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Edited Transcript of ELD.TO earnings conference call or presentation 1-Nov-19 3:30pm GMT

Q3 2019 Eldorado Gold Corp Earnings Call

VANCOUVER Nov 10, 2019 (Thomson StreetEvents) -- Edited Transcript of Eldorado Gold Corp earnings conference call or presentation Friday, November 1, 2019 at 3:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* George Raymond Burns

Eldorado Gold Corporation - President, CEO & Director

* Jason Cho

Eldorado Gold Corporation - Executive VP & Chief Strategy Officer

* Paul James Skayman

Eldorado Gold Corporation - Executive VP & COO

* Peter Lekich

Eldorado Gold Corporation - Manager of IR

* Philip Chow Yee

Eldorado Gold Corporation - Executive VP & CFO

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Conference Call Participants

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* Cosmos Chiu

CIBC Capital Markets, Research Division - Executive Director of Institutional Equity Research & Equity Research Analyst

* Frank Duplak

PGIM Fixed Income, Research Division - Head of High Yield Credit Research

* Kerry Smith

Haywood Securities Inc., Research Division - VP & Senior Mining Analyst

* Matthew Anthony Castellini

BofA Merrill Lynch, Research Division - Research Analyst

* Michael Parkin

National Bank Financial, Inc., Research Division - Mining Analyst

* Michael Jalonen

BofA Merrill Lynch, Research Division - MD

* Steven Howard Butler

GMP Securities L.P., Research Division - MD of Equity Research & Gold Analyst

* Tanya M. Jakusconek

Scotiabank Global Banking and Markets, Research Division - Analyst

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Presentation

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Operator [1]

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Thank you for standing by. This is the conference operator. Welcome to the Eldorado Gold Corporation Third Quarter 2019 Results Conference Call. (Operator Instructions) And the conference is being recorded. (Operator Instructions)

I would now like to turn the conference over to Mr. Peter Lekich, Manager Investor Relations. Please go ahead, Mr. Lekich.

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Peter Lekich, Eldorado Gold Corporation - Manager of IR [2]

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

Our release yesterday details our 2019 third quarter financial and operating results. This should be read in conjunction with our third 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 in 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 would like to remind you that any projections included in our discussion today are likely to involve risks, which are detailed in our 2018 AIF and in the cautionary note on Slide 1.

I will now turn the call over to George.

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George Raymond Burns, Eldorado Gold Corporation - President, CEO & Director [3]

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Thanks, Peter, and good morning, everyone. Here's the format for today's call. I will give an overview of the quarter's highlights, along with some comments, then I'll pass it over to Phil to go through the financials. And Paul will follow by reviewing operations. Then we'll open it up for questions.

Over to Q3 highlights on the next slide. It was a solid quarter overall, both operationally and financially. Consolidated gold production and costs came in on plan, and we reiterated our 2019 guidance of 390,000 to 420,000 ounces of gold at cash costs of $550 to $600 per ounce. Revenues were up in Q3, driven by another great quarter at Lamaque, increased production at both Kisladag and Efemcukuru and a higher gold price.

Our operating cash flow was almost 3x higher than Q3 last year. And I'm pleased to report a second consecutive quarter of free cash flow resulting from higher sales volumes. This quarter, Kisladag saw the benefit of ore stacked earlier this year, with production beginning to increase after ongoing longer lead cycles. Also, positive recent test results confirmed recoveries from leaching deeper material over 250-day cycles, supporting an extension of mine life beyond our current 3-year guidance. As such, we took the decision to begin waste stripping to support such an extension. The team began this work in October. Test work is still ongoing to determine the ultimate heap leach recovery and the extent of the mine life extension. We expect to announce this in Q1 2020.

It was a busy cycle at Lamaque, who had a second successful operating quarter. Resource expansion drilling in the lower triangle deposit continues to reinforce our belief that the deposit could be larger than what we currently have in our resource model. We hosted an analyst tour of Lamaque in September, and announced we are undertaking a PEA to increase average annual gold production from approximately 130,000 ounces to 170,000 ounces. We expect to release this during Q4.

In Greece, advances on the permitting front was a highlight this quarter. We received the long-outstanding installation permits for both Skouries and Olympias in September. Subsequent to the quarter, we received further permits and approvals for Skouries. These include the building permit for the Skouries mill and consent from the Central Archaeological Council to relocate antiquities from the open pit area. We still require ministerial approval to finalize this.

Here's a bit more detail on engagement with the Greek government during the quarter and next steps. We've had several positive meetings with all levels of the government, including 2 meetings with Prime Minister Mitsotakis. We are very encouraged by the outcomes of our discussions to date, that is receipt of the outstanding permits and we will continue to work together to drive the projects forward. The focus of discussion remains on dry stack tailings permit and establishing necessary investor protections. A modification to the technical study to move to dry stack tailings is underway. This would be followed by the submission of an electromechanical permit application for the tailings filtration plant. We expect this process to be completed later next year.

In parallel to this, we have restarted desktop work on our Perama Hill Project, which has been on hold since 2014. A review is underway to update permitting and relevant legislative changes. We will then establish a revised path forward, including engagement with the local community. Lastly, we'll continue to explore funding options for our Greek projects.

Before I hand it over to Phil, a quick word on resources and reserves. We expect to publish our updated statement before the year-end. So look for that in the coming months. In the case of Kisladag, we will use subtraction only, and then update the reserves and resources for this asset once the metallurgical test work has been completed. That's it for me.

Over to you, Phil.

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Philip Chow Yee, Eldorado Gold Corporation - Executive VP & CFO [4]

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Thanks, George. Good morning, everyone. I will start on Slide 5, where we have an overview of our financial results for Q3 2019. During the quarter, Eldorado generated $172.3 million in total metal revenue, which included $150.2 million in gold sales. Revenues were higher than the comparative period in 2018 due to a higher gold sales volume and a higher average realized gold price in Q3 2019. The rise in gold price and the increase in production translated into net earnings to shareholders of $4.2 million or $0.03 per share for Q3 2019.

Adjusted earnings for the quarter amounted to $7.5 million or $0.05 per share. This is after adjusting for, among other items, the $3.4 million of deferred tax expense related to foreign currency exchange rate fluctuations. The strong sales in Q3 2019 resulted in EBITDA of $73.2 million and adjusted EBITDA of $75.9 million. Adjusted EBITDA excludes the impact of noncash share-based compensation expense.

Some of the nonoperational items affecting net earnings include finance costs totaling $13.2 million in the quarter compared with $0.8 million in Q3 2018. The significant increase in Q3 2019 was primarily a result of changes in the treatment of interest costs between the 2 periods. Interest costs related to Lamaque are no longer capitalized after Q1 of 2019, following commencement of commercial operations. Interest charges related to Skouries are no longer capitalized in 2019, after Skouries was transferred to care and maintenance at the end of 2018.

As I mentioned last quarter, going forward, we expect our interest cost to be in the ballpark of approximately $12 million per quarter. This includes interest on debt fees related to the credit facility and amortization of transaction costs. The interest component may vary slightly from quarter-to-quarter as a portion of the debt is now at variable rates. Mine standby costs of $2.5 million were incurred during the quarter, reflecting a decrease from $4.5 million in Q3 of 2018. This was a result of Kisladag transitioning back into operation in April of 2019.

Income tax expense totaled $15.9 million for Q3 2019. And included current income taxes of $10.1 million, primarily relating to operations in Turkey, and deferred taxes of $5.8 million, primarily due to timing differences and foreign currency exchange fluctuations. In Q3 2019, the income tax expense was impacted by a deferred tax liability, whereas both Q1 and Q2 were impacted by a deferred tax recovery.

As George mentioned, we had a second consecutive quarter of positive free cash flow generation. We finished the quarter with approximately $322 million of available liquidity. Of this, $134.9 million was in cash, cash equivalents and term deposits. And approximately $187 million was available under our $250 million revolving credit facility, which remains undrawn. $63 million of this facility is allocated to secure certain reclamation obligations.

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

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Paul James Skayman, Eldorado Gold Corporation - Executive VP & COO [5]

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Thanks, Phil. Good morning, everyone. On Slide 6. Here's a quick summary of our quarterly and year-to-date operating results. As George mentioned, we produced 101,596 ounces of gold in the quarter at cash operating cost of $560 per ounce sold. This was a decrease from $754 per ounce sold in Q3 2018, and is primarily due to the resumption of mining operations at Kisladag, partially offset by higher cash operating costs at Olympias and Efemcukuru.

All-in sustaining costs per ounce sold averaged $1,031 in Q3 2019 compared to $1,112 in Q3 2018. The decrease was a result of lower cash operating costs, partially offset by higher sustaining capital expenditures in the quarter compared to the prior year.

Production year-to-date has been 276,376 ounces at a cash cost of $602 per ounce, and an all-in sustaining cost of $998 per ounce. This is in line with our expectations. I would reiterate that management expects to be in line with the 2019 consolidated guidance, and we've pointed to expected stronger production in the back half of the year a number of times.

Looking at Slide 7 now. We announced earlier this year that we're working on a PEA at Lamaque to increase production to approximately 170,000 ounces per year. This study will look at 3 discrete projects: one, a decline from the Sigma Mill to the Triangle deposit; two, upgrades to the Sigma Mill; and three, the paste plant to provide a long-term tailing solution.

Before we commit meaningful capital to any of these discrete projects, we will complete a PFS that will outline the optimal plan for Lamaque, including timelines. If the study support further development, construction on the ramp could begin in late 2020.

At Kisladag, we announced the positive test results we have received, confirm an extension of mine life beyond the current 3-year guidance. The size of the pit will be determined early next year when we update our mine plan with the ultimate heap leach recovery.

As George mentioned earlier, we've begun waste stripping at Kisladag and expect to spend approximately $4 million this year. We are confident, though, that any stripping completed in the short term will be with any of the current pit scenarios that we're currently contemplating.

Over to Olympias on Slide 8. At Olympias, production and associated costs for the quarter were, once again, below expectations. Our focus remains on improving underground operations. The amount of underground development and the amount of all brought to surface are the key metrics.

The underground contractor has made good progress on development. As more development meters are completed, we'll be able to access more stopes and increase production.

Approximately half of the development done in Q3 occurred in September, demonstrating our increasing rate of development. Our October development was 60% higher than the Q3 monthly average.

It's a similar story on backfilling, where our rates are now on target and paste plant utilization and availability are increasing. Ore hauled to surface was over 31,000 tonnes for October, which is 40% higher than the Q3 monthly average of 22,000 tonnes. We expect to see similar levels in November before this drops off for the Christmas period. While we still have a ways to go at Olympias, we are making progress.

And with that, I'll turn it over to George for closing remarks.

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George Raymond Burns, Eldorado Gold Corporation - President, CEO & Director [6]

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Thanks, Paul. Overall, it was a solid quarter, particularly, at Kisladag, Efemcukuru and Lamaque. We remain committed to paying down our debt while remaining disciplined in our capital allocation as we look to generate value from our growth projects. This includes a potential expansion at Lamaque, mine life extension at Kisladag, and transformational investments in Greece.

As we said before, we are committed to building safe, modern and world-class operations in Greece. This includes implementing best available technologies, such as dry stack tailings at Skouries and Perama Hill. Thank you, everyone.

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

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question comes from Cosmos Chiu of CIBC.

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Cosmos Chiu, CIBC Capital Markets, Research Division - Executive Director of Institutional Equity Research & Equity Research Analyst [2]

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George, Phil, Paul and Jason, maybe my first question is on Kisladag. I know you're still doing some ongoing test work on it. But at this point in time, I'm wondering if you can share with us any kind of -- the potential recovery with a longer leach cycle. From that perspective, can we actually get back to some of the recoveries levels that you realized previous to the issues you had in 2017?

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Paul James Skayman, Eldorado Gold Corporation - Executive VP & COO [3]

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Yes. Cosmos, it's Paul. We're obviously still working on recovery numbers. I think it's fair to say we're not going to see the numbers that we were seeing prior to the to the issues. But obviously, a fair bit better than what we've been guiding to with the 22 million tonnes. As you can appreciate, we've got a lot of columns underway, and we're trying to get as many days into those as we can and continuing to see recovery as you'd expect. So we'll have to wait until the first quarter to get final numbers there.

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Cosmos Chiu, CIBC Capital Markets, Research Division - Executive Director of Institutional Equity Research & Equity Research Analyst [4]

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And then on a longer leach cycle here. You start stacking, once again, in Kisladag in 2Q. Could we see some of the improving recoveries come through in Q4, you think, in 2019? I ask that question as well, just given that if I work through the numbers, you need a fairly robust Q4 to get to 2019 guidance. I'm just wondering if you factored in any kind of improvement and recovery. Or is it grade?

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Paul James Skayman, Eldorado Gold Corporation - Executive VP & COO [5]

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A little bit of both, Cosmos. So as you can appreciate, as we get more material under leach and under irrigation with a longer lead cycle, we do expect more gold recovery. So the stuff that we put on very early in the year is now pretty well leased. The stuff that's going on now is still sort of coming up. So that's why we've been pointing to a slower production in the first half and a stronger second half. So yes, I think we're still -- as we keep saying, we're maintaining guidance. And obviously, key to that is a good quarter out of Kisladag.

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Cosmos Chiu, CIBC Capital Markets, Research Division - Executive Director of Institutional Equity Research & Equity Research Analyst [6]

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Maybe switching gears a little bit here. At Olympias, it certainly wasn't the best quarter you've had. I appreciate all the different ways to try to improve the operation here. But is there a point in time or some kind of scenario whereby you might come to a realization that Olympias just might not make money, isn't profitable at current spot prices? And as you said, you have a lot of growth opportunities coming from Lamaque, coming from Kisladag, in terms of allocation of capital of capital. Is there a point in time where you might start allocating some of the capital that you have earmarked for Olympias to somewhere else? Or is it more complicated than that given the overall picture in Greece?

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George Raymond Burns, Eldorado Gold Corporation - President, CEO & Director [7]

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So I'll take the first crack at that, Cosmos. To begin with, we're still very confident in Olympias being a high-value project for us. The ore body is performing well. And it's a long-life asset. The mill has performed well this year. We're consistently seeing recoveries in concentrate quality as expected. Our challenge this year is really around the underground. And as Paul stated, underground development, available faces underground and backfill, which also has implications in available faces.

So as you know, as we ramp up tonnage on Olympias, it dramatically impacts operating results and that's been our challenge to date. We see -- and so it's a mining issue, it's not a processing issue, it's not an ore body issue. And we see the underlying factors that are going to solve that improving.

In terms of capital allocation, we're pretty disciplined in how we look at capital. And for Olympias, I would tell you, we're focused on getting that mine up to nameplate throughput through the plant and producing good operating results. And when we achieve that, and I believe that will happen next year, then we'll -- it will line up against the other capital allocation growth opportunities within the company.

At Olympias, we have the ability for a very nominal capital to be able to increase throughput. And again, due to the variable fixed cost, it can have a 50% increase in throughput can nearly double free cash flow generation from this asset.

So we believe this is going to be a long-term great asset for us. For now it's head down, execution, get the underground productivities and efficiencies up. And I'd say keep watching this quarter-over-quarter, we're expecting to see significant improvements.

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Cosmos Chiu, CIBC Capital Markets, Research Division - Executive Director of Institutional Equity Research & Equity Research Analyst [8]

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Sure. And maybe in a bit more detail, I think Olympias late last year, there were some issues in terms of the mix of ore coming from East and West, given some of the issues you've had with the pace backfill. So is that still an issue in terms of how you're blending the ore from East and West?

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Paul James Skayman, Eldorado Gold Corporation - Executive VP & COO [9]

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I think I'd say, Cosmos, that's improved over the last while. I mean, obviously, as you can appreciate, with not enough development, having enough headings makes that a bigger issue. But we're getting on top of that now and actually simplifying that blending on site to give the miners a bit more sort of free run in terms of production. So pretty happy with where that's sitting now.

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Cosmos Chiu, CIBC Capital Markets, Research Division - Executive Director of Institutional Equity Research & Equity Research Analyst [10]

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For sure. And maybe one last question for me, if I can. On taxes here, Phil, certainly, taxes in Q3 as a percentage was higher than what I had expected. And I think what The Street has expected as well. I appreciate some of the comments around it, I think, deferred tax expense previously was a deferred tax recovery. But what should we do? Can you give us some guidance in terms of what we should model for Q4? And maybe for the full year and next year?

And any guidance would be helpful.

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Philip Chow Yee, Eldorado Gold Corporation - Executive VP & CFO [11]

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Hi, Cosmos. I mean, I think -- I mean, the tax expenses from an income tax perspective, Turkey is our most profitable operation at this point. And the average tax rate is about 22% on a corporate tax perspective. The income tax expense is impacted as well by fluctuations in foreign exchange. That's a bit hard to predict at times. But I think most of it -- and there's also -- in Lamaque, there's Québec mining duties. That's about $1 million per quarter. So I think those are probably more stable, the Turkish tax rate, the Québec mining duties are pretty stable going forward. It's the fluctuations in foreign exchange that have an impact. That is a little bit harder to predict.

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Operator [12]

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The next question comes from Steven Butler of GMP Securities.

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Steven Howard Butler, GMP Securities L.P., Research Division - MD of Equity Research & Gold Analyst [13]

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Guys, a question for you on Skouries. When would you expect to submit your Skouries application permit for the dry stack, George?

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George Raymond Burns, Eldorado Gold Corporation - President, CEO & Director [14]

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Well, we're busy with that now. We believe that will happen early in the new year.

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Steven Howard Butler, GMP Securities L.P., Research Division - MD of Equity Research & Gold Analyst [15]

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Okay. And is there a reason why that maybe couldn't have occurred by now? Or did you need there certainty and other permits? Or was it just -- because we were at the site almost 2 years ago, George, you knew the dry stack was the way to go. But was there just a process that had to follow on that as to why it's taken longer to file than expected?

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George Raymond Burns, Eldorado Gold Corporation - President, CEO & Director [16]

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Yes. I mean, as you know, Steve, we had done -- updated technical study in the first quarter of 2018, signaling our desire to move towards dry stack tailings. And unfortunately, we didn't get any constructive response from the government until just recently. And then obviously, with this government, we sit down and, with the regulatory process, understand from their perspective what do we need to include in the modification file. And so that's what's been happening, is working through the regulatory requirements. We have those, our engineering, permitting teams are working to make the necessary adjustments to meet the government's needs. And as I said, we expect to file that early in the new year.

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Steven Howard Butler, GMP Securities L.P., Research Division - MD of Equity Research & Gold Analyst [17]

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Okay. And then last question just on Lamaque, which the opposite of Olympias, I suppose. The implied unit cost to the operation were better-than-expected for us and you delivered really good cash cost there. So what's been the pleasant surprise? Has it been underground productivity in mining? Where you seeing some of the perks of the ramp-up in terms of unit cost there?

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George Raymond Burns, Eldorado Gold Corporation - President, CEO & Director [18]

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Well, I think it's across the board. I mean, one of the first things I'd point to is recovery. As you know, we've -- in our PFS, we had 95% target, and we're beating that by a few points. So the mill is doing a great job.

Underground, we're moving the tons, the ore grades and the stopes are reconciling well. Dilutions as expected. And we've got a fantastic workforce there that are knocking out of the park day in and day out. So it's, I think, across the board, we're just hitting on all cylinders there. And I think the most exciting thing that you have at Lamaque is that the exploration potential is enormous. We're doing the infill drilling on the bottom of C4, C5. And we actually have 1 drill underground now drilling C7. And all that ties into the PEA and the expansion opportunity. So we're really pleased with Lamaque. And I'd say, it's unfolding as we expected when we acquired the asset, we're very pleased with (inaudible) team and how they're performing.

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Paul James Skayman, Eldorado Gold Corporation - Executive VP & COO [19]

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I guess, the other one, the mill one. I mean it was a refurbishment. There was probably a little bit of risk there, but it started up and run according to plan. It's delivered good performance in terms of recovery and availability. So yes, it makes life a lot easier.

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Operator [20]

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The next question comes from Kerry Smith of Haywood Securities.

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Kerry Smith, Haywood Securities Inc., Research Division - VP & Senior Mining Analyst [21]

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Just George or maybe Paul, for the waste stripping at Kisladag, you were suggesting that the stripping that you've got planned as well within the pit limits had even the smallest sort of ultimate pit that you could envision there. Can you -- would you share with us what the mine life would be for even that smallest pit?

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Paul James Skayman, Eldorado Gold Corporation - Executive VP & COO [22]

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I'd prefer not to, Kerry. As you can appreciate, we're still doing sort of recovery numbers. I think you should take confidence, though, that the fact that we're committing capital to stripping within any of the scenarios indicates it's going to be a reasonable amount more than the 3 years we're talking to at the moment. You're just going to have to wait a little bit longer before we can share that with you.

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Kerry Smith, Haywood Securities Inc., Research Division - VP & Senior Mining Analyst [23]

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Okay. Okay. That's fine. And on Perama. Now that you've started to do some work there. Is it your understanding, George, that you would need to refile the EIS that you filed back in 20 -- I think it was maybe even 2012. And would the engineering studies that you're updating now, would those be required as part of that refiling?

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George Raymond Burns, Eldorado Gold Corporation - President, CEO & Director [24]

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So Kerry, the EIA has been kind of on hold and dormant since 2014. And so there's been some minor legislative changes in the EU in Greece that we're making some adjustments to the EIA. And the other thing, given the amount of time that's passed, we want to reengage with not only the local community that we've been close to during this period, but also regionally in the area and update everybody in terms of the project, the benefits, all the environmental and social controls and benefits that go with it. So I guess, what I would say is we don't expect any significant changes to the EIA, but we are going to refresh it. And we will be reengaging with communities prior to considering moving forward with that project. Obviously, in our industry, we need strong local support. Believe we'll have it, but we will reengage just given the time it's passed.

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Kerry Smith, Haywood Securities Inc., Research Division - VP & Senior Mining Analyst [25]

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Okay. And is there -- George, is there any sort of opposition to that project currently that you're aware of?

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George Raymond Burns, Eldorado Gold Corporation - President, CEO & Director [26]

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Yes, the way I would describe it, Kerry, everywhere around the world, there are people that are concerned about mining projects. And so we have those in Greece and around the Perama project. And so we'll be engaging with those parties to try to inform them better and get the true facts. This is a pretty simple project. Here we're going to deploy dry stack tailings. It's an oxide ore body, simple mill projects. It's high-return. It's in an area of Greece that needs development and economic input. So we think we have the right ingredients here. And so I would say it's the normal environment that any mining project deals with, and we have what I would consider pretty strong support from the local communities and believe with -- the government, we'll be able to find a path forward to begin construction.

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Kerry Smith, Haywood Securities Inc., Research Division - VP & Senior Mining Analyst [27]

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Okay. And when would you sort of expect that you would be filing or refiling this amended EIA then? Is that something that would happen in maybe the back half of 2020 then?

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George Raymond Burns, Eldorado Gold Corporation - President, CEO & Director [28]

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Yes. I would describe 2020 is -- we'll be unfolding the permit process and the consultation process with communities. And it's really hard for me to predict the schedule around that other than I expect to see significant progress down that path during next year.

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Operator [29]

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The next question comes from Mike Parkin of National Bank.

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Michael Parkin, National Bank Financial, Inc., Research Division - Mining Analyst [30]

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Most of them have been answered. Just had one follow-up on Kisladag. Give a sense on the stripping of the waste, would that be broken into growth and sustaining? Or just growth, just sustaining? How do you guys -- how should we kind of think about that being modeled? I'm just wondering kind of on the potential impact of all-in sustaining cost profile for the asset.

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Philip Chow Yee, Eldorado Gold Corporation - Executive VP & CFO [31]

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Mike, it's Phil here. So I think at this point, as we begin the process of pre-stripping and extending the life of mine, it would fit into the category of nonsustaining. And I think as we get -- we get further in and start realizing production, that's when the mix would change. But I think at this point, at the start, it's nonsustaining.

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Operator [32]

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The next question comes from Tanya Jakusconek of Scotiabank.

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Tanya M. Jakusconek, Scotiabank Global Banking and Markets, Research Division - Analyst [33]

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Maybe, Paul, just starting off back to Olympias. It sounds as though you're getting that development rate up. And you've guided that November was going to be good, and then down again for December. Are you indicating to us that Q4, we're expecting a similar quarter operationally to Q3 for Olympias?

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Paul James Skayman, Eldorado Gold Corporation - Executive VP & COO [34]

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No, I think we're looking to be a fair bit better in Q4. I mean, obviously, we're not where we want to be yet, Tanya. But we are seeing, I think, as we pointed out, October was a fair bit better than any of the sort of Q3 months, and we're looking to put some of those together now. So I think we're expecting a better Q4. And then, obviously, looking forward to a much stronger 2020.

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Tanya M. Jakusconek, Scotiabank Global Banking and Markets, Research Division - Analyst [35]

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When do you think, Paul, that the development rate is going to be at the level that we need still poised to feed the mill? Is that towards the end of 2020 or mid next year? Just to get a sense of when do we think we'll be at steady state?

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Paul James Skayman, Eldorado Gold Corporation - Executive VP & COO [36]

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No, I think it will be early 2020. I think a solid sort of last quarter 2019, we'll be pretty well placed and getting a lot, lot closer to sort of nameplate for 2020.

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Tanya M. Jakusconek, Scotiabank Global Banking and Markets, Research Division - Analyst [37]

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Okay. Great. That's very helpful on that one. And maybe just continuing on the technical side. Just wanted to come back to Kisladag. Just I remember from our -- when we were at Lamaque, at the mine tour, we talked a little bit about just capital allocation and we talked about Kisladag in terms of being a priority for that, and depending on what the recoveries come out, you were looking at potentially HPGR. Has anything changed right now in terms of your view of whether you need an HPGR?

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Paul James Skayman, Eldorado Gold Corporation - Executive VP & COO [38]

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We're continuing to do work on the HPGR, and it's something we'll be discussing as we're sort of putting budgets, et cetera, together for early next year. At the moment, where it's -- the recoveries, et cetera, are predicated on a standard crack as we've been doing previously. So undecided at this point. We are seeing some improvement with HPGR. It really needs a trade-off analysis as to whether that justifies the extra required capital, et cetera.

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George Raymond Burns, Eldorado Gold Corporation - President, CEO & Director [39]

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I'd like to supplement that. I think, Tanya, in terms of outlook. As Paul's stating, there is some benefits from HPGR, we'll continue to study it. Perhaps becomes a project that we'd invest in. But it's not something that's being contemplated in the current work. We're going to set up reserves in Q1. So don't expect to see HPGR in the reserve announcement that will happen in early Q1, but perhaps it is an opportunity to compete for capital amongst the rest of our growth projects later in the year, later next year.

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Tanya M. Jakusconek, Scotiabank Global Banking and Markets, Research Division - Analyst [40]

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Okay. Okay. And then we also talked, I think, George, when we were at the mine site about the waste stripping that is required at Kisladag. And I remember a number of between $50 million and $100 million or $150 million thereabout for pre -- like the waste stripping and pre-strip, is that still something that is valid?

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George Raymond Burns, Eldorado Gold Corporation - President, CEO & Director [41]

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Well, for the mill scenario, we had about $100 million dedicated to capital for that project. So I mean that just gives you an idea, we had roughly a 9-year mine life under the mill scenario, roughly $100 million in pre-stripping to support that sort of a mine life. So I think you can just scale from that, dependent on how good the recoveries end up and how big that pit is. It will be scalable around that at $100 million capital depending on the mine life.

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Tanya M. Jakusconek, Scotiabank Global Banking and Markets, Research Division - Analyst [42]

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Okay. But I mean, the pre-strip is something that is quite substantial in terms of capital outlay that would have to be done?

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George Raymond Burns, Eldorado Gold Corporation - President, CEO & Director [43]

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Yes. I mean, again, it depends on the mine life. If you go from a 3- to a 5- to a 7- to a 10-year mine life, the deeper material requires a high-strip ratio than the shallow. So it's hard to give you a number because right now we definitively don't know the ultimate recovery or the size of that pit. But I'd say, at this point, it's going to be less than $100 million, and the bigger the mine life extension, the closer to $100 million and the lesser of the mine life extension, it's closer to sort of 0 number. So I really can't help you beyond that until we get the numbers finished.

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Tanya M. Jakusconek, Scotiabank Global Banking and Markets, Research Division - Analyst [44]

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Okay. And just looking at the Lamaque. If you were to make that decision to go ahead, and pending on the -- what you decide to do, most of the spend would start in 2020 -- end of 2021 into 2022?

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George Raymond Burns, Eldorado Gold Corporation - President, CEO & Director [45]

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Yes, for -- so the pre-feasibility study in Lamaque, we expect to have done in the second half of next year. If that's supportive, we're looking to potentially begin the ramp development in late 2020. So that'd be the only thing possible next year in terms of expenditures beyond, obviously, the engineering work on the PFS. And then it's a 3-stage project. So you put the decline in first, that would continue into 2021. When the decline is completed, it would be the conveyor and crusher infrastructure. And in parallel, work on the mill to support the higher throughput. And the paste plant is the third stage of the expansion. And that's a couple of years down the road at least. But we want to make sure in the PFS we have a full life of mine scenario for tailings, and that's why it's in there.

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Tanya M. Jakusconek, Scotiabank Global Banking and Markets, Research Division - Analyst [46]

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Okay. So it'd be spread over like about 3 or 4 years or so?

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George Raymond Burns, Eldorado Gold Corporation - President, CEO & Director [47]

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Yes. Yes, maybe even a bit longer for the paste.

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Tanya M. Jakusconek, Scotiabank Global Banking and Markets, Research Division - Analyst [48]

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Okay. That's helpful. And then just maybe, George, just lastly on your conversation with the Greek government. You've talked about some of the technical stuff that's been going on. With the 2 meetings you had with the Prime Minister and your other meetings that you had. Where are we on the foreign direct investor protection? We've talked about the permits that you're looking to grab, but what about some of the other things that you're looking at to get security to start investing in country?

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George Raymond Burns, Eldorado Gold Corporation - President, CEO & Director [49]

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So I don't want to get into any of the details, obviously, but I'd just tell you, at a high level, Prime Minister Mitsotakis and the Greek government are keenly interested in getting foreign direct investment into the country. They're publicly supportive of Skouries that we're focused heavily on. And we have the right environment to land on a mutually beneficial agreement that can allow this investment to restart.

Obviously, we've got some time to get that completed as we work through the dry stack tailings permitting. But I tell you, it's very favorable. I think we're both aligned that this is a good project and it's environmentally extremely well done. The life of mine for this project, the pit finishes in a decade. We've run the underground for 2.5 decades and the dry stack tailings from the underground portion, backfill the pit. We've shrunk the footprint of the property. So environmentally, we've, I think, upgraded the project tremendously. They see the value in all that, and we're aligned to getting this done. But I really can't get into any details around the negotiations other than to tell you I'm very optimistic, we'll get this completed.

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Tanya M. Jakusconek, Scotiabank Global Banking and Markets, Research Division - Analyst [50]

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Yes, I guess, more than anything, I just wanted to understand whether you've actually gotten to discussing the foreign direct investor protections? Or has it been mainly focused on getting the permits?

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George Raymond Burns, Eldorado Gold Corporation - President, CEO & Director [51]

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I'd just tell you, we're advancing on both fronts.

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Operator [52]

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(Operator Instructions) The next question comes from Mike Jalonen of Bank of America.

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Michael Jalonen, BofA Merrill Lynch, Research Division - MD [53]

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George, just following up what Tanya was on Skouries. I guess you kind of answered a part of my question. But I was just wondering, assuming -- it sounds like permits and approvals are raining down in Greece these days after a long period of drought, sorry, for the metaphor. But just wondering what -- it sounds like you could get the Skouries approvals permit very quickly once implement the dry stack tailings, get that -- put output in. How long would it take to build Skouries? I think there's still, what, $500 million left to build it? Just wondering -- I guess, I'm looking at the next step.

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George Raymond Burns, Eldorado Gold Corporation - President, CEO & Director [54]

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Yes. So we've got about 2 years' worth of construction once we restart. In the pre-feasibility study that was out in early 2018, had us about $670 million, $680 million, as I recall, in remaining capital. So we are going to put the mill building up and pour the concrete. We're committed to that, it's about $5 million over the next couple of months. So you're just shy of $700 million in 2 years of construction, Mike.

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Michael Jalonen, BofA Merrill Lynch, Research Division - MD [55]

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Okay. I look forward to the mine opening in about 2.5 years.

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George Raymond Burns, Eldorado Gold Corporation - President, CEO & Director [56]

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We do, too.

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Operator [57]

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The next question comes from Matt Fields of Bank of America.

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Matthew Anthony Castellini, BofA Merrill Lynch, Research Division - Research Analyst [58]

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Hi guys, Matt Castellini here on for Matt Fields. So we saw you filed that shelf registration recently. Just looking for any color on what that was for. And maybe secondly, any thought to taking advantage of your recent bounce in stock price to issue some opportunistic equity like your -- some of your peers have done? Maybe you could get ahead of some of the mandatory term loan amortization you have coming up?

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Jason Cho, Eldorado Gold Corporation - Executive VP & Chief Strategy Officer [59]

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It's Jason here. Just as a quick summary, the use of proceeds, as was described in the prospectus, is in part to fund some of the internal projects that the company has currently have. The other thing that was mentioned was possible use of proceeds with respect to potential debt pay down as well. So with regard to the last question you're asking there on potential issuance with the current share price, I suppose, that was the part of the purpose in filing the shelf and potentially proceeding with the ATM.

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Operator [60]

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The next question comes from Frank Duplak of Prudential Financial.

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Frank Duplak, PGIM Fixed Income, Research Division - Head of High Yield Credit Research [61]

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Just a question. I don't know that I've seen it updated, maybe I missed it. Have you guys talked about full year kind of CapEx for 2019? I thought I had an earlier number that you guys have come up pretty close to through 3 quarters. Just curious as you think about kind of Q4 CapEx, where that might come out.

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George Raymond Burns, Eldorado Gold Corporation - President, CEO & Director [62]

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Yes. We -- I mean, we're sticking with our guidance for the year, which is $80 million to $105 million in sustaining CapEx.

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Frank Duplak, PGIM Fixed Income, Research Division - Head of High Yield Credit Research [63]

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And then is the growth CapEx number different than the $45 million guidance?

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George Raymond Burns, Eldorado Gold Corporation - President, CEO & Director [64]

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No, it still stands.

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Philip Chow Yee, Eldorado Gold Corporation - Executive VP & CFO [65]

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Yes, Frank, it's Phil here. Most of that growth CapEx was tied to Lamaque -- completion of Lamaque and getting it to commercial production. And that was completed at the end of Q1.

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Frank Duplak, PGIM Fixed Income, Research Division - Head of High Yield Credit Research [66]

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I guess, as I look at the cash flow statement, I see something like $149 million year-to-date. And the math would take you to somewhere maybe the $160 million area, could CapEx be as low in that only $10 million to $12 million in the fourth quarter?

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Philip Chow Yee, Eldorado Gold Corporation - Executive VP & CFO [67]

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I think at this point, Frank, I think, as we said, we believe we'll be within guidance, and I don't -- like I think the sustaining CapEx will continue in Q4, but they'll be very limited growth CapEx other than the pre-stripping that was announced. That was the additional amount, that was around $3.8 million, that was approved for pre-stripping, starting at Kisladag. And maybe part of this is when, we talk numbers, we're netting out the pre-commercial production from Lamaque. So you may see gross versus net.

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Frank Duplak, PGIM Fixed Income, Research Division - Head of High Yield Credit Research [68]

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Then how much has that been year-to-date? Pre-commercial dollars?

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Philip Chow Yee, Eldorado Gold Corporation - Executive VP & CFO [69]

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Pre-commercial proceeds that were netted against capital, it was about just over $12 million year-to-date.

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Frank Duplak, PGIM Fixed Income, Research Division - Head of High Yield Credit Research [70]

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Okay. Okay. Got it. And then just on -- I think the prior call, I touched on it. I mean, you have $33 million of loan and more by the end of this year. Kind of is the plan there that sort of comes out of the cash balance? How do you guys kind of think about dealing with that first tranche of kind of amortization coming up in the term loan?

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Jason Cho, Eldorado Gold Corporation - Executive VP & Chief Strategy Officer [71]

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Yes, Frank, it's Jason. The first payment on the term loan starts in June of next year. So the expectation is between cash on balance sheet at that time combined with internally generated cash. That would be the primary source of funding for that. Okay.

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Operator [72]

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

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George Raymond Burns, Eldorado Gold Corporation - President, CEO & Director [73]

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Thanks, everybody, for joining us today. Look forward to giving you another good update here in a couple of months. Thanks, everyone.

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Operator [74]

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This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.