Centerra Gold Inc. (TSX:CG) -
This news release contains forward-looking information that is subject to the
risk factors and assumptions set out on page 16 and in the Cautionary Note
Regarding Forward-looking Information on page 26. It should be read in
conjunction with the Company's unaudited interim condensed consolidated
financial statements and notes for the three and six months ended June 30, 2014
and associated Management's Discussion and Analysis. The condensed interim
financial statements of Centerra are prepared in accordance with International
Accounting Standard 34, Interim Financial Reporting, as issued by the
International Accounting Standards Board and the Company's accounting policies
as described in note 3 of its annual consolidated financial statements for the
year ended December 31, 2013. All figures are in United States dollars unless
otherwise stated.
To view Management's Discussion and Analysis and the Financial Statements and
Notes for the three and six months ended June 30, 2014, please visit the
following link: http://media3.marketwire.com/docs/cg0729fsmda.pdf.
Centerra Gold Inc. today reported a net loss for the second quarter of 2014 of
$31.7 million, or $0.13 per share (basic and diluted) which reflects the lower
average realized gold price(1), higher share-based compensation, and increased
depreciation, depletion and amortization (DD&A) and an inventory charge at
Kumtor. For the same period in 2013, the Company recorded net earnings of $1.6
million or $0.01 per common share.
2014 Second Quarter Highlights
-- Kumtor obtained approvals for its 2014 annual mine plan from the
relevant Kyrgyz agencies.
-- Boroo mill repairs were completed and the mill returned to full milling
capacity.
-- Company on track to meet 2014 production and cost guidance.
-- Produced 92,124 ounces of gold in the quarter, including 77,860 ounces
at Kumtor and 14,265 ounces at Boroo, compared to 99,426 ounces in the
same period in 2013.
-- Cash provided by operations increased to $71.7 million compared to $40.8
million in the second quarter of 2013.
-- All-in sustaining costs per ounce sold(1) of $1,540, which excludes
revenue-based tax in the Kyrgyz Republic, compared to $1,537 in the same
period in 2013.
-- All-in costs per ounce sold(1), which excludes revenue-based tax in the
Kyrgyz Republic and income taxes was $1,722 for the quarter compared to
$1,708 for the second quarter of 2013.
The Company recorded a net loss of $29.6 million in the first half of 2014,
compared to net earnings of $52.9 million in the comparative period of 2013. The
decrease in earnings reflects lower realized gold prices, higher share-based
compensation and increased DD&A and an inventory impairment charge at Kumtor.
During the second quarter of 2014, Centerra's cash, cash equivalents and
short-term investments decreased by $20.0 million to $492.2 million from $512.2
million at the end of March 2014 ($501.5 million at December 31, 2013). As at
June 30, 2014, the Company had drawn $76 million on its $150 million revolving
credit facility with the European Bank for Reconstruction and Development
(EBRD), leaving a balance of $74 million undrawn at June 30, 2014. The amount
drawn is due to be repaid on August 11, 2014. The Company has elected to extend
the repayment date to February 2015 pending EBRD's confirmation, which it
expects to receive. Centerra believes, based on its current forecast, that it
has sufficient cash and short-term investments to carry out its business plan in
2014 (see "2014 Outlook").
Commentary
Ian Atkinson, President and CEO of Centerra Gold stated, "I am pleased to report
that during the quarter the Kumtor mine obtained approvals of its 2014 mine plan
allowing the operation to continue uninterrupted. Both the operations performed
well during the quarter, achieving a total quarterly gold production of 92,124
ounces, which brings year-to-date gold production to 208,794 ounces. We are on
track to achieve our 2014 guidance."
"In the Kyrgyz Republic, the Company is continuing its discussions with the
government regarding the potential restructuring of the Kumtor Project to
resolve all outstanding concerns relating to the project. We are in the process
of drafting the definitive agreements and are continuing discussions with the
Kyrgyz Government."
"I am also pleased to welcome Messrs. Emil Orozbaev, Michael Parrett and Kalinur
Sadyrov to the Board of Directors, each of whom were elected to the Board at our
recent annual and special meeting of shareholders held in May. Messrs. Orozbaev
and Sadyrov were nominated by Kyrgyzaltyn, Centerra's largest shareholder, and
replace former Board members Messrs. Karybek Ibraev and Amangeldy Muraliev. Mr.
Parrett replaces Mr. John Lill who did not stand for re-election."
Consolidated Financial and Operating Summary
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Unaudited ($ millions, Three Months Ended Six Months Ended
except as noted) June 30, June 30,
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% %
Financial Highlights 2014 2013 Change 2014 2013 Change
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Revenue 119.5 128.2 (7%) 267.5 320.5 (17%)
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Cost of sales 109.4 84.6 29% 218.5 175.8 24%
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Revenue-based taxes 14.0 13.5 4% 32.4 34.3 (6%)
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Exploration and
business development
(1) 4.0 6.3 (37%) 6.6 13.4 (51%)
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Corporate
administration 11.8 7.2 64% 18.3 13.9 32%
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(Loss) Earnings from
operations (29.0) 8.6 (437%) (25.2) 67.4 (137%)
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Net (loss) earnings (31.7) 1.6 (2081%) (29.6) 52.9 (156%)
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Earnings (loss) per
common share - $
basic (2) $ (0.13) $ 0.01 (1400%) $ (0.13) $ 0.22 (159%)
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Earnings (loss) per
common share - $
diluted (2) $ (0.13) $ 0.01 (1400%) $ (0.13) $ 0.22 (159%)
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Cash provided by
operations 71.4 40.9 75% 173.4 132.8 31%
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Average gold spot
price - $/oz (3) 1,288 1,415 (9%) 1,291 1,532 (16%)
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Average realized gold
price - $/oz(4) 1,285 1,376 (7%) 1,289 1,512 (15%)
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Capital expenditures
(5) 111.5 105.5 6% 210.4 209.4 0%
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Operating Highlights
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Gold produced - ounces 92,124 99,426 (7%) 208,794 214,646 (3%)
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Gold sold - ounces 93,004 93,177 (0%) 207,497 211,922 (2%)
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Operating costs (on a
sales basis) (6) 48.5 53.0 (8%) 90.9 100.3 (9%)
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Adjusted operating
costs (4) 56.6 60.7 (7%) 105.6 114.0 (7%)
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All-in Sustaining
Costs (4) 143.3 143.2 0% 270.2 270.0 0%
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All-in Costs (4) 160.2 159.1 1% 292.8 310.9 (6%)
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All-in Costs -
including taxes (4) 174.2 176.3 (1%) 325.2 354.0 (8%)
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Unit Costs
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Cost of sales - $/oz
sold (4) 1,176 908 30% 1,053 829 27%
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Adjusted operating
costs - $/oz sold (4) 608 652 (7%) 509 538 (5%)
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All-in sustaining
costs - $/oz sold (4) 1,540 1,537 0% 1,302 1,274 2%
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All-in costs - $/oz
sold (4) 1,722 1,708 1% 1,411 1,467 (4%)
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All-in costs
(including taxes) -
$/oz sold (4) 1,873 1,892 (1%) 1,567 1,671 (6%)
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(1) Includes business development of $0.1 million in the second quarter and
first half 2014 (nil for second quarter and first half 2013).
(2) As at June 30, 2014, the Company had 236,396,821 common shares issued
and outstanding.
(3) Average for the period as reported by the London Bullion Market
Association (US dollar Gold P.M. Fix Rate).
(4) Adjusted operating costs, all-in sustaining costs, all-in costs and
all-in costs - including taxes ($millions and per ounce sold) as well
as average realized gold price per ounce and cost of sales per ounce
sold are non-GAAP measures and are discussed under "Non-GAAP Measures".
(5) Includes capitalized stripping of $86.9 million and $175.0 million in
the second quarter and first half of 2014 ($77.2 million and $151.5
million in the second quarter and first half of 2013).
(6) Operating costs (on a sales basis) is comprised of mine operating costs
such as mining, processing, regional office administration, royalties
and production taxes (except at Kumtor where revenue-based taxes are
excluded), but excludes reclamation costs and depreciation, depletion
and amortization. Operating costs (on a sales basis) is the same as the
cash component of cost of sales and represent the operating costs
associated with the ounces sold in the period.
Second Quarter 2014 compared to Second Quarter 2013
-- Gold production for the second quarter of 2014 totaled 92,124 ounces
compared to 99,426 ounces in the comparative quarter of 2013. The
decrease in ounces poured reflects lower production at the Boroo mine
due to unscheduled mill downtime, the processing of lower grade ore and
lower ounces under primary leach at Boroo.
-- All-in sustaining costs per ounce sold(2), which excludes revenue-based
tax in the Kyrgyz Republic, were $1,540 in the second quarter of 2014
compared to $1,537 in the comparative quarter of 2013.
-- All-in costs per ounce sold(1), which excludes revenue-based tax in the
Kyrgyz Republic and income taxes, for 2014, were $1,722 compared to
$1,708 in 2013. The increase is mainly due to higher spending on growth
capital(1) at Kumtor and higher capitalized stripping costs at Kumtor.
Excluding capitalized stripping, the cash component of capital
expenditures at Kumtor increased by $2.1 million in the second quarter
of 2014 spent mainly on infrastructure relocation and equipment
purchases.
-- Revenue for the second quarter of 2014, decreased to $119.5 million from
$128.2 million in the comparative quarter of 2013, primarily from a 7%
lower average realized gold price in the second quarter of $1,285 per
ounce compared to $1,376 per ounce in the same quarter of 2013. Sales
volumes were also slightly lower (93,004 ounces in the second quarter of
2014 compared to 93,177 ounces in the second quarter of 2013).
-- Cost of sales increased by 29% to $109.4 million in the second quarter
of 2014, compared to $84.6 million in the comparative period of 2013,
mainly as a result of the higher DD&A and an inventory impairment charge
at Kumtor. DD&A associated with production increased to $60.9 million in
the second quarter of 2014 from $31.6 million in the comparative quarter
of 2013. The increase in DD&A resulted from processing higher cost ore
from cut-back 15 in the second quarter of 2014 compared to ore from cut-
back 14B which was processed in the second quarter of 2013. Access to
ore from cut-back 15 required more stripping of ice and waste thereby
resulting in increased amortization of capitalized stripping costs as
the ore was mined and stockpiled. Operating costs were capitalized for
the stripping of 142 million tonnes of ice and waste for cut-back 15,
whereas 61 million tonnes were stripped and capitalized for cut-back
14B. In addition, the expanded mobile fleet at Kumtor was fully
commissioned in 2013 thereby attaching a higher equipment cost to the
ore from cut-back 15. In addition, Kumtor recorded an inventory charge
of $14.1 million in the second quarter of 2014, representing the excess
of the inventoried cost over the amount the Company believes it could
realize after further processing and subsequent sale of the gold.
-- Exploration expenditures in the second quarter of 2014 totaled $3.9
million compared to $6.3 million in the same period of 2013. The
decrease in exploration spending in the second quarter of 2014 reflects
the cessation of all exploration activities at Kumtor in the fourth
quarter of 2013 (second quarter of 2013 included $2 million of
exploration at Kumtor).
-- Corporate administration costs increased to $11.8 million in the second
quarter of 2014 from $7.2 million in the second quarter of 2013 due to
an increase in share-based compensation resulting from the revaluation
at June 30, 2014 of the awards issued under the Company's share-based
plans. The Company's share price increased by 31% during the second
quarter of 2014 as compared to a decrease in share price of 45% during
the same quarter of 2013. Share-based compensation was $5.3 million in
the second quarter of 2014, compared to $0.2 million in the same period
in 2013.
-- Cash provided by operations was $71.4 million in the second quarter of
2014 compared to $40.9 million in the same period of 2013 as a result of
a reduction in working capital levels, partially offset by lower
earnings in the second quarter of 2014. Working capital decreased in the
second quarter of 2014 by $36.5 million due to the timing of and payment
for gold shipments and a reduction of gold inventory.
-- Capital expenditures in the second quarter of 2014 were $111.5 million,
which included sustaining capital(1) of $13.0 million, growth capital(1)
of $11.6 million and $86.9 million of capitalized stripping costs ($61.5
million cash). Capital expenditures in the same quarter of 2013 were
$105.5 million, which included $18.7 million for sustaining capital(1)
and $9.6 million for growth capital(1) and capitalized stripping of
$77.2 million ($56.6 million cash).
First Half 2014 compared to First Half 2013
-- Gold production for the first half of 2014 totaled 208,794 ounces
compared to 214,646 ounces in the comparative period of 2013. The
decrease in ounces poured is due to lower production at the Boroo mine
due to an unscheduled mill downtime at Boroo, lower mill grades
processed and lower ounces under primary leach, partially offset by
higher production at Kumtor due to drawing down in-circuit inventory.
-- All-in sustaining costs per ounce sold(3), which excludes revenue-based
tax in the Kyrgyz Republic, were $1,302 in the first half of 2014
compared to $1,274 in the comparative period of 2013. The increase is
primarily due to higher capitalized stripping costs at Kumtor partially
offset by lower spending on sustaining capital(1).
-- All-in costs per ounce sold(1), which excludes revenue-based tax in the
Kyrgyz Republic and income taxes, for the first half of 2014 were $1,411
compared to $1,467 in 2013. The decrease is primarily due to lower
spending on sustaining and growth capital(1) and exploration, partially
offset by lower ounces sold and higher capitalized stripping costs at
Kumtor. Capitalized stripping increased by 13% to $123.9 million (cash
component) in the first half of 2014 reflecting higher tonnage moved and
higher maintenance costs for the augmented fleet.
-- Revenue for the first half of 2014, decreased to $267.5 million from
$320.52 million in the comparative period of 2013, primarily from a 15%
lower average realized gold price of $1,289 per ounce compared to $1,512
per ounce in the first half of 2013. Sales volumes were also slightly
lower (207,497 ounces compared to 211,922 ounces in the first half of
2013).
-- Cost of sales increased by 24% to $218.5 million in the first half of
2014 due primarily to higher DD&A and an inventory impairment charge at
Kumtor. DD&A associated with production increased to $127.5 million in
the first half of 2014 from $75.4 million in the comparative period of
2013. The increase in DD&A resulted from processing higher cost ore from
cut-back 15 compared to ore from cut-back 14B which was processed in the
second quarter of 2013. In addition, Kumtor recorded an inventory
impairment charge of $14.6 million in the first half of 2014.
-- Exploration expenditures in the first half of 2014 totaled $6.5 million
compared to $13.4 million in the same period of 2013. The decrease in
the first half of 2014 primarily reflects the cessation of all
exploration activities at Kumtor in the fourth quarter of 2013 (first
half of 2013 included $4.4 million of exploration at Kumtor) and lower
spending on the Company's projects in Russia and Mongolia.
-- Corporate administration costs increased to $18.3 million in the first
half of 2014 from $13.9 million in the first half of 2013 due to an
increase in share-based compensation. The increase reflects the movement
in the Company's share price which increased by 56% during the first
half of 2014 as compared to a decrease of 64% during the same period of
2013. Share-based compensation was $6.8 million in the first half of
2014, compared to $0.3 million in the same period in 2013.
-- Cash provided by operations increased $40.5 million to $173.4 million in
the first half of 2014, mainly as a result of lower levels of working
capital.
-- Capital expenditures in the first half of 2014 were $210.4 million,
which included sustaining capital(1) of $21.6 million, growth capital(1)
of $13.8 million and $175.0 million of capitalized stripping costs
($123.9 million cash). Capital expenditures in the same period of 2013
were $209.4 million, which included $32.1 million for sustaining
capital(1) and $25.8 million for growth capital(1) and capitalized
stripping of $151.5 million ($110.0 million cash).
Operations Update
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Three Months Ended Six Months Ended
Kumtor Operating Results June 30, June 30,
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($ millions, except as % %
noted) 2014 2013 Change 2014 2013 Change
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Revenue 99.8 96.5 3% 231.4 245.2 (6%)
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Cost of sales - cash 36.0 40.5 (11%) 67.6 72.7 (7%)
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Cost of sales - non-cash 56.9 25.2 126% 120.4 59.3 103%
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Cost of sales -total 92.9 65.7 41% 188.0 132.0 42%
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Cost of sales - $/oz sold
(1) 1,195 935 28% 1,047 815 28%
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Tonnes mined - 000s 49,527 47,901 3% 100,289 88,085 14%
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Tonnes ore mined - 000s 460 799 (42%) 602 1,008 (40%)
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Average mining grade - g/t 1.40 1.91 (26%) 1.41 2.02 (30%)
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Tonnes milled - 000s 1,430 1,351 6% 2,912 2,824 3%
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Average mill head grade -
g/t 2.35 2.17 8% 2.50 2.44 2%
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Recovery - % 73.2 69.3 6% 74.8 72.0 4%
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Mining costs - total ($/t
mined material) 1.30 1.37 (5%) 1.28 1.42 (10%)
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Milling costs ($/t milled
material) 11.82 11.42 4% 11.45 11.05 4%
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Gold produced - ounces 77,860 72,365 8% 180,793 161,983 12%
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Gold sold - ounces 77,743 70,318 11% 179,658 161,935 11%
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Average realized gold
price(1) - $/oz sold 1,284 1,372 (6%) 1,288 1,514 (15%)
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Capital
expenditures(sustaining)
(1) 12.9 15.0 (14%) 21.2 26.8 (21%)
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Capital expenditures
(growth)(1) 11.4 9.3 23% 13.4 25.4 (47%)
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Capital expenditures
(stripping)(1) 86.9 77.2 13% 175.0 151.5 16%
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Adjusted Operating Costs -
$/oz sold (1) 551 660 (17%) 443 512 (13%)
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All-in Sustaining Costs -
$/oz sold (1) 1,511 1,681 (10%) 1,254 1,359 (8%)
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All-in Costs - $/oz sold
(1) 1,658 1,842 (10%) 1,328 1,552 (14%)
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All-in Costs - including
taxes - $/oz sold (1) 1,838 2,034 (10%) 1,508 1,764 (15%)
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Boroo Operating Results
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Revenue 19.7 31.7 (38%) 36.1 75.3 (52%)
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Cost of sales - cash 12.5 12.5 0% 23.4 27.7 (16%)
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Cost of sales - non-cash 4.0 6.4 (38%) 7.1 16.1 (56%)
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Cost of sales - total 16.5 18.9 (13%) 30.5 43.8 (30%)
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Cost of sales - $/oz sold
(1) 1,081 827 31% 1,096 876 25%
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Tonnes stacked heap leach
- 000s - 1,026 (100%) - 1,294 (100%)
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Tonnes leached - 000s 735 1,083 (32%) 1,348 2,886 (53%)
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Tonnes milled - 000s 425 624 (32%) 1,007 1,196 (16%)
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Average mill head grade -
g/t 0.67 1.13 (41%) 0.66 1.33 (50%)
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Recovery - % 61.3 60.8 1% 61.3 57.0 8%
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Milling costs ($/t milled
material) 11.33 8.80 29% 11.25 9.34 20%
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Gold produced - mill -
ounces 6,305 13,851 (54%) 13,319 29,080 (54%)
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Gold produced - heap leach
- ounces 7,959 13,210 (40%) 14,682 23,583 (38%)
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Gold produced - total -
ounces 14,265 27,061 (47%) 28,001 52,663 (47%)
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Gold sold - ounces 15,261 22,858 (33%) 27,839 49,987 (44%)
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Average realized gold
price(1) - $/oz sold 1,290 1,388 (7%) 1,295 1,506 (14%)
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Capital expenditures -
sustaining (Boroo)(1) 0.1 3.6 (97%) 0.3 4.8 (94%)
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Capital expenditures -
growth (Gatsuurt)(1) 0.2 0.3 (33%) 0.4 0.4 0%
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Adjusted Operating Costs -
$/oz sold (1) 901 627 44% 935 622 50%
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All-in Sustaining Costs -
$/oz sold (1) 915 777 18% 954 716 33%
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All-in Costs - $/oz sold
(1) 915 777 18% 954 716 33%
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All-in Costs - including
taxes - $/oz sold (1) 915 938 (2%) 954 892 7%
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(1) Adjusted operating costs, all-in sustaining costs, all-in costs and
all-in costs - including taxes (in $millions and per ounce sold), as
well as average realized gold price per ounce sold, cost of sales per
ounce sold and capital expenditures (sustaining and growth) are non-
GAAP measures and are discussed under "Non-GAAP Measures".
Kumtor
At the Kumtor mine in the Kyrgyz Republic, gold production in the second quarter
of 2014 was 77,860 ounces compared to 72,365 ounces in the comparative quarter
of 2013 as Kumtor processed stockpiled ore from cut-back 15 that was mined
during the fourth quarter of 2013. During the second quarter of 2014, Kumtor's
mill head grade averaged 2.35 g/t with a recovery of 73.2%, compared with 2.17
g/t and a recovery of 69.3% for the same quarter in 2013 when the mill processed
metallurgically difficult stockpiled ore. Tonnes processed were approximately
1.4 million for the second quarter of 2014, which was 6% higher than the
comparative quarter of 2013 when the mill was affected by an unscheduled
shutdown as a result of protesters' actions.
During the second quarter of 2014, Kumtor's mining fleet focused on stripping
waste to establish access to the south portion of the Kumtor pit (cut-back 16)
that is expected to provide high-grade ore at the end of the third quarter of
2014. The total waste and ore mined for the second quarter of 2014 was 49.5
million tonnes compared to 47.9 million tonnes in the comparative period of
2013, reflecting the increased mining fleet at Kumtor.
The total waste and ore mined for the first six months of 2014 was 100.3 million
tonnes compared to 88.1 million tonnes in the comparative period of 2013,
representing an increase of 14% due to the increased volume of higher density
material mined, the shorter haulage distances of waste material used for
construction of the buttress within the pit and the increased fleet capacity.
The buttress, located at the bottom of the advancing Davidov glacier on the edge
of the ultimate pit design is working effectively. However, there can be no
assurance that the buttress will ultimately stop or sufficiently slow down the
movement of the Davidov glacier. On-going monitoring will continue.
All-in sustaining costs per ounce sold(4), which excludes revenue-based tax,
were $1,511 in the second quarter of 2014 compared to $1,681 in the comparative
quarter of 2013. The decrease results primarily from higher production and sales
and lower sustaining capital(1) expenditures partially offset by increased
capitalized stripping in the current period.
All-in costs per ounce sold(1), which excludes revenue-based tax and income tax,
for the second quarter of 2014 decreased 10% to $1,658 compared to $1,842 in the
comparative period of 2013. The decrease in all-in costs(1) is primarily due to
an 11% increase in gold sold for the second quarter of 2014.
Capital expenditures in the second quarter of 2014 were $111.2 million which
includes $12.9 million of sustaining capital(1), $11.4 million invested in
growth capital(1) mainly on infrastructure relocation and equipment purchases
and $86.9 million for capitalized stripping ($61.5 million cash). Capital
expenditures the comparative quarter of 2013 totaled $101.5 million, consisting
of $15.0 million for sustaining capital(1) and $9.3 million for growth
capital(1) excluding $77.2 million of capitalized stripping ($56.6 million
cash).
Boroo/Gatsuurt
At the Boroo mine in the second quarter of 2014, gold production was 14,265
ounces, compared to 27,061 ounces in the same period of 2013. The lower gold
production is mainly the result of the unscheduled downtime of the mill
resulting in 32% lower tonnes milled. Additionally, lower grade ore was
processed through the mill and lower tonnage of ore was under primary leach in
the second quarter of 2014. The mill head grade averaged 0.67 g/t with a
recovery of 61.3% in the second quarter of 2014, compared to 1.13 g/t with a
recovery of 60.8% in the same period of 2013.
All-in sustaining costs per ounce sold(1) were $915 in the second quarter of
2014 compared to $777 in the comparative quarter of 2013. The increase in all-in
sustaining costs(1) is primarily due to the 33% decrease in ounces sold at Boroo
year-over-year, partially offset by lower adjusted operating costs(1) and lower
sustaining capital(1) expenditures.
All-in costs per ounce sold(1), which excludes income taxes, were $915 in the
second quarter of 2014 compared to $777 in the same quarter of 2013 reflecting
the lower production and resulting reduction in gold sales which was partially
offset by lower adjusted operating costs(1) and lower sustaining capital(1)
expenditures.
During the second quarter of 2014 exploration expenditures in Mongolia increased
to $1.4 million from $0.7 million in the same period in 2013 as exploration
activity commenced at the ATO property in Mongolia.
Subsequent to the end of the quarter, the Company and Boroo's trade union signed
a new 2-year collective agreement which will expire on June 30, 2016.
The Gatsuurt project remained under care and maintenance in the first quarter of
2014 due to continued delays in permitting resulting from the Water and Forest
Law which prohibits mining and exploration activities in water basin and
forested areas. The Company continued discussions with the Mongolian Government
regarding the Gatsuurt project during the second quarter and expects that the
Mongolian Parliament will consider the designation of Gatsuurt as a strategic
deposit by the end of 2014. If Parliament ultimately approves this designation,
it would have the effect of excluding Gatsuurt from the application of the
Mongolian Water and Forest Law and would allow Mongolia to acquire up to a 34%
interest in Gatsuurt. The terms of such participation would be subject to
further negotiations with the Government. See "Other Corporate Developments -
Mongolia".
Exploration Update
Turkey
Oksut
The majority of the applications for drill permits, which were submitted in the
second quarter of 2013, were received in March 2014. Drilling commenced in early
April with a reverse circulation drill rig and by the end of the second quarter
40 reverse circulation drill holes were completed for a total of 4,991 metres of
drilling. The majority of the RC holes (36) were condemnation holes to test the
proposed sites for waste-rock dumps, the heap-leach pad as well as the mine
office and shop buildings and have shown that there is no significant
mineralization below surface at these sites.
Diamond drilling started in May with three drill rigs to drill core holes for
geotechnical and metallurgical information as well as to test a number of
exploration targets. Seven 'metallurgical' holes were completed during the
quarter, with four holes being drilled into the main Keltepe Zone and the other
three holes into the smaller Guneytepe Zone for a total of 1,210 metres. By the
end of June a total of 16 geotechnical drill holes were completed for a combined
length of 1,838 metres.
In addition nine exploration holes with a combined length of 2,150 metres were
drilled at Oksut during the quarter. A fence of five holes was completed to test
the possible southward extension of the Keltepe deposit and assays have been
received for one hole, ODD0204, which returned an intercept of 26.0 metres
averaging 1.75 g/t Au. Additional drill holes will need to be drilled 50 metres
south of ODD0204 to determine if the mineralization of the Keltepe Zone can be
extended further south. Diamond drill holes were also completed to test the
western margin of the Keltepe Zone and the southern extension of the Guneytepe
Zone and assays are pending. In addition two holes were drilled to test a
high-priority geophysical anomaly a few hundred metres west of the Keltepe Zone,
both holes intercepted significant alteration, however, assay results were
disappointing.
Mongolia
Altan Tsagaan Ovoo (ATO)
During the second quarter nine holes totaling 2,265 metres were drilled to test
geophysical targets that occur on or close to the principal fault structures
associated with the ATO resource and Mungu Zone. Results from the drilling have
been disappointing with only hole ATO-293, which is located between the northern
end of Pipe 4 of the ATO deposit and the southwestern end of the Mungu Zone,
intersecting mineralization of any significance; 42.7 metres of 0.62 g/t Au and
48.9 g/t Ag and 6.7 metres of 1.66 g/t Au and 144.4 g/t Ag.
A program of shallow drilling was carried out as a bedrock geochemical survey to
identify targets beneath the colluvium cover to the west and southwest of the
known ATO gold resource. Two targets of interest have been outlined by this work
- the Del Northeast Target which shows evidence of Pb-Zn-Ag mineralization
similar to that found at ATO and the BMW Target where intrusion-related
copper-gold mineralization appears to be developed. The targets will be tested
by diamond drill holes in the third quarter.
Additional geophysical surveys, geological mapping and trenching are in progress
on other prospects on the large land package to define other drill targets.
Qualified Person & QA/QC
Exploration information and related scientific and technical information in this
news release regarding the Oksut project were prepared in accordance with the
standards of the Canadian Institute of Mining, Metallurgy and Petroleum and
National Instrument 43-101 - Standards of Disclosure for Mineral Projects ("NI
43-101") and were prepared, reviewed, verified and compiled by Centerra's
geological and mining staff under the supervision of Malcolm Stallman, Member of
the Australian Institute of Geoscientists (AIG), Centerra's Regional Exploration
Manager - Western Asia and Eastern Europe, who is the qualified person for the
purpose of NI 43-101. Sample preparation, analytical techniques, laboratories
used and quality assurance-quality control protocols used during the exploration
drilling programs are done consistent with industry standards and independent
certified assay labs are used.
Exploration information and related scientific and technical information in this
news release regarding the ATO project were prepared in accordance with the
standards of the Canadian Institute of Mining, Metallurgy and Petroleum and
National Instrument 43-101 - Standards of Disclosure for Mineral Projects ("NI
43-101") and were prepared, reviewed, verified and compiled by Centerra's
geological and mining staff under the supervision of Boris Kotlyar, Certified
Professional Geologist with The American Institute of Professional Geologists
(AIPG), Centerra's Director, Asia Exploration, who is the qualified person for
the purpose of NI 43-101. Sample preparation, analytical techniques,
laboratories used and quality assurance-quality control protocols used during
the exploration drilling programs are done consistent with industry standards
and independent certified assay labs are used.
The production information and related scientific and technical information in
this news release, including the production estimates were prepared in
accordance with the standards of the Canadian Institute of Mining, Metallurgy
and Petroleum and National Instrument 43-101 and were prepared, reviewed,
verified and compiled by Centerra's geological and mining staff under the
supervision of Gordon Reid, Professional Engineer and Centerra's Vice-President
and Chief Operating Officer, who is the qualified person for the purpose of NI
43-101. Mr. Reid will supervise the preparation, review, verification and
compilation of such information as the qualified person following the departure
of Mr. Dan Redmond from the Company and until Mr. Redmond's replacement develops
sufficient knowledge and familiarity with the Company's projects to take on such
responsibility.
Other Corporate Developments
The following is a summary of corporate developments with respect to matters
affecting the Company and its subsidiaries in the Kyrgyz Republic and Mongolia.
For a more complete discussion of these matters, see the Company's 2013 Annual
Information Form available on SEDAR at www.sedar.com.
Readers are cautioned that there are a number of legal and regulatory matters
that are currently affecting the Company and that the following brief
description is only a summary of the current status of such matters. For more
complete background and information on these matters, including with respect to
the Kyrgyz Parliamentary and State Commissions and their reports, Kyrgyz
Parliamentary resolutions, discussions with the Government of the Kyrgyz
Republic in relation to the Memorandum of Understanding and the Heads of
Agreement relating to the proposed restructuring of the Kumtor Project, various
environmental and other claims made by Kyrgyz state agencies and the draft
Kyrgyz Law on Denunciation of the Agreement on New Terms for the Kumtor Project,
please refer to the description contained in the 2013 Annual Information Form.
Kyrgyz Republic
Negotiations between Kyrgyz Republic and Centerra
Following discussions with representatives of the Kyrgyz Government in the
second half of 2013, Centerra announced on December 24, 2013 that it had entered
into a non-binding heads of agreement ("HOA") with the Government of the Kyrgyz
Republic in connection with a potential restructuring transaction under which
Kyrgyzaltyn would exchange its 32.7% equity interest in Centerra for an interest
of equivalent value in a joint venture company that would own the Kumtor
Project. On February 6, 2014, after their review of the HOA, the Kyrgyz
Parliament adopted a resolution which appears to support the concept of the
restructuring described in the HOA but also contains a number of recommendations
that are materially inconsistent with the terms of the HOA.
Centerra expects to continue its discussions with the Government regarding a
potential restructuring transaction to resolve all outstanding concerns relating
to the Kumtor Project. However, it maintains that any agreement to resolve
matters must be fair to all of Centerra's shareholders. Any definitive agreement
for a potential restructuring remains subject to required approvals in the
Kyrgyz Republic, including the Government and Parliament of the Kyrgyz Republic,
Centerra Special Committee and Board approval, as well as compliance with all
applicable legal and regulatory requirements and approvals, including an
independent formal valuation and shareholder approval.
While Centerra expects to continue discussions with the Government, there can be
no assurance that any transaction will be consummated or that Centerra will be
able to successfully resolve any of the matters currently affecting the Kumtor
Project. The inability to successfully resolve matters, including obtaining all
necessary approvals, and/or further actions of the Kyrgyz Republic Government
and/or Parliament, could have a material adverse impact on Centerra's future
cash flows, earnings, results of operations and financial conditions.
Glacier Law
On April 23, 2014 the Parliament of the Kyrgyz Republic passed a law prohibiting
activities which affect glaciers in the Kyrgyz Republic (the "Glacier Law").
Subsequently, the President of the Kyrgyz Republic (who is required to approve
legislation prior to it becoming effective) declined to approve the Glacier Law
and returned it to Parliament for revision.
Permitting and Regulatory Matters
As previously disclosed, KGC experienced a delay this year in receiving
approvals for its 2014 annual mine plan from the relevant Kyrgyz Republic
authorities. As a result, Centerra announced on June 2, 2014 that if such
approvals were not received by June 13, 2014, the Company would begin an orderly
shutdown of operations at Kumtor. However, the Company subsequently announced on
June 13, 2014 that KGC had received the necessary approvals of its 2014 annual
mine plan and accordingly, no shutdown of the Kumtor mine was necessary.
Dividend Claim
On May 23, 2014, the Kyrgyz Republic General Prosecutor's Office ("GPO") filed a
civil claim in Kyrgyz court against KGC which seeks to unwind an inter-corporate
dividend declared and paid by KGC to Centerra in December 2013. KGC is a
wholly-owned subsidiary of Centerra and the dividend was paid in the normal
course of business. The GPO alleges that the dividend was contrary to the
procedural requirements of Kyrgyz corporate law. Centerra and KGC dispute such
allegations and believe that the dividend complied with the agreements governing
the Kumtor Project and all applicable Kyrgyz laws. Centerra has also stated that
the dividend does not have an impact on the valuation which underlies the
restructuring contemplated by the HOA. Accordingly, KGC has contested claims
made by the GPO by filing a number of motions with the Kyrgyz courts. These
include challenges to, among other things, the jurisdiction of the Kyrgyz courts
to hear the claim due to the arbitration provisions of the Restated Investment
Agreement which requires all such disputes to be resolved through international
arbitration.
Centerra also understands that the GPO has brought criminal proceedings against
Mr. D. Japarov, who was a director of KGC (nominated by Kyrgyzaltyn) when the
dividend was declared and paid. Mr. Japarov was also Chairman of the management
board of Kyrgyzaltyn at that time.
Environmental Claims
As previously disclosed, on June 7, 2013, Kumtor received four claims filed by
the Kyrgyz Republic State Inspectorate for Environmental and Technical Safety
("SIETS") with the Bishkek Inter-District Court. The SIETS environmental claims
seek to enforce the previously disclosed environmental claims issued by SIETS in
December 2012, seeking compensation in the aggregate amount of approximately
$150 million in relation to (i) placement of waste rock on glaciers; (ii) unpaid
use of water from Petrov Lake; (iii) unaccounted industrial and household waste;
and (iv) damages caused to land resources (top soil). Each of these claims was
dismissed by the Bishkek Inter-District Court and, on appeal, by the Bishkek
City Court, on the basis that the arbitration clause in the Restated Investment
Agreement requires that all such disputes be resolved through international
arbitration.
SIETS appealed each of these decisions to the Kyrgyz Supreme Court, which upheld
the appeal and referred the cases back to the Bishkek Inter-District Court.
Notably, the Kyrgyz Supreme Court did not decide the question of jurisdiction
but referred the cases back to the court of first instance for "new
consideration". Accordingly, the Company will again argue that the Kyrgyz courts
do not have jurisdiction to hear these cases due to the international
arbitration provision of the Restated Investment Agreement.
In addition to the original four claims of SIETS discussed above, SIETS has
filed the following additional claims against KOC: (i) on October 12, 2013, a
claim in the amount of approximately $485,000 for damages caused to land
resources due to disturbance of land at the Kumtor Project (similar to the claim
in (iv) above but involving a different area of the Kumtor concession); and (ii)
on January 21, 2014, a claim for approximately $8.5 million for lost
agricultural production and lost profits from 1994 to 2042. Kumtor has responded
in writing to SIETS disputing both of these additional claims.
The previously disclosed claim commenced by Kyrgyz Republic State Agency for
Environmental Protection and Forestry ("SAEPF") for the aggregate amount of
approximately $315 million is currently being appealed by KGC on a preliminary
motion in the Bishkek City Court.
As previously stated, Kumtor believes the claims are exaggerated and without
merit. The Kumtor Project has been the subject of systematic audits and
investigations over the years by Kyrgyz and international experts, including by
an independent internationally recognized expert who carried out a due diligence
review of Kumtor's performance on environmental matters at the request of
Centerra's Safety, Health and Environmental Committee of the Board of Directors.
The report of this expert released in October 2012 can be found on the Kumtor
website at www.kumtor.kg/en/ under the "Environment" section.
Land Use Claim
On November 11, 2013, the Company received a claim from the Kyrgyz Republic
General Prosecutor's Office requesting the Inter-District Court of the Issyk-Kul
Province to invalidate the Company's land use certificate and seize certain
lands within Kumtor's concession area.
As previously noted, the Company believes that the invalidation of the land use
certificate and purported seizure of land is in violation of the Kyrgyz Republic
Land Code as well as the Restated Investment Agreement, which provides that the
Kumtor Project is guaranteed all necessary access to the Kumtor concession area,
including all surface lands as are necessary or desirable for the operation of
the Kumtor Project.
Management Assessment
There are several important outstanding issues affecting the Kumtor Project,
which require consultation and co-operation between the Company and Kyrgyz
regulatory authorities. The Company has benefited from a close and constructive
dialogue with Kyrgyz authorities during project operations and remains committed
to working with them to resolve these issues in accordance with the agreements
governing the Kumtor Project (the "Kumtor Project Agreements"), which provide
for all disputes to be resolved by international arbitration, if necessary.
However, there are no assurances that the Company will be able to successfully
resolve any or all of the outstanding matters affecting the Kumtor Project.
There are also no assurances that continued discussions between the Kyrgyz
Government and Centerra will result in a mutually acceptable solution regarding
the Kumtor Project, that any agreed upon proposal for restructuring would
receive the necessary legal and regulatory approvals under Kyrgyz law and/or
Canadian law and that the Kyrgyz Republic Government and/or Parliament will not
take actions that are inconsistent with the Government's obligations under the
Kumtor Project Agreements, including adopting a law "denouncing" or purporting
to cancel or invalidate the Kumtor Project Agreements or laws enacted in
relation thereto. The inability to successfully resolve all such matters would
have a material adverse impact on the Company's future cash flows, earnings,
results of operations and financial condition. See "Caution Regarding
Forward-looking Information".
Mongolia
Gatsuurt
Centerra continues to be in discussions with the Mongolian Government regarding
the development of the Gatsuurt property. Centerra remains reasonably confident
that the economic and development benefits resulting from its exploration and
development activities will ultimately result in the Mongolian Water and Forest
Law having a limited impact on the Gatsuurt project, in particular, and other of
the Company's Mongolian activities, including the ATO deposit. As previously
disclosed, the Mongolian Water and Forest Law prohibits mineral prospecting,
exploration and mining in water basins and forestry areas in Mongolia.
During meetings with representatives of the Mongolian Government, Centerra was
advised that the Mongolian Government has developed a list of deposits, which
includes Gatsuurt, which was submitted to the Mongolian Parliament for
consideration as "strategic deposits". Centerra expects that Parliament and/or
any relevant committees of Parliament will consider this matter further in the
second half of 2014. If the Mongolian Parliament ultimately approves this
designation, it would have the effect of excluding the Gatsuurt deposit from the
application of the Mongolian Water and Forest Law and would allow the Government
of Mongolia to acquire up to a 34% interest in Gatsuurt. The terms of any such
participation would be subject to negotiations with the Mongolian Government.
There can be no assurance, however, that the Water and Forest Law will not have
a material impact on Centerra's Mongolian operations. Unless the Water and
Forest Law is repealed or amended such that the law no longer applies to the
Gatsuurt project or Gatsuurt is designated by the Parliament of Mongolia as a
"mineral deposit of strategic importance" that is exempt from the Water and
Forest Law, mineral reserves at Gatsuurt may have to be reclassified as mineral
resources and the Company may be required to write-off approximately $38.1
million related to the investment in Gatsuurt and approximately $38.7 million of
costs that remain capitalized for the Boroo mill facility and other surface
structures. These amounts represent the capitalized costs at June 30, 2014
associated with its investment in Gatsuurt and Boroo (where Gatsuurt ore is
planned to be milled).
Corporate
Enforcement Notice by Sistem
In March 2011, a Turkish company, Sistem Muhenkislik Insaat Sanayi Ticaret SA
("Sistem") initiated a claim in an Ontario court which alleged that the shares
in Centerra owned by Kyrgyzaltyn are, in fact, legally and beneficially owned by
the Kyrgyz Republic. On April 15, 2014, the Ontario Superior Court of Justice
found in favour of Sistem, ruling that the shares of Centerra owned by
Kyrgyzaltyn could be seized to satisfy an arbitration award against the Kyrgyz
Republic. We understand that Kyrgyzaltyn has appealed this ruling and a hearing
in this matter has been set for October 2014.
Pursuant to a separate court order issued by the Ontario Superior Court of
Justice (as amended from time to time, and most recently amended on June 5,
2013) (the "Court Order"), Centerra is holding in trust (for the credit of the
Sistem court proceedings) dividends otherwise payable to Kyrgyzaltyn. Effective
as of June 6, 2013, when a dividend was paid by Centerra, the maximum amount to
be held in trust, as set out in the Court Order (Cdn$11.3 million), has been
reached. As of June 30, 2014, Centerra holds in trust, for the benefit of the
Sistem court proceeding, approximately Cdn$11.4 million, including interest
earned.
2014 Outlook
Kumtor's forecast for 2014 production and costs discussed in this news release
are provided on a 100% basis and the forecast does not make any assumptions
regarding possible changes in the structure and management of the Kumtor
Project, including the level of ownership resulting from ongoing discussions
with the Government of the Kyrgyz Republic and Kyrgyzaltyn JSC, Centerra's
largest shareholder. See "Material Assumption and Risks" for other material
assumptions or factors used to forecast production and costs for 2014.
Centerra's 2014 guidance for production, unit costs, capital spending and
expenditures for exploration, corporate administration, community costs and DD&A
are unchanged from the previous guidance disclosed in the Company's news release
of January 13, 2014, as updated on May 6, 2014.
----------------------------------------------------------------------------
2014 Production 2014 Adjusted 2014
Forecast Operating Costs(1) All-in Costs(1)
(ounces of gold) ($ per ounce sold) ($ per ounce sold)
----------------------------------------------------------------------------
Kumtor 550,000 - 600,000 $373 - $407 $833 - $909
----------------------------------------------------------------------------
Boroo Approx. 45,000 $1,280 $1,308
----------------------------------------------------------------------------
Consolidated 595,000 - 645,000 $434 - $471 $971 - $1,053
----------------------------------------------------------------------------
Gold Production
Centerra's 2014 consolidated gold production is expected to be 595,000 to
645,000 ounces. Over 50% of gold production at Kumtor is expected during the
fourth quarter when mining will reach the high-grade section of the SB Zone.
Based on progress to date, Kumtor's mining fleet is expected to obtain access to
high-grade ore from cut-back 16 at the end of the third quarter of 2014.
The 2014 forecast assumes no mining activities at Boroo or Gatsuurt, and no gold
production from Gatsuurt.
All-in Unit Costs
Centerra's 2014 all-in sustaining costs per ounce sold(5), which excludes
revenue-based tax in the Kyrgyz Republic, and all-in costs per ounce sold(1),
which excludes revenue-based tax in the Kyrgyz Republic and income taxes remain
unchanged from the previous guidance and are forecast as follows:
----------------------------------------------------------------------------
Kumtor Boroo(4) Consolidated
----------------------------------------------------------------------------
Ounces sold forecast 550,000-600,000 Approximately 45,000 595,000-645,000
----------------------------------------------------------------------------
US $ / gold ounces sold
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating Costs (on a
sales basis) $329 - 360 $1,137 $386 - 418
----------------------------------------------------------------------------
Regional office
administration 32 - 35 131 36 - 41
----------------------------------------------------------------------------
Community costs related
to current operations 13 13 13
----------------------------------------------------------------------------
Refining costs and by-
product credits (1) (1) (1)
----------------------------------------------------------------------------
Sub-Total (Adjusted
Operating Costs)(1) $373 - 407 $1,280 $434 - 471
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Corporate general &
administrative costs - - 57- 62
----------------------------------------------------------------------------
Accretion expense 1 11 3
----------------------------------------------------------------------------
Capitalized stripping
costs - cash 319 - 348 - 296 - 321
----------------------------------------------------------------------------
Capital expenditures
(sustaining) (1) 69 - 76 17 67 - 72
----------------------------------------------------------------------------
All-in Sustaining Costs
(1) $762 - 832 $1,308 $857 - 929
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Capital expenditures
(growth) (1) 71 - 77 - 66 - 72
----------------------------------------------------------------------------
Other costs (2) - - 48 - 52
----------------------------------------------------------------------------
All-in Costs (1) $833 - 909 $1,308 $971 -1,053
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Revenue-based tax and
income taxes (3) $175 - 191 - $163 - 176
----------------------------------------------------------------------------
All-in Costs (including
taxes) (1) $1,008 -1,100 $1,308 $1,134 -1,229
----------------------------------------------------------------------------
(1) Adjusted operating costs per ounce sold, all-in sustaining costs per
ounce sold, all-in costs per ounce sold, all-in costs (including taxes)
per ounce sold, as well as capital expenditures (sustaining and growth)
are non-GAAP measures and are discussed under "Non-GAAP Measures".
(2) Other costs per ounce sold include global exploration expenses,
business development expenses and project development costs not related
to current operations.
(3) Includes revenue-based tax that reflects a forecast gold price
assumption of $1,250 per ounce sold for the second half of 2014.
(4) The Boroo operation is nearing the end of its mine life. All forecast
production and sales are a result of drawing down the existing
stockpiles and assume no mining activities.
Oksut Project
The Company completed a preliminary economic assessment in the first quarter of
2014 and has commenced a feasibility study for its Oksut property. The total
planned spending in 2014 of approximately $10 million remains unchanged from
previous guidance and includes work for technical studies, environmental and
social impact assessment and project support (collectively, $6.4 million) and
$3.5 million for exploration activities.
Royalties
Since January 2014, Boroo has been paying a royalty rate of 2.5% for gold sold
to the Bank of Mongolia (reduced from 9% using current gold prices for gold not
sold to the Bank of Mongolia).
Sensitivities
Centerra's revenues, earnings and cash flows for the remaining six months of
2014 are sensitive to changes in certain variables. The Company has estimated
the impact of any such changes on revenues, net earnings and cash from
operations.
----------------------------------------------------------------------------
Impact on
($ millions)
----------------------------------
Earnings
Cash before
Change Costs Revenues flow income tax
----------------------------------------------------------------------------
Gold Price $50/oz 3.1 21.8 18.7 18.7
----------------------------------------------------------------------------
Diesel Fuel (1) 10% 5.3 - 5.3 5.3
----------------------------------------------------------------------------
Kyrgyz som (2) 1 som 0.9 - 0.9 0.9
----------------------------------------------------------------------------
Mongolian tugrik (2) 25 tugrik 0.2 - 0.2 0.2
----------------------------------------------------------------------------
Canadian dollar (2) 10 cents 1.5 - 1.5 1.5
----------------------------------------------------------------------------
(1) a 10% change in diesel fuel price equals $12/oz produced
(2) appreciation of currency against the US dollar will result in higher
costs and lower cash flow and earnings, depreciation of currency
against the US dollar results in decreased costs and increased cash
flow and earnings
Material Assumptions and Risks:
Material assumptions or factors used to forecast production and costs for the
remaining six month of 2014 include the following:
-- a gold price of $1,250 per ounce,
-- exchange rates:
-- $1USD:$1.09 CAD
-- $1USD:51.0 Kyrgyz som
-- $1USD:1,800 Mongolian tugriks
-- $1USD:0.75 Euro
-- diesel fuel price assumption:
-- $0.78/litre at Kumtor
-- $1.09/litre at Boroo
The assumed diesel price of $0.78/litre at Kumtor assumes that no Russian export
duty will be paid on the fuel exports from Russia to the Kyrgyz Republic. Diesel
fuel is sourced from separate Russian suppliers for both sites and only loosely
correlates with world oil prices. The diesel fuel price assumptions were made
when the price of oil was approximately $109 per barrel.
Other material assumptions were used in forecasting production and costs for
2014. These material assumptions include the following:
-- That current discussions between the Government of the Kyrgyz Republic
and Centerra regarding a potential restructuring of the Kumtor Project
will result in a mutually satisfactory solution to the outstanding
matters affecting the Kumtor Project, which is fair to all of Centerra's
shareholders, and that such proposal will receive all necessary legal
and regulatory approvals under Kyrgyz law and/or Canadian law.
-- All mine plans and related permits and authorizations at Kumtor receive
timely approval from all relevant governmental agencies.
-- The buttress constructed at the bottom of the Davidov glacier
successfully stops or slows the movement of the Davidov glacier.
-- The proposed Glacier Law will not affect mining or other operations at
the Kumtor Project.
-- Any recurrence of political or civil unrest in the Kyrgyz Republic will
not impact operations, including movement of people, supplies and gold
shipments to and from the Kumtor mine and/or power to the mine site.
-- The activities of the Kyrgyz Republic Parliament and Government,
referred to in the 2013 Annual Information Form do not have a material
impact on operations or financial results. This includes any action
being taken by the Parliament or Government to cancel the current
project agreements governing the Kumtor Project, or taking any actions
which would be inconsistent with the rights of Centerra, Kumtor Gold
Company and Kumtor Operating Company under the project agreements
governing the Kumtor Project.
-- The previously disclosed environmental claims received from the Kyrgyz
regulatory authorities in the aggregate amount of approximately $476
million and the claims of the Kyrgyz Republic's General Prosecutor's
Office purporting to invalidate land use rights and/or seize land at
Kumtor and to unwind the $200 million inter-company dividend declared
and paid by KGC to Centerra in December 2013, and any further claims,
whether alleging environmental allegations or otherwise, are resolved
without material impact on Centerra's operations or financial results.
-- The movement in the Central Valley Waste Dump at Kumtor, referred to in
the 2013 Annual Information Form, does not accelerate and will be
managed to ensure continued safe operations, without impact to gold
production, including the successful demolition of buildings and
relocation of certain other infrastructure as planned.
-- Grades and recoveries at Kumtor will remain consistent with the 2014
production plan to achieve the forecast gold production.
-- The Company is able to manage the risks associated with the increased
height of the pit walls at Kumtor.
-- The dewatering program at Kumtor continues to produce the expected
results and the water management system works as planned.
-- The Kumtor ball mill and the rotated ring gear or replacement ring gear
continue to operate as expected.
-- The successful negotiation of new collective agreement at Kumtor which
expires on December 31, 2014, without any labour actions/strikes and
without significantly increasing labour costs.
-- Prices of key consumables, costs of power and water usage fees are not
significantly higher than prices assumed in planning.
-- No unplanned delays in or interruption of scheduled production from our
mines, including due to civil unrest, natural phenomena, regulatory or
political disputes, equipment breakdown or other developmental and
operational risks.
-- All necessary permits, licenses and approvals are received in a timely
manner.
The Company cannot give any assurances in this regard.
Centerra Gold Inc.
Condensed Consolidated Statements of Financial Position
(Unaudited)
June 30, December 31,
2014 2013
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(Expressed in Thousands of United States
Dollars)
Assets
Current assets
Cash and cash equivalents $ 312,745 $ 343,108
Short-term investments 179,492 158,358
Amounts receivable 19,562 78,707
Inventories 248,308 373,289
Prepaid expenses 11,548 29,191
----------------------------
771,655 982,653
Property, plant and equipment 686,140 539,070
Goodwill 129,705 129,705
Restricted cash 10,734 10,731
Other assets 28,233 20,276
Long-term inventories 2,240 5,229
----------------------------
857,052 705,011
----------------------------
Total assets $ 1,628,707 $ 1,687,664
----------------------------
----------------------------
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable and accrued liabilities $ 38,025 $ 32,109
Short-term debt 75,964 75,582
Revenue-based taxes payable 9,489 30,742
Taxes payable 653 2,108
Current portion of provision for reclamation 1,919 1,194
----------------------------
126,050 141,735
Dividend payable 10,588 10,636
Provision for reclamation 59,711 58,826
Deferred income tax liability 3,435 2,157
----------------------------
73,734 71,619
----------------------------
Total liabilities 199,784 213,354
----------------------------
----------------------------
Shareholders' equity
Share capital 660,517 660,486
Contributed surplus 21,347 20,087
Retained earnings 747,059 793,737
----------------------------
1,428,923 1,474,310
----------------------------
Total liabilities and shareholders' equity $ 1,628,707 $ 1,687,664
----------------------------
----------------------------
Centerra Gold Inc.
Condensed Consolidated Statements of (Loss) Earnings and Comprehensive
(Loss) Income
(Unaudited) Three months ended Six months ended
June 30, June 30,
2014 2013 2014 2013
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(Expressed in Thousands of
United States Dollars)
(except per share amounts)
Revenue from gold sales $ 119,473 $ 128,229 $ 267,494 $ 320,480
Cost of sales 109,355 84,626 218,469 175,775
Mine standby costs 184 - 184 -
Regional office
administration 6,106 5,869 11,795 11,490
----------------------------------------------------------------------------
Earnings from mine operations 3,828 37,734 37,046 133,215
Revenue-based taxes 13,970 13,510 32,402 34,328
Other operating expenses 3,044 2,150 4,939 4,096
Exploration and business
development 4,034 6,259 6,606 13,429
Corporate administration 11,818 7,203 18,341 13,946
----------------------------------------------------------------------------
(Loss) earnings from
operations (29,038) 8,612 (25,242) 67,416
Other expenses 687 2,841 477 4,121
Finance costs 1,243 1,245 2,636 2,501
----------------------------------------------------------------------------
(Loss) earnings before income
taxes (30,968) 4,526 (28,355) 60,794
Income tax expense 725 2,974 1,277 7,890
----------------------------------------------------------------------------
Net (loss) earnings and
comprehensive (loss) income $ (31,693) $ 1,552 $ (29,632) $ 52,904
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Basic (loss) earnings per
common share $ (0.13) $ 0.01 $ (0.13) $ 0.22
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Diluted (loss) earnings per
common share $ (0.13) $ 0.01 $ (0.13) $ 0.22
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Centerra Gold Inc.
Condensed Consolidated
Statements of Cash Flows Three months ended Six months ended
(Unaudited) June 30, June 30,
2014 2013 2014 2013
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(Expressed in Thousands of
United States Dollars)
Operating activities
Net (loss) earnings $ (31,693) $ 1,552 $ (29,632) $ 52,904
Items not requiring
(providing) cash:
Depreciation, depletion and
amortization 60,943 31,714 127,714 75,614
Finance costs 1,243 1,245 2,636 2,501
Loss on disposal of equipment 446 2,143 542 2,152
Compensation expense on stock
options 650 812 1,260 1,563
Income tax expense 725 2,974 1,277 7,890
Other operating items (1,489) 20 (590) (172)
--------------------------------------------
30,825 40,460 103,207 142,452
Change in operating working
capital 36,518 724 58,833 (6,495)
Change in long-term inventory 1,910 3,480 2,989 4,432
Change in provision - (82) - (149)
Prepaid revenue-based taxes
utilized 2,578 1,077 9,845 3,845
Income taxes paid (435) (4,760) (1,512) (11,239)
--------------------------------------------
Cash provided by operations 71,396 40,899 173,362 132,846
--------------------------------------------
Investing activities
Additions to property, plant
and equipment (83,331) (86,246) (156,057) (159,919)
Net redemption (purchase) of
short-term investments 123,009 108,330 (21,134) 39,987
Purchase of interest in Oksut
Gold Project- net of cash
acquired - - - (19,742)
Increase in restricted cash (25) (2,084) (51) (4,840)
Decrease (increase) in long-
term other assets 594 (117) (7,957) (334)
Proceeds from disposition of
equipment - - 3 27
--------------------------------------------
Cash (used in) provided by
investing 40,247 19,883 (185,196) (144,821)
--------------------------------------------
Financing activities
Dividends paid (8,642) (6,747) (17,046) (13,096)
Payment of interest and other
borrowing costs - - (1,483) (1,408)
--------------------------------------------
Cash used in financing (8,642) (6,747) (18,529) (14,504)
--------------------------------------------
(Decrease) increase in cash
during the period 103,001 54,035 (30,363) (26,479)
Cash and cash equivalents at
beginning of the period 209,744 253,601 343,108 334,115
--------------------------------------------
Cash and cash equivalents at end
of the period $ 312,745 $ 307,636 $ 312,745 $ 307,636
--------------------------------------------
--------------------------------------------
Cash and cash equivalents
consist of:
Cash $ 77,949 $ 56,665 $ 77,949 $ 56,665
Cash equivalents 234,796 250,971 234,796 250,971
--------------------------------------------
$ 312,745 $ 307,636 $ 312,745 $ 307,636
--------------------------------------------
--------------------------------------------
Centerra Gold Inc.
Condensed Consolidated Statements of Shareholders' Equity
(Unaudited)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(Expressed in Thousands of United States Dollars, except share information)
Number of Share
Common Capital Contributed Retained
Shares Amount Surplus Earnings Total
----------------------------------------------------------------------------
Balance at January
1, 2013 236,376,011 $660,420 $ 36,243 $ 672,430 $ 1,369,093
----------------------------------------------------------------------------
Share-based
compensation
expense - - 1,563 - 1,563
Adjustment for
acquisition of
30% non-
controlling
interest - - (18,986) - (18,986)
Shares issued on
redemption of
restricted share
units 8,441 29 - - 29
Dividend declared - - - (18,380) (18,380)
Net earnings for
the period - - - 52,904 52,904
----------------------------------------------------------------------------
Balance at June
30, 2013 236,384,452 $660,449 $ 18,820 $ 706,954 $ 1,386,223
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Balance at January
1, 2014 236,390,219 $660,486 $ 20,087 $ 793,737 $ 1,474,310
----------------------------------------------------------------------------
Share-based
compensation
expense - - 1,260 - 1,260
Shares issued on
redemption of
restricted share
units 6,602 31 - - 31
Dividend declared - - - (17,046) (17,046)
Net loss for the
period - - - (29,632) (29,632)
----------------------------------------------------------------------------
Balance at June
30, 2014 236,396,821 $660,517 $ 21,347 $ 747,059 $ 1,428,923
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Non-GAAP Measures
This news release contains the following non-GAAP financial measures: all-in
sustaining costs, all-in costs, all-in costs including taxes, and adjusted
operating costs in dollars (millions) and per ounce sold, as well as cost of
sales per ounce sold, capital expenditures (sustaining), capital expenditures
(growth) and average realized gold price. These financial measures do not have
any standardized meaning prescribed by GAAP and are therefore unlikely to be
comparable to similar measures presented by other issuers, even as compared to
other issuers who may also be applying the World Gold Council (WGC) guidelines,
which can be found at www.gold.org.
Management believes that the use of these non-GAAP measures will assist
analysts, investors and other stakeholders of the Company in understanding the
costs associated with producing gold, understanding the economics of gold
mining, assessing our operating performance, our ability to generate free cash
flow from current operations and to generate free cash flow on an overall
Company basis, and for planning and forecasting of future periods. However, the
measures do have limitations as analytical tools as they may be influenced by
the point in the life cycle of a specific mine, and the level of additional
exploration or expenditures a company has to make to fully develop its
properties. Accordingly, these non-GAAP measures should not be considered in
isolation, or as a substitute for, analysis of our results as reported under
GAAP.
Definitions
The following is a description of the non-GAAP measures used in this news
release. The definitions are consistent with the WGC's Guidance Note on these
non-GAAP measures:
-- Operating costs (on a sales basis) include mine operating costs such as
mining, processing, site support, royalties and operating taxes (except
at Kumtor where revenue-based taxes are excluded), but exclude
depreciation, depletion and amortization (DD&A), reclamation costs,
financing costs, capital development and exploration.
-- Adjusted operating costs per ounce sold include operating costs (on a
sales basis), regional office administration, community costs related to
current operations, refining fees and by-product credits.
-- All-in sustaining costs per ounce sold include adjusted operating costs,
the cash component of capitalized stripping costs, regional office
administration costs, accretion expenses, and sustaining capital. The
measure incorporates costs related to sustaining production.
-- All-in costs per ounce sold include all-in sustaining costs and
additional costs for growth capital, corporate general and
administrative expenses, global exploration expenses and social
development costs not related to current operations.
-- All-in cost per ounce sold exclude the following:
-- Working capital (except for adjustments to inventory on a sales
basis).
-- All financing charges (including capitalized interest).
-- Costs related to business combinations, asset acquisitions and asset
disposals.
-- Other non-operating income and expenses, including interest income,
bank charges, and foreign exchange gains and losses.
-- All-in costs including taxes per ounce sold measure includes revenue-
based taxes at Kumtor and income taxes at Boroo.
-- Capital expenditures (Sustaining) is a capital expenditure necessary to
maintain existing levels of production. The sustaining capital
expenditures maintain the existing mine fleet, mill and other facilities
so that they function at levels consistent from year to year.
-- Capital expenditures (Growth) is capital expended to expand the business
or operations by increasing productive capacity beyond current levels of
performance.
-- Average realized gold price is calculated by dividing revenue derived
from gold sales by the number of ounces sold.
Adjusted Operating Cost, All-in Sustaining Costs and All-in Costs (including and
excluding taxes) are non-GAAP measures and can be reconciled as follows:
1) By operation
----------------------------------------------------------------------------
Three months ended Six months ended
(unaudited) June 30,(1) June 30,(1)
($ millions, unless otherwise
specified) 2014 2013 2014 2013
----------------------------------------
Kumtor:
Cost of sales, as reported $ 92.9 $ 65.7 $ 188.0 $ 132.0
Less: Non-cash component 56.9 25.2 120.5 59.3
----------------------------------------
Cost of sales, cash component $ 36.0 $ 40.5 $ 67.6 $ 72.7
Adjust for:
Regional office administration 5.0 4.4 9.4 8.5
Refining fees 0.5 0.4 1.0 0.9
By-product credits (0.4) (0.6) (1.0) (1.2)
Community costs related to current
operations 1.8 1.6 2.6 2.0
----------------------------------------
Adjusted Operating Costs $ 42.8 $ 46.4 $ 79.6 $ 82.9
Accretion expense 0.3 0.2 0.6 0.3
Capitalized stripping 61.5 56.6 123.9 110.0
Capital expenditures (sustaining) 12.9 15.0 21.2 26.8
----------------------------------------
All-in Sustaining Costs $ 117.5 $ 118.2 $ 225.3 $ 220.0
Capital expenditures (growth) 11.4 9.3 13.3 25.4
Exploration expense - 2.0 (0.1) 4.4
Other project costs not related to
current operations - - - 1.4
----------------------------------------
All-in Costs $ 128.9 $ 129.5 $ 238.6 $ 251.3
Revenue-based taxes 14.0 13.5 32.4 34.3
----------------------------------------
All-in Costs (including taxes) $ 142.9 $ 143.0 $ 271.0 $ 285.6
----------------------------------------
----------------------------------------
Ounces sold (000s) 77.7 70.3 179.7 161.9
Adjusted Operating Costs per ounce
sold $ 551 $ 660 $ 443 $ 512
All-in Sustaining Costs per ounce
sold $ 1,511 $ 1,681 $ 1,254 $ 1,359
All-in Costs per ounce sold $ 1,658 $ 1,842 $ 1,328 $ 1,552
All-in Costs (including taxes) per
ounce sold $ 1,838 $ 2,034 $ 1,508 $ 1,764
Boroo:
Cost of sales, as reported $ 16.5 $ 18.9 $ 30.5 $ 43.8
Less: Non-cash component 4.0 6.4 7.1 16.1
----------------------------------------
Cost of sales, cash component $ 12.5 $ 12.5 $ 23.4 $ 27.7
Adjust for:
Regional office administration 1.1 1.5 2.4 3.0
Mine stand-by costs 0.2 - 0.2 -
Refining fees - 0.1 0.1 0.2
By-product credits - (0.2) (0.1) (0.3)
Community costs related to current
operations (0.1) 0.5 0.1 0.5
----------------------------------------
Adjusted Operating Costs $ 13.7 $ 14.3 $ 26.0 $ 31.1
Accretion expense 0.1 0.1 0.2 0.2
Capitalized stripping - - - -
Capital expenditures (sustaining) 0.1 3.4 0.3 4.6
----------------------------------------
All-in Sustaining Costs $ 14.0 $ 17.8 $ 26.6 $ 35.8
Capital expenditures (growth) - - - -
Exploration expense - - - -
Other project costs not related to
current operations - - - -
----------------------------------------
All-in Costs $ 14.0 $ 17.8 $ 26.6 $ 35.8
Income taxes - 3.7 - 8.8
----------------------------------------
All-in Costs (including taxes) $ 14.0 $ 21.4 $ 26.6 $ 44.6
----------------------------------------
----------------------------------------
Ounces sold (000s) 15.3 22.9 27.8 50.0
Adjusted Operating Costs per ounce
sold $ 901 $ 627 $ 935 $ 622
All-in Sustaining Costs per ounce
sold $ 915 $ 777 $ 954 $ 716
All-in Costs per ounce sold $ 915 $ 777 $ 954 $ 716
All-in Costs (including taxes) per
ounce sold $ 915 $ 938 $ 954 $ 892
----------------------------------------------------------------------------
(1) Results may not add due to rounding.
2) Consolidated
----------------------------------------------------------------------------
Three months ended Six months ended
(unaudited) June 30,(1) June 30,(1)
($ millions, unless otherwise
specified) 2014 2013 2014 2013
----------------------------------------
Centerra:
Cost of sales, as reported $ 109.4 $ 84.6 $ 218.5 $ 175.8
Less: Non-cash component 60.9 31.6 127.6 75.4
----------------------------------------
Cost of sales, cash component $ 48.5 $ 53.0 $ 90.9 $ 100.3
Adjust for:
Regional office administration 6.1 5.9 11.8 11.5
Mine stand-by costs 0.2 - 0.2 -
Refining fees 0.5 0.5 1.1 1.1
By-product credits (0.4) (0.7) (1.1) (1.5)
Community costs related to current
operations 1.7 2.1 2.7 2.5
----------------------------------------
Adjusted Operating Costs $ 56.6 $ 60.7 $ 105.6 $ 114.0
Corporate General Administrative
costs 11.7 7.1 18.2 13.8
Accretion expense 0.4 0.2 0.8 0.5
Capitalized stripping and ice
unload 61.5 56.6 123.9 110.0
Capital expenditures (sustaining) 13.0 18.5 21.6 31.8
----------------------------------------
All-in Sustaining Costs $ 143.3 $ 143.2 $ 270.2 $ 270.0
Capital expenditures (growth) 11.6 9.6 13.8 25.8
Exploration and Business
Development 4.1 6.3 6.6 13.4
Other project costs not related to
current operations 1.3 0.1 2.2 1.6
----------------------------------------
All-in Costs $ 160.2 $ 159.1 $ 292.8 $ 310.9
Revenue-based taxes and income
taxes 14.0 17.2 32.4 43.1
----------------------------------------
All-in Costs (including taxes) $ 174.2 $ 176.3 $ 325.2 $ 354.0
----------------------------------------
----------------------------------------
Ounces sold (000s) 93.0 93.2 207.5 211.9
Adjusted Operating Costs per ounce
sold $ 608 $ 652 $ 509 $ 538
All-in Sustaining Costs per ounce
sold $ 1,540 $ 1,537 $ 1,302 $ 1,274
All-in Costs per ounce sold $ 1,722 $ 1,708 $ 1,411 $ 1,467
All-in Costs (including taxes) per
ounce sold $ 1,873 $ 1,892 $ 1,567 $ 1,671
----------------------------------------------------------------------------
(1) Results may not add due to rounding.
Sustaining capital, growth capital and capitalized stripping presented in the
All-in measures can be reconciled as follows:
----------------------------------------------------------------------------
Second quarter Kumtor Boroo All other Consolidated
----------------------------------------------------------------------------
($ millions) (Unaudited)
2014
----------------------------------------------------------------------------
Capitalized stripping - cash 61.5 - - 61.5
----------------------------------------------------------------------------
Sustaining capital - cash 12.9 0.1 - 13.0
----------------------------------------------------------------------------
Growth capital - cash 11.4 - 0.2 11.6
----------------------------------------------------------------------------
Net increase in accruals
included in additions to PP&E (2.8) - - (2.8)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total - Additions to PP&E 83.0 0.1 0.2 83.3 (1)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
2013
----------------------------------------------------------------------------
Capitalized stripping - cash 56.6 - - 56.6
----------------------------------------------------------------------------
Sustaining capital - cash 15.0 3.4 0.1 18.5
----------------------------------------------------------------------------
Growth capital - cash 9.3 - 0.3 9.6
----------------------------------------------------------------------------
Net decrease in accruals
included in additions to PP&E 1.6 - - 1.6
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total - Additions to PP&E 82.5 3.4 0.4 86.3 (1)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
First Half Kumtor Boroo All other Consolidated
----------------------------------------------------------------------------
($ millions) (Unaudited)
2014
----------------------------------------------------------------------------
Capitalized stripping -cash 123.9 - - 123.9
----------------------------------------------------------------------------
Sustaining capital - cash 21.2 0.3 0.1 21.6
----------------------------------------------------------------------------
Growth capital - cash 13.3 - 0.5 13.8
----------------------------------------------------------------------------
Net increase in accruals
included in additions to PP&E (3.2) - - (3.2)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total - Additions to PP&E 155.2 0.3 0.6 156.1 (1)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
2013
----------------------------------------------------------------------------
Capitalized stripping - cash 110.0 - - 110.0
----------------------------------------------------------------------------
Sustaining capital - cash 26.8 4.6 0.5 31.9
----------------------------------------------------------------------------
Growth capital - cash 25.4 - 0.3 25.7
----------------------------------------------------------------------------
Net increase in accruals
included in additions to PP&E (7.7) - - (7.7)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total - Additions to PP&E 154.5 4.6 0.8 159.9 (1)
----------------------------------------------------------------------------
(1) As reported in the Company's Consolidated Statement of Cash Flows as
"Investing Activities - Additions to property, plant & equipment".
Caution Regarding Forward-Looking Information
Information contained in this news release which are not statements of
historical facts, and the documents incorporated by reference herein, may be
"forward-looking information" for the purposes of Canadian securities laws. Such
forward-looking information involves risks, uncertainties and other factors that
could cause actual results, performance, prospects and opportunities to differ
materially from those expressed or implied by such forward looking information.
The words "believe", "expect", "anticipate", "contemplate", "target", "plan",
"intends", "continue", "budget", "estimate", "may", "will", "schedule" and
similar expressions identify forward-looking information. These forward-looking
statements relate to, among other things, general economic indicators affecting
the price of gold and gold production, interest rates, and exchange rates, the
Company's plans for future borrowing under its revolving credit facility the
successful resolution of outstanding matters in the Kyrgyz Republic to the
benefit of all shareholders including matters relating to the State Commission
report, government resolutions and decrees, discussions with the Kyrgyz
Government on the Kumtor Project Agreements and a possible restructuring of the
Kumtor Project into a joint venture pursuant to the terms of the HOA, the
resolution of environmental claims received by Kumtor from SIETS and SAEPF in
December 2012 and February 2013, the claims of the Kyrgyz General Prosecutor's
Office's purporting to invalidate Kumtor's land use certificate and to seize
certain lands within the Kumtor concession area and to unwind an inter-corporate
dividend declared and paid by KGC to Centerra, statements regarding the
Company's ability to successfully manage the movement of the Davidov Glacier and
the increased rate of movement of the Davidov Waste-rock Dump (Central Valley
Waste Dump), the construction of a buttress at the bottom of the Davidov Glacier
and the monitoring and effectiveness of the buttress, and the Company's ability
to successfully demolish certain buildings and relocate other infrastructure at
Kumtor, the Company's ability to mine high grade ore in the SB Zone at Kumtor,
statements regarding the Company's future production in 2014, including
estimates of cash operating costs, all-in sustaining costs per ounce sold(6),
all in costs per ounce sold(1), all in costs per ounce sold (including
taxes)(1), capital expenditures (sustaining) (1) and capital expenditures
(growth)(1), exploration and drilling plans and expenditures and the success
thereof, capital expenditures, mining plans at Kumtor; processing activities at
Boroo and royalties and taxes to be paid by Boroo; the outcome of discussions
with the Mongolian government on the potential development of the Company's
Gatsuurt deposit, the impact of the Water and Forest Law on the Company's
Mongolian activities; and the Company's ability to carry out a feasibility study
on the Oksut Project.
Forward-looking information is necessarily based upon a number of estimates and
assumptions that, while considered reasonable by Centerra, are inherently
subject to significant political, business, economic and competitive
uncertainties and contingencies. Known and unknown factors could cause actual
results to differ materially from those projected in the forward looking
information. Factors that could cause actual results or events to differ
materially from current expectations include, among other things: (A) political
and regulatory risks, including the political risks associated with the
Company's principal operations in the Kyrgyz Republic and Mongolia, resource
nationalism, the impact of changes in, or to the more aggressive enforcement of,
laws, regulations and government practices in the jurisdictions in which the
Company operates, the impact of any actions taken by the Government and
Parliament relating to the Kumtor Project Agreement, any impact on the purported
cancellation of Kumtor's land use rights at the Kumtor Project, the impact of
the failure of relevant Kyrgyz Government agencies to provide approvals of
annual mine plans and other required permits and authorizations, the effect of
the Water and Forest Law on the Company's operations in Mongolia, the impact of
continued scrutiny from Mongolian regulatory authorities on the Company's Boroo
Project, the impact of changes to, or the increased enforcement of,
environmental laws and regulations relating to the Company's operations, the
Company's ability to successfully negotiate an investment agreement for the
Gatsuurt project to complete the development of the mine and the Company's
ability to obtain all necessary permits and commissions needed to commence
mining activity at the Gatsuurt Project; the ability of the Company to obtain,
in a timely manner, all required permits and other authorizations to carry out
its feasibility and other studies at the Oksut Project and related drilling and
operational activities;
(B) risks related to operational matters and geotechnical issues, including the
movement of the Davidov Glacier and the Davidov Waste-rock Dump (Central Valley
Waste Dump), the waste and ice movement at the Kumtor Project and the Company's
continued ability to successfully manage such matters, including by the building
of a buttress at the bottom of the Davidov Glacier, the occurrence of further
ground movements at the Kumtor Project, the timing of the infrastructure move
potentially impacting the maintenance of the mobile fleet and its availability,
the success of the Company's future exploration and development activities,
including the financial and political risks inherent in carrying out exploration
activities, the adequacy of the Company's insurance to mitigate operational
risks, mechanical breakdowns, the Company's ability to obtain the necessary
permits and authorizations to (among other things) raise the tailings dam at the
Kumtor Project to the required height, the Company's ability to replace its
mineral reserves, the occurrence of any labour unrest or disturbance and the
ability of the Company to successfully re-negotiate collective agreements when
required, seismic activity in the vicinity of the Company's operations in the
Kyrgyz Republic and Mongolia, long lead times required for equipment and
supplies given the remote location of the Company's properties, reliance on a
limited number of suppliers for certain consumables, equipment and components,
illegal mining on the Company's Mongolian properties, the Company's ability to
accurately predict decommissioning and reclamation costs, the Company's ability
to attract and retain qualified personnel, competition for mineral acquisition
opportunities, and risks associated with the conduct of joint ventures;
(C) risks relating to financial matters including the sensitivity of the
Company's business to the volatility of gold prices, the imprecision of the
Company's mineral reserves and resources estimates and the assumptions they rely
on, the accuracy of the Company's production and cost estimates, the impact of
restrictive covenants in the Company's revolving credit facility which may,
among other things, restrict the Company from pursuing certain business
activities, the Company's ability to obtain future financing, the impact of
global financial conditions, the impact of currency fluctuations, the effect of
market conditions on the Company's short-term investments, the Company's ability
to make payments including any payments of principal and interest on the
Company's debt facilities depends on the cash flow of its subsidiaries; and (D)
risks related to environmental and safety matters, including the ability to
continue obtaining necessary operating and environmental permits, licenses and
approvals, the impact of the significant environmental claims made in December
2012 and February 2013 relating to the Kumtor Project, inherent risks associated
with using sodium cyanide in the mining operations; legal and other factors such
as litigation, defects in title in connection with the Company's properties, the
Company's ability to enforce its legal rights, risks associated with having a
significant shareholder, and possible director conflicts of interest. There may
be other factors that cause results, assumptions, performance, achievements,
prospects or opportunities in future periods not to be as anticipated, estimated
or intended. See "Risk Factors" in the Company's 2013 Annual Information Form
available on SEDAR at www.sedar.com.
Furthermore, market price fluctuations in gold, as well as increased capital or
production costs or reduced recovery rates may render ore reserves containing
lower grades of mineralization uneconomic and may ultimately result in a
restatement of reserves. The extent to which resources may ultimately be
reclassified as proven or probable reserves is dependent upon the demonstration
of their profitable recovery. Economic and technological factors which may
change over time always influence the evaluation of reserves or resources.
Centerra has not adjusted mineral resource figures in consideration of these
risks and, therefore, Centerra can give no assurances that any mineral resource
estimate will ultimately be reclassified as proven and probable reserves.
Mineral resources are not mineral reserves, and do not have demonstrated
economic viability, but do have reasonable prospects for economic extraction.
Measured and indicated resources are sufficiently well defined to allow
geological and grade continuity to be reasonably assumed and permit the
application of technical and economic parameters in assessing the economic
viability of the resource. Inferred resources are estimated on limited
information not sufficient to verify geological and grade continuity or to allow
technical and economic parameters to be applied. Inferred resources are too
speculative geologically to have economic considerations applied to them to
enable them to be categorized as mineral reserves. There is no certainty that
mineral resources of any category can be upgraded to mineral reserves through
continued exploration.
There can be no assurances that forward-looking information and statements will
prove to be accurate, as many factors and future events, both known and unknown
could cause actual results, performance or achievements to vary or differ
materially, from the results, performance or achievements that are or may be
expressed or implied by such forward-looking statements contained herein or
incorporated by reference. Accordingly, all such factors should be considered
carefully when making decisions with respect to Centerra, and prospective
investors should not place undue reliance on forward looking information.
Forward-looking information is as of July 29, 2014. Centerra assumes no
obligation to update or revise forward looking information to reflect changes in
assumptions, changes in circumstances or any other events affecting such
forward-looking information, except as required by applicable law.
About Centerra
Centerra Gold Inc. is a gold mining company focused on operating, developing,
exploring and acquiring gold properties primarily in Asia, the former Soviet
Union and other markets worldwide. Centerra is the largest Western-based gold
producer in Central Asia. Centerra's shares trade on the Toronto Stock Exchange
(TSX) under the symbol CG. The Company is based in Toronto, Ontario, Canada.
Additional information on Centerra is available on the Company's website at
www.centerragold.com and at SEDAR at www.sedar.com.
Conference Call
Centerra invites you to join its 2014 second quarter conference call on
Wednesday July 30, 2014 at 11:00AM Eastern Time. The call is open to all
investors and the media. To join the call, please dial toll-free in North
America (800) 269-0310 or International participants dial +1 (416) 981-9073.
Alternatively, an audio feed of the conference call is being webcast by Thomson
Reuters and can be accessed live on the Company's website at:
www.centerragold.com. An audio recording of the call will be available on
Centerra's website www.centerragold.com shortly after the call and via telephone
until midnight on Wednesday August 14, 2014 by calling (416) 626-4100 or (800)
558-5253 and using passcode 21720499.
Additional information on Centerra is available on the Company's web site at
www.centerragold.com and at SEDAR at www.sedar.com.
To view the Management's Discussion and Analysis and the Financial Statements
and Notes for the three and six month periods ended June 30, 2014, please visit
the following link: http://media3.marketwire.com/docs/cg0729fsmda.pdf.
(1) Non-GAAP measure, see discussion under "Non-GAAP Measures".
(2) Non-GAAP measure, see discussion under "Non-GAAP Measures".
(3) Non-GAAP measure, see discussion under "Non-GAAP Measures".
(4) Non-GAAP measure, see discussion under "Non-GAAP Measures".
(5) Non-GAAP measure, see discussion under "Non-GAAP Measures".
(6) Non-GAAP measure, see discussion under "Non-GAAP Measures".
FOR FURTHER INFORMATION PLEASE CONTACT:
Centerra Gold Inc.
John W. Pearson
Vice President, Investor Relations
(416) 204-1241
john.pearson@centerragold.com
www.centerragold.com
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