All figures are in United States dollars and
all production figures are on a 100% basis and continuing
operations basis unless otherwise stated. This news release
contains forward looking information regarding Centerra Gold’s
business and operations. See “Caution Regarding
Forward-Looking Information”. 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.
TORONTO, Aug. 10, 2021 (GLOBE NEWSWIRE) --
Centerra Gold Inc. (“Centerra” or the “Company”) (TSX: CG and NYSE:
CGAU) today reported its second quarter 2021 results. As a result
of the seizure of the Kumtor Mine and the continuing actions by the
Kyrgyz Republic, the Company has recognized a loss on the change of
control and included the Kumtor Mine in discontinued operations.
The Company’s results from continuing operations include the Mount
Milligan Mine, the Öksüt Mine and the Molybdenum Business Unit.
Significant financial and operating highlights
of the second quarter include:
- Earnings from continuing
operations and adjusted net earnings from
continuing operationsNG of
$33.0 million or $0.11 per common share (basic), and $49.9 million
or $0.17 per common share (basic), respectively.
- Net loss and
adjusted net
earningsNG of $851.7 million
or $2.87 loss per common share (basic), and $78.3 million or $0.26
per common share (basic), respectively. Net loss includes net loss
from discontinued operations of $884.7 million.
- Cash flow provided by
operating activities from continuing operations and
free cash flow from continuing
operationsNG of $60.3 million
and $30.7 million, respectively. Cash provided by operating
activities from discontinued operations and net cash flow from
discontinued operations were $77.1 million and $49.7 million,
respectively.
- Cash position at
quarter-end of $882.9 million with total liquidity of $1,282.9
million.
- Consolidated production
from continuing operations of 69,854 ounces of gold and
19.8 million pounds of copper.
- Kumtor Mine was seized by
the Kyrgyz Republic Government on May 15, 2021 under the
pretext of groundless corruption, tax, environmental and other
claims. These unjustified actions by the Kyrgyz Republic
government, including the appointment of external manager,
continued during the quarter. In response, the Company and its
Kumtor subsidiaries have commenced legal proceedings against the
Kyrgyz Republic, Kyrgyzaltyn JSC (“Kyrgyzaltyn”) and others,
including international arbitration, Chapter 11 proceedings before
the U.S. Bankruptcy Court and a proceeding in the Ontario Superior
Court of Justice.
- Mount Milligan process
plant achieved record throughput of 5.6 million tonnes, or
61,848 tonnes per day in the second quarter.
- Gold production
costs and copper production costs from continuing
operations were $593 per ounce and $1.41 per pound,
respectively.
- All-in sustaining costs on
a by-product basisNG from continuing
operations and All-in costs on a by-product
basisNG from continuing
operations were $676 per ounce and $851 per ounce,
respectively.
- Continuing focus on
safety of our employees, contractors and local
communities. The Öksüt Mine achieved one million
work hours without a Lost Time Injury. Vaccination clinics have
been set up for employees and contractors at the Mount Milligan
Mine and Öksüt Mine, with second vaccination doses provided to 64%
and 55% of site employees, respectively.
- On track to achieve 2021
production and cost guidance at the Mount Milligan Mine
and the Öksüt Mine with the revised consolidated free cash flow
guidance of $125 to $175 million, including free cashflow from
continuing operationsNG of $30.7 million in the second
quarter of 2021.
- Quarterly Dividend
declared of CAD$0.07 per common share.
As a result of the seizure of the Kumtor Mine by
the Kyrgyz Republic Government on May 15, 2021, and the continuing
actions by the Kyrgyz Republic, the Company has updated its
consolidated full-year 2021 guidance and three-year outlook to
exclude the Kumtor Mine. Highlights of the Company’s revised
consolidated guidance include:
- Gold production:
- 2021: 270,000 to 310,000
ounces.
- 2022: 380,000 to 430,000
ounces.
- 2023: 380,000 to 430,000
ounces.
- Copper production:
- 2021: 70 to 80 million pounds.
- 2022: 90 to 100 million
pounds.
- 2023: 70 to 80 million pounds.
- Gold production costs per ounce:
- 2021: $625 to $675 per ounce
- 2022: $550 to $600 per ounce
- 2023: $575 to $625 per ounce
- All-in sustaining costs on
by-product basisNG per ounce:
- 2021: $750 to $800 per ounce
- 2022: $450 to $500 per ounce
- 2023: $525 to $550 per ounce
Commentary
Scott Perry, President and Chief Executive
Officer of Centerra stated, “During the second quarter we continued
to demonstrate positive safety performance as the Öksüt Mine
achieved one million work hours without a Lost Time Injury. Across
the organization we continue to stay vigilant with respect to the
COVID-19 virus. At both our Mount Milligan and Öksüt Mines
vaccination clinics have been set up for employees and contractors,
with second vaccination doses having been provided to 64% and 55%
of site employees, respectively, through the Company’s vaccination
program. We are proactively maintaining our rigorous safety
protocols across the organization to prevent any outbreaks and
reduce the spread of the COVID-19 virus for the health and safety
of our employees, contractors, communities and other
stakeholders.”
“As we have previously disclosed, the Kyrgyz
Republic Government seized control of the Kumtor Mine based on
false and misleading allegations. While the Company remains the
rightful owner of Kumtor Gold Company (“KGC”), our 100% owned
subsidiary that holds the Kumtor mine, we cannot effectively
exercise power over any relevant activities or affect the returns
of the Kumtor Mine. Therefore, in the second quarter we have
derecognized the assets and liabilities of KGC in the statement of
financial position and recorded a loss on the change of control of
$926.4 million in the Statement of Earnings. The results from the
Kumtor Mine are presented as a discontinued operation and the
Company’s consolidated results exclude the Kumtor Mine’s.”
“The situation involving our Kumtor asset does
not impact Centerra’s other operations and businesses. In the
second quarter Company-wide gold production from continuing
operations was 69,854 ounces at all-in sustaining
costsNG on a by-product basis of $676 per ounce. The
Mount Milligan Mine achieved record throughput of 5.6 million
tonnes, or 61,848 tonnes per day, producing 54,675 ounces of gold
and 19.8 million pounds of copper at all-in sustaining
costsNG on a by-product basis of $486 per ounce, making
it our lowest cost producer in the quarter. The Öksüt Mine produced
15,179 ounces of gold at all-in sustaining costsNG on a
by-product basis of $947 per ounce.”
“Financially, the Company generated $60.3
million of cash from continuing operations Company-wide for the
second quarter of 2021, which includes $73.6 million from the Mount
Milligan Mine and $8.1 million from the Öksüt Mine. Company-wide
free cash flow from continuing operationsNG in the
second quarter of 2021 totalled $30.7 million, including $50.4
million from the Mount Milligan Mine and $1.6 million from the
Öksüt Mine. Cash provided by operating activities from discontinued
operations of $77.1 million and net cash flow from discontinued
operations of $49.7 million. We finished the quarter with a debt
free balance sheet and a cash position of $882.9 million.”
“Based on the Company’s financial position,
strong operating results and cash flows, the Board approved on
August 9, 2021, a quarterly dividend of CAD$0.07 per share.”
“As a result of the seizure of the Kumtor Mine
by the Kyrgyz Republic Government, the Company has updated its
consolidated full-year 2021 guidance and three-year outlook to
exclude the Kumtor Mine. For 2021, we are estimating consolidated
gold production to be in the range of 270,000 to 310,000 ounces and
70 to 80 million pounds of copper production. Centerra’s
consolidated all-in sustaining cost on a by-product
basisNG for 2021 is expected to be in the range of $750
to $800 per ounce. In our three-year outlook, the gold production
profile in 2022 and 2023 increases to 380,000 to 430,000 ounces,
respectively, with all-in sustaining cost on a by-product
basisNG for 2022 expected to be in the range of $450 to
$500 per ounce and in 2023 expected to be in the range of $525 to
$550 per ounce.”
“While we continue to seek resolution to the
Kumtor Mine dispute, our Company continues to be financially and
operationally strong. We remain on track to achieve 2021 production
and cost guidance at our Mount Milligan and Öksüt Mines, and the
Company is expected to generate consolidated free cash flow from
continuing operations of $125 to $175 million in 2021. The
Company’s guidance for consolidated free cash flow from continuing
operations excludes net cash flow from discontinued operations. Net
cash flow from discontinued operations was $47.8 million for the
first half of 2021.”
“Although we continue to pursue all measures
necessary to protect the Company’s rights related to the Kumtor
Mine, in arbitration and in other legal proceedings, the Company
has consistently stated that it remains willing and available to
engage with the Kyrgyz Government in a constructive dialogue on the
matters it considers to be the subject of dispute.”
Kyrgyz Republic Update
In February 2021, the Kyrgyz Republic Parliament
established the State Commission to, among other things, review the
performance of the Kumtor Mine and to review the results of a
previous 2012 Kyrgyz Republic state commission. The State
Commission made voluminous and urgent document requests and
inquiries of Kumtor to which the Company dutifully responded. While
the work of the State Commission was ongoing and causing an
enormous administrative burden on the Company and putting pressure
and stress on its employees, the Kyrgyz Republic took a series of
actions to undermine the basis on which the Kumtor Mine had been
operated (further described below) in an attempt to create a
pretext for its subsequent seizure of the Kumtor Mine.
In early March 2021, the Government of the
Kyrgyz Republic resurrected a number of historical tax claims
relating to Kumtor, each of which was resolved years ago either
through previous settlements or Kyrgyz court decisions. When the
Company disclosed such claims in March 2021, the amounts claimed by
the Kyrgyz Republic were estimated to be approximately $352
million, including taxes, interest and penalties. However, the
Company’s understanding is now that the Kyrgyz officials may have
subsequently increased the amounts claimed to over $1 billion.
On May 7, 2021, a Kyrgyz Republic court ruled
against KGC in a civil case brought by four Kyrgyz Republic private
citizens seeking a determination that KGC’s past practice of
placing waste rock on glaciers was illegal. The court awarded
damages of over $3 billion in favour of the Kyrgyz Republic.
In early May 2021, the Kyrgyz Republic
Parliament passed a temporary management law that would allow the
Kyrgyz Republic to assume management authority over KGC in certain
circumstances. On May 15, 2021, the Kyrgyz Government effectively
seized control of the Kumtor Mine by sending state security
services to the mine, KGC’s office in Bishkek and the homes of
several KGC employees. The seizure was formalized on May 17, 2021
when the Kyrgyz Government appointed an external manager for the
Kumtor Mine following an extraordinary session of the Kyrgyz
Republic Parliament. During that session, the State Commission
provided its preliminary report and made a number of false and
meritless allegations against KGC, including claims related to
corruption, environmental damage and taxation payments, and the
Kyrgyz Parliament recommended the Kyrgyz Government appoint an
external manager under the temporary management law. The Kyrgyz
Government subsequently appointed Mr. Tengiz Bolturuk as the
external manager of the Kumtor Mine later that day. Consequently,
Centerra is no longer in control of the Kumtor Mine and can no
longer ensure the safety of the mine’s employees or operations.
Centerra and its Kumtor-related subsidiaries
have taken a number of measures in response to the Kyrgyz
Republic’s unjustified and illegal seizure of the Kumtor Mine,
including but not limited to:
- Initiating binding arbitration
against the Kyrgyz Republic and Kyrgyzaltyn, the state-owned mining
company and gold refining monopoly, to enforce Centerra’s rights
under longstanding agreements governing the Kumtor Mine and to,
among other things, hold the Kyrgyz Republic Government and
Kyrgyzaltyn accountable for any and all losses and damage that
result from its actions against KGC and the Kumtor Mine.
- Restricted Kyrgyzaltyn from
transferring or encumbering any common shares of the Company or
exercising any voting rights or dissent rights attached to Centerra
common shares. In addition, dividends or distributions on Centerra
common shares that would otherwise be payable to Kyrgyzaltyn or its
affiliates are waived and will be donated to the Company to the
extent such dividends or distributions can be attributed reasonably
to KGC (or the Kumtor Mine’s assets or operations) or distributions
from KGC.
- Initiating proceedings in the
Ontario Superior Court of Justice against Centerra’s former
director, Tengiz Bolturuk, who resigned from the Company’s Board to
assume control of the Kumtor Mine on behalf of the Kyrgyz Republic
as external manager in breach of his fiduciary duties to the
Company.
- Filed for protection under Chapter
11 of the federal U.S. Bankruptcy Code in the Southern District of
New York (KGC and Kumtor Operating Company (“KOC”)). The
court-supervised process provides, among other things, for a
worldwide automatic stay of all claims against KGC and KOC, which
the Company hopes will deter the Kyrgyz Republic from taking
further precipitous action against KGC, its assets and its
creditors and other stakeholders, including actions to enforce the
meritless Kyrgyz court judgments in respect of “environmental”
damages and tax claims.
- Continued outreach through various
avenues to encourage the leadership of the Kyrgyz Republic to
engage in a dialogue to attempt to resolve these disputes.
The Company believes that the actions of the
Kyrgyz Republic authorities described above were part of a
concerted effort to coerce Centerra to give up economic value in or
ownership of the Kumtor Mine and to falsely justify a
nationalization of the Kumtor Mine.
As the Company has noted many times, the 2009
Kumtor Project Agreements provide a solid foundation for Kumtor’s
operations and were approved by the Kyrgyz Republic Parliament and
Constitutional Court in 2009. Those agreements were re-affirmed by
the Government of the Kyrgyz Republic in 2017 when it entered into
the Strategic Agreement which was completed and became fully
effective in 2019. Until the seizure of the mine by the Kyrgyz
Government in May 2021, KGC’s operations and activities had always
carefully adhered to those agreements and applicable laws,
including with regard to the annual mine plans approved by (among
others) Kyrgyz state agencies responsible for environment and
safety. Furthermore, the Strategic Agreement included a release of
the Company and KGC by the Kyrgyz Government of all outstanding
claims at such time, including damages for harm allegedly caused to
the environment from storing production tails (e.g. waste rock) on
glaciers.
The Kumtor Mine’s environmental performance
prior to its seizure by the Kyrgyz Government adhered to
international standards, including those of the European Bank for
Reconstruction and Development, and had been audited multiple times
by, among others, the Kyrgyz Government’s own environmental
consultant, AMEC Foster Wheeler.
While Centerra will continue to pursue all
measures necessary to protect its rights in arbitration and in
other legal proceedings, the Company has consistently stated that
it remains willing and available to engage with the Kyrgyz
Government in a constructive dialogue on the matters it considers
to be the subject of dispute. Unfortunately, the Kyrgyz Government
has provided no official response to the Company’s direct and
indirect outreach. No assurances can be given that Centerra will be
successful in any of the foregoing legal proceedings or that the
Company will be able to negotiate a solution that will not have a
material impact on Centerra. There remains the further risk that
additional regulatory, tax, or civil claims will be commenced
against KGC or the Company.
Although the Company remains the rightful legal
owner of KGC, it cannot effectively exercise power over any
relevant activities or affect the returns of the Kumtor Mine. As a
result of the loss of control, the Company has deconsolidated the
results of the Kumtor Mine, recognizing a loss on the change of
control of $926.4 million in the second quarter of 2021, ascribed
no value to the Company’s interest in KGC and is accounting for the
Kumtor Mine as a discontinued operation. Accordingly, the
consolidated results from the Company’s continuing operations
exclude Kumtor Mine’s operations for all periods presented
(including comparative periods), unless otherwise noted.
The figures related to the Kumtor and
Kyrgyzaltyn presented in this document (including Centerra’s
management’s discussion and analysis for the three and six months
ended June 30, 2021) and Centerra’s condensed consolidated interim
financial statements and the notes thereto for the three and six
months ended June 30, 2021 (“Interim Financial Statements”) are
accounting figures and do not represent the potentially recoverable
damages based on legal claims asserted by the Company and certain
subsidiaries arising from the loss of control of the Kumtor Mine.
Nothing in this document or the Interim Financial Statements shall
act as a waiver of any rights or claims the Company and its
subsidiaries may have in connection with the Kumtor Mine.
British Columbia, Canada (“BC”) Fires
Update
Recent record high temperatures and dry
conditions in BC have led to an increase in forest fires in the
province, which may pose a risk to the health and safety of our
employees, contractors and the communities in which we operate.
Such conditions have potential to disrupt shipments of supplies to
the mine site, operation of the mine and transportation of
concentrate from the Mount Milligan Mine. To date, the only
disruption experienced is related to the movement of concentrate
via rail through the province of BC. The Company is working with
the Canadian National Railway (“CN”) to try to mitigate the impact
of any such delays.
The CN truss bridge near the town of Lytton, BC,
a key route for the Mount Milligan Mine’s concentrate shipments,
sustained fire damage which affected traffic on the route. CN has
since repaired the damage. Despite some disruption to rail traffic,
nineteen railcars of the Mount Milligan Mine’s concentrate were
released and arrived in the Port of Vancouver in mid-July and were
subsequently loaded on a vessel as planned.
There are currently no highly visible forest
fires in the vicinity of the mine and the Company does not believe
the forest fires pose a risk of disruption to the mine at this
time. However, for the health and safety of our employees and
contractors, the Company has an evacuation strategy in place,
including four buses that remain on standby for evacuation purposes
and 40 mine rescue team members trained in wildland firefighting
techniques. The Mount Milligan Mine also has a weather station on
site and receives regular updates from the BC Wildfire Service to
monitor this evolving situation closely.
As of date of this release, the Company does not
expect an impact on the 2021 production or cost guidance for the
Mount Milligan Mine as a result of the fires, however this is
subject to change pending any change in the status of the forest
fires and their potential to disrupt the logistics of our
operations.
COVID-19 Update
Centerra continues to prioritize the health,
safety and well-being of its employees, contractors, communities,
and other stakeholders during the current outbreak of COVID-19 and
to take steps to minimize the effect of the pandemic on its
business. The Company has established strict COVID-19 protocols at
its mine sites to help prevent infection and reduce the potential
transmission of COVID-19. Vaccination clinics have been set up for
employees and contractors at the Mount Milligan Mine and the Öksüt
Mine, with second vaccination doses provided to 64% and 55% of site
employees, respectively. COVID-19 vaccination rates continue to
rise in the communities and countries in which the Company operates
with significant portions of the population in Canada and Turkey
having received two vaccination doses. Although immunization rates
continue to climb, the Company, its mine sites and offices are
currently maintaining their COVID-19 protocols.
Centerra continues to assess the resiliency of
its supply chains, maintaining increased mine site inventories of
key materials. The Company implemented travel restrictions and
temporarily closed or limited office capacity at its various
administration offices, including its head office in
Toronto. The Company is planning to open its head office in
Toronto in September 2021 for those employees who want to return to
the office and is currently developing a hybrid workplace policy
(work from office and home) for implementation in 2022. Other
offices and various administration offices at the mine sites are
open with office capacity limits in place and remain flexible and
empathetic to the needs of employees to ensure that the health,
safety and wellness of our employees remain top priorities.
Neither the Mount Milligan Mine nor the Öksüt
Mine has been materially affected by COVID-19 as employee absences
due to COVID-19 and other illnesses have so far been successfully
managed. The Company notes that the effects of COVID-19 on its
business continue to change rapidly. All measures enacted to date
reflect the Company’s best assessment at this time but will remain
flexible and will be revised as necessary or advisable and/or as
recommended by public health and governmental authorities.
Exploration Update
Exploration activities in the second quarter of
2021 included drilling, surface sampling, geological mapping and
geophysical surveying at the Company’s various projects and earn-in
properties, targeting gold and copper mineralization in Canada,
Turkey, Finland and USA. Until May 15, 2021, the Company also
conducted exploration activities in the Kyrgyz Republic.
New projects have been initiated in Turkey at
the 100% Centerra owned Karataş Project in eastern Turkey and in
the Nechako Plateau area of northcentral British Columbia at the
100% Centerra owned Lucas North Project.
Exploration expenditures at the Company’s
continuing operations were $7.6 million in the second quarter of
2021 compared to $4.1 million in the same quarter of 2020. The
increase in exploration expenditures was primarily due to expanded
drilling programs at the Mount Milligan Mine in Canada, the Öksüt
Mine and the Sivritepe Project in Turkey, and drilling activities
performed at our U.S joint ventures.
Selected drill program results and intercepts
are highlighted in the supplementary data at the end of this news
release. The drill collar locations and associated graphics are
available at the following link: http://ml.globenewswire.com/Resource/Download/2d207407-3f8e-4fca-a118-837afc222be2
About Centerra
Gold
Centerra 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. Centerra
operates two mines, the Mount Milligan Mine in British Columbia,
Canada, the Öksüt Mine in Turkey and the Molybdenum Business Unit
in the United States. The Company owns the Kumtor Mine in the
Kyrgyz Republic, which is currently not under the Company’s
control. Centerra's shares trade on the Toronto Stock Exchange
(TSX) under the symbol CG and on the New York Stock Exchange (NYSE)
under the symbol CGAU. The Company is based in Toronto, Ontario,
Canada.
Conference Call
Centerra invites you to join its 2021 second quarter conference
call on Tuesday, August 10, 2021 at 9:00 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 (877)-329-6284. International
participants may access the call at: +1 (212)-231-2903. Results
summary presentation slides are available on Centerra Gold’s
website at www.centerragold.com. Alternatively, an audio
feed webcast will be broadcast live by Intrado 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 August 17,
2021 by calling: +1 (416) 626-4100 or 1 (800) 558-5253 and using
passcode 21995606.
For more
information:
John W. Pearson
Vice President, Investor Relations
Centerra Gold Inc.
(416) 204-1953
john.pearson@centerragold.com
Additional information on Centerra Gold
is available on the Company’s web site
at www.centerragold.com and at SEDAR at
www.sedar.com and EDGAR at www.sec.gov/edgar.
Management’s Discussion and
Analysis
For the Period Ended June 30,
2021
This Management Discussion and Analysis
(“MD&A”) has been prepared as of August 9, 2021 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 six months ended June 30, 2021 in
comparison with the corresponding period ended June
30, 2020. This discussion should be read in conjunction
with the Company’s unaudited condensed consolidated interim
financial statements and the notes thereto for the three and six
months ended June 30, 2021 prepared in accordance
with International Financial Reporting Standards (“IFRS”). This
MD&A should also be read in conjunction with the Company’s
audited annual consolidated financial statements for the years
ended December 31, 2020 and 2019, the related MD&A and the
Annual Information Form for the year ended December 31, 2020 (the
“2020 Annual Information Form”). The Company’s unaudited condensed
consolidated interim financial statements and the notes thereto for
the three and six months ended June 30, 2021, the
2020 Annual Report and the 2020 Annual Information Form are
available at www.centerragold.com,
on the System for Electronic Document Analysis and Retrieval
(“SEDAR”) at www.sedar.com and on the
Electronic Data Gathering, Analysis and Retrieval system
(“EDGAR”) www.sec.gov/edgar. In addition,
this discussion contains forward looking information regarding
Centerra’s business and operations. Such forward-looking statements
involve risks, uncertainties and other factors that could cause
actual results to differ materially from those expressed or implied
by such forward looking statements. See “Caution Regarding
Forward-Looking Information” in this discussion. All dollar amounts
are expressed in United States dollars (“USD”), except as otherwise
indicated. 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.
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 and within the meaning of the United
States Private Securities Litigation Reform Act of 1995. 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 regarding 2021 Guidance and the three-year outlook,
including outlook on production (including the timing thereof),
cost, free cash flow and capital spend in 2021 and production and
costs in 2022 and 2023, and the assumptions used in preparing such
guidance and outlook, including those discussed under “2021
Material Assumptions”; the impact of the seizure of the Kumtor Mine
on the Company’s other operations and businesses; the outcome of
arbitration and other proceedings initiated by the Company
regarding the unlawful seizure by the Kyrgyz Government of the
Kumtor Mine in May, 2021, or the outcome or effect of the legacy
environmental and tax disputes and criminal investigations relating
to the Kumtor Mine or the outcome of any future discussions or
negotiations to resolve any or all of the disputes relating to the
Kumtor Mine; possible impacts to operations relating to COVID-19;
Company’s expectations regarding ongoing forest fires in British
Columbia, Canada not posing a risk of disruption of, or having an
impact on the 2021 production or cost guidance for the Mount
Milligan Mine; the Company’s expectation regarding having
sufficient water at the Mount Milligan Mine in the medium term and
for its targeted throughput and its plans for a long term water
solution; expectations regarding planned mill maintenance shutdowns
at Mount Milligan in the second half of 2021 and the impact of
Mount Milligan’s continuous improvement projects, including staged
flotation reactors; expectations regarding the receipt of a
forestry permit for the Öksüt Mine, plans to access the Güneytepe
deposit in 2022, the expected construction of the Öksüt Mine’s heap
leach facility and its ability to accommodate 2022 production and
planned heap leach recovery rates at the Öksüt Mine; the Company’s
expectations of adequate liquidity for 2021; and expectations
regarding contingent payments to be received from the sale of
Greenstone Gold Mine Partnership.
Forward-looking information is necessarily
based upon a number of estimates and assumptions that, while
considered reasonable by Centerra, are inherently subject to
significant technical, political, business, economic and
competitive uncertainties and contingencies. Known and unknown
factors could cause actual results to differ materially from those
projected in the forward-looking information. Factors and
assumptions that could cause actual results or events to differ
materially from current expectations include, among other things:
(A) strategic, legal, planning and other risks, including:
political risks associated with the Company’s operations in Turkey
and Canada; resource nationalism including the management of
external stakeholder expectations; the impact of changes in, or to
the more aggressive enforcement of, laws, regulations and
government practices, including unjustified civil or criminal
action against the Company, its affiliates or its current or former
employees; risks that community activism may result in increased
contributory demands or business interruptions; the risks related
to outstanding litigation affecting the Company, including the
potential failure to negotiate a mutually acceptable outcome of
disputes relating to the Kumtor Mine; risks that an arbitrator will
reject the Company’s claims against the Kyrgyz Republic and/or
Kyrgyzaltyn JSC (“Kyrgyzaltyn”)or that such claims may not be
practically enforceable against the Kyrgyz Republic and/or
Kyrgyzaltyn; risks related to the continued imposition by the
Kyrgyz Government of external management on KGC or the prolongation
of such external management, including risks that the external
manager materially damages the Kumtor Mine’s operations; the
ongoing failure of the Kyrgyz Republic Government to comply with
its continuing obligations under the investment agreements
governing the Kumtor Mine and not take any expropriation action
against the Kumtor Mine; risks that the Kyrgyz Government undertake
further unjustified civil or criminal action against the Company,
its affiliates or its current or former employees; the impact of
constitutional changes in Turkey; 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; risks related to
anti-corruption legislation; risks related to the concentration of
assets in Central Asia; Centerra not being able to replace mineral
reserves; Indigenous claims and consultative issues relating to the
Company’s properties which are in proximity to Indigenous
communities; and potential risks related to kidnapping or acts of
terrorism; (B) risks relating to financial matters, 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 the Mount Milligan Mine, reliance
on a few key customers for the gold-copper concentrate at the Mount
Milligan Mine, use of commodity derivatives, the imprecision of the
Company’s mineral reserves and resources estimates and the
assumptions they rely on, the accuracy of the Company’s production
and cost estimates, the impact of restrictive covenants in the
Company’s credit facilities which may, among other things, restrict
the Company from pursuing certain business activities or making
distributions from its subsidiaries, the Company’s ability to
obtain future financing, the impact of global financial conditions,
the impact of currency fluctuations, the effect of market
conditions on the Company’s short-term investments, the Company’s
ability to make payments including any payments of principal and
interest on the Company’s debt facilities depends on the cash flow
of its subsidiaries; and (C) risks related to operational matters
and geotechnical issues and the Company’s continued ability to
successfully manage such matters, including the stability of the
pit walls at our operations; the risk of having sufficient water to
continue operations at the Mount Milligan Mine and achieve expected
mill throughput; the risk of forest fires in BC disrupting or
otherwise impacting the Mount Milligan Mine; the success of the
Company’s future exploration and development activities, including
the financial and political risks inherent in carrying out
exploration activities; inherent risks associated with the use of
sodium cyanide in the mining operations; the adequacy of the
Company’s insurance to mitigate operational risks; mechanical
breakdowns; the Company’s ability to replace its mineral reserves;
the occurrence of any labour unrest or disturbance and the ability
of the Company to successfully re-negotiate collective agreements
when required; the risk that Centerra’s workforce and operations
may be exposed to widespread epidemic including, but not limited
to, the COVID-19 pandemic; seismic activity and wildfires in the
vicinity of the Company’s properties; long lead times required for
equipment and supplies given the remote location of some of the
Company’s operating properties; reliance on a limited number of
suppliers for certain consumables, equipment and components; the
ability of the Company to address physical and transition risks
from climate change and sufficiently manage stakeholder
expectations on climate-related issues; the Company’s ability to
accurately predict decommissioning and reclamation costs; the
Company’s ability to attract and retain qualified personnel;
competition for mineral acquisition opportunities; risks associated
with the conduct of joint ventures/partnerships; and the Company’s
ability to manage its projects effectively and to mitigate the
potential lack of availability of contractors, budget and timing
overruns and project resources. For additional risk factors, please
see section titled “Risk Factors” in the Company’s most recently
filed Annual Information Form available on SEDAR at www.sedar.com and EDGAR www.sec.gov/edgar.
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 August 9, 2021.
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 |
13 |
Recent Events and
Developments |
14 |
Overview of
Consolidated Financial and Operating Results |
20 |
Overview of
Consolidated Results |
21 |
Outlook |
24 |
Financial
Performance |
32 |
Balance Sheet
Review |
34 |
Financial
Instruments |
37 |
Operating Mines and
Facilities |
38 |
Discontinued
Operations |
47 |
Quarterly Results –
Previous Eight Quarters |
48 |
Related party
transactions |
48 |
Contingencies |
49 |
Accounting Estimates,
Policies and Changes |
50 |
Disclosure Controls
and Procedures and Internal Control Over Financial
Reporting |
50 |
Non-GAAP
Measures |
51 |
Qualified Person &
QA/QC – Non-Exploration (including Production
information) |
57 |
|
|
Overview
Centerra is a Canadian-based gold mining company
focused on operating, developing, exploring and acquiring gold
properties worldwide. Centerra’s principal continuing operations
are the Mount Milligan Gold-Copper Mine located in British
Columbia, Canada, and the Öksüt Gold Mine located in Turkey. The
Company has one property in Canada in the pre-development stage,
the Kemess Underground Gold Project. The Company owns exploration
properties in Canada, the United States of America and Turkey and
has options to acquire exploration joint venture properties in
Canada, Finland, Turkey, and the United States of America. The
Company owns various assets within its Molybdenum Business Unit,
particularly the Langeloth metallurgical processing facility in
Pennsylvania, United States of America and two primary molybdenum
mines currently on care and maintenance, the Thompson Creek Mine in
Idaho, United States of America, and the Endako Mine (75%
ownership) in British Columbia, Canada.
Until May 15, 2021, the Company also
consolidated the results of the Kumtor Mine located in the Kyrgyz
Republic through its wholly owned subsidiary Kumtor Gold Company
(“KGC”). Although the Company remains the rightful legal owner of
KGC, as a result of the seizure of the Kumtor Mine and the
continuing actions by the Kyrgyz Republic, the carrying value of
the net assets of the mine has been derecognized from the Company’s
balance sheet, no value was ascribed to the Company’s interest in
KGC, the Company has recognized a loss on the change of control and
results of the Kumtor Mine’s operations are presented as a
discontinued operation in our financial statements.
As of June 30, 2021, Centerra’s significant
subsidiaries are as follows:
|
|
Current |
Property |
Entity |
Property - Location |
Status |
Ownership |
Thompson Creek Metals Company Inc.
|
Mount Milligan Mine - Canada |
Operation |
100 |
% |
Öksüt Madencilik A.S. (“OMAS”)
|
Öksüt Mine - Turkey |
Operation |
100 |
% |
Langeloth Metallurgical Company LLC
|
Langeloth - United States |
Operation |
100 |
% |
AuRico Metals Inc.
|
Kemess Underground Project - Canada |
Pre-development |
100 |
% |
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 |
% |
KGC |
Kumtor Mine - Kyrgyz Republic |
Discontinued
Operation |
100 |
% |
|
|
|
|
The Company’s common shares are listed on the
Toronto Stock Exchange and trade under the symbol CG and on the New
York Stock Exchange and trade under the symbol CGAU.
As of August 9, 2021, there are 296,774,930
common shares issued and outstanding, options to acquire 3,433,852
common shares outstanding under its stock option plan and 1,021,367
restricted share units outstanding under its restricted share unit
plan (exercisable on a 1:1 basis for common shares).
Recent Events and
Developments
The seizure of Kumtor
Mine
Since the beginning of 2021, the Kyrgyz Republic
has taken a number of coordinated actions that resulted in the
seizure of the Kumtor Mine by the Kyrgyz Republic and a loss of
control of the mine by Centerra.
State Commission
In February 2021, the Kyrgyz Republic Parliament established the
State Commission to, among other things, review the performance of
the Kumtor Mine and to review the results of a previous 2012 Kyrgyz
Republic state commission. The State Commission made voluminous and
urgent document requests and inquiries of Kumtor to which the
Company dutifully responded. While the work of the State Commission
was ongoing and causing an enormous administrative burden on the
Company and putting pressure and stress on its employees, the
Kyrgyz Republic took a number of coordinated actions (further
described below) in an attempt to create a pretext for its
subsequent seizure of the Kumtor Mine.
Resurrection of Historical Tax
Claims
First, the Kyrgyz Government resurrected a number of historical tax
claims relating to Kumtor, each of which was resolved years ago
either through previous settlements or Kyrgyz court decisions. Such
claims are also precluded by the “Kumtor Project Agreements,
including the 2009 Restated Investment Agreement which provides
for, among other things, a unique fiscal and tax regime applicable
to Kumtor Mine’s operations. In particular, Kyrgyz Republic state
agencies brought claims against KGC for a number of previous tax
years in relation to alleged: (i) taxes owing on intercompany
dividends paid by KGC to its direct parent company, Centerra; (ii)
underpayments to the Kyrgyz Republic Social Fund; and (iii) taxes
owing for failure to withhold payroll deductions on certain
employment premiums payable to Kumtor employees. The Kyrgyz
Government also alleged that KGC failed to pay an annual amount
equal to 4% of the Kumtor Mine’s gross proceeds, beginning from
2010. When the Company disclosed such alleged claims in March 2021,
the amounts claimed by the Kyrgyz Republic were estimated to be
approximately $352 million, including taxes, interest and
penalties. However, the Company’s understanding is now that the
Kyrgyz officials have subsequently increased the amounts claimed to
over $1 billion.
Environmental Claim
Second, four Kyrgyz Republic private citizens, with the active
support of the Kyrgyz Government, commenced a civil claim against
KGC requesting that KGC’s past practice of placing waste rock on
glaciers be determined to be illegal. In early May 2021, the
claimants amended their claim to demand over $3 billion in
environmental damages be paid to the Kyrgyz Republic. A Kyrgyz
court rendered a decision on May 7, 2021 awarding damages against
KGC of approximately $3.1 billion payable to the Kyrgyz
Republic.
Kyrgyz Legislative Amendments and Temporary
Management Law
Third, during the spring of 2021, the Kyrgyz Republic Parliament
began to consider a number of laws and legislative amendments that
would fundamentally alter and breach the 2009 Kumtor Project
Agreements. For example, in April 2021, the Kyrgyz Republic
Parliament proposed a law that would specifically amend the 2009
law that ratified the Kumtor Project Agreements. Such amendments
would not only delete provisions that ensure the primacy of the
Kumtor Project Agreements over other Kyrgyz legislation but also
subject Kumtor to certain Kyrgyz laws of general application,
including tax laws.
More significantly, on May 6, 2021, the Kyrgyz
Republic Parliament passed, after three readings in a single day, a
temporary management law (the “Temporary Management Law”) that
would allow the Kyrgyz Republic to assume management authority over
KGC in certain circumstances. Although drafted in general terms,
during the short parliamentary debates, it was acknowledged that
the only operation to which it might apply was the Kumtor Mine.
Among other things, the Temporary Management Law provides for the
following:
(i) |
If
KGC’s mineral rights are suspended pursuant to other Kyrgyz laws
for violation of subsoil protection and/or environmental and
industrial safety requirements established by Kyrgyz law posing an
immediate threat to the life or health of persons working or living
in the zone of influence of KGC operations, the Kyrgyz Republic
President may in effect unilaterally decide to prohibit KGC’s
management from making decisions relating to its operations,
business management, commercial, and financial activities, and take
control of KGC’s assets by introducing temporary external
administration; |
|
|
(ii) |
The external management appointed
by the Kyrgyz Republic will have full control over all of KGC’s
assets, including its bank accounts; |
|
|
(iii) |
If external management is
appointed by the Kyrgyz Republic, KGC’s shareholders, including
Centerra, and its Board of Directors will have “no right to
interfere in the current management of the company by giving direct
instructions, orders or any other instructions in the form of a
request or recommendation to the temporary external manager”;
and |
|
|
(iv) |
Individuals who violate the
Temporary Management Law can be subjected to criminal punishment
and imprisonment. |
Seizure of the Kumtor Mine
Fourth, on the morning of May 15, 2021, Centerra learned that the
Kyrgyz Republic had seized control of the Kumtor Mine when the
Company received reports that the homes of senior managers of KGC
in the Kyrgyz Republic were visited by persons purporting to be law
enforcement officials. KGC’s managers’ computers and passwords were
seized and they were then taken to KGC’s office in Bishkek where a
search of the office was carried out and significant documents and,
perhaps, additional computers were seized. One or more of KGC’s IT
personnel were also taken from their homes and brought to the mine
site. Kyrgyz authorities concurrently installed their officials at
the Kumtor Mine site without providing Centerra or KGC with any
advance warning.
At an extraordinary session of the Kyrgyz
Republic Parliament held on May 17, 2021, the State Commission
provided a preliminary report of its work and the Chairman of the
State Commission and other Kyrgyz Republic officials made a number
of groundless claims in support of its recommendation to impose a
Government appointed temporary external manager on KGC. Such claims
included: (i) allegations of corrupt dealings between Centerra and
its predecessor company with former Kyrgyz Republic officials which
led to the previous and current project agreements under which the
Kumtor Mine was developed and operated; (ii) allegations of
environmental damage caused by KGC operations, including due to the
placement of waste rock on glaciers; and (iii) allegations that
Centerra severed information systems which led to the shutdown of
critical safety, pit wall and glacier monitoring systems at the
Kumtor Mine site; and (iv) unfair distribution of economic benefits
from the Kumtor Mine. The Company understands that the State
Commission also obtained an extension of three months to complete
its work during the same session of Parliament.
Kyrgyz Republic’s seizure of the Kumtor Mine,
completed as a practical matter in the preceding days, was
formalized when the Kyrgyz Parliament recommended the Kyrgyz
Government appoint an external manager under the Temporary
Management Law. As a result of this loss of control, the Company
can no longer ensure the safety of the mine’s employees or
operations and is unable to maintain insurance over the Kumtor
Mine. The Kyrgyz Government subsequently appointed Mr. Tengiz
Bolturuk as the external manager of the Kumtor Mine later that day.
Kumtor has been under the effective control of the Kyrgyz Republic
since May 15, 2021.
Centerra strongly disputes the legality of the
Temporary Management Law and its application to KGC.
Criminal Investigations
According to statements made during the May 17, 2021 extraordinary
session of Parliament and recent press reports, the Company
understands that the Kyrgyz Republic has opened a series of
criminal investigations relating to the Kumtor Mine and, in
particular, to alleged corruption of previous agreements entered
into between Centerra, its predecessor, and the Kyrgyz Republic
Government. The Company further understands that the Kyrgyz
Republic has arrested or detained a significant number of former
Kyrgyz politicians and government officials, including several
former prime ministers, in connection with such investigations. The
use of the Kyrgyz criminal law and investigations as a pressure
tactic in aid of economic or commercial goals is not a new tactic
for the Kyrgyz Republic. The Company strenuously denies any such
allegations which should be viewed in the broader context,
including the Kyrgyz Republic Government’s goal of seizing the
Kumtor Mine and intimidating its political opponents.
Centerra Responses
Centerra has taken a number of measures in
response to the Kyrgyz Republic’s unjustified and illegal seizure
of the Kumtor Mine.
Arbitration Proceedings
First, on May 17, 2021, the Company announced that it initiated
binding arbitration (the “Kumtor Arbitration Proceedings”) against
the Kyrgyz Republic to enforce its rights under longstanding
agreements governing the Kumtor Mine and to, among other things,
hold the Kyrgyz Republic Government accountable in the arbitration
for any and all losses and damage that result from its actions
against KGC and the Kumtor Mine. Subsequently, this claim was
amended to add Kyrgyzaltyn as a respondent in the Kumtor
Arbitration Proceedings.
These claims will be adjudicated by a single
arbitrator in the Kumtor Arbitration Proceedings to be held at
Stockholm, Sweden and conducted under the rules of the United
Nations Commission on International Trade Law. The applicable
governing law of most of the longstanding agreements with the
Kyrgyz Republic and Kyrgyzaltyn is the law of the State of New
York. Centerra has requested that the Permanent Court of
Arbitration in the Hague, Netherlands designate an appointing
authority to select an arbitrator.
Restrictions on Kyrgyzaltyn
Shareholding
Second, on May 17, 2021 the Company announced that as a result of
recent events in the Kyrgyz Republic, Kyrgyzaltyn is prohibited
under the 2009 Restated Shareholders’ Agreement between Kyrgyzaltyn
and Centerra from transferring or encumbering any common shares of
the Company or exercising any voting rights or dissent rights
attached to Centerra common shares. In addition, dividends or
distributions on Centerra common shares that would otherwise be
payable to Kyrgyzaltyn or its affiliates are waived and will be
donated to the Company to the extent such dividends or
distributions can be attributed reasonably to KGC (or the Kumtor
Mine’s assets or operations) or distributions from KGC.
Ontario Court Proceedings Against
Bolturuk
Third, the Company initiated proceedings in the Ontario Superior
Court of Justice against Tengiz Bolturuk for breaches of his
fiduciary duties to the Company related to the seizure of the
Kumtor Mine by the Kyrgyz Republic. In particular, the Company
notes Kyrgyzaltyn nominated Mr. Bolturuk to Centerra’s board of
directors in December 2020 and Mr. Bolturuk remained on the Board
while the Kyrgyz Republic undertook the coordinated actions
described above that resulted in the seizure of the Kumtor Mine. He
resigned as a director on May 17, 2021 in Bishkek in order to
assume control of the Kumtor Mine on behalf of the Kyrgyz Republic,
as external manager appointed under the Kyrgyz Republic’s Temporary
Management Law.
U.S. Chapter 11 Proceedings
Finally, on June 1, 2021, to protect their interests in response to
the seizure of Kumtor, the two wholly owned subsidiaries of
Centerra that own and operated the Kumtor Mine, KGC and Kumtor
Operating Company (“KOC”), filed for protection under Chapter 11 of
the federal U.S. Bankruptcy Code in the Southern District of New
York. The court-supervised process provides, among other things,
for a worldwide automatic stay of all claims against KGC and KOC
which the Company hopes will deter the Kyrgyz Republic from taking
further precipitous action against KGC and the Kumtor Mine,
including actions to enforce the meritless environmental and tax
claims noted above.
Management Assessment
The Company believes that the actions of the Kyrgyz Republic
authorities described above were part of a concerted effort to
coerce Centerra to give up economic value or ownership of the
Kumtor Mine and to falsely justify a nationalization of the Kumtor
Mine.
The meritless corruption, tax, environmental
claims and criminal investigations brought by the Kyrgyz Republic
against and in relation to Kumtor must be viewed in this context.
Similarly, the Kyrgyz Republic’s allegation that Centerra
endangered worker health and safety at the Kumtor Mine by shutting
off critical safety systems is also patently false. When Kyrgyz
state authorities confiscated computers and passwords of individual
Kumtor employees, Centerra restricted Kyrgyz users access to
preserve the integrity of the organization’s global IT
infrastructure and its confidential information. Although central
system access was restricted, the mine’s safety systems, including
the individual pit wall and glacier monitoring systems, remained
operational. In fact, the repeated assertions by Kyrgyz officials
that operations of Kumtor must continue non-stop demonstrate the
fact that the alleged “imminent harm” to the environment or human
health used as a pretext by the Kyrgyz Government to purportedly
impose “temporary management” was wholly contrived, in blatant
breach of long-standing investment agreements. The imposition of
Mr. Bolturuk as Kumtor’s external manager was also done in
violation of the Kyrgyz Republic’s own Temporary Management Law
since, as noted above, an external manager may only be imposed when
there has been a suspension of Kumtor’s rights to use subsoil.
Clearly, Kumtor’s subsoil rights have not been suspended by the
Kyrgyz Republic as the mine continues to operate as it had prior to
the Kyrgyz Republic’s seizure of control.
As the Company has noted many times, the Kumtor
Project Agreements provide a solid foundation for Kumtor’s
operations and were approved by the Kyrgyz Republic Parliament and
Constitutional Court in 2009. Those agreements were re-affirmed by
the Government of the Kyrgyz Republic in 2017 when it entered into
the Strategic Agreement which was completed and became fully
effective in 2019. Until the seizure of the mine by the Kyrgyz
Government in May 2021, KGC’s operations and activities had always
carefully adhered to those agreements and applicable laws,
including with regard to the annual mine plans approved by (among
others) Kyrgyz state agencies responsible for environment and
safety. Furthermore, the Strategic Agreement included a release of
the Company and KGC by the Kyrgyz Government of all outstanding
claims at such time, including damages for harm allegedly caused to
the environment from storing production tails (e.g. waste rock) on
glaciers.
The Kumtor Mine’s environmental performance
prior to its seizure by the Kyrgyz Government adhered to
international standards, including those of the European Bank for
Reconstruction and Development, and had been audited multiple times
by, among others, the Kyrgyz Government’s own environmental
consultant, AMEC Foster Wheeler.
While Centerra will continue to pursue all
measures necessary to protect its rights in arbitration and in
other legal proceedings, the Company has consistently stated that
it remains willing and available to engage with the Kyrgyz
Government in a constructive dialogue on the matters it considers
to be the subject of dispute. Unfortunately, the Kyrgyz Government
has provided no official response to the Company’s direct and
indirect outreach. No assurances can be given that Centerra will be
successful in any of the foregoing legal proceedings or that the
Company will be able to negotiate a solution that will not have a
material impact on Centerra. There remains the further risk that
additional regulatory, tax, or civil claims will be commenced
against KGC or the Company. See “Caution Regarding Forward-Looking
Information” and the section titled “Risk Factors” in our most
recently completed Annual Information Form.
The figures related to Kumtor and Kyrgyzaltyn
presented in this document and Centerra’s Interim Financial
Statements are accounting figures and do not represent the
potentially recoverable damages based on legal claims asserted by
the Company and certain subsidiaries arising from the loss of
control of the Kumtor Mine. Nothing in this document or the Interim
Financial Statements shall act as a waiver of any rights or claims
the Company and its subsidiaries may have in connection with the
Kumtor Mine.
British Columbia, Canada (“BC”)
Fires Update
Recent record high temperatures and dry
conditions in BC have led to an increase in forest fires in the
province, which may pose a risk to the health and safety of our
employees, contractors and the communities in which we operate.
Such conditions have potential to disrupt shipments of supplies to
the mine site, operation of the mine and transportation of
concentrate from the Mount Milligan Mine. To date, the only
disruption experienced is related to the movement of concentrate
via rail through the province of BC. The Company is working with
the Canadian National Railway (“CN”) to try to mitigate the impact
of any such delays.
The CN truss bridge near the town of Lytton, BC,
a key route for the Mount Milligan Mine’s concentrate shipments,
sustained fire damage which affected traffic on the route. CN has
since repaired the damage. Despite some disruption to rail traffic,
nineteen railcars of the Mount Milligan Mine’s concentrate were
released and arrived in the Port of Vancouver in mid-July and were
subsequently loaded on a vessel.
There are currently no highly visible forest
fires in the vicinity of the mine and the Company does not believe
the forest fires pose a risk of disruption to the mine at this
time. However, for the health and safety of our employees and
contractors, the Company has an evacuation strategy in place,
including four buses that remain on standby for evacuation purposes
and 40 mine rescue team members trained in wildland firefighting
techniques. The Mount Milligan Mine also has a weather station on
site and receives regular updates from the BC Wildfire Service to
monitor this evolving situation closely.
As of date of this release, the Company does not
expect an impact on the 2021 production or cost guidance for the
Mount Milligan Mine as a result of the fires, however this is
subject to change pending any change in the status of the forest
fires and their potential to disrupt the logistics of our
operations.
COVID-19 Update
Centerra continues to prioritize the health,
safety and well-being of its employees, contractors, communities,
and other stakeholders during the current outbreak of COVID-19 and
to take steps to minimize the effect of the pandemic on its
business. The Company has established strict COVID-19 protocols at
its mine sites to help prevent infection and reduce the potential
transmission of COVID-19. Vaccination clinics have been set up for
employees and contractors at the Mount Milligan Mine and the Öksüt
Mine, with second vaccination doses provided to 64% and 55% of site
employees, respectively. COVID-19 vaccination rates continue to
rise in the communities and countries in which the Company operates
with significant portions of the population in Canada and Turkey
having received two vaccination doses. Although immunization rates
continue to climb, the Company, its mine sites and offices are
currently maintaining their COVID-19 protocols.
Centerra continues to assess the resiliency of
its supply chains, maintaining increased mine site inventories of
key materials. The Company implemented travel restrictions and
temporarily closed or limited office capacity at its various
administration offices, including its head office in
Toronto. The Company is planning to open its head office in
Toronto in September 2021 for those employees who want to return to
the office and is currently developing a hybrid workplace policy
(work from office and home) for implementation in 2022. Other
offices and various administration offices at the mine sites are
open with office capacity limits in place and remain flexible and
empathetic to the needs of employees to ensure that the health,
safety and wellness of our employees remain top priorities.
Neither the Mount Milligan Mine nor the Öksüt
Mine has been materially affected by COVID-19 as employee absences
due to COVID-19 and other illnesses have so far been successfully
managed. The Company notes that the effects of COVID-19 on its
business continue to change rapidly. All measures enacted to date
reflect the Company’s best assessment at this time but will remain
flexible and will be revised as necessary or advisable and/or as
recommended by public health and governmental authorities.
Safety and
Environment
The Company recognized the following notable
developments in the course of the second quarter of 2021:
- The Öksüt Mine achieved one million
work hours without a Lost Time Injury.
- There were two reportable injuries
company-wide, including one medical aid injury and one restricted
work injury, both at the Öksüt Mine.
- There were no reportable incidents
to the environment.
Overview of Consolidated Financial and
Operating Results
Unaudited ($ millions, except as
noted) |
Three months ended June 30 |
Six months ended June 30
|
Financial Highlights (Continuing operations basis, except
as noted) |
|
2021 |
|
|
2020 |
|
% Change |
|
2021 |
|
|
2020 |
|
% Change |
Revenue |
$ |
202.3 |
|
$ |
130.0 |
|
56 |
% |
$ |
428.5 |
|
$ |
258.0 |
|
66 |
% |
Production costs |
|
112.7 |
|
|
91.0 |
|
24 |
% |
|
234.1 |
|
|
207.0 |
|
13 |
% |
Depreciation, depletion, and amortization |
|
24.7 |
|
|
20.6 |
|
20 |
% |
|
59.0 |
|
|
40.0 |
|
48 |
% |
Net earnings from mine operations |
$ |
64.9 |
|
$ |
18.4 |
|
253 |
% |
$ |
135.4 |
|
$ |
11.0 |
|
1131 |
% |
Net earnings (loss) from continuing operations |
|
33.0 |
|
|
(39.4 |
) |
(184 |
%) |
|
144.5 |
|
|
(104.7 |
) |
(238 |
%) |
Adjusted net earnings (loss) from continuing
operations(1) |
|
49.9 |
|
|
(22.3 |
) |
(324 |
%) |
|
78.2 |
|
|
(61.2 |
) |
(228 |
%) |
Net (loss) earnings from discontinued operations |
|
(884.7 |
) |
|
120.2 |
|
(836 |
%) |
|
(828.7 |
) |
|
205.4 |
|
(503 |
%) |
Net (loss) earnings (2) |
$ |
(851.7 |
) |
$ |
80.7 |
|
(1155 |
%) |
$ |
(684.2 |
) |
$ |
100.8 |
|
779 |
% |
Adjusted net earnings (1)(2) |
$ |
78.3 |
|
$ |
97.8 |
|
(20 |
%) |
$ |
162.6 |
|
$ |
144.3 |
|
13 |
% |
Cash provided by operating activities from continuing operations
before changes in working capital |
|
61.6 |
|
|
30.1 |
|
105 |
% |
|
146.3 |
|
|
20.0 |
|
632 |
% |
Cash provided by operating activities from continuing
operations |
|
60.3 |
|
|
49.4 |
|
22 |
% |
|
146.7 |
|
|
36.3 |
|
304 |
% |
Free cash flow (deficit) from continuing
operations(1) |
|
30.7 |
|
|
13.8 |
|
122 |
% |
|
98.7 |
|
|
(4.8 |
) |
(2156 |
%) |
Adjusted free cash flow (deficit) from continuing
operations(1) |
|
35.3 |
|
|
13.8 |
|
156 |
% |
|
103.3 |
|
|
(4.8 |
) |
(2252 |
%) |
Cash provided by operating activities from discontinued
operations |
|
77.1 |
|
|
218.7 |
|
(65 |
%) |
|
143.9 |
|
|
352.9 |
|
(59 |
%) |
Net cash flow from discontinued
operations(8) |
|
49.7 |
|
|
155.2 |
|
(68 |
%) |
|
47.8 |
|
|
244.6 |
|
(80 |
%) |
Capital expenditures - total(3) |
|
27.3 |
|
|
23.8 |
|
15 |
% |
|
45.3 |
|
|
42.6 |
|
6 |
% |
Sustaining capital expenditures |
|
26.1 |
|
|
9.6 |
|
171 |
% |
|
43.5 |
|
|
15.7 |
|
177 |
% |
Non-sustaining capital expenditures |
|
1.2 |
|
|
14.2 |
|
(92 |
%) |
|
1.8 |
|
|
26.9 |
|
(93 |
%) |
Net earnings (loss) from continuing operations per common share -
$/share basic (4) |
|
0.11 |
|
|
(0.13 |
) |
185 |
% |
|
0.49 |
|
|
(0.36 |
) |
236 |
% |
Net (loss) earnings per common share - $/share
basic (2)(4) |
|
(2.87 |
) |
|
0.27 |
|
(1163 |
%) |
|
(2.31 |
) |
|
0.34 |
|
779 |
% |
Adjusted net earnings (loss) from continuing operations per common
share - $/share basic(1)(4) |
|
0.17 |
|
|
(0.08 |
) |
(313 |
%) |
|
0.26 |
|
|
(0.21 |
) |
224 |
% |
Adjusted net earnings per common share - $/share
basic (1)(2)(4) |
|
0.26 |
|
|
0.33 |
|
(21 |
%) |
|
0.55 |
|
|
0.49 |
|
12 |
% |
Operating Highlights (Continuing operations
basis) |
|
|
|
|
|
|
|
|
|
|
Gold produced (oz) |
|
69,854 |
|
|
46,447 |
|
50 |
% |
|
140,031 |
|
|
84,614 |
|
65 |
% |
Gold sold (oz)(7) |
|
66,642 |
|
|
47,189 |
|
41 |
% |
|
148,724 |
|
|
90,357 |
|
65 |
% |
Average market gold price ($/oz)(5) |
|
1,815 |
|
|
1,711 |
|
6 |
% |
|
1,806 |
|
|
1,646 |
|
10 |
% |
Average realized gold price ($/oz )(1)(5) |
|
1,419 |
|
|
1,381 |
|
3 |
% |
|
1,445 |
|
|
1,300 |
|
11 |
% |
Copper produced (000's lb) |
|
19,811 |
|
|
19,064 |
|
4 |
% |
|
38,421 |
|
|
39,136 |
|
(2 |
%) |
Copper sold (000's lb) |
|
19,538 |
|
|
19,352 |
|
1 |
% |
|
42,321 |
|
|
39,776 |
|
6 |
% |
Average market copper price ($/lb)(5) |
|
4.40 |
|
|
2.42 |
|
82 |
% |
|
4.36 |
|
|
2.49 |
|
75 |
% |
Average realized copper price ($/lb )(1)(5) |
|
2.92 |
|
|
2.06 |
|
42 |
% |
|
2.81 |
|
|
1.83 |
|
54 |
% |
Molybdenum sold (lb) |
|
3,176 |
|
|
2,666 |
|
19 |
% |
|
6,485 |
|
|
6,457 |
|
0 |
% |
Average market molybdenum price ($/lb) |
|
14.48 |
|
|
8.30 |
|
75 |
% |
|
12.90 |
|
|
9.02 |
|
43 |
% |
Unit Costs (Continuing operations basis) |
|
|
|
|
|
|
|
|
|
|
Gold production costs ($/oz) |
|
593 |
|
|
759 |
|
(22 |
%) |
|
621 |
|
|
833 |
|
(25 |
%) |
All-in sustaining costs on a by-product basis
($/oz)(1)(6) |
|
676 |
|
|
1,238 |
|
(45 |
%) |
|
617 |
|
|
1,118 |
|
(45 |
%) |
All-in costs on a by-product basis ($
/oz)(1)(6) |
|
851 |
|
|
1,675 |
|
(49 |
%) |
|
742 |
|
|
1,550 |
|
(52 |
%) |
Gold - All-in sustaining costs on a co-product
basis($/oz)(1) |
|
970 |
|
|
1,470 |
|
(34 |
%) |
|
916 |
|
|
1,292 |
|
(29 |
%) |
Copper production costs ($/lb) |
|
1.41 |
|
|
1.34 |
|
5 |
% |
|
1.41 |
|
|
1.29 |
|
9 |
% |
Copper - All-in sustaining costs on a co-product basis –
($/lb)(1) |
|
2.06 |
|
|
1.72 |
|
20 |
% |
|
1.95 |
|
|
1.64 |
|
19 |
% |
(1) |
Non-GAAP measure. See discussion under “Non-GAAP Measures”. |
(2) |
Inclusive of the results from the
Kumtor Mine prior to the loss of control on May 15, 2021. |
(3) |
Capital expenditures are
presented as incurred and accrued. |
(4) |
At June 30, 2021, the Company had
296,715,105 common shares issued and outstanding. |
(5) |
Average for the period as
reported by the London Bullion Market Association (US dollar Gold
P.M. Fix Rate) and London Metal Exchange (LME). |
(6) |
Includes the impact of reduced
metal prices resulting from the Mount Milligan Streaming
Arrangement, and the impact of copper hedges. |
(7) |
Includes 3,788 and 6,603 ounces
of gold in the second quarter and first half of 2020, which were
sold prior to the commercial production at the Öksüt Mine. |
(8) |
Calculated as the sum of cash flow provided by operating activities
from discontinued operations, cash flow used in investing
activities from discontinued operations and cash flow used in
financing activities from discontinued operations. |
|
|
Overview of Consolidated
Results
Although the Company remains the rightful legal
owner of KGC, as a result of the seizure of the Kumtor Mine and the
continuing actions by the Kyrgyz Republic, the Company derecognized
the assets and liabilities of the Kumtor Mine in the statement of
financial position and presented its financial and operating
results prior to the loss of control as discontinued operations for
the three and six months ended June 30, 2021 and 2020. As a result,
the Company’s consolidated results from continuing operations,
discussed in this MD&A (including prior periods) exclude the
Kumtor Mine’s operations.
Second Quarter
2021 compared to Second
Quarter 2020
Net loss of $851.7 million was recognized in the second quarter of
2021, compared to net earnings of $80.7 million in the second
quarter of 2020. Net loss and net earnings figures include the
results from the Kumtor Mine which is accounted for as a
discontinued operation. The change was primarily due to the loss on
the change of control of the Kumtor Mine of $926.4 million,
partially offset by an increase in net earnings from continuing
operations between periods.
Adjusted net earningsNG in the second
quarter of 2021 was $78.3 million, compared to adjusted net
earningsNG in the second quarter of 2020 of $97.8
million.
Significant adjusting items to the net loss in
the second quarter of 2021 include:
- $926.4 million non-cash loss on the
change of control of the Kumtor Mine,
- $10.8 million non-cash reclamation
provision revaluation expense at sites on care and maintenance,
resulting solely from the movement in the discount rates being
applied to the underlying reclamation cash flows,
- $8.1 million Kumtor Mine legal
costs, onerous contract and other related costs, and
- $15.3 million gain from the
discontinuance of Kumtor Mine’s fuel hedge instruments.
Significant adjusting items to the net earnings
in the second quarter of 2020 include:
- $17.1 million non-cash reclamation
provision revaluation expense at sites on care and maintenance,
resulting solely from the movement in the discount rates being
applied to the underlying reclamation cash flows.
Net earnings from continuing operations of $33.0
million was recognized in the second quarter of 2021, compared to
net loss from continuing operations of $39.4 million in the second
quarter of 2020. The change was primarily due to an increase in the
gold ounces sold at the Mount Milligan Mine, a 42% higher average
realized copper prices (after the effects of hedges), lower
corporate administration costs as a result of a decrease in the
Company’s share price and higher tax recovery related to additional
eligible expenditures available to reduce current and deferred
income taxes under the Investment Incentive Certificate previously
obtained by the Öksüt Mine.
Adjusted net earnings from continuing
operationsNG in the second quarter of 2021 was $49.9
million, compared to adjusted net loss from continuing
operationsNG in the first quarter of 2020 of $22.3
million.
Significant adjusting items to the net earnings
from continuing operations in the second quarter of 2021
include:
- $10.8 million non-cash reclamation
provision revaluation expense at sites on care and maintenance,
resulting solely from the movement in the discount rates being
applied to the underlying reclamation cash flows, and
- $6.1 million Kumtor Mine legal and
other related costs.
Significant adjusting items to the net loss from
continuing operations in the second quarter of 2020 include:
- $17.1 million non-cash reclamation
provision revaluation expense at sites on care and maintenance,
resulting solely from the movement in the discount rates being
applied to the underlying reclamation cash flows.
Cash provided by operating activities from
continuing operations was $60.3 million in the second quarter of
2021, compared to $49.4 million in the second quarter of 2020. The
increase in cash provided by operating activities from continuing
operations was primarily due to higher average realized copper
prices and an increase in gold ounces sold at the Mount Milligan
and Öksüt Mines, partly offset by an unfavourable working capital
change at the Öksüt Mine as the mine transitioned in 2021 into a
normalized operating level.
Free cash flow from continuing
operationsNG of $30.7 million was recognized in the
second quarter of 2021, compared to $13.8 million in the second
quarter of 2020. The increase in free cash flow from continuing
operationsNG was primarily due to higher cash provided
by operating activities from continuing operations and lower
non-sustaining capital expenditures as the construction of the
Öksüt Mine was completed in 2020.
Adjusted free cash flow from continuing
operationsNG of $35.3 million was recognized in the
second quarter of 2021, compared to $13.8 million in the second
quarter of 2020.
Significant adjusting items to free cash flow in
the second quarter of 2021 include:
- $4.6 million Kumtor Mine legal and
other related costs.
Gold production costs from continuing operations
were $593 per ounce in the second quarter of 2021 compared to $759
per ounce in the second quarter of 2020. The decrease in production
costs from continuing operations was primarily due to an increase
in gold ounces sold at the Mount Milligan and Öksüt Mines.
All-in sustaining costs on a by-product
basisNG from continuing operations were $676 per ounce
in the second quarter of 2021 compared to $1,238 per ounce in the
second quarter of 2020. The decrease in all-in sustaining costs on
a by-product basis was primarily due to an increase in ounces sold
at the Mount Milligan and Öksüt Mines, higher average realized
copper prices and lower corporate administration expenses as a
result of a decrease in the Company’s share price. Partially
offsetting a decrease between the periods was higher sustaining
capital expenditures at the Mount Milligan Mine primarily due to
the timing of the purchase of new mining equipment and development
costs associated with the tailings storage facility.
All-in costs on a by-product basisNG
from continuing operations were $851 per ounce in the second
quarter of 2021 compared to $1,675 per ounce in the second quarter
of 2020. The decrease was primarily due to lower all-in sustaining
costs on a by-product basisNG and lower non-sustaining
capital expenditures as the construction of the Öksüt Mine was
completed in 2020.
First Half 2021 compared to First
Half 2020
Net loss of $684.2 million was recognized in the first half of
2021, compared to net earnings of $100.8 million in the first half
of 2020. Net loss and net earnings figures include the results from
the Kumtor Mine which is accounted for as a discontinued operation.
The change was primarily due to the loss on the change of control
of the Kumtor Mine of $926.4 million, partially offset by a gain on
the disposition of the Company’s interest in the Greenstone Gold
Mines Partnership and an increase in net earnings from continuing
operations between periods.
Adjusted net earningsNG in the first
half of 2021 were $162.6 million, compared to adjusted net
earningsNG in the first half of 2020 of $144.3
million.
Significant adjusting items to net loss in the
first half of 2021 include:
- $926.4 million non-cash loss on the
change of control of the Kumtor Mine,
- $72.3 million gain on the sale of
the Greenstone property,
- $15.3 million gain from the
discontinuance of the Kumtor Mine’s fuel hedge instruments,
and
- $8.1 million Kumtor Mine legal
costs, onerous contract and other related costs.
Significant adjusting items to net earnings in
the first half of 2020 include:
- $43.5 million non-cash reclamation
provision revaluation expense at sites on care and maintenance,
resulting solely from the movement in the discount rates being
applied to the underlying reclamation cash flows.
Net earnings from continuing operations of
$144.5 million were recognized in the first half of 2021, compared
to net loss from continuing operations of $104.7 million in the
first half of 2020. The change was primarily due to an increase in
gold ounces sold at the Mount Milligan Mine and higher average
realized copper prices, a gain on the disposition of the Company’s
interest in the Greenstone Gold Mines Partnership, lower corporate
administration costs as a result of a decrease in the Company’s
share price, a decrease in reclamation expense at the Molybdenum
sites placed on care and maintenance, primarily resulting from the
change in the discount rates applied to the underlying future cash
outflows and higher tax expense resulting from both the gain on the
sale of the Company’s interest in the Greenstone Gold Mines
Partnership and higher BC mineral tax expense.
Adjusted net earnings from continuing
operationsNG in the first half of 2021 was $78.2 million
compared to adjusted net loss from continuing
operationsNG in the first half of 2020 of $61.2
million.
Significant adjusting items to net earnings from
continuing operations in the first half of 2021 include:
- $6.1 million Kumtor Mine legal and
other related costs, and
- $72.3 million gain on the sale of
the Greenstone property.
Significant adjusting items to net loss from
continuing operations in the first half of 2020 include:
- $43.5 million non-cash reclamation
provision revaluation expense at sites on care and maintenance,
resulting solely from the movement in the discount rates being
applied to the underlying reclamation cash flows.
Cash provided by operating activities from
continuing operations was $146.7 million in the first half of 2021,
compared to $36.3 million in the first half of 2020. The increase
in cash provided by operating activities from continuing operations
was primarily due to higher average realized copper prices and an
increase in ounces of gold sold at the Mount Milligan and Öksüt
Mines and a more favourable change in working capital at the Mount
Milligan Mine. Partially offsetting the increase between the
periods was a $11.4 million tax refund that was received in the
first half of 2020.
Free cash flow from continuing
operationsNG of $98.7 million was recognized in the
first half of 2021, compared to free cash flow deficitNG
from continuing operations of $4.8 million in the first half of
2020. The increase in free cash flow from continuing
operationsNG was due to higher cash provided by
operating activities from continuing operations and lower
non-sustaining capital expenditures as the construction of the
Öksüt Mine was completed in 2020. Partially offsetting the increase
in free cash flow from continuing operationsNG between
the periods was higher sustaining capital expenditures at the Mount
Milligan Mine primarily due to the timing of the purchase of new
mining equipment, development costs associated with the tailings
storage facility, and major planned equipment rebuilds.
Adjusted free cash flow from continuing
operationsNG of $103.3 million was recognized in the
first half of 2021, compared to free cash flow deficit from
continuing operationsNG of $4.8 million in the first
half of 2020.
Significant adjusting items to free cash flow in
the first half of 2021 include:
- $4.6 million Kumtor Mine legal and
other related costs.
Gold production costs from continuing operations
were $621 per ounce in the first half of 2021 compared to $833 per
ounce in the first half of 2020. The decrease in gold production
costs from continuing operations was primarily due to an increase
in ounces of gold sold at the Mount Milligan and Öksüt Mines,
partially offset by higher mining costs at the Mount Milligan Mine
as a result of higher maintenance costs and diesel prices as well
as higher processing costs at the Mount Milligan Mine from higher
throughput.
All-in sustaining costs on a by-product
basisNG from continuing operations were $617 per ounce
in the first half of 2021 compared to $1,118 per ounce in the first
half of 2020. The decrease was primarily due to an increase in
ounces of gold sold at the Mount Milligan and Öksüt Mines, higher
average realized copper prices and lower corporate administration
expenses as a result of a decrease in the Company’s share price.
Partially offsetting the decrease between the periods were higher
mining costs and higher sustaining capital expenditures at the
Mount Milligan Mine, as noted above.
All-in costs on a by-product basisNG
from continuing operations were $742 per ounce in the first half of
2021 compared to $1,550 per ounce in the first half of 2020. The
decrease was due to lower all-in sustaining costs on a by-product
basisNG and lower non-sustaining capital expenditures as
the construction of the Öksüt Mine was completed in 2020.
Outlook
2021 - 2023
Outlook
See “Material Assumptions” for material assumptions or factors used
to forecast production and costs.
Suspension of Centerra’s 2021 guidance and
three-year outlook
As a result of the seizure of the Kumtor Mine and the continuing
actions by the Kyrgyz Republic, on May 17, 2021 when the external
manager took over, Centerra suspended its previously issued 2021
guidance and three-year outlook. The Company is no longer in a
position to provide any forward-looking information on the Kumtor
Mine’s operations. Refer to Recent Events and Developments
section of this MD&A for further details regarding the Kumtor
Mine.
Revisions to Centerra’s 2021 guidance and
three-year outlook
As a consequence of the seizure of the Kumtor Mine, the Company is
updating its 2021-2023 consolidated outlook for production, sales,
its per ounce unit costs including, gold production costs, all-in
sustaining costs on a by-product basisNG, all-in
sustaining costs on a co-product basisNG and all-in
costs on a by-product basisNG, as well as capital
expenditures. These revisions reflect the removal of Kumtor
results, updates to the copper price assumption for these years,
and revised estimates for capital expenditures. More detailed
discussion on changes to the Company’s 2021 guidance is provided
below.
The Company’s three-year outlook is set out in
the following table:
|
Units
|
2021 |
2022 |
2023 |
Guidance |
Outlook |
Outlook |
Gold Production(1) |
(Koz) |
|
|
|
Mount Milligan(2) |
|
180 – 200 |
170 - 190 |
180 - 210 |
Öksüt |
|
90 – 110 |
210 - 240 |
200 - 220 |
Consolidated Gold Production |
(Koz) |
270 – 310 |
380 – 430 |
380 – 430 |
Copper Production(2) |
(Mlb) |
70 – 80 |
90 – 100 |
70 - 80 |
Gold production costs |
($/oz) |
625 - 675 |
550 - 600 |
575 - 625 |
All-in sustaining costs on a by-product
basis(3) |
|
750 - 800 |
450 - 500 |
525 - 550 |
All-in costs on a by-product
basis(3) |
|
900 - 950 |
550 - 600 |
620 - 670 |
Gold - All-in sustaining costs on a co-product
basis(3) |
|
950 - 1000 |
725 - 775 |
775 - 825 |
Copper Production costs sold |
|
1.45 - 1.60 |
1.70 - 1.85 |
1.70 - 1.85 |
Copper - All-in sustaining costs on a co-product
basis (3) |
|
2.10 - 2.25 |
2.15 - 2.30 |
2.05 - 2.20 |
Capital Expenditures |
($M) |
|
|
|
Sustaining capital expenditures(4) |
|
85 - 100 |
80 - 90 |
60 - 75 |
Non-sustaining capital expenditures(5) |
|
10 - 15 |
5 |
5 |
Total Capital Expenditures |
($M) |
95 - 115 |
85 - 95 |
65 - 80 |
Outlook Assumptions(6) |
|
|
|
|
Copper Price |
($/lb) |
3.38 |
4.00 |
4.00 |
Canadian Dollar |
(CAD/USD) |
1.27 |
1.23 |
1.21 |
|
(1) |
Kumtor Mine gold production and costs for 2021 have been excluded
from the consolidated results. Centerra has suspended providing any
forward-looking information on the Kumtor Mine’s operations
including the mine’s production and costs until the Kumtor Mine
situation is resolved. |
|
(2) |
Mount Milligan 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, 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. Assuming a market
gold price of $1,750 per ounce and a hedged copper price of $3.48
per pound, Mount Milligan’s average realized gold and copper price
would be $1,290 per ounce and $2.84 per pound, respectively. |
|
(3) |
Non-GAAP measure and is discussed
under “Non-GAAP Measures”. |
|
(4) |
Sustaining capital expenditures
include cash and non-cash components of capitalized stripping. |
|
(5) |
Non-sustaining capital
expenditures are distinct projects designed to have a significant
increase the net present value of the mine. |
|
(6) |
Copper price for 2021 and CAD/USD exchange rates for 2021 and 2022,
giving effect to hedges in place as at June 30, 2020. Copper in
2021 is hedged using swaps with an average price of $3.39 per
pound. Copper in 2022 and 2023 is hedged with collars, which
encapsulate the estimated market price of $4.00 per pound. |
|
|
|
Mount Milligan
Gold and copper production guidance ranges for the Mount Milligan
Mine for 2021-2023 remain unchanged from previously issued
production guidance. Centerra is estimating average daily mill
throughput of approximately 60,000 tonnes per day, the maximum
permitted rate, which is unchanged from previous guidance. The
Company does not expect CN rail delays due to forest fires in BC to
have a material impact on its full year 2021 guidance.
Centerra expects to have adequate water
inventory levels for targeted throughput and is working with
government regulators, its First Nations partners, and other
stakeholders to secure a stable long-term water solution. The
long-term water solution is expected to require additional
infrastructure, the capital for which is not included in the
capital expenditure guidance. Mount Milligan’s water level was in
excess of 8 million cubic metres as June 30, 2021. See Mount
Milligan section below for further information on current water
levels and longer-term initiatives.
Öksüt
Gold production guidance ranges for the Öksüt Mine for 2021-2023
remain unchanged from previously issued production guidance. Gold
production guidance assumes mining will continue at the Keltepe pit
in 2021, and the Güneytepe pit forestry permit is assumed to be
received in mid-2022. The gold production outlook reflects higher
grades from the Güneytepe pit for part of 2022 and 2023
(approximately 2.22 g/t gold (Au) during 2022 and 2023 compared to
the estimated 1.27 g/t Au in 2021 and the actual stacked grade of
1.40 g/t Au in 2020) partially offset by lower estimated ore tonnes
stacked. Currently, the Company has sufficient capacity in the heap
leach facility to accommodate production through 2022 and expects
to complete construction of Phase 2 of the heap leach facility in
2022.
2021 Guidance
The Company’s 2021 consolidated cash flow
provided by operating activities from continuing operations
excluding Kumtor’s cash flows is expected to be in the range of
$200 to $250 million compared to the previous guidance range of the
range of $750 to $800 million, which included Kumtor’s cash flows.
Centerra’s consolidated free cash flow from continuing
operationsNG excluding the Kumtor Mine’s free cash flow
is estimated to be in the range of $125 to $175 million compared to
the previous guidance range of the range of $350 to $400 million,
which included Kumtor’s free cash flow. The Company’s revised
guidance for consolidated free cash flow from continuing
operationsNG excludes cash flows from discontinued
operations. Net cash flow from discontinued operations was $47.8
million for the first half of 2021.
2021 Production
Guidance
Centerra’s 2021 production is currently forecasted as follows:
|
Units |
Kumtor(1) |
Mount
Milligan(2) |
Öksüt |
Centerra
Consolidated |
Gold - Production |
|
|
|
|
|
Unstreamed Gold Production |
(Koz) |
- |
115 - 130 |
90 - 110 |
205 - 240 |
Streamed Gold Production(2) |
(Koz) |
- |
65 - 70 |
- |
65 - 70 |
Consolidated Gold
Production(3) |
(Koz) |
- |
180 - 200 |
90 - 110 |
270 - 310 |
Copper - Production |
|
|
|
|
|
Unstreamed Copper Production |
(Mlb) |
- |
55 - 65 |
- |
55 - 65 |
Streamed Copper Production(2) |
(Mlb) |
- |
15 - 15 |
- |
15 - 15 |
Consolidated Copper
Production(4) |
(Mlb) |
- |
70 - 80 |
- |
70 - 80 |
|
(1) |
Centerra has suspended providing any forward-looking information on
the Kumtor Mine’s operations including the mine’s production and
costs until the Kumtor situation is resolved. |
|
(2) |
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 $435 per ounce of gold delivered and 15% of the
spot price per metric tonne of copper delivered. |
|
(3) |
Gold production assumes
recoveries of approximately 64% at Mount Milligan and approximately
75% at Öksüt. |
|
(4) |
Copper production assumes 79.6%
recovery for copper at Mount Milligan. |
|
|
|
Production at the Mount Milligan Mine in the
third and fourth quarters will be affected by planned mill
maintenance shutdowns to complete SAG Mill reline replacements and
other maintenance work. The Company plans to continue to work on
continuous improvement projects in 2021, including secondary
crusher improvements. Installation of staged flotation reactors
which are expected to contribute to gold and copper recovery rates
in 2022 and beyond are currently underway. Sales at the Mount
Milligan Mine in the third quarter of 2021 may be impacted by CN
rail delays caused by wildfires in British Columbia. Currently, the
Company does not expect CN rail delays to have a material impact on
its full year guidance.
Gold production at the Öksüt Mine is expected to
be back-end weighted in 2021 with the first half of the year
representing approximately 40% of the 2021 annual gold production
total while the second half of the year will represent
approximately 60% of the 2021 annual gold production total. As of
June 30, 2021 Öksüt achieved project-to-date accumulated heap leach
recovery of approximately 75%, and the mine is expected to maintain
project-to-date accumulated heap leach recovery of approximately
75% recovery for the full year of 2021, which is unchanged from the
previous guidance.
2021 Sales, All-in Sustaining and
All-in Unit Costs
GuidanceNG
Centerra’s 2021 sales, and cost guidance are forecasted as
follows:
|
Units |
Kumtor(1) |
Mount
Milligan |
Öksüt |
Centerra
Consolidated(2) |
Gold sold |
(Koz) |
- |
180 - 200 |
90 - 110 |
270 - 310 |
Gold production costs |
($/oz) |
- |
650 - 700 |
500 - 550 |
625 - 675 |
All-in sustaining costs on a by-product
basis(2) |
($/oz) |
- |
530 - 580 |
730 - 780 |
750 - 800 |
All-in costs on a by-product
basis(2),(3) |
($/oz) |
- |
590 - 640 |
790 - 840 |
900 - 950 |
Gold - All-in sustaining costs on a co-product
basis(2),(3) |
($/oz) |
- |
850 - 900 |
730 - 780 |
950 - 1,000 |
Copper production costs |
($/lb) |
- |
1.45 - 1.60 |
- |
1.45 - 1.60 |
Copper - All-in sustaining costs on a co-product
basis(2),(3) |
($/lb) |
- |
2.10 - 2.25 |
- |
2.10 - 2.25 |
|
(1) |
Centerra has suspended providing any forward-looking information on
the Kumtor Mine’s operations including the mine’s production and
costs until the Kumtor situation is resolved. |
|
(2) |
All-in sustaining costs and all-in costs on a by-product and
co-product basis are non-GAAP measures and are discussed under
“Non-GAAP Measures”. Gold production cost per ounce is different
from the all-in sustaining costs on a by-product basis measure and
is considered the nearest GAAP measure. |
|
(3) |
Mount Milligan 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 including revenue-based taxes. Production for
copper and gold reflects estimated metallurgical losses resulting
from handling of the concentrate and metal deductions, subject to
metal content, levied by smelters. |
|
|
|
Consolidated gold production costs are expected
to increase to $625 to $675 per ounce range up from the previously
issued guidance of $475 to $525 per ounce due to the removal of
Kumtor gold production costs and sales.
Consolidated all-in sustaining costs on a
by-product basisNG are expected to be in the range of
$750 to $800 per ounce compared to the previous guidance range of
$850 to $900 per ounce primarily due to the removal of the Kumtor
Mine all-in sustaining costs on a by-product basisNG and
an increase in the copper price assumption, partially offset by
overhead costs spread over less ounces. Mount Milligan’s all-in
sustaining costs on a by-product basisNG is expected to
be in the range of $530 to $580 per ounce, which is unchanged from
the previous guidance. Öksüt’s all-in sustaining costs on a
by-product basisNG are expected to be in the range of
$730 to $780 per ounce, which is unchanged from the previous
guidance.
Consolidated all-in costs on a by-product
basisNG are expected to be in the range of range of $900
to $950 per ounce compared to the previous guidance range of $1,175
to $1,230 per ounce, primarily due to the removal of the Kumtor
Mine’s all-in costs on a by-product basisNG which
included significant revenue-based taxes. Mount Milligan’s all-in
costs on a by-product basisNG are expected to be in the
range of $590 to $640 per ounce compared, which is unchanged from
the previous guidance. Öksüt’s all-in costs on a by-product
basisNG are expected to be between $790 to $840 per
ounce, which is unchanged from the previous guidance.
2021 Capital Expenditures
Guidance
Projected capital expenditures are currently forecast as
follows:
|
Sustaining |
Non-sustaining |
|
Projects ($ millions) |
Capital |
Capital(1) |
Total |
Mount Milligan Mine |
65 - 70 |
5 - 10 |
70 - 80 |
Öksüt Mine(1) |
15 - 25 |
- |
15 - 25 |
Other |
~5 |
~5 |
~10 |
Consolidated Total |
85 - 100 |
10 – 15 |
95 – 115 |
|
1) |
Non-sustaining capital expenditures are distinct projects designed
to increase the net present value of the mine. 2021 guidance
includes the stage floatation reactor at the Mount Milligan
Mine. |
|
2) |
Sustaining Capital includes
capitalized stripping costs of $10 to $15 million at the Öksüt
Mine. |
|
|
|
Mount
Milligan
Sustaining capital
expenditure in 2021 is unchanged from the previous guidance and is
forecast to be $65 to $70 million and relate primarily to tailings
storage facility costs, major overhauls and water management
costs.
Non-sustaining capital investment at Mount
Milligan for 2021 is unchanged from the previous guidance and is
forecast at $5 to $10 million for the installation of staged
flotation reactors to improve future metal recoveries.
Öksüt
In 2021 sustaining capital spending has been revised from the
previous guidance to include capitalized stripping, previously
reported separately, and is otherwise unchanged and estimated to be
$15 to $25 million. Öksüt sustaining capital for 2021 relates to
geotechnical study costs, early work on the construction of the
Phase 2 heap leach expansion, and electric equipment costs.
Molybdenum Business Unit 2021
Guidance
The Molybdenum Business Unit in 2021 is expected to incur net cash
expenditures of $30 to $35 million, which includes cash outflows
for changes in working capital. The Molybdenum Business Unit’s cash
outflows before changes in working capital are estimated
approximately to be in the range of $3 to $5 million for 2021.
Previously, the Langeloth metallurgical roasting facility was
expected to generate sufficient operating margins to cover the care
and maintenance costs of the Endako Mine and the Thompson Creek
Mine. The change in projected cash flows is due to a significant
increase in the purchase costs of molybdenum concentrate, which has
a significant impact on the Molybdenum Business Unit’s working
capital requirements. The Company is currently assuming molybdenum
price of $18.00 per pound compared to $9.00 per pound per the
previous guidance.
Kemess Underground Project 2021
Guidance
In 2021, total spending at the Kemess Underground Project is
unchanged from the previous guidance and is estimated at
approximately $13 to $15 million, including $11 million for care
and maintenance activities.
2021 Exploration
Expenditures
Planned exploration expenditures for 2021 are expected to be
approximately $30 million, which exclude any exploration costs that
were incurred or expected to be incurred at the Kumtor Mine. The
revised planned exploration expenditures include approximately $10
million for brownfields exploration at the Mount Milligan and Öksüt
Mines. Greenfield exploration costs of approximately $15 million
are planned to be spent for regional exploration in Turkey, BC and
USA. The remaining balance of exploration costs is expected to be
spent on other generative projects.
2021 Corporate
Administration
Corporate and administration expense forecast for 2021 has been
increased to be between $45 and $55 million compared to previously
issued guidance of $35 to $40 million. The increase is related to
higher estimate of legal costs due to ongoing Kumtor legal and
other matters. Corporate and administration expense guidance for
2021 includes approximately $3 to $5 million of stock-based
compensation expense compared to the previous guidance of $8 to $10
million due to the lower Centerra share price.
2021 Depreciation, Depletion and
Amortization
Consolidated depreciation, depletion, and amortization (“DD&A”)
expense included in costs of sales expense for 2021 has been
revised to exclude Kumtor and is now forecasted to be in the range
of $110 to $125 million compared to the previous range of $240 to
$270 million. DD&A expense at Mount Milligan is now estimated
at $75 to $90 million compared to the previous estimate of $55 to
$65 million, and Öksüt’s DD&A expense is estimated at $25 to
$35 million, which is unchanged from the previous guidance.
2021 Taxes
The Mount Milligan operations are subject to corporate income tax
and British Columbia mineral tax. The British Columbia mineral tax
is forecast to be between $7 and $9 million, which is unchanged
from the previous guidance. At the Öksüt Mine, income tax is
expected to be between $1 to $2 million, which is unchanged from
the previous guidance and assumes approval of an increase in
eligible expenditures under the Investment Incentive Certificate
obtained by the Öksüt Mine.
2021 Sensitivities
Centerra’s revenues, earnings, and cash flows for the remaining six
months of 2021 are sensitive to changes in certain key inputs or
currencies. The Company has estimated the impact of any such
changes on revenues, net earnings, and cash flows for the second
half of 2021.
|
Impact on
($ millions) |
Impact on
($ per ounce sold) |
Production
Costs & Taxes |
Capital
Costs |
Revenues |
Cash flows |
Net Earnings
(after tax) |
AISC(2)(3) on
by-
product basis |
Gold price |
$50/oz |
0.1 - 0.5 |
- |
5.0 - 6.5 |
5.0 - 6.0 |
5.0 - 6.0 |
2.0 - 3.0 |
Copper price(4) |
10 |
% |
0.1 - 0.2 |
- |
0.1 - 1.0 |
0.1 - 0.8 |
0.1 - 0.8 |
5.0 - 6.5 |
Diesel fuel(3) |
10 |
% |
1.0 - 1.5 |
0.1 - 0.5 |
- |
1.5 - 2.0 |
1.0 - 1.5 |
11.0 - 14.5 |
Canadian dollar(1)(3) |
10 cents |
5.0 - 5.5 |
0.9 - 1.0 |
- |
6.0 - 6.5 |
5.0 - 5.5 |
20.0 - 27.0 |
Turkish lira(1) |
1 lira |
1.5 - 2.0 |
0.1 - 0.5 |
- |
2.0 - 3.0 |
1.5 - 2.0 |
15.5 - 21.0 |
|
(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) |
Includes the effect of hedging
programs. |
|
(4) |
2021 copper sales net of the
Royal Gold’s 18.75% share are hedged up to 90%. |
|
|
|
Production, cost and capital forecasts for 2021
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 “2021 Material Assumptions” and “Caution Regarding
Forward-Looking Information” in this document and under the heading
“Risks Factors” in the Company’s most recently filed Annual
Information Form.
2021 Material
Assumptions
Material assumptions or factors used to forecast production and
costs for 2021, after giving effect to the hedges in place as at
June 30, 2021, include the following:
- a market gold price of $1,750 per
ounce (unchanged from the previous guidance) and an average
realized gold price at Mount Milligan of $1,290 per ounce after
reflecting the streaming arrangement with Royal Gold (35% of Mount
Milligan’s gold at $435 per ounce).
- a copper price of $3.48 per pound
reflects an average swap price of $3.39 per pound on 89% of our
unstreamed copper (previously assumed at $3.36 per pound); an
average realized copper price at the Mount Milligan Mine of $2.84
per pound after reflecting the streaming arrangement with Royal
Gold (18.75% of the Mount Milligan Mine’s copper at 15% of the spot
price per metric tonne).
- a molybdenum price of $18.00 per
pound (previously assumed at $9.00 per pound).
- exchange rates:
- $1USD:$1.27 Canadian dollar
(previously assumed at $1USD:$1.31 Canadian dollar),
- $1USD:8.00 Turkish lira (previously
assumed at $1USD:7.50 Turkish lira).
- diesel fuel price assumption:
- $0.71/litre (CAD$0.90/litre) at the
Mount Milligan Mine (previously assumed at $0.69/litre
(CAD$0.90/litre)).
Mount Milligan Streaming Arrangement
The Mount Milligan Mine is an open pit mine located in north
central British Columbia, Canada producing a gold and copper
concentrate. Production at the Mount Milligan Mine is subject to an
arrangement with RGLD Gold 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”). To satisfy its obligations under
the Mount Milligan Streaming Arrangement the Company purchases
refined gold and copper warrants and arranges for delivery to Royal
Gold. The difference between the cost of the purchases of refined
gold and copper warrants, and the corresponding amounts payable to
the Company under the Mount Milligan Mine Streaming Arrangement is
recorded as a reduction of revenue and not a cost of operating the
mine.
Other Material Assumptions
Other material assumptions used in forecasting production and costs
for 2021 can be found under the heading “Caution Regarding
Forward-Looking Information” in this document. Production, cost,
and capital forecasts for 2021 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 Factors” in the Company’s most
recent Annual Information Form.
Financial Performance
As a result of events described in Recent
Events and Developments, the Company lost control of the
Kumtor Mine, and accordingly,
Kumtor Mine has been classified as a
discontinued operation. The financial and operating data below
is presented on a continuing operations basis, excluding the Kumtor
Mine for all periods discussed, unless otherwise noted.
Second Quarter
2021 compared to Second
Quarter 2020
Revenue of $202.3 million was recognized in the second quarter of
2021 compared to $130.0 million in the second quarter of 2020. The
increase in revenue was due to an increase in ounces of gold sold
at the Mount Milligan and Öksüt Mines and higher average realized
gold, copper and molybdenum prices.
Gold production was 69,854 ounces in the second
quarter of 2021 compared to 46,447 ounces in the second quarter of
2020. Gold production in the second quarter of 2021 included 54,675
ounces of gold from the Mount Milligan Mine, an increase compared
to the second quarter of 2020, primarily due to higher gold grades
and higher throughput. The Öksüt Mine, which commenced commercial
production on May 31, 2020, produced 41% more ounces of gold in the
second quarter of 2021 compared to the second quarter of 2020.
Copper production at the Mount Milligan Mine was
19.8 million pounds in the second quarter of 2021 compared to 19.1
million pounds in the second quarter of 2020. The increase was
primarily due to higher throughput, partially offset by lower
copper grades and recoveries.
The Langeloth Facility roasted 2.7 million
pounds of molybdenum in the second quarter of 2021 compared to 3.6
million pounds in the second quarter of 2020. This decrease was
primarily due to a decline in molybdenum concentrate available for
roasting, resulting from a decrease in concentrate supply and
increased competition for concentrate.
Cost of sales of $137.4 million was recognized
in the second quarter of 2021 compared to $111.6 million in the
second quarter of 2020. The increase was primarily due to an
increase in ounces sold at the Mount Milligan and Öksüt Mines
compared to the second quarter of 2020.
Corporate administration expenses of $5.8
million were recognized in the second quarter of 2021 compared to
$25.3 million in the second quarter of 2020. The decrease was
primarily due to a recovery recognized on the provision related to
the Company’s share-based compensation plan as a result of the
decline in the Company’s share price.
Other expenses of $4.7 million were recognized
in the second quarter of 2021 compared to other income of $3.0
million in the second quarter of 2020. The increase in other
expenses was primarily due to corporate legal costs incurred in
connection with the seizure and the loss of control of the Kumtor
Mine.
Income tax recovery of $10.4 million was
recognized in the second quarter of 2021 compared to an income tax
recovery of $1.6 million in the second quarter of 2020. Income tax
recovery in the second quarter of 2021 comprised of current income
tax recovery of $0.9 million and deferred income tax recovery of
$9.5 million. In comparison, income tax recovery in the second
quarter of 2020 comprised current income tax expense of $1.4
million and deferred income tax recovery of $3.0 million. The
increase in income tax recovery was primarily due to changes in
deferred income tax asset base in Turkey and the impact of
fluctuations in foreign exchange, partially offset by differences
in the level of taxable income in the Company’s operating
jurisdictions between periods.
Net loss from discontinued operations of $884.7
million was recognized in the second quarter of 2021 compared to
net earnings from discontinued operations of $120.2 million in the
second quarter of 2020. The decrease in net earnings was primarily
due to the loss on the change of control of $926.4 million
recognized in the second quarter of 2021 and a shorter operating
period resulting from the seizure of the Kumtor Mine. Partially
offsetting the decrease in net earnings was a gain recognized on
the discontinuance of the Kumtor Mine’s fuel hedging program.
First Half 2021 compared to First
Half 2020
Revenue of $428.5 million was recognized in the first half of 2021
compared to $258.0 million in the first half of 2020. The increase
in revenue was primarily due to 42,780 gold ounces sold at the
Öksüt Mine in the first half of 2021, which commenced commercial
production on May 31, 2020, an increase in gold ounces sold at
Mount Milligan Mine and higher average realized gold, copper and
molybdenum prices.
Gold production was 140,031 ounces in the first
half of 2021 compared to 84,614 ounces in the first half of 2020.
Gold production in first half of 2021 included 97,251 ounces of
gold from the Mount Milligan Mine, a 53% increase compared to the
first half of 2020, primarily due to higher throughput and higher
gold grades. The Öksüt Mine, which commenced commercial production
May 31, 2020, produced 42,780 ounces of gold in the first half of
2021 compared to 15,277 ounces of gold in the first half of 2020,
primarily due to a higher number of ore tonnes stacked on the heap
leach.
Copper production at the Mount Milligan Mine was
38.4 million pounds in the first half of 2021 compared to 39.1
million pounds in the first half of 2020. The decrease was
primarily due to lower copper grades, partially offset by higher
throughput and higher copper recoveries.
The Langeloth Facility roasted 5.4 million
pounds of molybdenum in the first half of 2021 compared to 8.0
million pounds in the first half of 2020. The decrease in pounds
roasted was primarily due to a decline in molybdenum concentrate
available for roasting, resulting from a decrease in concentrate
supply and increased competition for concentrate.
Cost of sales of $293.1 million was recognized
in the first half of 2021 compared to $247.0 million in the first
half of 2020. The increase was primarily due to higher mining and
processing costs at the Mount Milligan Mine and higher mining and
processing costs at the Öksüt Mine which was still ramping up
production in the first half of 2020. In addition, there was an
increase in depreciation, depletion and amortization costs at the
Öksüt Mine as result of a higher number of ore tonnes stacked on
the heap leach.
Corporate administration expenses of $10.8
million were recognized in the first half of 2021 compared to $28.7
million in the first half of 2020. The decrease was primarily due
to a recovery recognized on the provision related to Company’s
share-based compensation plan as a result of the decline in the
Company’s share price.
Reclamation recovery of $0.1 million was
recognized in the first half of 2021 compared to an expense of
$43.5 million in the first half of 2020. The decrease in expense
was primarily due to a significant decline in discount rates in the
first half of 2020 that are applied to the underlying future
reclamation costs at the Molybdenum sites placed on care and
maintenance.
A gain on sale of $72.3 million (excluding
contingent receivable consideration) was recognized in the first
quarter of 2021 on the disposal of the Company’s 50% interest in
the Greenstone Gold Mines Partnership.
Other expenses of $7.1 million were recognized
in the first half of 2021 compared to other expenses of $4.3
million in the first half of 2020. The increase in other expenses
was primarily due to corporate legal costs incurred in connection
with the seizure and the loss of control of the Kumtor Mine.
Income tax expense of $9.2 million was
recognized in the first half of 2021 compared to an income tax
expense of $1.3 million in the first half of 2020. Income tax
expense in the first half of 2021 comprised current income tax
expense of $5.4 million and deferred income tax expense of $3.8
million. In comparison, income tax expense in the first half of
2020 comprised current income tax expense of $2.2 million and
deferred income tax recovery of $0.9 million. The increase in
income tax expense was primarily due to tax expense recorded on the
sale of the Company’s interest in the Greenstone Gold Mines
Partnership and higher BC mineral tax expense.
Net loss from discontinued operations of $828.7
million was recognized in the first half of 2021 compared to net
earnings from discontinued operations of $205.4 million in the
first half of 2020. The decrease in net earnings was primarily due
to the loss on the change of control of $926.4 million recognized
in the second quarter of 2021 and a shorter operating period
resulting from the seizure of the Kumtor Mine. Partially offsetting
the decrease in net earnings was a gain recognized on the
discontinuance of the Kumtor Mine’s fuel hedging program.
Balance Sheet Review
As a result of the loss of control of the Kumtor
Mine, the Company deconsolidated the assets and liabilities of KGC,
a 100% owned subsidiary that holds the Kumtor Mine, in the
Company’s statement of financial position for the period ended June
30, 2021. The assets and liabilities presented as at December 31,
2020 are inclusive of the Kumtor Mine.
Cash at June 30, 2021 was $882.9 million
compared to $545.2 million at December 31, 2020. The increase was
due to the receipt of $210.0 million as consideration for the sale
of the Company’s 50% interest in the Greenstone Gold Mines
Partnership, free cash flow from continuing operationsNG
of $30.7 million and net cash flow from discontinued operations of
$49.7 million generated in the first half of 2021.
Total inventories at June 30, 2021 were $196.1
million compared to $580.6 million at December 31, 2020. The
decrease in inventories was primarily due to the loss of control of
the Kumtor Mine and derecognition of associated inventory balances
of $333.6 million from the Company’s consolidated financial
position. The decrease was partially offset by an increase in
inventories at the Langeloth Facility primarily due to higher
working capital needs as result of higher molybdenum prices.
At June 30, 2021, the product inventory balance
consisted of 84,731 contained gold ounces and 20.4 million
contained pounds of copper in surface stockpiles at the Mount
Milligan Mine (6.4 million tonnes of ore at a grade of 0.42 g/t
gold and 0.14% copper), of which roughly 20% is expected to be
processed in 2021. Additionally, product inventory balance at the
Öksüt Mine consisted of 3,827 contained gold ounces in solution at
the absorption, desorption and recovery (ADR) plant and 12,003
contained gold ounces on surface and stacked (0.1 million tonnes of
ore at a grade of 0.16 g/t gold in surface stockpiles and 1.23 g/t
gold stacked on the heap leach pad), which is expected to be
processed in 2021.
The carrying value of property, plant and
equipment at June 30, 2021 was $1.13 billion compared to $1.69
billion at December 31, 2020. The decrease was primarily due to the
derecognition of property, plant and equipment of $629.4 million
associated with the change of control of the Kumtor Mine and the
derecognition of property, plant and equipment of $139.6 million
associated with the sale of the Company’s 50% interest in the
Greenstone Gold Mines Partnership. Partially offsetting the overall
decrease were $47.2 million of additions capitalized to the
property, plant and equipment related to the Company’s continuing
operations and $95.7 million of additions capitalized to the
property, plant and equipment related to the Kumtor Mine.
Other non-current assets at June 30, 2021 was
$14.9 million compared to $77.1 million at December 31, 2020. The
decrease was primarily due to the loss of control of the Kumtor
Mine and derecognition of the associated reclamation deposits
balance of $52.9 million from the Company’s consolidated financial
position.
Accounts payable and accrued liabilities at June
30, 2021 was $177.1 million compared to $232.7 million at December
31, 2020. The decrease was primarily due to the loss of control of
the Kumtor Mine and derecognition of the associated accounts
payable and accrued liabilities balances of $63.3 million from the
Company’s consolidated financial position.
The provision for reclamation at June 30, 2021
was $298.7 million compared to $352.2 million at December 31, 2020.
The decrease was primarily due to the loss of control of the Kumtor
Mine and derecognition of the associated reclamation provision
balance of $56.5 million from the Company’s consolidated financial
position.
Liquidity and Capital
Resources
The Company’s total liquidity position is $1,282.9 million,
representing a cash balance of $882.9 million and $400.0 million
available under the Corporate Credit Facility. As a result of the
seizure of the Kumtor Mine in May 2021, the Corporate Credit
Facility agreement will not permit an increase of the credit limit
of the facility to $600.0 million. Such an increase would have
previously been permitted upon the satisfaction of certain
conditions. The Company believes that the current liquidity
position and forecasted free cash flows from the Company’s Mount
Milligan and Öksüt operations are expected to be sufficient to
satisfy working capital needs, contractual obligations and planned
capital expenditure and exploration and meet other liquidity
requirements through at least the end of 2021. See “Caution
Regarding Forward-Looking Information”.
Second Quarter 2021 compared to
Second Quarter 2020
Cash provided by operating activities from continuing operations of
$60.3 million was recognized in the second quarter of 2021 compared
to $49.4 million in the second quarter of 2020. The increase in
cash provided by operating activities from continuing operations
was primarily due to higher average realized copper prices and an
increase in gold ounces sold at the Mount Milligan and Öksüt Mines,
partially offset by an unfavourable working capital change at the
Öksüt Mine.
Cash used in investing activities from
continuing operations of $28.2 million was recognized in the second
quarter of 2021 compared to $32.9 million in the second quarter of
2020. The decrease was primarily due to lower capital expenditures
at the Öksüt Mine as the construction of the mine was completed in
the second quarter of 2020.
Cash used in financing activities of $22.1
million was recognized in the second quarter of 2021 compared to
$153.3 million in the second quarter of 2020. The decrease was
primarily due to the net repayment of the corporate revolving
credit facility in the second quarter of 2020.
First Half
2021 compared to First
Half 2020
Cash provided by operating activities from continuing operations of
$146.7 million was recognized in the first half of 2021 compared to
$36.3 million in the first half of 2020. The increase in cash
provided by operating activities from continuing operations was
primarily due to higher average realized copper prices and an
increase in ounces of gold sold at the Mount Milligan and Öksüt
Mines and a more favourable change in working capital at the Mount
Milligan Mine, mostly resulting from the timing of vendor payments
between periods. The increase in cash was partially offset by an
$11.4 million tax refund that was received in the first half of
2020.
Cash provided by investing activities from
continuing operations of $165.9 million was recognized in the first
half of 2021 compared to cash used in investing activities from
continuing operations of $13.7 million in the first half of 2020.
The increase in cash provided by investing activities from
continuing operations was primarily due to the proceeds received
from the sale of the Company’s 50% interest in the Greenstone Gold
Mines Partnership and lower capital expenditures at the at the
Öksüt Mine as the construction of the mine was completed in the
first half of 2020. Partially offsetting an increase in cash
provided by investing activities from continuing operations were
higher capital expenditures at the Mount Milligan Mine primarily
due to the timing of the purchase of a new mining equipment,
development costs associated with the tailings storage facility and
major planned equipment rebuilds.
Cash used in financing activities of $22.7
million was recognized in the first half of 2021 compared to $97.8
million in the first half of 2020. The decrease was primarily due
to the net repayment of the corporate revolving credit facility in
first half of 2020.
Financial Instruments
The Company seeks to manage its exposure to
fluctuations in diesel fuel prices, commodity prices and foreign
exchange rates by entering into derivative financial instruments
from time-to-time.
The outstanding hedge positions for each of
these programs as at June 30, 2021 are summarized as follows:
|
Average Strike Price |
Settlements (% of exposure hedged) |
As at June 30, 2021 |
Instrument |
Unit |
Type |
2021 |
2022 |
2023 |
2021 |
2022 |
2023 |
Total
position (2) |
Fair value
($'000's) |
|
|
|
|
|
|
|
|
|
|
|
FX Hedges |
|
|
|
|
|
|
|
|
|
|
USD/CAD zero-cost collars |
CAD |
Fixed |
$1.33/$1.40 |
$1.32/$1.38 |
$1.21/$1.27 |
$106.8 M (39%) |
$149.0 M (29%) |
$34.0 M (13%) |
$289.8 M |
13,364 |
|
USD/CAD forward contracts |
CAD |
Fixed |
$1.35 |
$1.30 |
$1.27 |
$69.0 M (25%) |
$60.0 M (12%) |
$58.0 M (23%) |
$187.0 M |
7,691 |
|
Total |
|
|
$1.34 |
$1.31 |
$1.25 |
$175.8 M (62%) |
$209.0 M (41%) |
$92.0 M (36%) |
$476.8 M |
21,055 |
|
|
|
|
|
|
|
|
|
|
|
|
Fuel Hedges |
|
|
|
|
|
|
|
|
|
|
ULSD zero-cost collars |
Barrels |
Fixed |
$54/$59 |
$59/$64 |
$67/$73 |
40,938 (42%) |
43,100 (32%) |
6,000 (9%) |
90,038 |
2,344 |
|
ULSD swap contracts |
Barrels |
Fixed |
$63 |
$62 |
$75 |
23,340 (38%) |
61,500 (37%) |
30,000 (42%) |
114,840 |
2,483 |
|
Total |
|
|
|
|
|
64,278 (79%) |
104,600 (69%) |
36,000 (51%) |
204,878 |
4,827 |
|
|
|
|
|
|
|
|
|
|
|
|
Copper Hedges (Strategic
hedges)(1): |
|
|
|
|
|
|
|
|
|
Copper forward contracts |
Pounds |
Fixed |
$3.39 |
N/A |
N/A |
27.3 M (89%) |
N/A |
N/A |
27.3 M |
(23,905 |
) |
Copper zero-cost collars |
Pounds |
Fixed |
N/A |
$3.59/$4.82 |
N/A |
N/A |
34.6 M (50%) |
N/A |
34.6 M |
(1,307 |
) |
|
|
|
|
|
|
|
|
|
|
|
Gold/Copper Hedges (Royal Gold
deliverables): |
|
|
|
|
|
|
|
|
|
Gold forward contracts |
Ounces |
Float |
N/A |
N/A |
N/A |
24,404 |
N/A |
N/A |
24,404 |
(105 |
) |
Copper forward contracts |
Pounds |
Float |
N/A |
N/A |
N/A |
3.4 M |
N/A |
N/A |
3.4 M |
(95 |
) |
(1) The copper hedge ratio is
based on the forecasted copper sales production, net of the
streaming arrangement with Royal Gold.
(2) Royal Gold hedging program with a market price
determined on closing of the contract.
The realized gains (losses) recorded in the
second quarter and first half of 2021 and 2020 were as follows:
Hedge program
|
Realized gain(loss) (thousands) |
Three months ended June 30 |
% Change |
Six months ended June 30 |
% Change |
2021 |
|
2020 |
|
2021 |
|
2020 |
|
FX Hedges |
$ |
6,261 |
|
$ |
(2,106 |
) |
397 |
% |
$ |
9,941 |
|
$ |
(3,366 |
) |
395 |
% |
Fuel hedges |
|
15,461 |
|
|
(993 |
) |
1657 |
% |
|
18,387 |
|
|
(2,117 |
) |
969 |
% |
Copper Hedges (Strategic hedges) |
|
(15,025 |
) |
|
N/A |
|
N/A |
|
|
(24,050 |
) |
|
N/A |
|
N/A |
|
During the second quarter of 2021, the Company unwound certain
positions that were hedging future fuel purchases at the Kumtor
Mine after May 15, 2021. Unwinding these positions during the
quarter resulted in the recognition of realized gain on settlement
of $14.2 million which was recorded in net loss (earnings) from
discontinued operations line in the condensed consolidated interim
statements of (loss) earnings and comprehensive (loss) income.
As at June 30, 2021, Centerra has not entered
into any off-balance sheet arrangements with special purpose
entities, nor does it have any unconsolidated affiliates.
Operating Mines and
Facilities
Mount Milligan
Mine
The Mount Milligan Mine is an open pit mine located in north
central British Columbia, Canada producing a gold and copper
concentrate. Production at the Mount Milligan Mine is subject to an
arrangement with RGLD Gold 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 $435 per ounce of gold delivered and 15% of
the spot price per metric tonne of copper delivered. To satisfy its
obligations under the Mount Milligan Streaming Arrangement the
Company purchases refined gold and copper warrants and arranges for
delivery to Royal Gold. The difference between the cost of the
purchases of refined gold and copper warrants, and the
corresponding amounts payable to the Company under the Mount
Milligan Streaming Arrangement is recorded as a reduction of
revenue and not a cost of operating the mine.
Water Update
Stored water inventory at the Mount Milligan Mine is critical to
the ability to process ore through the process plant on a
sustainable basis. The Mount Milligan Mine accessed water from
surface water sources and groundwater wells near the tailings
storage facility during the second quarter of 2021. The stored
water inventory was in excess of 8.0 million cubic metres as at
June 30, 2021 which is sufficient to enable continuous production
for the period of at least 12 months. The Company expects the water
inventory level to be maintained at approximately 7.5 million cubic
metres during the summer of 2021.
The Company continues to pursue a longer-term
solution to its water requirements at the Mount Milligan Mine and
is in discussions with regulators, First Nations partners and other
stakeholders. In the first half of 2021, the Company’s obtained an
environmental assessment certificate amendment and related permits
to access surface water sources for the Mount Milligan Mine through
November 2023.
Mount Milligan Financial and Operating
Results
Unaudited ($ millions, except as noted) |
Three months ended June 30, |
Six months ended June 30, |
Financial Highlights: |
|
2021 |
|
2020 |
% Change |
|
2021 |
|
2020 |
% Change |
Gold revenue |
$ |
67.9 |
$ |
45.3 |
50 |
% |
$ |
138.3 |
$ |
94.3 |
47 |
% |
Copper revenue |
|
57.0 |
|
39.8 |
43 |
% |
|
118.9 |
|
72.7 |
64 |
% |
Other by-product revenue |
|
3.3 |
|
2.6 |
27 |
% |
|
6.5 |
|
4.3 |
51 |
% |
Total Revenues |
$ |
128.2 |
$ |
87.7 |
46 |
% |
$ |
263.7 |
$ |
171.3 |
54 |
% |
Production costs |
|
60.3 |
|
55.6 |
8 |
% |
|
129.4 |
|
117.9 |
10 |
% |
Depreciation, depletion and amortization |
|
19.7 |
|
18.0 |
9 |
% |
|
42.6 |
|
36.0 |
18 |
% |
Earnings from mine operations |
$ |
48.2 |
$ |
14.1 |
242 |
% |
$ |
91.7 |
$ |
17.4 |
427 |
% |
Earnings from operations |
$ |
42.4 |
$ |
10.0 |
324 |
% |
$ |
82.0 |
$ |
10.6 |
674 |
% |
Cash provided by mine operations before changes in working
capital |
|
59.7 |
|
29.1 |
105 |
% |
|
119.1 |
|
41.1 |
190 |
% |
Cash provided by mine operations |
|
73.6 |
|
41.6 |
77 |
% |
|
163.4 |
|
68.8 |
138 |
% |
Free cash flow from mine operations(1) |
|
50.4 |
|
34.4 |
47 |
% |
|
130.6 |
|
56.4 |
132 |
% |
Capital expenditures - total |
|
20.6 |
|
7.1 |
189 |
% |
|
32.0 |
|
12.4 |
158 |
% |
Sustaining capital expenditures(3) |
|
19.7 |
|
7.1 |
176 |
% |
|
31.0 |
|
12.4 |
150 |
% |
Non-sustaining capital
expenditures(3)(4) |
|
0.9 |
|
- |
100 |
% |
|
1.0 |
|
- |
100 |
% |
Operating Highlights: |
|
|
|
|
|
|
|
|
|
|
Tonnes mined (000's) |
|
11,631 |
|
8,109 |
43 |
% |
|
22,304 |
|
18,998 |
17 |
% |
Tonnes ore mined (000's) |
|
5,002 |
|
4,140 |
21 |
% |
|
10,124 |
|
8,829 |
15 |
% |
Tonnes processed (000's) |
|
5,628 |
|
4,373 |
29 |
% |
|
10,398 |
|
9,244 |
12 |
% |
Process plant head grade gold (g/t) |
|
0.47 |
|
0.39 |
21 |
% |
|
0.45 |
|
0.38 |
19 |
% |
Process plant head grade copper (%) |
|
0.21% |
|
0.26% |
(17 |
%) |
|
0.22% |
|
0.26% |
(14 |
%) |
Gold recovery (%) |
|
65.7% |
|
66.5% |
(1 |
%) |
|
65.9% |
|
63.1% |
4 |
% |
Copper recovery (%) |
|
78.1% |
|
80.8% |
(3 |
%) |
|
79.0% |
|
78.0% |
1 |
% |
Concentrate produced (dmt) |
|
43,639 |
|
41,242 |
6 |
% |
|
85,543 |
|
86,329 |
(1 |
%) |
Gold produced (oz) (2) |
|
54,675 |
|
35,656 |
53 |
% |
|
97,251 |
|
69,337 |
40 |
% |
Gold sold (oz)(2) |
|
51,447 |
|
35,001 |
47 |
% |
|
105,944 |
|
75,354 |
41 |
% |
Average realized gold price - combined ($/oz)(1)(2) |
|
1,321 |
|
1,295 |
2 |
% |
|
1,305 |
|
1,252 |
4 |
% |
Copper produced (000's lb) (2) |
|
19,811 |
|
19,064 |
4 |
% |
|
38,421 |
|
39,136 |
(2 |
%) |
Copper sold (000's lb)(2) |
|
19,538 |
|
19,352 |
1 |
% |
|
42,321 |
|
39,776 |
6 |
% |
Average realized copper price - combined
($/lb) (1)(2) |
|
2.92 |
|
2.06 |
42 |
% |
|
2.81 |
|
1.83 |
54 |
% |
Unit Costs: |
|
|
|
|
|
|
|
|
|
|
Gold production costs ($/oz) |
|
638 |
|
846 |
(25 |
%) |
|
657 |
|
883 |
(26 |
%) |
All-in sustaining costs on a by-product basis
($/oz) (1)(5) |
|
486 |
|
689 |
(29 |
%) |
|
424 |
|
808 |
(48 |
%) |
All-in costs on a by-product basis ($
/oz)(1)(4) |
|
550 |
|
732 |
(25 |
%) |
|
465 |
|
836 |
(44 |
%) |
Gold - All-in sustaining costs on a co-product basis
($/oz)(1) |
|
867 |
|
973 |
(11 |
%) |
|
916 |
|
1,292 |
(29 |
%) |
Copper production costs ($/lb) |
|
1.41 |
|
1.34 |
5 |
% |
|
1.41 |
|
1.29 |
9 |
% |
Copper - All-in sustaining costs on a co-product basis
($/lb)(1) |
|
2.06 |
|
1.72 |
20 |
% |
|
1.95 |
|
1.64 |
19 |
% |
(1) |
Non-GAAP measure. See discussion under “Non-GAAP Measures”. |
(2) |
Mount Milligan production and sales are presented on a 100% basis.
Under the Mount Milligan Streaming Arrangement, Royal Gold is
entitled to 35% of gold ounces and 18.75% of copper. Royal Gold
pays $435 per ounce of gold delivered and 15% of the spot price per
metric tonne of copper delivered. |
(3) |
Capital expenditures are
presented as spent and accrued. |
(4) |
Non-sustaining capital expenditures are distinct projects designed
to have a significant increase in the net present value of the
mine. In the current year, non-sustaining capital expenditures
included costs related to the installation of staged flotation
reactors. |
(5) |
Includes the impact of reduced
metal prices resulting from the Mount Milligan Streaming
Arrangement, and the impact of copper hedges. |
|
|
Second Quarter 2021 compared to Second
Quarter 2020
Earnings from mine operations of $48.2 million were recognized in
the second quarter of 2021 compared to $14.1 million in the second
quarter of 2020. The increase was primarily due to higher average
realized copper prices, and an increase in ounces of gold sold,
partially offset by an increase in production costs and
depreciation.
A chart accompanying this announcement is available at
https://www.globenewswire.com/NewsRoom/AttachmentNg/3b141c29-8a2f-4261-8209-73d621681f23
Cash provided by mine operations of $73.6
million was recognized in the second quarter of 2021 compared to
$41.6 million in the second quarter of 2020. The increase was
primarily due to higher average realized copper prices and an
increase in gold ounces sold.
Free cash flow from mine operationsNG
of $50.4 million was recognized in the second quarter of 2021
compared to $34.4 million in the second quarter of 2020, primarily
due to an increase in cash provided by mine operations, partially
offset by an increase in capital expenditures related to the
purchase of new mining equipment and development costs associated
with the tailings storage facility.
During the second quarter of 2021, mining
activities were carried out in phases 4, 5 and 8 of the open pit.
Total tonnes mined were 11.6 million tonnes in the second quarter
of 2021 compared to 8.1 million tonnes in the second quarter of
2020.
Total process plant throughput for the second
quarter of 2021 was 5.6 million tonnes, averaging 61,848 tonnes per
calendar day, compared to 4.4 million tonnes, averaging 48,056
tonnes per calendar day in the second quarter of 2020. Increased
throughput was a result of an increase in process plant
availability in the second quarter of 2021 compared to the second
quarter of 2020, when the process plan operated at a reduced
capacity as a result of COVID-19.
Gold production was 54,675 ounces in the second
quarter of 2021 compared to 35,656 ounces in the second quarter of
2020. The increase was due to higher throughput and higher gold
grades. During the second quarter of 2021, the average gold grade
was 0.47 g/t and a recovery rate of 66% compared to 0.39 g/t and a
recovery rate of 67% in the second quarter of 2020. Total copper
production was 19.8 million pounds in the second quarter of 2021
compared to 19.1 million pounds in the second quarter of 2020. The
increase was due to higher throughput, partially offset by lower
copper grades and recoveries.
Gold production costs were $638 per ounce in the
second quarter of 2021 compared to $846 per ounce in second quarter
of 2020. The decrease was due to an increase in ounces of gold
sold.
A chart accompanying this announcement is available at
https://www.globenewswire.com/NewsRoom/AttachmentNg/95551412-0264-4fd7-9d71-0f21f64deb94
All-in sustaining costs on a by-product
basisNG were $486 per ounce in the second quarter of
2021 compared to $689 per ounce in the second quarter of 2020. The
decrease was primarily due to 42% higher average realized copper
prices and an increase in ounces of gold sold, partially offset by
higher sustaining capital and production costs. Production costs
increased due to higher mining costs per tonne as a result of
higher maintenance costs and higher diesel prices, partially offset
by lower processing costs per tonne due to lower water sourcing
costs.
All-in costs on a by-product basisNG
were $550 per ounce in the second quarter of 2021 compared to $732
per ounce in the second quarter of 2020. The decrease was primarily
due to lower all-in sustaining costs on a by-product
basisNG.
First Half 2021 compared to First Half
2020
Earnings from mine operations of $91.7 million were recognized in
the first half of 2021 compared to $17.4 million in the first half
of 2020. The increase was primarily due to higher average realized
gold and copper prices and an increase in ounces of gold sold.
A chart accompanying this announcement is available at
https://www.globenewswire.com/NewsRoom/AttachmentNg/ddb56f2f-ad8b-4210-af45-c2a8687f6524
Cash provided by mine operations of $163.4
million was recognized in the first half of 2021 compared to $68.8
million in the first half of 2020. The increase was due to higher
average realized copper prices, an increase in gold ounces sold and
a more favourable change in working capital. A more favourable
change in working capital was primarily due to an increase in trade
payables due to timing of certain vendor payments, partially offset
by an increase in trade receivables.
Free cash flow from mine operationsNG
of $130.6 million was recognized in the first half of 2021 compared
to $56.4 million in the first half of 2020, primarily due to an
increase in cash provided by mine operations, partially offset by
an increase in capital expenditures related to the purchase of
mining equipment, development costs associated with the tailings
storage facility and major planned equipment rebuilds.
During the first half of 2021, mining activities
were carried out in phases 4, 5 and 8 of the open pit. Total tonnes
mined were 22.3 million tonnes in the first half of 2021 compared
to 19.0 million tonnes in the first half of 2020.
Total process plant throughput for the first
half of 2021 was 10.4 million tonnes, averaging 57,449 tonnes per
calendar day, compared to 9.2 million tonnes, averaging 50,791
tonnes per calendar day in the first half of 2020. Higher
throughput was a result of an increase in process plant
availability in the first half of 2021 compared to the first half
of 2020.
Gold production was 97,251 ounces in the first
half of 2021 compared to 69,337 ounces in the first half of 2020
primarily due to higher gold grades and higher throughput. During
the first half of 2021, the average gold grade was 0.45 g/t and a
recovery rate of 66% compared to 0.38 g/t and a recovery rate of
63% in the first half of 2020. Total copper production was 38.4
million pounds in the first half of 2021 compared to 39.1 million
pounds in the first half of 2020. The decrease was primarily due to
lower copper grades, partially offset by higher throughput.
Gold production costs were $657 per ounce in the
first half of 2021 compared to $883 per ounce in the first half of
2020. The decrease was primarily due to an increase in ounces of
gold sold, partially offset by slightly higher mining costs as a
result of higher maintenance costs and higher diesel prices.
A chart accompanying this announcement is available at
https://www.globenewswire.com/NewsRoom/AttachmentNg/274011a1-9412-403f-b86a-70b3a1d90ee3
All-in sustaining costs on a by-product
basisNG were $424 per ounce in the first half of 2021
compared to $808 per ounce in the first half of 2020. The decrease
was primarily due to 54% higher average realized copper prices and
an increase in ounces of gold sold, partially offset by higher
sustaining capital and production costs. Production costs were
higher primarily due to higher mining costs.
All-in costs on a by-product basisNG
were $465 per ounce in the first half of 2021 compared to $836 per
ounce in the first half of 2020. The decrease was due to lower
all-in sustaining costs on a by-product basisNG.
Öksüt Mine
Öksüt Mine is located in Turkey approximately 300 kilometres
southeast of Ankara and 48 kilometres south of Kayseri, the
provincial capital. The nearest administrative centre is Develi,
located approximately 10 kilometres north of the mine site. Öksüt
Mine achieved commercial production on May 31, 2020. Prior to
achieving commercial production, revenue from the sale of gold
ounces was deducted from the cost of related property, plant and
equipment and the associated production costs were added to the
cost of the related property, plant and equipment.
Öksüt Financial and Operating Results
Unaudited ($ millions, except as noted) |
Three months ended June 30, |
Six months ended June 30, |
Financial Highlights: |
|
2021 |
|
2020 |
% Change |
|
2021 |
|
2020 |
|
% Change |
Revenue |
$ |
26.6 |
$ |
14.6 |
82 |
% |
$ |
76.5 |
$ |
14.6 |
|
424 |
% |
Production costs |
|
6.7 |
|
3.3 |
103 |
% |
|
22.8 |
|
3.3 |
|
591 |
% |
Depreciation, depletion and amortization |
|
3.4 |
|
0.6 |
467 |
% |
|
13.1 |
|
0.6 |
|
2083 |
% |
Earnings from mine operations |
$ |
16.5 |
$ |
10.7 |
54 |
% |
$ |
40.6 |
$ |
10.7 |
|
279 |
% |
Earnings from operations |
$ |
16.1 |
$ |
10.7 |
50 |
% |
$ |
39.9 |
$ |
10.7 |
|
273 |
% |
Cash provided by mine operations before changes in working
capital |
|
19.4 |
|
11.2 |
73 |
% |
|
42.3 |
|
11.2 |
|
278 |
% |
Cash provided by mine operations |
|
8.1 |
|
13.5 |
(40 |
%) |
|
40.1 |
|
13.5 |
|
197 |
% |
Free cash flow from mine operations (1) |
|
1.6 |
|
5.0 |
(68 |
%) |
|
27.4 |
|
(15.4 |
) |
(278 |
%) |
Capital expenditures - total |
|
6.5 |
|
9.9 |
(34 |
%) |
|
12.1 |
|
18.7 |
|
(35 |
%) |
Sustaining capital expenditures(2) |
|
6.3 |
|
1.1 |
473 |
% |
|
11.6 |
|
1.1 |
|
955 |
% |
Non-sustaining capital
expenditures(2)(3) |
|
0.2 |
|
8.8 |
(98 |
%) |
|
0.5 |
|
17.6 |
|
(97 |
%) |
Operating Highlights: |
|
|
|
|
|
|
|
|
|
|
Tonnes mined (000's) |
|
4,085 |
|
3,448 |
18 |
% |
|
7,365 |
|
6,323 |
|
16 |
% |
Tonnes ore mined (000's) |
|
959 |
|
496 |
93 |
% |
|
1,462 |
|
1,067 |
|
37 |
% |
Ore mined - grade (g/t) |
|
0.80 |
|
0.99 |
(19 |
%) |
|
0.82 |
|
0.99 |
|
(17 |
%) |
Tonnes of ore stacked (000's) |
|
959 |
|
877 |
9 |
% |
|
1,484 |
|
1,179 |
|
26 |
% |
Heap leach grade (g/t) |
|
0.81 |
|
0.81 |
0 |
% |
|
0.81 |
|
0.87 |
|
(7 |
%) |
Heap leach contained ounces stacked |
|
24,764 |
|
22,752 |
9 |
% |
|
38,828 |
|
32,944 |
|
18 |
% |
Gold produced (oz) |
|
15,179 |
|
10,791 |
41 |
% |
|
42,780 |
|
15,277 |
|
180 |
% |
Gold sold (oz)(4) |
|
15,195 |
|
12,188 |
25 |
% |
|
42,780 |
|
15,003 |
|
185 |
% |
Average realized gold price ($/oz)(1) |
|
1,753 |
|
1,745 |
0 |
% |
|
1,789 |
|
1,745 |
|
3 |
% |
Unit Costs: |
|
|
|
|
|
|
|
|
|
|
Gold production costs ($/oz) |
|
441 |
|
393 |
12 |
% |
|
533 |
|
393 |
|
36 |
% |
All-in sustaining costs on a by-product basis
($/oz)(1) |
|
947 |
|
536 |
77 |
% |
|
848 |
|
536 |
|
59 |
% |
All-in costs on a by-product basis ($
/oz)(1) |
|
985 |
|
1,580 |
(38 |
%) |
|
876 |
|
2,628 |
|
(67 |
%) |
|
(1) |
Non-GAAP measure. See discussion under “Non-GAAP Measures”. |
|
(2) |
Capital expenditures are
presented as spent and accrued. |
|
(3) |
Non-sustaining capital expenditures are distinct projects designed
to have a significant increase in the net present value of the
mine. In the current year, non-sustaining capital expenditures
included construction costs. |
|
(4) |
Includes 3,788 and 6,603 ounces
of gold in the second quarter and first half of 2020, respectively,
which were sold prior to achieving commercial production. |
|
|
|
Second Quarter 2021
During the second quarter of 2021, earnings from mine operations
were $16.5 million, cash provided by mine operations was $8.1
million and free cash flow from mine operationsNG was
$1.6 million. Total gold ounces sold were 15,195 resulting in
revenue of $26.6 million in the second quarter of 2021.
Non-sustaining capital expenditures in the
second quarter of 2021 were $0.2 million compared to $8.8 million
in the second quarter of 2020. Non-sustaining capital costs in the
second quarter of 2020 were related to the final stages of the mine
construction.
Mining in the second quarter of 2021 was focused
on the development of phase 3, phase 4 and phase 5 of the Keltepe
pit, with total tonnes mined of 4.1 million. Processing in the
second quarter of 2021 was focused on the preparation, stacking and
irrigation of the heap leach pad, with tonnes stacked of 0.96
million at a gold grade ore of 0.81 g/t.
Gold production costs were $441 per ounce,
all-in sustaining costs on a by-product basisNG were
$947 per ounce and all-in costs on a by-product basisNG
were $985 per ounce in the second quarter of 2021.
First Half 2021
During the first half of 2021, earnings from mine operations were
$40.6 million, cash provided by mine operations was $40.1 million
and free cash flow from mine operationsNG was $27.4
million. Total gold ounces sold were 42,780 resulting in revenue of
$76.5 million in the first half of 2021.
Non-sustaining capital expenditures in the first
half of 2021 were $0.5 million compared to $17.6 million in the
first half of 2020. Non-sustaining capital costs in the first half
of 2020 were related to the final stages of the mine
construction.
Mining in the first half of 2021 was focused on
the development of phase 3, phase 4 and phase 5 of the Keltepe pit,
with total tonnes mined of 7.4 million. Processing in the first
half of 2021 was focused on the preparation, stacking and
irrigation of the heap leach pad, with tonnes stacked of 1.48
million at a gold grade ore of 0.81g/t.
Gold production costs were $533 per ounce,
all-in sustaining costs on a by-product basisNG were
$848 per ounce and all-in costs on a by-product basisNG
were $876 per ounce in the first half of 2021.
Molybdenum Business
Unit
The molybdenum business includes two North American molybdenum
mines that are currently on care and maintenance: the Thompson
Creek Mine in Idaho and the 75%-owned Endako Mine in British
Columbia. The molybdenum business also includes the Langeloth
Facility in Pennsylvania. The Thompson Creek Mine operates a
molybdenum beneficiation circuit to treat molybdenum concentrates
to supplement the concentrate feed sourced directly for the
Langeloth Facility. This beneficiation process allows the Company
to upgrade high copper content molybdenum concentrate purchased
from third parties into upgraded products which are then sold in
the metallurgical and chemical markets.
Molybdenum Financial and Operating
Results
($ millions, except as noted) |
Three months ended June 30, |
Six months ended June 30, |
Financial Highlights: |
|
2021 |
|
2020 |
% Change |
|
2021 |
|
2020 |
% Change |
Molybdenum (Mo) revenue |
$ |
45.6 |
|
$ |
25.3 |
|
80 |
% |
$ |
84.3 |
|
$ |
66.9 |
|
26 |
% |
Tolling and calcining revenue |
|
0.4 |
|
|
1.3 |
|
(69 |
%) |
|
1.2 |
|
|
2.9 |
|
(59 |
%) |
By-product revenue |
|
1.5 |
|
|
1.1 |
|
36 |
% |
|
2.8 |
|
|
2.3 |
|
22 |
% |
Total revenues |
$ |
47.5 |
|
$ |
27.7 |
|
71 |
% |
$ |
88.3 |
|
$ |
72.1 |
|
22 |
% |
Production costs |
|
45.7 |
|
|
32.1 |
|
42 |
% |
|
81.9 |
|
|
85.7 |
|
(4 |
%) |
Depreciation, depletion and amortization |
|
1.6 |
|
|
1.8 |
|
(11 |
%) |
|
3.3 |
|
|
3.4 |
|
(3 |
%) |
Earnings (loss) from mine operations |
$ |
0.2 |
|
$ |
(6.2 |
) |
103 |
% |
$ |
3.1 |
|
$ |
(17.0 |
) |
(118 |
%) |
Care and Maintenance costs - Molybdenum mines |
|
3.5 |
|
|
3.2 |
|
9 |
% |
|
6.7 |
|
|
6.5 |
|
4 |
% |
Reclamation (recovery) expense |
|
10.8 |
|
|
17.1 |
|
37 |
% |
|
0.1 |
|
|
43.5 |
|
(100 |
%) |
Net loss from operations |
$ |
(14.8 |
) |
$ |
(26.9 |
) |
45 |
% |
$ |
(5.0 |
) |
$ |
(68.2 |
) |
(93 |
%) |
Cash provided by mine operations before changes in working
capital |
|
(0.8 |
) |
|
(0.9 |
) |
11 |
% |
|
0.9 |
|
|
(5.0 |
) |
(118 |
%) |
Cash (used in) provided by operations |
|
(1.0 |
) |
|
(2.7 |
) |
(63 |
%) |
|
(7.8 |
) |
|
8.0 |
|
(198 |
%) |
Free cash flow (deficit) from operations (1) |
|
(1.2 |
) |
|
(4.1 |
) |
(71 |
%) |
|
(8.6 |
) |
|
5.8 |
|
248 |
% |
Total capital expenditures(2) |
|
0.2 |
|
|
1.4 |
|
(86 |
%) |
|
0.9 |
|
|
2.2 |
|
(61 |
%) |
Operating Highlights: |
|
|
|
|
|
|
|
|
|
|
Mo purchased (lbs) |
|
2,557 |
|
|
3,858 |
|
(34 |
%) |
|
5,352 |
|
|
7,200 |
|
(26 |
%) |
Mo roasted (lbs) |
|
2,697 |
|
|
3,606 |
|
(25 |
%) |
|
5,356 |
|
|
7,988 |
|
(33 |
%) |
Mo sold (lbs) |
|
3,176 |
|
|
2,666 |
|
19 |
% |
|
6,485 |
|
|
6,457 |
|
0 |
% |
Average market Mo price ($/lb) |
|
14.48 |
|
|
8.30 |
|
75 |
% |
|
12.90 |
|
|
9.02 |
|
43 |
% |
(1) Non-GAAP
measure. See discussion under “Non-GAAP Measures”.
(2) Capital
expenditures are presented as spent and accrued.
Second Quarter 2021 compared to Second
Quarter 2020
Earnings from mine operations of $0.2 million were recognized in
the second quarter of 2021 compared to loss from mine operations of
$6.2 million in the second quarter of 2020. The increase was
primarily due to increased sales margin from rising molybdenum
prices and the effect of various cost control measures.
Cash used in operations of $1.0 million was
recognized in the second quarter of 2021, compared to cash used in
operations of $2.7 million in the second quarter of 2020 primarily
due to higher sales margins. Free cash flow deficit from
operationsNG of $1.2 million was recognized in the
second quarter of 2021 compared to free cash flow deficit from
operationsNG of $4.1 million in the second quarter of
2020 primarily due to lower capital expenditures and higher sales
margins.
The Langeloth Facility roasted and sold 2.7
million pounds and 3.2 million pounds of molybdenum, respectively,
in the second quarter of 2021, compared to 3.6 million pounds and
2.7 million pounds of molybdenum in the second quarter of 2020. A
decrease in pounds roasted was due to a decline in molybdenum
concentrate available for roasting, resulting from a decrease in
concentrate supply and increased competition for concentrate. The
increase in pounds sold was due to an increase in demand for
molybdenum as the economy begins to recover from the COVID-19
pandemic.
A chart accompanying this announcement is available at
https://www.globenewswire.com/NewsRoom/AttachmentNg/00a352d8-147c-4b2b-9ae9-b52953639ef2
First Half 2021 compared to First Half
2020
Earnings from mine operations of $3.1 million were recognized in
the first half of 2021 compared to a loss from mine operations of
$17.0 million in the first half of 2020. The increase in the first
half of 2021 was mainly due to the increased sales margin from
rising molybdenum prices and the effect of various cost control
measures.
Cash used in operations of $7.8 million was
recognized in the first half of 2021, compared to cash provided by
operations of $8.0 million in the first half of 2020. The decrease
was due to a $11.4 million tax refund that was received in the
first half of 2020. Free cash flow deficit from
operationsNG of $8.6 million was recognized in the first
half of 2021 compared to free cash flow from
operationsNG of $5.8 million in the first half of 2020,
due to a tax refund received in the first half of 2020.
The Langeloth Facility roasted and sold 5.4
million pounds and 6.5 million pounds of molybdenum, respectively,
in the first half of 2021, compared to 8.0 million pounds and 6.5
million pounds of molybdenum in the first half of 2020. The
decrease in roasted material was due to a decline in molybdenum
concentrate available for roasting.
Discontinued Operations
Kumtor Mine
As a result of the events described in the
Recent Events and Developments section above, specifically
the seizure of the Kumtor Mine and loss of control of the mine by
the Company, the Kumtor Mine was reclassified as a discontinued
operation. Consequently, the Company is only presenting financial
and operating results pertaining to 44 days (April 1 to May 14,
2021) and 134 days (January 1 to May 14, 2021) for the three and
six months ended June 30, 2021, compared to 91 days and 181 days
for the three and six months ended June 30, 2020. Consequently, the
results reported are not comparable.
Kumtor Financial and Operating
Results
Unaudited ($ millions, except as noted) |
Three months ended June 30, |
Six months ended June 30, |
Financial Highlights: |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
Revenue |
$ |
88.5 |
|
$ |
288.2 |
|
$ |
264.1 |
|
$ |
538.9 |
|
Production costs |
|
24.3 |
|
|
56.5 |
|
|
72.6 |
|
|
109.8 |
|
Depreciation, depletion and amortization |
|
19.4 |
|
|
64.9 |
|
|
57.9 |
|
|
118.5 |
|
Standby costs |
|
- |
|
|
- |
|
|
- |
|
|
6.7 |
|
Earnings from mine operations |
$ |
44.8 |
|
$ |
166.8 |
|
$ |
133.6 |
|
$ |
303.9 |
|
Loss on the change of control of the Kumtor Mine |
|
(926.4 |
) |
|
- |
|
|
(926.4 |
) |
|
- |
|
Net (loss) earnings from discontinued operations |
$ |
(884.7 |
) |
$ |
120.2 |
|
$ |
(828.7 |
) |
$ |
205.4 |
|
Cash provided by operating activities from discontinued operations
before changes in working capital |
|
61.0 |
|
|
185.3 |
|
|
155.5 |
|
|
327.7 |
|
Cash provided by operating activities from discontinued
operations |
|
77.1 |
|
|
218.7 |
|
|
143.9 |
|
|
352.9 |
|
Cash used in investing activities from discontinued operations |
|
27.4 |
|
|
63.5 |
|
|
96.1 |
|
|
108.3 |
|
Net cash flow from discontinued operations |
|
49.7 |
|
|
155.2 |
|
|
47.8 |
|
|
244.6 |
|
Free cash flow from discontinued
operations (1) |
|
49.6 |
|
|
155.3 |
|
|
53.7 |
|
|
250.7 |
|
Capital expenditures - total |
|
28.4 |
|
|
73.5 |
|
|
95.1 |
|
|
122.5 |
|
Sustaining capital expenditures(3) |
|
24.1 |
|
|
70.2 |
|
|
69.2 |
|
|
118.5 |
|
Non-sustaining capital
expenditures(3)(4) |
|
4.3 |
|
|
3.3 |
|
|
25.9 |
|
|
4.0 |
|
Operating Highlights: |
|
|
|
|
|
|
|
|
Tonnes mined (000's) |
|
25,052 |
|
|
23,077 |
|
|
74,26 |
|
|
43,075 |
|
Tonnes ore mined (000's) |
|
413 |
|
|
14 |
|
|
1,298 |
|
|
585 |
|
Tonnes processed (000's) |
|
748 |
|
|
1,568 |
|
|
2,343 |
|
|
3,170 |
|
Process plant head grade (g/t) |
|
2.77 |
|
|
3.95 |
|
|
2.52 |
|
|
3.74 |
|
Recovery (%)(2) |
|
71.9% |
|
|
84.1% |
|
|
71.5% |
|
|
83.9% |
|
Gold produced (oz) |
|
49,661 |
|
|
173,245 |
|
|
139,830 |
|
|
325,551 |
|
Gold sold (oz) |
|
49,363 |
|
|
170,350 |
|
|
147,800 |
|
|
330,440 |
|
Unit Costs: |
|
|
|
|
|
|
|
|
Gold production costs ($/oz) |
|
492 |
|
|
332 |
|
|
491 |
|
|
332 |
|
All-in sustaining costs on a by-product basis
($/oz)(1) |
|
950 |
|
|
700 |
|
|
929 |
|
|
687 |
|
All-in costs on a by-product basis ($
/oz)(1) |
|
1,349 |
|
|
971 |
|
|
1,414 |
|
|
949 |
|
|
(1) |
Non-GAAP measure. See discussion under “Non-GAAP Measures”. |
|
(2) |
Metallurgical recoveries are
based on recovered gold, not produced gold. |
|
(3) |
Capital expenditures are
presented as spent and accrued. |
|
(4) |
Non-sustaining capital expenditures are distinct projects designed
to have a significant increase in the net present value of the
mine. In the current year, non-sustaining capital expenditures
included costs related to the expansion of the mine. |
|
|
|
Sale of Interest in Greenstone Gold
Mines (“Greenstone”)
On December 15, 2020, the Company entered into
an agreement with an affiliate of the Orion Mine Finance Group
(“Orion”) and Premier Gold Mines Limited to sell the Company’s 50%
interest in the Greenstone Partnership to Orion for cash
consideration of $225 million, subject to certain adjustments, and
contingent consideration of approximately $75 million (assuming a
gold price of $1,500 per ounce), payable based on the successful
construction and operation of the mine. Any contingent
consideration will be recorded upon achieving the applicable
milestones. On January 19, 2021, the Company completed the sale of
its 50% interest in the Greenstone Partnership with final cash
consideration received of $210 million, net of adjustments, and
recognized a gain on sale of $72.3 million (excluding contingent
consideration).
Quarterly Results – Previous Eight
Quarters
As a result of the loss of control, the Company
deconsolidated the results of the Kumtor Mine and presented its
financial results as a discontinued operation, separate from the
Company’s consolidated financial results. Accordingly, the
quarterly results presented below were updated retrospectively to
reflect the impact of discontinued operations accounting.
$ million, except per share data |
2021 |
2020 |
|
2019 |
|
Quarterly data unaudited |
|
Q2 |
Q1 |
Q4 |
Q3 |
Q2 |
Q1 |
Q4 |
Q3 |
Revenue |
202 |
|
226 |
212 |
251 |
130 |
|
128 |
|
115 |
|
157 |
|
Net earnings (loss) from continuing operations |
33 |
|
111 |
31 |
82 |
(39 |
) |
(66 |
) |
(68 |
) |
(235 |
) |
Basic earnings (loss) per share - continuing operations |
0.11 |
|
0.37 |
0.10 |
0.28 |
(0.13 |
) |
(0.22 |
) |
(0.23 |
) |
(0.80 |
) |
Diluted earnings (loss) per share - continuing operations |
0.10 |
|
0.36 |
0.10 |
0.26 |
(0.13 |
) |
(0.24 |
) |
(0.23 |
) |
(0.80 |
) |
Net (loss) earnings |
(852 |
) |
167 |
95 |
206 |
81 |
|
20 |
|
(12 |
) |
(165 |
) |
Basic (loss) earnings per share |
(2.87 |
) |
0.57 |
0.32 |
0.70 |
0.27 |
|
0.07 |
|
(0.04 |
) |
(0.56 |
) |
Diluted (loss) earnings per share |
(2.87 |
) |
0.55 |
0.32 |
0.68 |
0.27 |
|
0.06 |
|
(0.04 |
) |
(0.56 |
) |
Related party transactions
Kyrgyzaltyn
While the Company was in control of the Kumtor Mine, the sole
customer of gold doré from the Kumtor mine was Kyrgyzaltyn, the
Company’s largest shareholder and a state-owned entity of the
Kyrgyz Republic. Revenues from the Kumtor Mine were subject to a
management fee of $1.00 per ounce based on sales volumes, payable
to Kyrgyzaltyn.
The breakdown of sales transactions with
Kyrgyzaltyn in the normal course of business are as follows:
|
|
Three months ended
June 30, |
|
|
Six months ended
June 30, |
|
|
2021 |
|
|
|
2020 |
|
|
|
2021 |
|
|
|
2020 |
|
Gross gold and silver sales to Kyrgyzaltyn |
$ |
88,847 |
|
|
$ |
289,974 |
|
|
$ |
265,407 |
|
|
$ |
542,427 |
|
Deduct: refinery and financing charges |
|
(307 |
) |
|
|
(1,778 |
) |
|
|
(1,248 |
) |
|
|
(3,479 |
) |
Net revenue received from Kyrgyzaltyn |
$ |
88,540 |
|
|
$ |
288,196 |
|
|
$ |
264,159 |
|
|
$ |
538,948 |
|
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 most recently filed Annual Information Form and specifically
the section therein entitled “Risk Factors” 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
Kumtor Mine
As a result of the seizure of the Kumtor Mine and the loss of
control of the mine, the Company deconsolidated KGC, and
derecognized the assets and liabilities of the Kumtor Mine at their
carrying amounts at the date when control was lost.
Arbitration Proceedings
On May 17, 2021, the Company announced that it initiated binding
arbitration (the “Kumtor Arbitration Proceedings”) against the
Kyrgyz Republic to enforce its rights under longstanding agreements
governing the Kumtor Mine and to, among other things, hold the
Government of the Kyrgyz Republic accountable in the arbitration
for any and all losses and damage that result from its actions
against KGC and the Kumtor Mine. Subsequently, this claim was
amended to add Kyrgyzaltyn JSC (“Kyrgyzaltyn”) as a respondent in
the Kumtor Arbitration Proceedings.
These claims will be adjudicated by a single
arbitrator in the Kumtor Arbitration Proceedings to be held at
Stockholm, Sweden and conducted under the rules of the United
Nations Commission on International Trade Law. The applicable
governing law of most of the longstanding agreements with the
Kyrgyz Republic and Kyrgyzaltyn is the law of the State of New
York. Centerra has requested that the Permanent Court of
Arbitration in the Hague, Netherlands designate an appointing
authority to select an arbitrator.
While Centerra will continue to pursue all
measures necessary to protect its rights in arbitration and in
other legal proceedings, no assurances can be given that Centerra
will be successful in any of the foregoing legal proceedings or
that the Company will be able to negotiate a solution that will not
have a material impact on Centerra. There remains further risk that
additional regulatory, tax, or civil claims will be commenced
against KGC or the Company.
Mount Milligan Mine
As previously disclosed, in the Company’s consolidated financial
statements for the year ended December 31, 2020, the Company
received a notice of civil claim from H.R.S. Resources Corp.
(“H.R.S.”), the holder of a 2% production royalty at the Mount
Milligan Mine. 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 correctly 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.
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 taxation 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 tax assessments
considered to be probable. As at June 30, 2021, the Company did not
have any material provision for claims or taxation assessments.
Accounting Estimates, Policies and
Changes
Accounting
Estimates
The preparation of the Company’s consolidated financial statements
in accordance with IFRS requires management to make estimates and
judgments that affect the amounts reported in the consolidated
financial statements and accompanying notes. With exception of the
accounting for the Company’s loss of control of Kumtor Mine as
disclosed in Note 4 of the Company's condensed consolidated interim
financial statements, the critical estimates and judgments applied
in the preparation of the Company’s condensed consolidated interim
financial statements for the three and six months ended June 30,
2021 are consistent with those used in the Company’s consolidated
financial statements for the year ended December 31, 2020.
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 condensed consolidated
interim financial statements that might have a significant risk of
causing a material adjustment to the carrying value of assets and
liabilities and (loss) earnings are outlined in Note 4 of the
consolidated financial statements for the year ended December 31,
2020 and in Note 4 of the Company's condensed consolidated interim
financial statements for the second quarter ended June 30,
2021.
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 the second quarter of 2021
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 of these
DC&P and ICFR were effective throughout the second quarter of
2021.
In response to the COVID-19 pandemic, the
Company asked all of its corporate office staff and many site
administrative staff at regional, mine site and exploration offices
to work from home. These offices were subsequently re-opened, or
are scheduled to re-open under new hygiene and physical distancing
protocols; however, employees whose work does not require physical
presence in the office can continue to work remotely. This change
requires certain processes and controls that were previously done
or documented manually to be completed and retained in electronic
form. The Company continues to monitor whether remote work
arrangements have adversely affected the Company’s ability to
maintain internal controls over financial reporting and disclosure
controls and procedures. Despite the changes required by the
current environment, there have been no significant changes in our
internal controls during the three months ended June 30, 2021 that
have materially affected, or are reasonably likely to materially
affect, internal control over financial reporting.
Non-GAAP Measures
This document contains the following non-GAAP
financial measures: all-in sustaining costs per ounce on a
by-product basis, all-in sustaining costs per ounce or pound on a
co-product basis and all-in costs on a by-product basis per ounce.
In addition, non-GAAP financial measures include adjusted net
earnings, adjusted net earnings per common share (basic and
diluted), average realized gold price and average realized copper
price.
As a result of the seizure of the Kumtor Mine by
the Kyrgyz Republic on May 15, 2021 and the loss of control of the
mine, the Company presented the results from the Kumtor Mine as a
discontinued operation, separate from the Company’s continuing
operations. Consequently, the following non-GAAP financial measures
were added: adjusted net earnings from continuing operations,
adjusted net earnings from continuing operations per common share
(basic and diluted), free cash flow from continuing operations and
adjusted free cash flow from continuing operations. These measures
are calculated in a similar fashion as the equivalent measures
presented on a total basis, inclusive of both continuing operations
and discontinued operations.
Management believes that the use of these
non-GAAP measures 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 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. These financial
measures do not have any standardized meaning prescribed by GAAP
and might not 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. Accordingly, these non-GAAP
measures should not be considered in isolation, or as a substitute
for, analysis of the Company’s recognized measures presented in
accordance with IFRS.
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 are calculated as the
aggregate of production costs as recorded in the condensed
consolidated interim statements of (loss) earnings, refining and
transport costs, cash component of capitalized stripping and
sustaining capital expenditures, lease payments related to
sustaining assets, corporate general and administrative expenses,
accretion expenses, asset retirement depletion expenses, copper and
silver revenue and the associated impact of hedging by-product
sales revenue. When calculating all-in sustaining costs on a
by-product basis, all revenue received from the sale of copper from
the Mount Milligan Mine, as reduced by the effect of the copper
stream, is treated as a reduction of costs incurred. All-in
sustaining costs on a by-product basis per ounce for the Kumtor
Mine excludes revenue-based taxes.
- All-in sustaining costs on a
co-product basis per ounce of gold or per pound of copper, are
based on an allocation of production costs between copper and gold
based on the conversion of copper production to equivalent ounces
of gold. For the second quarter and first half of 2021, 453 pounds
and 465 pounds, respectively, of copper were equivalent to one
ounce of gold. All-in sustaining costs on a co-product basis per
ounce of gold for the Kumtor Mine excludes revenue-based
taxes.
- All-in costs on a by-product
basis per ounce include all-in sustaining costs on a
by-product basis, exploration and study costs, non-sustaining
capital expenditures, care and maintenance and pre-development
costs. All-in costs on a by-product basis per ounce for the Kumtor
Mine includes revenue-based taxes.
- Adjusted net earnings is
calculated by adjusting net (loss) earnings as recorded in the
consolidated statements of (loss) income and comprehensive (loss)
income for items not associated with ongoing operations. The
Company believes that this generally accepted industry measure
allows the evaluation of the results of continuing income
generating capabilities and is useful in making comparisons between
periods. This measure adjusts for the impact of items not
associated with ongoing operations. Management uses this measure to
monitor and plan for the operating performance of the Company in
conjunction with other data prepared in accordance with IFRS.
- Adjusted net earnings from
continuing operations is calculated by adjusting net earnings
(loss) from continuing operations as recorded in the consolidated
statements of (loss) income and comprehensive loss for items not
associated with continuing operations. This measure adjusts for the
impact of items not associated with continuing operations.
Management uses this measure to monitor and plan for the operating
performance of continuing operations of the Company in conjunction
with other data prepared in accordance with IFRS.
- 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(1)) 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(1)) by the number of pounds
sold.
- Free cash flow from continuing
operations is calculated as cash provided by operations less
additions to property, plant and equipment.
- Free cash flow from mine
operations is calculated as cash provided by mine operations
less additions to property, plant and equipment.
- Adjusted free cash flow from
continuing operations is calculated as free cash flow adjusted
for items not associated with ongoing operations.
Certain unit costs, including all-in
sustaining costs on a by-product basis (including and excluding
revenue-based taxes) per ounce are non-GAAP measures and can be
reconciled as follows:
|
Three months ended June 30, |
(Unaudited - $ millions, unless otherwise
specified) |
Consolidated(3) |
|
Mount Milligan |
|
Öksüt |
|
Kumtor(4) |
|
2021 |
2020 |
|
2021 |
2020 |
|
2021 |
2020 |
|
2021 |
2020 |
|
|
|
|
|
|
|
|
|
|
|
|
Production costs attributable to gold |
39.5 |
|
32.9 |
|
|
32.8 |
|
29.6 |
|
|
6.7 |
3.3 |
|
24.3 |
|
56.5 |
|
Production costs attributable to copper |
27.5 |
|
26.0 |
|
|
27.5 |
|
26.0 |
|
|
- |
- |
|
- |
|
- |
|
Total production costs excluding molybdenum segment, as
reported |
67.0 |
|
58.9 |
|
|
60.3 |
|
55.6 |
|
|
6.7 |
3.3 |
|
24.3 |
|
56.5 |
|
Adjust for: |
|
|
|
|
|
|
|
|
|
|
|
Third party smelting, refining and transport costs |
3.6 |
|
2.1 |
|
|
2.8 |
|
2.1 |
|
|
0.8 |
- |
|
0.3 |
|
1.8 |
|
By-product and co-product credits |
(60.2 |
) |
(42.4 |
) |
|
(60.2 |
) |
(42.4 |
) |
|
- |
- |
|
(0.9 |
) |
(1.8 |
) |
Community costs related to current operations |
- |
|
- |
|
|
- |
|
- |
|
|
- |
- |
|
0.9 |
|
2.3 |
|
Adjusted production costs |
10.4 |
|
18.6 |
|
|
2.9 |
|
15.3 |
|
|
7.5 |
3.3 |
|
24.6 |
|
58.8 |
|
Corporate general administrative and other costs |
6.5 |
|
25.6 |
|
|
0.8 |
|
0.5 |
|
|
- |
- |
|
- |
|
- |
|
Reclamation and remediation - accretion (operating sites) |
0.8 |
|
0.2 |
|
|
0.4 |
|
0.2 |
|
|
0.4 |
- |
|
0.1 |
|
1.0 |
|
Sustaining capital expenditures(1) |
26.0 |
|
8.2 |
|
|
19.7 |
|
7.1 |
|
|
6.3 |
1.1 |
|
22.3 |
|
59.5 |
|
Sustaining leases |
1.4 |
|
1.1 |
|
|
1.2 |
|
1.0 |
|
|
0.2 |
0.1 |
|
- |
|
- |
|
All-in sustaining costs on a by-product basis |
45.1 |
|
53.7 |
|
|
25.0 |
|
24.1 |
|
|
14.4 |
4.5 |
|
47.0 |
|
119.3 |
|
Revenue-based taxes |
- |
|
- |
|
|
- |
|
- |
|
|
- |
- |
|
12.4 |
|
40.4 |
|
Exploration and study costs |
7.6 |
|
4.1 |
|
|
2.4 |
|
1.5 |
|
|
0.4 |
- |
|
3.0 |
|
2.5 |
|
Non-sustaining capital
expenditures(1)(2) |
1.1 |
|
8.8 |
|
|
0.9 |
|
- |
|
|
0.2 |
8.8 |
|
4.3 |
|
3.3 |
|
Care and maintenance costs and pre-development costs |
2.9 |
|
6.1 |
|
|
- |
|
- |
|
|
- |
- |
|
- |
|
- |
|
All-in costs on a by-product basis |
56.7 |
|
72.7 |
|
|
28.3 |
|
25.6 |
|
|
15.0 |
13.3 |
|
66.7 |
|
165.5 |
|
Ounces sold (000's) |
66.6 |
|
43.4 |
|
|
51.4 |
|
35.0 |
|
|
15.2 |
8.4 |
|
49.4 |
|
170.4 |
|
Pounds sold (millions) |
19.5 |
|
19.4 |
|
|
19.5 |
|
19.4 |
|
|
- |
- |
|
- |
|
- |
|
Gold production costs ($ /oz) |
593 |
|
759 |
|
|
638 |
|
846 |
|
|
441 |
393 |
|
492 |
|
332 |
|
All-in sustaining costs on a by-product basis ($ /oz) |
676 |
|
1,238 |
|
|
486 |
|
689 |
|
|
947 |
536 |
|
950 |
|
700 |
|
All-in costs on a by-product basis ($ /oz) |
851 |
|
1,675 |
|
|
550 |
|
732 |
|
|
985 |
1,580 |
|
1,349 |
|
971 |
|
Gold - All-in sustaining costs on a co-product basis ($ /oz) |
970 |
|
1,470 |
|
|
867 |
|
973 |
|
|
947 |
536 |
|
950 |
|
700 |
|
Copper production costs ($ /pound) |
1.41 |
|
1.34 |
|
|
1.41 |
|
1.34 |
|
|
n/a |
n/a |
|
n/a |
n/a |
Copper - All-in sustaining costs on a co-product basis ($
/pound) |
2.06 |
|
1.72 |
|
|
2.06 |
|
1.72 |
|
|
n/a |
n/a |
|
n/a |
n/a |
|
(1) |
Capital expenditures are presented on a cash basis. |
|
(2) |
Non-sustaining capital expenditures are distinct projects designed
to have a significant increase in the net present value of the
mine. In the current year, non-sustaining capital expenditures
included costs related to the installation of staged flotation
reactors at the Mount Milligan Mine, the expansion of the Kumtor
Mine and construction costs at the Öksüt Mine. |
|
(3) |
Presented on a continuing
operations basis, excluding results from the Kumtor Mine. |
|
(4) |
Results for the periods ended
June 30, 2021 from the Kumtor Mine prior to the seizure of the mine
on May 15, 2021. |
|
|
|
|
Six months ended June 30, |
(Unaudited - $ millions, unless otherwise
specified) |
Consolidated(3) |
|
Mount Milligan |
|
Öksüt |
|
Kumtor(4) |
|
2021 |
|
2020 |
|
|
2021 |
|
2020 |
|
|
2021 |
2020 |
|
2021 |
2020 |
|
|
|
|
|
|
|
|
|
|
|
|
Production costs attributable to gold |
92.4 |
|
69.8 |
|
|
69.6 |
|
66.5 |
|
|
22.8 |
3.3 |
|
72.6 |
109.8 |
Production costs attributable to copper |
59.8 |
|
51.4 |
|
|
59.8 |
|
51.4 |
|
|
- |
- |
|
- |
- |
Total production costs excluding molybdenum segment, as
reported |
152.2 |
|
121.2 |
|
|
129.4 |
|
117.9 |
|
|
22.8 |
3.3 |
|
72.6 |
109.8 |
Adjust for: |
|
|
|
|
|
|
|
|
|
|
|
Third party smelting, refining and transport costs |
6.5 |
|
4.4 |
|
|
5.7 |
|
4.4 |
|
|
0.8 |
- |
|
1.2 |
3.5 |
By-product and co-product credits |
(125.4 |
) |
(77.0 |
) |
|
(125.4 |
) |
(77.0 |
) |
|
- |
- |
|
- |
- |
Community costs related to current operations |
- |
|
- |
|
|
- |
|
- |
|
|
- |
- |
|
2.6 |
13.6 |
Adjusted production costs |
33.3 |
|
48.6 |
|
|
9.7 |
|
45.3 |
|
|
23.6 |
3.3 |
|
76.4 |
126.9 |
Corporate general administrative and other costs |
11.5 |
|
28.7 |
|
|
1.0 |
|
0.5 |
|
|
- |
- |
|
- |
- |
Reclamation and remediation - accretion (operating sites) |
1.7 |
|
0.6 |
|
|
0.9 |
|
0.6 |
|
|
0.8 |
- |
|
0.3 |
2.0 |
Sustaining capital expenditures(1) |
42.6 |
|
13.5 |
|
|
31.0 |
|
12.4 |
|
|
11.6 |
1.1 |
|
60.6 |
98.0 |
Sustaining leases |
2.6 |
|
2.2 |
|
|
2.3 |
|
2.1 |
|
|
0.3 |
0.1 |
|
- |
- |
All-in sustaining costs on a by-product basis |
91.7 |
|
93.6 |
|
|
44.9 |
|
60.9 |
|
|
36.3 |
4.5 |
|
137.3 |
226.9 |
Revenue-based taxes |
- |
|
- |
|
|
- |
|
- |
|
|
- |
- |
|
37.0 |
75.5 |
Exploration and study costs |
11.1 |
|
7.2 |
|
|
3.3 |
|
2.1 |
|
|
0.7 |
- |
|
8.8 |
7.2 |
Non-sustaining capital
expenditures(1)(2) |
1.5 |
|
17.6 |
|
|
1.0 |
|
- |
|
|
0.5 |
17.6 |
|
25.9 |
4.0 |
Care and maintenance costs and pre-development costs |
6.1 |
|
11.4 |
|
|
- |
|
- |
|
|
- |
- |
|
- |
- |
All-in costs on a by-product basis |
110.4 |
|
129.8 |
|
|
49.2 |
|
63.0 |
|
|
37.5 |
22.1 |
|
209.0 |
313.6 |
Ounces sold (000's) |
148.7 |
|
83.8 |
|
|
105.9 |
|
75.4 |
|
|
42.8 |
8.4 |
|
147.8 |
330.4 |
Pounds sold (millions) |
42.3 |
|
39.8 |
|
|
42.3 |
|
39.8 |
|
|
- |
- |
|
- |
- |
Gold production costs ($ /oz) |
621 |
|
833 |
|
|
657 |
|
883 |
|
|
533 |
393 |
|
491 |
332 |
All-in sustaining costs on a by-product basis ($ /oz) |
617 |
|
1,118 |
|
|
424 |
|
808 |
|
|
848 |
536 |
|
929 |
687 |
All-in costs on a by-product basis ($ /oz) |
742 |
|
1,550 |
|
|
465 |
|
836 |
|
|
876 |
2,628 |
|
1,414 |
949 |
Gold - All-in sustaining costs on a co-product basis ($ /oz) |
916 |
|
1,292 |
|
|
916 |
|
1,292 |
|
|
848 |
536 |
|
929 |
687 |
Copper production costs ($ /pound) |
1.41 |
|
1.29 |
|
|
1.41 |
|
1.29 |
|
|
n/a |
n/a |
|
n/a |
n/a |
Copper - All-in sustaining costs on a co-product basis ($
/pound) |
1.95 |
|
1.64 |
|
|
1.95 |
|
1.64 |
|
|
n/a |
n/a |
|
n/a |
n/a |
|
(1) |
Capital expenditures are presented on an accrual basis. |
|
(2) |
Non-sustaining capital expenditures are distinct projects designed
to have a significant increase in the net present value of the
mine. In the current year, non-sustaining capital expenditures
included costs related to the installation of staged flotation
reactors at Mount Milligan Mine, the expansion of the Kumtor Mine
and construction costs at the Öksüt Mine. |
|
(3) |
Presented on a continuing
operations basis. |
|
(4) |
Results for the periods ended
June 30, 2021 from the Kumtor Mine prior to the seizure of the mine
on May 15, 2021. |
|
|
|
Adjusted net earnings can be
reconciled as follows:
|
|
Three months ended June 30, |
Six months ended June 30, |
($ millions, except as noted) |
2021 |
2020 |
2021 |
2020 |
|
|
|
|
|
|
|
|
|
|
Net (loss) earnings |
$ |
(851.7 |
) |
$ |
80.7 |
$ |
(684.2 |
) |
$ |
100.8 |
|
|
|
|
|
|
|
|
|
|
Adjust for items not associated with ongoing operations: |
|
|
|
|
|
|
|
|
|
Loss of control of the Kumtor Mine |
|
926.4 |
|
|
- |
|
926.4 |
|
|
- |
|
Kumtor Mine legal costs, onerous contract and other related
costs |
|
8.1 |
|
|
- |
|
8.1 |
|
|
- |
|
Gain from the discontinuance of Kumtor Mine hedge instruments |
|
(15.3 |
) |
|
- |
|
(15.3 |
) |
|
- |
|
Gain on the sale of Greenstone property |
|
- |
|
|
- |
|
(72.3 |
) |
|
- |
|
Reclamation provision revaluation expense (recovery) at sites on
care and maintenance |
|
10.8 |
|
|
17.1 |
|
(0.1 |
) |
|
43.5 |
|
|
|
|
|
|
|
|
|
|
Adjusted net earnings |
$ |
78.3 |
|
$ |
97.8 |
$ |
162.6 |
|
$ |
144.3 |
|
|
|
|
|
|
|
|
|
|
Net (loss) earnings per share - basic |
$ |
(2.87 |
) |
$ |
0.27 |
$ |
(2.31 |
) |
$ |
0.34 |
Net (loss) earnings per share - diluted |
$ |
(2.87 |
) |
$ |
0.27 |
$ |
(2.31 |
) |
$ |
0.34 |
Adjusted net earnings per share - basic |
$ |
0.26 |
|
$ |
0.33 |
$ |
0.55 |
|
$ |
0.49 |
Adjusted net earnings per share - diluted |
$ |
0.26 |
|
$ |
0.33 |
$ |
0.55 |
|
$ |
0.49 |
|
|
|
|
|
|
|
|
|
|
Adjusted net earnings from
continuing operations can be reconciled as
follows:
|
|
Three months ended June 30, |
Six months ended June 30, |
($ millions, except as noted) |
2021 |
2020 |
2021 |
2020 |
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) from continuing
operations |
$ |
33.0 |
$ |
(39.4 |
) |
$ |
144.5 |
|
$ |
(104.7 |
) |
|
|
|
|
|
|
|
|
|
|
Adjust for items not associated with ongoing operations: |
|
|
|
|
|
|
|
|
|
Kumtor Mine litigation and other related costs |
|
6.1 |
|
- |
|
|
6.1 |
|
|
- |
|
|
Gain on the sale of Greenstone property |
|
- |
|
- |
|
|
(72.3 |
) |
|
- |
|
|
Reclamation provision revaluation expense (recovery) at sites on
care and maintenance |
|
10.8 |
|
17.1 |
|
|
(0.1 |
) |
|
43.5 |
|
|
|
|
|
|
|
|
|
|
|
Adjusted net earnings (loss) from continuing
operations |
$ |
49.9 |
$ |
(22.3 |
) |
$ |
78.2 |
|
$ |
(61.2 |
) |
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) from continuing operations per share -
basic |
$ |
0.11 |
$ |
(0.13 |
) |
$ |
0.49 |
|
$ |
(0.36 |
) |
Net earnings (loss) from continuing operations per share -
diluted |
$ |
0.10 |
$ |
(0.13 |
) |
$ |
0.47 |
|
$ |
(0.36 |
) |
Adjusted net earnings (loss) from continuing operations per
share - basic |
$ |
0.17 |
$ |
(0.08 |
) |
$ |
0.26 |
|
$ |
(0.21 |
) |
Adjusted net earnings (loss) from continuing operations per
share - diluted |
$ |
0.17 |
$ |
(0.08 |
) |
$ |
0.24 |
|
$ |
(0.21 |
) |
|
|
|
|
|
|
|
|
|
|
Free cash flow from continuing
operations is calculated as follows:
|
|
Three months ended June 30 |
Six months ended June 30 |
($ millions, except as noted) |
2021 |
2020 |
2021 |
2020 |
|
|
|
|
|
|
|
|
|
|
Cash provided by operating activities from continuing
operations (1) |
$ |
60.3 |
|
$ |
49.4 |
|
$ |
146.7 |
|
$ |
36.3 |
|
|
|
|
|
|
|
|
|
|
|
Adjust for: |
|
|
|
|
|
|
|
|
|
Additions to property, plant and equipment at continuing
operations (1) |
|
(29.6 |
) |
|
(35.6 |
) |
|
(48.0 |
) |
|
(41.1 |
) |
|
|
|
|
|
|
|
|
|
|
Free cash flow from continuing operations |
$ |
30.7 |
|
$ |
13.8 |
|
$ |
98.7 |
|
$ |
(4.8 |
) |
|
|
|
|
|
|
|
|
|
|
Adjust for: |
|
|
|
|
|
|
|
|
|
Kumtor Mine legal and other related costs |
|
4.6 |
|
|
- |
|
|
4.6 |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
Adjusted free cash flow from continuing
operations |
$ |
35.3 |
|
$ |
13.8 |
|
$ |
103.3 |
|
$ |
(4.8 |
) |
|
|
|
|
|
|
|
|
|
|
(1) As
presented in the Company’s Condensed Consolidated Interim
Statements of Cash Flows.
Average realized sales price for
gold
Average realized sales price for gold at continuing
operations |
Three months ended June 30, |
Six months ended June 30, |
|
2021 |
2020 |
2021 |
2020 |
|
|
|
|
|
Gold sales reconciliation ($ millions) |
|
|
|
|
Gold sales - Öksüt |
26.6 |
|
14.6 |
|
76.5 |
|
14.6 |
|
|
|
|
|
|
Gold sales - Mount Milligan |
|
|
|
|
Total gold sales under Royal Gold
stream(1) |
7.0 |
|
2.0 |
|
16.5 |
|
6.8 |
|
Total gold sales to third party
customers(1) |
61.1 |
|
43.5 |
|
122.1 |
|
87.8 |
|
Gold sales, net of adjustments |
68.1 |
|
45.5 |
|
138.6 |
|
94.6 |
|
Refining and treatment costs |
(0.2 |
) |
(0.2 |
) |
(0.3 |
) |
(0.3 |
) |
Total gold sales |
67.9 |
|
45.3 |
|
138.3 |
|
94.3 |
|
|
|
|
|
|
Total gold revenue - Consolidated |
94.5 |
|
59.9 |
|
214.8 |
|
108.9 |
|
|
|
|
|
|
Ounces of gold sold |
|
|
|
|
Gold ounces sold - Öksüt |
15,195 |
|
8,349 |
|
42,780 |
|
8,349 |
|
Ounces sold to Royal Gold - Mount
Milligan(1) |
17,907 |
|
12,192 |
|
36,917 |
|
26,219 |
|
Ounces sold to third party customers - Mount
Milligan(1) |
33,540 |
|
22,809 |
|
69,027 |
|
49,135 |
|
|
|
|
|
|
Total ounces sold - Consolidated |
66,642 |
|
43,350 |
|
148,724 |
|
83,703 |
|
|
|
|
|
|
Average realized sales price for gold on a per ounce
basis |
|
|
|
|
Average realized sales price - Öksüt |
1,753 |
|
1,745 |
|
1,789 |
|
1,745 |
|
|
|
|
|
|
Average realized gold price - Mount Milligan - Royal Gold |
397 |
|
166 |
|
455 |
|
264 |
|
Average realized gold price - Mount Milligan - Third party |
1,823 |
|
1,906 |
|
1,769 |
|
1,787 |
|
Average realized gold price - Mount Milligan - Combined |
1,321 |
|
1,295 |
|
1,305 |
|
1,252 |
|
|
|
|
|
|
Average realized sales price for gold -
Consolidated |
1,419 |
|
1,381 |
|
1,445 |
|
1,300 |
|
|
|
|
|
|
|
(1) |
Includes both current and prior period final pricing and metal
content adjustments such as mark-to-market adjustments on
provisionally priced sales and final adjustments to originally
invoiced weights and assays. |
|
|
|
Average realized sales price for
Copper - Mount Milligan
Average realized sales price for Copper - Mount
Milligan |
Three months ended June 30, |
Six months ended June 30, |
|
2021 |
2020 |
2021 |
2020 |
|
|
|
|
|
Copper sales reconciliation ($ millions) |
|
|
|
|
Total copper sales under Royal Gold
stream(1) |
1.8 |
|
0.1 |
|
2.6 |
|
2.2 |
|
Total copper sales to third party
customers(1)(2) |
58.2 |
|
43.2 |
|
123.1 |
|
77.7 |
|
Copper sales, net of adjustments |
60.0 |
|
43.3 |
|
125.7 |
|
79.9 |
|
Refining and treatment costs |
(3.0 |
) |
(3.5 |
) |
(6.8 |
) |
(7.2 |
) |
Copper sales |
57.0 |
|
39.8 |
|
118.9 |
|
72.7 |
|
|
|
|
|
|
Pounds of copper sold (000's lbs) |
|
|
|
|
Pounds sold to Royal Gold(1) |
3,672 |
|
3,641 |
|
7,943 |
|
7,479 |
|
Pounds sold to third party customers(1) |
15,866 |
|
15,711 |
|
34,378 |
|
32,297 |
|
Total pounds sold |
19,538 |
|
19,352 |
|
42,321 |
|
39,776 |
|
|
|
|
|
|
Average realized sales price for copper on a per pound
basis |
|
|
|
|
Average realized copper price - Royal Gold |
0.49 |
|
0.02 |
|
0.33 |
|
0.33 |
|
Average realized copper price - Third party |
3.67 |
|
2.75 |
|
3.58 |
|
2.80 |
|
|
|
|
|
|
Average realized copper price - Combined |
2.92 |
|
2.06 |
|
2.81 |
|
1.83 |
|
|
|
|
|
|
|
(1) |
Includes both current and prior period final pricing and metal
content adjustments such as mark-to-market adjustments on
provisionally priced sales and final adjustments to originally
invoiced weights and assays. |
|
(2) |
Includes the impact of copper
hedges. |
|
|
|
Qualified Person & QA/QC –
Non-Exploration (including Production information)
The production information and other scientific
and technical information presented in this document, including the
production estimates were prepared in accordance with the standards
of the Canadian Institute of Mining, Metallurgy and Petroleum and
NI 43-101 and were prepared, reviewed, verified, and compiled by
Centerra’s geological and mining staff under the supervision of
Slobodan (Bob) Jankovic, Professional Geoscientist, member of the
Association of Professional Geoscientists of Ontario (APGO) and
Centerra’s Senior Director, Technical Services, who is a qualified
person for the purpose of NI 43-101. Unless otherwise noted below,
sample preparation, analytical techniques, laboratories used and
quality assurance-quality control protocols used during the
exploration drilling programs are done consistent with industry
standards and independent certified assay labs are used.
The Kumtor deposit is described in a NI 43-101
technical report dated February 24, 2021 (with an effective date of
July 1, 2020) and filed on SEDAR at www.sedar.com. The technical
report describes the exploration history, geology, and style of
gold mineralization at the Kumtor deposit. Sample preparation,
analytical techniques, laboratories used, and quality
assurance-quality control protocols used are described in the
technical report.
The Mount Milligan deposit is described in a NI
43-101 technical report dated March 26, 2020 and filed on SEDAR at
www.sedar.com. The technical report describes the
exploration history, geology, and style of gold mineralization at
the Mount Milligan deposit. Sample preparation, analytical
techniques, laboratories used, and quality assurance-quality
control protocols used during the exploration drilling programs are
done consistent with industry standards and independent certified
assay labs.
The Öksüt deposit is described in a NI 43-101
technical report dated September 3, 2015 and filed on SEDAR at
www.sedar.com. The technical report describes the
exploration history, geology, and style of gold mineralization at
the Öksüt deposit. Sample preparation, analytical techniques,
laboratories used, and quality assurance-quality control protocols
used during the exploration drilling programs are done consistent
with industry standards and independent certified assay labs.
|
Centerra Gold Inc. |
Condensed Consolidated Interim Statements of Financial
Position |
(Unaudited) |
|
|
|
|
|
|
|
|
|
June 30, |
|
December 31, |
|
|
2021 |
|
2020 |
(Expressed in thousands of United States
Dollars) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
882,875 |
|
$ |
545,180 |
|
Amounts receivable |
|
|
74,716 |
|
|
66,108 |
|
Inventories |
|
|
196,094 |
|
|
580,587 |
|
Assets held-for-sale |
|
|
- |
|
|
140,005 |
|
Other current assets |
|
|
34,477 |
|
|
40,961 |
|
|
|
|
1,188,162 |
|
|
1,372,841 |
Property, plant and equipment |
|
|
1,125,470 |
|
|
1,686,067 |
Other non-current assets |
|
|
14,947 |
|
|
77,101 |
|
|
|
|
1,140,417 |
|
|
1,763,168 |
Total assets |
|
$ |
2,328,579 |
|
$ |
3,136,009 |
|
|
|
|
|
|
|
|
Liabilities and Shareholders' equity |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
|
$ |
177,104 |
|
$ |
232,704 |
|
Income taxes payable |
|
|
3,008 |
|
|
2,474 |
|
Liabilities held-for-sale |
|
|
- |
|
|
2,255 |
|
Other current liabilities |
|
|
28,986 |
|
|
20,395 |
|
|
|
|
209,098 |
|
|
257,828 |
|
|
|
|
|
|
|
Deferred income tax liability |
|
|
40,537 |
|
|
39,473 |
Provision for reclamation |
|
|
298,277 |
|
|
351,149 |
Other non-current liabilities |
|
|
18,782 |
|
|
21,541 |
|
|
|
|
357,596 |
|
|
412,163 |
Shareholders' equity |
|
|
|
|
|
|
|
Share capital |
|
|
981,658 |
|
|
975,122 |
|
Contributed surplus |
|
|
30,908 |
|
|
30,601 |
|
Accumulated other comprehensive income |
|
|
5,735 |
|
|
11,600 |
|
Retained earnings |
|
|
743,584 |
|
|
1,448,695 |
|
|
|
|
1,761,885 |
|
|
2,466,018 |
Total liabilities and Shareholders' equity |
|
$ |
2,328,579 |
|
$ |
3,136,009 |
Commitments and contingencies (note 17) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes form an integral part of these condensed
consolidated interim financial statements. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Centerra Gold Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidated Interim Statements of (Loss)
Earnings and Comprehensive (Loss) Income |
(Unaudited) |
|
|
|
Three months ended |
|
|
Six months ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2021 |
|
|
|
2020 |
|
|
|
2021 |
|
|
|
2020 |
|
(Expressed in thousands of United States
Dollars) |
|
|
|
|
|
|
|
|
|
|
|
(except per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
202,264 |
|
|
$ |
129,977 |
|
|
$ |
428,498 |
|
|
$ |
258,017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
Production costs |
|
|
112,683 |
|
|
|
90,960 |
|
|
|
234,050 |
|
|
|
206,979 |
|
|
Depreciation, depletion and amortization |
|
|
24,656 |
|
|
|
20,563 |
|
|
|
59,048 |
|
|
|
40,007 |
|
Earnings from mine operations |
|
|
64,925 |
|
|
|
18,454 |
|
|
|
135,400 |
|
|
|
11,031 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration and development costs |
|
|
8,760 |
|
|
|
6,474 |
|
|
|
12,222 |
|
|
|
11,237 |
|
|
Corporate administration |
|
|
5,848 |
|
|
|
25,271 |
|
|
|
10,795 |
|
|
|
28,718 |
|
|
Care and maintenance expense |
|
|
6,402 |
|
|
|
7,074 |
|
|
|
12,834 |
|
|
|
13,862 |
|
|
Reclamation expense (recovery) |
|
|
10,825 |
|
|
|
17,065 |
|
|
|
(42 |
) |
|
|
43,505 |
|
|
Other operating expenses |
|
|
4,138 |
|
|
|
3,055 |
|
|
|
7,765 |
|
|
|
5,934 |
|
Earnings (loss) from operations |
|
|
28,952 |
|
|
|
(40,485 |
) |
|
|
91,826 |
|
|
|
(92,225 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of Greenstone Partnership |
|
|
- |
|
|
|
- |
|
|
|
(72,274 |
) |
|
|
- |
|
|
Other expenses (income) |
|
|
4,710 |
|
|
|
(2,998 |
) |
|
|
7,092 |
|
|
|
4,324 |
|
|
Finance costs |
|
|
1,580 |
|
|
|
3,536 |
|
|
|
3,307 |
|
|
|
6,864 |
|
Earnings (loss) before income tax |
|
|
22,662 |
|
|
|
(41,023 |
) |
|
|
153,701 |
|
|
|
(103,413 |
) |
|
Income tax (recovery) expense |
|
|
(10,385 |
) |
|
|
(1,609 |
) |
|
|
9,215 |
|
|
|
1,256 |
|
Net earnings (loss) from continuing
operations |
|
|
33,047 |
|
|
|
(39,414 |
) |
|
|
144,486 |
|
|
|
(104,669 |
) |
|
Net (loss) earnings from discontinued operations |
|
|
(884,705 |
) |
|
|
120,157 |
|
|
|
(828,717 |
) |
|
|
205,420 |
|
Net (loss) earnings |
|
$ |
(851,658 |
) |
|
$ |
80,743 |
|
|
$ |
(684,231 |
) |
|
$ |
100,751 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive (Loss) Income |
|
|
|
|
|
|
|
|
|
|
|
|
Items that may be subsequently reclassified to
earnings: |
|
|
|
|
|
|
|
|
|
|
|
Net (loss) gain on translation of foreign operation |
$ |
- |
|
|
$ |
(592 |
) |
|
$ |
31 |
|
|
$ |
(1,607 |
) |
|
Net loss on derivative instruments |
|
|
(4,218 |
) |
|
|
(1,930 |
) |
|
|
(5,896 |
) |
|
|
(1,732 |
) |
Other comprehensive loss |
|
|
(4,218 |
) |
|
|
(2,522 |
) |
|
|
(5,865 |
) |
|
|
(3,339 |
) |
Total comprehensive (loss) income |
|
$ |
(855,876 |
) |
|
$ |
78,221 |
|
|
$ |
(690,096 |
) |
|
$ |
97,412 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share - continuing
operations: |
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.11 |
|
|
$ |
(0.13 |
) |
|
$ |
0.49 |
|
|
$ |
(0.36 |
) |
|
Diluted |
|
$ |
0.10 |
|
|
$ |
(0.13 |
) |
|
$ |
0.47 |
|
|
$ |
(0.36 |
) |
(Loss) earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(2.87 |
) |
|
$ |
0.27 |
|
|
$ |
(2.31 |
) |
|
$ |
0.34 |
|
|
Diluted |
|
$ |
(2.87 |
) |
|
$ |
0.27 |
|
|
$ |
(2.31 |
) |
|
$ |
0.34 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared per common share (C$) |
$ |
0.05 |
|
$ |
0.08 |
|
$ |
0.10 |
|
$ |
0.08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes form an integral part of these condensed
consolidated interim financial statements. |
Centerra Gold Inc. |
|
|
|
|
Condensed Consolidated Interim Statements of Cash
Flows |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Six months ended |
|
|
|
June 30, |
|
June 30, |
|
|
|
2021 |
|
|
|
2020 |
|
|
|
2021 |
|
|
|
2020 |
|
(Expressed in thousands of United States
Dollars) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) from continuing operations |
|
$ |
33,047 |
|
|
$ |
(39,414 |
) |
|
$ |
144,486 |
|
|
$ |
(104,669 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation, depletion and amortization |
|
|
26,192 |
|
|
|
25,459 |
|
|
|
62,068 |
|
|
|
43,217 |
|
|
Reclamation expense (recovery) |
|
|
10,825 |
|
|
|
17,065 |
|
|
|
(42 |
) |
|
|
43,505 |
|
|
Share-based compensation expense (recovery) |
|
|
474 |
|
|
|
20,470 |
|
|
|
(2,642 |
) |
|
|
17,231 |
|
|
Finance costs |
|
|
1,580 |
|
|
|
3,536 |
|
|
|
3,307 |
|
|
|
6,864 |
|
|
Gain on sale of Greenstone Partnership |
|
|
- |
|
|
|
- |
|
|
|
(72,274 |
) |
|
|
- |
|
|
Income tax (recovery) expense |
|
|
(10,385 |
) |
|
|
(1,609 |
) |
|
|
9,215 |
|
|
|
1,256 |
|
|
Other |
|
|
(70 |
) |
|
|
4,611 |
|
|
|
2,295 |
|
|
|
12,570 |
|
|
|
|
61,663 |
|
|
|
30,118 |
|
|
|
146,413 |
|
|
|
19,974 |
|
Changes in working capital |
|
|
(1,362 |
) |
|
|
19,233 |
|
|
|
315 |
|
|
|
16,314 |
|
Cash provided by operating activities from
continuing operations |
|
|
60,301 |
|
|
|
49,351 |
|
|
|
146,728 |
|
|
|
36,288 |
|
|
Cash provided by operating activities from
discontinued operations |
|
|
77,132 |
|
|
|
218,709 |
|
|
|
143,853 |
|
|
|
352,928 |
|
Cash provided by operating activities |
|
137,433 |
|
|
|
268,060 |
|
|
|
290,581 |
|
|
|
389,216 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment additions |
|
|
(29,574 |
) |
|
|
(35,615 |
) |
|
|
(47,967 |
) |
|
|
(41,082 |
) |
|
Proceeds from sale of Greenstone Partnership |
|
|
- |
|
|
|
- |
|
|
|
210,291 |
|
|
|
- |
|
|
Decrease in restricted cash |
|
|
1,039 |
|
|
|
149 |
|
|
|
2,658 |
|
|
|
25,990 |
|
|
Decrease in other assets |
|
|
317 |
|
|
|
2,562 |
|
|
|
921 |
|
|
|
1,426 |
|
Cash (used in) provided by investing
activities
from continuing operations |
|
|
(28,218 |
) |
|
|
(32,904 |
) |
|
|
165,903 |
|
|
|
(13,666 |
) |
|
Cash used in investing activities from
discontinued operations |
|
|
(27,432 |
) |
|
|
(63,501 |
) |
|
|
(96,081 |
) |
|
|
(108,250 |
) |
Cash (used in) provided by investing
activities |
|
|
(55,650 |
) |
|
|
(96,405 |
) |
|
|
69,822 |
|
|
|
(121,916 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends paid |
|
|
(20,880 |
) |
|
|
(16,992 |
) |
|
|
(20,880 |
) |
|
|
(16,992 |
) |
|
Debt drawdown |
|
|
- |
|
|
|
114,000 |
|
|
|
- |
|
|
|
250,000 |
|
|
Debt repayment |
|
|
- |
|
|
|
(250,000 |
) |
|
|
- |
|
|
|
(327,472 |
) |
|
Payment of borrowing costs |
|
|
(914 |
) |
|
|
(2,789 |
) |
|
|
(1,605 |
) |
|
|
(4,854 |
) |
|
Repayment of lease obligations |
|
|
(953 |
) |
|
|
(1,415 |
) |
|
|
(3,336 |
) |
|
|
(3,152 |
) |
|
Proceeds from common shares issued |
|
|
606 |
|
|
|
3,908 |
|
|
|
3,113 |
|
|
|
4,666 |
|
Cash used in financing activities |
|
|
(22,141 |
) |
|
|
(153,288 |
) |
|
|
(22,708 |
) |
|
|
(97,804 |
) |
Increase in cash during the period |
|
|
59,642 |
|
|
|
18,367 |
|
|
|
337,695 |
|
|
|
169,496 |
|
Cash at beginning of the period |
|
|
823,233 |
|
|
|
193,846 |
|
|
|
545,180 |
|
|
|
42,717 |
|
Cash at end of the period |
|
$ |
882,875 |
|
|
$ |
212,213 |
|
|
$ |
882,875 |
|
|
$ |
212,213 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes form an integral part of these condensed
consolidated interim financial statements. |
The Condensed Consolidated Interim Financial
Statements and Notes for the three and six months ended June 30,
2021 and Management’s Discussion and Analysis for the three and six
months ended June 30, 2021 have been filed on the System for
Electronic Document Analysis and Retrieval (‘SEDAR’) at www.sedar.com, on the Electronic Data Gathering,
Analysis and Retrieval system (“EDGAR”) at www.sec.gov/edgar, and are available at the Company’s
web site at: www.centerragold.com.
Supplementary Information: Second
Quarter 2021 Exploration Update
Mount Milligan
Mine
The 2021 exploration drilling program at Mount
Milligan Mine includes 50 drill holes of planned brownfield
drilling totalling approximately 20,000 metres and nine drill holes
of planned greenfield drilling totalling approximately 4,200
metres. Primary targets include zones below the current ultimate
pit boundary (MBX Deep) and on the eastern margin of the pit (Great
Eastern Fault) where positive drilling results were returned in
2019 and 2020.
Mount Milligan Brownfield Drilling and
Exploration
Exploration drilling continued in the second quarter of 2021 with
17 diamond drill holes completed totalling 9,853 metres. Four drill
holes totalling 2,425 metres were completed in the MBX Deep zone,
an exploration target below the current ultimate pit boundary in
the central portion of the deposit. Eight drill holes totalling
4,640 metres were completed in the Great Eastern Fault (GEF) zone,
testing for both shallow mineralization associated with fault
intersections, and deeper porphyry mineralization associated with
the Great Eastern stock. Three drill holes were completed in the
Saddle zone totalling 1,781 metres, and the one drill hole was
completed in the WBX zone totalling 551 metres, targeting
mineralization below the ultimate pit boundary. One drill hole was
completed in the Rainbow Extension zone totalling 456 metres,
targeting for resource expansion potential south of the ultimate
pit boundary.
During the second quarter of 2021, assay results
were returned for 12 drill holes completed in 2021. These include
significant mineralization from below the ultimate pit boundary in
the MBX Deep, WBX, Saddle zones, Southern Star zone along the
southeastern margin of the pit and in the Great Eastern Fault zone
along the eastern margin of the pit.
Selected significant intersections are reported
below:
MBX Deep Zone (central portion of the pit)
21-1305 |
111.6 metres @ 0.39 g/t Gold (“Au”), 0.22% Copper (“Cu”) from 22.2
metres
including 4.0 metres @ 2.25 g/t Au, 0.25%
Cu from 43.5 metres
and 5.0 metres @
1.61 g/t Au, 0.28% Cu from 75.0 metres
98.5 metres @ 0.20 g/t Au, 0.12% Cu from 252.5 metres
38.2 metres @ 0.44 g/t Au, 0.21% Cu from 362.8 metres |
21-1308 |
48.8 metres @ 0.60 g/t Au, 0.29% Cu from 20.3 metres
including 4.0
metres @ 3.04 g/t Au, 0.47% Cu from 46.0 metres
85.7 metres @ 0.64 g/t Au, 0.16% Cu from 275.0 metres |
21-1309
|
18.0 metres @ 0.73 g/t Au, 0.09% Cu from 282.0 metres
including 5.2 metres @ 1.67 g/t Au, 0.11% Cu from 284.8
metres
101.0 metres @ 0.23 g/t Au, 0.20% Cu from 305.0 metres |
WBX Deep Zone (northwestern portion of the
pit)
21-1304
|
124.3 metres @ at 0.23 g/t Au, 0.19% Cu from 3.7 metres
including 1.85 metres @ 0.74 g/t Au, 1.31% Cu from
111.7 metres
57.7 metres @ 0.14 g/t Au, 0.03% Cu from 199.0 metres |
Saddle Zone (central portion of the
pit)
21-1307
|
44.6 metres @ 0.20 g/t Au, 0.10% Cu from 175.0 metres
73.3 metres @ 0.36 g/t Au, 0.11% Cu from 225.0 metres
54.0 metres @ 0.22 g/t Au, 0.20% Cu from 393.0 metres |
GEF Deep Zone (eastern margin of the
pit)
21-1310 |
42.0 metres @ 0.31 g/t Au, 0.38% Cu from 341.0 metres
19.0 metres @ 1.03 g/t Au, 0.15% Cu from 408.0 metres
21.8 metres @ 0.33 g/t Au, 0.14% Cu from 480.1 metres
34.6 metres @ 0.30 g/t Au, 0.10% Cu from 523.4 metres
19.3 metres @ 0.27 g/t Au, 0.36% Cu from 566.0 metres
18.0 metres @ 0.12 g/t Au, 0.12% Cu from 600.0 metres
33.8 metres @ 0.31 g/t Au, 0.32% Cu from 627.3 metres |
Assays returned from the MBX Deep zone
throughout the second quarter show wide intercepts of significant
mineralization below the ultimate pit boundary. Porphyry-style
mineralization is associated with potassic altered monzonite
porphyry and footwall latites-andesites units with potassic to
inner propylic alteration overprinted by
quartz-sericite-pyrite-carbonate alteration. Lithologies are
variably crosscut by early, transitional, and late-stage veins. The
highest gold grades are associated with intervals of increased
density of late-stage veins near the Saddle-Saddle Splay fault
zones. To date, the tested dimensions of the MBX Deep zone are
approximately 190 metres (north-northeast to south-southwest) by
140 metres (east to west) with an average width of 124 metres for
significant intervals, and potential to expand to the south and to
the east.
Drilling in the Great Eastern Fault zone
throughout the second quarter defined a recently discovered
potassic altered monzonite porphyry stock interpreted to be a
similar size as the MBX stock and shallowly west-southwest dipping.
The first set of assay results returned from the Great Eastern
stock show wide runs of significant mineralization in the hanging
wall and footwall margins of the stock and surrounding altered
volcanic-volcaniclastic units. The east-west dimensions of the
GEF stock, defined by 2021 drilling to date, are approximately 260
metres with room to extend up-dip to the east, and no surrounding
drill holes to the north or to the south.
The above mineralized intercepts were calculated using a
cut-off grade of 0.1 g/t Au or 0.1 % Cu and a maximum internal
dilution interval of 4.0 metres. Significant assay
intervals reported represent apparent widths due to the undefined
geometry of mineralization in this zone, relationship between fault
blocks, and conceptual nature of the exploration target. Drill
collar locations and associated graphics are available at the
following link: http://ml.globenewswire.com/Resource/Download/2d207407-3f8e-4fca-a118-837afc222be2
A full listing of the drill results, drill hole
locations and plan map (including the azimuth, dip of drill holes,
and depth of the sample intervals) for the Mount Milligan Mine 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.
Öksüt Mine
Resource infill, geotechnical, and exploration
drilling continued in the second quarter of 2021 at the Öksüt Mine.
Thirty-one diamond drill holes were completed, including 12
geotechnical and 19 resource infill/step-out holes, totalling 6,209
metres. Resource infill/step-out drill holes were designed to
target inferred and unclassified mineralization within the Keltepe
and Güneytepe pits, whereas geotechnical drill holes were designed
for slope stability measurements with the purpose of expanding pit
boundaries. Final assay results were received for holes ODD0471 to
ODD0500, along with the results from two geotechnical holes
(ODD0467 and ODD0469) that were drilled in the first quarter.
Significant intercepts were returned from both
the Keltepe and Güneytepe pits. These intercepts are expected to
result in the conversion of inferred/unclassified mineralization
into indicated and measured categories and to improve grades in
places.
Selected significant intersections are reported
below:
Keltepe (oxide gold resource upgrade and
expansion)
ODD0467 |
35.0 metres @ 3.79 g/t Au from 31.5 metres
including 21.5 metres @ 5.38 g/t Au from
31.5 metres |
ODD0472 |
18.0 metres @ 2.99 g/t Au from 24.5 metres
including 9.9 metres @ 5.18 g/t Au from
26.5 metres |
ODD0474 |
60.8 metres @ 0.57 g/t Au from 23.9 metres
including 9.4 metres @ 1.56 g/t Au from
9.4 metres |
ODD0478 |
63.6 metres @ 0.65 g/t Au from 9.6 metres
including 5.7 metres @ 1.09 g/t Au from
26.3 metres
and 10.5 metres @ 1.65 from 37.2
metres |
ODD0497 |
44.4 metres @ 0.96 g/t Au from 32.4 metres
including 17.0 metres @ 1.55 g/t Au from
34.4 metres |
Güneytepe (oxide gold resource
expansion)
ODD0494 |
68.0 metres @ 0.71 g/t Au from 6.0 metres
including 17.8 metres @ 1.52 g/t Au from
40.2 metres |
ODD0500 |
12.0 metres @ 0.44 g/t Au from 30.0 metres |
The above mineralized intercepts were
calculated using a cut-off grade of 0.2 g/t Au and a maximum
internal dilution interval of 5.0 metres. The true widths of the
mineralized intervals reported represent approximately 60 to 90% of
the stated downhole interval. Drill collar locations and associated
graphics are available at the following link: http://ml.globenewswire.com/Resource/Download/2d207407-3f8e-4fca-a118-837afc222be2
A full listing of the drill results, drill hole
locations and plan map (including the azimuth, dip of drill holes,
and depth of the sample intervals) for the Öksüt Gold Mine 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.
Other Projects
Turkey
Sivritepe Project
The 2021 drilling program continued at Sivritepe
East during the second quarter. Twelve drill holes totalling
3,020 metres were completed. The drill holes were designed to
target geochemical and geophysical anomalies. Widespread
low-grade Au mineralization was intersected in most holes with
higher grade intercepts being returned from two holes.
Selected significant intersections are reported
below:
Sivritepe
East
STE0016 |
80.0 metres @ 0.90 g/t Au from 5.0 metres
including 21.0 metres @ 2.76 g/t
Au (oxide gold) |
STE0017
|
40.4 metres @ 0.55 g/t Au from 3.0 metres
including 13.0 metres @ 1.02 g/t
Au (oxide gold) |
The above mineralized intercepts were
calculated using a cut-off grade of 0.1 g/t Au and a maximum
internal dilution interval of 5.0 metres. Significant assay
intervals reported represent apparent widths due to the undefined
geometry of mineralization in this zone. Drill collar locations and
associated graphics are available at the following
link: http://ml.globenewswire.com/Resource/Download/2d207407-3f8e-4fca-a118-837afc222be2
A full listing of the drill results, drill hole
locations and plan map (including the azimuth, dip of drill holes,
and depth of the sample intervals) for the Sivritepe Project 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.
Qualified Person & QA/QC –
Exploration
Exploration information and related scientific and technical
information in this document regarding the Mount Milligan mine were
prepared in accordance with the standards of NI 43-101 and were
prepared, reviewed, verified and compiled by Cheyenne Sica, Member
of the Association of Professional Geoscientists Ontario,
Exploration Manager at Centerra’s Mount Milligan Mine, who is the
qualified person for the purpose of NI 43-101. Sample preparation,
analytical techniques, laboratories used, and quality assurance
quality control protocols used during the exploration drilling
programs are done consistent with industry standards and
independent certified assay labs are used. The Mount Milligan
deposit is described in the 2020 Annual Information Form and a
technical report dated March 26, 2020 (with an effective date of
December 31, 2019) prepared in accordance with NI 43-101, both of
which are available on SEDAR at www.sedar.com.
Exploration information and related scientific
and technical information in this document regarding the Öksüt Mine
and the Sivritepe Project were prepared, reviewed, verified and
compiled in accordance with NI 43-101 by Mustafa Cihan, Member of
the Australian Institute of Geoscientists (AIG), Exploration
Manager Turkey at Centerra’s Turkish subsidiary Centerra Madencilik
A.Ş., who is the qualified person for the purpose of NI 43-101.
Sample preparation, analytical techniques, laboratories used, and
quality assurance-quality control protocols used during the
exploration drilling programs are done consistent with industry
standards and independent certified assay labs are used. The Öksüt
deposit is described in Centerra’s 2020 Annual Information Form and
in a technical report dated September 3, 2015 (with an effective
date of June 30, 2015) prepared in accordance with NI 43-101, both
of which are available on SEDAR at www.sedar.com.
For more
information:
John W. Pearson
Vice President, Investor Relations
Centerra Gold Inc.
(416) 204-1953
john.pearson@centerragold.com
Additional information on Centerra Gold
is available on the Company’s web site
at www.centerragold.com and at SEDAR at
www.sedar.com and EDGAR at www.sec.gov/edgar.
A PDF accompanying this announcement is available
at: http://ml.globenewswire.com/Resource/Download/00688798-ec8d-4c69-8228-44d2b854b78e
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