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Eldorado Gold Corporation (NYSE:EGO)
Q2 2021 Earnings Call
Jul 30, 2021, 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 Q2 2021 Financial and Operational Results Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. [Operator Instructions]

I would now like to turn the conference over to Lisa Wilkinson, Vice President, Investor Relations. Please go ahead, Ms. Wilkinson.

Lisa Wilkinson -- Vice President, Investor Relations

Thank you, operator and good morning everyone. I'd like to welcome you to our second quarter 2021 conference call. On the call today, we have George Burns, President and Chief Executive Officer; Phil Yee, Executive Vice President and Chief Financial Officer; Joe Dick, Executive Vice President and Chief Operating Officer; and Jason Cho, Executive Vice President and Chief Strategy Officer.

Our release yesterday details our 2021 second quarter financial and operating results. This should be read in conjunction with our second quarter financial statements and management's discussion and analysis, both of which are available on our website. They've also been filed on SEDAR and EDGAR. All dollar figures discussed today are US 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 would like to remind you that we will be making forward-looking statements during the call. Please refer to the cautionary statements included in the presentation, as well as the risk factors set out in our annual information form.

I will now turn the call over to George.

George Burns -- President and Chief Executive Officer

Thanks, Lisa and good day, everyone. Here's the outline for today's call. I'll provide a brief overview of Q2 results and highlights before passing it to Phil to go through the financials. Joe will follow by reviewing operational performance and then we'll open it up for questions.

In the second quarter, we had strong project and operating results at Kisladag, Efemcukuru and Lamaque. However, Olympias was affected by work slowdowns as we progress our transformation efforts at the Kassandra mines. We continue to be on track for 2021 production and cost guidance. Our transformation focus is on increasing productivity across the Kassandra assets, which is essential to create value. We are actively engaging with our stakeholders on this initiative and we are confident with their cooperation, we will make meaningful progress.

Joe will discuss our transformation plans at Kassandra mines in more detail later on the call but first I want to touch on a few highlights. During the quarter, we reduced our debt and maintained our strong liquidity position, while investing to grow our business. We ended the quarter with a cash balance of $410 million and our balance sheet continues to emerge as a major strength. It will enable us to fund growth and maximize the opportunities ahead of us.

In the second quarter of 2021, we successfully completed the acquisition of QMX, which significantly increased Eldorado's position in the Abitibi Greenstone belt and is consistent with our strategy to invest in world-class mining jurisdictions. The addition of QMX to our portfolio opens a range of opportunities to expand our activities in the region and to leverage our existing infrastructure and Eldorado's strong operational exploration and stakeholder expertise.

Shifting gears and looking ahead to the second half of 2021 and into 2022, we have several upcoming catalysts that I will discuss on this slide. Starting with Turkey, commissioning of the high pressure grinding roll circuit at Kisladag is now scheduled to initiate at the start of Q4. We expect the HPGR to increase gold recovery by approximately 4% and enhance the already positive results achieved with the CIC trains and the new carbon regeneration kiln that were completed in the first half of the year.

In Canada, at Lamaque, the decline connecting the Sigma mill with a Triangle underground mine is progressing on schedule. It is expected to be complete in the fourth quarter. Work continues to progress on the Lamaque PEA with expected completion in the first quarter of 2022. We have taken some extra time with this study as our operational performance has improved, exceeding nameplate at the mill. As a result, the PEA will reflect the optimization of the asset.

Moving to Greece. The updated feasibility study for Skouries continues to advance and we expect to complete it in the fourth quarter. The revised schedule is largely driven by our focus on capital discipline with respect to the additional scope for infrastructure related to legislative changes, climate change impacts on water management, and inflationary cost pressures. The study will support our process of finalizing financing and a decision by management and our board to restart construction for this world-class project. With the timely completion of construction in 2.5 years, low cost of production from Skouries represents significant upside in our current five-year production profile. In parallel, we're also working toward submitting an updated EIA for the Kassandra mines in Q4. To be clear, the updated EIA will accommodate future Olympias expansion and Stratoni port modernization.

Finally at Perama Hill, an updated technical study remains on schedule for completion in early 2022. In parallel with the study work, we will be working with regulators to efficiently permit the project, leveraging our recent successes with the recent amendments to the Kassandra EIA for the use of dry stack tailings.

We continue to monitor cost and capex inflation across our operations. In Turkey, inflationary pressures have been mostly offset by the weakening lira. In Canada, mining project activity has picked up in the Val-d'Or area, which is putting pressure on our contractor and labor rates. The COVID-19 has impacted supply chain causing minor shipment delays.

In June, we released our 2020 sustainability report, which showcases details of the sustainability framework and our ESG performance. We achieved our sustainability targets, which included developing a sustainability integrated management system having zero fatalities and zero environmental and regulatory non-compliance incidents. We originally targeted a 10% reduction in our loss time frequency rate and in fact, we reduced it by 43%. We also ended at 10% reduction in our total recordable injury frequency rate, and surpassed our goal there too, by reducing it by 27%. We continue to focus on safety improvements with a strong emphasis at the Kassandra mines as part of our transformation efforts.

Our sustainability framework is our foundation for how we approach responsible mining. It articulates our four key pillars that are commitments across environment, social and governance indicators as follows. Number one, first and foremost, safe, inclusive and innovative operations. Second, engaged and prosperous communities. Third, responsibly produced products. And finally, healthy environment now and for the future. This slide highlights from our 2020 sustainability report grouped under each of these four pillars of our sustainability framework. I'm very proud for [Phonetic] achieving these successes. In delivery on our commitments, we believe we will continue to be a preferred partner for host communities and countries and have the access to capital to grow our business to benefit all stakeholders.

With that, I will turn things over to Phil for a review of the second quarter financial results.

Philip Yee -- Executive Vice President and Chief Financial Officer

Thank you, George. Good day everyone. Starting on Slide 7, we had another solid quarter of operational results with production and costs both in line with our 2021 annual guidance. Revenues were consistent with plan and expectations supported by strong sales and an average realized gold price of $1,835 per ounce. Free cash flow was lower in the quarter due to the increased growth capital spending, increased tax cash payments, and the timing of royalty and interest payments. We expect free cash flow generation to improve in the second half of the year.

Eldorado reported a net loss attribute to shareholders in Q2 2021 of $55 million or $0.31 loss per share compared to net earnings of $49 million or $0.29 per share in the second quarter of 2020. After adjusting for one-time non-recurring items, including a $99 million non-cash impairment of the Tocantinzinho project, among other things, adjusted net earnings for Q2 2021 increased to $29 million or $0.16 per share, an increase from $24 million or $0.14 per share in Q1 of 2021.

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

All-in sustaining costs per ounce sold averaged $1,074 an ounce in Q2 2021, an increase from $859 a ounce in Q2 2020, primarily due to the increase in average cash operating costs per ounce sold, higher royalty expense at Kisladag and Efemcukuru as a result of the 25% increase to gold royalty rates effective from September 2020, higher royalty rates at Olympias effective from March 2021 following the ratification of the amended investment agreement, and higher sustaining capital expenditures.

Capital expenditures in Q2 2021 were $72 million compared to $37 million in Q2 2020 and $64 million last quarter. This reflects a planned increase in growth capital spending at Kisladag and Lamaque. Capital expenditures at the Kassandra mines in Greece are lower than expected in the first half of 2021, a result of our ongoing transformation work. We are focusing on rigorous capital discipline across our portfolio of assets and we will specifically be looking at capital allocation more closely at the Kassandra mines, as we progress through our transformation efforts over the remainder of 2021 and into 2022. As a result, we expect capital expenditures at the Kassandra mines to be at the low end of our guidance range for the year.

Tax expense decreased to $0.1 million in Q2 2021 from $25 million in Q2 2020, mainly driven by the investment tax credit received in Turkey in Q2 2021 related to Kisladag heap leach improvements. The investment tax credit reduced the corporate tax rate, resulting in current tax savings of $22 million in the second quarter. As we typically pay quarterly tax installments on a one-quarter lag, we expect the lower tax expense in Q2 2021 to result in lower cash tax payments in Q3 2021. This difference also lead to high cash tax payments in Q2 2021 of $27 million, as a result of the higher increase current tax expense that was reported in Q1.

Depreciation expense totaled $51 million in Q2 2021 compared to $53 million in Q2 2020, which has been recast as a result of the correction of an immaterial error related to the prior year's depreciation. The decrease in depreciation this quarter reflects lower sales volumes. We are forecasting full year 2021 depreciation expense to be in the range of $200 million to $215 million.

Moving on to Slide 8 on financial position. We continue to focus on maintaining a solid financial position which provides flexibility to unlock value for our portfolio of assets. At quarter-end, we had unrestricted cash and cash equivalents and term deposits of $410 million. We made a $50 million repayment on a revolving credit facility during the quarter in response to the improved circumstances pertained to the COVID-19 pandemic. As a result, we now have approximately $150 million undrawn and available under our revolving credit facility. We also completed a scheduled payment of $22 million on our term loan, which now has an outstanding balance of $100 million at the end of Q2. Our net leverage ratio is at 0.08 times, as at June 30, 2021, compared to 0.46 times at the end of the second quarter of 2020. This reflects a much improved credit profile for the Company and reiterating George's comments earlier, our balance sheet continues to emerge as a major strength.

With that, I will now turn it over to Joe to go through the operational highlights.

Joseph Dick -- Executive Vice President and Chief Operating Officer

Thanks, Phil and good day everyone. Our second quarter operating performance continued to be strong and we are tracking in line with our 2021 annual guidance range of between 430,000 and 460,000 ounces of gold. And I want to thank the team for their hard work over the past quarter in achieving these results. As always, the foundation of our production performance is our health and safety culture. We continue to be a fatality free organization since Q3 of 2017 and several sites and functions have completed more than a year and some multiple years without a lost time injury.

We produced 116,066 ounces of gold in the quarter at cash operating costs of $645 per ounce sold and all-in sustaining costs of $1,074 per ounce. As Phil mentioned earlier, capital expenditures were higher in Q2 '21 compared to last quarter and last year, reflecting our planned increase in growth capital spending at Kisladag and Lamaque. We're focused on disciplined capital allocation across our operations. And specifically, we will be looking at capital allocation more closely at our Kassandra mines in Greece, as our transformation efforts continue to progress.

Starting in Turkey with Kisladag, our second quarter gold production totaled 44,016 ounces, at cash operating costs of $529 per ounce. The commissioning of the high pressure grind roll circuit is scheduled to initiate at the start of the fourth quarter. As George mentioned, we expect the HPGR to increase gold recovery [Phonetic] by approximately 4% and enhance the already positive results achieved from the CIC trains and the new carbon regeneration kiln completed in the first half of the year. We're also progressing well on our multi-year pre-stripping campaign and studies are actively underway to assess the potential for accelerating this work to bring value forward at Kisladag. Work continues on the North heap leach pad construction. We can continue to be on schedule and completion of phase one is expected mid-2022.

Over to Efemcukuru, second quarter gold production totaled 23,473 ounces at cash operating costs of $525 per ounce. Our recently installed flotation columns continue to operate well as we continue to evaluate optimum ranges. This has resulted and will continue to result in significant improvements in the quality of our gold concentrate. Efemcukuru continues to deliver quarter-after-quarter with a strong track record as a safe and reliable operation.

Turning to our Canadian operations. Second quarter tones and grade at Lamaque continued to continue to deliver to plan. Second quarter gold production totaled 35,643 ounces at cash operating costs of $658 per ounce. The underground decline between Triangle and the Sigma mill is progressing on schedule and we expect completion in the fourth quarter. We expect to reduce operating costs upon completion of the decline as surface haulage costs are eliminated and the current up ramp underground route is replaced with straight line haulage to the Sigma mill. At Lamaque, early infield drilling results for this 800,000 ounce maiden gold resource have been as expected.

Preliminary mine planning studies are underway to assess the initial scope of this resource within the Lamaque operation. Once completed, the underground decline will enable the team to drift over the deposit and gain additional information to integrate this promising new discovery into future mine plans. Work continues to progress on the Lamaque PEA and we expect completion during the first quarter of 2022. We've taken some extra time with this study, as our operational performance has improved, exceeding nameplate at the mill and the PEA will better reflect the opportunities and optionality of the asset, getting us the opportunity to view capital with a longer-term outlook, as we evaluate in the context of a much larger land package.

Over to Greece. At Olympias, second quarter gold production totaled 12,934 ounces at cash operating costs of $1,237 per ounce. Earlier this year, we initiated transformation efforts at the Kassandra mines focused on increasing productivity, which is essential in realizing the full potential of these assets. Transformation is key to underpinning investment and longevity of the Kassandra mine. I'm really happy to see our union partners now taking part in this effort and understanding the importance of our transformation plans. I'll talk about transformation a bit more in detail on the next slide.

But first I want to touch on Perama Hill, where an updated technical study remains on schedule for completion in early 2022. We also continue to see great exploration potential Thrace region supporting opportunities for growth in and around Perama Hill. In [Indecipherable] study work, we'll be working with regulators to efficiently permit the project, leveraging our recent success amending the Kassandra EIA for the use of dry stack tailings.

Now let's move on to a transformation initiative at Kassandra mines, which we briefly discussed a few months ago in our Q1 conference call. I want to take this opportunity to provide a few additional details. Essentially, the transformation work in Greece is a sustained to optimize the Kassandra mines. It touches on every part of the business in Greece, including employee education and training, physical plant upgrades, business system upgrades and leadership. The overall goal is increased productivity and operating safely, economically and at globally competitive levels.

Implementing this scale of change in an existing operation like Olympias is challenging and entails risk, which we have planned for as part of the transformation work. We expect this effort will lead to sustainable continuous improvement and value delivery as we move into 2022. The long term benefits in safety, culture and productivity will result in a stronger operation with greatly enhanced economics. We remain committed to responsibly developing the Kassandra mines to create value for all stakeholders. This includes job creation, investment into local communities, and opportunities for local suppliers while maintaining our high environmental standards.

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

George Burns -- President and Chief Executive Officer

Thanks, Joe. With strong operational results in the first half of 2021 and numerous upcoming catalysts expected in the second half of the year, Eldorado remains well positioned to deliver on our growth plans and create value at our assets. Thank you for your time everyone.

We will now turn it over to the operator for questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] The first question comes from Cosmos Chiu with CIBC. Please go ahead.

Cosmos Chiu -- CIBC World Markets -- Analyst

Hi, thanks, George, Phil, Joe, and team. Maybe my first question is in Greece. As you talked about, you are working on the transformational work optimization of the Kassandra mines. You don't say Olympias, you say Kassandra because I would imagine you're looking at it from the entire Greek operational level. I'm just wondering, as you kind of work through how you can optimize Olympias, are there any benefits that you foresee for Skouries as well? Is that in part why you've undergone this plan, in terms of transformation optimization? And then the second part of my question is, is there a target that you're trying to get to before you make further commitments to Skouries and how are some of this optimization work going to be factored into your feasibility study that's upcoming for Skouries?

George Burns -- President and Chief Executive Officer

Thanks, Cosmos.

Cosmos Chiu -- CIBC World Markets -- Analyst

Hi, George.

George Burns -- President and Chief Executive Officer

I will also let Joe jump in with some details. I mean, we refer to Kassandra because that's our subsidiary that holds the assets of Olympias, Skouries project and our Mavres Petres, Stratoni operation, which is a kind of immaterial base metal operation. So, I mean, the primary focus is definitely on the Olympias. That's where we're currently producing and we have an enormous opportunity to reduce costs and increase productivities and create value. But you're right, we're also in the early stages of preparing for construction at Skouries. And in there, we're looking to make improvements across all of those assets underneath Kassandra. And without a turnover to Joe to give you some more details on transformation.

Joseph Dick -- Executive Vice President and Chief Operating Officer

George, first in kind of relation to the Skouries, Olympias relationship, Cosmos, I think, certainly work and safety culture, and those things are very similar between both sides. Well, Skouries is a different operation, open pit, more technology, maybe the kind of the productivity numbers aren't directly transferable but a lot of the cultural items are and that pertains to our entire workforce, including, staff and our miners. We're pleased that we have experienced miners at Olympias and they know their work.

I think our biggest challenge is really the introduction of management operating system and a culture of continuous improvement. And as we look to really optimize our short range plans, how we convert those plans to executable shift plans, how we manage the shifts on a shorter interval control basis, how we feedback at the end of the day on performance, those kinds of things haven't been done on an ongoing basis and we've introduced all of that. In addition, we've looked at the mining cycle from drill and blast, and the types of rounds we're pulling, the length of rounds, and we have all of that, along with whole cycle times. In our whole productive time cycle, in the mine, in a set of KPIs, which our labor partners are reviewing with us now on a bi-weekly basis, so we're pleased about that.

We've kind of put it in a two-tiered target. First as we work to get ourselves to a first step in Olympias growth to around 530,000 tonnes and then to 650,000 tonnes. So we've kind of phased that out through some benchmarking and other things as to looking at similar mines, how they perform, and we're looking to be kind of in that average performance range from where we are today which is a bit of a step. And I think it boils down to mostly productive time and shifting utilization. But there are many other factors around technology and performance and safety, our business plans, other things. And I would mention that we are in the process of introducing dispatch [Phonetic] and helping us with shift control and historical data. So, there's a lot going on but we're pleased with the work so far and it's a lot of change but necessary change.

Cosmos Chiu -- CIBC World Markets -- Analyst

Yeah, for sure. Thanks, Joe. That's really helpful here. And then, I guess more specifically on Skouries here, as you mentioned, Q4, you're expecting the feasibility study to come out. I think in the past, George, you had talked about potentially finalizing some kind of joint venture partnership by 2021 as well. Is that still sort of potentially the timeline? And then the second part of my question is, I see that for Skouries, you've done about $2.8 million in terms of capex. I believe your full year guidance was $25 million to $30 million. Are you still expecting to hit those numbers for full year? Are you -- is some sort of capex delayed due to COVID-19, could you maybe comment on that as well?

George Burns -- President and Chief Executive Officer

Sure. So for Skouries, the schedule slipped a little bit. We, at the beginning of the year, expected to get the feasibility study completed in the third quarter, to support progress on financing in the fourth quarter and now we're looking at early Q4 to finalize the feasibility study and that's probably going to push the financing evaluation into Q1 next year, so a little bit of slippage. In terms of why that occurred, we're focused to ensure this feasibility study is updated and gives us a really good estimate of scheduling cost. And there have been some changes in both EU and Greek legislations that are being baked into this feasibility study. We've also taken a fresh look at climate change and the impact on precipitation to ensure all of our storm water management facilities are adequate. So there's some changes happening in that regard, modest but things that we need to have our hands completely on.

And then in terms of our strategy on how we'll fund the construction of Skouries, we're still believing that a joint venture partner at the Kassandra level is the optimum strategy. And a couple of factors for that; one, we're looking for some strategic partners that can bring influence and expertise to the development of the Kassandra assets, so that's one. And two an equity injection that would position us, we think, in an optimum way for overall portfolio as well as our balance sheet and delivering on the outstanding upside we have with these high quality assets. So that still remains a primary strategy but we're always looking at every alternative for financing, project financing, potentially streams. So, we're taking a broad look and in terms of schedule, it's probably going to slip into Q1 of next year but still remain confident these high quality assets will be able to deliver significant upside to our current five-year guidance.

Cosmos Chiu -- CIBC World Markets -- Analyst

Sure.

Joseph Dick -- Executive Vice President and Chief Operating Officer

George, just a couple of comments on Cosmos' question about capital outlay at Skouries this year, it will likely be a bit under, Cosmos. Certainly, mobilization and getting the owners team together follows the other adjustments in schedule. And we had some pre-construction activities that were planned and some modest construction work that we were to get going with this year, but that all kind of times with the owners' team, and preparing to be able to execute. So, we can still see some of that done, as we move further into Q3 and into Q4 but we'll provide more information in about a month, six weeks down the road.

Cosmos Chiu -- CIBC World Markets -- Analyst

Great. And then maybe just one last question here, as we wrap up the discussion in Greece. Joe, as you talked about, as you engage all these different stakeholders in Greece, any concerns about potential strike risk or kind of labor risk? And then the second part of my question is, for Skouries, what are you assuming, right now, in terms of labor productivity? Are you currently assuming kind of current level of Olympias productivity or have you factored in some upside to?

Joseph Dick -- Executive Vice President and Chief Operating Officer

On the first question, there's always a risk, but we're confident, at least at this point, that you will find workable solutions with our labor partners regarding ongoing work slowdowns and potential work stoppage that is a focus, as we move through this quarter. As far as the kind of mine productivities and that kind of information that comes -- that kind of transfer that comes over, it's kind of apples and oranges, even the underground work at Skouries is quite different than that at Olympias. So, they're not directly transferable, but we are in that kind of globally competitive type productivities for planning at Skouries and both in pit and underground, but we're not at all, kind of, on the far optimistic side, we're kind of middle of the road.

Cosmos Chiu -- CIBC World Markets -- Analyst

Of course. Thank you. That's all the questions I had. Yeah.

George Burns -- President and Chief Executive Officer

I might just add some supplementary comments. So, I mean, overall, as Joe mentioned, we're aiming at kind of globally average productivity rates for mines similar to Olympias. As always, including all of us on the call, when you need to change, sometimes it's not easy, and it doesn't feel comfortable. So we're working through those issues with labor. I can tell you, though that we're all aligned. Our communities, our workforce, everybody wants these assets to be successful, to be profitable in for how successful the next couple of decades with the assets based on the current reserves. And so we've got great alignment there. And in the end, we all understand that we need to deliver on the transformation, we need to attract the financing for Skouries and we follow that all of our stakeholders are going to benefit greatly. So, I focus on those positives. We recognize there will be some bumps along the road with changes there always is but we remain confident we're going to deliver on this.

Cosmos Chiu -- CIBC World Markets -- Analyst

Great. Thanks, George. And I totally agree with you. And thanks again for answering all my questions and have a good weekend.

George Burns -- President and Chief Executive Officer

Thank you.

Operator

The next question comes from Josh Wolfson with RBC Capital Markets. Please go ahead.

Josh Wolfson -- RBC Capital Markets -- Analyst

Thank you. I noticed the commentary earlier on the call about the plan to submit an updated EIA in the fourth quarter. Forgive me -- excuse me, if I'm sort of mistaken on this, that seems to be a new development because I was under the impression, I think you had sort of already received the amended EIA. So what is this sort of incremental step in the process?

George Burns -- President and Chief Executive Officer

Thanks, Josh, for the question. So now, this isn't a new expectation or requirement. So we did, earlier this year, get a modification to the prior EIA to enable us to deploy dry stack tailings at Skouries. And, as we discussed frequently, that's a massive improvement in project scope and risk reduction and environmental performance. What we've always said is that at the current permitted production rate of Olympias, it's a two-step process, as Joe mentioned. And so the first step, we're focused on driving productivity and efficiencies out but to get to the expanded potential throughput, we need a revision to the EIA. And so we've been working on this modification with regulators and engineering firms for around a year now and we'll be submitting that revision.

And essentially what it is we're going to be moving more tonnes out of the underground than the existing EIA anticipated, and processing it through the plant and then delivering the tailings to the Kokkinolakkas, extremely high quality tailings disposal facility as dry stack tailings. So we're just increasing volumes and now that has to be engineered and modeled and walked through the normal permitting process. So this was always in the plan as part of our five year guidance and our five year plan and we're on schedule to deliver this year and expect approvals next year.

Josh Wolfson -- RBC Capital Markets -- Analyst

Okay. Just so I understand it, so the EIA is for Kassandra overall, but the real only changes are related to Olympias.

George Burns -- President and Chief Executive Officer

Yeah, well, beyond Olympias, the other thing we've mentioned, we use the Stratoni facility, which is a port to export the Olympias concentrates, at least a portion of them currently. And so, some of the concentrates coming out of Olympias mill end up being bagged and trucked to Thessaloniki where it's then shipped to customers. A portion of the Olympias concentrate goes through that Stratoni port right at our operation, obviously at a much lower cost. And then our kind of immaterial base metal mine from a financial perspective Mavres Petres, we also ship the concentrate from that mine out of Stratoni port.

So with this EIA, our plan is to upgrade that port, modernize it and improve its environmental controls, but at the same time, set it up that we can ship all concentrate from Olympias directly out of that port, reducing our freight costs. So this EIA is mainly about the Olympias expansion in mine production and plant throughput but it's also supports this modernization of Stratoni. So that is in -- maybe I wasn't clear, the Kassandra mines has single EIA and it's been that way from the beginning and under that EIA, we have operations and projects. So, it's a stage approach and we're on schedule as planned to deliver on that.

Josh Wolfson -- RBC Capital Markets -- Analyst

Okay. And for Skouries -- sorry for Olympias, excuse me, the plan to submit study for processing the refractory are there by 2023. Are we sort of -- should we think about this as the equivalent or maybe the same as the old study for the flash smelter or is this going to be a new type of study?

George Burns -- President and Chief Executive Officer

No, it's a new study. So, our business plan, we're committed to completing the construction on Skouries, expanding Olympias and modernizing the Stratoni port. So I just told that's our base business plan. Now if you look at our guidance, what you see in our guidance is simply the expansion of Olympias and for now, we don't have Skouries in our five year production cost guidance simply because we have finished the engineering and walk it through our capital allocation process, and ultimately seek financing and management and board approval to proceed. So I mean, that's where we stand with our production guidance and our permitting. Now I lost my train of thought -- now can repeat your question?

Josh Wolfson -- RBC Capital Markets -- Analyst

This was sort of related to the processing plants for the refractory or --

George Burns -- President and Chief Executive Officer

Yeah, so that's really not built into our base plan. What we're saying here is that we're looking at other alternatives other than flash smelting that might be economic and good investment to improve the value of Olympias and so one option would be and one that's commonly used for these types of ores would be special oxidation and leaching. And with that we could produce an array of gold in country, we'd still be shipping out the lead and zinc concentrate in that scenario. So that's just one alternative for taking a fresh look at technology, but it's not smelting, it's other alternatives.

Josh Wolfson -- RBC Capital Markets -- Analyst

Okay. So I guess the wording on that, maybe, you sort of committed to providing proposal on this processing plan for Olympias. Should we understand this as part of requirement in developing these assets?

George Burns -- President and Chief Executive Officer

Yeah, for every country there's a desire to maximize value out of the natural resources that are being produced and to benefit the country as much as possible. So, Greece is like every other country, they'd like to see as much of the work done in country. And so in our new investment agreement that was signed and ratified by Parliament, and now is law, we've committed to just do the study work, we won't proceed on another technology for further processing of the Olympias gold pyrite concentrate, unless we find an economic solution. And assuming both government and us are comfortable with that investment opportunity and the permitting that would go with it, there's obviously be public consultation. So there's no requirement to execute the plan. There's a commitment and a requirement for us to evaluate and assess alternatives, and then to work with government on whether or not we might proceed with them so. Hopefully, that's clear.

Josh Wolfson -- RBC Capital Markets -- Analyst

Okay. And I'll try to limit this to maybe just one more question. The commentary on some of the additional work that was done for the Lamaque tailings, what sort of thinking should we have in terms of the takeaway recommendations that are that are upcoming?

George Burns -- President and Chief Executive Officer

Joe, do you want to take that one?

Joseph Dick -- Executive Vice President and Chief Operating Officer

Yeah, so what we have done is essentially review the plan thoroughly and be rested. I don't think we see too much different than prior. We're continuing with the Sigma tailings lift on schedule this summer. And we're looking at the tailings facility required with QMX to make certain that it is maintaining at reasonable standard, as well as the Lamaque tailings. And we don't expect anything material at this point, and potentially looking at either of those facilities for optimization as we continue to work on potential for impact going forward. So, all we've really done is had a good solid look at current plan and work to de-risk that plan.

Josh Wolfson -- RBC Capital Markets -- Analyst

Great. Thank you.

George Burns -- President and Chief Executive Officer

I'd like to supplement that answer as well. I mean, obviously, there's been a major focus on the way our industry manages tailings. And I think Eldorado is positioned significantly better than most companies with our deployment of dry stack tailings disposal, both in our operations and in our future projects, as well as underground cemented paste backfill. I think we're way better than average in terms of where we manage tailings. But we're also looking at our historical sites that we've inherited and how we improve and manage those historic facilities.

As Joe mentioned, we've got a long runway of exploration opportunities ever expanding the property post the QMX acquisition in Q2, and so we're just trying to be strategic about the alternatives for long-term tailings disposal with an appetite of extended mine lives and hopefully higher production rates. So, with success there, we're going to have to have more tailings capacity, and we're assessing those alternatives and trying to deploy the best available technologies. Right now, our Sigma tailings facility is the only conventional tailings disposal we have in our operating company. And we want to move that to improved tailings management standard. So we've been working on this for a couple of years, continue to work on it and with the focus that we're expected to grow our business there, so we're going to need more tailings capacity.

Josh Wolfson -- RBC Capital Markets -- Analyst

Okay. Thank you very much.

George Burns -- President and Chief Executive Officer

Thanks, Josh.

Operator

[Operator Instructions] The next question comes from Tanya Jakusconek from Scotiabank. Please go ahead. Hello, everyone, and thank you for taking my call. I just wanted to come back to just inflation and I'm going to start first on the inflationary pressures you're seeing in your cost structure before I get to capital. So can I just start with the inflationary inputs into your cost structure in terms of labor, consumables, given energies is an easier one to understand? But of your labor and consumables, Can you go through the jurisdictions you operate in and what you're seeing?

George Burns -- President and Chief Executive Officer

Sure, I mean, starting with Turkey, Turkey's economy is dealing with some pretty significant inflationary pressure and we're seeing that in our costs from a Turkish Lira perspective. But as we've seen in prior inflationary periods in Turkey, the US dollar exchange rate with the lira ends up washing away that effect. So if anything, we're probably seeing a slight benefit in Turkey overall, when you look at from a US dollar perspective.

In Canada, the opposite is true to some degree. We've seen, like everybody is seeing, price of copper is up, so if you're buying anything with copper, it's going to be a little bit more expensive. You got the normal labor rates, pushing prices up on everything. But I'd say again, no significant impact that we can measure in our current costs other than diesel is up a bit and some of these inputs are up slightly. I think the bigger issue with our Canadian operation is just the negative headwind on FX exchange rate to the US dollar. So that has put some pressure on Lamaque.

In Greece, the exchange rates been a bit of an issue there. Our inflation rate in Greece has not been that high although those same inputs -- input costs are obviously having some impact. So I will tell you overall, if you look at our results through mid-year, we're not seeing a material impact from inflation but I can't say we are concerned about it. We're seeing other projects that have announced recent capital increases. We don't have any indication yet on our Skouries update, we're in the middle of that. And as Joe mentioned, internally, we'll be seeing some numbers in Q3 and as we work those and finalize it, we will update the market in Q4.

But on the things I can speak to, diesel is definitely up from where it was. For us, we only have one open pit mine and that's usually where there's the most impact and that's Kisladag. It's not a high strip ratio mine, so a modest impact. And the rest of our operations are underground. So yeah, diesel prices are up, but not that material.

And then in terms of the overall project at Kisladag, most of the major equipment is in place. We got to buy the filters and all the equipment that will go with running that. We got to purchase the building. We got to construct the primary crusher, there's still all the wiring and instrumentation in flotation plant needs to be completed. So copper prices are up, there's got to be an impact there. There's lots of underground development to be done. So impacts on steel will have some impact on ground support and other normal infrastructure and underground mine. We have the rock dam that will sit at the bottom of the dry stack tailings facility as erosion control barrier. So, there's haulage from the open pit waste down into that valley, so some minor impacts. We'll have a lot better idea of the inflationary impact on Skouries once we get this feasibility study down and we'll update the market there.

So, is there pressure? For sure there's some. Can I quantify it with our existing results? Not very well. Tanya, I think, again, we're on track to deliver on our guidance for the year, so I'd say nothing abnormal, but for sure, global inflationary pressure is out there and every jurisdiction is a bit different and we're continuing to monitor it.

Tanya Jakusconek -- Scotiabank -- Analyst

That's why I'm asking more specifically in your jurisdiction, because every jurisdiction is different. I just want to confirm that you've mentioned obviously copper, you've mentioned diesel, of course, you've mentioned steel. Can I just ask specifically for your operations? Are you seeing any pressure on explosive and/or cyanide? You've mentioned labor, just kind of wondering, forget the FX impact that's offsetting it, but generally, what are you seeing labor inflation at or just the cyanide? Go ahead.

George Burns -- President and Chief Executive Officer

In terms of the inflation, general inflation is over 20%. But again, we've seen these high inflationary periods and the FX rate is adjusted for that in reality, in country and we're seeing that again. So overall, it washes away in terms of our US dollar cost. I am going to let Joe jump in here. He probably has better detail than I can speak to but the only place I know we've had some issues with COVID in Quebec, there was some issues earlier in the year of moving materials out of Ontario, so the border was restricted. At some point, we had to go to some alternative suppliers. There was some minor delays, but none of that really impacted our production profile and, as far as I know, an immaterial impact on our cost structure so far. So those are my thoughts. Joe, if you got anything you can add, jump in here.

Joseph Dick -- Executive Vice President and Chief Operating Officer

Sure, George. Tanya, to a couple of specific questions you asked around cyanide, explosives, no material or significant change to this point, as George mentioned. Energy prices are up slightly. As far as labor goes, we're net or better in Turkey, modest pressure in Greece and modest pressure in Lamaque. And maybe a little more significant at Lamaque based on just a lot of activity in the area, so it's twofold, FX plus the amount of activity in the area. We're not, at this point, at least projecting significant labor costs change going forward. We'll continue to review it but, at present, we're holding standard historic inflation rates.

Tanya Jakusconek -- Scotiabank -- Analyst

Okay, and maybe if I could leave off this and move back to Olympias. I think in your commentary you talked about this transformational effort that you're doing and trying to minimize some of the risks within this. Can you just talk to us what you see are the risks in this transformational change that you're undergoing?

Joseph Dick -- Executive Vice President and Chief Operating Officer

Certainly, I think it always when you go through a change like this, it's the duration it takes to make the changes. As George stated in his comments, we're confident we'll get through it and see ourselves as a more productive operator on the other side, and it's really a matter of how long does that take. And we're a bit encouraged. We're seeing progress in blasting practices and results already. We're seeing a bit of progress in shift duration around first and last trucks, as they get in and out of the mine. Coupled with that within Olympias that we have been at a bit of a development deficit or at least, certainly, haven't progressed that greatly or according to plan. So we're kind of facing two issues. One is, lack of a basis and work areas at the same time that we're working to increase productivity. And so those things kind of go hand in hand, and it's just a matter of how long does it take. And, we think we'll see a kind of a turning point or bottoming as we move through Q3. We're planning and our plans are for seeing increased or improved numbers as we get into 2022 and value creation on the back of that.

As far as the risk mitigation and that side of it, we're -- certainly have open and transparent communications ongoing with our labor partners. As I mentioned, during the discussion, we are meeting bi-weekly basis with the Union Presidents on how things are going relative to key performance indicators and metrics. And we also have several improvement teams that go from minor on up through kind of Superintendent level working together on solution. So we're really positive about all that but it does take time.

George Burns -- President and Chief Executive Officer

Maybe a couple of supplementary comments on this topic. So, we went through a pretty difficult period a couple of years ago with the last government and delayed permits, and putting Skouries and care and maintenance and all that was a headwind. And I can tell you, our labor workforce, union leadership, were in full support of us getting through those difficult times and been in full support of the revised business plan and in setting us up to be able to grow our business there. So, we got strong community and labor support on that. Change is never easy on any of us and we're working our way through the changes that are going to make these mines profitable and material assets for the company. And again, as I said, I'm confident about that.

And on how we're mitigating the risk of working through change, I mean, one of them is training. So we're working on a new training facility that will support some of this transformation on our existing operations and support the training and development of a new workforce that we're going to need to bring Skouries into operation. So here again, we're going to have alignment. We've put a board together for this training center. The union has got a representative to help us design this and build the systems to support it, to bring success. So I just want to put an optimistic tone on this, even though the reality is working through changes is never easy and remain confident we'll get through all that and you're going to see some pretty good numbers next year.

Tanya Jakusconek -- Scotiabank -- Analyst

And maybe just my final question on this, because you mentioned getting the appropriate leadership in place to get all of this going. Do you have the leadership? Do you have the right people in place to do this for you?

Joseph Dick -- Executive Vice President and Chief Operating Officer

Yes. Tanya, this is, Joe. We're confident that we do have the right leadership in place around the transformation. We're looking forward to some more, call it, resource sharing across Eldorado and kind of short-term assignments and subject matter expert help, but we're confident around the transformation resources that we have. We think it's important that we work through this as a team and as Eldorado. When I was talking earlier about leadership, I was talking more about the owner's team for Skouries as we are now in selection process on.

Tanya Jakusconek -- Scotiabank -- Analyst

Okay. Okay, great. Thank you.

George Burns -- President and Chief Executive Officer

Thanks, Tanya.

Operator

[Operator Closing Remarks]

Duration: 61 minutes

Call participants:

Lisa Wilkinson -- Vice President, Investor Relations

George Burns -- President and Chief Executive Officer

Philip Yee -- Executive Vice President and Chief Financial Officer

Joseph Dick -- Executive Vice President and Chief Operating Officer

Cosmos Chiu -- CIBC World Markets -- Analyst

Josh Wolfson -- RBC Capital Markets -- Analyst

Tanya Jakusconek -- Scotiabank -- Analyst

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