Eldorado Gold Corporation (EGO) Q3 2024 Earnings Call Transcript
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Overview
The earnings call summary presents a mixed picture. Financial performance shows increased net earnings and cash flow, but with negative free cash flow and increased costs. The Q&A reveals some uncertainties, particularly regarding underground development and inflationary pressures. However, optimistic guidance on production and liquidity provides balance. The market cap suggests moderate reaction, leading to a neutral prediction.
Key Financial Performance
Net Earnings $101 million (up from $0.49 per share), compared to the same quarter in 2023, positively impacted by higher revenue due to higher volumes sold and prices realized, and a gain on deferred consideration from G Mining.
Adjusted Net Earnings $71 million (or $0.35 per share), adjustments included a $50 million gain on G Mining deferred consideration and a $33 million unrealized loss on derivative instruments.
Free Cash Flow Negative $4.8 million (or positive $98.3 million excluding capital investment in Skouries), reflecting strong performance of underlying operating assets.
Cash Flow from Operating Activities $166.5 million, compared to $97.5 million in Q3 2023, driven by an increase in revenue of $87 million due to higher volumes and realized gold prices.
Total Cash Costs $953 per ounce sold, increased due to higher royalty expenses and increased labor costs compared to Q3 2023.
All-in Sustaining Costs (ASIC) $1,335 per ounce sold, increased primarily due to higher royalty expenses and increased sustaining capital investment.
Capital Expenditures $169 million in Q3, including investment in growth projects at Kisladag.
Current Tax Expense Approximately $40 million, increased from $21 million in Q3 2023, primarily due to capital gains tax and increased Turkish taxes.
Deferred Income Tax $11.4 million recovery, compared to an expense of over $30 million in Q3 2023.
Total Liquidity $885 million, including $677 million in cash and cash equivalents and $208 million in available credit capacity.
Gold Production (Q3) 125,195 ounces, aligning with full year guidance.
Gold Production (Olympias) 21,211 ounces, total cash costs of $1,210 per ounce sold, impacted by increased labor costs and higher royalty expenses.
Gold Production (Kisladag) 41,084 ounces, total cash costs of $899 per ounce sold, impacted by increased royalties.
Gold Production (Efemcukuru) 19,794 ounces, total cash costs of $1,325 per ounce sold.
Gold Production (Lamaque) 43,106 ounces, total cash costs of $728 per ounce sold, affected by higher sales volumes and additional costs.
Operating Highlights
New Product: At Kisladag, the new North ADR plant became operational this week, expected to optimize stacking, irrigation, and extraction cycles.
Expansion: The Olympias mill expansion to 650,000 tonnes per annum from 500,000 tonnes per annum has begun with long lead items ordered.
Operational Efficiency: Productivity improvements at Skouries are slightly beating assumptions, with a focus on integrating additional personnel to maintain schedule and budget.
Strategic Shift: The company has tightened its gold production guidance due to inventory buildup at Kisladag and work stoppages at Olympias.
Production: Gold production for Q3 was 125,195 ounces, with year-to-date production up 7% compared to 2023.
Cost Guidance: Total cash costs are expected to be between $910 and $940 per ounce sold, up from previous guidance.
Capital Investment: Skouries capital investment guidance lowered to $350 million - $380 million, reflecting rescheduled non-critical work.
Strategic Focus: The company is focused on maintaining a solid financial position while delivering growth strategy and responsible mining.
Risk or Challenges
Production Challenges: Inventory buildup at Kisladag due to slower leach cycles and work stoppages totaling 17 days at Olympias, impacting gold production guidance.
Cost Increases: Total cash costs increased primarily due to higher royalties driven by increased gold prices and higher labor costs.
Regulatory and Tax Issues: Increased current tax expense due to capital gains tax and higher mining duties in Quebec, along with increased Turkish taxes.
Supply Chain and Labor Market: Challenges in mobilizing contractors to site for Skouries project and a tight construction labor market affecting project timelines.
Operational Risks: Increased lost time frequency rate indicating potential safety risks, despite a decrease in total recordable incidents.
Project Delays: Slower-than-expected mobilization of contractors and rescheduling of non-critical work at Skouries could impact project timelines.
Guidance & Outlook
Gold Production Guidance: Anticipate gold production to be between 505,000 and 530,000 ounces, revised from previous guidance of 505,000 to 555,000 ounces.
Cost Guidance: Total cash costs expected to be between $910 and $940 per ounce sold, up from previous guidance of $840 to $940.
All-in Sustaining Costs Guidance: Expected to be between $1,260 and $1,290 per ounce sold, revised from $1,190 to $1,290.
Capital Expenditure Guidance: Sustaining capital guidance expected to be between $135 million and $145 million, down from $135 million to $160 million.
Skouries Project Update: Skouries expected to achieve first production in Q3 2025, with significant derisking and major contracts signed.
Kisladag Project Update: New North ADR plant operational, expected to optimize costs and improve efficiency.
Net Earnings: Reported net earnings attributable to shareholders of approximately $101 million or $0.49 per share.
Free Cash Flow: Free cash flow in the quarter was negative $4.8 million, or positive $98.3 million excluding capital investment in Skouries.
Liquidity Position: Total liquidity of $885 million, including $677 million in cash and cash equivalents.
Capital Investment at Skouries: Capital investment at Skouries was $82.7 million in Q3, with year-to-date spend at $227.1 million.
Shareholder Return Plan
Deferred Consideration from G Mining: Eldorado Gold is set to receive $60 million in September 2025 as part of the deferred consideration related to the sale of the Tocantinzinho mine.
Free Cash Flow: In Q3 2024, Eldorado reported negative free cash flow of $4.8 million, or positive $98.3 million excluding capital investment in the Skouries project.
Capital Investment at Skouries: Eldorado invested approximately $83 million in the Skouries project during Q3 2024.
Total Liquidity: Eldorado ended the quarter with total liquidity of $885 million, including $677 million in cash and cash equivalents.
Key Q&A
Earnings Word Cloud
EGO Transcript
The earnings call presented strong financial performance with a significant revenue increase, driven by elevated gold prices, and a positive free cash flow when excluding Skouries investments. The expansion of the share repurchase program and strategic investments in Skouries and other projects indicate confidence in long-term growth. Despite some concerns about production delays and increased costs, management's optimistic guidance and strategic initiatives suggest a positive outlook. Given the market cap of approximately $3 billion, the stock is likely to experience a positive movement of 2% to 8%.
The earnings call indicates strong revenue growth and improved cash flow, despite increased costs and tax expenses. The Q&A section reveals confidence in project completion and shareholder value return, boosting sentiment. However, caution is warranted due to increased costs and lack of clear guidance on NCIB. The market cap suggests moderate sensitivity, leading to a prediction of a 2% to 8% stock price increase.
The earnings call summary presents a mixed picture. Financial performance shows increased net earnings and cash flow, but with negative free cash flow and increased costs. The Q&A reveals some uncertainties, particularly regarding underground development and inflationary pressures. However, optimistic guidance on production and liquidity provides balance. The market cap suggests moderate reaction, leading to a neutral prediction.
The earnings call presents a mixed picture. While net earnings and cash flow from operations have improved, free cash flow remains negative due to capital investments. The Q&A section reveals some uncertainties, particularly regarding production optimization and labor costs. However, management's optimistic outlook on future production and no significant operational disruptions suggest stability. Given the market cap and mixed signals, the stock is likely to remain neutral in the short term.
EGO Report
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