Earnings Call Transcript - EGO Q2 2020

Operator, Operator

Thank you for joining us. This is the conference operator. Welcome to the Eldorado Gold Corporation Second Quarter 2020 Conference Call. Please note that all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be a chance for questions. I now hand the call over to Peter Lekich, Manager of Investor Relations. Please proceed.

Peter Lekich, Manager, Investor Relations

Thank you, operator, and thank you ladies and gentlemen for taking the time to dial into our conference call today. On the line today are George Burns, President and CEO; Phil Yee, Executive Vice President and CFO; Joe Dick, Executive Vice President and COO; and Jason Cho, Executive Vice President and Chief Strategy Officer. Our release yesterday details our 2020 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 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 2019 AIF and in the cautionary note on slide one. I will now turn the call over to George.

George Burns, President and CEO

Thanks, Peter, and good morning, everyone. Here's the outline for today's call. I'll give an overview of Q2 along with some comments. Then I'll pass it to Phil to go through the financials. Joe will follow by reviewing operational performance and then we'll open it up for questions. I'm excited to be reporting an outstanding second quarter, both operationally and financially. We continue to make progress in delivering value for our stakeholders, as demonstrated by our strong quarterly production and maintaining guidance despite COVID-19 operational challenges. The operations performed exceptionally and I'm proud of the agility of teams to adapt to our new normal. I'm especially pleased to report we delivered a significant increase in cash flow this quarter and improved our financial position. We've elected to issue a redemption notice of $58.6 million under the equity clawback provision of our senior secured notes. Repayment of these notes will help lower interest expense and average cost of capital. Another highlight this quarter includes beginning construction of the decline at Lamaque. As a reminder, this will connect the Triangle underground mine to the Sigma Mill via a 3-kilometer tunnel. This gives us a number of benefits, including eliminating surface ore haulage, reduced road traffic and lower carbon footprint, enabling lower cost underground exploration for Ormaque Plug 4 and Parallel deposits and increase safety by providing a secondary means of egress. Over to Greece, where we've resumed negotiations with the Greek government on an updated investment agreement. As mentioned last quarter, COVID-19 had diverted both our own and the Greek government's attention. However, we are back now in discussion. Perhaps a little background may be helpful here. Eldorado's existing agreement is nearly 15 years old and is no longer fit for purpose. It was negotiated back in 2006 by a previous owner under vastly different economic and technological conditions. A modernized investment agreement, with appropriate investor protections, will offer significant economic and environmental benefits to Greece. Our investment in Greece will not only benefit Eldorado shareholders, but also the Greek state and local communities, through providing jobs in construction and operations, increasing foreign direct investment in Greece, using best available technologies like dry stack tailings and other CSR projects. Greece's prosperity was once built on mining. Mining could again become a key sustainable industry and source of wealth for Greece, while using best-available technologies to protect the environment. We remain committed to acting in good faith in discussions with the Greek government, to find a mutually agreeable path forward. Also in Greece, we saw movement on drilling permits from Avis Petroz during the quarter, which we see as another positive indicator. And lastly, we completed the purchase of 5% of Hellas Gold shares that were owned by Ellaktor. Eldorado is now 100% shareholder of Hellas Gold. This gives us full ownership of the Kassandra assets and more flexibility for joint venture partnerships. Greece continues to represent a fantastic growth opportunity for Eldorado that we believe is not currently reflected in our evaluation. Skouries and Perama Hill are world-class assets that will add significant value for our investors, local communities and the Greek state. I'll stop there. Over to you, Phil.

Phil Yee, Executive Vice President and CFO

Thank you, George. Good morning, everyone. On slide five we provide an overview of Eldorado's financial results for the second quarter of 2020. As George stated earlier, we are very pleased with our financial results for the quarter. The headline for this quarter is our strong free cash flow generation of $63.4 million in Q2 of 2020, versus $4.8 million in Q2 of 2019 and $7.2 million in Q1 of 2020. This increase is due to increased production, higher sales and higher gold prices. Eldorado generated $255.9 million in total metal revenue in the quarter. This includes $232.9 million in gold revenue and represents an increase of 55% over the comparative quarter in 2019. The increased revenue resulted from higher gold sales volumes of 134,960 ounces compared to 113,685 ounces in the second of 2019 and 116,219 ounces in the first quarter of 2020. The increase was also the result of higher average realized gold price of $1,726 an ounce in the second quarter of 2020, compared to $1,321 per ounce in the comparative quarter in 2019. The company reported net earnings to shareholders in the second quarter of $45.6 million, or $0.27 per share. After adjustments, primarily to remove the non-cash revaluation of a derivative related to our debt and a non-cash loss on foreign exchange due to translation of deferred tax balances, adjusted net earnings for the second quarter were $43.8 million, or $0.26 earnings per share. This was a significant improvement over the second quarter of 2019's adjusted net loss of $3.5 million, or $0.02 loss per share, and over the first quarter of 2020's adjusted net earnings of $12.5 million, or $0.08 earnings per share. Like a lot of our metrics this quarter, the increased net earnings and adjusted net earnings reflect higher gold prices and higher gold sales relative to Q2 of 2019. EBITDA for the quarter was $131.8 million and after removing certain non-cash items adjusted EBITDA was $135.8 million. This was a material improvement over EBITDA of $74.5 million and adjusted EBITDA of $66.8 million in the second quarter of 2019. Depreciation and amortization increased to $58.3 million in the second quarter from $41.2 million in the comparative quarter in 2019, again reflecting higher production and higher sales volumes in Q2 of 2020. Finance costs were $6.5 million in the second quarter 2020, compared to $16.8 million for the comparative quarter in 2019. The decrease was due to lower interest and financing costs in Q2 of 2020 and a non-cash gain on the revaluation of the derivative related to our debt. Income tax expense for Q2 2020 amounted to $23.7 million for the quarter, compared to $8 million in the comparative period of 2019. The significant increase was a result of higher sales volumes in Q2 2020 leading to higher income tax on operations in Turkey and higher provincial mining duties for our Lamaque operation in Quebec. We finished the quarter with approximately $440 million in cash, cash equivalents and term deposits and approximately $35 million available under the revolving credit facility. Our liquidity position is very strong and we have been clear that paying down debt is a priority for the company. As George mentioned, we have elected to partially redeem the 9.5% secured notes under the equity clawback provision in the bond indenture. This allows us to use the net cash proceeds from equity raised in the past 120 days to redeem $58.6 million of senior secured notes in late August. These notes carry a 9.5% coupon, so this redemption will lower our interest expense going forward. Under the terms of the indenture, the redemption price of the redeemed notes is 109.5% of the aggregate principal amount, plus accrued and unpaid interest up to the redemption date. These costs will be incurred in Q3 of 2020. It is also worth noting that we expect Q3 2020 free cash flow to be impacted by the premium and interest paid on the redemption as well as the timing of certain cash tax payments and the timing of capital expenditures. Moving on to slide 6, we have provided four graphs that I think really capture the turnaround that we're seeing in our financial performance over the past year. You will recall in April of last year Lamaque commenced commercial operations. In June 2019, we completed the refinancing of the outstanding debt. Earlier this year, we announced the mine life extension at Kisladag to 15 years and we have steadily increased production at Olympias over the past few quarters. All of these factors have contributed to the strong performance reflected in these graphs. Adjusted EBITDA as shown in the top left graph has increased quarter-over-quarter in the past year. This is reflective of our operational improvements and supported by a high gold price. In Q2 2020, Eldorado reported $99.6 million in net cash generated from operating activities, $63.4 million in free cash flow and $43.8 million in adjusted net earnings. All three of these metrics reflect significant increases over the previous four quarters and were driven by strong production and a higher realized gold price in Q2 of 2020. Thank you everyone. I'll conclude on that positive note. And will now turn it over to Joe.

Joe Dick, Executive Vice President and COO

Thanks Phil and good morning everyone. Here's a quick summary of our quarterly operating results. We produced 137,782 ounces of gold in the quarter at cash operating costs of $550 per ounce sold, and all-in sustaining costs of $859 per ounce sold; so a great quarter and in line with our expectations. Looking forward, we are maintaining our 2020 guidance. As a reminder, this is 520,000 to 550,000 ounces of gold at all-in sustaining costs of $850 to $950 per ounce. Last quarter we talked a bit about a reduced workforce due to some workers being considered high risk for COVID-19. We are now back to normal workforce levels as we found ways for them to work safely. We continue to monitor our safety protocols and find new and innovative ways to keep people healthy. That's a good segue to the next slide. Here I want to highlight a contact tracing and tracking system, we've implemented at Lamaque and will be implementing in Greece and Turkey as well. Contact tracing has become an essential tool to identify and isolate people who may have been exposed to the coronavirus and mitigating potential impacts quickly for the benefit of our people and our business. Our solution builds on existing hardware and software systems at sites using ID cards. At Lamaque, each employee and contractor wears a silicone bracelet, as you can see in the picture that they use to tap in and out at various entry points in the mill and surface buildings. The card reader records their employee or contractor number, which allows us to identify anyone who may have been exposed to a potential positive case and complete the investigative process within a couple of hours. This solution is cost-effective, easy to implement, protects privacy, and was quickly deployed at Lamaque. The system is unique to our knowledge and we will continue to work closely with public health authorities as we look to improve and build on this innovative approach. Here on slide 9, we have some further color on the quarter at each of our assets. At Kisladag production was 20% higher than Q1 due to increased tonnes of stacked ore at higher grade during the quarter. Solution inventories began to reduce with the drier weather during the latter half of the quarter. We expect these factors to continue to support higher production levels over the remainder of the year. Work is continuing on the installation of the HPGR with deliveries scheduled for the first half of 2021. We expect this to be online in the second half of 2021. And as a reminder for everyone, this will improve heap leach recovery. At Lamaque, gold production met expectations for the quarter despite a temporary suspension of operations in late March to mid-April to comply with Quebec government mandated restrictions to address the COVID-19 pandemic in the process. The big news this quarter was the commencement of the decline at Lamaque. As we've mentioned previously, we're currently evaluating an underground crushing and conveying system, as well as a mill expansion. An update outlining the path forward at Lamaque is expected in Q4 of this year, along with our updated reserves. As we've always said, our long-term goal at Lamaque is to increase production at the Sigma Mill to its ultimate nameplate capacity of 5,000 tonnes per day. We will continue to evaluate other deposits in our land package such as Ormaque in pursuit of this goal. Efemcukuru continues to be a consistent performer. The column flotation project remains on schedule for later this year, and will result in improved concentrate grade and quality to lower transportation costs and concentrate treatment charges. Moving over to Greece, at Olympias I am pleased to report another quarter of improved production. In fact, we saw a 2,700-ounce increase over Q1 2020 and our highest ever quarterly gold production. This is a result of ongoing underground development improvements to the paystack fill system, and greater collaboration among our employees resulting in improved productivity. This quarter marks the third consecutive period of decreasing all-in sustaining costs at Olympias. Base metal prices remain low and treatment charges high, however improved efficiencies are leading to lower costs and we will continue to drive operational improvements at Olympias. Just a quick note on Skouries, as the asset protection works continue, the picture here shows concrete being placed in June. We had planned to install the mill building and we'll review that work as we continue to monitor the COVID-19 situation. With that, I'll turn it over to George for closing remarks.

George Burns, President and CEO

Thanks, Joe. Before wrapping up, I want to welcome Judith Mosely to our Board of Directors. Judith will join us effective September 1. Her skills in the metals and mining banking sector are complementary to those of our existing board members, and we look forward to her insights. This timing is consistent with our ongoing board succession plan. I also wish to welcome Sam Houston, as our VP Capital Projects and Engineering. Sam joined us in Q1 2020, and is responsible for strategic oversight of our capital projects. Sam has extensive experience in global mega-projects from across diverse sectors, including mining, oil and gas, and infrastructure. In conclusion, I want to emphasize the turnaround that Phil mentioned earlier. I believe that the groundwork laid throughout 2019 continues to pay off. Kisladag is back on track. Olympias is showing signs of consistent improvement. Lamaque is firing on all cylinders and Efemcukuru continues with reliable steady performance. This is reflected in our strong share price appreciation over the past 12 months. With our solid operating performance, several potential catalysts in Greece and Quebec, a balance sheet that supports near-term growth, and our energy and drive to execute we are well-positioned for a period of sustained value creation. When combined with record gold prices, Eldorado offers a compelling value proposition. Thank you everyone. I will now turn it over to the operator for questions.

Operator, Operator

Thank you. We will now begin the question-and-answer session. Our first question comes from Cosmos Chiu of CIBC. Please go ahead.

Cosmos Chiu, Analyst

Hi. Thanks, George, Phil and Joe. First off, congratulations on a very strong Q2. Maybe my first question is on Lamaque. Good to see that you're ramping up well after the Quebec-mandated shutdown. As Joe, as you mentioned, the ultimate capacity is 5,000 tonnes per day potentially. Could you remind us like, if I look back historically did the mill ever do 5,000 tonnes per day with the old timers? And what do they need? Like what would you need to do to that mill to get it up to that nameplate capacity? Because if I remember correctly, when I was on site, there were some idle leach tanks. Certainly, there were some rock mills that were idle as well, would you need to bring those back? And is that what you need to get it up to 5,000 tonnes per day potentially?

Joe Dick, Executive Vice President and COO

Well I'll answer and then maybe ask George for a little help. I think the first thing we need is the resource on which to build that. And that is ongoing through exploration as I mentioned both on the land package and this decline figures considerably into that. Predominantly, I think it would be a grind addition would be number one and then certainly downstream would be additional retention at those rates. But George, do you have a better flavor for the requirements in the mill at 5,000?

George Burns, President and CEO

Yes. I mean the plant did historically do 5,000 tons a day and it was back in the era where there was an open pit to supplement underground ore. And it had a SAG mill in the circuit at that time. Prior operators sold that SAG mill. So as Joe said, we need additional grinding capacity to push the plant to that level. And that's part of the engineering work that's happening this year and will be completed in the second half. And then I think Joe hit the nail on the head. The big issue is really not the plant. It's get the grinding in there and then retrofit more of the tanks more of the leach tanks. So we've guided an estimate of around $50 million to be able to do the upgrades to the plant to get to that 5,000-tonne-a-day level. And we're looking at alternatives to scale it up incrementally rather than in one push. So that work is ongoing. And then in terms of where the feed would come from, that's really the strategic work that continues with Peter and our exploration group. For Triangle itself, we've got a permit now to 2,650 tonnes per day and we're already executing a ramp-up in development and production from underground and that's going to support ramping the production up from the original maiden reserve and mine plan of 130,000 tonnes a day up to 150,000 tonnes a day over the next couple of years. And beyond that as we continue to convert resources to reserves at depth and we'll continue to assess what the ultimate potential is for Triangle itself. Then in parallel with that we're continuing to explore on Ormaque. We've got Parallel and Plug four haul-offing opportunities for additional feed to the plant. And then, if you think about this property package, nearly 10 million ounces produced with two underground mines, one of which is trying as a look-alike to those two historic mines. So when you think about after decades of mining, a new discovery of a look-alike deposit occurred, so we think that potential still exists on the property. We have some very good exploration targets that we're working on. And so that offers the opportunity. And we continue to look around our existing property for other opportunities that could be used to ramp up production to that potential 5,000-tonne-a-day.

Cosmos Chiu, Analyst

Thank you for your detailed response. Regarding the studies expected in Q4 about the underground crushing potential, conveyor system potential, and resources and mill expansion, how does Ormaque fit into this? You mentioned it as one of your new high-grade targets. Should we anticipate a resource update alongside the Q4 study? Additionally, could you remind me of the historical conversion rate from resources to reserves?

George Burns, President and CEO

I'll start with the inference regarding resource to reserve conversions, which has been approximately 80% to 85%. We believe this conversion rate will persist as we continue our deeper drilling efforts. Regarding Ormaque, we are still in the process of defining the boundaries of this new exploration discovery, focusing on step-out drilling. Our geologists are actively modeling the resource, which has different characteristics compared to most mining in the area; the veins here are flatter and high-grade relative to the current reserves. I am unable to provide a specific timeline for when we will have our first resource assessment. This year, we aim to define the overall size of the deposit and conduct more detailed drilling to support our modeling efforts. The decline will play an important role, as completing it will allow us to drill from underground, enhancing our understanding of the deposit and ultimately leading to reserves. We are optimistic about these developments. Additionally, since this ore body is flatter, Joe may share some insights about the test mining currently happening that could be relevant to this type of deposit.

Joe Dick, Executive Vice President and COO

Thanks, George. I think we mentioned it before we do have a Minrail test going on at Lamaque that we kind of did the investigative work and movement of the equipment to Lamaque late in 2019 and then in 2020 began the setup of it. So we have installed Minrail. We have driven 50-plus meters using the equipment and have kind of set it up nicely for a test. It works well in that those flatter lying ore veins roughly in that 20% to 40% or 20 to 40 degree dip angles. It's a bit like a horizontal or semi-horizontal Alimak and with attachments that work off the front for drilling scraping or slushing type ore recovery. And so we'll be providing more information as Q3 goes on and we kind of test the economics of it and what kind of resource it will need to make it economic. So far though I can say that from a very favorable point of view the safety aspects of the Minrail are quite good and keeps us from exposing ourselves to any unsupported ground and those kind of things. So we're optimistic and more information to come as the quarter moves along.

Cosmos Chiu, Analyst

Of course. And no just to confirm I guess George or maybe Joe you don't really need a resource on Ormaque to make a decision on this underground crushing conveyor system or mill expansion do you?

George Burns, President and CEO

No. I mean our studies this year are really based on Triangle. And obviously anything we add to that will be a supplementary benefit.

Cosmos Chiu, Analyst

And then one last question if I may. Turning to Kisladag quickly here I think in a previous conference call we talked about the fact that I think stripping at that point in time was a bit slower. And if it continued to be slow into the summer months, it could have longer-term impact in terms of the 15-year sort of mine plan or the near-term of the 15-year mine plan. I want to know you did about $7 million in stripping in Q2. Is the mining rate and stripping at Kisladag where you want it to be to prepare you for that 15-year mine plan?

Joe Dick, Executive Vice President and COO

So presently we're back to very close to budget levels for stripping. And we'll close that gap completely in Q3. As we've looked at the different pit options going forward, we don't see that the short-term stripping deficit in Q2 is going to impact us this year or in the five-year plan. And then for that matter even life of mine it's slightly different scheduling but we see no impacts at this point.

Cosmos Chiu, Analyst

Great. That's great to hear. Congrats again on a very good Q2 and have a good long weekend everyone.

Joe Dick, Executive Vice President and COO

Thanks, Cosmos.

Operator, Operator

Our next question comes from Kerry Smith of Haywood Securities. Please go ahead.

Kerry Smith, Analyst

Thanks, operator. George, great quarter. I think that you guys are definitely moving this company in the right direction so congratulations. So just a couple of things. One, the mill upgrade study that you're doing in Q4 that will be for the 5000-tonne-a-day rate I think correct?

George Burns, President and CEO

Yes, it's 5000 but we're looking at other incremental opportunities. So it potentially is a staged approach as we continue to expand reserves and find additional feed for the plant.

Kerry Smith, Analyst

Got it. My second question is regarding the Perama Hill study you mentioned that is set to be released in the fourth quarter. Will that also be timed for the fourth quarter?

George Burns, President and CEO

Yes. It's also tracking for the fourth quarter.

Kerry Smith, Analyst

And what are you doing there just updating the old engineering? Are you updating the mine plan? Or is it just really trying to wrap some new economics around that project?

George Burns, President and CEO

There's a bit of a redesign happening, so the pit looks to be a bit bigger. We've re-optimized the location of plant infrastructure, resulting in some modest improvements and updates to meet current environmental standards as we prepare to submit the revised EIA.

Kerry Smith, Analyst

Okay. Got you. And then just maybe the last question if I could. What are your sort of – is your current thinking on TZ? Are you thinking to maybe update the economics that you did in the feasibility? Obviously, the economics would look significantly better today versus the economics that you had back when you did that study.

George Burns, President and CEO

I mean the study is pretty fresh. So really it is higher metal prices and FX rate changes that impact valuation. And obviously those are numbers we have and are articulating with prospective acquirers.

Kerry Smith, Analyst

Okay. And are you still thinking to try and sell that property? And is that still your plan?

George Burns, President and CEO

Well, the way I'd characterize it is both our Romanian and Brazilian assets are viewed to be non-core. And if we found a reasonable offer that's in line with strengthening our balance sheet and supportive of our focus on growth elsewhere.

Kerry Smith, Analyst

Okay. Got it. That’s great. Thanks very much and congratulations again.

George Burns, President and CEO

Thanks, Kerry.

Operator, Operator

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

Tanya Jakusconek, Analyst

Hi, good morning, gentlemen. Can you hear me?

George Burns, President and CEO

Yes, good morning.

Tanya Jakusconek, Analyst

Good morning. I have three questions, I guess, two I can give to Phil and then the last one for you George. Phil, maybe can we start? I know that we have reconfirmed the guidance for production all-in sustaining costs and cash costs. Can we talk about the capital? You did mention that capital is going to be higher in Q3. Can you kind of review what the capital spend is for this year and sort of how it goes into Q3, Q4?

Phil Yee, Executive Vice President and CFO

Sure, Tanya. So I think the capital in Q2 was just slightly lower than what we spent in Q1. And I think in terms of overall, below the rate, if you spread it out for the whole year. But I think we're still on schedule for our guidance for the year, which would indicate a higher rate of capital spending in the second half. It all comes down to timing as well. It comes – there's certain projects that have perhaps been slightly impacted by for example COVID at Lamaque with the three-week shutdown in March and April. But we continue to move ahead and I think we're confident that our guidance on the capital will remain for this year.

Tanya Jakusconek, Analyst

Okay. Can you remind me your capital guidance for this year on sustaining development?

Joe Dick, Executive Vice President and COO

Phil, I have the number. Maybe, I can help you out.

Phil Yee, Executive Vice President and CFO

Sure. Thanks, Joe.

Joe Dick, Executive Vice President and COO

The guidance for development capital is $101 million to $145 million, and for sustaining growth, it's $105 million to $125 million.

Tanya Jakusconek, Analyst

Okay. So I got these correctly. Did you say $105 million to $125 million for sustaining capital?

Joe Dick, Executive Vice President and COO

Correct.

Tanya Jakusconek, Analyst

And then for development capital did you say $101 million to $145 million?

Joe Dick, Executive Vice President and COO

Correct.

Tanya Jakusconek, Analyst

Okay. And then just the key items on the development capital just remind me that, I mean Lamaque is in there?

Joe Dick, Executive Vice President and COO

Lamaque is in there, Kisladag. And those are the two primary ones.

Tanya Jakusconek, Analyst

Okay. It hasn't changed since the beginning of the year. We'll review the press release to confirm this. I can turn it over to Phil to discuss your capital allocation, and George may want to chime in as well. I noticed you used proceeds from your ETM to repurchase your senior secured notes. How should we consider this free cash flow and other cash you're generating in terms of prioritizing pipeline allocation and other areas? Also, where do you currently stand on dividends?

Phil Yee, Executive Vice President and CFO

Sure. Overall, our capital requirements for the year and beyond are about $100 million for sustaining operations. Our growth capital needs are primarily for pre-stripping at Kisladag, which totals around $260 million over five years, as well as the HPGR project at Kisladag, estimated at $30-36 million, and the recently announced decline project at Lamaque, which is about $25 million. Most of this will be funded through flow-through financing, minimizing its impact on our liquidity. I believe our capital expenditures moving forward are quite manageable. We are still focused on reducing our debt in a sensible manner. The equity clawback on the senior notes is our most expensive debt, carrying a 9.5% interest rate. The provisions in the indenture and the proceeds from our ATM have enabled us to address this. Looking ahead, we face uncertainty regarding potential impacts of COVID, so we aim to maintain strong liquidity. If commodity prices remain high, we will generate significant free cash flow and will evaluate how to use those funds at that time. Regarding dividends, our priority is to address our debt first, but we also have opportunities for internal growth that we will consider as we progress.

Tanya Jakusconek, Analyst

Okay. Sorry would I just add that the ATM and how you're using that, we should kind of think about it in that way in terms of helping you with your debt? Is that a good way to think of it?

Phil Yee, Executive Vice President and CFO

Well, I think the way the equity clawback provision for the indenture has worked is, the window is only 120 days leading up to the redemption date. So we managed to raise a sizable portion of the ATM in Q2. It hit that 120-day window. So that's how that fit together.

Tanya Jakusconek, Analyst

Okay.

Phil Yee, Executive Vice President and CFO

And it's capped at $105 million. So we can retire a little over 1/3 of the entire original high-yield debt. And obviously, we made one big step in Q2 down that direction.

Tanya Jakusconek, Analyst

Okay perfect.

Phil Yee, Executive Vice President and CFO

And it's capped at $105 million. So we can retire a little over 1/3 of the entire original high yield debt. And obviously, we made one big step in Q2 down that direction.

Tanya Jakusconek, Analyst

I just want to clarify your capital requirements. George, this might relate to your discussions with the Greek government. From what we previously discussed, it seems that Skouries will need approximately another $700 million to finish. Perama Hill should be in the range of $200 million to $250 million. For Lamaque, we have $25 million allocated for the decline and $50 million to increase throughput to 5,000 tonnes a day. Additionally, there are costs for underground crushing and conveyor systems. Should I estimate the total for this, excluding development capital, to be around $100 million to $150 million?

George Burns, President and CEO

It is. I mean, the way we look at Lamaque, we're committed to the decline. It brings the benefits and advantages we discussed on this call. You've got the $50 million, to get to 5,000 tonnes a day. But to be realistic, it's probably going to be a staged approach to further expansion that will unfold as we are successful in exploration. So that timing I think is going to be spread out a bit. The underground crusher in conveyors is around another $25 million. And I think we'll have some clear insight by the end of this year when's the right time to make that investment and that might come sooner rather than later. And the last opportunity is around tailings. We're a company that deploys dry stack tailings pretty universally with the exception of Lamaque and we've been working on permitting and engineering studies on how to bring that asset in line with the rest of our assets. And a big paste backfill plant is the likely scenario where we put much of the tailings underground is backfilled. That will help us as we get deeper with higher quality backfill. And then any excess potentially would be put as cemented backfill in the old Sigma pit. So those studies are continuing. And that one is not urgent. We have plenty of capacity in the existing dam, which has been buttressed with an enormous amount of waste rock. But that's probably an opportunity down the road a ways and it's also in that $50 million range. So if you add all that up, it's not going to come as one bullet. It's going to be spread over say the next five years, but that's strategically what we're thinking at this point.

Tanya Jakusconek, Analyst

Yeah. So that comes to about $150 million. All right. So we've got Skouries is about $700 million, and then Perama Hill at $200 million. and then this one spread over five years at about $150 million. Would that be fair on the capital for these projects?

George Burns, President and CEO

That's correct. But again we're focused on bringing in joint venture partners to fund the Skouries and the Olympias expansion. So that won't need to necessarily come off our balance sheet. And having a strong balance sheet positions us well for those negotiations and making the right strategic decisions for our investors.

Tanya Jakusconek, Analyst

Okay. And I think the Olympias expansion was under $50 million right?

George Burns, President and CEO

Yeah. We're estimating $50 million on that. And that engineering work is ongoing this year as well.

Tanya Jakusconek, Analyst

Okay. So maybe then just if I could my final question was really about where are we now? We've come back to the table with the Greek government maybe just a bit of flavor of where we are on these conversations and what are the focus?

George Burns, President and CEO

Well, again I'd say there's good alignment. Obviously for us, getting these high-quality assets built and generating enormous free cash flow is strategically important to us. I'd say for Greece given every country around the world is dealing with economic impacts from COVID and there's no end in sight from that being eliminated. So I think the opportunity is ripe for both the government and us to hammer out a mutually beneficial agreement and to get these investments moving. So I just described we've got good progress going on the permitting. We're back at the table and I think it's a good environment to get it done.

Tanya Jakusconek, Analyst

Yeah. It looks like the permitting you've got those additional permits for drilling. How is the investment part of it coming? I know we had talked originally about updating that portion and having an arbitration clause in there and other aspects that you've talked about on conference calls. How are we proceeding on that route? Is it slower than…?

George Burns, President and CEO

I don't want to go into details, but there was a slowdown during Q2 as we focused on protecting our employees and the health of our business. The Greek government, like every other jurisdiction, prioritized controlling the spread of COVID. Therefore, not much progress was made in Q2. However, I can say that we are back in discussions and both sides are committed to moving forward.

Tanya Jakusconek, Analyst

Okay. All right. Well, good luck with that George. And thanks a lot everyone.

George Burns, President and CEO

Thank you.

Operator, Operator

Our next question comes from Josh Wolfson of RBC Capital Markets. Please go ahead.

Josh Wolfson, Analyst

Thanks. A quick single one for me. I was looking back at the notes from the site tour last year. And I guess there was a couple of interim resource updates we were expecting for Lamaque midyear or later in the year. And obviously, there's been success with the exploration front with Ormaque and then also impact from drilling just given COVID. In terms of I guess which components of the resource are going to be included in the next resource update and just to clarify that's one. Could you review which the vein sets are going to be incorporated and I guess what the timelines for that are?

George Burns, President and CEO

We are currently updating our resource models and moving them through engineering and design. We expect this to be a good year for converting inferred resources into reserves. This work aligns with our annual planning cycle, and we aim to complete it late in the year to support our budgeting process. We anticipate a productive year that will provide additional reserves for our expansion plans. Significant progress is expected in the deeper parts of Triangle, specifically for C4 and C5, where we have been conducting infill drilling to facilitate conversion, and we anticipate a noticeable increase this year to assist with ongoing studies. Regarding our mock-up and mean, we are still in the process of defining the resource size and do not have a reliable model yet. We likely won't reach that stage this year, but it is expected next year.

Josh Wolfson, Analyst

Okay. And then I guess C6, C7 some of the deeper sets, C10 is there any chance that we'll see those maybe an inferred category there?

George Burns, President and CEO

Yes, our exploration is focused on C6 and C7, and we are currently drilling in that area. We will definitely see an increase in inferred resources there.

Josh Wolfson, Analyst

Okay. Good. Thank you.

George Burns, President and CEO

Thank you, Josh.

Operator, Operator

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

George Burns, President and CEO

Well a big thanks to our entire team. It was a solid quarter. We continue to build on our success from last year and we're optimistic that we have a number of catalysts in front of us and look forward to updating everybody next call. Thank you.

Operator, Operator

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