Release Date: August 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Centerra Gold Inc (CGAU, Financial) delivered solid operating performance and maintained consistent cash flow from operations before working capital and income taxes paid.
- Year-to-date production costs are in line with guidance ranges, and full-year 2024 consolidated guidance for production costs and CapEx remains unchanged.
- The company made significant progress on strategic initiatives, including an agreement with Royal Gold to assess Mount Milligan's potential as a multi-decade operation.
- Centerra Gold Inc (CGAU) achieved meaningful progress in ESG initiatives, including a 17% decrease in reportable incidents and surpassing gender diversity goals ahead of schedule.
- The company generated consistent cash flow from operations before working capital and income taxes paid of $94 million in the second quarter.
Negative Points
- Gold and copper sales at Mount Milligan were down quarter over quarter due to the timing of shipments, impacting overall revenue.
- All-in sustaining costs on a by-product basis were higher quarter over quarter at both Mount Milligan and Oksut due to lower sales and higher sustaining CapEx and royalty costs.
- Oksut experienced a free cash flow deficit of $11 million in the second quarter, impacted by routine statutory tax and royalty payments to the Turkish government.
- The molybdenum business unit had a free cash flow deficit of $13 million in the second quarter, primarily due to activities at the Thompson Creek mine.
- The company anticipates potentially exceeding cost guidance ranges if gold prices remain at current elevated levels, driven by higher royalty rates.
Q & A Highlights
Q&A Highlights from Centerra Gold Inc (CGAU) Q2 2024 Earnings Call
Q: With regards to Oksut and the hit sequencing, was there a change in the stripping campaign schedule?
A: (Paul Chawrun, COO) We are continuing with our waste stripping throughout the year, which is relatively even. We did have a change in our ore sequencing to blend higher-grade material, and we experienced some dilution due to the rainy season.
Q: Given the significant free cash flow expected in the second half of the year, how does this impact your capital allocation strategy?
A: (Paul Tomory, CEO) Our immediate focus is on the Thompson Creek feasibility study. We are also looking at external opportunities, particularly in gold, and continue to invest in junior explorers. We remain disciplined in our M&A approach and are encouraged by our internal drilling results, especially at Mount Milligan.
Q: On Mount Milligan, were the lower grades in Q2 expected, and what should we expect for the second half of the year?
A: (Paul Chawrun, COO) The lower grades were due to standard mine sequencing. We expect slightly higher grades and improved gold recovery in the second half of the year. Our guidance remains on track.
Q: Regarding the molybdenum study, should we anticipate any capital spend in Q4?
A: (Paul Tomory, CEO) We are currently preparing the site for a potential go decision on the project. There has been some spending and it will continue through August and September. We will provide an update on spending for the remainder of the year when the study is released.
Q: Can you provide an update on the Goldfield project, particularly on the resource estimate and metallurgical tests?
A: (Paul Tomory, CEO) We are focusing on a run-of-mine oxide resource. The column leach tests are going well, and we continue drilling to add to our internal view on quantity. We will release a resource estimate, recovery rates, and a high-level view on the flowsheet by the end of the year.
Q: The depreciation has been trending below guidance. Will this pick up in the second half of the year?
A: (Ryan Snyder, CFO) We are heading towards the lower end of the guidance range. Depreciation will pick up in the second half as we sell more material at Mount Milligan.
Q: Are the forest fires in BC impacting your operations at Mount Milligan?
A: (Paul Chawrun, COO) Currently, we are at a low-risk category for forest fires. There was a period of higher risk earlier in the quarter, but it did not impact our operations significantly.
Q: Can you provide more details on the cost improvement initiatives at Mount Milligan?
A: (Paul Chawrun, COO) The bulk of the gains will come from improving the load haul cycle productivity. We are also optimizing consumables like tires and diesel. These improvements are part of a long-term strategy to make Mount Milligan a world-class operation.
Q: How will the Thompson Creek and Langeloth integration impact your molybdenum operations?
A: (Paul Tomory, CEO) The integration will significantly increase utilization of the Langeloth facility, allowing us to process third-party material and insulate ourselves from molybdenum price fluctuations. The feasibility study will show the economics of this integrated approach.
Q: Do you expect continued improvements in processing costs at Mount Milligan?
A: (Paul Chawrun, COO) Yes, we expect continuous improvements in processing costs due to various optimization programs. These gains were not included in our initial guidance for the year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
