All figures are in United States dollars. All production figures reflect payable metal quantities and are on a 100%-basis, unless otherwise stated. For references denoted with NG, refer to the “Non-GAAP and Other Financial Measures” disclosure at the end of this news release for a description of these measures.
TORONTO, July 31, 2023 (GLOBE NEWSWIRE) -- Centerra Gold Inc. (“Centerra” or the “Company”) (TSX: CG and : CGAU) today reported its second quarter 2023 results.
Second Quarter Highlights
Operations:
- Production: Second quarter 2023 gold production of 61,622 ounces, including production from Mount Milligan Mine (“Mount Milligan”), which achieved record throughput in May and June in the process plant, and a partial month of production from the Öksüt Mine (“Öksüt”). Copper production in the quarter was 13.8 million pounds.
- Sales: Second quarter 2023 gold sales of 48,155 ounces at an average realized market price of $1,532 per ounce and copper sales of 12.8 million pounds at an average realized copper price of $2.56 per pound. Gold sales were 22% lower than gold production in the quarter due to timing related to Turkish national holidays at the end of June 2023.
- Costs: Consolidated gold production costs were $1,066 per ounce and all-in sustaining costs (“AISC”) on by-product basisNG were $1,711 per ounce for the quarter. Costs were primarily impacted by mine sequencing and other timing factors, in addition to general inflation on labour and consumable costs. In the quarter, the weakening of the Canadian dollar, which offset some of the cost increases at Mount Milligan, was mitigated by a loss on the Company’s foreign exchange hedging program.
- Capital expendituresNG: Additions to property, plant, equipment (“PPE”) and sustaining capital expendituresNG of $20.8 million and $20.7 million, respectively. Sustaining capital expendituresNG in the second quarter 2023 included costs for equipment overhauls and the tailings storage facility (“TSF”) step out at Mount Milligan, as well as capitalized stripping costs at Öksüt.
- Updated production guidance: Centerra’s 2023 consolidated gold production guidance has been updated following the resumption of operations at Öksüt and is now expected to be between 340,000 to 360,000 ounces, including estimated gold production of 180,000 to 190,000 ounces at Öksüt and 160,000 to 170,000 ounces at Mount Milligan. Although guidance for Mount Milligan is unchanged, production is trending to near the low end of the range. Copper production guidance is unchanged and is expected to be within the range of 60 to 70 million pounds.
- Updated cost guidance: Centerra’s 2023 consolidated gold production costs are expected to be $700 to $750 per ounce, reflecting the full restart of gold production at Öksüt, with lower unit costs expected during the second half of 2023. Full year 2023 gold production costs at Öksüt are expected to be $450 to $500 per ounce and the Company has increased full year gold production costs at Mount Milligan which are now expected to be $1,000 to $1,050 per ounce, up from $900 to $950 per ounce previously. Full year 2023 AISC on a by-product basisNG is expected to be $1,000 to $1,050 per ounce, including $650 to $700 per ounce at Öksüt and $1,125 to $1,175 per ounce at Mount Milligan, an increase from previous guidance of $1,075 to $1,125.
Financial:
- Net loss: Net loss of $39.7 million or $0.18 per share and adjusted net lossNG of $42.3 million or $0.20 per share. Adjustments include $8.3 million of reclamation provision revaluation recovery at sites on care and maintenance and $5.7 million of deferred income tax expense resulting from the effect of foreign exchange rate changes on monetary assets and liabilities in the determination of taxable income related to the Öksüt and the Mount Milligan mines.
- Free cash flowNG: Cash provided by operating activities of $33.4 million and free cash flowNG of $10.6 million, including a $35 million reduction in working capital from the Langeloth Metallurgical Facility.
- Cash and cash equivalents: Total liquidity of $799.9 million, representing a cash balance of $401.8 million and $398.1 million available under a corporate credit facility as at June 30, 2023.
- Dividend: Quarterly dividend declared of C$0.07 per common share
Other:
- Öksüt: On May 31, 2023, the Turkish Ministry of Environment, Urbanization and Climate Change (the “Ministry of Environment”) approved an amended Environmental Impact Assessment (“EIA”) for Öksüt and the Company resumed full operations on June 5, 2023.
- Share buy-backs: Under Centerra’s Normal Course Issuer Bid (“NCIB”) program, the Company repurchased and cancelled 1,271,900 common shares for the total consideration of $7.3 million (C$9.7 million) in the second quarter 2023. The Company continued to make purchases via an Automatic Share Purchase Plan in July 2023.
- Executive Appointment: In May 2023, the Company appointed Hélène Timpano as its new Executive Vice-President, Strategy & Corporate Development.
President and CEO, Paul Tomory, commented, “The second quarter of 2023 was pivotal for Centerra, as we achieved several milestones that should contribute to stronger performance in the second half of the year. Most notably, at the end of May, we received approval from the Turkish Ministry of Environment for Öksüt’s amended EIA. Having received these regulatory approvals, we restarted full operations at the mine in early June and produced 20,503 ounces of gold within the month. Looking ahead, Öksüt’s gold production guidance is between 180,000 and 190,000 ounces of gold in 2023. At Mount Milligan, we sequenced out of the ore-waste transition zone of the mine and are on track to access higher grade copper and gold ore in the second half of the year, which should help to bolster the production profile going forward.”
“We are in the process of evaluating all Centerra’s assets with the intent of developing a comprehensive value maximizing strategic plan. Key aspects of this plan will include a view on the Molybdenum Business Unit, with an assessment of the potential for a restart of operations at the Thompson Creek molybdenum mine in Idaho, continuing to drive operational and technical improvements at Mount Milligan, repositioning our approach at the Goldfield project to target higher returns, and assessing opportunities for growth in gold production. This new strategy will focus on safe and sustainable operations while maximizing value for our shareholders and our local stakeholders.”
Table 1 - Overview of Consolidated Financial and Operating Highlights
| ($millions, except as noted) | Three months ended June 30, | Six months ended June 30, | ||||||||||
| 2023 | 2022 | % Change | 2023 | 2022 | % Change | |||||||
| Financial Highlights | ||||||||||||
| Revenue | 184.5 | 167.7 | 10% | 411.0 | 462.9 | (11)% | ||||||
| Production costs | 153.5 | 140.4 | 9% | 357.8 | 284.6 | 26% | ||||||
| Depreciation, depletion, and amortization ("DDA") | 23.3 | 27.9 | (16)% | 41.8 | 65.4 | (36)% | ||||||
| Earnings (loss) from mine operations | 7.7 | (0.6 | ) | (1383)% | 11.4 | 112.9 | (90)% | |||||
| Net (loss) earnings | (39.7 | ) | (2.6 | ) | 1427% | (113.1 | ) | 86.8 | (230)% | |||
| Adjusted net (loss) earnings(1) | (42.3 | ) | (36.2 | ) | 17% | (95.1 | ) | 20.2 | (571)% | |||
| Cash provided by (used in) operating activities | 33.4 | (3.5 | ) | (1054)% | (66.4 | ) | 24.8 | (368)% | ||||
| Free cash flow (deficit) | 10.6 | (31.2 | ) | (134)% | (95.3 | ) | (22.1 | ) | 331% | |||
| Additions to property, plant and equipment (“PP&E”) | 20.8 | 25.3 | (18)% | 28.8 | 235.4 | (88)% | ||||||
| Capital expenditures - total(1) | 22.5 | 25.7 | (12)% | 27.4 | 41.7 | (34)% | ||||||
| Sustaining capital expenditures(1) | 20.7 | 24.7 | (16)% | 25.6 | 39.8 | (36)% | ||||||
| Non-sustaining capital expenditures(1) | 1.8 | 1.0 | 80% | 1.8 | 1.9 | (5)% | ||||||
| Net (loss) earnings per common share - $/share basic(2) | (0.18 | ) | (0.01 | ) | 1700% | (0.52 | ) | 0.29 | (278)% | |||
| Adjusted net (loss) earnings per common share - $/share basic(1)(2) | (0.20 | ) | (0.12 | ) | 67% | (0.44 | ) | 0.07 | (729)% | |||
| Operating highlights | ||||||||||||
| Gold produced (oz) | 61,622 | 42,728 | 44% | 94,837 | 136,512 | (31)% | ||||||
| Gold sold (oz) | 48,155 | 41,597 | 16% | 87,145 | 136,505 | (36)% | ||||||
| Average market gold price ($/oz) | 1,890 | 1,879 | 1% | 1,890 | 1,879 | 1% | ||||||
| Average realized gold price ($/oz )(3) | 1,532 | 1,335 | 15% | 1,493 | 1,580 | (6)% | ||||||
| Copper produced (000s lbs) | 13,787 | 17,351 | (21)% | 27,142 | 37,910 | (28)% | ||||||
| Copper sold (000s lbs) | 12,831 | 18,923 | (32)% | 28,162 | 38,372 | (27)% | ||||||
| Average market copper price ($/lb) | 4.05 | 4.53 | (11)% | 4.05 | 4.53 | (11)% | ||||||
| Average realized copper price ($/lb)(3) | 2.56 | 2.19 | 17% | 3.03 | 2.99 | 1% | ||||||
| Molybdenum sold (000s lbs) | 3,030 | 3,229 | (6)% | 6,377 | 6,116 | 4% | ||||||
| Average market molybdenum price ($/lb) | 21.23 | 18.38 | 16% | 27.09 | 18.73 | 45% | ||||||
| Unit costs | ||||||||||||
| Gold production costs ($/oz)(4) | 1,066 | 961 | 11% | 1,085 | 624 | 74% | ||||||
| All-in sustaining costs on a by-product basis ($/oz)(1)(4) | 1,711 | 1,660 | 3% | 1,564 | 780 | 101% | ||||||
| All-in costs on a by-product basis ($/oz)(1)(4) | 2,284 | 2,082 | 10% | 2,205 | 994 | 122% | ||||||
| Gold - All-in sustaining costs on a co-product basis ($/oz)(1)(4) | 1,656 | 1,699 | (3)% | 1,635 | 1,008 | 62% | ||||||
| Copper production costs ($/lb)(4) | 2.28 | 1.58 | 44% | 2.51 | 1.68 | 49% | ||||||
| Copper - All-in sustaining costs on a co-product basis – ($/lb)(1)(4) | 2.77 | 2.10 | 32% | 2.81 | 2.18 | 29% | ||||||
(1) Non-GAAP financial measure. See discussion under “Non-GAAP and Other Financial Measures”.
(2) As at June 30, 2023, the Company had 217,536,452 common shares issued and outstanding.
(3) This supplementary financial measure within the meaning of National Instrument 52-112 - Non-GAAP and Other Financial Measures Disclosure (“NI 51-112”). is calculated as a ratio of revenue from the consolidated financial statements and units of metal sold and includes the impact from the Mount Milligan Streaming Arrangement, copper hedges and mark-to-market adjustments on metal sold not yet finally settled.
(4) All per unit costs metrics are expressed on a metal sold basis.
2023 Outlook
Centerra’s initial 2023 guidance was disclosed in January 2023, however, as a result of restarting activities at Öksüt and changes in the unit costs and sustaining capital expendituresNG at Mount Milligan, the Company has revised its outlook. The Company also updated costs relating to exploration activities, including the Goldfield Project.
The Company’s updated 2023 outlook and comparative actual results for the six months ended June 30, 2023 are set out in the table below.
| Units | 2023 Guidance - updated | Six Months 2023 results | 2023 Guidance - previous | |
| Production | ||||
| Total gold production(1) | (Koz) | 340 - 360 | 95 | n/a |
| Mount Milligan Mine(2)(3)(4) | (Koz) | 160 - 170 | 74 | 160 - 170 |
| Öksüt Mine | (Koz) | 180 - 190 | 21 | n/a |
| Total copper production(2)(3)(4) | (Mlb) | 60 - 70 | 27 | 60 - 70 |
| Unit Costs(5) | ||||
| Gold production costs(1) | ($/oz) | 700 - 750 | 1,085 | n/a |
| Mount Milligan Mine(2) | ($/oz) | 1,000 - 1,050 | 1,181 | 900 - 950 |
| Öksüt Mine | ($/oz) | 450 - 500 | 404 | n/a |
| All-in sustaining costs on a by-product basisNG(1)(3)(4) | ($/oz) | 1,000 - 1,050 | 1,564 | n/a |
| Mount Milligan Mine(4) | ($/oz) | 1,125 - 1,175 | 1,250 | 1,075 - 1,125 |
| Öksüt Mine | ($/oz) | 650 - 700 | 1,484 | n/a |
| All-in costs on a by-product basisNG(1)(3)(4) | ($/oz) | 1,225 - 1,275 | 2,205 | n/a |
| Mount Milligan Mine(4) | ($/oz) | 1,175 - 1,225 | 1,267 | 1,125 - 1,175 |
| Öksüt Mine | ($/oz) | 750 - 800 | 2,896 | n/a |
| All-in sustaining costs on a co-product basisNG(1) | ($/oz) | 1,050 - 1,100 | 1,635 | n/a |
| Mount Milligan Mine | ($/oz) | 1,225 - 1,275 | 1,330 | 1,150 - 1,200 |
| Öksüt Mine | ($/oz) | 650 - 700 | 2,896 | n/a |
| Copper production costs | ($/lb) | 2.15 - 2.40 | 2.51 | 1.90 - 2.15 |
| All-in sustaining costs on a co-product basisNG | ($/lb) | 2.90 - 3.15 | 2.81 | 2.75 - 3.00 |
| Capital Expenditures | ||||
| Additions to PP&E(1) | ($M) | 90 - 115 | 28.8 | n/a |
| Mount Milligan Mine | ($M) | 50 - 60 | 16.1 | 65 - 70 |
| Öksüt Mine | ($M) | 35 - 45 | 10.7 | n/a |
| Total Capital ExpendituresNG(1) | ($M) | 90 - 115 | 27.4 | n/a |
| Mount Milligan Mine | ($M) | 50 - 60 | 15.1 | 65 - 70 |
| Öksüt Mine | ($M) | 35 - 45 | 10.4 | n/a |
| Sustaining Capital ExpendituresNG(1) | ($M) | 90 - 110 | 25.6 | n/a |
| Mount Milligan Mine | ($M) | 50 - 60 | 15.1 | 65 - 70 |
| Öksüt Mine | ($M) | 35 - 45 | 10.4 | n/a |
| Non-sustaining Capital ExpendituresNG(6) | ($M) | 2 | 1.8 | n/a |
| Depreciation, depletion and amortization(1) | ($M) | 115 - 140 | 41.8 | n/a |
| Mount Milligan Mine | ($M) | 65 - 80 | 37.2 | 65 - 80 |
| Öksüt Mine | ($M) | 40 - 50 | 2.3 | n/a |
| Income tax and BC mineral tax expense(1) | ($M) | 80 - 90 | 9.9 | n/a |
| Mount Milligan Mine | ($M) | 1 - 3 | 0.9 | 1 - 3 |
| Öksüt Mine | ($M) | 75 - 85 | 9.0 | n/a |
- Consolidated Centerra figures.
- The Mount Milligan Mine is subject to an arrangement with RGLD Gold AG and Royal Gold, Inc. (together, “Royal Gold”) which entitles Royal Gold to purchase 35% and 18.75% of gold and copper produced, respectively, and requires Royal Gold to pay $435 per ounce of gold and 15% of the spot price per metric tonne of copper delivered (“Mount Milligan Streaming Arrangement”). Using an assumed market gold price of $1,850 per ounce and a blended copper price of $3.85 per pound for the remaining six months ending December 31, 2023 ($1,750 per ounce and $3.85 per pound in the previous guidance), the Mount Milligan Mine’s average realized gold and copper price for the remaining six months of 2023 would be $1,350 per ounce and $2.98 per pound, respectively, compared to average realized prices of $1,493 per ounce and $3.03 per pound in the six months ended June 30, 2023, when factoring in the Mount Milligan Streaming Arrangement and concentrate refining and treatment costs. The blended copper price of $3.85 per pound factors in copper hedges in place as of June 30, 2023 and a market price of $3.70 per pound for the unhedged portion for the remainder of 2023.
- Gold and copper production at the Mount Milligan Mine assumes recoveries of 66% and 81%, respectively, which is unchanged from the previous guidance. Gold production at the Öksüt Mine assumes recoveries of approximately 72%. 2023 gold ounces and copper pounds sold are expected to approximate production figures.
- Unit costs include a credit for forecasted copper sales treated as by-product for all-in sustaining costsNG and all-in costsNG. Production for copper and gold reflects estimated metallurgical losses resulting from handling of the concentrate and metal deductions levied by smelters.
- Units noted as ($/oz) relate to gold ounces and ($/lb) relate to copper pounds.
- Represents non-sustaining capital expendituresNG at the Goldfield Project.
Mount Milligan
Mount Milligan produced 41,119 ounces of gold, a 24% increase from last quarter, and 13.8 million pounds of copper in the second quarter of 2023. Production in the quarter was impacted by lower than planned metal recoveries due to mine sequencing, which resulted in more oxide ore than planned in an ore-waste transition zone in Phase 9. Mount Milligan is now deeper in Phase 9 and has mostly mined through the ore-waste transition zone. Copper head grades are expected to improve in the second half of the year as the mine progresses deeper, which is expected to improve metal recoveries compared to the first half of the year.
During the second quarter of 2023, mining activities were carried out in phases 4, 5, 6, 7, and 9 of the open pit, with phase 6 being mainly composed of top soil stripping and phase 5 waste being used to construct the TSF. A total of 12.9 million tonnes were mined in the second quarter of 2023. Process plant throughput for the second quarter of 2023 was 5.6 million tonnes and averaged 61,482 tonnes per day. The Mount Milligan processing plant achieved record tonnes processed in the months of May and June 2023.
The Company remains on track to access the higher-grade copper and gold from phase 7 and phase 9 in the second half of the year. Given the lower than planned production in the first quarter, the Company’s 2023 gold production guidance remains unchanged at 160,000 to 170,000 ounces, although trending near the low end of the range. Copper production guidance is tracking towards the mid-point of 60 to 70 million pounds for the year. Mount Milligan’s 2023 gold and copper production is expected to be back-end weighted. Full year guidance includes a planned mill shutdown in the third quarter 2023. Mount Milligan is expected to have four concentrate shipments in the third quarter, and another four shipments in the fourth quarter. The timing of shipments and associated sales between quarters may be affected by logistical delays from the union strike in the Port of Vancouver.
Gold production costs in the second quarter 2023 were $1,255 per ounce driven by higher mining costs and a decrease in gold ounces sold. Mining costs in the quarter were impacted by mine sequencing and other timing factors, in addition to general inflation on labour and consumable costs. The benefits of a weakening Canadian dollar on costs in the quarter were offset by a loss on the Corporate foreign exchange hedge program. AISC on a by-product basisNG was $1,599 per ounce was driven by slightly higher operating costs, lower copper credits as a result of lower sales, partially offset by lower sustaining capital expenditures.
Full year 2023 gold production costs at Mount Milligan have been increased and are now expected to be $1,000 to $1,050 per ounce, up from $900 to $950 per ounce previously. Full year 2023 AISC on a by-product basisNG guidance at Mount Milligan has also been increased to be in the range of $1,125 to $1,175 per ounce, up from $1,075 to $1,125 per ounce previously. This was driven by an increase in gold production costs per ounce, partially offset by lower sustaining capital expenditures. Full year 2023 capital guidance at Mount Milligan has been lowered to between $50 to $60 million, down from $65 to $70 million previously. This was driven by lower capitalized costs for the TSF as a result of lower than planned TSF step-out tonnes and a deferral of some capital projects to 2024.
Öksüt
Öksüt resumed its full operations in early June 2023 following an approval of the amended EIA. During the month of June 2023, the mine started ramping up its crushing, stacking, and processing activities and produced 20,503 ounces in the second quarter of 2023. As of June 30, 2023, there were approximately 80,000 recoverable ounces in stored gold-in-carbon inventory and approximately 20,000 ounces in the adsorption, desorption and recovery (“ADR”) plant inventory. In addition, approximately 200,000 recoverable ounces of gold remain in ore stockpiles and on the heap leach pad as at June 30, 2023. The mine stacked 0.3 million tonnes at an average grade of 1.25 g/t, containing 10,546 ounces of gold in the second quarter.
Full year production guidance at Öksüt is expected to be within the range of 180,000 to 190,000 ounces of gold and it is expected that production levels will continue to ramp up in the second half of the year, with gold production approximately split 45% and 55% in the third and fourth quarters, respectively.
Gold production costs and AISC on a by-product basisNG for the quarter were $404 per ounce and $1,143 per ounce, respectively, and full-year gold production costs are expected to be in the range of $450 to $500 per ounce. Remaining cash processing costs associated with the 80,000 recoverable ounces in gold-in-carbon inventory are expected to be less than $50 per ounce, while cash processing costs associated with the 200,000 recoverable ounces of gold in ore stockpiles and on the heap leach pad are expected to be less than $225 and $100 per ounce, respectively.
On July 15, 2023, the Republic of Türkiye increased the corporate income tax rate applicable to Öksüt from 20% to 25%. The change applies to earnings beginning January 1, 2023 and subsequent taxation periods. The Company estimated that this change will result in an incremental $0.9 million in cash taxes to be paid with respect to the income earned in the first half 2023 at Öksüt. The Company will reflect the impact of the change in tax law in subsequent reporting periods.
To manage gold price risk du
