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Eldorado Gold Reports Q2 2021 Financial and Operational Results

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Eldorado Gold Reports Q2 2021 Financial and Operational Results

 

 

 

 

Eldorado Gold Corporation (TSX: ELD) (NYSE: EGO) reports the Company’s financial and operational results for the second quarter of 2021.

 

  • Quarterly production in line with expectations; full year 2021 annual guidance: Gold production totalled 116,066 ounces in Q2 2021, a decrease of 16% from Q2 2020 production of 137,782 ounces and a 4% increase over Q1 2021, driven by a planned shift to lower-grade ore at Kisladag. Eldorado is maintaining its 2021 annual production guidance of 430,000-460,000 ounces of gold at an all-in sustaining cost of $920-1,150 per ounce sold.
  • All-in sustaining costs: Q2 2021 all-in sustaining costs of $1,074 per ounce of gold sold in the quarter increased from Q2 2020 ($859 per ounce sold) as a result of lower production in the quarter and increased from Q1 2021 ($986 per ounce sold) primarily as a result of AISC in that quarter benefiting from a reversal of accrued royalty expense.
  • Net loss and adjusted net earnings attributable to shareholders: Net loss attributable to shareholders of the Company in Q2 2021 was $55.7 million, or $0.31 loss per share (Q2 2020: $49.1 million or $0.29 earnings per share, Q1 2021: $11.9 million or $0.07 earnings per share)(1). Adjusted net earnings attributable to shareholders of the Company in Q2 2021 were $29.3 million, or $0.16 earnings per share (Q2 2020: $47.2 million or $0.28 earnings per share, Q1 2021: $24.6 million or $0.14 earnings per share)(1).
  • EBITDA: Q2 2021 EBITDA was $7.6 million (Q2 2020: $131.8 million Q2 2020 $105.3 million) and Q2 2021 adjusted EBITDA was $101.9 million (Q2 2020: $135.8 million, Q2 2020: $108.0 million). Material adjustments in Q2 2021 included a $99.5 million ($89.5 million net of deferred tax) impairment of the Tocantinzinho project, a non-core gold asset, as a result of a plan to consider selling the project.
  • Free cash flow: Negative free cash flow of $36.6 million in Q2 2021 decreased from free cash flow of $63.4 million in Q2 2020 as a result of higher capital spend and lower sales. A decrease from free cash flow of $24.6 million in Q1 2021 was primarily due to increased growth capital spending, increased tax payments and the timing of royalty and interest payments. We expect free cash flow generation to improve in the second half of 2021.
  • Financial position: Debt repayments in Q2 2021 included $50 million on the Company’s revolving credit facility and $22 million on the Company’s term loan. At June 30, 2021, the Company had $410.7 million of cash, cash equivalents and term deposits and approximately $150 million available under its revolving credit facility.
  • Capital spending: Capital expenditures totalled $72.5 million in Q2 2021 (Q2 2020: $37.1 million, Q1 2021: $64.9 million), reflecting a planned increased in growth capital spending and following reduced spending in the prior year due to the novel coronavirus (“COVID-19”) pandemic. Capital allocation is following a rigorous process to ensure discipline and control at all operations.
    • At Kisladag, $29.4 million investment in the quarter related to waste stripping, construction of the north leach pad to support the mine life extension and installation of a high-pressure grinding roll (“HPGR”) circuit, which is expected to improve heap leach recovery with commissioning now scheduled to initiate at the start of Q4 2021.
    • At Lamaque, $8.9 million investment in the quarter related primarily to the decline connecting the Triangle underground mine with the Sigma mill, which is expected to reduce operating costs, reduce greenhouse gas emissions, and provide access for underground drill platforms for Ormaque, Plug 4, and other exploration targets in the prospective corridor.
  • Optimization of the Kassandra mines: Operations at Olympias were negatively affected in Q2 2021 as the Company progresses through the implementation of transformation efforts at its Kassandra mines. Discussions with stakeholders are ongoing and are expected to lead to a sustainable continuous improvement program as the year progresses.
  • Measures remain in place to manage the impact of the COVID-19 pandemic: The Company’s mines remain fully operational and isolated cases of COVID-19 have been successfully managed. Preventing the spread of COVID-19, ensuring safe working environments across Eldorado’s global sites, and preparedness should an outbreak occur, remain priorities.
(1)  

2020 and YTD 2021 amounts have been recast to correct an immaterial error related to an understatement of the net book value of certain of our property, plant and equipment as a result of errors in the amounts recorded for depreciation. See Note 2(c) of our Unaudited Condensed Consolidated Interim Financial Statements.

   

 

“We delivered strong production this quarter driven by Kisladag and Lamaque and we continue to be on track to meet our 2021 production and cost guidance,” said George Burns, President and CEO. “We ended the quarter with a cash balance of just over $410 million and are maintaining a strong liquidity position as we continue to grow our business. Our balance sheet continues to emerge as a major strength, which will enable us to fund growth and maximize the opportunities ahead of us.”

 

“In line with our growth strategy, we are investing capital into our operations, particularly at Kisladag and Lamaque, to deliver value from our portfolio of assets. Equally, the Kassandra mines represent a significant opportunity for the company to develop our top tier assets in Europe. In Greece, we continue to work through transformation efforts focused on increasing productivity and are actively engaged with our key stakeholders on this front.”

 

“With strong operational results in the first half of 2021 and numerous upcoming catalysts expected in the second half of the year, Eldorado remains well positioned for growth and value creation in the future.”

Consolidated Financial and Operational Highlights

 

  3 months ended June 30, 6 months ended June 30,
  2021 2020 2021 2020
Revenue $233.2   $255.9   $457.8   $460.6  
Gold revenue $209.5   $232.9   $405.1   $416.6  
Gold produced (oz) 116,066   137,782   227,808   253,732  
Gold sold (oz) 114,140   134,960   227,734   251,179  
Average realized gold price ($/oz sold) (4) $1,835   $1,726   $1,779   $1,658  
Cash operating costs ($/oz sold) (1,4) 645   550   643   586  
Total cash costs ($/oz sold) (1,4) 746   616   716   644  
All-in sustaining costs ($/oz sold) (1,4) 1,074   859   1,030   902  
Net (loss) earnings for the period (2,5) (55.7 ) 49.1   (43.8 ) 46.2  
Net (loss) earnings per share – basic ($/share) (2,5) (0.31 ) 0.29   (0.25 ) 0.27  
Adjusted net earnings (loss) (2,3,4,5) 29.3   47.2   53.9   61.7  
Adjusted net earnings (loss) per share ($/share) (2,3,4,5) 0.16   0.28   0.30   0.37  
Cash flow from operating activities before changes in working capital (4) 62.8   99.0   141.6   168.5  
Free cash flow (4) (36.6 ) 63.4   (12.0 ) 70.5  
Cash, cash equivalents and term deposits $410.7   $440.3   $410.7   $440.3  

 

(1) By-product revenues are off-set against cash operating costs.
(2) Attributable to shareholders of the Company.
(3) See reconciliation of net earnings (loss) to adjusted net earnings (loss) in the section ‘Non-IFRS Measures’ in the June 30, 2021 MD&A.
(4)  These measures are non-IFRS measures. See the June 30, 2021 MD&A for explanations and discussion of these non-IFRS measures.
(5) 2020 and YTD 2021 amounts have been recast to correct an immaterial error related to an understatement of the net book value of certain of our property, plant and equipment as a result of errors in the amounts recorded for depreciation. See Note 2(c) of our Unaudited Condensed Consolidated Interim Financial Statements.
   

 

Gold production of 116,066 ounces decreased 16% from last year’s second quarter production of 137,782 ounces. Gold sales in Q2 2021 totalled 114,140 ounces, a decrease of 15% from 134,960 ounces sold in Q2 2020. The lower sales volume compared with the prior year primarily reflects decreases in production at Kisladag and Olympias.

 

Total revenue was $233.2 million in Q2 2021, a decrease from $255.9 million in Q2 2020. Total revenue was $457.8 million in the six months ended June 30, 2021, a decrease from $460.6 million in the six months ended June 30, 2020. The decreases in both three and six-month periods were due to lower sales volumes and were partially offset by higher average realized gold prices.

 

Cash operating costs in Q2 2021 averaged $645 per ounce sold, an increase from $550 in Q2 2020, and cash operating costs per ounce sold averaged $643 in the six months ended June 30, 2021, an increase from $586 in the six months ended June 30, 2020. Increases in both the three and six-month periods were primarily due to lower-grade ore mined and processed at Kisladag, Lamaque, and Olympias, resulting in fewer ounces produced and sold. These increases were partially offset by a modest reduction in cash operating costs per ounce sold at Efemcukuru as a result of the weakening of the Turkish Lira from Q2 2020 and a change in the structure of concentrate contracts whereby lower payable ounces are offset by the elimination of treatment charges and other deductions.

 

We reported net loss attributable to shareholders of $55.7 million ($0.31 loss per share) in Q2 2021, compared to net earnings of $49.1 million ($0.29 per share) in Q2 2020 and net loss of $43.8 million ($0.25 loss per share) in the six months ended June 30, 2021 compared to net earnings of $46.2 million ($0.27 per share) in the six months ended June 30, 2020. The decreases in both periods were primarily due to the $99.5M impairment loss related to the Tocantinzinho project, and also reflects lower production and sales volumes, which were partially offset by lower income tax expense.

 

Adjusted net earnings were $29.3 million ($0.16 per share) in Q2 2021 compared to $47.2 million ($0.28 per share) in Q2 2020. Adjusted net earnings in Q2 2021 removes, among other things, the $99.5 million impairment of the Tocantinzinho project, the $6.2 million loss on the non-cash revaluation of the derivative related to redemption options in our debt, the $5.3 million net recovery of deferred tax relating to tax rate changes in Greece and Turkey and the $7.0 million ($5.3 million net of tax) gain on sale of mining licences in Turkey.

 


Gold Operations

  3 months ended June 30, 6 months ended June 30,
  2021 2020 2021 2020
Total        
Ounces produced 116,066   137,782   227,808   253,732  
Ounces sold 114,140   134,960   227,734   251,179  
Cash operating costs ($/oz sold) (1,2) $645   $550   $643   $586  
All-in sustaining costs ($/oz sold) (1,2) $1,074   $859   $1,030   $902  
Sustaining capital expenditures (2) $24.2   $21.9   $44.7   $41.3  
Kisladag        
Ounces produced 44,016   59,890   90,188   110,066  
Ounces sold 44,049   59,917   91,555   111,517  
Cash operating costs ($/oz sold) (1,2) $529   $465   $510   $459  
All-in sustaining costs ($/oz sold) (1,2) $728   $630   $665   $606  
Sustaining capital expenditures (2) $3.7   $5.4   $6.5   $8.4  
Lamaque        
Ounces produced 35,643   33,095   64,478   60,448  
Ounces sold 34,677   31,964   63,755   58,692  
Cash operating costs ($/oz sold) (1,2) $658   $480   $704   $553  
All-in sustaining costs ($/oz sold) (1,2) $1,065   $796   $1,109   $908  
Sustaining capital expenditures (2) $11.0   $8.0   $20.3   $16.3  
Efemcukuru        
Ounces produced 23,473   26,876   46,771   50,115  
Ounces sold 23,006   25,692   47,136   48,913  
Cash operating costs ($/oz sold) (1,2) $525   $534   $525   $586  
All-in sustaining costs ($/oz sold) (1,2) $917   $807   $802   $835  
Sustaining capital expenditures (2) $3.8   $3.6   $6.3   $6.7  
Olympias        
Ounces produced 12,934   17,921   26,371   33,103  
Ounces sold 12,409   17,387   25,288   32,057  
Cash operating costs ($/oz sold) (1,2) $1,237   $993   $1,190   $1,086  
All-in sustaining costs ($/oz sold) (1,2) $1,893   $1,377   $1,845   $1,500  
Sustaining capital expenditures (2) $5.7   $4.9   $11.5   $9.9  

 

 

(1)

By-product revenues are off-set against cash operating costs.
(2) These measures are non-IFRS measures. See the June 30, 2021 MD&A for explanations and discussion of these non-IFRS measures.
   

 

Kisladag

 

Kisladag produced 44,016 ounces of gold in Q2 2021, a decrease of 27% from 59,890 ounces in Q2 2020. The decrease was the result of a planned shift to lower-grade ore through 2021 as compared to 2020. Production was in line with expectations for the quarter and solution processing rates have increased as a result of the installation of two additional multi-stage carbon-in-column sets during Q1 2021.

 

Cash operating costs per ounce sold increased to $529 in Q2 2021 from $465 in Q2 2020. The increase was primarily due to lower production and sales volumes, a result of lower grade ore mined in the quarter, and was partially offset by lower costs as a result of the weakening of the Turkish Lira from Q2 2020.

 

AISC per ounce sold increased to $728 in Q2 2021 from $630 in Q2 2020, as a result of lower production and sales. AISC per ounce sold was positively impacted in Q2 2021 by reduced sustaining capital spending as compared to Q2 2020. Sustaining capital expenditures of $3.7 million in Q2 2021 primarily included process upgrades and mine equipment overhauls.

 

Lamaque

 

Lamaque produced 35,643 ounces of gold in Q2 2021, an 8% increase from 33,095 ounces in Q2 2020 despite a planned shift to lower-grade ore stopes. Average grade was 5.98 grams per tonne in Q2 2021 an increase from 5.17 grams per tonne in Q1 2021 but lower than 7.25 grams per tonne in Q2 2020. Grade is expected to improve at Lamaque in the second half of 2021.

 

Cash operating costs per ounce sold increased to $658 in Q2 2021 from $480 in Q2 2020, primarily reflecting the planned shift to lower-grade ore and were negatively impacted by a stronger Canadian dollar in the quarter as compared to Q2 2020.

 

AISC per ounce sold increased to $1,065 in Q2 2021 from $796 in Q2 2020 and included $11.0 million of sustaining capital expenditure related primarily to underground development, underground infrastructure improvements and tailings management.

 

Growth capital expenditures of $8.9 million in Q2 2021 and $16.0 million in the six months ended June 30, 2021 primarily included continued development of the decline from the Sigma mill to the Triangle mine which commenced in Q3 2020 and remains on schedule for completion in Q4 2021. Following completion, the decline is expected to reduce operating costs, reduce greenhouse gas emissions, and provide access for underground drill platforms for Ormaque, Plug 4, and other exploration targets in the prospective corridor between the Triangle underground mine and the Sigma mill.

 

Efemcukuru

 

Efemcukuru produced 23,473 ounces of gold in Q2 2021, a 13% decrease from 26,876 ounces in Q2 2020 reflecting a slight decrease in tonnes milled combined with lower average grade. Production in 2021 has also been adjusted to reflect reduced payable ounces, following a change in structure of concentrate sales contracts. The lower payable ounces under the new contracts are offset by a decrease in production costs due to the elimination of treatment charges and other deductions.

 

Cash operating costs per ounce sold improved to $525 in Q2 2021 from $534 in Q2 2020. Cash operating costs in Q2 2021 benefited from lower selling costs due to the change in structure of concentrate sales contracts and lower costs resulting from the weakening of the Turkish Lira. These decreases were partly offset by a decrease in average grade to 6.60 in Q2 2021 from 7.21 in Q2 2020.

 

AISC per ounce sold increased to $917 in Q2 2021 from $807 in Q2 2020. The increase is primarily due to higher royalty expense as a result of a 25% increase to gold royalty rates, effective from September 2020. Sustaining capital expenditure of $3.8 million in Q2 2021 primarily included underground development, resource conversion drilling and process upgrades.

 

Olympias

 

Olympias produced 12,934 ounces of gold in Q2 2021, a 28% decrease from 17,921 ounces in Q2 2020. The decrease reflected lower processing volumes in the quarter, combined with lower average gold grade. Lead, silver and zinc production was also lower in Q2 2021 as compared to Q2 2020 primarily a result of lower processing volumes, a modest increase in lead and silver average grades and a modest decrease in zinc average grade. Operations at Olympias were negatively affected in Q2 2021 by work slowdowns as the Company progresses through the implementation of transformation efforts at its Kassandra mines. Discussions with stakeholders are ongoing and are expected to lead to a sustainable continuous improvement program as the year progresses. Further improvement is underway to long range mine design and planning based on updated geotechnical guidance.

 

Cash operating costs per ounce sold increased to $1,237 in Q2 2021 from $993 in Q2 2020 primarily a result of decreased production and lower silver and base metal sales, which reduce cash operating costs as by-product credits.

 

AISC per ounce sold increased to $1,893 in Q2 2021 from $1,377 in Q2 2020 in line with higher cash operating costs and an increase in royalties following ratification of the Amended Investment Agreement in March 2021. AISC was also negatively impacted by an increase in sustaining capital expenditure to $5.7 million in Q2 2021 from $4.9 million in Q2 2020. Sustaining capital expenditure in Q2 2021 primarily included underground development, diamond drilling and tailings facility construction.


About Eldorado

 

Eldorado is a gold and base metals producer with mining, development and exploration operations in Turkey, Canada, Greece, Romania and Brazil. The Company has a highly skilled and dedicated workforce, safe and responsible operations, a portfolio of high-quality assets, and long-term partnerships with local communities. Eldorado’s common shares trade on the Toronto Stock Exchange and the New York Stock Exchange.

 

Posted July 30, 2021

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