Centerra Gold Inc. (“Centerra” or the “Company”) (TSX: CG) today
reported fourth quarter and full-year 2019 results. Key events and
operating results of the fourth quarter and year included:
- Net loss for the quarter of $12.2 million,
$0.04 per common share (basic) and net loss for the year of $93.5
million, $0.32 per common share (basic).
- Adjusted net earningsNG for the quarter of
$22.3 million, $0.08 per common share (basic) and adjusted net
earningsNG for the year of $181.5 million, $0.62 per common share
(basic).
- Cash flow from operations for the quarter and
year was $92.5 million and $334.1 million, respectively. Adjusted
cash flow from operationsNG for the quarter and year was $92.5
million and $396.7 million, respectively.
- Gold Production for the quarter of 194,507
ounces and gold production for the year of 783,308 ounces, in
excess of the high end of our full-year guidance of 765,000
ounces.
- Copper production for the quarter of 18.1
million pounds and copper production for the year of 71.1 million
pounds, within our guidance range.
- Production costs per ounce of gold sold for
the quarter and year were $455 per ounce and $465 per ounce,
respectively.
- Production costs per pound of copper sold for
the quarter and year were $1.50 per pound and $1.46 per pound,
respectively.
- All-in sustaining costs per ounce soldNG for
the quarter was $799 per ounce and $708 per ounce for the year,
below the annual guidance range of $713 to $743 per ounce.
- Debt net of cash of $34.8 million at the end
of 2019, includes cash of $42.7 million. On January 30, 2020, the
Company cancelled the $150 million Öksüt Project finance facility
and repaid the $78 million drawn balance which resulted in the
release of $25 million in restricted cash.
- Proven and probable gold mineral reserves
total an estimated 11.1 million ounces of contained gold (442 Mt at
0.78 g/t gold) at year-end, reflecting 2019 mining depletion and
the impact of the updated Mount Milligan NI 43-101 technical
report.
- Proven and probable copper mineral reserves
total an estimated 1,589 million pounds of contained copper (298.4
Mt at 0.24% copper) at year-end, reflecting 2019 mining depletion
and the impact of the updated Mount Milligan NI 43-101 technical
report.
- In December 2019, the Kumtor Mine experienced a significant
waste rock movement at the Lysii waste rock dump resulting in two
employee fatalities.
Key events subsequent to
year-end:
- In January 2020, the Company received all the necessary
approvals and permits to recommence mining operations at the Kumtor
Mine.
- In January 2020, the Company announced that first gold pour was
achieved at the Öksüt Project. The Company completed first gold
pour on time and under budget.
- In February 2020, a Kumtor employee succumbed to a fatal injury
while operating an excavator near the edge of Petrov Lake.
- In March 2020, the Company filed an updated NI 43-101 technical
report for the Mount Milligan Mine with an effective date of
December 31, 2019.
- Dividend of CAD$0.04 per common share declared
in March 2020.
All references in this document denoted with NG,
indicate a non-GAAP term which is discussed under “Non-GAAP
Measures” and reconciled to the most directly comparable GAAP
measure.
Commentary
Scott Perry, President and Chief Executive
Officer of Centerra stated, “We are fully committed to
understanding the circumstances that led to the troubling safety
incidents at Kumtor in December 2019 and February 2020, so that we
can take all necessary steps to prevent such incidents from
happening in the future. We remain steadfast in our resolve to
ensure that everyone who works at our operations can do so safely
and will return home safely, each and every day. There is nothing
more important.”
“In 2019, due to the strong operating
performance at both operations, the Company exceeded its
consolidated gold production and cost guidance, delivering more
than 783,300 ounces of gold at an all-in sustaining costNG on a
by-product basis of $708 per ounce sold, which was lower than the
low-end of our all-in sustaining cost guidance. Kumtor had another
strong year exceeding its revised production guidance in delivering
600,201 ounces of gold production at an all-in-sustaining cost on a
by-product basis of $598 per ounce sold, which was lower than the
low-end of its all-in-sustaining cost guidance. In 2019, Mount
Milligan exceeded the upper end of its gold production guidance and
achieved the mid-point of its copper production guidance, producing
183,107 ounces of gold and 71.1 million pounds of copper.
All-in-sustaining cost on a by-product basis was above guidance at
$828 per ounce sold.”
“Financially, the Company generated a meaningful
$334.1 million of cash from operations for the year, Mount Milligan
generated $62.2 million and Kumtor generated $376.2 million. In
2019, Kumtor generated $240 million of free cash flowNG and Mount
Milligan generated $27 million which enabled the Company to
aggressively pay down its debt over the year by approximately $111
million ending the year with debt net of cash of $34.8 million
(excluding restricted cash).”
“Based on the Company’s financial position,
recent strong operating results and cash flows, the Board approved
on March 25, 2020 a dividend of Cdn$0.04 per share.”
“For 2020, we are estimating consolidated gold
production to be in the range of 740,000 to 820,000 ounces combined
with 80 million to 90 million pounds of payable copper production
from Mount Milligan. Centerra’s consolidated all-in sustaining cost
on a by-product basis per ounce soldNG for 2020 is expected to be
in the range of $820 to $870 per ounce.”
“Our projected capital expenditures for 2020,
excluding capitalized stripping, is estimated to be $169 million
which includes $109 million of sustaining capital and $60 million
of growth capital spending. Growth capital spending includes $29
million at the Öksüt Project in Turkey as we complete the
construction of the site, $13 million at the Kemess Underground
Project and $18 million at the Kumtor Mine. Total capitalized
stripping for 2020 is estimated to be $236 million, including $215
million at the Kumtor Mine and $21 million at the Öksüt Project,
with a total cash component of $193 million, including $173 million
at the Kumtor Mine and $20 million at the Öksüt Project.” See “2020
Outlook” for further details.
“At Kumtor over the past 18 months we have
invested significantly in exploration drilling and at year-end we
can see the results as Kumtor’s open pit measured and indicated
gold mineral resources increased by 3.3 million contained ounces to
6.3 million contained ounces and open pit inferred gold mineral
resources increased by 1.2 million contained ounces to 1.4 million
contained ounces. We are now in the process of updating Kumtor’s
life-of-mine plan and an updated technical report which we plan to
release in the second half of 2020.”
COVID-19 Update
Centerra continues to prioritize the health,
safety and well-being of its employees, contractors, communities
and other stakeholders, particularly during the current outbreak of
COVID-19. To date, the Company has experienced no operating or
production disruptions nor any supply chain interruptions or
impact.
However, the Company has decided to undertake a
significant reduction of manpower and operations at the Öksüt
Project on March 31, 2020 for an initial period of two weeks. This
decision was taken in response to recent Turkish government
initiatives aimed to reducing the spread of COVID-19. The reduction
will result in a suspension of open pit mining activities, though
limited crews will remain on site to place ore on the heap leach
pad, to operate the ADR plant and to perform essential site
services. Approximately 150,000 tonnes of crushed material is
available at site for stacking (such volume represents
approximately 15 days worth of stacking activity). Öksüt has
prepared detailed plans in case a further reduction or cessation of
operations becomes necessary or desirable.
Kumtor and Mount Milligan operations continue
for the time being and, in the case of Kumtor, with the support of
the Kyrgyz Republic Government. Each site has implemented a number
of proactive measures to prevent the spread of COVID-19 and ensure
the safety of its employees, contractors, communities and other
stakeholders. Both Kumtor and Mount Milligan have also made
detailed plans in case a reduction or cessation in operations
becomes necessary or desirable.
Scott Perry, President and Chief Executive
Officer, commented: “The safety of our employees remains our top
priority during the outbreak of COVID-19 and we are taking action
based on the best available information we have. We believe that
the temporary reduction of operations at Öksüt is the most prudent
course of action at this juncture. Kumtor and Mount Milligan remain
in operation for the time being, but we will not hesitate to reduce
or shut down operations at those sites if we believe it is required
to responsibly protect people.” To ensure appropriate social
distancing, the Company has temporarily closed its head office in
Toronto and regional offices in Bishkek, Kyrgyz Republic, Prince
George, British Columbia and Ankara, Turkey and has asked its
workforce to operate remotely.
To date, there are no confirmed cases of
COVID-19 in the Issyk-Kul district of the Kyrgyz Republic, nor the
Kayseri province of Turkey, where the Kumtor Mine and the Öksüt
Mine are located, respectively, and from where they source their
main workforce. To date, there has been a few reported cases in
Prince George area of British Columbia from which the Mount
Milligan Mine sources some of its workforce.
The Company is continuously monitoring
information published by the Public Health Agency of Canada, U.S.
Centers for Disease Control and Prevention (CDC), the World Health
Organization (WHO) and other guidance released from appropriate
government agencies.
Centerra has taken the following measures to
provide its employees with accurate information, help prevent
infection and reduce the potential transmission of COVID-19:
- Pandemic & Crisis Management: A global
crisis management team was activated in early March. The team,
comprised of executives and local site leaders, has been leading
Centerra’s global response and has implemented a corporate pandemic
response plan complemented by local site-specific crisis management
plans.
- Health and Mental Well-being Support: Centerra
continues to educate and raise awareness on COVID-19 facts and
preventative actions through frequent communication with employees
and is directing leaders to offer compassionate support for
employees who are concerned about their wellbeing and the wellbeing
of their families. Any employee who is feeling unwell or
experiencing flu-like symptoms has been advised to stay home. The
Company is conducting temperature checks using non-contact
thermometers and asking health questions of all individuals
entering any of its sites. A standard operating procedure has been
implemented in case there is a need for individual isolation and
subsequent transportation from site for any individual who exhibits
COVID-19 related symptoms.
- Workplace Hygiene: All sites have increased
daily cleaning of all common areas and spaces where there is
frequent employee contact, including shared objects and any
high-touch surfaces. Proper food hygiene and preparation practices
have been reinforced at the Company’s mine sites which have onsite
living quarters.
- Remote Working: As noted above, to promote
social distancing practices, corporate and regional offices have
been closed for the time being and flexible work arrangements have
been implemented globally. Site employees who can work at home have
been encouraged to do so. The Company has also moved to virtual
meetings across the organization where possible or limited
attendees at meetings while practicing prudent social
distancing.
- Travel and Site Visit Restrictions: The
Company has instituted a no-air travel policy. At the guidance of
public health authorities, individuals who have recently returned
from either business or non-business-related travel have entered a
14-day self-isolation period. In addition, a visitor ban has been
instituted at all sites, including our operating mines, development
projects and at our care and maintenance sites.
In addition to the above precautionary measures,
operating mine sites have been actively assessing the resiliency of
their supply chain, increasing mine site inventories of key
materials and developing contingency plans to allow for continued
operations.
The Company notes that the situation is fluid
and has been changing rapidly. The measures enacted reflect the
Company’s best assessment at this time but will remain flexible and
be revised as necessary or advisable and/ or as recommended by the
public health and governmental authorities.
About CenterraCenterra Gold
Inc. is a Canadian-based gold mining company focused on operating,
developing, exploring and acquiring gold properties in North
America, Asia and other markets worldwide and is the largest
Western-based gold producer in Central Asia. Centerra operates two
flagship assets, the Kumtor Mine in the Kyrgyz Republic, the Mount
Milligan Mine in British Columbia, Canada and now has a third
operating gold mine, the 100%-owned Öksüt Mine in Turkey, which
began production in January 2020. Centerra's shares trade on the
Toronto Stock Exchange (TSX) under the symbol CG. The Company is
based in Toronto, Ontario, Canada.
Conference CallCenterra invites
you to join its 2019 conference call on Thursday, March 26, 2020 at
10:00 AM Eastern Time. The call is open to all investors and the
media. To join the call, please dial toll-free in North America
1-800-952-1797. International participants may access the call at
+1 416-641-6701. Results summary slides are available on Centerra
Gold’s website at www.centerragold.com. Alternatively, an audio
feed webcast will be broadcast live by Nasdaq Corporate Solutions
and can be accessed live at Centerra Gold’s website at
www.centerragold.com. A recording of the call will be available
on www.centerragold.com shortly after the call and via
telephone until midnight Eastern Time on April 2, 2020 by calling
(416) 626-4100 or (800) 558-5253 and using passcode 21953022.
For more information:John W.
PearsonVice President, Investor RelationsCenterra Gold Inc.(416)
204-1953john.pearson@centerragold.com
Additional information on Centerra is
available on the Company’s web site at
www.centerragold.com and at SEDAR at www.sedar.com.
Attachment available at the following
link: http://ml.globenewswire.com/Resource/Download/14bffd24-2493-44c9-95c7-88a6ce2fc5f5
Management’s Discussion and
Analysis For the Period Ended December 31,
2019
This Management Discussion and Analysis
(“MD&A”) has been prepared as of March 25, 2020, and is
intended to provide a review of the financial position and results
of operations of Centerra Gold Inc. (“Centerra” or the “Company”)
for the three and twelve months ended December 31, 2019 in
comparison with the corresponding periods ended December 31, 2018.
This discussion should be read in conjunction with the Company’s
audited financial statements and the notes thereto for the year
ended December 31, 2019 prepared in accordance with International
Financial Reporting Standards (“IFRS”). The Company’s audited
financial statements and the notes thereto for year ended December
31, 2019, are available at www.centerragold.com and on the System
for Electronic Document Analysis and Retrieval (“SEDAR”) at
www.sedar.com. All references in this document denoted with NG,
indicate a non-GAAP term which is discussed under “Non-GAAP
Measures” and reconciled to the most directly comparable GAAP
measure. All dollar amounts are expressed in United States dollars
(“USD”), except as otherwise indicated.
Caution Regarding Forward-Looking
Information Information contained in this document
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”, “plan”,
“intends”, “continue”, “budget”, “estimate”, “may”, “will”,
“schedule”, “understand” and similar expressions identify
forward-looking information. These forward-looking statements
relate to, among other things: statements under the heading “2020
Outlook” including expected gold and copper production in 2020,
expectations regarding throughput rates per calendar day at the
Mount Milligan mill, plans for maintenance work at our mines which
will impact production, expectations for ramping up gold production
at the Öksüt Project, production costs and all-in sustaining costs,
capital spending and other expenditures expected for 2020, and
expectations about the molybdenum business unit in 2020; our
estimates for asset retirement obligations; the Company’s
expectations regarding having sufficient liquidity for 2020; the
Company’s expectations of extending the term of permits received
for pumping from a wellfield; expectations regarding having
sufficient water in the tailings storage facility for 2020; the
Company’s plans and timing for developing and submitting requests
to implement a long-term solution to the Mount Milligan water
sufficiency issues, including consultations with potentially
affected Indigenous groups and regulators; expectations regarding
the construction completion of the Öksüt Project and timing of ramp
up of operations; the expectations that the Kyrgyz Government will
continue to comply with the terms of the Strategic Agreement; the
outcome of the litigation involving the Company, the Greenstone
Managing Partner, Premier Gold and its nominees to the Greenstone
Managing Partner board of directors; the Company’s planned
exploration activities; the Company’s cash on hand, working
capital, future cash flows and existing credit facilities being
sufficient to fund anticipated operating cash requirements and
statements found under the heading “2020 Outlook”, including
forecast 2020 production figures and costs, capital spending
(growth and sustaining) and exploration expenditures and taxes;
expectations of not needing to slow production at Mount Milligan to
conserve water; and the Company will achieve Mount Milligan
production and costs estimates as detailed in the updated NI 43-101
technical report for Mount Milligan.
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. For a list of known risk factors, please see “Risks
That Can Affect our Business”.
Furthermore, market price fluctuations in gold
and copper, 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 March 25, 2020. 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.
TABLE OF CONTENTS
Overview |
9 |
Consolidated Financial and Operational
Highlights |
10 |
Overview of Consolidated Results |
11 |
2020 Outlook |
12 |
Risks That Can Affect Our Business |
18 |
Financial Performance |
20 |
Balance Sheet Review |
23 |
Market Conditions |
24 |
Financial Instruments |
27 |
Operating Mines and Facilities |
27 |
Construction and Development Projects |
43 |
Quarterly Results – Previous Eight
Quarters |
45 |
Related party transactions |
45 |
Contingencies |
47 |
Contractual Obligations |
52 |
Accounting Estimates, Policies and
Changes |
52 |
Disclosure Controls and Procedures and Internal Control
Over Financial Reporting |
53 |
Non-GAAP Measures |
53 |
Qualified Person & QA/QC – Production
Information |
58 |
Qualified Person & QA/QC – Mineral Reserves and
Mineral Resources |
58 |
Mineral Reserves and Mineral Resources |
59 |
Overview
Centerra is a Canadian-based gold mining company
focused on operating, developing, exploring and acquiring gold
properties worldwide and is one of the largest Western-based gold
producers in Central Asia. Centerra’s principal operations are the
Kumtor Gold Mine located in the Kyrgyz Republic, the Mount Milligan
Gold-Copper Mine located in British Columbia, Canada, and the Öksüt
Gold Mine in Turkey, which began production in January 2020. The
Company has two properties in Canada in the pre-development stage,
the Kemess Underground Gold Property and the Greenstone Gold
Project (50% ownership), owns exploration properties in Canada, the
United States of America and Turkey and has options to acquire
exploration joint venture properties in Canada, Finland, Mexico and
Turkey. The Company owns various assets included in its Molybdenum
Business Unit consisting of the Langeloth metallurgical processing
facility and two mines currently on care and maintenance, Thompson
Creek Mine in the United States of America, and the Endako Mine in
British Columbia, Canada (75% ownership).
As of December 31, 2019, Centerra’s significant
subsidiaries are as follows:
|
|
Current |
Property |
Entity |
Property - Location |
Status |
Ownership |
Kumtor Gold Company (“KGC”) |
Kumtor Mine - Kyrgyz Republic |
Operation |
100% |
Thompson Creek Metals Company Inc. |
Mount Milligan Mine - Canada |
Operation |
100% |
Öksüt Madencilik A.S. (“OMAS”) |
Öksüt Project - Turkey |
Development / Commissioning(1) |
100% |
Langeloth Metallurgical Company LLC |
Langeloth - United States |
Operation |
100% |
AuRico Metals Inc. |
Kemess Project - Canada |
Pre-development |
100% |
Greenstone Gold Mines LP |
Greenstone Gold Property - Canada |
Pre-development |
50% |
Thompson Creek Mining Co. |
Thompson Creek Mine - United States |
Care and Maintenance |
100% |
Thompson Creek Metals Company Inc. |
Endako Mine - Canada |
Care and Maintenance |
75% |
(1) Commenced production in January 2020 |
|
Centerra’s common shares are listed for trading
on the Toronto Stock Exchange under the symbol CG. As of March 25,
2020, there are 293,814,618 common shares issued and outstanding,
options to acquire 4,142,782 common shares outstanding under its
stock option plan and 1,029,201 units outstanding under its
restricted share unit plan (exercisable on a 1:1 basis for common
shares).
The Company reports the results of its
operations in U.S. dollars, however not all of its costs are
incurred in U.S. dollars. As such, the movement in exchange rates
between currencies in which the Company incurs costs and the U.S.
dollar also impact reported costs of the Company.
Consolidated Financial and Operational
Highlights
Unaudited ($ millions, except as noted) |
Three months ended December 31 |
Twelve months ended December 31 |
Financial Highlights |
|
2019 |
|
|
2018 |
% Change |
|
2019 |
|
|
2018 |
|
2017 |
% Change2019 vs 2018 |
Revenue |
$ |
312.5 |
|
$ |
391.5 |
(20%) |
$ |
1,375.3 |
|
$ |
1,129.3 |
|
1,199.0 |
22% |
Production costs |
|
149.4 |
|
|
172.5 |
(13%) |
|
676.6 |
|
|
578.2 |
|
505.3 |
17% |
Standby costs |
|
9.1 |
|
|
- |
100% |
|
9.1 |
|
|
10.8 |
|
- |
(16%) |
Depreciation, depletion and amortization |
|
59.3 |
|
|
63.7 |
(7%) |
|
239.5 |
|
|
196.9 |
|
195.0 |
22% |
Earnings from mine operations |
|
94.7 |
|
|
155.3 |
(39%) |
|
450.1 |
|
|
343.4 |
|
498.7 |
31% |
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) earnings |
$ |
(12.2 |
) |
$ |
49.0 |
(125%) |
$ |
(93.5 |
) |
$ |
107.5 |
|
209.5 |
(187%) |
Adjusting items |
|
|
|
|
|
|
|
|
|
|
|
- ARO revaluation at sites on Care and Maintenance |
|
34.5 |
|
|
41.8 |
(17%) |
|
34.5 |
|
|
40.4 |
|
- |
(15%) |
- Asset Impairment - Mount Milligan |
|
- |
|
|
- |
0% |
|
230.5 |
|
|
- |
|
- |
100% |
- Kyrgyz Republic settlement |
|
- |
|
|
- |
0% |
|
10.0 |
|
|
- |
|
60.0 |
100% |
- Gain on sale of ATO |
|
- |
|
|
- |
0% |
|
- |
|
|
(28.0 |
) |
- |
(100%) |
- Other adjusting items |
|
- |
|
|
- |
0% |
|
- |
|
|
(1.8 |
) |
11.5 |
(100%) |
Adjusted net earnings (3) |
$ |
22.3 |
|
$ |
90.8 |
(75%) |
$ |
181.5 |
|
$ |
118.1 |
|
281.0 |
54% |
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by operations |
|
92.5 |
|
|
151.6 |
(39%) |
|
334.1 |
|
|
217.5 |
|
500.9 |
54% |
Adjusted cash provided by operations(3) |
|
92.5 |
|
|
151.6 |
(39%) |
|
396.7 |
|
|
221.9 |
|
500.9 |
79% |
Free cash flow (deficit) (3) |
|
(0.4 |
) |
|
65.5 |
(101%) |
|
34.7 |
|
|
(68.4 |
) |
222.9 |
151% |
Adjusted free cash flow (deficit)(3) |
|
(0.4 |
) |
|
65.5 |
(101%) |
|
97.3 |
|
|
(64.0 |
) |
222.9 |
252% |
Capital expenditures - sustaining |
|
17.8 |
|
|
23.6 |
(24%) |
|
79.6 |
|
|
88.5 |
|
91.8 |
(10%) |
Capital expenditures - growth and development projects |
|
42.4 |
|
|
34.3 |
23% |
|
148.9 |
|
|
101.5 |
|
32.0 |
47% |
Capital expenditures - stripping |
|
35.1 |
|
|
36.0 |
(3%) |
|
97.2 |
|
|
138.8 |
|
200.2 |
(30%) |
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
$ |
2,701.7 |
|
$ |
2,826.7 |
(4%) |
$ |
2,701.7 |
|
$ |
2,826.7 |
|
2,772.2 |
(4%) |
Long-term debt and lease obligation |
|
88.3 |
|
|
183.5 |
(52%) |
|
88.3 |
|
|
183.5 |
|
211.6 |
(52%) |
Cash, cash equivalents and restricted cash |
|
70.7 |
|
|
179.2 |
(61%) |
|
70.7 |
|
|
179.2 |
|
416.6 |
(61%) |
|
|
|
|
|
|
|
|
|
|
|
|
Per Share Data |
|
|
|
|
|
|
|
|
|
|
|
(Loss) earnings per common share - $ basic (1) |
$ |
(0.04 |
) |
$ |
0.17 |
(124%) |
$ |
(0.32 |
) |
$ |
0.37 |
|
0.72 |
(186%) |
Adjusted net earnings per common share - $ basic (1)(3) |
$ |
0.08 |
|
$ |
0.31 |
(74%) |
$ |
0.62 |
|
$ |
0.40 |
|
0.96 |
55% |
|
|
|
|
|
|
|
|
|
|
|
|
Per Ounce Data (except as
noted) |
|
|
|
|
|
|
|
|
|
|
|
Average gold spot price ($/oz)(2) |
|
1,483 |
|
|
1,229 |
21% |
|
1,393 |
|
|
1,269 |
|
1,258 |
10% |
Average realized gold price ($/oz)(3)(4) |
|
1,403 |
|
|
1,158 |
21% |
|
1,309 |
|
|
1,175 |
|
1,171 |
11% |
Average copper spot price ($/lb)(2) |
|
2.68 |
|
|
2.79 |
(4%) |
|
2.73 |
|
|
2.96 |
|
2.61 |
(8%) |
Average realized copper price ($/lb)(3)(4) |
|
2.23 |
|
|
1.76 |
27% |
|
2.09 |
|
|
2.02 |
|
2.11 |
3% |
|
|
|
|
|
|
|
|
|
|
|
|
Operating Highlights |
|
|
|
|
|
|
|
|
|
|
|
Gold produced (oz's) |
|
194,507 |
|
|
288,367 |
(33%) |
|
783,308 |
|
|
729,556 |
|
785,316 |
7% |
Gold sold (oz's) |
|
169,892 |
|
|
269,754 |
(37%) |
|
780,654 |
|
|
709,330 |
|
792,466 |
10% |
Payable Copper Produced (000's lbs) |
|
18,079 |
|
|
11,796 |
53% |
|
71,146 |
|
|
47,091 |
|
53,596 |
51% |
Copper Sales (000's payable lbs) |
|
14,301 |
|
|
13,591 |
5% |
|
67,430 |
|
|
44,370 |
|
59,719 |
52% |
|
|
|
|
|
|
|
|
|
|
|
|
Unit Costs |
|
|
|
|
|
|
|
|
|
|
|
Production costs per ounce of gold sold
(4) |
$ |
455 |
|
$ |
375 |
21% |
$ |
465 |
|
$ |
464 |
|
360 |
0% |
Gold - All-in sustaining costs on a by-product basis ($/oz
sold)(3)(4) |
$ |
799 |
|
$ |
576 |
39% |
$ |
708 |
|
$ |
754 |
|
687 |
(6%) |
Gold - All-in sustaining costs on a by-product basis
(including taxes) ($/oz sold)(3) (4) |
$ |
969 |
|
$ |
709 |
37% |
$ |
862 |
|
$ |
889 |
|
815 |
(3%) |
Gold - All-in sustaining costs on a co-product basis
(before taxes) – ($/oz sold)(3)(4) |
$ |
829 |
|
$ |
573 |
45% |
$ |
737 |
|
$ |
750 |
|
737 |
(2%) |
Production costs per pound of copper sold
(4) |
|
1.50 |
|
|
1.33 |
13% |
|
1.46 |
|
|
1.26 |
|
1.48 |
16% |
Copper - All-in sustaining costs on a co-product basis
(before taxes) – ($/pound
sold)(3)(4) |
$ |
2.28 |
|
$ |
1.53 |
49% |
$ |
1.85 |
|
$ |
1.77 |
|
1.47 |
5% |
(1) As at December 31, 2019, the Company had 293,690,456
common shares issued and outstanding. |
(2) Average for the period as reported by the London Bullion
Market Association (US dollar Gold P.M. Fix Rate) and London Metal
Exchange (LME). |
(3) Non-GAAP measure. See discussion under “Non-GAAP
Measures”. |
(4) Combines streamed and unstreamed amounts. |
|
Overview of Consolidated
Results
Fourth Quarter 2019 compared to Fourth
Quarter 2018Net loss of $12.2 million and adjusted net
earningsNG of $22.3 million in the fourth quarter of 2019, compared
to net earnings and adjusted net earningsNG of $49.0 million and
$90.8 million, respectively, in the fourth quarter of 2018. The
decrease in adjusted net earningsNG in the fourth quarter of 2019
was due to lower gold grades at Kumtor and Mount Milligan and costs
related to the significant waste rock movement at Kumtor’s Lysii
waste rock dump, partially offset by higher average gold prices in
2019 together with higher copper grades processed at the Mount
Milligan Mine.
Significant adjusting items to the net loss in
the fourth quarter of 2019 include:
- $34.5 million asset retirement
obligation (“ARO”) expense at the Company’s non-operating sites,
due primarily to a change in discount rates.
Significant adjusting items to net earnings in
the fourth quarter of 2018 include:
- $40.4 million ARO expense at the Company’s non-operating sites,
due primarily to a change in the underlying closure plan at the
Thompson Creek Mine.
Cash provided by operations was $92.5 million in
the fourth quarter of 2019, compared to $151.6 million in the same
prior year period, due to the decrease in adjusted net earningsNG,
increase in inventory and decrease in accounts payable at Mount
Milligan, partially offset by an increase in accounts payable at
Kumtor. Negative free cash flow NG of $0.4 million in the fourth
quarter of 2019 compared to positive free cash flowNG of $65.5
million in the same period of 2018, consistent with the change in
adjusted net earningsNG.
Year ended December 31, 2019 compared to
2018Net loss of $93.5 million and adjusted net earningsNG
of $181.5 million in 2019, compared to net earnings and adjusted
net earningsNG of $107.5 million and $118.1 million, respectively,
in 2018.
The increase in adjusted net earningsNG in the
current year was due to increased gold sales at Kumtor and Mount
Milligan, increased copper sales at Mount Milligan and higher
realized gold prices. At Kumtor, the increase in gold sold was as a
result of processing higher grade ore and achieving higher
recoveries. At Mount Milligan the increased sales levels reflect
additional concentrate shipments during the year due to higher mill
availability and throughput, coupled with higher copper grades and
higher gold recoveries.
Significant adjusting items to the net loss in
2019 include:
- $230.5 million impairment charge on the assets at the Mount
Milligan Mine,
- $34.5 million ARO expense at the non-operating sites due to a
significant change in the discount rate assumption, and
- $10.0 million charge relating to the completion of the
Strategic Agreement with the Kyrgyz Government.
Significant adjusting items to net earnings in
2018 include:
- $40.4 million ARO expense at the non-operating sites due to
changes in the underlying closure models, partially offset by,
- $28.0 million gain on the sale of the Company’s royalty
portfolio that was acquired as part of the AuRico Metals Inc.
acquisition.
Cash provided by operations was $334.1 million
in 2019, which included the Kyrgyz Republic settlement payment of
$62.6 million, compared to $217.5 million in the same prior year
period. Excluding this payment, adjusted cash provided by
operationsNG for 2019 was $396.7 million compared to $221.9 million
in 2018 due to higher revenue as a result of increased gold sold at
Kumtor, increased copper sold at Mount Milligan and higher realized
gold prices. There was also an increase in cash from working
capital due to a larger increase in accounts payable balances at
Kumtor, Mount Milligan and the corporate office in 2019 compared to
2018, partially offset by a larger increase in the accounts
receivable balance at Mount Milligan, due to the timing of
shipments in 2019 compared to 2018. The increase in adjusted free
cash flow NG of $97.3 million in 2019 compared to negative adjusted
free cash flow NG of $64.0 million in 2018 is due to an increase in
cash provided by operations and decrease in capitalized stripping
at Kumtor, partially offset by an increase in capital expenditures
at Öksüt. The negative adjusted free cashflowNG of $64.0 million in
2018 was primarily due to lower sales and earnings at Kumtor and
Mount Milligan.
Safety and EnvironmentOn
December 1, 2019, a significant waste rock movement occurred at
Kumtor’s Lysii waste rock dump resulting in two employee
fatalities. After six weeks of continuous search efforts and with
the consent of the families and the relevant Kyrgyz state agencies,
the search was concluded. Investigations involving the Kyrgyz State
Inspectorate for Environmental and Technical Safety as well as
internal investigations by Centerra Gold are currently underway.
Including these two fatalities, Centerra incurred fourteen
reportable injuries in the fourth quarter of 2019, including six
lost time injuries, six medical aid injuries and two restricted
work injuries.
On February 15, 2020, a Kumtor employee
succumbed to a fatal injury while operating an excavator, which
tipped and then slipped down into a water-filled basin near the
edge of Petrov Lake. An internal investigation has commenced, and
management is working closely with the Kyrgyz regulators and other
state authorities to ascertain the cause of the incident.
There were no reportable releases to the
environment in the fourth quarter and for the 2019 year.
2020 Outlook
The Company has been monitoring closely
developments relating to COVID19 and has taken a number of
proactive measures to ensure the safety of its employees and the
continuity of its business. To date, the Company has experienced no
operating or production disruptions nor any supply chain
interruptions or impact.
However, the Company has decided to undertake a
significant reduction of manpower and operations at the Öksüt
Project on March 31, 2020 for an initial period of two weeks. This
decision was taken in response to recent Turkish government
initiatives aimed to reducing the spread of COVID-19. The reduction
will result in a suspension of open pit mining activities though,
limited crews will remain on site to place ore on the heap leach
pad, to operate the ADR plant and to perform essential site
services. Approximately 150,000 tonnes of crushed material is
available at site for stacking (such volume represents
approximately 15 days worth of stacking activity). Öksüt has
prepared detailed plans in case a further reduction or cessation of
operations becomes necessary or desirable. This short-term
cessation of mining is not expected to impact 2020 production
guidance as estimated at December 31, 2019.
Kumtor and Mount Milligan operations continue
for the time being and, in the case of Kumtor, with the support of
the Kyrgyz Republic Government. Each site has implemented a number
of proactive measures to prevent the spread of COVID-19 and ensure
the safety of its employees, contractors, communities and other
stakeholders. Both Kumtor and Mount Milligan have also made
detailed plans in case a reduction or cessation in operations
becomes necessary or desirable.
Despite its best efforts, the Company notes that
COVID-19 has the potential to significantly further disrupt
Centerra’s operations. Among other things, COVID19 has the
potential to cause significant illness in our workforce,
temporarily shut down mining, milling and other operations, disrupt
supply chains as well as rail and shipping networks used to deliver
our products to customers. While Centerra has taken and will
continue to take measures to mitigate such risks, the global
effects of COVID19 are rapidly evolving and cannot be
predicted.
The guidance in this Outlook section has been
largely reproduced from the Company’s news release of February 11,
2020 for ease of reference. However, the Company cautions that due
to the rapidly evolving risks relating to COVID-19, the guidance
set out below will not reflect the Company’s estimates of its 2020
performance if there are any further significant disruptions to any
of its operations. Readers are therefore cautioned to carefully
consider the foregoing paragraphs of this Outlook section and the
risks identified elsewhere in this document and in Centerra’s most
recently filed Annual Information Form.
2020 Gold Production
GuidanceCenterra’s 2020 gold production is expected to be
between 740,000 to 820,000 ounces.
Kumtor Mine’s gold production forecast is
expected to be in the range of 520,000 ounces to 560,000 ounces. A
planned shutdown of the processing plant, for the replacement
of the SAG Mill girth gear, SAG Mill pinion and Ball Mill
electrical motor occurred in December 2019 and the processing
plant was successfully restarted in early-January. This shutdown is
expected to reduce production levels in the first quarter of
2020. For 2020, 100% of the ore feed for the processing
plant will come from existing ore stockpiles on surface.
At Mount Milligan, the Company expects to
achieve an average daily throughput of approximately 55,000 tonnes
per calendar day for the full year. Crusher maintenance was
completed during January. Further mill maintenance downtime is
scheduled for the first quarter (9-days) and third quarter (8-days)
to complete SAG Mill relines and other maintenance work. The
Company notes that any delays in the completion of such work, due
to COVID19 or otherwise, may result in a potentially prolonged
period during which the mill could be shut down. Mount Milligan’s
total payable gold production is forecast to be in the range of
140,000 to 160,000 ounces. During the first half of 2020, lower
than the expected 2020 average gold and copper grades are planned
to be processed resulting in lower first half production. Gold and
copper grades and metal production is expected to increase over the
second half of 2020. The Company continues to work on several
continuous improvement projects including electrification of all
pumping equipment, groundwater exploration and remediation of the
secondary crushing circuit and is actively reducing costs
throughout the operation, including the removal of a layer of
management in January 2020.
At Öksüt, first gold pour occurred on January 31
and 2020 gold production is expected to be in the range of 80,000
to 100,000 ounces with gold production expected to ramp up over the
course of the year.
2020 Copper Production
GuidanceCenterra expects total payable copper production
from the Mount Milligan Mine to be in the range of 80 to 90 million
pounds.
Centerra’s 2020 production is currently forecast
as follows:
|
Units |
Kumtor |
Mount Milligan(1) |
Öksüt |
Centerra |
Gold |
|
|
|
|
|
Unstreamed Gold Payable Production |
(Koz) |
520-560 |
91-104 |
80-100 |
691-764 |
Streamed Gold Payable Production(1) |
(Koz) |
- |
49-56 |
- |
49-56 |
Total Gold Payable
Production(2) |
(Koz) |
520-560 |
140-160 |
80-100 |
740-820 |
|
|
|
|
|
|
Copper |
|
|
|
|
|
Unstreamed Copper Payable Production |
(Mlb) |
- |
65-73 |
- |
65-73 |
Streamed Copper Payable Production(1) |
(Mlb) |
- |
15-17 |
- |
15-17 |
Total Copper Payable
Production(3) |
(Mlb) |
- |
80-90 |
- |
80-90 |
(1) The Mount Milligan Streaming Arrangement entitles Royal
Gold to 35% and 18.75% of gold and copper sales, respectively, from
the Mount Milligan Mine. Under the Mount Milligan Streaming
Arrangement, Royal Gold will pay $435 per ounce of gold delivered
and 15% of the spot price per metric tonne of copper
delivered. |
(2) Gold production assumes recoveries of 82.4% at Kumtor, 64%
at Mount Milligan and approximately 60% at Öksüt. |
(3) Copper production assumes 81.9% recovery for copper at
Mount Milligan. |
|
2020 Sales and All-in Sustaining Unit
Costs GuidanceNGCenterra’s 2020 sales and all-in
sustaining costs per ounce sold NG (“AISC”) calculated on a
by-product basis, are forecasted as follows:
|
Units |
Kumtor |
Mount Milligan(2) |
Öksüt |
Centerra(2)(4) |
Ounces sold |
(Koz) |
520-560 |
140-160 |
80-100 |
740-820 |
Production
costs per ounce of gold sold |
($/oz) |
$300-$360 |
$750-$800 |
$375-$550 |
$450-$500 |
All-in sustaining costs on a by-product
basis(1), (2) |
($/oz) |
$750-$800 |
$885-$935 |
$650-$700 |
$820-$870 |
Revenue-based tax and taxes(3) |
($/oz) |
$190-$205 |
$20-$24 |
$10-$12 |
$130-$140 |
All-in
sustaining costs on a by-product basis, including taxes(1), (2),
(3) |
($/oz) |
$940-$1,005 |
$905-$959 |
$660-$712 |
$950-$1,010 |
|
|
|
|
|
|
Gold -
All-in sustaining costs on a co-product basis(1), (2) |
($/oz) |
$750-$800 |
$970-$1,220 |
$650-$700 |
$825-$925 |
Production
costs per pound of copper sold |
($/lb) |
- |
$1.30-$1.40 |
- |
$1.30-$1.40 |
Copper - All-in sustaining costs on a co-product basis(1), (2) |
($/lb) |
- |
$1.70-$2.10 |
- |
$1.70-$2.10 |
(1) All-in sustaining costs per ounce sold, all-in sustaining
costs per ounce sold on a by-product basis, all-in sustaining costs
on a by-product basis including taxes per ounce sold and all-in
sustaining costs on a co-product basis (gold and copper) on a per
unit basis are non-GAAP measures and are discussed under “Non-GAAP
Measures”. |
(2) Mount Milligan payable production and ounces sold are on a
100% basis (the Mount Milligan Streaming Arrangement entitles Royal
Gold to 35% and 18.75% of gold and copper sales, respectively).
Unit costs and consolidated unit costs include a credit for
forecasted copper sales treated as by-product for all-in sustaining
costs and all-in sustaining costs plus taxes. Payable production
for copper and gold reflects estimated metallurgical losses
resulting from handling of the concentrate and payable metal
deductions, subject to metal content, levied by smelters. |
(3) Includes revenue-based tax at Kumtor, British Columbia
mineral tax at Mount Milligan and income tax at Öksüt. |
(4) Results in chart may not add due to rounding. |
|
Production costs per ounce of gold sold are
included as a new guidance measure and is considered the nearest
GAAP measure to AISC. AISC is defined in the non-GAAP section of
this MD&A, and includes production costs, as presented in the
financial statements, as well as sustaining capital, capitalized
stripping, corporate administration costs and various “other
costs”, and a credit for copper sales ranging from $175 to $197
million for 2020. At Mount Milligan, “other costs” include
approximately $20 million for treatment and refining charges and
$10 million for marketing costs. In 2020, at Kumtor, “other costs”
include approximately $10 million as contributions to various
development funds in the Kyrgyz Republic.
2020 Capital SpendingProjected
capital expenditures include:
|
Capitalized |
Sustaining |
Growth |
|
Projects ($ millions) |
Stripping |
Capital |
Capital |
Total |
Kumtor Mine(1) |
215 |
49 |
18 |
282 |
Mount Milligan Mine |
- |
55 |
- |
55 |
Öksüt Mine(1) |
21 |
- |
29 |
50 |
Kemess Underground Project |
- |
- |
13 |
13 |
Other(2) |
- |
5 |
- |
5 |
Consolidated Total |
$236 |
$109 |
$60 |
$405 |
(1) Capitalized stripping includes a cash component of $173
million (Kumtor Mine), and $20 million (Öksüt Mine). |
(2) Thompson Creek Mine, Endako Mine (75% ownership),
Langeloth facility, and Corporate. |
|
Kumtor MineSpending on sustaining capital of $49
million relates primarily to major overhauls, purchase of vehicles
and dewatering projects.
Growth capital investment at Kumtor for 2020 is
forecast at $18 million which includes capital expenditures for the
tailings dam lift required to allow for production from cutback 20
and cost related to the construction of the effluent treatment
plant.
Mining activities at Kumtor in 2020 will be
focused on stripping cutback 20. The cash component of capitalized
stripping costs related to the development is expected to be $173
million of the $215 million total capitalized stripping estimated
in 2020.
Mount Milligan MineSustaining capital
expenditures are forecast to be $55 million and relate primarily to
tailings storage facility costs, major overhauls and water
management costs.
Öksüt MineGrowth capital investment for 2020 is
forecast at $29 million as the Company completes the construction
of the site.
The cash component of capitalized stripping
costs related to the development of the open pit is expected to be
$20 million of the $21 million total capitalized stripping
estimated in 2020.
Kemess Underground ProjectIn 2020, total
spending at Kemess is estimated at $35 million, including $22
million for care and maintenance for the year. The Company has
authorized $13 million of capitalized pre-construction spending at
the Kemess Underground Project, with further spending subject to
board approval.
Greenstone Gold PropertyThe 2020 expenditures
relating to the Greenstone Gold Property (50-50 joint venture with
Premier Gold) including the Hardrock Project continue to be under
review given the ongoing legal dispute between the Company and
Premier Gold.
2020 Exploration
ExpendituresPlanned exploration expenditures for 2020 are
expected to be $50 million, including approximately $32 million for
brownfields exploration (Kumtor - $20 million, Mount Milligan - $7
million, Öksüt - $3 million and Kemess - $2 million) and the
balance for greenfields and generative exploration programs.
2020 Corporate
AdministrationCorporate and administration expense for
2020 is forecast to be between $32 million and $38 million
(including $6 million to $8 million of stock-based compensation
expense).
2020 Depreciation, Depletion and
AmortizationConsolidated depreciation, depletion and
amortization (DD&A) expense included in costs of sales expense
for 2020 is forecasted to be in the range of $295 to $345 million,
including Kumtor’s DD&A expense of $235 to $255 million, Mount
Milligan’s DD&A expense of $40 million to $60 million, and
Öksüt’s DD&A expense of $20 to $30 million.
2020 TaxesPursuant to the
Restated Investment Agreement, Kumtor’s operations are not subject
to corporate income taxes. Instead, the Restated Investment
Agreement imposes a tax of 13% on gross revenue plus 1% for the
Issyk-Kul Oblast Development Fund. The Mount Milligan operations
are subject to corporate income tax and British Columbia mineral
tax. At Öksüt, income tax is expected to be between $1 to $2
million. Corporate income tax for 2020 is forecast to be nil, while
British Columbia mineral tax is forecast to be between $2 and $4
million.
2020 Financing CostsFinancing
costs for 2020 are expected to be $5 to $7 million. As at December
31, 2019 the Company’s cash balance was approximately $43 million
(excluding $28 million of restricted cash) and the outstanding debt
balance was $78 million (Öksüt facility). At the end of 2019, the
CAT lease facility of $27 million was repaid and the Öksüt facility
with a drawn balance of $78 million was repaid on January 30, 2020
using lower cost funds from the Company’s corporate credit
facility. In 2020, the Company expects to utilize the corporate
credit facility and then expedite its repayment using available
cash flow.
Molybdenum Business UnitIn
2020, the Company expects that the Langeloth metallurgical roasting
facility, forming part of the molybdenum business, will not
generate sufficient operating margins to cover the costs of its two
molybdenum mines on care and maintenance. This assumption is based
on a decline in the molybdenum price late in 2019. Care and
maintenance expenses related to the Molybdenum unit are currently
estimated to be between $12 million and $14 million for 2020.
SensitivitiesCenterra’s
revenues, earnings and cash flows for 2020 are sensitive to changes
in certain key inputs or currencies. The Company has estimated the
impact of any such changes on revenues, net earnings and cash from
operations.
|
|
Impact on ($ millions) |
Impact on ($ per ounce sold) |
|
Production Costs & Taxes |
Capital Costs |
Financing Costs |
Revenues |
Cash flows |
Net Earnings (after tax) |
AISC(2)(3) on
by-product basis |
Gold price |
$50/oz |
5.1 - 5.6 |
- |
1.5 - 1.6 |
34.5 - 38.2 |
27.9 - 31.0 |
27.9 - 31.0 |
0.2 - 0.5 |
Copper price |
10% |
4.7 - 5.3 |
- |
0.6 - 0.7 |
17.0 - 19.0 |
11.7 - 13.0 |
11.7 - 13.0 |
21 - 23 |
Diesel fuel(4) |
10% |
4.9 - 6.0 |
- |
- |
- |
4.9 - 6.0 |
4.9 - 6.0 |
7 - 8 |
Kyrgyz som(1) |
1 som |
1.2 - 1.6 |
- |
- |
- |
1.2 - 1.6 |
1.2 - 1.6 |
1.5 - 2.0 |
Turkish lira(1) |
1 lira |
4.5 - 5.0 |
1.5 - 2.5 |
- |
- |
5.5 - 7.5 |
4.0 - 5.0 |
8 - 9 |
Canadian dollar(1)(4) |
10 cents |
8.5 - 10.0 |
4.1 - 4.8 |
- |
- |
12.6 - 14.8 |
8.5 - 10.0 |
13 - 15 |
(1) Appreciation of currency against the U.S. dollar will
result in higher costs and lower cash flow and earnings,
depreciation of currency against the U.S. dollar results in
decreased costs and increased cash flow and earnings. |
(2) Non-GAAP measure. See discussion under “Non-GAAP
Measures” |
(3) AISC is calculated over the full year
ounces sold forecast. |
(4) Includes the effect of hedging
programs. |
|
Production, cost and capital forecasts for 2020
are forward-looking information and are based on key assumptions
and subject to material risk factors that could cause actual
results to differ materially and which are discussed herein under
the headings “Material Assumptions” and “Caution Regarding
Forward-Looking Information” in this document and under the heading
“Risks That Can Affect Our Business” in this document and the
Company’s most recently filed Annual Information Form.
Material
AssumptionsMaterial assumptions or factors used
to forecast production and costs for 2020 include the
following:
- a gold price of $1,350 per ounce
- a copper price of $2.60 per pound
- a molybdenum price of $10.75 per pound
- exchange rates: ° $1USD:$1.30 Canadian dollar,°
$1USD:69.50 Kyrgyz som,° $1USD:5.50 Turkish lira,°
$1USD:0.85 Euro.
- diesel fuel price assumption: ° $0.50/litre at
Kumtor,° $0.81/litre (CAD$1.06/litre) at Mount Milligan.
The assumed diesel price of $0.50/litre at
Kumtor assumes that no Russian export duty will be paid on the fuel
exports from Russia to the Kyrgyz Republic. Diesel fuel for Kumtor
is sourced from separate Russian suppliers. The diesel fuel price
assumptions were made when the oil price was approximately $66 per
barrel. Crude oil is a component of diesel fuel purchased by the
Company, such that changes in the price of Brent crude oil
generally impacts diesel fuel prices. The Company established a
hedging strategy to manage changes in diesel fuel prices on the
cost of operations at the Kumtor Mine with the objective to hedge
approximately 75% of Kumtor’s 2020 diesel purchases. The oil
price has significantly decreased from January 1, 2020. The company
is currently re-evaluating its diesel procurement strategy together
with its hedging strategy, this may include holding higher levels
of diesel at the Kumtor mine and the hedging strategy extending
beyond the current 12-month period.
Other material assumptions used in forecasting
production and costs for 2020 can be found under the heading
“Caution Regarding Forward-Looking Information” in this document.
Production, cost and capital forecasts for 2020 are forward-looking
information and are based on key assumptions and subject to
material risk factors that could cause actual results to differ
materially and which are discussed under the heading “Risks That
Can Affect Our Business” in this document and in the Company’s most
recent Annual Information Form.
Risks That Can Affect Our
Business
OverviewThe Company is subject
to risks that can have a material effect on the profitability,
future cash flow, stated mineral reserves and financial condition
of the Company. Some of these risks relate to the mining industry
in general, and others apply to specific properties, operations or
planned operations. The Company has adopted an enterprise risk
management program which applies to all of our operations and
corporate offices. This broad, systematic approach is used to
identify, assess, report and manage the significant risks that the
Company faces in our business and operations. The Company uses a
common risk matrix throughout the organization and considers any
risk that has the potential to significantly affect our ability to
achieve our corporate objectives or strategic plan as an enterprise
risk.
Board and Committee
OversightThe Company has a Risk Committee of the Board of
Directors which has oversight responsibilities in relation to the
policies, processes and systems for the identification, assessment
and management of the Company’s principal strategic, financial, and
operational risks. To ensure cross-communication of risks amongst
Board committees, the members of the Risk Committee are comprised
of at least one member from each of the other standing committees
of the Board. Each of the other Board committees are responsible
for overseeing risks related to their area of expertise and
reviewing the policies, standards and actions undertaken to
mitigate such risks.
Management OversightThe
Company’s executive team meets regularly with our Vice President,
Risk Management and Insurance to review the risks applicable to the
organization in general, and to specific sites, and to discuss
mitigation actions. The Company’s Vice President, Risk Management
and Insurance in turn has regular calls and meetings with
counterparts at the operations and sites to raise and discuss risks
facing the operations and mitigation actions.
Principal risksThe following
section describes the risks that are most material to our business.
This is not, however, a complete list of the potential risks we
face; there may be others we are not aware of, or risks we feel are
not material today that could become material in the future. For a
more comprehensive discussion about our risks, see our most
recently filed Annual Information Form.
Strategic, legal, planning and other risksThese
include political risks associated with the Company’s operations in
the Kyrgyz Republic, Turkey and Canada; resource nationalism;
reliance on cash flow from its subsidiaries; the impact of changes
in, or more aggressive enforcement of laws, regulations and
government practices including with respect to the environment;
impact of community activism on laws and regulations; increases in
contributory demands, or business interruption; delays or refusals
to grant required permits and licenses; status of our relationships
with local communities; Indigenous claims and consultative issues
relating to the Company’s properties which are in proximity to
Indigenous communities; the risks related to outstanding litigation
affecting the Company; the impact of any sanctions imposed by
Canada, the United States or other jurisdictions against various
Russian and Turkish individuals and entities; potential defects of
title in the Company’s properties that are not known as of the date
hereof; the inability of the Company and its subsidiaries to
enforce their legal rights in certain circumstances; the presence
of a significant shareholder that is a state-owned company of the
Kyrgyz Republic; conflicts of interest among its board members;
risks related to anti-corruption legislation; Centerra’s future
exploration and development activities not being successful;
Centerra not being able to replace mineral reserves and resources;
risks related to disagreements with partners; risks related to
mineral reserves and resources being imprecise; our production and
cost estimates may be inaccurate; reputational risks, particularly
in light of the increase in social media; ability to identify new
opportunities and to grow the business; large fluctuations in the
Company’s trading price that are beyond the Company’s control or
ability to predict and mitigate; potential risks related to
kidnapping or acts of terrorism; and competition amongst mining
companies for acquisition or development opportunities.
Financial RisksThe Company is subjected to risks
related to its financial position and liquidity, including
sensitivity of the Company’s business to the volatility of gold,
copper and other mineral prices; the use of provisionally-priced
sales contracts for production at Mount Milligan; reliance on a few
key customers for the gold-copper concentrate at Mount Milligan;
use of commodity derivatives; sensitivity to fuel price volatility;
the impact of currency fluctuations; global financial conditions;
access to future financing including the impact of our
environmental, social and corporate governance (“ESG”) practices
and reporting on our ability to obtain future financing or
accessing capital; the impact of restrictive covenants in the
Company’s credit facilities which may, among other things, restrict
the Company from pursuing certain business activities or making
distributions from its subsidiaries; 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; ability to obtain adequate insurance coverage;
and changes to taxation laws in the jurisdictions where we
operate.
Operational RisksMining and metals processing
involve significant production and operational risks. Some of these
risks are outside of the Company’s control or ability to predict
and mitigate. Risks include but are not limited to the following:
unanticipated ground and water conditions; shortages of water for
processing activities; adjacent or adverse land or mineral
ownership that results in constraints on current or future mine
operations; geological problems, including earthquakes and other
natural disasters; metallurgical and other processing problems;
unusual or unexpected mineralogy or rock formations; ground or
slope failures; pit flooding; tailings design or operational
issues, including dam breaches or failures; structural cave-ins,
wall failures or rock-slides; flooding or fires; equipment failures
or performance problems; periodic interruptions due to inclement or
hazardous weather conditions or operating conditions and other
force majeure events; lower than expected ore grades or recovery
rates; accidents; delays in the receipt of, or failure to receive,
necessary government permits; delays in transportation, including
disruption in rail and shipping networks caused by COVID19;
interruption of energy supply; labour disturbances; the
availability of drilling and related equipment in the area where
mining operations will be conducted; the failure of equipment or
processes to operate in accordance with specifications or
expectations; tailings management facilities; exposure of workforce
to widespread pandemic (including COVID19); cyanide use;
regulations regarding greenhouse gas emissions and climate change;
development and construction costs being over budget; predicting
decommissioning and reclamation costs; attracting and retaining
qualified personnel; long lead times required for equipment and
supplies given the remote location of some of the Company’s
operating properties, and the potential that COVID19 could disrupt
such supply chains; reliance on a limited number of suppliers for
certain consumables, equipment and components; and security of
critical operating systems.
Financial Performance
Fourth Quarter 2019 compared to Fourth
Quarter 2018
Revenue:Revenue decreased to $312.5 million in
the fourth quarter of 2019 from $391.5 million in the comparative
prior year period, as a result of 37% fewer gold ounces sold
compared to 2018, partially offset by 21% higher average realized
gold price and 5% more copper pounds sold.
Production:Gold production in the fourth quarter
of 2019 was 194,507 ounces compared to 288,367 ounces for the same
prior year period. Gold production at Kumtor was 148,523 ounces in
the fourth quarter of 2019, 35% less than the same period of 2018.
The decrease in ounces produced at Kumtor was a result of
processing lower grade ore, lower recoveries and a comprehensive
mill shutdown in December to replace equipment. During the fourth
quarter for 2019, Mount Milligan produced 45,984 ounces of gold, a
24% decrease from the same prior year period due to lower gold
grades processed. Copper production at Mount Milligan during the
fourth quarter of 2019 was 18.1 million pounds, 6.3 million pounds
more than the comparative prior year period, reflecting higher
grades, partially offset by lower recoveries.
Production costs per ounce of gold
sold:Production costs per ounce of gold sold increased in the
fourth quarter of 2019 to $455 compared to $375 in the same period
of 2018, mainly due to lower sales volumes at both operating
mines.
All-in Sustaining CostsNG:
A photo accompanying this announcement is available
at
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Centerra’s all-in sustaining costs on a
by-product basis per ounce of gold soldNG, which excludes
revenue-based tax and income tax, increased to $799 per ounce in
the fourth quarter of 2019, up from $576 per ounce in the same
prior year period due primarily to fewer ounces sold, partially
offset by higher copper credits and lower production costs.
Exploration:Exploration expenditures in the
fourth quarter of 2019 were $9.1 million compared to $6.5 million
in the comparative prior year period. The increase was due to an
additional $1.0 million spent on drilling at each of the Kumtor and
Mount Milligan mines.
Financing costs:Financing costs in the fourth
quarter of 2019 were $4.3 million compared to $4.9 million in the
comparative prior year period, reflecting the Company’s repayment
of the principal outstanding on its Corporate Facility.
Corporate administration:Corporate
administration costs were $9.2 million in the fourth quarter of
2019, an increase of $2.7 million compared to the same period of
2018, mainly due to an increase in employee and other costs.
Year ended December 31, 2019 compared to
2018
Revenue:Revenue increased to $1,375.3 million in
2019 from $1,129.3 million in the comparative year, as a result of
10% more gold ounces sold, 11% higher average realized gold price,
52%more copper pounds sold and 2% higher molybdenum sales as
compared to 2018.
Production:Gold production for 2019 was 783,308
ounces compared to 729,556 ounces in 2018. Gold production at
Kumtor was 600,201 ounces in 2019, 65,638 ounces (12%) more
than the comparative year. The increase in ounces produced at
Kumtor was a result of milling higher-grade ore (3.7g/t compared to
3.3g/t) and higher recoveries (83.5%compared to 79.3%). During
2019, although Mount Milligan recorded 21% higher throughput, it
produced 183,107 ounces of gold, 6%lower than in 2018, as a result
of lower grades (0.5g/t compared to 0.7g/t). Mount Milligan
produced 71.1 million pounds of copper, 51%more than in 2018,
reflecting higher throughput and grades (0.26%compared to
0.20%).
Production costs per ounce of gold
sold:Production costs per ounce of gold sold increased in 2019 to
$465 from $464 in 2018 due to higher mining and milling costs per
ounce at Mount Milligan, partially offset by higher sales volumes
at Kumtor.
All-in Sustaining CostsNG:
A photo accompanying this announcement is available
at
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All-in sustaining costs on a by-product basis
per ounce of gold soldNG, which excludes revenue-based tax and
income tax, decreased to $708 per ounce in 2019 from $754 per ounce
in the comparative year mainly as a result of significantly more
ounces sold and lower capitalized stripping costs at Kumtor,
resulting in a 14% decrease in Kumtor’s all-in sustaining costNG.
This was partially offset by an 8% increase in all-in sustaining
costsNG at Mount Milligan attributable to higher production costs,
partially offset by higher copper credits.
Exploration:Exploration expenditures in 2019
were $28.0 million, a 34% increase compared to the $20.9 million in
2018, reflecting the increased exploration spending at Kumtor,
Mount Milligan and Kemess in 2019.
Financing costs:Financing costs in 2019 were
$16.3 million compared to $30.7 million in the comparative year,
reflecting the Company’s repayment of its Corporate Facility, which
resulted in lower interest expense, and lower financing costs and
fees.
Corporate administration:Corporate
administration costs increased to $45.3 million in 2019 compared to
$29.6 million in the prior year, mainly due to an increase in
share-based compensation of $15.3 million, driven by an increase in
the Company’s share price, partially offset by administration costs
in 2018 associated with the Company’s acquisition of AuRico Metals
Inc (“AuRico”).
Balance Sheet Review
$ millions |
Year ended December 31, |
2019 |
2018 |
Change |
Consolidated: |
|
|
|
Cash and cash equivalents |
42.7 |
151.7 |
(72%) |
Inventories |
774.1 |
577.4 |
34% |
Current assets |
115.9 |
85.3 |
36% |
Property, plant and equipment |
1,669.5 |
1,905.5 |
(12%) |
Non-current assets |
99.5 |
106.7 |
(7%) |
Total Assets |
2,701.7 |
2,826.7 |
(4%) |
Current debt |
- |
5.0 |
(100%) |
Current liabilities |
244.8 |
229.8 |
7% |
Non-current Debt |
70.0 |
179.3 |
(61%) |
Provision for reclamation |
265.0 |
212.2 |
25% |
Non-current liabilities |
56.0 |
52.4 |
7% |
Total Liabilities |
635.9 |
678.7 |
(6%) |
Total Equity |
2,065.8 |
2,148.0 |
(4%) |
Total Liabilities and Equity |
2,701.7 |
2,826.7 |
(4%) |
Cash and cash equivalentsCash
and cash equivalents decreased by $109.0 million from December 31,
2018 to the end of 2019 as the Company paid down its current and
non-current debt by $111 million.
InventoryTotal inventory at
December 31, 2019 was $774.1 million compared to $577.4 million at
the end of 2018. Inventory on hand included product inventory of
$564.7 million and supplies inventory of $209.3 million, compared
to $389.3 million and $188.2 million, respectively, at the end of
2018. The increase in product inventory was primarily attributable
to an increase at Kumtor of $161.6 million in product inventory due
to the additional ounces mined and stockpiled in 2019 from cut-back
19.
As at December 31, 2019, the inventory balance
consisted of 1 million contained gold ounces on surface at Kumtor,
of which roughly 73% is expected to be processed in 2020, and
85,246 contained gold ounces and 19.2 million contained pounds of
copper in stockpiles at Mount Milligan.
Property, Plant and
EquipmentThe book value of property, plant and equipment
as at December 31, 2019 was $1.7 billion, which compares to $1.9
billion at the end of 2018. The decrease in 2019 of 12% was mainly
due to the impairment charge on the Mount Milligan assets recorded
in the third quarter of 2019. Capital expenditures in the fourth
quarter of 2019 were $95.4 million compared to $60.8 million in the
same prior year period, primarily due to increased spending to
construct the Öksüt Project and increased capitalized stripping at
Kumtor.
Asset Retirement ObligationsThe
total future asset retirement obligations were estimated by
management based on the estimated costs to reclaim the mine sites
and facilities and the estimated timing of the costs to be incurred
in future periods.
The Company has estimated the net present value
of the total asset retirement obligations to be $265.2 million as
at December 31, 2019, compared to $212.2 million at the end of
2018, primarily due to a reduction in the discount rates used to
calculate the present value of the reclamation costs. The Company
does not anticipate any significant costs to be incurred on
reclamation until 2027 at the Kumtor Mine, under the assumption
that there is no extension of the Kumtor mine life.
In 1998, a reclamation trust fund was
established to cover the future costs of reclamation, net of
salvage values at the Kumtor Gold Mine. On December 31, 2019, this
fund had a balance of $41.0 million.
DebtAs at December 31, 2019,
the Company’s $500 million secured revolving credit facility was
undrawn (December 31, 2018 – outstanding balance was $111
million).
As at December 31, 2019, the Öksüt Project
financing facility had a drawn balance of $77.5 million.
Subsequent to year end, the Company repaid and
cancelled its Öksüt Project financing facility, which resulted in
the release of $25 million in restricted cash.
In December 2019, the remaining balance of $27.2
million promissory note payable to Caterpillar Financial Services
Limited was fully repaid.
LiquidityThe Company believes
its cash on hand, cash flow from the Company’s Kumtor, Mount
Milligan and Öksüt operations and available capacity in its
existing corporate credit facility will be sufficient to satisfy
working capital needs, fund its anticipated construction and
development activities and meet other liquidity requirements
through to the end of 2020.
Cash provided by operating
activitiesCash provided by operations increased by 54% in
2019 as a result of higher earnings at Kumtor and Mount
Milligan.
Cash used in investing
activitiesCash used in investing activities decreased
by 12% in 2019 when compared to 2018 due primarily to the
acquisition of AuRico in 2018, partially offset by the sale of the
Company’s royalty portfolio and disposal of the Mongolian business
unit, also in 2018.
Cash used in financing
activitiesCash used in financing activities increased by
3% in 2019 when compared to 2018. The increase was mainly on
account of higher lease payments, partially offset by lower
payments for interest and borrowing costs.
Market Conditions
Gold PriceDuring the fourth
quarter of 2019, the spot gold price fluctuated between a low of
$1,454 per ounce and a high of $1,517 per ounce. The average spot
gold price for the fourth quarter was $1,483 per ounce, an increase
of 21% from the comparative prior year period ($1,229 per ounce).
The average gold spot price for 2019 was $1,393 per ounce, an
increase of 10% over the average in 2018 ($1,269 per ounce).
Copper PriceThe average spot
copper price in the fourth quarter of 2019 was $2.68 per pound, a
4% decrease compared to the comparative prior year period ($2.79
per pound). The average copper spot price for 2019 was $2.73 per
pound, a decrease of 8% over the average in 2018 ($2.96 per
pound).
Molybdenum PriceThe average
molybdenum price in the fourth quarter of 2019 was $9.65 per pound,
a decrease of 20% from the comparative prior year period ($12.05
per pound). The average molybdenum spot price for 2019 was $11.35
per pound, a decrease of 5% over the average in 2018 ($11.94 per
pound).
Foreign ExchangeThe Company
receives its revenues through the sale of gold, copper and
molybdenum in U.S. dollars. The Company has operations in Canada,
including its corporate head office, the Kyrgyz Republic, Turkey
and the United States.
During 2019, the Company incurred combined
expenditures (including capital and leases) of approximately $1,266
million. Approximately $644 million of this (51%) was in
currencies other than the U.S. dollar. The percentage of Centerra’s
non-U.S. Dollar costs by currency was as follows:
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at
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The net impact of the currency movements in the
year ended December 31, 2019, after factoring in the balances in
non-USD currencies held at the beginning of the year, was to
increase annual costs by $9.0 million (decrease of $14.5 million in
the year ended December 31, 2018).
A photo accompanying this announcement is available
at
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USD to CADDuring the fourth quarter of 2019, the
spot price of the U.S dollar to Canadian dollar fluctuated between
a low of 1.30 and a high of 1.33. The average U.S. dollar to
Canadian dollar exchange rate for the fourth quarter of 2019 was
1.32, consistent with the average of the third quarter of 2019 and
the fourth quarter of 2018. The Canadian dollar strengthened by 4%
from its value as at December 31, 2018 (1.36). As at December 31,
2019, we maintained currency hedges (zero cost collars) on
approximately 62% of our Canadian dollar exposure over the next
twelve months.
USD to Kyrgyz SomDuring the fourth quarter of
2019, the spot price of the U.S. dollar to Kyrgyz som exchange rate
fluctuated from 69.6 to 69.9. The average U.S. dollar to Kyrgyz som
for the fourth quarter of 2019 was 69.8, consistent with the third
quarter of 2019 and minimal movement when compared to the fourth
quarter of 2018 (69.6). The Kyrgyz som was relatively consistent to
the U.S. dollar as compared to its value at December 31, 2018.
USD to Turkish LiraThe average U.S. dollar to
Turkish lira exchange rate for the fourth quarter of 2019 was 5.8,
and ranged from 5.7 to 6.0 during the quarter. The Turkish lira
weakened by 2% when compared to the third quarter of 2019 (5.7) and
5% when compared to the average of the fourth quarter of 2018
(5.5). The Turkish lira weakened by 9% from its value as at
December 31, 2018 (5.3).
Diesel Fuel PricesAfter lower
prices for a majority of the year when compared to 2018,
international benchmarks of crude oil prices, Intercontinental
Exchange Brent (“Brent”) and West Texas Intermediate (“WTI”)
increased by 13% and 9%, respectively, in the last quarter of
2019.
According to the U.S. Energy Information
Administration, the Brent crude oil price averaged $64/bbl. in
2019, $7/bbl. lower than the 2018 average of $71/bbl. As at
December 31, 2019 the closing Brent price was $68/bbl., $17/bbl.
higher than the price at December 31, 2018 of $51/bbl. WTI crude
oil prices averaged $57/bbl. in 2019, $8/bbl. lower than the 2018
average of $65/bbl. As at December 31, 2019 the closing WTI price
was $61/bbl., $16/bbl. higher than the price at December 31, 2018
of $45/bbl.
Fuel costs represent a significant cost
component for Centerra’s mining operations. Prices for Kumtor
diesel fuel in 2019 generally reflected the price movements of
Brent crude oil. The purchase price for diesel fuel for Kumtor in
2019 remained unchanged when compared to 2018, averaging $0.52 per
litre for the year. Kumtor sources its fuel from Russia either
directly or through Kyrgyz distributors. Kumtor’s diesel prices
include additional costs such as seasonal premiums for winterizing
the diesel fuel and transportation costs from the Russian
refineries. Centerra’s diesel hedging program resulted in a $0.7
million realized gain to offset purchasing costs in 2019, compared
to $2.2 million realized gain in the same comparative period.
The Company continues to utilize its rolling
diesel hedging program in order to manage its exposure to
fluctuations in diesel fuel prices. See “Financial
Instruments”.
Financial Instruments
The Company seeks to manage its exposure to
fluctuations in diesel fuel prices, commodity prices and foreign
exchange rates by entering into derivative financial instruments
from time-to-time.
The hedge positions for each of these programs
as at December 31, 2019 are summarized as follows:
|
|
|
|
|
As at December 31, 2019 |
Program |
Instrument |
Unit |
Average strike price |
Type |
Total position (4) |
Fair value gain (loss)($) ('000's) |
Fuel Hedges |
Brent Crude Oil zero-cost collars(1) |
Barrels |
$58/$67 |
Fixed |
137,108 |
(14) |
|
|
|
|
|
|
|
Gold/Copper Hedges (Royal Gold deliverables): |
|
|
|
|
|
|
Gold Derivative Contracts |
Forward contracts(2) |
Ounces |
N/A(3) |
Float |
22,500 |
384 |
Copper Derivative Contracts |
Forward contracts(2) |
Pounds |
N/A(3) |
Float |
4.2 million |
253 |
|
|
|
|
|
|
|
FX Hedges |
|
|
|
|
|
|
USD/CAD Derivative Contracts |
Zero-cost collars |
CAD |
1.30/1.34 |
Fixed |
197.6 million |
946 |
(1) Under the fuel zero-cost collars, the Company retains the
right to buy fuel barrels at the contract’s ‘ceiling’ price if the
market price was to exceed this price upon contract expiration,
while requiring the Company to buy fuel barrels at the ‘floor’
price if the market price fell below this price upon expiration. At
the end of each contract there is no exchange of the underlying
item and it is financially settled. |
(2) Under the Royal Gold forward contracts, the Company must
sell specified quantities of gold or copper, at a future market
price on a specified date. |
(3) Royal Gold hedging program with a market price determined
on closing of the contract. |
(4) Hedge positions as at end of December 2019 are due to
settle by end of 2020. |
|
Centerra does not enter into off-balance sheet
arrangements with special purpose entities in the normal course of
its business, nor does it have any unconsolidated affiliates.
Operating Mines and
Facilities
Kumtor MineThe Kumtor open pit
mine, located in the Kyrgyz Republic, is one of the largest gold
mines in Central Asia. It has been in production since 1997 and has
produced over 12.6 million ounces of gold to December 31, 2019.
Recent DevelopmentsIn August 2019, all
conditions precedent in relation to the comprehensive settlement
agreement (“Strategic Agreement”) entered into with the Government
of the Kyrgyz Republic (“the Kyrgyz Government”) on September 11,
2017 were satisfied or waived and the Strategic Agreement closed on
August 26, 2019. See “Contingencies”.
On December 1, 2019, Kumtor experienced a
significant waste rock movement at the Lysii waste rock dump,
resulting in two employee fatalities. The Company initiated an
emergency evacuation of all mine personnel from the area and an
immediate cessation of mining operations. In January 2020, after an
extensive search and in consultation with the families of the
deceased Kumtor employees, search efforts were terminated. In late
January 2020, after significant analysis of its procedures,
including safety procedures, and consultation and approval of the
relevant the Kyrgyz Republic state agencies, the Company
recommenced mining operations after receiving approvals for its
revised 2020 mining plans. During the cessation period, in
accordance with IFRS, certain per unit fixed costs were not
allocated to inventory as they were in excess of historical unit
production costs, and instead recognized as standby costs.
On February 15, 2020, a Kumtor employee
succumbed to a fatal injury while operating an excavator, which
tipped and then slipped down into a water-filled basin near the
edge of Petrov Lake, which is situated five kilometers northeast of
the Kumtor mill site. An internal investigation has commenced and
management is working closely with the Kyrgyz regulators and other
state authorities to ascertain the cause of the incident.
Kumtor Operating Results
($ millions, except as noted) |
Three months ended December 31, |
Twelve months ended December 31, |
2019 |
|
2018 |
|
% Change |
|
2019 |
|
2018 |
|
% Change |
Financial Highlights: |
|
|
|
|
|
|
|
|
|
|
Revenue |
|
200.5 |
|
|
246.9 |
|
(19%) |
|
827.5 |
|
|
660.1 |
|
25% |
|
|
|
|
|
|
|
|
|
|
|
Production costs |
|
49.6 |
|
|
61.8 |
|
(20%) |
|
228.6 |
|
|
209.1 |
|
9% |
Standby costs |
|
9.1 |
|
|
- |
|
100% |
|
9.1 |
|
|
- |
|
100% |
Depreciation, depletion and amortization |
|
46.6 |
|
|
51.3 |
|
(9%) |
|
181.3 |
|
|
154.6 |
|
17% |
Earnings from mine operations |
|
95.2 |
|
|
133.8 |
|
(29%) |
|
408.5 |
|
|
296.4 |
|
38% |
|
|
|
|
|
|
|
|
|
|
|
Cash provided by mine operations |
|
149.1 |
|
|
149.6 |
|
(0%) |
|
376.3 |
|
|
291.0 |
|
29% |
Cash provided by mine operations before changes in working
capital(1) |
|
107.1 |
|
|
144.1 |
|
(26%) |
|
385.1 |
|
|
345.0 |
|
12% |
|
|
|
|
|
|
|
|
|
|
|
Operating Highlights: |
|
|
|
|
|
|
|
|
|
|
Tonnes mined (000's) |
|
28,565 |
|
|
47,965 |
|
(40%) |
|
156,439 |
|
|
180,331 |
|
(13%) |
Tonnes ore mined (000's) |
|
1,716 |
|
|
2,235 |
|
(23%) |
|
10,970 |
|
|
7,356 |
|
49% |
Average mining grade (g/t) |
|
5.50 |
|
|
3.94 |
|
40% |
|
2.91 |
|
|
3.26 |
|
(11%) |
Tonnes milled (000's) |
|
1,322 |
|
|
1,445 |
|
(9%) |
|
5,968 |
|
|
6,325 |
|
(6%) |
Average mill head grade (g/t) |
|
3.79 |
|
|
5.49 |
|
(31%) |
|
3.69 |
|
|
3.29 |
|
12% |
Mill Recovery (%) |
|
85.3 |
% |
|
87.5 |
% |
(2%) |
|
83.5 |
% |
|
79.3 |
% |
5% |
Mining costs - total ($/t mined material) |
|
1.50 |
|
|
1.12 |
|
34% |
|
1.26 |
|
|
1.17 |
|
8% |
Milling costs ($/t milled material) |
|
13.48 |
|
|
12.70 |
|
6% |
|
12.00 |
|
|
10.65 |
|
13% |
|
|
|
|
|
|
|
|
|
|
|
Gold produced (ounces) |
|
148,523 |
|
|
228,096 |
|
(35%) |
|
600,201 |
|
|
534,563 |
|
12% |
Gold sold (ounces) |
|
136,568 |
|
|
203,388 |
|
(33%) |
|
600,231 |
|
|
530,448 |
|
13% |
Average realized gold price ($/oz sold)(1) |
$ |
1,468 |
|
$ |
1,214 |
|
21% |
$ |
1,379 |
|
$ |
1,244 |
|
11% |
|
|
|
|
|
|
|
|
|
|
|
Capital Expenditures - sustaining |
|
7.8 |
|
|
11.8 |
|
(34%) |
|
38.6 |
|
|
43.7 |
|
(12%) |
Capital Expenditures - growth |
|
2.9 |
|
|
2.9 |
|
1% |
|
16.0 |
|
|
16.7 |
|
(4%) |
Capital Expenditures - stripping - cash |
|
28.2 |
|
|
26.3 |
|
7% |
|
76.5 |
|
|
103.9 |
|
(26%) |
Capital Expenditures - stripping - non-cash |
|
6.9 |
|
|
9.7 |
|
(29%) |
|
20.7 |
|
|
34.9 |
|
(41%) |
Capital expenditures - total |
|
45.8 |
|
|
50.7 |
|
(10%) |
|
151.8 |
|
|
199.2 |
|
(24%) |
|
|
|
|
|
|
|
|
|
|
|
Unit Costs: |
|
|
|
|
|
|
|
|
|
|
Production costs per ounce of gold sold |
$ |
363 |
|
$ |
303 |
|
20% |
$ |
381 |
|
$ |
394 |
|
(3%) |
Gold - All-in sustaining costs on a by-product basis ($/oz
sold)(1) |
$ |
657 |
|
$ |
508 |
|
29% |
$ |
598 |
|
$ |
694 |
|
(14%) |
Gold - All-in sustaining costs on a by-product basis - including
taxes ($/oz sold)(1) |
$ |
864 |
|
$ |
679 |
|
27% |
$ |
792 |
|
$ |
869 |
|
(9%) |
(1) Non-GAAP measure. See discussion under “Non-GAAP
Measures” |
Fourth Quarter 2019 compared to Fourth
Quarter 2018
Financial:For the three months ended December
31, 2019, Kumtor recorded lower revenue and earnings from mine
operations of 19% and 29%, respectively, compared to the same prior
year period. The decrease was mainly due to fewer ounces sold as a
result of lower mill feed grade and lower tonnes milled, as well as
higher non-operating and administrative expenses due to the
significant rock movement at Kumtor’s Lysii waste rock dump,
partially offset by 21% higher average gold prices in the fourth
quarter of 2019 compared to the same prior year period.
Cash provided by mine operations in the fourth
quarter of 2019 was $149.1 million, $0.5 million less than the same
prior year period due to fewer ounces sold, partially offset by an
increase in accounts payable in 2019 when compared to 2018.
Production:During the fourth quarter of 2019,
Kumtor continued mining cut-back 19 and cut-back 20.
Total waste and ore mined in the fourth quarter
of 2019 was 28.6 million tonnes compared to 48.0 million tonnes in
the comparative prior year period, representing a decrease of40%,
mainly due to the suspension of mining operations in December
2019.
Kumtor produced 148,523 ounces of gold in the
fourth quarter of 2019 compared to 228,096 ounces of gold in the
same prior year period. The decrease in the current quarter was
primarily due to processing ore with lower grades and recoveries
from cut-back 19, compared to higher grade ore from cut-back 18 in
the fourth quarter of 2018. During the fourth quarter of 2019,
Kumtor’s average mill head grade was 3.8 g/t with a recovery of
85.3% compared to 5.5 g/t and a recovery of 87.5% in 2018.
Mining costs including capitalized stripping
A photo accompanying this announcement is available
at
https://www.globenewswire.com/NewsRoom/AttachmentNg/50a9a83f-a7dc-4644-bcee-437d1587d492
Mining costs, including capitalized stripping,
were $42.8 million in the fourth quarter of 2019, an $11.1 million
decrease from the comparative prior year period. Lower mining
costs, including lower diesel costs and blasting supplies in the
fourth quarter of 2019, resulted from the suspension of mining
operations in December 2019.
Milling costs:Milling costs were $17.8 million
in the fourth quarter of 2019 compared to $18.4 million in the
prior year period, due primarily to the decreased costs of
consumables, including liners and grinding media. This was offset
by higher costs on mill process equipment due to performing a
comprehensive mill shutdown for planned replacement of a girth
gear, SAG mill pinion and ball mill electrical motor in December
2019, not performed in the fourth quarter of 2018.
Site Support Costs:Site support costs in the
fourth quarter of 2019 were $13.7 million compared to $13.9 million
in 2018, due primarily to lower cost of camp supplies.
Production costs per ounce of gold
sold:Production costs per ounce of gold sold were $363 for the
fourth quarter of 2019, compared to $303 in the fourth quarter of
2018. The increase was primarily due to fewer ounces sold.
All-in Sustaining CostsNG:
A photo accompanying this announcement is available
at
https://www.globenewswire.com/NewsRoom/AttachmentNg/25ce643f-8bbc-4f67-b9ad-1abdd54915d0
All-in sustaining costs on a by-product basis
per ounce soldNG, which excludes revenue-based tax, were $657 per
ounce in the fourth quarter of 2019 compared to $508 per ounce in
the prior year period. The increase was due primarily to fewer
ounces sold, partially offset by lower mining costs due to the
suspension of operations and lower spending on sustaining
capital.
Including revenue-based taxes, all-in sustaining
costs on a by-product basis per ounce soldNG were $864 per ounce in
the fourth quarter of 2019 compared to $679 per ounce in the prior
year period.
Year ended December 31, 2019 compared to
2018
Financial:Kumtor recognized 25% higher revenues
and 38% higher earnings from mine operations during 2019 when
compared to the prior year as a result of more ounces sold, higher
realized gold prices and lower unit costs from the processing of
ore with higher grades and recoveries.
Cash provided by mine operations was $85.3
million higher in 2019 when compared to 2018 due to higher realized
gold prices, higher ounces sold and higher accounts payable.
Production:During 2019, Kumtor focused on
developing cut-back 19 and stripping and unloading of ice from
cut-back 20.
Total waste and ore mined in 2019 was 156.4
million tonnes compared to 180.3 million tonnes in the comparative
prior year, due primarily to weather delays affecting the truck and
shovel availability and the suspension of mining operations in
December 2019.
Kumtor produced 600,201 ounces of gold in 2019
compared to 534,563 ounces of gold in 2018. The increase was due
primarily to processing ore with higher grade and recovery from
cut-back 18 and cut-back 19. During 2019, Kumtor’s mill head grade
was 3.7 g/t with a recovery of 83.5% compared with 3.3 g/t grade
and a recovery of 79.3% for 2018.
Mining Costs, including capitalized
stripping:
A photo accompanying this announcement is available at
https://www.globenewswire.com/NewsRoom/AttachmentNg/950e562f-a17c-425f-9a27-9ae054970ce8
Mining costs, including capitalized stripping,
were $197.6 million in 2019 compared to $211.1 million in
2018. Mining costs decreased due to fewer tonnes mined as a result
of the suspension of mining in December 2019 and poor weather
conditions during the summer, resulting in a decrease in diesel
costs, partially offset by higher costs for spare parts.
Milling Costs:Milling costs were $71.6 million
in 2019 compared to $67.3 million in the comparative prior year,
which increased due to higher carbon fine processing, costs related
to the comprehensive maintenance shutdown for the planned
replacement of equipment (not performed in 2018) and higher
grinding media and cyanide costs due to the processing of a harder
ore type.
Site Support Costs:Site support costs in 2019
totaled $49.0 million compared to $51.7 million in the comparative
prior year, the decrease was due primarily to fewer contractors on
site and lower camp supply costs.
Production costs per ounce of gold
sold:Production costs per ounce of gold sold were $381 for 2019,
consistent with $394 in 2018, due to ounces sold and cost of sales
increasing by similar percentages.
All-in Sustaining CostsNG:
A photo accompanying this announcement is available
at
https://www.globenewswire.com/NewsRoom/AttachmentNg/9faa3f1d-aee0-42c0-98a2-72b1f9e39a12
All-in sustaining costs on a by-product basis
per ounce soldNG, which excludes revenue-based tax, were $598 per
ounce in 2019 compared to $694 per ounce in 2018. The decrease was
mainly due to more ounces of gold sold and lower capitalized
stripping as a result of the suspension of mining operations and
earlier cessation of stripping activity in 2019 (cut-back 19) than
in 2018 (cut-back 18).
Including revenue-based taxes, all-in sustaining
costs on a by-product basis per ounce soldNG were $792 per ounce in
2019 compared to $869 per ounce in 2018.
Mount Milligan MineThe Mount
Milligan Mine is an open pit mine located in north central British
Columbia, Canada producing a gold and copper concentrate.
Production at Mount Milligan is subject to an arrangement with RGLD
AG and Royal Gold, Inc. (together, “Royal Gold”) pursuant to which
Royal Gold is entitled to purchase 35% of the gold produced and
18.75% of the copper production at the Mount Milligan Mine for $435
per ounce of gold delivered and 15% of the spot price per metric
tonne of copper delivered (the “Mount Milligan Streaming
Arrangement”).
Water UpdateThe Company received amendments to
its environmental assessment certificate to permit access to
additional sources of surface water and groundwater until November
30, 2021.
During the fourth quarter of 2019, Mount
Milligan continued to access surface water from Philip Lake 1 and
Rainbow Creek until October when surface water flows diminished to
levels below the levels allowed under the permits.
During the summer, surface water flows were
augmented by higher than normal rainfall in the second half of the
year. In addition, Mount Milligan has developed a wellfield in the
Lower Rainbow Valley that began pumping in late December. The
permit for this wellfield allows pumping over the next four years
and the Company expects to extend the length of the permits
provided there is appropriate monitoring of the impact on the
aquifer and local surface water courses. The Company does not
expect a curtailment in production in 2020 as there is expected to
be sufficient water in the tailing storage facility to run at full
capacity throughout the year.
The Company continues to work with relevant
stakeholders to evaluate water sources that have been identified in
a multiple accounts analysis to supply Mount Milligan’s mill for
the life-of-mine while meeting environmental and other parameters.
The application for a long-term water solution will be the subject
of ongoing discussions with regulators, potentially affected
Indigenous groups, local communities and other interested
parties. The Company expects that an updated long-term water
source solution for the entire life-of-mine should be finalized
prior to the expiry of its current water access permits, although
there can be no assurance that it will have adequate sources of
water over the long term. See “Caution Regarding
Forward-Looking Information”.
ImpairmentAs part of the Company’s annual budget
and life of mine process, the Company identified in the third
quarter of 2019 that recent cost escalation relating to short and
long-term water sourcing requirements, higher maintenance costs,
higher than expected labour requirements, and lower mill throughput
estimates, among other things, will continue in the short to medium
term. This combined with lower than expected long term gold
recoveries and the expectation that Mount Milligan’s mineral
reserves and resources would be materially reduced resulted in a
trigger for an impairment test on Mount Milligan’s long-lived
assets.
The impairment test was performed effective
September 1, 2019, and used the Fair Value Less Costs of Disposal
(“FVLCD”) methodology. Specifically, the net asset value (“NAV”) of
the Mount Milligan cash generating unit (“CGU”) was determined
based on a discounted cash flow analysis of an indicative
life-of-mine model (“Indicative model”) developed solely for
impairment testing purposes and was management’s best estimate of
the economics associated with the remainder of the life of the mine
at that point in time. The Indicative model was not a NI 43-101
technical report and it did not include the associated detailed
engineering; rather, it was management’s best estimate when the
impairment trigger was identified. The Indicative model included
the estimated higher cost profile referred to above, updated
grade-recovery curves for both gold and copper, an estimate of
contained gold and copper metal to be mined and processed over the
life of the mine, the cash flows expected to be generated over the
life of the mine, and various other business and economic
assumptions. The higher cost profile referred to above, was
incorporated in the discounted cash flow analysis used in the
impairment test.
In determining fair value, management believed
that an industry participant would consider the value of resources
not included in the Indicative model. As such, the Company also
included the fair value of the estimated recoverable amount of
known resources beyond the Indicative model by considering the
estimated cash flows per ounce generated in the Indicative
model.
Some gold companies trade at a market
capitalization greater than the net present value (“NPV”) of their
expected cash flows. Market participants describe this as a “NAV
multiple”, which represents the multiple applied to the NPV to
arrive at the trading price. The NAV multiple is generally
understood to take account of a variety of additional value factors
such as the exploration potential of the mineral property, namely
the ability to find and produce more metal than what is currently
included in the Indicative model or reserve and resource estimates,
and the benefit of gold price optionality. As a result, the Company
applied a specific NAV multiple based on the multiples observed in
the market in recent periods that management judged to be
appropriate.
The test concluded that the recoverable amount
of the Mount Milligan CGU using the Indicative model and higher
cost profile was lower than its carrying value as at September 1,
2019. As a result, the Company recorded an impairment charge of
$230.5 million in the Statement of Earnings, including the
write-down of goodwill of $16.1 million and long-lived assets of
$214.4 million.Updated NI 43-101 Technical ReportOn March 26, 2020,
the Company announced the results of the updated NI 43-101
technical report on the Mount Milligan Mine as at December 31,
2019. This resulted in a material reduction in reserves and
resources compared to the reserves and resources statement as at
December 31, 2018. The assumptions used in the development of this
NI 43-101 technical report and revised reserve included a gold
price of $1,250 per ounce, a copper price of $3.00 per pound and a
CAD foreign exchange rate of 1.3. The decrease in Mount Milligan’s
reserves was considered to be a triggering event for impairment
testing as at December 31, 2019, however no further impairment
charge or reversal of impairment was identified as a result of the
test. The assumptions used in our impairment test at both December
31, and September 1, 2019 are included in the table below. The
updated NI 43-101 technical report on the Mount Milligan Mine was
published by the Company on March 26, 2020, see “Mineral Reserves
and Mineral Resources”.
Assumptions and JudgmentsCalculating the FVLCD
required management to make estimates and assumptions with respect
to future production levels, metallurgical recoveries and
operating, capital and closure costs in the life of mine plans;
continued license to operate; future metal prices; foreign exchange
rates; discount rates; net asset value multiples and the value of
mineral reserves and resources outside the Indicative model and NI
43-101. Changes in any of the assumptions or estimates used in
determining the fair values could have impacted the impairment
analysis and its conclusions.
The key assumptions used in the impairment test
for Mount Milligan are summarized in the table below:
|
September 1, 2019 |
December 31, 2019 |
Gold price per oz -
short-term |
$1,350 |
$1,400 |
Gold price per oz -
long-term |
$1,300 |
$1,350 |
Copper price per lb -
short-term |
$2.60-$2.80 |
$2.60-$2.80 |
Copper price per lb -
long-term |
$3.00 |
$3.00 |
Foreign exchange rate
(Canadian dollar to US dollar) |
$1.30 |
$1.30 |
Discount rate |
8% |
6% |
NAV
multiple |
1.00-1.25 |
1.00-1.25 |
Gold pricesManagement estimated gold prices
through an analysis of gold forward prices and by considering the
average of the most recent market commodity price forecasts
consensus from a number of recognized financial analysts. Recent
changes in the gold market has resulted in a revision to our gold
price assumption from September 1, 2019 to December 31, 2019.
Beyond Life of MineFor the impairment test as at
December 31, 2019, where the life of mine plans exclude a material
portion of total resources, the Company assigns a fair value per
ounce to the resources not considered in these plans.
ProductionAs at September 1, 2019, the Company
determined its indicative production profile and total life of mine
production based on an updated pit shell estimate developed in the
third quarter. As at December 31, 2019, the production profile was
based on the updated NI 43-101 technical report on the Mount
Milligan Mine.
Discount rateA real after-tax discount rate was
based on the Company’s estimated weighted-average cost of capital
adjusted for the risks associated with Mount Milligan’s cash flow.
Some risks associated with the Mount Milligan Mine reflected in the
discount rate employed in our analysis at September 1, 2019, have
since been reduced, including throughput and production risks
related to water availability. As a result, we have reduced our
discount rate from 8% as at September 1, 2019 to 6% as at December
31, 2019.
Mount Milligan Operating
Results
($ millions, except as noted) |
Three months ended December 31, |
Twelve months ended December 31, |
2019 |
|
2018 |
|
% Change |
2019 |
|
2018 |
|
% Change |
Financial Highlights: |
|
|
|
|
|
|
|
|
|
|
Gold sales |
|
37.9 |
|
|
65.2 |
|
(42%) |
|
194.2 |
|
|
173.5 |
|
12% |
Copper sales |
|
31.9 |
|
|
23.9 |
|
34% |
|
140.8 |
|
|
89.5 |
|
57% |
Total Revenues |
|
69.8 |
|
|
89.1 |
|
(22%) |
|
335.0 |
|
|
263.0 |
|
27% |
|
|
|
|
|
|
|
|
|
|
|
Production costs |
|
49.1 |
|
|
57.0 |
|
(14%) |
|
232.7 |
|
|
176.5 |
|
32% |
Standby costs |
|
- |
|
|
- |
|
0% |
|
- |
|
|
10.8 |
|
(100%) |
Depreciation, depletion and amortization |
|
11.0 |
|
|
11.3 |
|
(3%) |
|
53.3 |
|
|
37.2 |
|
43% |
Earnings from mine operations |
|
9.7 |
|
|
20.8 |
|
(53%) |
|
49.0 |
|
|
38.5 |
|
27% |
|
|
|
|
|
|
|
|
|
|
|
Cash (used in) provided by mine operations |
|
(18.8 |
) |
|
39.3 |
|
(148%) |
|
62.2 |
|
|
37.4 |
|
66% |
Cash provided by mine operations before changes in working
capital(1) |
|
16.2 |
|
|
28.5 |
|
(43%) |
|
85.7 |
|
|
63.1 |
|
36% |
|
|
|
|
|
|
|
|
|
|
|
Operating Highlights: |
|
|
|
|
|
|
|
|
|
|
Tonnes mined (000's) |
|
9,577 |
|
|
8,431 |
|
14% |
|
39,466 |
|
|
33,225 |
|
19% |
Tonnes ore mined (000's) |
|
3,812 |
|
|
3,678 |
|
4% |
|
15,736 |
|
|
13,461 |
|
17% |
|
|
|
|
|
|
|
|
|
|
|
Tonnes milled (000's) |
|
3,919 |
|
|
3,753 |
|
4% |
|
16,350 |
|
|
13,556 |
|
21% |
Mill Head Grade Copper (%) |
|
0.28 |
% |
|
0.18 |
% |
50% |
|
0.26 |
% |
|
0.20 |
% |
25% |
Mill Head Grade Gold (g/t) |
|
0.56 |
|
|
0.76 |
|
(27%) |
|
0.53 |
|
|
0.71 |
|
(25%) |
Copper Recovery (%) |
|
80.3 |
% |
|
82.0 |
% |
(2%) |
|
81.3 |
% |
|
81.4 |
% |
(0%) |
Gold Recovery (%) |
|
67.1 |
% |
|
67.0 |
% |
0% |
|
67.4 |
% |
|
64.5 |
% |
4% |
Mining costs - total ($/t mined material) |
$ |
2.43 |
|
$ |
2.22 |
|
10% |
$ |
2.19 |
|
$ |
2.22 |
|
(1%) |
Milling costs - total ($/t milled material) |
$ |
7.43 |
|
$ |
5.81 |
|
28% |
$ |
7.10 |
|
$ |
6.26 |
|
13% |
Concentrate Produced (dmt) |
|
41,688 |
|
|
26,861 |
|
55% |
|
159,517 |
|
|
105,998 |
|
50% |
Payable Gold Produced (oz) (3) |
|
45,984 |
|
|
60,271 |
|
(24%) |
|
183,107 |
|
|
194,993 |
|
(6%) |
Payable Copper Produced (000's lbs) (3) |
|
18,079 |
|
|
11,796 |
|
53% |
|
71,146 |
|
|
47,091 |
|
51% |
|
|
|
|
|
|
|
|
|
|
|
Gold Sales (payable oz)(3) |
|
33,324 |
|
|
66,366 |
|
(50%) |
|
180,423 |
|
|
178,882 |
|
1% |
Copper Sales (000's payable lbs)(3) |
|
14,301 |
|
|
13,591 |
|
5% |
|
67,430 |
|
|
44,370 |
|
52% |
Average Realized Price - Gold - combined ($/oz )(1)(2) (3) |
$ |
1,137 |
|
$ |
987 |
|
15% |
$ |
1,077 |
|
$ |
971 |
|
11% |
Average Realized Price - Copper - combined ($/lb) (1)(2) (3) |
$ |
2.23 |
|
$ |
1.76 |
|
27% |
$ |
2.09 |
|
$ |
2.02 |
|
3% |
|
|
|
|
|
|
|
|
|
|
|
Capital Expenditures - sustaining (1) |
|
8.9 |
|
|
10.1 |
|
(12%) |
|
35.6 |
|
|
42.2 |
|
(16%) |
|
|
|
|
|
|
|
|
|
|
|
Unit Costs: |
|
|
|
|
|
|
|
|
|
|
Production costs per ounce of gold sold |
|
831 |
|
|
585 |
|
42% |
|
746 |
|
|
672 |
|
11% |
Gold - All in Sustaining costs on a by-product basis ($/oz
sold) (1) |
|
1,114 |
|
|
689 |
|
62% |
|
828 |
|
|
764 |
|
8% |
Gold - All in Sustaining costs on a by-product basis -
including taxes ($/oz sold) (1) |
|
1,129 |
|
|
707 |
|
60% |
|
848 |
|
|
779 |
|
9% |
Gold - All in Sustaining costs on a co-product basis ($/oz
sold) (1) |
|
1,269 |
|
|
676 |
|
88% |
|
950 |
|
|
751 |
|
26% |
Production costs per pound of copper sold |
|
1.50 |
|
|
1.33 |
|
13% |
|
1.46 |
|
|
1.26 |
|
16% |
Copper - All in Sustaining costs on a co-product basis
($/lb sold) (1) |
|
2.28 |
|
|
1.53 |
|
49% |
|
1.85 |
|
|
1.77 |
|
5% |
(1) Non-GAAP measure. See discussion under “Non-GAAP
Measures” |
(2) The average realized price of gold is a combination of
market price paid by third parties and $435 per ounce paid by Royal
Gold, while the average realized price of copper is a combination
of market price paid by third parties and 15% of the spot price per
metric tonne of copper delivered paid by Royal Gold, in each case
under the Mount Milligan Streaming Arrangement. |
(3) Mount Milligan payable production and sales are presented
on a 100% basis (the Mount Milligan Streaming Agreement entitles it
to 35% and 18.75% of gold and copper sales, respectively). Under
the Mount Milligan Streaming Arrangement, Royal Gold will pay $435
per ounce of gold delivered and 15% of the spot price per metric
tonne of copper delivered. Payable production for copper and gold
reflects estimated metallurgical losses resulting from handling of
the concentrate and payable metal deductions, subject to metal
content, levied by smelters. The current payable percentage applied
is approximately 95% for copper and 97.5% for gold, which may be
revised on a prospective basis after a sufficient history of
payable amounts is determined. |
|
Fourth Quarter 2019 compared to Fourth Quarter
2018
Financial:Earnings from mine operations was $9.7
million in the fourth quarter of 2019 compared to earnings from
mine operations of $20.8 million in the prior year period. The
decrease was due to lower revenues as a result of fewer gold ounces
sold, partially offset by higher gold prices. In the fourth quarter
of 2019, only 72% and 79%, respectively, of the gold and copper
produced was sold. This compares to 2018, when gold and copper
sales exceeded production for the quarter.
Cash provided by mine operations was $58.1
million lower in the fourth quarter of 2019 when compared to 2018
due to the decrease in revenue, greater mining and milling costs, a
decrease in accounts payable and an increase in the inventory
balance as compared to 2018.
Production:During the fourth quarter of 2019,
mining activities were in phases 3, 4 and 8 of the open pit, with
the majority of ore coming from phase 3 and the bulk of the waste
coming from phases 4 and 8. Overburden and topsoil stripping
continued in phase 8 through the fourth quarter of 2019. Total
waste and ore mined in the fourth quarter of 2019 was 9.6 million
tonnes and total material moved was 10.8 million tonnes. In the
comparative quarter of 2018, total waste and ore mined was 8.4
million tonnes and total material moved was 9.2 million tonnes.
Mine production averaged 117,903 tonnes per day compared to 98,893
tonnes per day in the comparative quarter of 2018. The increase was
primarily due to higher haul truck loading rates and improvements
in haul fleet productivity.
Total mill throughput was 3.9 million tonnes in
the fourth quarter of 2019 compared to 3.8 million tonnes in the
same quarter of 2018. In the fourth quarter of 2019, mill
throughput averaged 42,599 tonnes per calendar day (51,624 tonnes
per operating day), compared to 40,790 tonnes per calendar day
(44,098 tonnes per operating day) in the same prior year period.
The increased throughput was due to increased mill and water
availability.
Gold production in the fourth quarter of 2019
was 45,984 ounces compared to 60,271 ounces in the comparative
prior year period due to lower gold grades. Total copper production
was 18.1 million pounds in the fourth quarter of 2019 compared to
11.8 million pounds in the comparative prior year period, due to
higher throughput and higher copper grades.
Mining costs:
A photo accompanying this announcement is available
at
https://www.globenewswire.com/NewsRoom/AttachmentNg/ec7afab9-e0c9-4977-8da0-cb1ae342f70b
Mining costs totaled $19.6 million in the fourth
quarter of 2019, which was $4.4 million higher than the comparative
prior year period. The increase was due to higher spend on
auxiliary equipment repair, labour cost inflation, implementation
of a new statutory employee health tax, more tonnes blasted and
more material moved.
Milling costs:
A photo accompanying this announcement is available
at
https://www.globenewswire.com/NewsRoom/AttachmentNg/9fb67924-ee83-49bd-91a8-c5b227e2730d
Milling costs totaled $29.1 million in the
fourth quarter of 2019 compared to $21.8 million in the prior year
period. The increase in milling costs was due to repairs to the
crusher equipment, grinding equipment relining, labour cost
inflation, the employee health tax, higher water sourcing costs and
higher mill throughput.
Site support costs:Site support costs in the
fourth quarter of 2019 totaled $12.6 million versus $12.1 million
in the comparative prior year period, primarily due to greater
labour costs and the new statutory employee health tax.
Production costs per ounce of gold
sold:Production costs per ounce of gold sold in the fourth
quarter of 2019 were $831 compared to $585 in the same quarter of
2018 due to lower sales volume which resulted in higher unit
costs.
Production costs per pound of copper
sold:Production costs per pound of copper sold in the fourth
quarter of 2019 were $1.50 compared to $1.33 in the same quarter of
2018 as a result of a 26% decline in the price of copper relative
to gold, which attributed more production costs to copper,
partially offset by higher sales volume.
All-in Sustaining CostsNG:
A photo accompanying this announcement is available
at
https://www.globenewswire.com/NewsRoom/AttachmentNg/95727174-8ac4-43da-8680-209fbb1a711d
All-in sustaining costs on a by-product basis
per ounce sold NG, which excludes taxes, were $1,114 per ounce for
the fourth quarter of 2019 compared to $689 per ounce in the fourth
quarter of 2018 due to fewer gold ounces sold and purchase of
previously leased equipment, partially offset by higher copper
credits.
Including income taxes, all-in sustaining costs
on a by-product basis per ounce soldNG were $1,129 per ounce in the
fourth quarter of 2019 compared to $707 per ounce in the same
period of 2018.
Year-end December 31, 2019 compared to 2018
Financial:Mount Milligan recognized $72.0
million in higher revenues and $10.5 million in higher earnings
from mine operations in 2019 when compared to 2018 as a result of
higher gold and copper sales and higher gold prices.
Cash provided by mine operations increased by
$24.8 million in 2019 compared to the prior year due to higher
revenue as a result of increased copper sold, higher realized
prices, an increase in accounts payable, partially offset by an
increase accounts receivable due to the timing of
shipments.
Production:During 2019, ore mined came primarily
from phase 3, while phase 4 of the main MBX pit and phase 8 of the
Southern Star Pit provided most of the waste material. In phase 8,
development focused on overburden and topsoil stripping in order to
provide access to ore and waste rock areas for mining. Total waste
and ore mined in 2019 was 39.5 million tonnes and total tonnes
moved was 43.2 million. In 2018, total waste and ore mined was 33.2
million tonnes and total tonnes moved was 35.8 million tonnes. Mine
production averaged 118,104 tonnes per day moved for 2019 while
98,071 tonnes per day was moved in 2018. The increase in
tonnes mined and moved in 2019 was primarily due to the higher mill
throughput with the increased availability of water and higher
mining fleet productivity.
Total mill throughput was 16.4 million tonnes in
2019 compared to 13.6 million tonnes in the prior year. In 2019,
mill throughput averaged 44,795 tonnes per calendar day (50,934
tonnes per operating day), compared to 37,140 tonnes per calendar
day (46,849 tonnes per operating day) in 2018 due to the increased
water availability.
In 2019, total payable gold and copper
production was 183,107 ounces and 71.1 million pounds,
respectively, compared to 194,993 ounces of gold and 47.1 million
pounds of copper in 2018.
Mining costs:
A photo accompanying this announcement is available at
https://www.globenewswire.com/NewsRoom/AttachmentNg/cdbbbe3b-6102-4a2c-bacf-4c4699b4459f
Mining costs were $68.8 million in 2019, $11.7
million higher than the prior year. The increase mainly reflects
higher spending on auxiliary equipment repair, implementation of a
new statutory employee health tax, higher fuel consumption as a
result of higher tonnes moved and higher in-pit drilling cost
associated with improvements to the long-term mine planning
process.
Milling costs:
A photo accompanying this announcement is available
at
https://www.globenewswire.com/NewsRoom/AttachmentNg/41c1f59e-f14a-4c96-8ead-cd405615db7d
Milling costs totaled $116.1 million in 2019
compared to $95.7 million in the prior year which included standby
costs of $10.8 million. The increase in production costs were
mainly due to higher water sourcing costs associated with increased
mill throughput, labour cost inflation and a new employee health
tax.
Site support costs:Site support costs (including
royalties) in 2019 totaled $47.1 million versus $44.1 million in
the comparative prior year. The increase reflects higher royalty
costs due to higher sales, and other costs including labour cost
inflation, partially offset by a reduction in support costs, as
costs for transportation services were capitalized and depreciated
in the current period.
Production costs per ounce of gold
sold:Production costs per ounce of gold sold in 2019 were $746
compared to $672 in 2018, primarily due to higher mining and
milling costs as a result of the additional costs of sourcing water
and higher labour costs.
Production costs per pound of copper
sold:Production costs per pound of copper sold in 2019 were $1.46
compared to $1.26 in 2018, due to a decline in the price of copper
relative to gold, which attributed more production costs to copper,
partially offset by higher volumes sold.
All-in Sustaining CostsNG:
A photo accompanying this announcement is available
at
https://www.globenewswire.com/NewsRoom/AttachmentNg/0317828f-2136-4a3d-bf84-079a3a698738
All-in sustaining costs on a by-product basis
per ounce sold NG, which excludes income taxes, were $ 828 per
ounce for 2019 compared to $764 per ounce in the comparative year.
The unit cost increase was due primarily to higher production
costs, partially offset by higher copper credits.
Including income taxes, all-in sustaining costs
after tax on a by-product basis per ounce sold NG were $848 per
ounce for 2019 compared to $779 per ounce in 2018.
Molybdenum BusinessThe
molybdenum business includes two North American primary molybdenum
mines that are currently on care and maintenance: the Thompson
Creek Mine ("TC Mine") (mine and mill) in Idaho and the 75%-owned
Endako Mine (mine, mill and roaster) in British Columbia. The
molybdenum business also includes the Langeloth metallurgical
roasting facility (the "Langeloth Facility") in Pennsylvania. TC
Mine operates a molybdenum beneficiation circuit to treat
molybdenum concentrates to supplement the concentrate feed sourced
directly for the Langeloth Facility. This beneficiation process
allows the Company to process high copper content molybdenum
concentrate purchased from third parties, which is then transported
from TC Mine to the Langeloth Facility for further processing.
The molybdenum business provides tolling
treatment services for customers by converting molybdenum
concentrates to molybdenum oxide powder and briquettes and
ferromolybdenum products. Additionally, molybdenum concentrates are
purchased to convert to upgraded products which are then sold in
the metallurgical and chemical markets.
Molybdenum Operating
Results
($ millions, except as noted) |
Three months ended December 31, |
Twelve months ended December 31, |
2019 |
|
2018 |
|
% Change |
2019 |
|
2018 |
|
% Change |
Financial Highlights: |
|
|
|
|
|
|
Molybdenum (Mo) Sales ($ millions) |
40.7 |
|
52.8 |
|
(23%) |
204.7 |
|
197.1 |
|
4% |
Tolling, Calcining and Other |
1.5 |
|
2.7 |
|
(44%) |
8.1 |
|
9.2 |
|
(12%) |
Total Revenues and Other Income |
42.2 |
|
55.5 |
|
(24%) |
212.8 |
|
206.3 |
|
3% |
|
|
|
|
|
|
|
Production costs |
50.8 |
|
53.7 |
|
(6%) |
215.2 |
|
192.7 |
|
12% |
Depreciation, depletion and amortization |
1.7 |
|
1.1 |
|
52% |
5.0 |
|
5.1 |
|
(3%) |
|
|
|
|
|
|
|
Reclamation expense |
34.5 |
|
41.8 |
|
(17%) |
34.5 |
|
40.4 |
|
(15%) |
|
|
|
|
|
|
|
Care and Maintenance costs - Molybdenum mines |
3.3 |
|
4.4 |
|
(26%) |
13.5 |
|
14.6 |
|
(8%) |
|
|
|
|
|
|
|
Loss from operations |
(48.7 |
) |
(46.0 |
) |
6% |
(58.1 |
) |
(48.8 |
) |
19% |
Adjusted loss from operations |
(14.2 |
) |
(4.2 |
) |
238% |
(23.6 |
) |
(8.4 |
) |
182% |
|
|
|
|
|
|
|
Total capital expenditure |
1.1 |
|
1.5 |
|
(26%) |
5.4 |
|
2.3 |
|
139% |
|
|
|
|
|
|
|
Cash (used in) provided by operations |
(12.9 |
) |
(10.6 |
) |
22% |
(20.2 |
) |
(24.9 |
) |
(19%) |
Cash (used in) provided by operations, before changes in working
capital |
(12.1 |
) |
(2.8 |
) |
332% |
(13.9 |
) |
(1.0 |
) |
1290% |
|
|
|
|
|
|
|
Average Mo spot price ($/lb) |
9.7 |
|
12.1 |
|
(20%) |
11.4 |
|
11.9 |
|
(5%) |
|
|
|
|
|
|
|
Production Highlights (000's lbs): |
|
|
|
|
|
|
Mo purchased |
4,723 |
|
4,809 |
|
(2%) |
17,779 |
|
16,735 |
|
6% |
Mo roasted |
3,235 |
|
4,612 |
|
(30%) |
17,384 |
|
16,883 |
|
3% |
Mo sold |
3,578 |
|
4,251 |
|
(16%) |
16,035 |
|
15,726 |
|
2% |
Toll roasted and upgraded Mo |
773 |
|
1,569 |
|
(51%) |
5,059 |
|
5,586 |
|
(9%) |
Fourth Quarter 2019 compared to Fourth Quarter
2018In the fourth quarter of 2019, 3.2million pounds of molybdenum
were roasted which represented a 30% decrease over the same period
in 2018. This decrease was the result of the scheduled maintenance
plant outages at Langeloth in September and October. A total of 0.7
million pounds of molybdenum were roasted under tolling
arrangements during the quarter, which was 51% less than the same
period in 2018, also mainly due to the scheduled maintenance.
Molybdenum unit sales in the fourth quarter of
2019 decreased by 16% as compared to the same period of 2018,
resulting from weakening demand from metallurgical grade molybdenum
products.
The Molybdenum business recorded a loss from
operations in the fourth quarter of 2019 of $48.7 million compared
to $46.0 million in the same period of 2018. The loss in 2019
included $31.4 million related to an increase in the asset
retirement obligation at the Company’s TC Mine due to a decrease in
interest rates which reduced the assumed discount rate. In 2018, TC
Mine was required to include water treatment in its asset
retirement obligation resulting in a charge of $48.2 million.
Excluding the increases in the asset retirement obligation
recognized in both 2019 and 2018, the increased operating loss in
2019 principally resulted from reduced sales volume and lower
realized prices. The Platts molybdenum oxide price, the Company’s
reference price for pricing, declined to an average of $9.61 per
pound in the fourth quarter of 2019 from $12.06 in 2018, due to a
significant weakening in steel demand globally in the fourth
quarter, impacting demand for molybdenum.
Year ended December 31, 2019 compared to 2018In
2019, a total of 17.4 million pounds of molybdenum were roasted,
which represented a 3% increase over 2018. A total of 5.1 million
pounds of molybdenum were roasted under tolling arrangements in
2019 which was 9% lower than 2018.
Molybdenum unit sales in 2019 increased by 2% as
compared to the prior year. This increase was the result of an
increase in sales to chemical grade customers.
The Molybdenum business recorded a loss from
operations for 2019 of $58.1 million compared to a loss of $48.8
million for 2018. The greater loss in 2019 was principally due to
inventory write-downs as a result of declining molybdenum pricing
which was affected by a significant weakening in steel demand
globally and market concerns that the industry was
oversupplied.
In 2019, the molybdenum business consumed $13.9
million of cash from the operations before changes in working
capitalNG, including $13.5 million in care and maintenance spending
at the two molybdenum mines. In 2018, $1 million was consumed, net
of $14.6 million in care and maintenance at the two mines. Total
capital spending in 2019 was $5.4 million ($2.3 million in 2018),
which included $3.9 million for the work completed during the plant
outage in September and October and for the replacement of the
molten sulfur tank.
As previously reported, the unionized staff at
the Langeloth facility went on strike on September 9, 2019
following expiration of the site’s collective bargaining agreement
earlier in 2019. The strike continued throughout the remainder of
2019 with no significant disruption to operations or customer
sales. In early January 2020 the Company hired permanent
replacement workers and operations are continuing without any
significant change in its operations.
Construction and Development
Projects
Öksüt ProjectThe Öksüt Project
is the Company’s gold deposit situated in Turkey approximately 300
kilometres southeast of Ankara and 48 kilometres south of Kayseri,
the provincial capital. The nearest administrative centre is at
Develi (population 64,000) located approximately 10 kilometres
north of the Project. Öksüt Madencilik Sanayi ve Ticaret Anonim
Sirketi (OMAS), a wholly-owned subsidiary of the Company, owns the
rights to mine and explore the Öksüt Project.
Construction Highlights – 2019 Year:As at
December 31, 2019 the Öksüt Project construction was 89% complete,
which was sufficient to allow operational start-up of all required
facilities.
The Company achieved first gold pour from the
Öksüt Project on January 31, 2020 and the remaining construction is
expected to be completed by mid-2020.
During the fourth quarter and year ended
December 31, 2019, the Company spent $28.8 million and $86.5
million, respectively, on construction and development activities
at the Öksüt Project.
Operating highlights – 2019 Year:Mining
activities commenced at the Keltepe and Güneytepe pits on August 16
and September 3, 2019, respectively, after the topsoil stripping
activities were completed. Total waste and ore mined from both pits
was 3.8 million tonnes. A total of 22,641 contained gold ounces
were mined and stockpiled on surface from the Keltepe and Güneytepe
pits in 2019.
Mining costs, including capitalized stripping,
were $9.3 million in 2019, of which contractor costs represented
$8.6 million. Mining activities are performed by a third-party
contractor, under the supervision of Öksüt’s technical team.
Kemess Underground Project:The
Kemess Project is located in north-central British Columbia,
Canada, approximately 250 kilometres north of Smithers, 430
kilometres northwest of Prince George and 209 kilometres from the
Mount Milligan Mine. The Kemess Project site (or “Kemess”) includes
infrastructure from the past producing Kemess South Mine. There are
currently no mining activities at the Kemess site and on-site
activities consist of care and maintenance work and initial surface
construction and development activities for the proposed Kemess
Underground Project.
In the fourth quarter of 2019, the Company spent
$5.2 million on care and maintenance and $0.3 million on
pre-development activities. Capital expenditures were $7.1 million
which includes costs for construction of a water treatment plant
and water distribution system. Comparatively, the Company spent
$5.2 million on care and maintenance activities in the fourth
quarter of 2018. Capital expenditures in the fourth quarter of 2018
were $13.8 million which included access corridor construction,
trenching, earth works, water treatment plant, water discharge
system and mobile equipment.
In 2019, the Company spent $14.9 million on care
and maintenance and $0.8 million on pre-development activities.
Capital expenditures were $32.7 million which includes costs for
the water treatment plant, camp refurbishment and mobile equipment
purchases. Comparatively, the Company spent $14.5 million and $2.6
million on care and maintenance and pre-development activities,
respectively, in 2018. Capital expenditures for the 2018 period
were $30.9 million.
Greenstone Gold Property:The
Greenstone Gold property is located in northern Ontario, Canada
approximately 275 kilometres northeast of Thunder Bay, Ontario.
Centerra owns a 50% partnership interest in the Greenstone
Partnership, which owns the Greenstone Gold development property,
including the Hardrock deposit.
During the fourth quarter and year ended
December 31, 2019, the Company spent $8.8 million and $30.7
million, respectively, (2018: $3.9million and $18.9 million,
respectively), funding the following activities by the managing
partner of the Greenstone Partnership (“Greenstone Managing
Partner”): advancing detailed engineering, permitting,
environmental fieldwork and monitoring, completing Indigenous
community agreements and providing project readiness support,
drilling and completing a project update. As at December 31, 2019,
Centerra’s funding towards its C$185 million commitment in the
Greenstone Partnership was C$138.8 million (USD106 million).
The Company has commenced a legal proceeding
against the Greenstone Managing Partner, its partner (a wholly
owned subsidiary of Premier Gold Mines Limited (“Premier”)) and
individuals nominated by Premier to the board of the Greenstone
Managing Partner, in connection with certain disputes relating to
the Greenstone Gold property. In turn, Premier and its board
nominees filed a counterclaim against the Company and its board
nominees to the Greenstone Managing Partner. See
“Contingencies”.
Quarterly Results – Previous Eight
Quarters
Over the last eight quarters, Centerra’s results
reflect the impact of increasing gold sales amidst a period of
rising gold prices. Production costs have also benefited from
stabilizing diesel fuel costs and a depreciating Canadian dollar
over the last eight quarters. Gold sold on a quarterly basis
declined from the first quarter of 2018 to the second quarter in
2018, steadily increasing from the third quarter of 2018 through to
the third quarter of 2019, followed by a decrease in the fourth
quarter of 2019. An after-tax gain of $21.3 million on the sale of
the Company’s royalty portfolio was recorded in the second quarter
of 2018. The Company recognized an increase in ARO expenses of
$41.8 million in the fourth quarter of 2018 mainly to record an
increase in water treatment costs at the TC Mine. The third quarter
of 2019 reflects the impairment of $230.5 million recorded on the
Mount Milligan Mine and the $10 million Kyrgyz Republic settlement
expense. While the fourth quarter of 2019 includes a reclamation
expense of $31.4 million as a result of a change in the interest
rate used to discount the reclamation costs at TC Mine. The
quarterly financial results for the last eight quarters are shown
below:
$ million, except per share data |
2019 |
2018 |
Quarterly data unaudited |
|
|
|
|
|
|
|
|
|
Q4 |
Q3 |
Q2 |
Q1 |
Q4 |
Q3 |
Q2 |
Q1 |
Revenue |
313 |
388 |
341 |
334 |
392 |
259 |
243 |
235 |
Net earnings (loss) |
(12) |
(165) |
33 |
50 |
49 |
6 |
44 |
9 |
Basic earnings (loss) per share |
(0.04) |
(0.56) |
0.11 |
0.17 |
0.17 |
0.02 |
0.15 |
0.03 |
Diluted earnings (loss) per share |
(0.04) |
(0.56) |
0.11 |
0.17 |
0.17 |
0.01 |
0.15 |
0.03 |
Related party transactions
KyrgyzaltynThe sole customer of
gold doré from the Kumtor Mine, Kyrgyzaltyn JSC (“Kyrgyzaltyn”), is
a shareholder of the Company and is a state-owned entity of the
Kyrgyz Republic. Gold produced by the Kumtor Mine is purchased at
the mine site by Kyrgyzaltyn, for processing at its refinery in the
Kyrgyz Republic pursuant to the Restated Gold and Silver Sales
Agreement (“Sales Agreement”), dated June 6, 2009 between KGC,
Kyrgyzaltyn and the Government of the Kyrgyz Republic. Amounts
receivable from Kyrgyzaltyn arise from the sale of gold to
Kyrgyzaltyn. Kyrgyzaltyn is required to pay for gold delivered
within 12 days from the date of shipment. Default interest is
accrued on any unpaid balance after the permitted payment period of
12 days. The obligations of Kyrgyzaltyn are partially secured by a
pledge of 2,850,000 shares of the Company owned by Kyrgyzaltyn.
Revenues from the Kumtor Mine are subject to a management fee of
$1.00 per ounce based on sales volumes, payable to Kyrgyzaltyn.
The breakdown of the sales transactions and
expenses with Kyrgyzaltyn, and the management fees paid and accrued
by KGC to Kyrgyzaltyn according to the terms of the Sales Agreement
are as follows:
|
|
2019 |
|
2018 |
|
Sales: |
|
|
|
|
Gross gold and silver sales to Kyrgyzaltyn (a) |
$ |
836,689 |
|
$ |
669,677 |
|
Deduct: refinery and financing charges |
|
(5,141 |
) |
|
(4,809 |
) |
Net sales revenue received from Kyrgyzaltyn |
$ |
831,548 |
|
$ |
664,868 |
|
Expenses: |
|
|
|
|
Contracting services provided by Kyrgyzaltyn (b) |
$ |
1,146 |
|
$ |
1,352 |
|
Management fees payable to Kyrgyzaltyn |
|
600 |
|
|
530 |
|
Expenses paid to Kyrgyzaltyn |
$ |
1,746 |
|
$ |
1,882 |
|
(a) As at December 31, 2019, there is $0.1 million (December
31, 2018 - $0.2 million) of amounts receivable from Kyrgyzaltyn
from gold sales. |
(b) As at December 31, 2019, there is $1.6 million (December
31, 2018 - $1.2 million) payable to Kyrgyzaltyn. |
|
Transactions with directors and key
managementThe Company transacts with key management
personnel and directors, who have authority and responsibility to
plan, direct and control the activities of the Company, for
services rendered in their capacity as directors and employees.
Key management personnel are defined as the
executive officers of the Company including the President and Chief
Executive Officer, Vice President and Chief Financial Officer, Vice
President and Chief Operating Officer, Vice President and General
Counsel and Vice President Business Development &
Exploration.
During the years ended December 31, 2019 and
2018, remuneration to directors and key management personnel were
as follows:
Compensation of directors
|
2019 |
|
2018 |
Fees earned and other compensation |
$ |
1,259 |
|
$ |
1,246 |
Share-based compensation |
|
2,465 |
|
|
945 |
Total expense |
$ |
3,724 |
|
$ |
2,191 |
Compensation of key management
personnel
|
2019 |
|
2018 |
Salaries and benefits |
$ |
4,311 |
|
$ |
4,191 |
Share-based compensation |
|
7,756 |
|
|
1,278 |
Total expense |
$ |
12,067 |
|
$ |
5,469 |
Subsequent to December 31, 2019, the position of
Vice President and Chief Human Resources Officer was added to the
list of executive officers.Contingencies
The following is a summary of contingencies with
respect to matters affecting the Company and its
subsidiaries. Readers are cautioned that the following is only
a brief summary of such matters. For a more complete
discussion of these matters, see the Company’s news releases and
its Annual Information Form for the year ended December 31, 2019
and specifically the section therein entitled “Risks that can
affect our business” available on SEDAR at www.sedar.com. The
following summary also contains forward-looking statements and
readers are referred to “Caution Regarding Forward-looking
Information”.
Kyrgyz Republic
Strategic Agreement and related claims
and proceedings
Strategic Agreement CompletedCenterra and its
Kyrgyz subsidiaries entered into the Strategic Agreement on
Environmental Protection and Investment Promotion dated September
11, 2017 with the Government of the Kyrgyz Republic.This agreement
was entered into in order to resolve existing arbitral and
environmental claims, disputes, proceedings and court orders
involving the Kumtor Mine. In the third quarter of 2019, after
satisfaction or waiver of all conditions precedent, the Strategic
Agreement was completed on August 26, 2019. As a result, all
obligations under the Strategic Agreement, including the settlement
and releases of liability as well as the obligations of KGC to make
contributions to various environmental and social funds of the
Kyrgyz Republic Government set out below, became effective.
The Strategic Agreement includes, among other
things:
- Full and final reciprocal releases
and resolution of all existing arbitral and environmental claims,
disputes, proceedings and court orders, and releases of the Company
and its Kyrgyz subsidiaries from future claims covering the same
subject matter as the existing environmental claims arising from
approved mine activities;
- an acknowledgement that there will
be no restrictions on the ability of KGC to distribute funds to
Centerra in the future;
- no admission on the part of
Centerra or its Kyrgyz subsidiaries of: (i) any environmental
wrongdoing, (ii) any non-compliance with Kyrgyz law or the Kumtor
Project Agreements (as defined below) or (iii) any pre-existing
obligation to make additional environmental or Reclamation Trust
Fund payments or environmental remediation efforts;
- the existing 2009 agreements
governing the Kumtor Mine (the “Kumtor Project Agreements”) shall
remain in full force and effect, including the tax and fiscal
regime thereunder;
- no changes to current or planned
operations at the Kumtor Mine are required; and
- KGC agreed to the following
additional contributions relating to the Kumtor Mine:a. make
a one-time lump sum payment totaling $57 million to a new,
government-administered Nature Development Fund ($50 million)
following closing (paid on August 28, 2019) and to a new,
government administered Cancer Care Support Fund ($7 million) (was
paid in 2017);b. within 12 months of closing make a further
one-time payment of $3 million to the new, government administered
Cancer Care Support Fund;c. make annual payments of $2.7
million to the Nature Development Fund, conditional on the
Government continuing to comply with its obligations under the
Strategic Agreement, and;d. accelerate its annual payments to
Kumtor’s Reclamation Trust Fund in the amount of $6 million a year
until the total amount contributed by KGC reaches the total
estimated reclamation cost for the Kumtor Project (representing the
independent assessment of Kumtor’s current reclamation costs)
subject to a minimum total reclamation cost of $69 million (which
is broadly in line with KGC’s current estimated reclamation cost
for the Kumtor Project).
In connection with the completion of the
Strategic Agreement and at the request of the Kyrgyz Government,
KGC committed to make certain additional financial contributions to
strengthen its social license to operate in Kyrgyz Republic. In
particular, KGC committed to:
- $5 million lump sum contribution to
a new Kyrgyz Republic Social Partnership for Regional Development
Fund (the “Regional Fund”) (this contribution was made on August
28, 2019);
- $5 million lump sum contribution to
the Regional Fund within 12 months of the Second Completion
Date;
- monthly contributions to the
Regional Fund equivalent to 0.4% of KGC’s revenues from the Kumtor
Project earned after the Second Completion Date;
- an annual contribution of $1
million to the Kyrgyz Republic Nature Development Fund;
and
- exploration expenditures of at
least $16 million at the Kumtor Project over a two-year period;
(this was satisfied as of December 31 2019).
These additional contributions are also
conditional upon the Kyrgyz Government continuing to comply with
the conditions precedent under the Strategic Agreement.
In March 2020, in view of the urgent need for
regional development in the Kyrgyz Republic, Kumtor Gold Company
further determined that additional contributions to the Regional
Fund are appropriate. Accordingly, it has made a further $9 million
contribution to the Regional Fund and plans to make further
contributions of $22 million over the next 30 months.
Claims and proceedings related to Strategic
AgreementIn connection with the completion of the Strategic
Agreement, the Kyrgyz Republic State Inspectorate for Environment
and Technical Safety (“SIETS”) has withdrawn each of their
outstanding claims against Kumtor and the Kyrgyz Republic
Government has released Centerra and its Kyrgyz subsidiaries from
any liability arising out of or in connection with the claims or
similar claims. As previously disclosed, beginning in 2013, SIETS
had made a series of claims against Kumtor in relation to which the
Kyrgyz Republic Inter-District Court had awarded significant
damages.
Also, in connection with the completion of the
Strategic Agreement, Centerra and Kumtor have withdrawn the
international arbitration proceeding commenced against the Kyrgyz
Republic and Kyrgyzaltyn JSC.
Kyrgyz Republic General Prosecutor’s Office
Proceedings
The Company was subject to a number of other
criminal proceedings commenced by the Kyrgyz Republic General
Prosecutor’s Office (“GPO”) and other Kyrgyz Republic state
agencies, each of which was resolved in connection with the
completion of the Strategic Agreement, except as described
below.
Criminal Investigation into Environmental
MattersIn connection with the completion of the Strategic
Agreement, the Kyrgyz Government confirmed the termination of a
criminal investigation which concerns the same subject matter as
the SIETS claims described above.
Land Use ClaimOn November 11, 2013, KOC received
a claim from the Kyrgyz Republic GPO requesting the Inter-District
Court of the Issyk-Kul Province (i) invalidate KOC’s land use
certificate; and (ii) seize certain lands within Kumtor Mine’s
concession area. KOC disputed the purported invalidation. On August
28, 2017, the Bishkek Inter-District Court terminated such
proceeding. The Company received new land use certificates on
January 24, 2019.
Kyrgyz State Tax OrdersIn August 2018, KGC commenced a claim in
the Kyrgyz courts (refiled on September 26, 2018) seeking to
invalidate orders of the Kyrgyz Republic State Tax Service which
reassessed taxes (including sanctions and penalties) owing from KGC
for the period from 2016 to 2017 in the amount of 1,377,709,739.44
Kyrgyz Soms (approximately $19.7 million), primarily in relation to
the alleged failure to pay taxes on high altitude premiums paid to
employees at the Kumtor Mine. Kyrgyz court decisions invalidating
the orders came into effect on January 10, 2019 after the customary
appeal period expired.
2013 KGC Dividend Civil and Criminal InvestigationOn June 3,
2016, the Inter-District Court renewed a claim previously commenced
by the GPO seeking to unwind the $200 million dividend paid by KGC
to Centerra in December 2013 (the “2013 Dividend”). On September
14, 2017, the Bishkek Inter-District Court determined to leave the
claim without review and, accordingly, the claim has been
terminated.
On March 20, 2018, and as contemplated by the
Kumtor Strategic Agreement, we received notification that the GPO
terminated a criminal investigation into executives of the Company
and KGC relating to the 2013 Dividend.
Criminal Proceedings Against Unnamed KGC
ManagersOn May 30, 2016, a criminal case was opened by the GPO
against unnamed KGC managers alleging that such managers engaged in
transactions that deprived KGC of its assets or otherwise abused
their authority, causing damage to the Kyrgyz Republic.
Specifically, the case appears to be focused on the reasonableness
of certain of KGC’s commercial transactions and in particular, the
purchase of goods and supplies in the normal course of its business
operations and the expenses relating to the relocation of the
Kumtor Mine’s camp in 2014 and 2015. On March 20, 2018, Centerra
received notification that the GPO had terminated its criminal
investigation against these unnamed KGC managers.
KGC Employee Movement RestrictionsIn connection
with certain of the foregoing criminal investigations, restrictions
were imposed on certain KGC managers and employees, which
prohibited them from leaving the Kyrgyz Republic. All such movement
restrictions have now been lifted.
GPO Review of Kumtor Project AgreementsIn
connection with the completion of the Strategic Agreement, the
Kyrgyz Republic Government has confirmed that this investigation
has been closed with respect to Centerra and its Kyrgyz
subsidiaries.
On June 14, 2016, according to reports in the
Kyrgyz Republic, the Kyrgyz Republic President instructed the GPO
to investigate the legality of the agreements relating to the
Kumtor Mine which were entered into in 2003, 2004 and 2009. The
2009 Restated Investment Agreement and restated agreements entered
into in 2019 (the “Kumtor Project Agreements”) governing the Kumtor
Project which was entered into in 2009 superseded entirely the 2003
and 2004 agreements. The 2009 Restated Investment Agreement was
negotiated with the Kyrgyz Government, Kyrgyzaltyn and their
international advisers, and approved by all relevant Kyrgyz
Republic state authorities, including the Kyrgyz Republic
Parliament and any disputes under the 2009 Restated Investment
Agreement are subject to resolution by international
arbitration.
GeneralWhile the completion of the Strategic
Agreement has resolved the outstanding issues relating to the
Kumtor Mine, the ongoing contributions under the Strategic
Agreement are conditional upon the Kyrgyz Government and/or
Parliament not taking actions that are inconsistent with the
Government’s obligations under the Strategic Agreement or Kumtor
Project Agreements. Any such action could lead to new or renewed
disputes with the Kyrgyz Government and could have a material
adverse impact on the Company’s future cash flows, earnings,
results of operations and financial condition.
Kumtor Mine
Lysii Waste Dump AccidentOn December 1, 2019,
Centerra announced that the Kumtor Mine experienced a significant
waste rock movement at the Lysii waste rock dump earlier that
morning, which resulted in the fatality of two Kumtor employees.
Open pit mining operations were halted and a search and rescue
operation was commenced immediately to recover the Company’s
employees. In January 2020, after an extensive search and in
consultation with the families of the deceased Kumtor employees,
search efforts were terminated. Kumtor’s annual mine plans have
been re-evaluated and after significant consultation with Kyrgyz
Republic state authorities, Kumtor re-commenced mining operations.
Milling activities at Kumtor continued with the mill continuing to
process stockpiled ore.
The Company and Kyrgyz state authorities are
carrying out separate investigations into the incident.
Petrov Lake AccidentOn February 18, 2020, the
Company announced that a fatal accident occurred at Kumtor when an
excavator tipped and then slid into a water filled basin while
operating near Petrov Lake. The Company has begun an internal
investigation and will continue to work closely with Kyrgyz
regulators and the commission formed to investigate the causes of
the accident.
Canada
Mount Milligan Mine
The Company has received a notice of civil
claims from H.R.S. Resources Corp. (“H.R.S.”), the holder of a 2%
production royalty at Mount Milligan. H.R.S. claims that since
November 2016 (when the royalty became payable) the Company has
incorrectly calculated amounts payable under the production royalty
agreement and has therefore underpaid amounts owing to H.R.S. The
Company disputes the claim and believes it has calculated the
royalty payments in accordance with the agreement. The Company
believes that the potential exposure in relation to this claim,
over what the Company has accrued, is not material.
Greenstone Gold Property
On December 23, 2019, the Company’s wholly owned
subsidiary, AuRico Canadian Royalty Holdings Inc., filed with the
Ontario Superior Court of Justice a statement of claim against the
Greenstone Managing Partner, Premier and two individual directors
appointed by Premier to the Greenstone Managing Partner’s board of
directors. Among other things, the claim relates to whether a
report prepared by G-Mining on behalf of the Greenstone Managing
Partner constitutes a Feasibility Study under the amended and
restated partnership agreement dated March 9, 2015 (the
“Partnership Agreement”), whether such report satisfies the
definition of “Feasibility Criteria” under the Partnership
Agreement, and how the Greenstone Managing Partner and Premier
responded to questions regarding the report that were raised by
members of Greenstone Managing Partner’s board of directors, AuRico
and the independent third-party expert retained to review it.
Statements of defense and counterclaim have been filed by Premier,
two individuals nominated by Premier to the Greenstone Managing
Partner’s board of directors and the Greenstone Managing
Partner.
Other
The Company operates in multiple countries
around the world and accordingly is subject to, and pays, taxes
under the various regimes in those jurisdictions in which it
operates. These tax regimes are determined under general corporate
income tax and other laws of the respective jurisdiction. The
Company has historically filed, and continues to file, all required
tax returns and to pay the taxes reasonably determined to be due.
The tax rules and regulations in many countries are complex and
subject to interpretation. From time to time the Company’s tax
filings are subject to review and in connection with such reviews
disputes can arise with the taxing authorities over the Company’s
interpretation of the country’s tax laws. The Company records
provisions for future disbursements considered probable. As at
December 31, 2019, the Company did not have any material provision
for claims or taxation assessments.
Contractual Obligations
The following table summarizes Centerra’s
contractual obligations as of December 31, 2019, including payments
due over the next five years and thereafter:
$ millions |
Total |
Due in Less than One Year |
Due in 1 to 3 Years |
Due in 4 to 5 Years |
Due After 5 Years |
Kumtor |
|
|
|
|
|
Reclamation trust fund(1) |
$ |
28.1 |
$ |
6.0 |
$ |
18.0 |
$ |
4.1 |
$ |
- |
Capital equipment(2) |
|
0.4 |
|
0.4 |
|
- |
|
- |
|
- |
Operational supplies |
|
24.9 |
|
24.9 |
|
- |
|
- |
|
- |
Mount Milligan |
|
|
|
|
|
Operational supplies |
|
1.7 |
|
1.7 |
|
- |
|
- |
|
- |
Leases |
|
26.4 |
|
7.3 |
|
16.9 |
|
2.2 |
|
- |
Öksüt |
|
|
|
|
|
Project development |
|
12.1 |
|
12.1 |
|
- |
|
- |
|
- |
Loan repayment (principal only)(3) |
|
77.5 |
|
- |
|
- |
|
77.5 |
|
- |
Leases |
|
0.7 |
|
0.5 |
|
0.2 |
|
- |
|
- |
Kemess Project |
|
|
|
|
|
Project development |
|
1.4 |
|
1.4 |
|
- |
|
- |
|
- |
Greenstone Project |
|
|
|
|
|
Project development |
|
0.1 |
|
0.1 |
|
- |
|
- |
|
- |
Corporate and other |
|
|
|
|
|
Leases |
|
4.6 |
|
0.6 |
|
2.1 |
|
1.9 |
|
- |
Total contractual
obligations(2) |
$ |
178.0 |
$ |
55.1 |
$ |
37.3 |
$ |
85.7 |
$ |
- |
|
|
|
|
|
|
(1) Centerra’s future estimated decommissioning and
reclamation costs for the Kumtor Mine are present-valued at $54.7
million to be incurred beyond 2026. The settlement agreement with
the Kyrgyz Republic Government requires this restricted cash to be
funded at a rate of $6 million per year until the Reclamation Trust
Fund reaches the total estimated reclamation cost for the Kumtor
Project (no less than $69 million). The estimated future cost of
closure, reclamation and decommissioning of the project are used as
the basis for calculating the amount remaining to be deposited in
the Reclamation Trust Fund ($28.1million). On December 31, 2019 the
balance in the Reclamation Trust Fund was $40.9 million (2018 -
$30.8 million), with the remaining $28.1 million to be funded over
the life of the mine. |
(2) Excludes trade payables and accrued liabilities. |
(3) Subsequent to year end, the Company repaid and cancelled
the Öksüt project financing facility. |
|
Accounting Estimates, Policies and
Changes
Accounting Estimates
The preparation of consolidated financial
statements in accordance with IFRS requires management to make
judgments, estimates and assumptions that affect the application of
the Company’s accounting policies, which are described in note 3 of
the consolidated financial statements, the reported amounts of
assets and liabilities and disclosure of commitments and contingent
liabilities at the date of the financial statements, and the
reported amounts of revenues and expenses during the reporting
period. The determination of estimates requires the exercise of
judgment based on various assumptions and other factors such as
historical experience, current and expected economic conditions.
Actual results could differ from those estimates.
Management’s estimates and underlying
assumptions are reviewed on an ongoing basis. Any changes or
revisions to estimates and underlying assumptions are recognized in
the period in which the estimates are revised and in any future
periods affected. Changes to these critical accounting estimates
could have a material impact on the consolidated financial
statements.
The key sources of estimation uncertainty and
judgment used in the preparation of the consolidated financial
statements that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities and
earnings within the next financial year are outlined in detail in
note 4 of the December 31, 2019 financial statements.
Changes in accounting
policies
On January 1, 2019, the Company adopted IFRS 16,
Leases, that revises the definition of leases and requires
companies to bring most leases on-balance sheet. IFRS 16 was
adopted using the modified retrospective approach which resulted
with the recording of additional lease liabilities of $26.0 million
and the recording of a corresponding right-of-use asset as part of
property, plant and equipment. IFRIC 23, Uncertainty over Income
Tax Treatments, was also adopted on January 1, 2019 with minimal
impact.
Disclosure Controls and Procedures and
Internal Control Over Financial Reporting
The Company’s management, including the CEO and
CFO, is responsible for the design of disclosure controls and
procedures (“DC&P”) and internal controls over financial
reporting (“ICFR”). Centerra adheres to the Committee of Sponsoring
Organizations of the Treadway Commission’s (COSO) revised 2013
Internal Control Framework for the design of its ICFR. There was no
material change to the Company’s internal controls over financial
reporting that occurred during 2019 that has materially affected,
or is reasonably likely to materially affect, the Company’s
internal controls over financial reporting.
The evaluation of DC&P and ICFR was carried
out under the supervision of and with the participation of
management, including Centerra’s CEO and CFO. Based on these
evaluations, the CEO and the CFO concluded that the design and
operation of these DC&P and ICFR were effective throughout
2019.
Non-GAAP Measures
This document contains the following non-GAAP
financial measures: all-in sustaining costs per ounce sold on a
by-product basis, all-in sustaining costs per ounce sold on a
by-product basis including taxes, and all-in sustaining costs per
ounce sold on a co-product basis. In addition, non-GAAP financial
measures include adjusted net earnings, adjusted net earnings per
common share (basic and diluted), average realized gold price,
average realized copper price, adjusted cash provided by
operations, free cash flow and adjusted free cash flow. 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 be applying the World Gold Council (“WGC”)
guidelines, which can be found at http://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 MD&A:
- All-in sustaining costs on a by-product basis per ounce sold
include production costs, the cash component of capitalized
stripping costs, corporate general and administrative expenses,
accretion expenses, and sustaining capital, net of copper and
silver credits. The measure incorporates costs related to
sustaining production. Copper and silver credits represent the
expected revenue from the sale of these metals.
- All-in sustaining costs on a by-product basis per ounce sold
including taxes, include revenue-based tax at Kumtor and taxes
(mining and income) at Mount Milligan.
- All-in sustaining costs on a co-product basis per ounce of gold
sold or per pound of copper sold, production costs are allocated
between copper and gold based on production. To calculate the
allocation of production costs, copper production has been
converted to ounces of gold equivalent using the copper production
for the periods presented, as well as an average of the futures
prices during the quotational pricing period for copper and gold
sold from Mount Milligan. For 2019, 512 pounds of copper were
equivalent to one ounce of gold.
- Adjusted net earnings is calculated by adjusting net earnings
(loss) as recorded in the condensed consolidated interim statements
of income (loss) and comprehensive income (loss) for items not
associated with ongoing operations.
- Adjusted cash provided by operations is calculated by adjusting
cash provided by operations as recorded in the condensed
consolidated interim statements of statements of cash flows for
items not associated with ongoing operations.
- Average realized gold price is calculated by dividing the
different components of gold sales (including third party sales,
mark to market adjustments, final pricing adjustments and the fixed
amount received under the Mount Milligan Streaming Arrangement) by
the number of ounces sold.
- Average realized copper price is calculated by dividing the
different components of copper sales (including third party sales,
mark to market adjustments, final pricing adjustments and the fixed
amount received under the Mount Milligan Streaming Arrangement) by
the number of pounds sold.
- Free cash flow is calculated as cash provided by operations
less additions to property, plant and equipment.
- Adjusted free cash flow is calculated as free cash flow
adjusted for items not associated with ongoing operations.
All-in Sustaining Costs on a by-product
basis (including and excluding taxes) per ounce of gold are
non-GAAP measures and can be reconciled as follows:
|
Three months ended December 31, |
Twelve months ended December 31, |
(Unaudited - $ millions, unless otherwise
specified) |
Consolidated (1) |
|
Kumtor(1) |
|
Mount Milligan(1) |
Consolidated (1) |
|
Kumtor(1) |
|
Mount Milligan(1) |
|
2019 |
2018 |
|
2019 |
2018 |
|
2019 |
2018 |
2019 |
2018 |
|
2019 |
2018 |
|
2019 |
2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production costs excluding molybdenum segment, as reported |
98.7 |
|
118.8 |
|
|
49.6 |
61.8 |
|
49.1 |
|
57.0 |
|
461.3 |
|
385.6 |
|
|
228.6 |
209.1 |
|
232.7 |
|
176.5 |
|
Adjust for: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and marketing |
2.3 |
|
1.9 |
|
|
- |
- |
|
2.3 |
|
1.9 |
|
8.0 |
|
5.0 |
|
|
- |
- |
|
8.0 |
|
5.0 |
|
Refining fees |
1.5 |
|
2.0 |
|
|
1.3 |
1.7 |
|
0.2 |
|
0.3 |
|
6.0 |
|
5.7 |
|
|
5.1 |
4.8 |
|
0.9 |
|
0.9 |
|
By-product credits - copper |
(31.9 |
) |
(23.9 |
) |
|
- |
- |
|
(31.9 |
) |
(23.9 |
) |
(140.8 |
) |
(89.5 |
) |
|
- |
- |
|
(140.8 |
) |
(89.5 |
) |
Community costs related to current operations |
2.4 |
|
1.4 |
|
|
2.4 |
1.4 |
|
- |
|
- |
|
8.7 |
|
5.3 |
|
|
8.7 |
5.3 |
|
- |
|
- |
|
Adjusted Production Costs |
73.0 |
|
100.2 |
|
|
53.3 |
64.9 |
|
19.7 |
|
35.3 |
|
343.2 |
|
312.1 |
|
|
242.4 |
219.2 |
|
100.8 |
|
92.9 |
|
Corporate general administrative and other costs |
9.0 |
|
6.3 |
|
|
- |
- |
|
- |
|
0.2 |
|
44.6 |
|
30.1 |
|
|
- |
0.1 |
|
- |
|
1.1 |
|
Accretion expense |
0.5 |
|
0.4 |
|
|
0.4 |
0.3 |
|
0.1 |
|
0.1 |
|
1.9 |
|
1.9 |
|
|
1.4 |
1.3 |
|
0.5 |
|
0.6 |
|
Capitalized stripping |
28.2 |
|
26.3 |
|
|
28.2 |
26.3 |
|
- |
|
- |
|
76.5 |
|
103.9 |
|
|
76.5 |
103.9 |
|
- |
|
- |
|
Capital expenditures (sustaining) |
16.7 |
|
22.2 |
|
|
7.8 |
11.8 |
|
8.9 |
|
10.1 |
|
74.2 |
|
86.8 |
|
|
38.6 |
43.7 |
|
35.6 |
|
42.2 |
|
Lease principal payments |
8.4 |
|
- |
|
|
- |
- |
|
8.4 |
|
- |
|
12.4 |
|
- |
|
|
- |
- |
|
12.4 |
|
- |
|
All-in Sustaining Costs on a by-product basis |
135.8 |
|
155.4 |
|
|
89.7 |
103.3 |
|
37.1 |
|
45.7 |
|
552.8 |
|
534.8 |
|
|
358.9 |
368.2 |
|
149.3 |
|
136.8 |
|
Revenue-based taxes |
28.3 |
|
34.7 |
|
|
28.3 |
34.7 |
|
- |
|
- |
|
116.4 |
|
93.0 |
|
|
116.4 |
93.0 |
|
- |
|
- |
|
Income and mining taxes |
0.5 |
|
1.2 |
|
|
- |
- |
|
0.5 |
|
1.2 |
|
3.6 |
|
2.7 |
|
|
- |
- |
|
3.6 |
|
2.7 |
|
All-in Sustaining Costs on a by-product basis (including
taxes) |
164.6 |
|
191.3 |
|
|
118.0 |
138.0 |
|
37.6 |
|
46.9 |
|
672.8 |
|
630.5 |
|
|
475.3 |
461.2 |
|
152.9 |
|
139.5 |
|
Ounces sold (000's) |
169.9 |
|
269.8 |
|
|
136.6 |
203.4 |
|
33.3 |
|
66.4 |
|
780.6 |
|
709.3 |
|
|
600.2 |
530.4 |
|
180.4 |
|
178.9 |
|
Gold - All-in Sustaining Costs on a by-product basis ($ /oz
sold) |
799 |
|
576 |
|
|
657 |
508 |
|
1,114 |
|
689 |
|
708 |
|
754 |
|
|
598 |
694 |
|
828 |
|
764 |
|
Gold - All-in Sustaining Costs on a by-product basis (including
taxes) - $ /oz sold |
969 |
|
709 |
|
|
864 |
679 |
|
1,129 |
|
707 |
|
862 |
|
889 |
|
|
792 |
869 |
|
848 |
|
779 |
|
Gold - All-in Sustaining Costs on a co-product basis - before taxes
($ /oz sold) |
829 |
|
573 |
|
|
657 |
508 |
|
1,269 |
|
676 |
|
737 |
|
750 |
|
|
598 |
694 |
|
950 |
|
751 |
|
Copper - All-in Sustaining Costs on a co-product basis - before
taxes ($ /pound sold) |
2.28 |
|
1.53 |
|
|
n/a |
n/a |
|
2.28 |
|
1.53 |
|
1.85 |
|
1.77 |
|
|
n/a |
n/a |
|
1.85 |
|
1.77 |
|
(1) Results may not add due to rounding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net earnings can be reconciled
as follows:Adjusted net earnings is intended to provide
investors with information about the Company’s continuing income
generating capabilities. This measure adjusts for the earnings
impact of items not associated with ongoing operations.
|
Three months ended December 31, |
Twelve months ended December 31, |
($ millions, except as noted) |
2019 |
2018 |
2019 |
2018 |
|
|
|
|
|
|
|
|
|
|
Net (loss) earnings |
$ |
(12.2 |
) |
$ |
49.0 |
|
$ |
(93.5 |
) |
$ |
107.5 |
|
|
|
|
|
|
|
|
|
|
|
Adjust for items not associated with ongoing operations: |
|
|
|
|
|
|
|
|
|
Kyrgyz Republic settlement |
|
- |
|
|
- |
|
|
10.0 |
|
|
- |
|
Asset Impairment - Mount Milligan |
|
- |
|
|
- |
|
|
230.5 |
|
|
- |
|
ARO revaluation at sites on Care and Maintenance |
|
34.5 |
|
|
41.8 |
|
|
34.5 |
|
|
40.4 |
|
Asset Impairment - Mongolia (net of tax) |
|
- |
|
|
- |
|
|
- |
|
|
8.4 |
|
Gain on sale of royalty portfolio |
|
- |
|
|
- |
|
|
- |
|
|
(28.0 |
) |
Gain on sale of ATO |
|
- |
|
|
- |
|
|
- |
|
|
(9.4 |
) |
Tax adjustment |
|
- |
|
|
- |
|
|
- |
|
|
(5.2 |
) |
AuRico Metals Inc. acquisition and integration expenses |
|
- |
|
|
- |
|
|
- |
|
|
4.4 |
|
|
|
|
|
|
|
|
|
|
|
Adjusted net earnings |
$ |
22.3 |
|
$ |
90.8 |
|
$ |
181.5 |
|
$ |
118.1 |
|
|
|
|
|
|
|
|
|
|
|
Net (loss) earnings per share - basic |
$ |
(0.04 |
) |
$ |
0.17 |
|
$ |
(0.32 |
) |
$ |
0.37 |
|
Net (loss) earnings per share - diluted |
$ |
(0.04 |
) |
$ |
0.17 |
|
$ |
(0.32 |
) |
$ |
0.36 |
|
Adjusted net earnings per share - basic |
$ |
0.08 |
|
$ |
0.31 |
|
$ |
0.62 |
|
$ |
0.40 |
|
Adjusted net earnings per share - diluted |
$ |
0.08 |
|
$ |
0.31 |
|
$ |
0.62 |
|
$ |
0.40 |
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating cash flow can be
reconciled as follows:
|
Three months ended December 31, |
Twelve months ended December 31, |
($ millions, except as noted) |
2019 |
2018 |
2019 |
2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by operations |
$ |
92.5 |
|
$ |
151.6 |
|
$ |
334.1 |
|
$ |
217.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjust for items not associated with ongoing operations: |
|
|
|
|
|
|
|
|
|
|
|
|
Kyrgyz Republic settlement |
|
- |
|
|
- |
|
|
62.6 |
|
|
- |
|
AuRico Metals Inc. acquisition and integration expenses |
|
- |
|
|
- |
|
|
- |
|
|
4.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted cash provided by operations |
$ |
92.5 |
|
$ |
151.6 |
|
$ |
396.7 |
|
$ |
221.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free cash flow is calculated as
follows:
|
Three months ended December 31, |
Twelve months ended December 31, |
($ millions, except as noted) |
2019 |
2018 |
2019 |
2018 |
|
|
|
|
|
|
|
|
|
Cash provided by operations
(1) |
$ |
92.5 |
|
$ |
151.6 |
|
$ |
334.1 |
|
$ |
217.5 |
|
|
|
|
|
|
|
|
|
|
Adjust for: |
|
|
|
|
|
|
|
|
Additions to property, plant and equipment (1) |
|
(92.9 |
) |
|
(86.1 |
) |
|
(299.4 |
) |
|
(285.9 |
) |
|
|
|
|
|
|
|
|
|
Free cash flow (deficit) |
$ |
(0.4 |
) |
$ |
65.5 |
|
$ |
34.7 |
|
$ |
(68.4 |
) |
|
|
|
|
|
|
|
|
|
Adjust for: |
|
|
|
|
|
|
|
|
Kyrgyz Republic settlement |
|
- |
|
|
- |
|
|
62.6 |
|
|
- |
|
AuRico Metals Inc. acquisition and integration expenses |
|
- |
|
|
- |
|
|
- |
|
|
4.4 |
|
|
|
|
|
|
|
|
|
|
Adjusted Free cash flow (deficit) |
$ |
(0.4 |
) |
$ |
65.5 |
|
$ |
97.3 |
|
$ |
(64.0 |
) |
|
|
|
|
|
|
|
|
|
(1) As presented in the Company’s Consolidated Statement of
Cash Flows |
|
Average realized sales price for
goldThe average realized gold price per ounce sold is
calculated by dividing gold sales revenue, gross together with the
final pricing adjustments and mark-to-market adjustments by the
ounces sold, as shown in the table below:
Average realized sales price for gold |
Three months ended December 31, |
Twelve months ended December 31, |
|
2019 |
2018 |
2019 |
2018 |
|
|
|
|
|
Gold sales reconciliation ($ millions) |
|
|
|
|
Gold sales - Kumtor |
200.5 |
|
246.9 |
|
827.5 |
|
660.1 |
|
|
|
|
|
|
Gold sales - Mt. Milligan |
|
|
|
|
Gold sales related to cash portion of Royal Gold stream |
5.1 |
|
9.9 |
|
27.4 |
|
27.0 |
|
Mark-to-market adjustments on sales to Royal Gold |
0.7 |
|
(3.7 |
) |
1.7 |
|
(2.0 |
) |
Final adjustments on sales to Royal Gold |
(0.9 |
) |
(1.0 |
) |
(4.0 |
) |
0.7 |
|
Total gold sales under Royal Gold stream |
4.9 |
|
5.2 |
|
25.1 |
|
25.7 |
|
|
|
|
|
|
Gold sales to third party customers |
32.8 |
|
53.0 |
|
164.3 |
|
145.5 |
|
Mark-to-market adjustments |
2.7 |
|
5.4 |
|
(2.7 |
) |
3.1 |
|
Final pricing adjustments |
(1.6 |
) |
1.2 |
|
8.6 |
|
(0.3 |
) |
Final metal adjustments |
(0.7 |
) |
1.0 |
|
(0.2 |
) |
0.4 |
|
Total gold sales to third party customers |
33.2 |
|
60.6 |
|
170.0 |
|
148.7 |
|
Gold sales, net of adjustments |
38.1 |
|
65.8 |
|
195.1 |
|
174.4 |
|
Refining and treatment costs |
(0.2 |
) |
(0.3 |
) |
(0.9 |
) |
(0.9 |
) |
Total gold sales |
37.9 |
|
65.5 |
|
194.2 |
|
173.5 |
|
|
|
|
|
|
Total gold revenue - Consolidated |
238.4 |
|
312.4 |
|
1,021.7 |
|
833.6 |
|
|
|
|
|
|
Ounces of gold sold |
|
|
|
|
Gold ounces sold - Kumtor |
136,568 |
|
203,388 |
|
600,231 |
|
530,448 |
|
Ounces sold to Royal Gold - Mt. Milligan |
11,577 |
|
22,970 |
|
62,800 |
|
62,261 |
|
Ounces sold to third party customers - Mt. Milligan |
21,747 |
|
43,396 |
|
117,623 |
|
116,621 |
|
|
|
|
|
|
Total ounces sold - Consolidated |
169,892 |
|
269,754 |
|
780,654 |
|
709,330 |
|
|
|
|
|
|
Average realized sales price for gold on a per ounce
basis |
|
|
|
|
Average realized sales price - Kumtor |
1,468 |
|
1,214 |
|
1,379 |
|
1,244 |
|
|
|
|
|
|
Average realized gold price - Royal Gold |
435 |
|
435 |
|
435 |
|
435 |
|
Average realized gold price - Mark-to-market adjustments |
43 |
|
(164 |
) |
27 |
|
(30 |
) |
Average realized gold price - Final pricing adjustments |
(80 |
) |
(45 |
) |
(64 |
) |
11 |
|
Average realized gold price - Mt. Milligan - Royal
Gold |
398 |
|
227 |
|
398 |
|
416 |
|
|
|
|
|
|
Average realized gold price - Third party |
1,510 |
|
1,220 |
|
1,397 |
|
1,248 |
|
Average realized gold price - Mark-to-market adjustments |
126 |
|
123 |
|
(23 |
) |
27 |
|
Average realized gold price - Final pricing adjustments |
(71 |
) |
28 |
|
73 |
|
(3 |
) |
Average realized gold price - Final metal adjustments |
(30 |
) |
22 |
|
(2 |
) |
3 |
|
Average realized gold price - Mt. Milligan - Third
party |
1,535 |
|
1,393 |
|
1,445 |
|
1,275 |
|
Average realized gold price - Mt. Milligan -
Combined |
1,137 |
|
987 |
|
1,077 |
|
971 |
|
|
|
|
|
|
Average realized sales price for gold -
Consolidated |
1,403 |
|
1,158 |
|
1,309 |
|
1,175 |
|
|
|
|
|
|
Average realized sales price for Copper
- Mount MilliganThe average realized copper price per
pound is calculated by dividing copper sales revenue, gross
together with the final pricing adjustments and mark-to-market
adjustments per pound, as shown in the table below:
Average realized sales price for Copper - Mount
Milligan |
Three months ended December 31, |
Twelve months ended December 31, |
|
2019 |
2018 |
2019 |
2018 |
|
|
|
|
|
Copper sales reconciliation ($ millions) |
|
|
|
|
Copper sales related to cash portion of Royal Gold stream |
1.0 |
|
1.1 |
|
5.2 |
|
3.7 |
|
Mark-to-market adjustments on Royal Gold stream |
(0.6 |
) |
(0.6 |
) |
(0.9 |
) |
0.7 |
|
Final adjustments on sales to Royal Gold |
(0.2 |
) |
0.4 |
|
(0.1 |
) |
0.5 |
|
Total copper sales under Royal Gold stream |
0.2 |
|
0.9 |
|
4.2 |
|
4.9 |
|
|
|
|
|
|
Copper sales to third party customers |
30.0 |
|
31.1 |
|
147.0 |
|
106.9 |
|
Mark-to-market adjustments |
5.4 |
|
(4.1 |
) |
8.1 |
|
(4.3 |
) |
Final pricing adjustments |
1.1 |
|
0.3 |
|
0.6 |
|
(4.5 |
) |
Final metal adjustments |
(1.0 |
) |
(0.6 |
) |
(2.0 |
) |
(1.3 |
) |
Total copper sales to third party customers |
35.5 |
|
26.7 |
|
153.7 |
|
96.8 |
|
Copper sales, net of adjustments |
35.7 |
|
27.6 |
|
157.9 |
|
101.7 |
|
Refining and treatment costs |
(3.8 |
) |
(3.7 |
) |
(17.1 |
) |
(12.2 |
) |
Copper sales |
31.9 |
|
23.9 |
|
140.8 |
|
89.5 |
|
|
|
|
|
|
Pounds of copper sold (000's lbs) |
|
|
|
|
Pounds sold to Royal Gold |
2,684 |
|
2,626 |
|
12,682 |
|
8,311 |
|
Pounds sold to third party customers |
11,617 |
|
10,965 |
|
54,748 |
|
36,059 |
|
Total pounds sold |
14,301 |
|
13,591 |
|
67,430 |
|
44,370 |
|
|
|
|
|
|
Average realized sales price for copper on a per pound
basis |
|
|
|
|
Copper sales related to cash portion of Royal Gold stream |
0.38 |
|
0.42 |
|
0.41 |
|
0.44 |
|
Mark-to-market adjustments on Royal Gold stream |
(0.21 |
) |
(0.21 |
) |
(0.07 |
) |
0.09 |
|
Final pricing adjustments on Royal Gold stream |
(0.07 |
) |
0.14 |
|
(0.01 |
) |
0.06 |
|
Average realized copper price - Royal Gold |
0.07 |
|
0.35 |
|
0.33 |
|
0.59 |
|
|
|
|
|
|
Average realized copper price - Third party |
2.58 |
|
2.83 |
|
2.68 |
|
2.96 |
|
Average realized copper price - Mark-to-market adjustments |
0.45 |
|
(0.38 |
) |
0.15 |
|
(0.12 |
) |
Average realized copper price - Final pricing adjustments |
0.10 |
|
0.03 |
|
0.01 |
|
(0.12 |
) |
Average realized copper price - Metal pricing adjustments |
(0.09 |
) |
(0.04 |
) |
(0.04 |
) |
(0.04 |
) |
Average realized copper price - Third party |
3.04 |
|
2.44 |
|
2.80 |
|
2.68 |
|
|
|
|
|
|
Average realized copper price - Combined |
2.23 |
|
1.76 |
|
2.09 |
|
2.02 |
|
|
|
|
|
|
Qualified Person & QA/QC –
Production Information
The 2019 production information and related
scientific and technical information, and the 2020 production
forecast and related scientific and technical information
determined as at December 31, 2019, were prepared in accordance
with the standards of the Canadian Institute of Mining, Metallurgy
and Petroleum (“CIMMP”) and NI 43-101 and were prepared,
reviewed, verified and compiled by Centerra’s geological and mining
staff. Gordon Reid, Professional Engineer, consultant and former
Chief Operating Officer of Centerra, is the qualified person for
the purpose of NI 43-101 for such information.
Qualified Person & QA/QC – Mineral
Reserves and Mineral Resources
John Fitzgerald, P.Eng., Centerra Gold’s Vice
President, Projects and Technical Services, has reviewed and
approved the technical information related to mineral reserves and
resources estimates contained in this document. John Fitzgerald is
a Qualified Person within the meaning of Canadian Securities
Administrator’s National Instrument 43-101 (“NI-43-101”).
Mineral Reserves and Mineral
Resources
On March 26, 2020, the Company released the
results of the updated mineral reserve and mineral resource
estimates for the Kumtor Mine, the Mount Milligan Mine, the Öksüt
Project, the Kemess Property and the Greenstone Gold Property, all
as of December 31, 2019. For additional details, please see the
news release “Centerra Gold 2019 Year-End Statement of Mineral
Reserves and Resources, Mount Milligan Technical Report and Fourth
Quarter Exploration Update” filed on SEDAR and posted on the
Company’s website on March 26, 2020.
Mount Milligan’s mineral reserves and mineral
resources are presented on a 100% basis. Sales of gold and copper
from the Mount Milligan Mine are subject to the Mount Milligan
Streaming Arrangement whereby Royal Gold is entitled to 35% and
18.75% of gold and copper sales respectively. Under the Mount
Milligan Streaming Arrangement, Royal Gold pays Centerra $435 per
ounce of gold delivered and 15% of the spot price per metric tonne
of copper delivered.
The Company notes that Premier Gold Mines
Limited, our 50% joint venture partner in the Greenstone
Partnership, has issued a news release in October 2019 announcing a
mineral resource estimate for the Hardrock property, which was
completed by G-Mining Services Inc. Centerra's technical staff has
reviewed the mineral resource estimate for the Hardrock
project prepared by G-Mining on behalf of Greenstone published
by Premier and raised significant concerns regarding its use of
certain technical parameters, as well as the related cost
assumptions. Those parameters and assumptions have since become the
subject of a legal proceeding involving Centerra and Premier.
Accordingly, an independent third-party expert was retained by
Centerra to review the parameters of the resource estimate and a
more comprehensive review of the cost assumptions has been
undertaken. That work is ongoing. Until such work is complete,
Centerra is not in a position to endorse or accept the work product
published by Premier and will instead rely on the 2016 Hardrock
Technical Report.
Gold reserves and resources
Gold (000s attributable ozs
contained)(1)(4) |
2019 |
2018 |
Total proven and probable mineral reserves |
11,086 |
14,223 |
Total measured and indicated mineral resources(2) |
13,347 |
11,338 |
Total inferred mineral resources(2)(3) |
6,722 |
6,191 |
(1) Centerra’s equity interests are as follows: Mount Milligan
100%, Kumtor 100%, Öksüt 100%, Kemess Underground and Kemess East
100% and Greenstone Gold properties (Hardrock, Brookbank, Key Lake,
Kailey) 50%. The mineral reserves and mineral resources above
reflect Centerra's equity interests in the applicable
properties. |
(2) Mineral resources are in addition to mineral reserves. Mineral
resources do not have demonstrated economic viability. |
(3) Inferred mineral resources have a great amount of uncertainty
as to their existence and as to whether they can be mined
economically. It cannot be assumed that all or part of the inferred
mineral resources will ever be upgraded to a higher category. |
(4) Production at Mount Milligan is subject to a streaming
agreement which entitles Royal Gold to 35% of gold sales from the
Mount Milligan Mine. Under the stream arrangement, Royal Gold will
pay $435 per ounce of gold delivered. Mineral resources for the
Mount Milligan property are presented on a 100% basis. |
|
Copper reserves and
resources
Copper (million pounds
contained)(1)(4) |
2019 |
2018 |
Total proven and probable mineral reserves |
1,589 |
2,465 |
Total measured and indicated mineral resources(2) |
5,327 |
5,836 |
Total inferred mineral resources(2)(3) |
502 |
607 |
(1) Centerra’s equity interests are as follows: Mount Milligan
100%, Kemess Underground 100%, Kemess East 100% and Berg 100%. |
(2) Mineral resources are in addition to mineral reserves. Mineral
resources do not have demonstrated economic viability. |
(3) Inferred mineral resources have a great amount of uncertainty
as to their existence and as to whether they can be mined
economically. It cannot be assumed that all or part of the inferred
mineral resources will ever be upgraded to a higher category. |
(4) Production at Mount Milligan is subject to a streaming
agreement which entitles Royal Gold to 18.75% of copper sales from
the Mount Milligan Mine. Under the stream arrangement, Royal Gold
will pay 15% of the spot price per metric tonne of copper
delivered. Mineral resources for the Mount Milligan property are
presented on a 100% basis. |
|
Molybdenum reserves and
resources
Molybdenum (million pounds
contained)(1)(3)(4) |
2019 |
2018 |
Total proven and probable mineral reserves |
- |
- |
Total measured and indicated mineral resources(2) |
636 |
636 |
Total inferred mineral resources(3) |
50 |
50 |
(1) Centerra’s equity interests are Berg 100%, Thompson Creek 100%,
and Endako 75%. |
(2) Mineral resources are in addition to mineral reserves. Mineral
resources do not have demonstrated economic viability. |
(3) Inferred mineral resources have a great amount of uncertainty
as to their existence and as to whether they can be mined
economically. It cannot be assumed that all or part of the inferred
mineral resources will ever be upgraded to a higher category. |
(4) Molybdenum mineral resources at Berg, Thompson Creek and
Endako were estimated using a molybdenum price of $14.00 per
pound. The exchange rate used at Berg and Endako was
1USD:1.25CAD. |
|
Material assumptions used to determine mineral
reserves and mineral resources are as follows:
|
2019 |
2018 |
Gold price |
|
|
Gold mineral reserves ($/oz) |
$1,250 |
$1,250 |
Gold mineral resources ($/oz) (1) |
$1,500 |
$1,450 |
|
|
|
Copper price |
|
|
Copper mineral reserves ($/lb) |
$3.00 |
$3.00 |
Copper mineral resources ($/lb) |
$3.50 |
$3.50 |
|
|
|
Foreign exchange rates |
|
|
1 USD : Cdn$ (2) |
1.25 |
1.25 |
1 USD : Kyrgyz som |
65 |
65 |
1 USD : Turkish Lira |
5.50 |
3.50 |
(1) Mineral resources at the Hardrock Project were estimated
at C$1,625, while resource estimation at Brookbank and Kailey
properties used $1,455 and mineral resources at the Kemess Project
used $1,450. |
(2) Cdn$ exchange rate used for the Hardrock Project was
1USD:1.30CAD and at Brookbank and Kailey properties a rate of
1USD:1.18CAD was used. |
|
Centerra Gold Inc. |
Consolidated Statements of Financial Position |
|
December 31, |
|
December 31, |
|
|
2019 |
|
2018 |
|
(Expressed in thousands of United States
Dollars) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
Cash and cash equivalents |
$ |
42,717 |
|
$ |
151,705 |
|
Amounts receivable |
|
79,022 |
|
|
59,558 |
|
Inventories |
|
774,060 |
|
|
577,443 |
|
Other current assets |
|
36,869 |
|
|
25,815 |
|
|
|
932,668 |
|
|
814,521 |
|
Property, plant and equipment |
|
1,669,516 |
|
|
1,905,514 |
|
Goodwill |
|
- |
|
|
16,070 |
|
Reclamation deposits |
|
40,999 |
|
|
30,841 |
|
Other assets |
|
58,470 |
|
|
59,765 |
|
|
|
1,768,985 |
|
|
2,012,190 |
|
Total assets |
$ |
2,701,653 |
|
$ |
2,826,711 |
|
|
|
|
|
|
|
|
Liabilities and Shareholders' equity |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
Accounts payable and accrued liabilities |
$ |
238,339 |
|
$ |
226,783 |
|
Revenue-based taxes payable |
|
744 |
|
|
954 |
|
Taxes payable |
|
1,034 |
|
|
878 |
|
Other current liabilities |
|
4,692 |
|
|
6,162 |
|
|
|
244,809 |
|
|
234,777 |
|
Long-term debt |
|
70,007 |
|
|
179,266 |
|
Lease obligations |
|
18,336 |
|
|
4,229 |
|
Deferred income tax liability |
|
33,733 |
|
|
44,524 |
|
Provision for reclamation |
|
265,049 |
|
|
212,248 |
|
Other liabilities |
|
3,875 |
|
|
3,636 |
|
|
|
391,000 |
|
|
443,903 |
|
Shareholders' equity |
|
|
|
|
|
|
Share capital |
|
960,404 |
|
|
949,328 |
|
Contributed surplus |
|
26,278 |
|
|
27,364 |
|
Accumulated other comprehensive loss |
|
(752 |
) |
|
(2,088 |
) |
Retained earnings |
|
1,079,914 |
|
|
1,173,427 |
|
|
|
2,065,844 |
|
|
2,148,031 |
|
Total liabilities and Shareholders' equity |
$ |
2,701,653 |
|
$ |
2,826,711 |
|
|
Centerra Gold Inc. |
Consolidated Statements of Earnings (Loss) and
Comprehensive Income (Loss) |
|
Three months endedDecember 31, |
|
Twelve months endedDecember 31, |
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
(Expressed in thousands of United States
Dollars) |
|
|
|
|
|
|
|
|
|
|
|
|
(except per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
$ |
312,503 |
|
$ |
391,521 |
|
$ |
1,375,328 |
|
$ |
1,129,336 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
|
|
|
|
|
|
|
|
|
|
Production costs |
|
149,431 |
|
|
172,519 |
|
|
676,632 |
|
|
578,223 |
|
Depreciation, depletion and amortization |
|
59,279 |
|
|
63,714 |
|
|
239,511 |
|
|
196,910 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Standby costs |
|
9,100 |
|
|
- |
|
|
9,100 |
|
|
10,849 |
|
Earnings from mine operations |
|
94,693 |
|
|
155,288 |
|
|
450,085 |
|
|
343,354 |
|
|
|
|
|
|
|
|
|
|
Care and maintenance expense |
|
8,421 |
|
|
11,086 |
|
|
28,529 |
|
|
29,344 |
|
Exploration expenses and business development |
|
14,599 |
|
|
26,214 |
|
|
45,958 |
|
|
34,774 |
|
Corporate administration |
|
9,155 |
|
|
6,448 |
|
|
45,265 |
|
|
29,636 |
|
Provision for Kyrgyz Republic settlement |
|
- |
|
|
(15,808 |
) |
|
10,000 |
|
|
- |
|
Impairment |
|
- |
|
|
- |
|
|
230,500 |
|
|
- |
|
Revenue-based taxes |
|
28,262 |
|
|
34,740 |
|
|
116,417 |
|
|
92,988 |
|
Other operating expenses |
|
44,260 |
|
|
44,118 |
|
|
59,113 |
|
|
57,999 |
|
(Loss) earnings from operations |
|
(10,004 |
) |
|
48,490 |
|
|
(85,697 |
) |
|
98,613 |
|
Other income, net |
|
421 |
|
|
880 |
|
|
(1,450 |
) |
|
(30,442 |
) |
Finance costs |
|
5,260 |
|
|
4,895 |
|
|
16,337 |
|
|
30,232 |
|
(Loss) earnings before income tax |
|
(15,685 |
) |
|
42,715 |
|
|
(100,584 |
) |
|
98,823 |
|
Income tax recovery |
|
(3,453 |
) |
|
(6,170 |
) |
|
(7,071 |
) |
|
(14,647 |
) |
(Loss) earnings from continuing operations |
$ |
(12,232 |
) |
$ |
48,885 |
|
$ |
(93,513 |
) |
$ |
113,470 |
|
Net loss from discontinued operations |
|
- |
|
|
91 |
|
|
- |
|
|
(5,941 |
) |
Net (loss) earnings |
$ |
(12,232 |
) |
$ |
48,976 |
|
$ |
(93,513 |
) |
$ |
107,529 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Income |
|
|
|
|
|
|
|
|
|
|
|
|
Items that may be subsequently reclassified to
earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
Net gain (loss) on translation of foreign operation |
$ |
701 |
|
$ |
(1,832 |
) |
$ |
1,753 |
|
$ |
(3,133 |
) |
Net unrealized gain (loss) on derivative instruments, net of
tax |
|
37 |
|
|
(3,775 |
) |
|
(395 |
) |
|
14,938 |
|
Post-retirement benefit, net of tax |
|
(22 |
) |
|
478 |
|
|
(22 |
) |
|
478 |
|
Other comprehensive income (loss) |
|
716 |
|
|
(5,129 |
) |
|
1,336 |
|
|
12,283 |
|
Total comprehensive (loss) income |
$ |
(11,516 |
) |
$ |
43,847 |
|
$ |
(92,177 |
) |
$ |
119,812 |
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
Basic (loss) earnings per share - Continuing
operations |
$ |
(0.04 |
) |
$ |
0.17 |
|
$ |
(0.32 |
) |
$ |
0.39 |
|
Diluted (loss) earnings per share - Continuing
operations |
$ |
(0.04 |
) |
$ |
0.16 |
|
$ |
(0.32 |
) |
$ |
0.38 |
|
Basic (loss) earnings per share |
$ |
(0.04 |
) |
$ |
0.17 |
|
$ |
(0.32 |
) |
$ |
0.37 |
|
Diluted (loss) earnings per share |
$ |
(0.04 |
) |
$ |
0.17 |
|
$ |
(0.32 |
) |
$ |
0.36 |
|
Centerra Gold Inc. |
Consolidated Statements of Cash Flows |
|
Three months endedDecember
31, |
Twelve months endedDecember
31, |
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
(Expressed in thousands of United States
Dollars) |
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)
earnings from continuing operations |
$ |
(12,233 |
) |
$ |
48,885 |
|
$ |
(93,513 |
) |
$ |
113,470 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments
for the following items: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation, depletion and amortization |
|
61,123 |
|
|
64,041 |
|
|
245,746 |
|
|
200,802 |
|
Finance
costs |
|
4,326 |
|
|
4,895 |
|
|
16,337 |
|
|
30,232 |
|
Compensation
expense on stock options |
|
448 |
|
|
490 |
|
|
1,940 |
|
|
1,714 |
|
Other share
based compensation expense |
|
885 |
|
|
896 |
|
|
17,833 |
|
|
2,082 |
|
Gain on
disposition of Royalty Portfolio |
|
- |
|
|
(20 |
) |
|
- |
|
|
(27,993 |
) |
Impairment |
|
- |
|
|
- |
|
|
230,500 |
|
|
- |
|
Inventory
impairment |
|
8,352 |
|
|
- |
|
|
8,352 |
|
|
- |
|
Income tax
recovery, net |
|
(3,453 |
) |
|
(6,170 |
) |
|
(7,071 |
) |
|
(14,647 |
) |
Kyrgyz
Republic settlement payment |
|
- |
|
|
- |
|
|
(62,600 |
) |
|
- |
|
Kyrgyz
Republic additional charges |
|
- |
|
|
- |
|
|
10,000 |
|
|
- |
|
Reclamation
expense and other |
|
34,288 |
|
|
43,358 |
|
|
35,029 |
|
|
41,151 |
|
Income taxes
paid |
|
(687 |
) |
|
(390 |
) |
|
(4,090 |
) |
|
(5,371 |
) |
Cash
provided by continuing operations before changes in operating
working capital |
|
93,049 |
|
|
155,985 |
|
|
398,463 |
|
|
341,440 |
|
Changes in
operating working capital |
|
(504 |
) |
|
(4,832 |
) |
|
(64,314 |
) |
|
(120,173 |
) |
Cash
provided by continuing operations |
|
92,545 |
|
|
151,153 |
|
|
334,149 |
|
|
221,267 |
|
Cash used in
discontinued operations |
|
- |
|
|
461 |
|
|
- |
|
|
(3,775 |
) |
Net
cash provided by operations |
|
92,545 |
|
|
151,614 |
|
|
334,149 |
|
|
217,492 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
Additions to
property, plant and equipment |
|
(91,806 |
) |
|
(82,921 |
) |
|
(288,990 |
) |
|
(271,830 |
) |
Deposits on
purchase of equipment |
|
(1,102 |
) |
|
(3,193 |
) |
|
(10,453 |
) |
|
(14,043 |
) |
Acquisition
of AuRico Metals Inc., net of cash acquired |
|
- |
|
|
- |
|
|
- |
|
|
(226,800 |
) |
Increase in
restricted cash |
|
587 |
|
|
(429 |
) |
|
(481 |
) |
|
(26,818 |
) |
Increase in
other assets |
|
(90 |
) |
|
2 |
|
|
(10,448 |
) |
|
(4,177 |
) |
Proceeds
from the sale of the Royalty Portfolio |
|
- |
|
|
- |
|
|
- |
|
|
155,450 |
|
Proceeds
from the sale of the Mongolian segment |
|
- |
|
|
35,000 |
|
|
- |
|
|
35,000 |
|
Proceeds
from disposition of fixed assets |
|
273 |
|
|
8 |
|
|
723 |
|
|
1,766 |
|
Cash
used in investing |
|
(92,138 |
) |
|
(51,533 |
) |
|
(309,649 |
) |
|
(351,452 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
Debt
drawdown |
|
95,932 |
|
|
667 |
|
|
302,804 |
|
|
395,737 |
|
Debt
repayment |
|
(121,986 |
) |
|
(140,069 |
) |
|
(417,986 |
) |
|
(501,069 |
) |
Payment of
interest and borrowing costs |
|
(1,895 |
) |
|
(3,932 |
) |
|
(9,293 |
) |
|
(25,230 |
) |
Lease
payments |
|
(10,949 |
) |
|
(269 |
) |
|
(16,962 |
) |
|
(665 |
) |
Proceeds
from common shares issued |
|
721 |
|
|
225 |
|
|
7,949 |
|
|
1,001 |
|
Cash
used in financing |
|
(38,177 |
) |
|
(143,378 |
) |
|
(133,488 |
) |
|
(130,226 |
) |
Decrease in
cash during the period |
|
(37,770 |
) |
|
(43,297 |
) |
|
(108,988 |
) |
|
(264,186 |
) |
Cash and
cash equivalents at beginning of the period |
|
80,487 |
|
|
195,002 |
|
|
151,705 |
|
|
415,891 |
|
Cash
and cash equivalents at end of the period |
$ |
42,717 |
|
$ |
151,705 |
|
$ |
42,717 |
|
$ |
151,705 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents consist of: |
|
|
|
|
|
|
|
|
|
|
|
|
Cash |
$ |
42,717 |
|
$ |
151,705 |
|
$ |
42,717 |
|
$ |
151,705 |
|
|
$ |
42,717 |
|
$ |
151,705 |
|
$ |
42,717 |
|
$ |
151,705 |
|
The Audited Consolidated Financial Statements
and Notes for the twelve months ended December 31, 2019 and
Management’s Discussion and Analysis for the period ended December
31, 2019 have been filed on the System for Electronic Document
Analysis and Retrieval (‘SEDAR’) at www.sedar.com and are available
at the Company’s web site at: www.centerragold.com. The Interim
Consolidated Financial Statements for the three months ended
December 31, 2019 are unaudited.
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