Eldorado Gold (EGO) Q4 2021 Earnings Call Transcript

Eldorado Gold (EGO 3.07%)
Q4 2021 Earnings Call
Feb 25, 2022, 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 fourth quarter and year-end 2021 results and the Lamaque Technical Study conference call. [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 Q4 and full year 2021 results and Lamaque Technical Study conference call. Before we begin, I would like to remind you that we will be making forward-looking statements during the call.

Please refer to the cautionary statements included in the presentation, as well as the risk factors set out in Our annual information form. Joining me on the call today, we have George Burns, president and chief executive officer; Phil Yee, executive vice president and chief financial officer; and Joe Dick, executive vice president and chief operating officer. Other members of the senior leadership team will also be available for the Q&A session. Our release yesterday details our 2021 fourth quarter financial and operating results.

This should be read in conjunction with our fourth quarter financial statements and management's discussion and analysis. We also released highlights of the new Lamaque Technical Study. These documents are available on our website and have 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. After the prepared remarks, we will open the call for Q&A. At this time, we will invite analysts to queue for questions.

I will now turn the call over to George.

George Burns -- President and Chief Executive Officer

Thanks, Lisa, and good morning, everyone. Here's the outline for today's call. I'll provide a brief overview of 2021 highlights before passing it to Phil to go through the financials, then Joe will discuss operational performance and provide some additional color on the new Lamaque Technical Study before we open it up for questions from our analysts. I am very proud of our team for achieving several key milestones in 2021.

Specifically, we delivered full year production of over 475,000 ounces, which was at the high end of our increased guidance range. In January, we released our five-year production outlook that shows continued growth at our current operating mines. The key highlight is, the midpoint of annual gold production has increased on average by approximately 4% or 21,250 ounces per year for the period between 2022 and 2025 compared to the guidance provided last year for the same period. In 2022, we expect first half production to be lower than second half due to the construction and ramp-up of the HPGR at Kisladag, year-to-date weather challenges in Turkey and Greece and the impact of COVID-19 Omicron variant across our operations, which has resulted in increased absenteeism.

We are still confident that we will deliver our 2022 production guidance range of 460,000 to 490,000 ounces. We continue to evaluate opportunities at our operations with a goal of providing potential upside to our future production outlook. Our Skouries financing discussions continue to advance. We are evaluating all available options, including joint venture equity partners, project and debt financing and, lastly, streams.

Our focus on selecting a financial package will continue to be driven by value optimization and derisking for the future. Yesterday, we released the results of the new Lamaque Technical Study, which showcases the growing value at the asset and the significant upside potential from Lower Triangle and Lamaque deposits. The Lamaque property has been an outstanding acquisition for us. We quickly developed the project and brought it into commercial production.

We have been replacing reserves year over year, and we have even exceeded peak production levels beyond the 2018 pre-feasibility study. Now, the new study shows robust economics. Specifically, the Upper Triangle reserve NPV is $459 million at a 5% discount rate and using a $1,500 gold price assumption. In addition, the Lower Triangle and Ormaque Inferred Resource deposits have incremental NPV of 162 and $197 million respectively.

Joe will speak more about the study later in the call. With the Triangle-Sigma decline project now complete, we are focused on an exploration drift and resource conversion at Lamaque. Our 2022 exploration strategy is focused on new targets within our expanded license area to support continued growth at Lamaque. We are also strategically positioned in the Abitibi region, providing us additional exposure to the potential upside in this world-class mining jurisdiction.

Switching gears, we have noted in previous quarters we continue to face pervasive inflationary pressures similar to the wider market. In the fourth quarter, we have seen increased volatility with inflation in Turkey. However, we continue to benefit from the weakening lira, which offset the majority of these inflationary pressures in 2021. In the Abitibi region, mining work has picked up, which is impacting the availability of contractors and labor.

We continue to successfully mitigate this challenge. We have reviewed our major spend categories to ensure resilience in our supply chain, and we'll continue to monitor the inflationary risk going forward. Finally, I'd like to highlight another significant step forward in our sustainability strategy. We recently published our inaugural Climate Change and Greenhouse Gas Emissions report.

In this report, we target mitigating greenhouse gas emissions by 30% by 2030 on a business-as-usual basis. In other words, we intend to remove approximately 65,000 tons of carbon dioxide equivalent by 2030. We have made tremendous progress to better understand and address climate change risks and opportunities facing our business, which will help us achieve our greenhouse gas emissions target and support our journey to decarbonization. I will stop there and turn things over to Phil for a review of our financial results.

Phil Yee -- Executive Vice President and Chief Financial Officer

Thank you, George. Good morning, everyone. We had a strong year of operational results in 2021. As George mentioned, full year production of over 475,000 ounces was at the high end of our increased guidance range.

Our full year 2021 cash operating cost was $626 per ounce sold and all-in sustaining costs for 2021 were $1,069 per ounce sold, both within our guidance ranges. Full year 2021 free cash flow was $62 million which was in line with our expectations despite lower free cash flow in Q2 2021 related to increased growth capital spending, increased tax cash payments and the timing of annual royalty and interest payments. Eldorado reported net loss of $43 million or negative $0.24 per share in Q4 2021 and net earnings of $11 million or $0.06 per share in full year 2021. This is down compared to full year 2020 net earnings of $131 million or $0.77 per share, driven mainly by lower production and higher taxes in 2021.

After adjusting for one-time nonrecurring items, including the $31 million expense related to moving Stratoni into care and maintenance, $31 million expense related to debt refinancing and $55 million in net loss on foreign exchange due to translation of deferred tax balances, which increased because of the weakening Turkish lira. Adjusted net earnings increased to $25 million or $0.14 per share in Q4 and $119 million or $0.66 per share in full year 2021. Adjusted net earnings in the fourth quarter were impacted by a $14 million impairment at Stratoni and the significant weakening of the Turkish lira in the quarter, resulting in high tax expense on unrealized foreign exchange gains in Turkey. Cash operating costs averaged $571 per ounce sold in Q4 and $626 per ounce sold for the full year 2021.

Cash operating costs in Q4 benefited from larger volumes of base metal sales at Olympias. All-in sustaining costs per ounce sold averaged $1,077 per ounce sold in Q4 and $1,069 per ounce sold for the full year 2021. Capital expenditures were $81 million in Q4 and $294 million for the full year. This reflects a planned increase in growth capital spending at Kisladag with the new HPGR project and at Lamaque with the underground decline project.

Current tax expense was $38 million in Q4 and $90 million for the full year. Current tax expense in the fourth quarter was driven by higher unrealized foreign exchange gains due to the weakening Turkish lira, which was partially offset by the investment tax credits received in Turkey related to the Kisladag heap leach capital improvements. Deferred tax expense was $57 million in Q4 and $50 million for the full year. As I mentioned earlier, deferred tax expense in the fourth quarter was primarily due to the weakening lira, as well as $13 million related to the closure of Stratoni.

Depreciation expense was $47 million in Q4 and $201 million for the full year. Depreciation expense for 2021 was at the low end of our guidance range. At year-end, we had unrestricted cash and cash equivalents of $481 million. We continue to focus on maintaining a solid financial position, which provides flexibility to unlock value for our Kassandra assets in Greece.

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

Joe Dick -- Executive Vice President and Chief Operating Officer

Thanks, Bill, and good morning. I will start with an important health and safety highlight from our operations. The teams at our mine sites are truly engaged in building our safety culture, and we are proud of the success we have seen in focusing on leading indicators to improve safety outcomes. Specifically, we have enhanced preventative health and safety engagements in the field and our corrective action closeout rate is 82%.

This demonstrates the proactive nature of health and safety at our operations and builds a culture of care. Now, moving to our operating results. We produced 122,582 ounces of gold in the fourth quarter and full year 2021 production of 475,850 ounces, which was at the upper end of our increased production guidance range of 460,000 to 480,000 ounces. This was driven by stronger-than-planned performance at Kisladad and Lamaque.

Starting in Turkey. Kisladag production in the fourth quarter was 33,136 ounces and cash operating costs were $737 per ounce. Construction and wet commissioning of the HPGR circuit were completed in December, and we are now ramping up production and metallurgical adjustments. We are currently balancing agglomeration and tons placed with leach kinetics and permeability to obtain optimal performance.

The HPGR circuit is expected to increase heap leach life of mine recovery by an estimated 4% to approximately 56%. So far, the performance of the HPGR circuit is meeting our expectations, and we believe there is potential to further enhance recovery with additional optimization. At Efemcukuru, fourth quarter gold production was 22,631 ounces at cash operating cost of $606 per ounce. Gold production throughput and average gold grade at Efemcukuru were in line with expectations.

Now, moving to our Canadian operations. Fourth quarter gold production at Lamaque was 51,354 ounces, a 37% increase over last quarter, driven by higher-than-planned gold grades in the C4 zone. Cash operating costs were $482 per ounce. Finally, let's move to Greece.

At Olympias, fourth quarter gold production was 15,461 ounces, a 12% increase over last quarter. Cash operating costs were $441 per ounce as a result of stronger base metal revenue in the quarter. Olympias performed better in the fourth quarter, delivering the strongest quarter of the year. This was driven mainly by efficiency initiatives started earlier in 2001 related to the transformation program at the Cassandra assets and positive grade reconciliation versus plan.

We continue to be optimistic that we can achieve the productivity targets outlined in the Cassandra transformation plan in the coming year. Switching gears, I'm excited to announce the positive results of the new Lamaque Technical Study, which includes an update to the current operation regarding mineral reserves in the Upper Triangle deposit, Zone C1 through C5, and updates to the inferred resources on the Lower Triangle zone C6 through C10 and the Ormaque deposits. The Upper Triangle reserves case has an NPV of $459 million at a 5% discount rate and a gold price assumption of $1,500 per ounce. Separately, there is an incremental NPV of $162 million for the Lower Triangle Inferred Resource and $197 million for the Ormaque Inferred Resource.

This value creation positions Lamaque as a cornerstone asset and a significant opportunity that Lower Triangle and Ormaque deposits provide. We are well positioned in the Abitibi region. Our recent acquisition of QMX has expanded our land package in properties near our core operations at Lamaque by over 500%. And we have many exploration targets to provide further opportunity to continue to grow the resources and reserves.

Mark has been an outstanding acquisition for us. Not only have we been able to continuously replace reserves year over year with additional growth, we have also exceeded the 2018 PFS metrics in terms of tonnage and gold production. In 2021, Lamaque gold production from Upper Triangle was 153,201 ounces, 13% higher than expected production in the PFS. The Upper Triangle reserves case also shows increased production to over 190,000 ounces per year, which exceeds the PFS.

Our study shows an extended mine life with about five and a half years of production from Upper Triangle reserves and potential for an additional eight and a half years of mine life from Lower Triangle and Ormaque Inferred Resource. Overall, the study continues the Eldorado growth story and our focus on value creation and builds on our recent work at Skouries. We have an outstanding team and robust surface infrastructure already in place at the Lamaque mine to support current operations and continue mining Upper Triangle reserves. Additional infrastructure is required on the Sigma tailings and the mine dewatering systems.

We have completed a significant amount of work so far, and I'm really proud of the team. Over the last few years -- over the next few years, we plan to complete studies on the Sigma tailings, North Basin, water treatment, resource conversion, tailings thickener and paste backfill, as well as Lower Triangle materials handling options. We remain focused on resource conversion at Lamaque and exploring new targets within our expanded land package to support additional growth opportunities at Lamaque. I'll stop there and turn it back to George for closing remarks.

George Burns -- President and Chief Executive Officer

Thanks, team. 2021 was a successful year for Eldorado with strong operational performance, meeting production and cost guidance and the completion of the Kisladag HPGR and the Lamaque decline growth projects. Looking ahead, we see 2022 as another pivotal year as we advance work on Skouries and explore growth opportunities at our current operations, while continuing to put safety and sustainability at the core of our business. Thank you for your time.

I will now turn it over to the operator for questions from our analysts.

Questions & Answers:

Operator

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

Cosmos Chiu -- CIBC -- Analyst

Thanks, George, Phil, Joe, for the presentation. Maybe my first question is on Lamaque, the technical report. Just to confirm, the grades that you've given for Lower Triangle and Lamaque, those are diluted grades, right?

Joe Dick -- Executive Vice President and Chief Operating Officer

That's correct, Cosmos.

Cosmos Chiu -- CIBC -- Analyst

Great So, you know, for Lower Triangle here, I noticed that the mining cost is a bit lower compared to Upper Triangle. The grade is also a bit lower. Is that due to a different sort of mining method? Are you using bigger stopes? Or is it really potentially just slightly lower grade?

Joe Dick -- Executive Vice President and Chief Operating Officer

The difference in mining method between Upper and Lower Triangle is primarily paste backfill in Lower Triangle, which does help mining costs a bit. And we do have some latitude to potentially pull that forward. As far as the grade comparison, I don't have it directly in front of me, Cosmos. Maybe there's someone on the phone who does.

Certainly, tonnage plays into it as we have higher tonnage.

Cosmos Chiu -- CIBC -- Analyst

It's not huge. One is slightly over seven, I think one has a six handle on it, so it's not huge. So I'm just wondering if there's -- I guess, the question is, is there upside potential in terms of C6 to C10 later on, because I believe there's some cross structures when I was on site, at least in the Upper Triangle. I'm wondering if that's been factored in.

I'm just wondering if this is the grade eventually for Lower Triangle. Or is there potentially some upside to it?

George Burns -- President and Chief Executive Officer

It's George. Maybe I'll --

Cosmos Chiu -- CIBC -- Analyst

Hi, George.

George Burns -- President and Chief Executive Officer

Jump in here for a minute. Yeah, Joe, I'll start. Maybe you can fill in any gaps. So I mean, the way I look at Lower Triangle, so far it's been drilled exclusively from surface.

And obviously, the deeper we go, the more challenging the drilling is to target the appropriate drill density. And obviously, the costs are much higher. And so, if you contrast it to Upper Triangle, we're going to be reliant on underground drilling. If you look at Upper Triangle, C1 through C5, with time, we've been successfully increasing not only converting from inferred resources to reserves, but we've also been growing the inferred resource.

So I think the upside on Lower Triangle is simply getting the development further down, getting the infill drilling from C6 down to C10. And I think just based on the history of C1 to C5, you'll see continued growth in the size of the resource. And obviously, with that drill density, we'll have a better idea on the grade.

Joe Dick -- Executive Vice President and Chief Operating Officer

George, I'll just add. Cosmos, from a mining perspective, we think there's likely upside in materials handling system, as I mentioned, that we'll do continued study work on, but our base case is trucking at this point.

Cosmos Chiu -- CIBC -- Analyst

And then maybe moving to Ormaque, my understanding is that this is a flatter lying structure. Also noticed in your cost, Lamaque, that is also slightly higher. Could you maybe comment on the mining method, stope sizes, the mining costs and therefore?

Joe Dick -- Executive Vice President and Chief Operating Officer

Maybe I'll open it, and if Brock's in the room, he can add to it. So Cosmos, you're correct, it is flat line, and we're at a mining height of about two and a half meters in the majority of Ormaque as we see it today. We think we can, through additional drilling, may change a bit. But it's a low-profile drift and fill type method.

Brock, anything you want to add to that?

Brock Gill -- Vice President, Projects and Transformation

No. Nothing from my end, Joe.

Cosmos Chiu -- CIBC -- Analyst

Great. Thanks. And then, in terms of Sigma tailings, as you mentioned, there's expansion plans. Eventually could that be expanded to include all the different years that you've highlighted, including Triangle, Upper Triangle, Lower Triangle and also Lamaque? And could there be -- could it actually be extended further beyond what you've outlined yesterday as well?

Joe Dick -- Executive Vice President and Chief Operating Officer

Well, Cosmos, it certainly contains the entire reserves case. And then, I think basically goes to about 2028, 2029 in total. And we're looking at a couple of other alternatives to increase tailings storage beyond that, one of them being the in-pit, as well as the historic Lamaque tailings. So we have what we believe is a path to all of the reserves and inferred resources noted and then have options as to how we do that with a good amount of runway in front of us through Sigma.

Cosmos Chiu -- CIBC -- Analyst

And maybe one last question here. You kind of mentioned in the MD&A changes to existing permits. Could you talk about the permits and other -- any additional permits that are needed for the inferred -- to get to the inferred resources to eventually mine the inferred resources at Lower Triangle and Lamaque?

Joe Dick -- Executive Vice President and Chief Operating Officer

There's no additional permits required on Upper or Lower Triangle. And at Ormaque, below an elevation, someone will have to correct me, but I think it's 435 meters below surface, then production from below there would require a permit adjustment.

Brock Gill -- Vice President, Projects and Transformation

I think, Cosmos -- this is Brock.

Cosmos Chiu -- CIBC -- Analyst

Hi, Brock.

Brock Gill -- Vice President, Projects and Transformation

I can add a bit of color to that. Yeah. Thank you. I think, as you correctly said, it's minimal permitting for the future.

We need a permit for the tailings race. So not a significant one, and it's already in plan. And on the certificate of authorization, we need an expansion of the lease just for one zone. So very minimal and already in train.

And then, not really on permitting, but we're also watching legislative changes in Quebec on water quality with regard to directive '19. So those are the three main areas we're looking at.

Cosmos Chiu -- CIBC -- Analyst

Great. Thanks again. Those are all the questions I had. And have a good weekend.

Brock Gill -- Vice President, Projects and Transformation

Thanks, Cosmos.

Operator

The next question is from Mike Parkin with National Bank. Please go ahead.

Mike Parkin -- National Bank Financial -- Analyst

Hey, guys. Congrats on the quarter. A couple of questions for me. Are we still looking at the same timing on the Perama Hill update?

George Burns -- President and Chief Executive Officer

Yeah, same timing.

Mike Parkin -- National Bank Financial -- Analyst

Over to Lamaque, in terms of -- what steps you guys see being possible in terms of ramp access versus when you'd have to consider switching to a shaft?

George Burns -- President and Chief Executive Officer

I'll start -- sorry, Joe, go ahead.

Joe Dick -- Executive Vice President and Chief Operating Officer

Essentially, it's an economic trade-off that will be ongoing. So that's what will drive it. And we have a bit of time to complete that work. So George, I didn't mean to cut in on you.

So maybe go ahead.

George Burns -- President and Chief Executive Officer

Yeah. I was just going to say from a capital allocation perspective, it really -- it's a trade-off between capital versus operations and obviously the impact that has on value. So the sort of scenarios we've considered for deep mining on Triangle or the current base case just continue to haul it out. That's the lowest capital option.

But from a profitability perspective, we continue to study material handling options. The current thinking would be, use the just completed decline for the top portion. And then, from there down, we've looked at vertical conveyor. It's a pretty low-cost capital option for hoisting.

It would just be or not people movement or not supply movement. We've looked at rail bars, and all these make some sense. But from a capital allocation perspective, we need to grow the tons and the return on investment for that to be the chosen solution. As I was trying to explain earlier in the call, there's still a lot of drilling to be done in Lower Triangle.

I think there's significant upside in terms of discovering additional inferred resources. We don't have any inferred resources yet on a bulk mining opportunity in Lower Triangle, but we have a stockwork zone that was successfully mined in the historical Lamaque mine, but we just don't have the ability to drill that from surface to the degree to have confidence in any kind of economic scenario. So as we continue to push the mine vertically, we'll get the drilling required. I think there's significant upside on Lower Triangle.

And as that unfolds, it will give us better clarity on the right infrastructure to maximize value to our shareholders.

Mike Parkin -- National Bank Financial -- Analyst

OK. That was actually going to be one of my follow-up there, was the stockwork zone. And then, you've also done the QMX acquisition where you've got that kind of hub-and-spoke potential with the Sigma mill. Can you just remind us what kind of work you're doing regionally in the next year to advance that? There's a number of kind of targets there.

George Burns -- President and Chief Executive Officer

Yeah. On what we call Bourlamaque, which is the QMX land acquisition, we've got a number of high-grade targets would be underground mining. Some of those have advanced to drilling. We did some drilling in 2021, kind of a ramp-up in that activity this year.

And we also have earlier-stage targets where we're trying to find discovery. So as we stated, we're really excited about the Bourlamaque area. We have a number of targets. It is a longer-term growth opportunity than obviously the things we've talked about at Triangle and Lamaque.

But we're really confident with this land package in the district we're in that we're going to have future discoveries to support further value creation with the outstanding infrastructure we have and the fantastic workforce we have.

Great. Thanks, guys. That's it for me. Have a good weekend.

Thank you.

Operator

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

Kerry Smith -- Haywood Securities -- Analyst

Thanks, operator. George or Joe, on the slide nine that you have in the slide that you used for this presentation, you show kind of a timeline for tons and where they're coming from for the project. So you kind of have Lower Triangle and the Ormaque Inferred Resource as kind of coming out over the same length of time. Would it be fair to assume that that would likely come out 50-50 in terms of tons to the mill, so 1,100, 1,200 tons from each of those operations over the course of that chart, that Gantt chart.

George Burns -- President and Chief Executive Officer

That's not unreasonable, Kerry.

Kerry Smith -- Haywood Securities -- Analyst

OK. OK, perfect. That's good. Thank you.

And in your opening comments, George, you did talk about different financing discussions that are ongoing, the JV, bringing in an equity partner, debt and equity, I know you talked about a stream. I know in the past, stream has kind of been the lowest priority option, but you did mention it. I'm just wondering if it's now becoming more of a viable option or you just mentioned it because it is something that you're still considering, but it's still a low priority?

George Burns -- President and Chief Executive Officer

Yeah. I mean, it's a comprehensive review to look at all alternatives. Historically, streams have a long-lasting impact, particularly if there's a tail on future discovery. So it's been on the lower end of our alternatives, but I do have to say the economics from streamers has been improving.

So I answer your question, nothing has really changed. We have the same strategies. We're hoping to have a great equity partner that can help us with successful execution and influence. We're looking at pretty favorable project financing opportunities and also engage with streamers.

So our whole strategy is to get all the information in, do a financial analysis around it, looking at value and risk and make the optimum decision for our shareholders. So Kerry, really nothing's changed. We're advancing and look forward to coming to a conclusion.

Kerry Smith -- Haywood Securities -- Analyst

OK. And you're still expecting to make that decision sort of late this year, I guess, second half, let's say?

George Burns -- President and Chief Executive Officer

Yeah. I mean, we're hopeful to get all the information around midyear and go through an evaluation process and make a decision hopefully in third quarter.

Kerry Smith -- Haywood Securities -- Analyst

OK. OK, that's great. Thank you, George. Appreciate it.

Operator

[Operator instructions] The next question comes from Tanya Jakusconek with Scotiabank. Please go ahead.

Tanya Jakusconek -- Scotiabank -- Analyst

Yeah, great. Good morning, everyone and thanks for taking my question. I just wanted to follow up on Kerry's question. We had talked about other options such as the Greek bank, great financial institutions.

Are they still involved and interested? I just wanted to see if that was still ongoing.

George Burns -- President and Chief Executive Officer

Yeah. Greek banks and COVID relief funding out of EU is one of the project financing alternatives we continue to progress and evaluate.

Tanya Jakusconek -- Scotiabank -- Analyst

OK. That's good. And then, when you talked about streaming option -- streaming as an option, I just want to remind you, when you're talking about streaming, George, are you talking about streaming the copper, or are you talking about streaming your principal commodity?

Jason Cho -- Executive Vice President and Chief Strategy Officer

Hi, Tanya. It's Jason. I think it would be fair to assume that we would be looking at both.

Tanya Jakusconek -- Scotiabank -- Analyst

Thank you for that. And then, I wanted to come back on to the Lamaque release yesterday on Lower Triangle and Ormaque and appreciate there's a lot of moving parts. But maybe if we can just looking at like -- just simplify it as you come toward 2026 when we commence mining -- from now until 2026, can you just review the critical path of what needs to be done to start on both of those from both the underground and surface? Thank you.

George Burns -- President and Chief Executive Officer

Maybe I can start just from a drilling and conversion perspective and then Joe and Brock can jump in on infrastructure and other important factors. So from an exploration perspective, with the just completed decline, we're about 100 meters into a new drift that will sit right over the top of the Ormaque lenses. And so, by sometime this summer, we will be underground drilling on Ormaque to progress the drill density we need to be able to convert Ormaque from an inferred resource to reserve. We've advanced studies.

So we're in pretty good shape on that side of it. And then, for Lower Triangle, it's really just pushing the ramp down each year as we have to-date to allow underground drill access to drill the next portion of the deposit off. So the way I see it, we'll get enough drilling on Ormaque to do the appropriate technical analysis to hopefully convert it to a reserve. And it will come in a big chunk as it always needs to cover the infrastructure and the new mining fleet that we'll need.

And then, for Lower Triangle, it's just simply getting the drill density really to have confidence to call it a reserve and then it's just pushing the infrastructure down. And over the long-term, it's trying to get enough confidence in Lower Triangle that we select the optimum infrastructure. So...

Brock Gill -- Vice President, Projects and Transformation

Yeah. Thanks, George. Tanya, it's Brock. So I would kind of break it into two categories.

The first would be, the studies that Joe had referenced in his remarks. So on the North Basin on the tailings facility for Sigma, water treatment and then, as George mentioned, resource conversion and then there's a tailings thickener and backfill study we wish to do. So those are the basic ones -- and sorry, I would also add to the question that was asked earlier. We've got a number of materials handling options in Lower Triangle.

So there's a study phase that is based -- how I would look at that is more confidence in the reserve base obviously, and then a little more work done on the two inferred cases. So that's No. 1. And then, two, to the comments on infrastructure.

The first thing up is a raise of tailings as we've already mentioned. And then, after that, it's kind of we've got a sequence set of, call it, capital decisions that we'll allocate on. So the reserve case does not have a lot of capital inside of it. And then, there's further kind of layered out -- as we get through that study phase, we've got a paste backfill decision if we want to get to it and so on.

Does that help you?

Tanya Jakusconek -- Scotiabank -- Analyst

Yeah. No, I was hoping to get just a bit more clarity on when all of these would be done in the time frame of 2022 to 2025 or '26. The studies like are they going to be available for us like the infrastructure and then all of the drilling. Just trying to fit it and look at your timeline on page nine and trying to put it into a schedule there for me to understand the progress.

Brock Gill -- Vice President, Projects and Transformation

OK. So the studies are -- apologies for not getting that. So the studies are ongoing now. Some of them will be distributed, I guess, as they would end up in a further technical report.

The tailings raise is Q3 of 2022. Look at North Basin, which I referenced on that in -- kind of in the second half of 2023. Resource conversion happens throughout -- starting this year. I mean, I think George had referenced that the resource conversion being one of our key areas.

And then, back end of '23, early '24 is when we look to have a PFS.

Tanya Jakusconek -- Scotiabank -- Analyst

OK. Yeah, that's helpful. It's just my understanding on how the progression will look like, because there's a lot of studies, right? And so, you're trying to understand how they're all going to fit together and what's going to be done there. So I really appreciate it.

Thank you.

Brock Gill -- Vice President, Projects and Transformation

Thanks, Tanya.

Operator

[Operator signoff]

Duration: 42 minutes

Call participants:

Lisa Wilkinson -- Vice President, Investor Relations

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

Cosmos Chiu -- CIBC -- Analyst

Brock Gill -- Vice President, Projects and Transformation

Mike Parkin -- National Bank Financial -- Analyst

Kerry Smith -- Haywood Securities -- Analyst

Tanya Jakusconek -- Scotiabank -- Analyst

Jason Cho -- Executive Vice President and Chief Strategy Officer

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