George Burns - CEO, President and Director Paul Skayman - COO Fabiana Chubbs - CFO.

Steven Butler - GMP Securities Tanya Jakusconek - Scotiabank Anita Soni - Crédit Suisse Aegean Dan Rollins - RBC Capital Markets.

Good morning. My name is Denise and I'll be your conference operator today. At this time, I would go to the Eldorado Gold Corporation Second Quarter Results Conference Call. [Operator Instructions]. Thank you, President and CEO, Mr. George Burns, you may begin your conference..

Thank you, Operator. Good morning and welcome to our 2017 Second Quarter Financial and Operating Results Call. With me in Vancouver, I have, Paul Skayman, Chief Operating Officer; and Fabiana Chubbs, Chief Financial Officer; and Krista Muhr, Vice President of Investor Relations.

Before I begin, I must remind you that any projections and objectives included in our discussion today are likely to involve risks which are detailed in our 2016 AIF and in the forward-looking statement disclaimer at the end of this news release.

We have provided detailed financial and operational information in the press release that went out yesterday evening. And I will shortly turn it over to Paul and Fabby to review these two areas.

I would like to focus on the recent close of the Integra acquisition, the progress in Greece, our exploration success during the quarter, as well as the work we have ahead of us for the remainder of the year.

I must admit, it was a pretty fast-paced start to my new role as President and CEO here at Eldorado, with the announcement of the Integra acquisition coming out only 2 weeks after me officially taking over for Paul Wright.

In early May, we went public with our offer to acquire the remaining shares of Integra Gold that we did not already own which totaled approximately USD 533 million.

Given our history of Integra ownership, just over 18 months and the active participation as a member of the technical committee, we formed our own internal views of the potential to optimize the Preliminary Economic Assessment or PEA.

We're now looking forward to releasing a prefeasibility study in early 2018 which will include the drilling that Integra had not previously captured in their PEA in February 2017. We expect to declare maiden reserve and incorporate 170,000 meters of drilling not included in the March 2017 resource.

We expect these results to clearly demonstrate why this is a good deal. In addition to the operational upside, the exploration team is excited by the addition of the highly prospective project to our portfolio. Here, we will build on the experience and knowledge of the team that completed the Triangle discovery to identify and test new opportunities.

Our plans for the second half of 2017 include drill testing new exploration targets in the project area as well as drilling extensions of the C5 and C7 mineralized zones at the Triangle deposit. Looking at exploration at our other projects. Our team is busy with a number of projects that fit into our future project pipeline.

During the second quarter, the company completed 21,650 meters of exploration drilling at the company's exploration projects and mines.

In Turkey, exploration activity at Efemcukuru included infill drilling of inferred resource zones in the middle, south and Kestane Beleni northwest shoots, drill testing exploration targets within the central parts of the Kokarpinar vein system and identifying and testing new targets outside of these two main vein systems.

In the Certej district in Romania, exploration during the quarter focused on the large Bolcana porphyry project. Most of the drilling during the quarter targeted deeper levels of the system and confirmed the deep continuity of the strong mineralization previously defined at shallow levels.

Exploration in Serbia during the quarter continued at the KMC project with further drilling of the Shanac, Copper Canyon and Gradina prospects. In Greece, underground drilling at Stratoni mine infill inferred resources in the lower portion of the Mavres Petres orebody and demonstrated down dip continuity of the ore body.

In Greece, during the quarter, we hosted 2 successful site tours with investors and analysts to see firsthand the development work at our Skouries and Olympias projects in Halkidiki. Our Greek team has advanced the Phase II at Olympias through commissioning.

While we're expecting to declare commercial production in the third quarter, the timing is being pushed out slightly and we're now expecting to declare commercial production during the fourth quarter. This extra time will give the team the opportunity to work through the tailings filtration bottleneck which Paul will discuss in more detail shortly.

The Skouries development project continues to advance. However, capital expenditure guidance has been reduced from $170 million to $200 million, down to $80 million to $90 million for 2017.

The delay in spend to date for the year was due to poor winter conditions in the region during the first quarter combined with a delay in granting of a required installation permit by the government. We continue to work with the ministry to move these permits through their process.

With this delay in project works, we're now pushing guidance for start-up at Skouries to 2020. As I stated last quarter, both Skouries and Olympias are quality assets with mine lives in excess of 25 years.

Combined, they are expected to produce over 240,000 ounces of gold per year in addition to an equivalent value in silver and base metal credits which in turn will translate into significant free cash flow. Once again, we're experiencing a delay in timing of granting of permits.

As well, we still have not received any information or formal notification about the intention by the government to move forward with arbitration. We're going through a full review of our capital spending in Greece and all of our in-country project timelines.

We're focused on working with the government to release the routine permits required to progress our investments. I do hope that we can find a mutually agreeable path forward with the Greek government in order to continue to drive economic growth and development in a region that we're a welcome partner.

And now, before I turn it over, I would like to say in closing that I'm excited to welcome our new team in Quebec to Eldorado Gold. We're looking forward to working in this new jurisdiction and learning from their experience and history in the region of Québec. That's it for me. Over to Paul Skayman..

Thanks, George. Good morning, everyone. Starting with Turkey. Kisladag produced 38,500 ounces of gold which is below our initial expectations for the quarter. As we indicated in late June, gold solution grade and consequently ounces recovered have lagged internal expectations and we've subsequently adjusted cyanide addition rights to the pad.

I should stress that common test work on material recently placed continues to confirm our recovery thesis on this material. We've adjusted cyanide addition at the end of Q2 and the ounce production improvement will take time, given the pad height and current percolation rates.

We do expect Q3 to be similar to Q2 in terms of ounce production and a pickup in Q4 to meet or exceed the 180,000 ounce guidance number for the full year. These pads exhibited type of inertia where once flows start to happen, we expect this to continue for some time. Tonnes of ore mined and placed on pad were in line with budget.

The head grade was slightly lower than budget. But year-to-date, we remain slightly above the predicted grade of 0.94 for the year. Year-to-date strip ratio at Kisladag was 1.27:1, again, slightly above full year guidance of 1.18. Cash costs are very good for the quarter at $464 an ounce.

And based on these results, we have reduced cash cost guidance by $75 an ounce. These savings are due to a combination of exchange, foreign exchange and operating efficiencies. Also, in Turkey, Efemcukuru turned in another solid quarter with production of 23,200 ounces.

Unfortunately, ounces sold were well below this as the final shipment for the quarter was not recognized as a sale due to shipment timing around the end of a religious holiday in Turkey. The tonnage mined in-process was slightly over budget and ounce production slightly behind, due to lower traded head grade in Q2.

Cash costs for Q2 were $525 an ounce and pretty well on the lower end of guidance which is between $525 and $575 per ounce. Moving over to Greece. We continue to work on ramp up for the Olympias circuit. All things have been progressing reasonably well.

We've identified a bottleneck in the tailings filtration stage that is limiting capacity to around 60% of design. We've identified a solution which is the installation of a cyclone to split tails with the course being mixed with cement placed underground as fill and the fines that we filtered through the same filter.

This will reduce the load on that filter by around 60%. This is being implemented currently. We still intend to be in commercial production before the end of the year. With the bottleneck and extra engineering required, we've reduced guidance by 20,000 ounces throughout the range for this year.

At Skouries, we continue to work at the site, concentrating on earthworks in both plant area and the tailings stand. Unfortunately, we've not been successful in obtaining the smaller routine permits in addition to the outstanding electromechanical permit we consider required for efficient progress.

So we've reduced our target capital spend in 2017 to around $85 million. This may change based on permit received. But with the government's publicly stated intention to proceed with arbitration, exact timing of these is difficult to predict.

At Tocantinzinho, we've now completed basic engineering in Vancouver and are in the process of updating all of our economic models. There have recently been changes in diesel cost and discussion around royalty rates in Brazil and these will also have to be factored in.

On permitting, we continue to work on the road and power line license with tailings and solutions pond permits expected early in 2018. I'd also like to echo George's comments regarding the Integra acquisition.

Post-close, we've spent a considerable amount of time with the new team, reviewing engineering alternatives, exploration potential, along with other initiatives. And we're all excited to be starting on a great new product with a solid team in Québec. And with that, I'll turn it over to Fabby..

Thank you, Paul and good morning, everyone. On the financial statements, we ended the quarter with cash, cash equivalent and term deposit balance of $752 million compared to $888 million at the end of 2016.

The decrease in the cash balance is mainly the result of cash flows generated from operating activities before changes in working capital of $46 million, net of usage of cash of $149 million in capital programs and $11 million in dividend payment to shareholders.

Profit attributable to shareholders of the company was $11.2 million or $0.02 per share in this quarter compared to a loss of $330 million or $0.46 per share in the second quarter of 2016.

Excluding the $5.6 million gain on foreign exchange regulation of deferred income taxes in Turkey, Greece and Brazil, a $1.5 million loss on write-down of assets were reported as adjusted net earnings of $6.3 million or $0.01 per share in Q2 2017 compared to an adjusted net earnings of $11.7 million or $0.01 per share in 2016.

Gross profit for the quarter was $28 million. Of $28 million was $14 million lower year-over-year due to lower production and sales at Kisladag and shipping delays at Efemcukuru. The effective tax rate was impacted for foreign exchange effects in Turkey, Greece and Brazil. Those are my comments on the financial statements.

I will turn the call back to George..

You can open up for questions now, operator..

[Operator Instructions]. Your first question comes from Steven Butler with GMP Securities..

Question for you, Paul, I guess, on Kisladag. In terms of Q2 production, while it did suffer the consequences of the cyanide, maybe not being fully applied or in earnest levels, you had a lower production quarter. But the cash costs are still remarkably intact or fairly low. What explains that? I think some of that being local currency strength.

And maybe remind us again if you can, how sensitive -- or what percentage of the operating costs are in local Turkish lira and your -- what budget you had for the year on lira? That's it..

Yes, the -- sorry, Fabby, is that mine? Fabby was going to answer that question and she's writing notes to me. The cash cost, a lot of those should be the sort of direct cost will have been attributed to ounces put on as inventory.

So you shouldn't necessarily look at sort of cash costs multiplied by ounces produced or ounces recovered as a sort of a total cost. Some costs will have sort of stayed in the pad and those ounces obviously will come out with those costs as we get further through the year.

Not that we're expecting cost to increase, but that sort of accounts for some of that movement. We budgeted the Turkish lira at 3.4. Most of the costs and Fabby's little note says 90%, so most of that costs are in Turkish lira.

That's a little bit misleading because a lot of the stuff's paid for in lira but actually linked to international rates, things like oil, et cetera. And I -- the Turkish lira got up to sort of 3.8:1. It's now back to around just over 3.5, I guess. So it's probably had a swing of about 10% throughout the year..

Is there anything else, Paul, in the results that we're even seeing any favorable trends on operating cost relative to the budget?.

It's reasonably consistent across the board. But I'm -- right now, I don't have sort of how much of that is FX. I mean, in sort of gross terms, FX probably accounts for about $50 an ounce. There's probably another sort of $25 or thereabouts of savings through efficiencies..

And then, perhaps at Olympias, in terms of the solution or the fix to the tailings circuit.

Is that something that is just underway now and the engineering has been done and the proof is largely already predetermined? In other words, the cyclone should be the fix?.

Yes, now, there's little air that sort of worries us from a technical standpoint. We've identified the concerned engineerings completed, equipment's been ordered and associated tanks, the footings are in. The tanks' in place. So we're moving forward quite well with that..

Is that something you think you'll, will have done by the end of say, September kind of time frame?.

Yes, yes. We intend having it done in Q3 and really sort of keep full guidance to give us a little bit more room to get it all right, I guess..

Your next question comes from Tanya Jakusconek with Scotiabank..

I just have a question for Paul and then may be one for Fabby, too. Paul, just coming back to Skouries again and we talked a little bit when we were there about some of the permits that were required. Remind me, I mean, some of the permits that we're not receiving are for tree cutting, road clearing, et cetera, et cetera.

We still have to hand in, from my recollection, the filter plant and dry stock plannings permit. I think we were going to submit that in Q4.

Is that still the plan?.

That's correct..

And then -- sorry and then, we were hoping to receive that by the end of Q1 or Q2 of 2018?.

The permit that's outstanding, as I've mentioned, is the electromechanical installation permit for sections of the process plant. I think we talked about the crusher, et cetera, when we were on site, crusher and sort of final stockpile. And its installation permits for those..

And I think it was for an adjustment to permits, I think for like, moving the buildings around, if I could remember? Is that part of that electromechanical permit?.

That's correct. Yes. I should just remind you, we're looking at all our sort of capital spending and plans for Greece generally, given the current situation..

Okay.

So that one, when were you expecting this electromechanical permit, I guess would be the question?.

Certainly, by now, we didn't anticipate this as being an issue. Obviously, beginning of the year, we were pretty comfortable we were going to receive it in a timely manner..

Okay. So that's separate from the roads and all the rest, okay.

And separate from the dry stack, the tailings permit and the filter plant?.

That's correct..

Okay. And then just maybe, you can help me on this and Fabby, like obviously, there's been a one-year delay, from 2019 to 2020. We've got $100 million that we're moving from this year. Are we just going to be spending that? And I know you're reviewing everything.

But are we looking that, that will be something that if we did get this permit, that would be spent in 2018? Or do we need to take that and distribute it over a few years? Maybe just to help us on how this would be spent if we got this electromechanical permit..

Yes, I mean, obviously there is a little bit of slippage given that sort of capital spend. We would be sooner, sort of permit on the issue we'd be spending fairly aggressively again. So that $100 million would probably be on the end of that -- of the capital spend.

So probably '18, '19 guidance would sort of stay -- would be sort of late '19, early '20 sort of thing..

Okay..

Tanya, if I can jump in for a second. For those of you who are on the tour, we had a bunch of earthwork happening just below the main plant area. And that earthwork has advanced to the point where we were expecting to start doing construction activities with that mechanical electrical installation permit.

And so now that the earthwork's there, we're lacking that permit that would have resulted in hiring of more than 1,000 workers and another set of work fronts. So that's the dilemma.

As soon as we get that permit, that work can be ramped up and initiated and that will be the focus of myself and our Greek team to help the ministry unclog that permit and get it to us..

Can you remind me, what's your cost at the mine site today? Like what does it cost you a day with everyone there to run?.

I don't know. Our year-to-date cost divided by 6 months would get you....

You're probably around, spending around sort of $8 million to $10 million a month, sort of thing. It can't be that high given -- yes, about $5 million a month, let's run it at that. But I mean, I think we're still able to work reasonably efficiently on what we're working on.

We're just not able to sort of open up extra work fronts to get things moving forward. While the sun's shining, doing earthworks, we do want to sort of keep moving forward with that as we can..

Yes and more than anything, Paul, just trying to get an understanding of, if we do slip a year, as you know, there is an addition to capital for slippage. So is the slippage, where we slip 12 months, 12 month time slide, is that a fair number to put on top of the....

No, I wouldn't say that. I would -- no. I need to think about what that number is. But it certainly wouldn't be that high..

Okay, so it would be under that..

Your next question comes from Anita Soni with Crédit Suisse..

Questions I had in terms of standby cost. Because I recall, last time, the Greek operations were on sort of standby or paused. Then when we came back to the capital plan, there were, we were reminded that there were these sort of ongoing costs. What -- that number you said was about $5 million a month? Is that....

No, well less than $5 million, Anita..

Okay.

So basically shift at $100 million and add something well less than $5 million for the course of this year, I guess?.

That $5 million a month is approximately what we're spending at the moment, Anita, with the earthworks, et cetera, on the site. So, yes..

Yes and then, just in terms of working capital, I think there was about $45 million use of cash from working capital.

Will that reverse in time?.

You assume working capital? Sorry, I didn't understand your question..

Sorry. There was a use of cash by -- in the working capital, there's a big working capital adjustment there.

I'm just wondering if that will reverse out in the next month or 2 or sorry, in the next quarter or 2?.

Well, in theory, well, as you get the ounces from the pad, so..

So is the working capital really inventory?.

Well, the working capital is the difference between the revenues that you have and your cost, correct?.

Okay..

So then as we get more ounces at Kisladag, that's when [indiscernible] inventory will change. That's your working capital..

Okay..

So with -- as Kisladag brings those parts that are -- the ounces in inventory into product -- into sales, that will be reversing..

[Operator Instructions]. Your next question comes from Dan Rollins with RBC Capital Markets..

Just a question on the sustaining capital going into the year at Kisladag, you had guided to about $45 million year-to-date. We're at $10 million. In the last couple of years, you've guided sort of higher than what's happened there. And obviously, you'll have some changes with the deferral of ounces from this year to next.

But what are you sort of looking now at sustaining capital spend for Kisladag in 2017?.

[Indiscernible], our focus on that $45 million. I think it was all Turkey..

Yes, I guess we're still maintaining that guidance for the moment, Dan. They generally sort of start a little slowly and we do come with a bit of a rush. But we sometimes struggle to get the full spend in. But we'll get reasonably close, I think..

But we should grow -- find that the guidance was $45 million..

No, $45 million, Kisladag, $25 million at Efemcukuru..

That's correct..

Yes, thanks, Dan..

And then with Olympias, when did you sort of run into the bottleneck in the back end of the plant?.

Well, I guess, as we obviously sort of built it, we felt we would be able to put those tonnes through. So as we sort of brought the plant up to speed and started hitting that 50 tonne an hour, then we identified the issue at that point. So things were ramping up reasonably well as we got to, as I say, 80% of capacity.

We started to realize that, that filter press wasn't going to cut it..

Okay.

And are you pretty happy with the performance at the front end of the plant so far during the ramp up?.

Yes. I mean, apart from sort of normal metallurgical untangling, if you like, trying to produce three separate products, the plants performed reasonably well, yes..

There are no further questions queued up at this time. I'll turn the call back over to the presenters..

Okay, operator, thank you. Maybe just one follow-up comment from me, on the Skouries extension. I think we're talking about $1.5 million a month in sort of G&A related type cost to keep -- fixed in the length of the project. It's significantly below that $5 million at any rate.

And lastly, it'll be obviously a focus for me to work with our Greek team and the Greek government to focus on getting these permits released so we can get Skouries ramped up and operating the mine as quickly as possible, so. Thank you for joining us today. Hope everybody has a great day..

This concludes today's conference call. You may now disconnect..