So 3 million tonnes a quarter and the cost should come down then. And then what about Olympias just on the cost and the total cash cost 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 ore body, 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 for ore. 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'll be -- in forecast, we're 7.3, 7.4. So we're looking to maintain that 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 by-product 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 a 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 by-product credits against our cost relative to Q4 just due to the lumpiness and timing in by-product sales. So it's only a part of the story. The COVID impacts were part of it. We also ended Q1 with ore stockpiled 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 TC/RCs, 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 TC/RCs 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 smelters. So that was a 13% VAT. Now we had planned to 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 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 it 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 it's going elsewhere and avoiding that VAT. So right now, that's a negative against what we budgeted, no shipments going to Russia. So part of that, we're paying the 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 the -- of not being able to ship to Russia is about $5 million.

Okay, okay. That was in Q1 (inaudible)?

No, total year.

That's total year.

Okay. For the 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 a problem now. Okay. I got it.

Yes.

(Operator Instructions) The next question comes from Fahad Tariq with Credit Suisse.

On Skouries, can you just remind us -- you mentioned the snowfall impact on some of the other operations. Was there any impact on Skouries?

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.

Okay. Great. I just wanted to confirm that.

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.