Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Eldorado Gold Corp (NYSE:EGO)

Q1 2014 Earnings Conference Call

May 2, 2014 11:30 PM ET

Executives

Nancy Woo - VP of IR

Paul Wright - CEO

Norm Pitcher - President

Paul Skayman - COO

Fabiana Chubbs - CFO

Analysts

Dave Katz - JPMorgan

John Bridges - JPMorgan

Cosmos Chiu - CIBC World Markets

Kerry Smith - Haywood Securities

David Haughton - BMO Capital Markets

Josh Wolfson - Dundee Capital Markets

Patrick Chidley - HSBC

Andrew Quail - Goldman Sachs

Anita Soni - Credit Suisse

Dan Rowlands - RBC Capital Markets

Operator

Good morning, ladies and gentlemen. Welcome to the Eldorado Gold Corporation First Quarter 2014 Financial and Operating Results Conference Call. Please be advised that this call is being recorded on May 2, and the replay will be available at www.eldoradogold.com. I would now like to turn the meeting over to Ms. Nancy Woo. Ms. Woo, please go ahead.

Nancy Woo

Thank you operator. This presentation includes statements that may constitute forward-looking statements or information. Any forward-looking statements made and information provided reflect our current plans, estimates and views. Forward-looking statements or information, which includes all statements that are not historical facts, are based on certain material factors and assumptions and are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated and/or suggested by the forward-looking statements or information.

Consequently, undue reliance should not be placed on these forward-looking statements and information. The information contained in our annual information form and in our annual quarterly management discussion and analysis is available on our website and on SEDAR identifies factors and assumptions upon which the forward-looking statements or information are based on and the risks, uncertainties and other factors that could cause actual results to differ.

All forward-looking statements and information made or provided during this presentation are expressed qualified in their entirety by this cautionary statement and the cautionary statement contained in our press release dated May 1, 2014.

I will now turn the call over to Paul Wright, CEO of Eldorado Gold.

Paul Wright

Thank you Nancy, and good day ladies and gentlemen and welcome to Eldorado Gold Corporation’s Q1 operating and financial results conference call. Joining me in Vancouver this morning are Norm Pitcher, President; Paul Skayman, Chief Operating Officer; Fabiana Chubbs, Chief Financial Officer; and Nancy Woo, Vice President, Investor Relations. We will follow the customary format, following a few brief introductory remarks from myself, Norm will cover, cover the operational highlights of the quarter and comment on the outlook, following which Fabiana will summarize the significant aspects of our Q1 financials and then we’ll open up for questions.

We’re very pleased with the start of the year, all of our mines contributed to a very strong performance in the quarter with gold production of 196,523 ounces representing a 20% increase over the same quarter of 2013. All in sustaining costs of 786 per ounce compared very favorably with our guidance for the year of $950 an ounce and secures our position as having one of the lowest cost structures in the industry. We retain our guidance for the year and expect to produce between 730,000 and 800,000 ounces. On the development front the Skouries project in Greece remains our most significant growth project in 2014. We’re approximately $200 million as planned to be spent in the year representing 60% of our total growth spend for 2014.

With over 500 persons working on the site, progress is being made on multiple fronts, both on surface and underground and in the quarter we commenced mill foundation force. As mentioned we are now in a position to state what we believe to be a realistic schedule to complete the outstanding permitting and construction of our Eastern Dragon project in China. Together with our 20% joint venture partner CDH, the team is working hard to ensure that we commence production in 2015.

Returning to Greece, specifically the outstanding approval of the Perama EIA, we previously mentioned we do not anticipate any movement on this file until after the municipal and European elections in late May. And you can expect commentary from us when we report on our second quarter results.

Before handing over to Norm, I’d like to acknowledge and express my appreciation for the dedication to and the hard work for the corporation by Nancy Woo our long standing Vice President of Investor Relations who will be retiring at the end of this month. Krista Muhr, who many of you know has joined us recently will be taking on these responsibilities as of June 1.

With that I’ll hand over to Norm.

Norm Pitcher

Thanks Paul, good morning everyone. My comments will be fairly brief this time since it was a very solid quarter operationally, and there isn’t really much in the way of issues to highlight this quarter. In Turkey, at Kisladag we produced 67,075 ounces at a cash cost of 456 per ounce with capital expenditure at $7.9 million, which included money spent on capitalized waste and leach pad construction. The new fleet of mine equipment has been incorporated into the operation is performing well. We continue to evaluate options for expanding the Kisladag operation including of course using equipment originally purchased for the Phase 4 expansion.

At Efemcukuru we produced 26,969 ounces at cash cost supply 26 per ounce. Capital costs at Efemcukuru were 5.4 million for underground development and mining equipment, we’re looking at potentially expanding Efemcukuru to 500,000 tons per annum. A decision on this will be made as capital costs are developed along with a new life of mine planned at the expanded grade.

Over to China, Tanjianshan produced 28,379 ounces at a cash cost of 422 per ounce, a modest capital spending of USD1.1 million was mostly for capital waste and the JLG cutback. Most of the tons processed during the quarter came from stockpile as we continue way stripping and the JLG open cut.

Jinfeng had an excellent quarter, producing 41,295 ounces at a cash cost of 626 per ounce well below the budgeted cost for the quarter, capital spending was $5.5 million for underground development, mining equipment and work on the tailing stem.

At White Mountain produced 26,472 ounces of gold at a cash cost of $607 per ounce. Our mine grades of White Mountain were high during the quarter due to changes in the mine plan and we expect rates to come down in subsequent quarters.

The Olympias tailings retreatment produced 6332 ounces of gold and we saw improved throughput and recoveries during the quarter there. That’s it for the gold assets as far as Vila Nova we sold 217,000 tonnes of iron ore during the quarter. Pit production was impacted slightly by heavy rains which are seasonal. And at Stratoni we sold 16,717 tonnes of concentrate no real operating issues there.

On the development side, Skouries capital spending was $16.3 million for the quarter clearing the open pit is pretty much done as of the roads connecting the first top soils storage area on the tailing dam. The poring of foundation for the mills began during the quarter along with other concrete works. Miner inflows of water into the decline slowed advance, this problem has been dealt with using concrete grouting and normal advances resumed.

At Certej, we’ve finalized the prefeasibility study and submitted the 43-101 Technical Report. We will now proceed with a number of optimization studies prior to starting to prepare a full feasibility study later this year.

At Eastern Dragon with our partner CDH we’re focusing on completing the revised EIA which we expect to submit this quarter. Following approval of that we can then submit the PPA application and we’re targeting approval of that by the end of 2014. The PPA is the main permit needed to resume construction in the project along with a few smaller locally granted approvals.

At Olympias in the main decline, we also encouraged water inflows there which now have been dealt with the same manner in the Skouries decline. Refurbishment in the main mine continued on plan.

Briefly on exploration, it was a fairly flat quarter really due to the season only 5500 meters were drilled during the quarter. We did drill about 1300 meters at Gold Fish which is a new project in Brazil, targeting high-grade orogenic veins. We only have assay results for one hole but so far so good we have 4.35 meters at 12.74 grams per tonne of gold in that hole. I always like to end in a positive note so there you go Fabby.

Fabiana Chubbs

Thank you, Norm. Good morning everyone. I will now go through the financial statement highlighting changes in significant accounts. Commencing with the balance sheet, during the quarter we completed the acquisition of Glory resources and entered into statistic agreement to advance our Eastern Dragon project. This resulted in a $10 million decrease in the investment in associated balance, an increase of $45 million in property, plan and equipment, and a net increase in liability and equity of $4 million.

Developed changes on our balance sheet related to our normal course of business including a reduction of $15 million in the inventory balance for percent reduction of gold in sequent inventories which was filled that at yearend at our Chinese operation. And an increase of $10 million in the deferred income tax liability balance related to the impact of Turkish lira exchange rate changes on the tax basis of our Turkish stock assets as well as an increase in accrued, we hold in taxes on the dividend paid by our subsidiaries.

Moving on to the income statement, we reported a net profit attributable to shareholder of the company of $31.3 million or $0.04 per share, compared to a log of $45.5 million or $0.06 per share in the first quarter of 2013.

Adjusted net earnings for the quarter were $37.3 million compared to $83.3 million in the first quarter of 2013. The difference in adjusted profit year-over-year was mainly due to higher gross profit from gold mining operations during the quarter. Revenues for the quarter of $280 million were lower from a year ago due to a 20% fall in realized gold prices year-over-year. The 24% increase on the depreciation and amortization over the first quarter of 2013 was a result of an increased in depreciation of capitalized waste stripping costs as well as higher production from our Chinese mines which carry higher depreciation rates than our Turkish mine.

Looking at income tax expense excluding the $125 million adjustments related to tax rate increase in Greece. The effective tax rate was 36% for the first quarter of 2013 compared to 51% for the quarter. The increase in the effective tax rate year-over-year was due to the impact of Turkish lira exchange rate changes as well as increase in accrued withholding taxes on dividends paid by subsidiaries.

On the statement of cash flow, we ended the quarter with cash, cash equivalents and term deposits balance of $619 compared to $624 million at the end of 2013. During the quarter, we generated cash flow from operating activities before changes in now working capital of $95 million compared to $140 million in the first quarter of 2013.

The main uses of cash relate to capital program $80 million, the Glory acquisition $30 million and dividend payment of $6.5 million, this was offset by proceed received in connection with Eastern Dragon transaction of $40 million.

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

Paul Wright

Thanks Fabiana, thanks Norm. Operator we’ll open up for questions now please.

Question-and-Answer Session

Operator

Thank you. We will now take questions from the telephone lines. (Operator Instructions) Our first question is from Dave Katz from JPMorgan. Please go ahead.

Dave Katz - JPMorgan

Good morning I hope you all are well. With the essence expense and that you guys were discussing do you have a particular return target that would serve as minimum in other words just when you do the analysis return is below that, you wouldn’t proceed?

Paul Wright

Yes, to be frank the nature of the expansion is not going to returned depend to the extent that it will go well beyond 20% rates of return. I mean what we’re looking at right now is an expansion both it’s been described as an increase in production from 400,000 to 500,000 tons that’s in reality we made obviously what we’re targeting is increased in ounce production which may actually be achieved with less of an increase in tonnage and simply through increasing rate through reducing dilution and modifying mining method so this is not, this will not require significant capital investment and therefore rates of return will be in excess of 20%.

Dave Katz - JPMorgan

And so now that if you’re expecting fully go forward with it?

Paul Wright

Yes, this is really just a matter of defining what it is not about to defining it to justify it simply to give our engineers the plan to go forward we’re not concerned about this being depending upon rate of return.

Dave Katz - JPMorgan

Okay. And we’re just curious would you be able to provide an update on where you expect to be in terms of the final cost is everything still on plan to hit the original budget?

Paul Wright

We’ve updated guidance as was last year in terms of schedule and cost and at that point we’re working within those parameters if we see a change in either schedule or final capital of any significance we’ll obviously provide that but given the fact that we have to this point that’s we’re operating within those parameters.

Dave Katz - JPMorgan

Okay. And then finally obviously you adjusted the dividend plan last year gold prices came down but have been reasonably steady within a band if they moved either up or I guess if they move down or up would you change your opinion with regard to hedging?

Paul Wright

Sorry, the questions are not quite clear and you started talking about dividends and you ended talking about hedging, what is that...you’re suggesting that we might consider hedging to secure our dividend policy is that the…

Dave Katz - JPMorgan

No, I am sorry. What I was trying to say is that the dividend policy was established so as to make the company’s dividend flat with gold prices and therefore link in the retained cash flow to gold prices as well. And what I was saying is would there be some gold price movement that would cause you in addition to having the cash flow be dependent linked to the dividend would there be another gold price movement that could have some cause you do a similar thing and institute a hedge?

Paul Wright

That’s like asking a question how long is the piece of string, I mean are there conditions under which hedging could be considered for the corporation the answer would have to be yes and to the extent that we’re not categorically against hedging any at all times I mean it’s fundamentally hedging is a tool that can be utilized given a specific set of condition I think that’s just a specific an answer I can give to you. We’re not a company that anytime soon at all and every time when we preclude hedging as a tool to use but it’s not something that we’re frankly considering at this time.

Dave Katz - JPMorgan

Okay, thank you. That last that was what I was going for. I appreciate that, thanks.

Paul Wright

You’re welcome.

Operator

Thank you. Our next question is from John Bridges from JPMorgan. Please go ahead.

John Bridges - JPMorgan

Good morning Paul, everybody. And so I don’t have any question I just want to say thank you Nancy for all the help over the years and wonder how you’re going to manage without her, Paul.

Paul Wright

It’s going to be bit of a challenge. Krista is recognizing that and I’m sure she is up for the task.

John Bridges - JPMorgan

Well done and great quarter. Thank guys.

Paul Wright

Appreciate your comments John, much appreciate it.

Operator

Thank you. Our next question is from Cosmos Chiu from CIBC. Please go ahead.

Cosmos Chiu - CIBC World Markets

Hi and thanks for hosting the call again first off best of luck Nancy and appreciate all the help over the years. Turning on to the questions then so maybe in terms first on CapEx certainly the spend, the CapEx spend this quarter when I compare to your full year guidance seems to be on the lighter side and I guess my question is twofold and team have you made any changes or are we still looking at the 2014 CapEx guidance that you’ve given to us is that still what we should be using and at the same time is it safe to assume that from that perspective CapEx will be higher in the subsequent quarters?

Paul Wright

Yes, I mean we haven’t really we’re not changing that guidance for 2014 Cosmos and you’re right it was a little bit lighter light at Olympias and Efemcukuru as part of that is just seasonal part of that with Olympias and I guess Efemcukuru to certain extent too is we think that with some of these water issues and the decline so that slowed production and that will certainly pick up, that’ll pick up now and for the rest of the year, you know at Skouries we are starting to pour foundations now and setting rebar and working in more areas so it’ll pick up there as well, so we’re not really, we’re not changing at this point for the -- the year’s guidance.

Cosmos Chiu - CIBC World Markets

Yes, and Norm even at the operating assets you know if I look at like Kisladag and Jinfeng and even those were pretty light in terms of Q1 spending, is there a reason behind it or you just assume that’s going to pick up.

Norm Pitcher

Probably because they beat him pretty good at the projects this year…

Paul Wright

Oh, no, I don’t think for any of the operations we really changed our view on what we’re going to spend this year you know again it partly comes down to the timing of the season and things like that or equipment deliveries what have you.

Norm Pitcher

In China we sort of almost take a month out of the circular, I think that the GM is probably a little bit optimistic and they sort of put things forward in terms of timing. So still expecting similar spending I guess on the operations.

Paul Wright

Well a lot of the sustaining capital relates to you know service works and tailings dams and leach pads and these sorts of things and most of our mines in the northern hemisphere and the winter time just isn’t the time when you’re doing this so…

Cosmos Chiu - CIBC World Markets

For sure.

Norm Pitcher

And you see sustaining and growth capital increasing, as we go through the quarters. Whether we end up at the end of the year spending as much as we budgeted I mean, I think typically we end up spending a little bit less each year, that’s just a pattern if you go back through history.

Cosmos Chiu - CIBC World Markets

And then you since Paul and Paul you bought out the Chinese assets and I noticed that the grade profile was actually pretty good in Q1 is that sustainable for the rest of 2014. It’s Jinfeng and White Mountain.

Norm Pitcher

Yes, it’s probably a little higher particularly White Mountain that was very good grade and it’ll come back down as the year weighs on and the same to a lesser extent at Jinfeng.

Cosmos Chiu - CIBC World Markets

Okay, maybe if I can ask a question about the, to be quite honest I don’t really understand all the workings behind the 51% tax rate increase but I guess more importantly how should we look at in terms of tax assumption or what should we kind of put into our model for the rest of 2014.

Fabiana Chubbs

On the tax rate you will consider probably tax rate around 30% to 33%.

Cosmos Chiu - CIBC World Markets

So, more normalized then.

Fabiana Chubbs

But then you included the fluctuation in currencies, for each move that the Turkish lira had, the 10% move in the Turkish lira will cost us $11 million into your deferred tax, and 10% in RMB movement will cost you around $16 million so for instance in this quarter we have almost 3% moved in the Turkish lira and that in itself give you like $3 million to $4 million impact on your rate.

Paul Wright

But Fabby that’s only deferred taxes so it’s not cash taxes.

Fabiana Chubbs

None of this is -- that’s not the thing it’s just on no cash so it’s volatility on your income statement and ends up having an impact in your EPS calculations so your effective tax rate too but it’s not cash at all.

Cosmos Chiu - CIBC World Markets

And I got to get the opposite impact to it if the currency turns in the opposite direction.

Fabiana Chubbs

Yes.

Cosmos Chiu - CIBC World Markets

Okay, so there’s no cash impact.

Fabiana Chubbs

Market deferred taxes…

Cosmos Chiu - CIBC World Markets

Okay, cool, thanks again and congrats on a very good quarter and keep up the good work, thanks.

Paul Wright

Thanks Cosmos.

Operator

Thank you, our next question is from Kerry Smith from Heywood Securities, please go ahead.

Kerry Smith - Haywood Securities

Thanks operator. Norm just or maybe Paul, the timing on the expansion study for J. Crew (ph) that’s something that you think you would have done this year then, you said you were going to do it, but you didn’t really talk about timing, I am just curious when that might be finished.

Paul Wright

I think we’ve done most of the plant information. We’re just waiting for a life of mine plan at the different rate. So mid-year probably.

Kerry Smith - Haywood Securities

And does that, with expansion by 25% require an amendment to your permit.

Paul Wright

No we’re already got the amended permit, we’re capable of going past that 500 if we wanted to.

Kerry Smith - Haywood Securities

Okay, okay, and then thirdly so if let’s say you finish the study by midyear and it was approved is it, I presume it sounds like something that could be implemented within three to six months would be running at the expanded rate for 2015, would that be fair.

Paul Wright

Probably six to nine, Kerry so, end of the year, first quarter next year were we to make that decision.

Kerry Smith - Haywood Securities

Okay, great and then secondly and maybe Norm or Paul might be able to answer this, you didn’t talk in the MD&A about the status of the permit application for the EIS at Perama, I just wonder is there any change there, do you have any perspective on where you’re at in that process.

Norm Pitcher

Kerry, I mean I tried to cover it also in my introductory comments, I mean we, as we’ve previously mentioned we’re really on hold, waiting for the results of the elections so we can reengage on the government on this particular outstanding permit, I mean the reality is it’s a bit blunted, it’s all about political will at this point, you know the permit application has gone through full review within the Ministry of Environment is been signed off by the Ministry of Environment including four local consultation so it’s just simply waiting for sign off within the government and it’s been suggest that we revisit this post the elections in May and that’s what we’ll be doing and hence my guidance that will be by time we report on our second quarter you can expect some commentary from us on where we are on that.

Kerry Smith - Haywood Securities

Okay, I apologize it took me a while to get logged in and I’ve got the second quarter comment and that was I had got, the cost I apologize. Okay and then thirdly, maybe Fabby knows, I was curious how many dollars have been spent of the budget so far as of the end of March like how much have you actually spent on that project?

Fabiana Chubbs

The specifics it’s…

Paul Wright

That was this quarter -- 16 million this quarter but as I said to the…

Kerry Smith - Haywood Securities

Just in total if I want to just try and compare it to the total project budget I am just curious how much you spent.

Fabiana Chubbs

I may have to send you that information. I don’t have it today.

Kerry Smith - Haywood Securities

Sure if you could do that and then maybe also just the percent completion on the project too that would be helpful and just please that kind of where things at. And then maybe the last question Paul your guidance for the year-on-your outstanding cost is sort of this 915 to 985 range and Q1 obviously was significantly below that. But I was wondering can you make any comment at all as to how the Q1 actual outstanding cost was as related to say the internal budget that you might have had for Q1. I am just curious if the cost in Q1 was lower because the grades were up but was it better than maybe you expected and on a go-forward basis here the next few quarters the grades will drop so the costs are going to move up and I am just kind of trying to get a sense for how that Q1 number was relative to what you might have expected?

Paul Wright

Well look I mean if we look at each mine in the quarter, all of the mines did better on an operating cost basis and we expect in the quarter. All the mines do little bit better on production and then we expected as Norm and Paul described our sustaining capital spend for the year it’s not a divide by four situation so for the reasons previously described our sustaining capital during the year was down. Look, I mean we try to be fairly conservative on this in our pattern as in previous years will be following the second quarter we’ll give you new guidance as appropriate as it relates to both production for the year and we’ll take that number and we’ll also take the number for all in sustaining costs. Certainly, although as Paul has described we expect grades to come down a little bit at White Mountain we expect grades to come off [indiscernible] at Jinfeng I think we’re set up for a descent year where there is probably room for little bit more upside than there is downside in terms of how we view the balance of the year but you’re going to have to wait until second quarter before we give you any firm revisions.

Kerry Smith - Haywood Securities

Okay, well, that’s helpful. Thanks appreciate it.

Operator

Thank you. Our next question is from David Haughton from BMO. Please go ahead.

David Haughton - BMO Capital Markets

Good morning Paul, Norm Fabby and of course Nancy who is cleverly slipping away before the next preparation of the quarterly report. So just a question for you on Efemcukuru if I may you were talking about modifying mining methods to reduce dilution my recollection is that you’ve got cut and fill there. And a fairly distinct hang in pit wall. How are you proposing to reduce the dilution is it just getting small gearing there or what’s the idea?

Paul Wright

Yes, that certainly part of it. We are using you’re correct we’re using a mechanized cut and fill mining method and as we get into we’re still mining a fair bit or the middle that is about half of the middle push right now which is pretty chunky A+ (ph) meters in there [indiscernible] issued a narrower and we have had some we’ve had some pretty good success with long haul mining actually getting some pretty good dilution control on that so I mean that maybe one of the things that we look at. So it is probably and again a combination of gear and mining method like we’re not looking we’re certainly not looking at changing the overall mining method that’d been to grow it’s just When we're in -- appear in a couple meter wide they how we handle that by long haul or smaller equipment and stay with mechanized cut and fill.

David Haughton - BMO Capital Markets

Okay because the checks not so much in expanding the plant is getting the feed to that plant.

Paul Wright

Yes, exactly.

David Haughton - BMO Capital Markets

Okay so that looks promising. In fact to Kisladag so in Turkey you’ve already purchased the quite a bit of fleet for the phase four expansion you noted that in your MD&A what’s happening with that fleet is that thing utilized at the moment or is it just sort of sitting around can you just explain what the intension there is and where you might move forward on it?

Paul Wright

Well maybe just before jump in we need to clarify between both mining fleet as well as about $50 million or $60 million worth of crushing and screening equipment.

David Haughton - BMO Capital Markets

Okay, so I mean mining fleet.

Paul Skayman

To answer here yes.

Paul Wright

Paul will provide it.

Paul Skayman

Yes I thought you are concentrating on the mining fleet and that certainly in operation now the two shuttles have been electrified we’re running those and trucks currently running on diesel but obviously larger equipment and more efficient so the mining equipments all that work the crushing equipment is really what we’re looking at, at utilizing in terms of considering expansion options as the moment sot that’s a bit sitting around.

Paul Wright

I can just jump in here for a moment. I guess it’s safe to say that all the new fleet is not being fully utilized at today’s production rate.

David Haughton - BMO Capital Markets

And also at Kisladag, are you still putting wrong amount of pad and that had pulled the average grade down in the quarter.

Paul Wright

We put a very small amount of raw on the pad. The lower grade is for the plant this year the grade of mine plant is simply lower.

Paul Wright

What we tend to David is mine the higher levels while at wetter and tougher conditions. So the first quarter generally is lower grade than the expected average for the year. But it’s mainly crush material is not a lot of run in mine gone on in the first quarter.

David Haughton - BMO Capital Markets

Would you be able to have a ballpark kind of tonnage stage if you got in your head other don’t worry?

Paul Wright

I guess sort of 500,000 to 600,000 tonnes.

David Haughton - BMO Capital Markets

Okay nice good. And over to Olympias, you’ve made reference to the decline progress and water ingress et cetera, what kind of time line do you for completion on that decline?

Paul Wright

Yes, 3 to 5 let’s day, it’s a 8 plus kilometer tunnel and we’re probably 1.5 in right now.

David Haughton - BMO Capital Markets

Okay 1.5 in, have you done any exploration of that tunnel because that always seemed to be a promising prospect?

Paul Wright

Not really. Of course we’re mapping and sampling as we go in and haven’t had anything really yet, but I don’t think we really in the area where we would have expected to.

Operator

Thank you. Our next question is from Josh Wolfson from Dundee Capital Markets. Please go ahead.

Josh Wolfson - Dundee Capital Markets

Just a question on the Eastern Dragon sale and pit condition that was disclosed, could you maybe talk about what the condition would be for that pit to be able to be exercised and I guess what the motivation was to incorporate that in the transaction agreement.

Paul Wright

Josh we’re not going to get into discussion on raw material contract and raw material assets, I mean, surprise to say we structured an arrangement with our partners to ensure we have showed congruence of objectives in terms of ensuring that Eastern Dragon is up and running and is structured also in a way that would satisfy the requirements of a part private equity group.

Josh Wolfson - Dundee Capital Markets

Okay I guess my concern or the concern from doing that would be related to permitting which relevant at the current time. But I understand if it’s not material for you guys. Just a question as well for Greek royalties given that you’ve already received joint ministerial decisions for number of assets there, what point would you finalize what the rates would be for I guess Olympias and Skouries?

Norm Pitcher

I think this has been Wright presented but it will -- as I understand that has to go through parliament. I don’t know that it’s negotiation individually. It’s basically the legislation that has to be enacted Josh. Obviously we’ve been involved in the process in terms of providing some recommendations and inputs into the process and I think it is safe to say that without being specific we’re comfortable with the direction of the government is going, but we just really waiting for legislation to be and then we can give guidance once it’s in place.

Josh Wolfson - Dundee Capital Markets

Okay, that sounds great. Thanks so much.

Operator

Thank you. Our next question is from Patrick Chidley from HSBC. Please go ahead.

Patrick Chidley - HSBC

Hello everybody and congregations. And thanks very much to Nancy for all the help. The first question just one Kisladag quickly just going back to -- I'm sorry if I miss this earlier but I used to wait in for permits on the expansion there and what sort of update is there if you have?

Paul Wright

We are still waiting for the EIA to give us the expanded up to 33 million tons I think total here. I mean we guided earlier sort of midyear this year and that as an early change.

Patrick Chidley - HSBC

So expecting that mid June is the just in the process at the moment or is it old?

Paul Wright

Yes, it’s system in process.

Patrick Chidley - HSBC

Okay and by that time you’ll be able to sort of I guess give us more information on what the development options are?

Paul Wright

I have coincided with grating of the EIA exactly but yes it will be probably little late but later in the year.

Patrick Chidley - HSBC

And then just on Skouries just wanted to get an idea where you think you’ll be at end of year here in terms of construction obviously it does seem to be going little bit slowly and just wondered what things will look like at end of the year?

Paul Wright

I expect a fair amount of concrete in the ground and you will see some steels ticking up above it, frankly speaking Patrick, I mean that’s really.

Patrick Chidley - HSBC

Okay.

Unidentified Company Representative

Yeah. I mean it; it will start to look like a plant.

Patrick Chidley - HSBC

That’s good. And how about the pits?

Paul Wright

We’ll send you some pretty photographs. Look, the pit is actually where, no matter which we’re constructing those project is a fine balance between, what we do in the pit and how we build the payments down. So the tailing, instruction comes from ways removal so you will start to see the, put will be developed consistent with the rate at which the tailing is done is being constructed it’s a best way of describing it.

Patrick Chidley - HSBC

Okay.

Unidentified Company Representative

There is no way to stop, for say that the waste from the pit goes to the tailings tank.

Patrick Chidley - HSBC

Okay.

Paul Wright

So it’s not a case of us going out there and doing a big free strip of the open pit, because there really is not pre-strip I mean they [Indiscernible] right at surface so that we’re really scheduling the way we’re moving around the pit to go inside, where our construction on in terms of billing the first tailing is done.

Patrick Chidley - HSBC

Okay. Great. Okay, well, that definitely helps visualize things. Great. Okay. Thanks very much.

Paul Wright

Thanks, Patrick.

Operator

Thank you (Operator Instructions) Our next questions is from Anita Soni from Credit Suisse. Please go ahead.

Anita Soni - Credit Suisse

All of my question have been asked except for the strip ratio I’m not sure I missed it.

Paul Wright

You didn’t miss it Anita, we are waiting for you.

Anita Soni - Credit Suisse

Okay. All right. So if you want to address it now, we will set it offline, that’s fine.

Paul Wright

Paul Skayman will take the honor.

Paul Skayman

Share price on I guess you’re talking Kisladag here?

Anita Soni - Credit Suisse

Yeah.

Paul Skayman

9%.

Anita Soni - Credit Suisse

And Jinfeng usually.

Paul Skayman

Well, Kisladag sort of running to shy at 2 to 1 in that sort of in-line with what we are expecting for rest of the year. Jinfeng is -- it was running a little higher in the first quarter, like we’ve sort of, done our major stripping now, it’s sort of running at 8 to 1 and that will drop down as the year ways on.

Anita Soni - Credit Suisse

Okay. And then sort of Tanjianshan is also, right?

Paul Wright

Yeah. Tanjianshan it’s a bit of a bogus number because we’re mainly mining of stockpile so it’s basically just a waste stripping campaign. You can’t really sign up a strip ratio to it for say.

Norm Pitcher

Okay. I mean strip ratio in the core it was 3 to 1 but it’s -- they are such small numbers that it becomes bit academic.

Anita Soni - Credit Suisse

All right. So thank you very much. And congratulation on a good quarter and thank you much Nancy for all your help throughout the years.

Operator

Thank you. Our next question is from Dan Rowlands from RBC Capital Markets. Please go ahead.

Dan Rowlands - RBC Capital Markets

Yeah. Thanks very much and great start to the year guys. Norm, I don’t know if it’s possible but could you maybe elaborate on some of the optimizations or the modification that are currently being contemplated for Kisladag?

Norm Pitcher

Well, we’re just -- I mean really just looking at a different production rates, kind of using what we’ve got, using the currently mining fleet and more or less using what we’ve got in terms of pricing and screening equipment you know sort of looking at, right now we’re sort of normal 4.5 for the crushing, to the crushing plants. So we’re looking at it and kind of increments from there, I mean 15, 20 you know plus 20 sort of thing. And then if you looking at the capital and operating associate with each of those and sort of you know coincide now with the production plant from the pit as well.

Dan Rowlands - RBC Capital Markets

Okay. So basically, the same expansion but maybe more in the staging approach going forward?

Norm Pitcher

So nothing, if you it what the mine look like under the original phase IV match and what is going to look like, regardless of any expansion that we do is, is quite similar I mean the lease pit expanse out to the north and the others are north, are new north rock of it and it’s very similar, it’s just the what rate are you mining it and crushing and screening.

Dan Rowlands - RBC Capital Markets

Okay. So just sort of falls that your project based developments they are all based on the IR and this is way to look at potentially boosting the IR their expansion.

Paul Wright

That’s right. I mean we’re just taking advantages of the fact that we’ve -- the time we are ready to find tune and better understand what the options are between where we are right now and we’ve previously been working towards and stepping off of the fact that as we previously we have $50 to $60 million of gear sitting there, what give us on a go forward basis are these sort of metal prices what gives us the best return on investment. Within the range between 12.5 and 25 we’re simplistically, previously we’d looked at going straight from 12.5 to 25 plus 8 million tonne of run of mine that was sort of predicated on our higher gold price it maybe if we’re in, if we take a view that were in a $1200 to $1400 range there maybe frankly a rate lower than that, that gives us a better rate of return than doing the full expansion and is also a lower capital investment given where we set so that’s the type of sort of exercise that we are going through, right now.

Dan Rowlands - RBC Capital Markets

Okay. That be great. And then just confirmatory question, with respect to the EIA the expansion at 33 million ton capacity that includes all run of mine and or what would be crushed and then directly?

Paul Wright

That’s any, and that’s just the number I mean [Indiscernible] something unless that we’re targeting for that lower we are not targeting that production lines. But yeah…

Dan Rowlands - RBC Capital Markets

Its [Indiscernible].

Paul Wright

I have to think if it’s all the leach pit.

Dan Rowlands - RBC Capital Markets

Okay. Perfect. That’s; great. Thanks very much and again we’re missing you Nancy but you did a great job. Enjoy the weekend.

Operator

Our next question is from Andrew Quail from Goldman Sachs. Please go ahead.

Andrew Quail - Goldman Sachs

Morning guys. Thank you very much for taking question. Pretty much of my questions have been answered. Just wanted to concern sort of any guidance you can give at Kisladag with sort of grades going forward given what happened in Q1 and I think the guidance is about 0.9?

Paul Wright

Yes little tiny bit more than that as sort of guidance for the year at the moment. And that hasn’t changed. As I said Q1 normally is a bit of lower grade because we’re mining that the periphery rather than getting into the heart the deposits while it’s wet.

Norm Pitcher

Until we change our guidance, our guidance remains the same for the year.

Andrew Quail - Goldman Sachs

And you guys don’t any sort of change the guidance sort of with the permitting process, if it was pushed out?

Paul Wright

Not at this stage.

Operator

Thank you. Our next question is a follow-up question from Kerry Smith from Haywood Securities. Please go ahead.

Kerry Smith - Haywood Securities

Thanks for taking my second call. I just wondered on Efemcukuru one of the thing, will there be some time required to develop bit more headings in more scoping areas to get to build delivered 500,000 tonnes a year or you have enough now that you could probably do that with no issues?

Paul Wright

There is not a lot. I don’t think there is a lot of underground infrastructure that would need to be little bed. As Paul sort of alluded to Paul Wright in his comments, I mean, the other thing that we’re looking at is getting ounces to the mill by reducing dilution a little bit and we’re not bad dilution, but I mean that’s another way by helping the grade to do it is well so I guess could be a combination of two. As I mentioned we’re not looking at radical changes in the mining method or anything else. So it can be a little bit more underground development but not significant.

Kerry Smith - Haywood Securities

But with the critical path to get to higher production rate that’s called whether it’s ounces or tonnes, is would be the construction not necessarily any underground development that you have to do?

Paul Wright

It wouldn’t be underground development other than anything.

Norm Pitcher

I think it’s reasonable to assume carry that in a time it would take to implement whatever changes in the plant would be sufficient for us to whatever development.

Operator

Thank you. We have no further questions at this time. I would now like to turn the meeting back over to Mr. Paul Wright.

Paul Wright

Well thank you Operator and thank you everybody who’s attended on the call and call for the questions, greatly appreciated, and we look forward to talking to you all at the end of second quarter. Thanks again operator

Operator

Thank you. The conference call has now ended. Please disconnect your lines at this time. And we thank all who participated.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Eldorado Gold's CEO Discusses Q1 2014 Results - Earnings Call Transcript
This Transcript
All Transcripts