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. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star then zero. 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 Dyck, 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 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 are 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 460,000-490,000 ounces. Joe will speak to the operations in more detail later in the call. As we've noted in previous quarters, we continue to face inflationary pressures similar to the wider market, which has been intensified by the Russia-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 continued to see inflation in Turkey. However, cost increases denominated in local currency, primarily 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 two-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 enclosing 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 Facility and metal streams. Our focus in selecting a financing package will continue to be driven by value optimization and de-risking 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 five 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 costs was $835 per ounce sold, and all-in sustaining costs were $1,347 per ounce sold. Free cash flow in the first quarter was -$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 one-time non-recurring items, including a $365 million non-cash impairment of Certej, our non-core asset in Romania, and a $20 million non-cash write-down of decommissioned equipment at Kışladağ, 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 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 Kışladağ 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 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. $32 million was related to growth capital, including waste stripping and construction of the north leach pad at Kışladağ. We are actively reviewing our growth in 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 Kışladağ 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% - 22%, and reduction in the 2023 corporate tax rate from 20% -1 9%. 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 equivalents, and term deposits of $435 million.
Our net leverage ratio is at 0.31 x as of March 31st, compared to 0.89 x 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 - 4.7.
Our focus on leading indicators such as leadership engagements and risk assessments is building a sustainable safety culture. I would like to congratulate Lamaque, the Lamaque team for achieving three and a half 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 eight looks at our operations in more detail. Starting in Turkey, Kışladağ'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 roll circuit. The severe weather and freezing temperatures in Q1 led to lower tons stacked on the leach pad, which is expected to negatively impact gold production in Q2. We anticipate production at Kışladağ 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 Efemçukuru, 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 Efemçukuru were in line with expectations.
The operations were minimally impacted by COVID absenteeism during the quarter, and Efemçukuru continues to be high-performing asset with solid results. Current exploration at Efemçukuru is focused on the Kocakarpinar and Fatih vein systems. Resource expansion drilling at Kocakarpinar 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 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.
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 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 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.
We will now begin the question and answer session. To join the question queue, you may press Star, then one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press Star then two. We will pause for a moment as callers join the queue. The first question comes from Cosmos Chiu with CIBC. Please go ahead.
Hi. Thanks, George, Phil, Joe, for the presentation. You know, certainly a tough Q1. Maybe my first question is on your cost guidance. You know, I appreciate that, as you mentioned, volatility in prices. You know, you're closely monitoring it. We'll get an update, you know, in Q2. I guess the guidance of $1,075-$1,175 announced on 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?
Hi, Cosmos, it's George.
Hi, George.
You know what? Good morning. When you look at Q1, predominantly production impacted us, and so you saw an uptick in our costs. Phil gave 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 gonna 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 predominantly an underground miner, so it's really Kışladağ that has the volume on diesel consumption. We are seeing some higher reagent costs.
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. Q1 was all about the issues related to lower production and no indication yet that our overall costs are being impacted. That's why, you know, our release talks about we'll continue to monitor this. Just, you know, we'll give you further update in Q2 as to how well are we combating the higher costs from power, diesel and reagents with, you know, with other measures we're taking. 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.
You know, 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. Hi, Cosmos.
Hi, Phil.
I think George has summed it up pretty well. From a cost perspective, 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. If you look at the total direct operating costs in Q1, you know, specifically our mining costs, our processing and other related costs, even though at Kışladağ, 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. You know, we recognize that there are price increases.
We're trying to get a, you know, just get more information in terms of the trend. We're monitoring it, 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. Then to you know wrap up this part of the question here, Phil or George, could you remind us, you know, what kind of year-over-year cost inflation assumption did you factor into your 2022 cost guidance? Is that consistent with you know what you're seeing so far?
Maybe I can answer that, Cosmos. 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, between 50% and 60%. We've factored that all in. At the same time, the impact of those of inflation has been offset primarily by the impact of the weakening lira. We haven't seen. You know, 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. Thanks, Phil. Maybe switching gears a little bit, you know, looking at Kışladağ, you know, I noticed that you did about a little bit less than 30,000 ounces in the quarter. You know, you've reiterated 145,000-165,000 ounces for the year. Just wanna get a better understanding, you know, of how you're gonna improve on your operations, for the rest of the year. Maybe on two points, I guess, you know, grade decreased to 0.61 gram per ton in Q1. Are you seeing that, you know, improve now? And then the other point is, you know, as you mentioned, cold temperatures in Turkey impacted some of the conveyor systems. But now the HPGR sounds like it's coming up, you know, ramping up as expected.
Could you maybe comment on recovery, so first on grade and how that's gonna 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,
Hi, Joe.
Maybe I'll start with kind of the production numbers or kind of the trend that we're seeing. You're right. As in Q1, as we were using belt agglomeration in the cold temperatures, that kept us from you know, 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 solution application rates than pre-HPGR with the agglomeration that we have done. That kind of speaks well to potential improvement in leach kinetics, which we're, you know, we have indications that that's headed in the right direction. As well, we have looked at the mine plan and grade. 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. We are meeting budget tons placed on pad at slightly better than budget grades at present. Kışladağ, all those things look pretty good and we're optimistic. As we look at recovery, you know, total we were targeting 56%, and we don't see any indication of anything less than that. In fact, we're optimistic.
Great. Thanks, George, Phil, and Joe. Those are all the questions I have. Thanks a lot.
Thanks, Cosmos.
Thanks, Cosmos.
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 Kışladağ for the second half. So how should we think about Q2? Is it gonna 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 I do 60/40, you know, 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 Kışladağ, even though we are seeing favorable indicators on recovery and leach kinetics. It'll come up in Q2, but it'll still be weighted to the second half. At Olympias, we took the opportunity in Q1 to set ourselves up for the second half. As we spoke earlier about water treatment plant and efficiency and quantity.
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, you know, do some different tie-ins with, you know, how we're using our thickeners. We set the mill up to be able to run a bit higher than planned in the second half. 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.
We're reasonably comfortable in both of those that they'll be second half, more second half-weighted. At Lamaque, you know, we got a little bit of a slow start on development. As we were transitioning from longitudinal longhole 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 Kışladağ. Because it's a heap leach pad, you kinda have to look at two sets of numbers. As Joe described in his earlier comments, you know, we had a tough Q1 due to weather and we were ramping up the agglomeration of the ore on the conveyor belt. We expect to see a strong Q2 on recoverable ounces placed on the pad and even a stronger second half. We're ramping up recoverable ounces placed on the pad, and we're comfortable with our guidance.
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 gonna be a significantly stronger second half just due to the delay between placing the ounces and then the ounces coming out of the pond. The trend will be up both on placements and production, but weighted to the second half on ounces poured.
Yeah. I'm just trying to understand, like, so Q2 overall for the company will be better than Q1. Is Q3 better than Q2, and then Q4 the best? Or are Q3 and Q4 the same?
Q3 and Q4 will be similar. Q4 may be slightly better.
Okay. That's mainly driven by Kışladağ.
Correct.
Okay, that's helpful. Thank you. 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.
Yeah, it's George. 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. 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.
So-
Yeah, Tanya, it's Phil.
Yeah, Phil. Yeah. We'll be looking at Stratoni separately from Skouries, because we're assuming Skouries starts construction in the second half. It won't have care and maintenance costs.
That's correct. Just to summarize, I think you know, the future quarters will be lower than we expect it to be lower than what we had in Q1.
If we use, like, $10 million a year for Stratoni, is that reasonable?
I think that's a reasonable number.
Yeah.
Yeah. 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. We expect the future quarters will be less than what we experienced in Q1.
Okay. 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 gonna review Skouries again?
Could 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?
On the initial capital cost, maybe just to reiterate where we're at on the project. You know, you got the main body of the plants in place. We believe that the overall capital cost is largely reduced relative to other projects that are starting from scratch. You know, all of grinding, crushing, flotation, concentrate handling, all that major gear is actually set in place. In fact, we're putting the building up around it. The exception in the processing area is just the filters. You know, 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. That, I think, was a pretty good indicator, and that's essentially the biggest piece of equipment yet to be procured.
When you look at what's left to be done, there's a lot of civil work, you know, 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. You know, obviously diesel prices are up. During the construction phase, we're not consuming a lot of electricity. So, you know, those 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. Just on the inflationary pressures, I guess, you know, would you say it's, you know, you're seeing it at all of your operation, or is it more localized to Turkey and Greece because it's, like, you know, closer to the Ukraine-Russia situation, where other companies are feeling more exposures on consumables than other?
Well, I'd say the unique thing in our situation is that, you know, our two operations in Europe are seeing higher electric energy costs, and it's being driven by the natural gas crisis. You know, 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. 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.
Maybe just.
And just to com-
Sorry, go ahead.
Sorry. Just to comment, Tanya. 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, you know, the published rate was quite high, between 50%-60% at the end of 2021, but we're not seeing that come through to the bottom line because of the lira. In Turkey, probably the most significant cost is the diesel impact at Kışladağ. 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 Kışladağ 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. At the same time, electricity on a consolidated basis is about 10% of our total direct operating costs. Again, it's not a huge percentage.
Maybe if Phil can remind us what oil price or diesel price did you use in your guidance for 2022, and what's the sensitivity for a $10 a barrel or a 10% change in diesel price?
In terms of diesel, the current price is about $1.25 a liter in Turkey. Everywhere else in terms of diesel at Efemçukuru, Greece, and in Quebec, it's really not significant. Again, diesel is about 3% of our total costs. The impact on our costs, you know, based on our 2022 guidance for sales is probably around $13 an ounce. It's not huge.
Take it offline. Thank you. I'll let someone else ask.
Thank you, Tanya.
Once again, if you have a question, please press star then one. The next question comes from Kerry Smith with Haywood Securities. Please go ahead.
Thanks, operator. Phil, maybe you can answer this or maybe Joe. What is the grade profile like at Kışladağ 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 it's slightly better later in the year. I don't have it in front of me, but I think we're right around 6.65, 6.6 quarter-over-quarter. It's really about getting tons on the pad at mine grade. What we saw in Q1 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. As we look forward, you know, in managing grade, those marginal tons above cutoff, we will not bring to pad, which will help us with grade for the balance of the year.
Okay.
We are stockpiling that lower grade for later placement.
Okay. When do you start putting the 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, you know, we did place additional inner liner plastic on the south leach pad for the early placement of HPGR tonnage as we work through what we expected to be getting our agglomeration right. We're gonna extend that a little bit. We will be available for placement probably mid Q3. You know, 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. We will be on clean plastic nonetheless, even on south.
Great.
I would say that we'll have that, you know, we'll know that more clearly by mid-year as to how we wish to deploy that going forward. You're right, meaning that north leach pad is really attractive.
Great. Right. Okay. Just going back to Tanya's question on the Stratoni standby cost, the $9.4 million in Q1. If it's $2 million - $2.5 million - $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 gonna be $5 million maybe or $6 million? Can you give any guidance?
Yeah, Kerry, it's Phil here. I think, you know, based on what we had in Q1, I would say, you know, probably less than $5 million, but I think it's probably in that ballpark per quarter.
By Q3, you would be back to sort of this $2.5 million-$3 million run rate, then you'd have all the one-time things out of the way. Is that right?
By Q3, you know, assuming we get Skouries reconstruction started, then the care and maintenance costs related to Skouries would end.
Yeah. Okay. I'm talking Stratoni, though.
Kerry, this is Joe Dick. By end of year, we should be normalized fully. You know, the start of construction at Skouries offsets any residual labor 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. Just so I'm clear, that $2.5 million-$3 million run rate is with Skouries not contributing any care and maintenance costs to that number, right? That's just for Stratoni.
Correct.
Gotcha. Okay. Phil, just going back to your comment about, you know, you're not really seeing any in U.S. dollar terms anyhow, any real cost inflation in Turkey. Are your unit costs 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, at least they went up a lot at Olympias based on what I calculated, and it seems like Kışladağ has gone up a significant amount as well. It was like $14.5 a ton in Q1, and last year it was slightly below $11. So how should we think about your unit cost per ton at Kışladağ and Olympias on a go-forward?
Kerry, just to be clear, your question's specifically to Olympias?
And-
Kışladağ.
Like, if I look at your total mine cost for mining at Olympias from the Q1 in U.S. dollars.
Yeah.
Divide the ounces sold, it's like $350 a ton. That number last year was like well below that. It was, you know, $270 or something. I'm just wondering about the all-in cost per ton going forward at both Olympias and Kışladağ. In which way
Well, Kışladağ tons in Q1 2022, as I mentioned, were lower than Q4. Sorry, higher than Q4.
Right.
They were lower than the first three quarters of 2021. Tons were down compared to, you know, the first few quarters of 2021, and we expect those tons will increase.
Right.
Kerry, this is Joe. Are you thinking in total tons strip plus or are you thinking in just ore tons? We're giving you the numbers back in ore tons.
I'm thinking in all-
Yeah, I'm just talking about tons.
Yeah. All-in cost divided by tons processed, tons milled, tons leached.
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 Kışladağ.
At Kışladağ.
At Kışladağ. Yeah. In my numbers, in Q4 at Kışladağ, your cost per ton to the pad was about $19 a ton. In Q1, it was about $14.5. Last year, average was less than $11. I'm just wondering about that number on a go-forward basis. Is it gonna get back to around $11 a ton? Then I have the same issue with Olympias. I think the cost per ton milled is quite a bit higher in Q1 than it was. Well, it was higher in Q4 as well, but it was certainly higher than last year. Last year was kind of a, you know, a year when every quarter you kinda incrementally were doing better on the cost side as you got more tons up. Obviously Q1 was pretty tough for you. That's what I was trying to get a handle on.
Kerry, it's Phil. Tons in Q1 2022 are just over 2 million tons for Kışladağ. In Q4 of last year, the tons were below 2 million tons. That's why you had a higher cost per ton in Q4. But then the previous three quarters were over 3 million tons. You had a much lower cost per ton. That's why you see that fluctuation. I think going forward in 2022, we expect to be over 3 million tons, probably approaching on a quarterly basis, you know, above that placing rate per quarter. You should see the cost per ton drop again.
Okay, so 3 million tons per quarter and the cost should come down 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. What will the grade look like at Olympias this year? You know, is it gonna probably be more in the 7-gram range, which is kinda what I was thinking.
Q2 to date, Kerry, we're placing at 7.4, or we're mining at 7.4. You know, 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.
Okay.
We're looking to maintain that grade rate as we have at the start of Q2.
Okay.
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. Those shipments occur when we've got a full shipment to ship. 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. When you look at Q1, we had a lot lower byproduct credits against our cost relative to Q4, just due to the lumpiness and timing in byproduct sales. It's only a part of the story, you know, that the COVID impacts were part of it. We also ended Q1 with more stockpiles on the ground, which is not typical at Olympias. It's kind of positioned us a bit better to start Q2.
A number of factors that don't show up in the bottom line that, you know, I think help give you an indication of why we, you know, we're confident we're gonna improve performance out of Olympias as quarters unfold.
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 con, so you're probably not getting great 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.
Kerry, last year there was a new Chinese VAT that was introduced for concentrate from Olympias that was being shipped to Chinese smelters. That was a 13% VAT. We had planned to offset a big chunk of that. Part of the plan was to ship I think it was up to 50% of the production to a Russian smelter. Unfortunately, with the sanctions that have been imposed recently because of the ongoing conflict, we're redirecting some of that and, you know, 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. You know, some of that now is going to China, but some of it's going elsewhere and avoiding that VAT. You know, that's right now a negative against what we budgeted. No shipments going to Russia. Part of that, we're paying the VAT into China, and part of it, we have found another customer that's testing the concentrate. Hopefully we'll be able to ramp that up.
Kerry just, you know, the impact of not being able to ship to Russia is about $5 million.
Okay. That was in Q1, right?
No, total year.
That's total year.
Okay. Gotcha. Okay. Yeah. You're not really seeing any significant increases in your treatment charges. Generally, it's just this tax that's causing you a bit of a problem then. Okay, I got it.
Yeah.
Okay. Okay, great. Thanks very much, guys. Appreciate it.
Thanks, Kerry.
Once again, if you have a question, please press star then one. The next question comes from Fahad Tariq with Credit Suisse. Please go ahead.
Hi, good morning. Thanks for taking my question. It's 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.
You know, we did have snow at Skouries, but it didn't impact us any way in as far as, you know, critical path or 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. No significant impact on the water systems or drainage or collection or that kind of thing for Skouries.
Okay, great. Yeah, just wanted to confirm that. Thank you.
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