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Eldorado Gold Corp (NYSE:EGO)
Q1 2020 Earnings Call
May 1, 2020, 11:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Thank you for standing by. This is the conference operator. Welcome to the Eldorado Gold Corporation First Quarter 2020 Conference Call. [Operator Instructions] I would now like to conference over to Peter Lekich, Manager, Investor Relations. Please go ahead, Mr. Lekich.

Joseph Dennis Dick -- Executive Vice President and Chief Operating Officer

Thank you, operator, and thank you, ladies and gentlemen, for taking the time to dial into our conference call today. With me in Vancouver this morning are George Burns, President and CEO; Phil Yee, Executive Vice President and CFO; Joe Dick, Executive Vice President and COO; Paul Skayman, Special Adviser to the COO; and Jason Cho, Executive Vice President and Chief Strategy Officer. Our release yesterday details our 2020 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.

Before we begin, I'd like to remind you that any projections included in our discussion today are likely to involve risks, which are detailed in our 2019 AIF and in the cautionary note on Slide 1.

I will now turn the call over to George.

George Raymond Burns -- President and Chief Executive Officer

Thanks, Peter, and good morning, everyone. Here's the outline for today's call. I'll give an overview of Q1, along with some comments, then I'll pass it along to Phil for financials. Joe will follow by reviewing operational performance, then we'll open it up for questions. Before getting into things, I want to take a moment to recognize the ongoing and considerable efforts all of our global teams have had in managing our business during the COVID-19 pandemic. Our overarching priority, each and every day, is keeping our people safe. I've witnessed a huge amount of collaboration across Eldorado as we've put in place new protocols that mitigate the risk to our people and prevent the spread of the virus. I'll talk some more about these later. But for now, I'd like to express my deep appreciation and gratitude to our teams for looking out for one another and maintaining business continuity during these unprecedented times.

In light of COVID-19, operational performance in the first quarter was exceptional with production of approximately 116,000 ounces. This was consistent with Q4 production rates, but slightly below 2020 plan due to rainfall at Kisladag and curtailed operations at Lamaque as a result of government-mandated restrictions. We expect quarterly production to increase going forward as the solution is processed at Kisladag and operations have already resumed at Lamaque. Costs were marginally higher than expected due to fewer ounces produced during the quarter and lower silver and base metal prices. We are expecting our cost to be lower over the remainder of the year. We delivered two key catalysts this quarter, including extension of mine life at Kisladag and receipt of expansion permit for underground production at Triangle. Also of note was improved production rates at Olympias, which resulted in the mine's highest production in over a year.

At this time, we are maintaining guidance of for 2020 of 520,000 to 550,000 ounces of gold at an all-in sustaining cost of $850 to $950 per ounce sold. We will continue to evaluate capital allocation, operational performance and monitor the impacts of COVID-19 on our business. As I mentioned earlier, we effectively maintained business continuity in light of the global pandemic. Our operations in Greece and Turkey continued throughout the quarter, and Lamaque is now back online. As the spread of the virus increased, we activated a global COVID crisis management team, which identified risks to the business. In addition to implementing safety protocols across our sites, the company was proactive in drawing USD150 million from its credit facility. We do not see an immediate need for these funds but are looking to ensure the company has sufficient cash on hand. With approximately $400 million in total liquidity at quarter end, Eldorado is well capitalized and positioned to maintain its strategic goals as we begin paying down our term loan in June of this year.

Here on Slide five are some of the global operating controls we have put in place across our sites. Our main focus has been on training and compliance, including physical distancing and personal hygiene in order to keep our people safe. We have worked closely with governments to ensure we have all necessary protocols in place. We have also collaborated with industry associations and peers to share best practices. We continue to consider ways in which we will be able to further protect our people and limit the spread of the virus. Our sites are currently operating at 75% normal staffing levels as employees considered to be at high risk have been asked to stay at home. We do not expect this to affect production in the near term, but are reviewing the potential longer-term impact to certain discretionary activities such as waste stripping, underground development and drilling are temporarily reduced. We will continue to track this situation closely and are actively working with sites to transition back to normal staffing levels.

Here on Slide 6, we highlight how we've been working with and supporting local communities during COVID. To date, we have donated approximately USD500,000 toward local emergency response efforts. In Greece, we have held, procured critical medical equipment for hospitals in Thessaloniki and Halkidiki regions. In Turkey, we've helped them providing health services, supplies and information to local communities. And in Quebec, we've donated to the Val-d'Or Hospital Foundation and helped the local food bank and other vulnerable groups.

In each jurisdiction, we have worked with local communities to ensure this funding has the greatest impact and supports their long-term resilience and recovery.

That's it for me. Over to you, Phil.

Philip Chow Yee -- Executive Vice President and Chief Financial Officer

Thank you, George. Good morning, everyone. Starting on slide seven, I will provide an overview of Eldorado's financial results for the first quarter of 2020. Eldorado generated $204.7 million in total metal revenue in the quarter. This includes $183.7 million in gold revenue and is an increase of 156% over the comparative quarter in 2019. This significant increase in revenue resulted from higher gold sales volumes of 116,219 ounces compared to 43,074 ounces in the first quarter of 2019. The increase in revenue also reflects the higher average realized gold price in the first quarter of 2020 of $1,580 per ounce compared to $1,265 per ounce in the comparative quarter in 2019.

The company reported adjusted net earnings for the quarter of $12.5 million or $0.08 earnings per share, a significant improvement over the first quarter of 2019 adjusted net loss of $21.1 million or $0.13 loss per share. Adjusted net earnings in Q1 2020 removes items not reflective of the underlying operations of the company, including a $12.2 million loss on foreign exchange-related to translation of deferred tax balances, and a $4.4 million loss on the noncash revaluation of a derivative related to redemption options on the senior secured notes. Prior to these adjustments, the company reported a net loss to shareholders in the first quarter of $4.9 million or $0.03 loss per share. This was a significant improvement over Q1 2019 and reflects higher depreciation charges, higher expensed finance costs and increased tax expense in Q1 2020. EBITDA for the quarter was $84.7 million, and adjusted EBITDA was $90 million, a material improvement over EBITDA of $4.9 million and adjusted EBITDA of $12.5 million in the first quarter of 2019. Adjusted EBITDA removed certain noncash items as well as a $1.1 million charge of mine standby cost incurred at Lamaque during the government-mandated suspension of operations in the last week of March. Depreciation and amortization increased to $52.4 million in the first quarter from $20.2 million in the comparative quarter in 2019, reflecting higher production and sales volumes in 2020.

Expense finance costs were $16.2 million in the first quarter of 2020 compared to $7.3 million for the comparative quarter in 2019. This increase was primarily due to a change in accounting for interest starting in Q2 of 2019 as capitalization of interest ceased following the commencement of commercial operations at Lamaque in April of 2019. Income tax expense for Q1 2020 amounted to $21.4 million for the quarter compared to $6 million in the comparative period of 2019. The significant increase was a result of higher sales volumes in Q1 of 2020, leading to higher income tax on operations in Turkey and higher provincial mining duties for Lamaque. The deferred tax expense of $2.8 million in the quarter included $12.2 million of expense arising from the significant weakening of certain currencies in which income tax was paid, and this was partially offset by deferred tax recoveries related to timing differences, primarily in property, plant and equipment.

Eldorado reported $53.3 million in net cash generated from operating activities in the first quarter. This was a significant increase from the first quarter of 2019, which reflected a usage of cash for operations of $600,000. With our continued strong operational results, the first quarter of 2020 also represented our fourth consecutive quarter of positive free cash flow since Lamaque commenced commercial production on April 1, 2019.We finished the quarter with approximately $400 million in available liquidity. Of this, $364 million was in cash, cash equivalents and term deposits and includes $150 million in proceeds from the March 30 draw on our credit facility, which was completed as a proactive measure in light of uncertainty regarding the COVID-19 pandemic. Approximately $36 million remains available under the $250 million revolving credit facility. Approximately $64 million of this facility is allocated to secure certain reclamation obligations in connection with our operations.

I will now turn it over to Joe for a recap of operations.

Joseph Dennis Dick -- Executive Vice President and Chief Operating Officer

Thanks, Phil, and good morning, everyone. Here's a quick summary of our quarterly operating results. As George mentioned, we produced 115,950 ounces of gold in the quarter at cash operating cost of $627 per ounce sold and all-in sustaining costs of $952 per ounce sold. This was consistent with Q4 2019, slightly below current plan. Looking forward, we are maintaining our 2020 guidance at this time. We have not observed any negative productivity impacts as a result of COVID-19 but we are continuing to monitor the situation. We have seen a reduction in our workforce of approximately 25% as some workers, who are considered to be high-risk to COVID-19, have been asked to stay at home as a precaution. This has led to a reduction of certain discretionary activities at our sites and has affected underground development and waste stripping at Olympias and Kisladag, respectively.

Here on slide nine, we have some further color on the quarter at each of our operations. At Kisladag, as George mentioned, we had increased rainfall during the quarter. This led to solution increased solution volumes and impacted our production. The amount of gold that was leached into solution was in line with tonnes placed, and we expect to recover this gold in the coming months. At Lamaque, we had a very good quarter despite having to temporarily move the mine into care and maintenance on March 23 to comply with restrictions as mandated by the Quebec government. The Quebec government has since declared mining operations an essential service, and we put Lamaque back into operations on April 15. We lost about three weeks of production there, but we are confident that we can make up for this over the remainder of the year. I'd also like to note that at Lamaque, we have initiated testing of a mechanized mining system called Minrail for extraction of shallow dipping structures. Current resources potentially mineable with this technology are estimated at 160,000 tonnes at an average grade of 9.16 grams per tonne. We expect to have results on Minrail tests during Q3. Commercial success at Minrail could support increased exploration opportunities to expand resource in gently dipping vein systems common to the Lamaque project area.

Efemcukuru was once again consistent with our expectations. Production was lower compared to the fourth quarter due to lower grade mined so far this year, but did manage to offset this a bit by increasing the amount of tonnes put through the mill. And finally, at Olympias, I am pleased to report that we had our highest gold production in 18 months. This was a result of the work we have completed on underground development and improvements to the paste backfill system. That said, unfortunately, Olympias had a poor quarter from a cost perspective, low base metal and silver prices as well as higher treatment charges led to increased cash operating costs and all-in sustaining costs. We will continue to drive operational improvements and look to lower cost as the year progresses. Over to a quick update on some of our projects on slide 10. At Kisladag, we're continuing waste stripping though at a reduced rate. We have also selected a vendor for the HPGR and expecting delivery of that unit late this year. At Lamaque, we are continuing technical work to increase production from Triangle, and we now have the permit to increase underground production up to 2,650 tonnes per day. We intend to increase our mining rate to roughly 2,200 tonnes per day, which is the current capacity of the Sigma Mill.

As a reminder that this expansion requires no incremental capital investment, it simply accelerates underground development in the current plan. Eldorado will continue to study and optimize the Triangle deposit. We'll focus on the decline on Triangle deposit to the Sigma Mill, and we'll also look at debottlenecking the mill and a long-term tailing solution to enable us to go beyond 2,200 tonnes per day. At Efemcukuru, construction of the flotation columns is under way as you can see from the picture. Once these are completed and commissioned, which is expected in the second half of the year, we will be able to further increase the quality of our concentrate, which will reduce our treatment charges.

And finally, over to Skouries. Early in the quarter, we mobilized crews to commence site protection work. We placed concrete at the mill building to protect the rebar that was installed several years ago, and we had planned to install the mill building, but that work has now been postponed due to COVID-19.

With that, I'll turn it back over to George for closing remarks.

George Raymond Burns -- President and Chief Executive Officer

Thanks, Joe. Perhaps a few words on Greece before wrapping up. The COVID-19 pandemic has diverted both our own and the Greek government's attention, leaving limited time to discuss advancement of our investment. However, we look forward to continuing negotiations and remain committed to developing our assets in Greece safely and responsibly for the benefit of our investors and the Greek people. Eldorado's assets in Halkidiki have the potential to be economic engines for Greece, creating high-quality jobs, increasing tax royalties and export revenues for the country and providing an additional revenue stream to help mitigate the economic impacts of COVID-19.

The safety of our people, their families and our local communities is always top of mind. As we look forward to the remainder of the year, we will continue to adapt our new normal while focusing on delivering our objectives.

Thank you, everyone. I will now turn it over to the operator for questions.

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from Cosmos Chiu with CIBC. Please go ahead. Hi. Thanks, George. Though and Joe. My first question is, I guess, overall, good to see that you've maintained your production guidance for year 2020. But George, as you also mentioned, you're currently running at about 75% of normal levels. How much of that have you factored into maintaining your guidance production guidance for 2020? And then on top of that, George, as you also mentioned, some discretionary items you might not be spending on right now. And you talked about potentially long-term impact here. In terms of long-term impact, is that 2020? Or are we talking about 2021?

George Raymond Burns -- President and Chief Executive Officer

Thanks for the question, Cosmo. So on our five year outlook, I would say that we've had limited impact, and we're still committed to that five year guidance. Obviously, if reduction in stripping and development were to continue, we'll have to reassess that day by day. As we stated, we are currently focused on how to get our manpower levels back to normal and believe we will be successful with that endeavor. In terms of what it means, I mean I'd say the first one would be Kisladag. If you look at we're not moving all the waste right now that we had planned. The impact to date won't impact the five year guidance. And one of the reasons is we've been able to reoptimize the next two phases. So we're currently mining Phase three to feed the crusher, there's a Phase four and then a Phase five pushback that are part of the 15-year mine plan.

What we've done is we've shrunk Phase four a bit, which allows us to get down to ore quicker, and it better optimizes the use of the truck fleet and stripping over the life of mine. That gives us a bit of a cushion to mitigate some of the issues we're currently dealing with lack of truck drivers. So that gives us some comfort. On the development side for underground mines, obviously, you have to do the development to get the faces opened up into the future. Again, here, I'm confident our teams will find ways to get our work force back to normal and our development where we'll need it to be. So I mean at this point, I'm pretty comfortable with the way we've managed COVID to date and believe we'll work through issues over the coming weeks and months to get back to normal.

Cosmos Chiu -- CIBC -- Analyst

For sure. And then maybe more specifically on Lamaque here. How any challenges in terms of getting it back up and running since restarting on April 15? And then on top of that, I believe before COVID-19, before the shutdown, you were running at about 1,600 tonnes per day. Are you back to about those levels? And Joe, as you talked about, you're aiming for getting to about 2,200 tonnes per day in Q2. Can you maybe elaborate on how you're going to get there? And can you do that even as you run at about 75% of normal levels?

George Raymond Burns -- President and Chief Executive Officer

Go ahead, Joe.

Joseph Dennis Dick -- Executive Vice President and Chief Operating Officer

So first off, at Lamaque, development went very well in Q1 and we finished Q1 ahead on development schedule, even though we lost the last week of the quarter. And as for the ramp-up, we have ramped up fairly quickly. It took us roughly from the 15th until about the 20th to get the mills turning, and since we have been able to beat the mills at close to 2,000 tonnes a day. So that early development and kind of being prepared and knowing that this potential permit was coming, we were working hard to wrap development up in advance and be prepared. So things have gone well in the Lamaque restart and in the continued growth at Lamaquestion.

Cosmos Chiu -- CIBC -- Analyst

And then, I just...

George Raymond Burns -- President and Chief Executive Officer

Yes. I'd like to supplement those comments, Cosmos. On the mill, we had a planned maintenance for the mill. And basically, since it was already down, took advantage of that opportunity. And I think it's another example where our teams quickly rallied around the restart, got the planned maintenance completed and the mill back up and running. So hats off to our team there.

Cosmos Chiu -- CIBC -- Analyst

And then as you mentioned in the MD&A, Lamaque grades were lower, but as expected, as you targeted some of the lower grade stopes, the head grade was 6.05 gram per tonne. Could you give us a bit more insight into what we should be looking for, for the rest of the year?

Joseph Dennis Dick -- Executive Vice President and Chief Operating Officer

Cosmos, this is Joe. Part of the issue with lower grades was higher development tonnes, which were typically at lower grades. So that was somewhat expected. And then toward the close of the quarter, we didn't get backed out the higher grade stopes at the end. As the year progresses, grade will recover, but we're likely to stay a bit below original plan due to that increased development.

Cosmos Chiu -- CIBC -- Analyst

Great. And then maybe one last question for Phil. As you talked about, the taxes based on compared to my model, they were quite high in Q1, $21 million on earnings that were $15.9 million. I think you touched on it in terms of higher revenue from Turkey and whatnot. But it would still work out to over 100% of earnings as taxes. I think a bit of it might have been adjusted out for your adjusted earnings, but I don't know exactly how much. I'm just trying to get a better handle on how I should look at the rest of 2020.

Philip Chow Yee -- Executive Vice President and Chief Financial Officer

Thanks, Cosmos. So for taxes, Cosmos, the only factors that affect the current income tax expense is the corporate income tax in Turkey and the Quebec mining duties in Quebec. And Turkey right now with Kisladag ramping up, we're expecting higher production this year, especially in comparison to last year. So the income tax rate in Turkey, just trying to I think it's I'm just trying to find effective rate here, but I think it's going to be proportional really with the increase in production in both Kisladag and Efemcukuru in our perspective.

Cosmos Chiu -- CIBC -- Analyst

Okay. Yes, because I think based on my numbers, your earnings today missed consensus, in part, due to taxes. So I just want to get a better handle on taxes to forecast in Q2, Q3 and Q4.

Philip Chow Yee -- Executive Vice President and Chief Financial Officer

Yes. So for Turkey, I mean the total income tax expense is $18.7 million, $17.7 million of that was from Turkey. And the Quebec mining duties was $1 million. And that's if you work out the effective tax rate, I think it's around 33%.

Cosmos Chiu -- CIBC -- Analyst

Thank you.

Operator

[Operator Instructions] Our next question comes from Kerry Smith with Haywood Securities. Please go ahead.

Kerry Smith -- Haywood Securities -- Analyst

Thanks, operator. Joe, just a follow-up on Triangle. How long do you think it will take you to get the development in place to be able to get to 2,200 tonnes a day? Do you think you can get there by year-end?

Philip Chow Yee -- Executive Vice President and Chief Financial Officer

I think we'll be close at year-end. I wouldn't guarantee 2,200, but I think we'll be very close.

Kerry Smith -- Haywood Securities -- Analyst

Okay. And that wouldn't assume any benefit from the Minrail thing, right? That would just be conventional.

George Raymond Burns -- President and Chief Executive Officer

That's just conventional. The Minrail, we got it installed in Q1, and we'll look to do testing in Q2 and then kind of evaluate economics in Q3. I think in total, there's roughly 20,000 tonnes, if that, in the Minrail test plan.

Kerry Smith -- Haywood Securities -- Analyst

Okay. And one, maybe, I'm not sure who this question would be best for, but there was the updated results that you plan to put out on Perama, the updated capital and operating cost, when might we see that? It sounds like it's going to be finished this year. Is that something that we'll see in maybe the Q3 results? Or what would the timing be?

George Raymond Burns -- President and Chief Executive Officer

So it's probably something we'll talk about in Q4, should complete the work in Q3 and be able to talk about it in Q4.

Kerry Smith -- Haywood Securities -- Analyst

Okay. So it wouldn't be necessarily in the Q4 call, which would be this time next year, kind of, well, next February. It'd be sometime later this year then, is that right, George?

George Raymond Burns -- President and Chief Executive Officer

Yes. I would say late this year.

Kerry Smith -- Haywood Securities -- Analyst

Okay. Okay. And the standby cost that you incurred at Lamaque, Phil, were about it was, I think, slightly over $1 million for the last, whatever, it was six or seven days of March. Was that were there just some large numbers in there? I'm just wondering what the cost might have been through to the start-up on the 15th of April? And I don't think I want to sort of normalize that $1.1 million, but I'm just wondering what the number might have been?

Philip Chow Yee -- Executive Vice President and Chief Financial Officer

Yes. That $1.1 million, Kerry, was really from March 24 to March 31. So we can probably extrapolate that, that was for one week. So for the next two weeks until April 15, I would it's probably safe to proportionalize that and to say it'd probably be $2.2 million during two weeks recently.

Kerry Smith -- Haywood Securities -- Analyst

Right. Okay. And then maybe the last question, if I could. You talked about not having enough manpower to do some of the pad maintenance at Kisladag, just because you've got about 25% of your workforce that's not able to work. Could you bring in contractors to do that work? Or how are you thinking about sort of trying to address that situation, so it doesn't impact your production in the longer term?

George Raymond Burns -- President and Chief Executive Officer

I mean that's one alternative for sure. But the best scenario is putting additional measures in place to protect the health of the employees that haven't been coming to work. And that's priority one. And I guess if that's not completely successful, we could look to bring in some temporary workers until COVID evolves to a better place.

Kerry Smith -- Haywood Securities -- Analyst

Yes, OK. And George, when do you have to get back to normal manpower levels at Kisladag and get back to stripping at the rate you had budgeted so this doesn't impact the mine plan, even though you did sort of rejig that Phase four plan?

George Raymond Burns -- President and Chief Executive Officer

It's tough to give you an exact, but I would say, during this quarter, we'll be assessing that. And I'm hopeful we can get back to normal levels in Q2. We're close to normal levels. And I think we can absorb all that due to discussions I had on a little while ago on Phase four stripping. If it persists beyond that, we'll have to run schedules and forecast to see the impact and then update the market on our outlook. But I'm sitting today, based on what we know, we're feeling pretty optimistic we'll get through this without an impact.

Kerry Smith -- Haywood Securities -- Analyst

Okay, great, thanks very much.

Operator

Our next question comes from Tanya Jakusconek with Scotiabank. Please go ahead.

Tanya Jakusconek -- Scotiabank -- Analyst

Yes, good morning everybody. Kerry asked quite a number of my questions. I just wanted to make sure I understood on Kisladag that, George, you mentioned that we're hoping to get back to that 100% capacity or close there in Q2, so that we don't impact the guidance for 2020. Is that correct? Did I understand it correctly?

George Raymond Burns -- President and Chief Executive Officer

No, for 2020, we're OK. The stripping won't impact 2020. We are moving all the ore and waste to Phase 3, and we're moving a great deal of the waste in Phase 4. It is not everything we planned currently. So the issue of getting back to normal attendance and manpower levels is about stripping waste for the five year plan, not for 2020. And again, there's work to be done to sort out how we can put additional protection in place for those employees, but we believe we can get there.

Tanya Jakusconek -- Scotiabank -- Analyst

Okay. So that so I understand. So 2020, even if we operate with 75% employees at Kisladag, you are comfortable with the 2020 guidance? It's the 75% going beyond the five year plan?

George Raymond Burns -- President and Chief Executive Officer

Yes, correct. So 2021 and beyond could get impacted if stripping does not resume the normal volumes.

Tanya Jakusconek -- Scotiabank -- Analyst

Okay. So when you say 2021 and beyond, you're talking it could impact 2021, all those years, I understood it as beyond the five years, but it's 2021?

George Raymond Burns -- President and Chief Executive Officer

Yes, 2021 to 2025, say is potentially at risk. If you look at Kisladag plan, we've got 5-plus years five, six years of stripping, at which point our truck requirements are up substantially. So what we've done with this resequencing is we've made Phase four a bit smaller, we get to ore quicker. That's mitigating to some degree the stripping issues we're currently experiencing. And so without getting that waste moving, there could be some impacts in 2021 and beyond. And that's why we're working hard to come up with so to get all the trucks moving again.

Tanya Jakusconek -- Scotiabank -- Analyst

Okay. And then just maybe on looking at what's happened with COVID and all of the social distancing, some of the other measures that you've had to implement the new health and safety. Can you do you have an understanding on some sort of range of what that has had an impact on the cost structure? And have you been able to offset it in other ways? I'm just trying to understand whether this is going to have impact longer term on the cost structure? Are we at a new level?

George Raymond Burns -- President and Chief Executive Officer

I'll maybe answer the high level and Joe can add any detail. So at a high level, we're not seeing any cost impact. We're obviously using a lot more PPE than normal, but that's minutia in the scheme of things. And there's lots of habit-changing that has to happen among our workforce to maintain that physical distancing and to have appropriate hygiene. So equipment operators between shift and the like, they're doing a lot more cleaning than we would have in pre-COVID era. But the impact that's having on cost, we don't see it and can't measure really any impact to date. And I think that's probably going to be the case moving forward. So as Joe said, we're not seeing any measurable change in productivity. And to me, that's the key issue. If these control start lowering productivity, that obviously would then have an impact on cost and cost per ounce.

But to date, we're not seeing any material change there, and it's really about the quality of our people adapting to these new risks. And everybody is motivated to keep themself and their coworkers safe, and at the same time, maintaining the health of our business because we all rely on it. So again, I think the collaboration has been fantastic. And to date, we haven't seen any material impact on our costs that we can speak to. Joe, I don't know if you had any color around that.

Joseph Dennis Dick -- Executive Vice President and Chief Operating Officer

I think a couple of points, George, one of them being, there's been some positive offsets. We've done a lot of task observation, which means getting out and looking at the work with teams. And that alone has maybe made some of our work more efficient. Even though you have the distancing, I think the engagement and interaction with kind of the leadership and teams in the field has kind of helped us a bit. And I think we could look to some other things. There's lower fuel prices and some other offsets that for any increases we're seeing, we're likely seeing some offsets as well.

So I mean I think we'll continue to look at those impacts over time and be able to better quantify them, but qualitatively so far, we're managing to maintain productivity levels pre-COVID.

Tanya Jakusconek -- Scotiabank -- Analyst

And you touched a little bit just, Joe, on opportunities. You talked a little bit about better engagement or more efficient engagement. Are you seeing other opportunities as you look at your operations, this whole change of workplace has brought to your attention?

George Raymond Burns -- President and Chief Executive Officer

Well, I think it's early days in that. But yes, we are. I think, we're working on kind of the tracking that we might do for potential management of any outbreak on-site. And so it's also helpful in kind of managing work in people's proximity to work. So it's a little different environment, and we're early days and kind of figuring out how to take advantage of that as but I think there's opportunity in it, yes.

Tanya Jakusconek -- Scotiabank -- Analyst

Okay. I look forward to...

Philip Chow Yee -- Executive Vice President and Chief Financial Officer

I think that's a pretty good it's a pretty good example. I mean we've got taking and tracking of equipment at most of our underground mines and obviously in our pit at Kisladag but haven't put the energy into surface facilities, and with COVID, we believe this is a huge mitigation factor. And as we deploy that in Q2, there's going to be some benefits come out of further investing in that sort of technology. And the other thing I'd say, just at a high level, it's changing the way we approach everything. Even on the management side, we're not traveling to our sites, but we are leveraging the technologies that we've put in place the last couple of years.

And I've been well, I'm of the belief right now, our communications are actually better. I mean our days are longer. There's a lot of stress around what's happened here globally. But I think we're getting better at communication and teamwork. And so it's an odd positive consequence. But we're going to learn a lot from this whole event, and we'll keep the good things with us and improve our business as a result.

Tanya Jakusconek -- Scotiabank -- Analyst

Yeah, thank you so much.

Philip Chow Yee -- Executive Vice President and Chief Financial Officer

Thank you.

Operator

This concludes the question-and-answer session. I would like to turn the conference back over to Mr. George Burns for any closing remarks.

George Raymond Burns -- President and Chief Executive Officer

Thank you. Again, I'd like to thank all of our employees and partners for their ongoing support during these unprecedented times. Look forward to catching up with everybody in the next quarter. Stay safe and stay healthy, everyone.

Philip Chow Yee -- Executive Vice President and Chief Financial Officer

Thank you.

Operator

[Operator Closing Remarks]

Duration: 42 minutes

Call participants:

Joseph Dennis Dick -- Executive Vice President and Chief Operating Officer

George Raymond Burns -- President and Chief Executive Officer

Philip Chow Yee -- Executive Vice President and Chief Financial Officer

Cosmos Chiu -- CIBC -- Analyst

Kerry Smith -- Haywood Securities -- Analyst

Tanya Jakusconek -- Scotiabank -- Analyst

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