Centerra Gold Reports Second Quarter Results
TORONTO, ONTARIO--(Marketwire - Aug. 1, 2012) - Centerra Gold Inc. (TSX: CG) --
To view Management's Discussion and Analysis and the Financial Statements and Notes for the three and six months ended June 30, 2012, please visit the following link: http://media3.marketwire.com/docs/CG2012FSMDAQ2.pdf
Centerra Gold Inc. (TSX:CG) today reported a net loss of $54.6 million, or $0.23 per share based on revenues of $89.7 million. The second quarter loss includes $13.5 million ($0.06 per share) of abnormal mining costs, an other operating expense of $21.0 million ($0.09 per share) for Kumtor's contribution to a national micro-credit financing program in the Kyrgyz Republic in April and a charge of $7.2 million ($0.03 per share) for a gold metal reconciliation adjustment of the stockpiles at Kumtor. For the same period in 2011, the Company recorded net earnings of $71.1 million or $0.30 per common share based on revenues of $243.8 million in the same quarter last year reflecting significantly higher gold production and sales.
Consolidated gold production for the second quarter of 2012 totaled 52,482 ounces at a total cash cost of $885 per ounce produced reflecting lower gold production as a result of the revised mine plan at Kumtor. In the corresponding quarter of 2011, consolidated gold production was 155,166 ounces at a total cash cost of $513 per ounce produced. (Total cash cost per ounce produced is a non-GAAP measure and is discussed under "Non-GAAP Measures" in this news release.)
Commentary
Ian Atkinson, President and CEO of Centerra Gold stated, "As expected, our gold production was down for the second quarter. While Kumtor continues with its mitigation plan of moving the ice and waste material to allow access to the SB Zone on the southeast side of the pit, we continue the pre-stripping in the southwest portion of the pit and are on track to be in ore by mid-September. We expect to achieve our annual production guidance of 450,000 to 470,000 ounces of gold."
"At Kumtor, the technical and financial study of the potential for expanding the limits of the ultimate pit is continuing. However, the work done to date has produced very encouraging results and indicates that a much larger open pit is feasible, which would result in a significant addition to the open pit reserves and a substantially extended mine life. The opportunity was created by the expansion of reserves and resources in the SB Zone over the last three years, in conjunction with the decision made in March to mitigate the impact of the high movement area by offloading the upper portion of the southeast section of the pit wall."
"The expanded pit would also encompass a significant part of the existing SB underground development and would result in a revaluation of the associated capital investment. Further development work on Decline 1 has been postponed until the study is finalized. The expanded pit may require removal of additional ice and waste material that may have an impact on the short-term (2013-2014) production and financial estimates previously disclosed on May 15, 2012. Significant technical, financial and permitting factors require further study. We expect to complete the study and release its conclusions late in the third quarter."
"Unfortunately for all shareholders, Centerra's share price has been negatively impacted by the recent developments in the Kyrgyz Republic. We believe that the Kyrgyz Parliamentary Commission's report regarding the Kumtor gold project released on June 18, 2012, and its findings are without merit. We believe that Kumtor has operated in full compliance with Kyrgyz laws and meets or exceeds Kyrgyz and international environmental, safety and health standards. This has been shown over the years in systematic compliance audits by both Kyrgyz and international independent experts, who have confirmed Centerra's high level of performance. We also believe that the new agreements we signed in 2009 form a solid foundation for the successful operation of the Kumtor project. The new agreements were approved by all relevant Kyrgyz governmental authorities, including the Kyrgyz Parliament and the Constitutional Court, and all disputes in relation to the new agreements are subject to international arbitration. In response to the Parliamentary report and resolution relating to Kumtor, the Government established a State Commission to examine the parliamentary report and its conclusions, and to initiate revisions to the new agreements that may impact the relevant concession area, tax regime, local operating company management structure and other matters. The Company will work with the State Commission and Government to address the environmental matters raised in the parliamentary report and to resolve other issues identified in the parliamentary resolution in accordance with the new agreements."
…
Boroo/Gatsuurt
At the Boroo mine in Mongolia, gold production was 11,175 ounces in the second quarter of 2012 compared to 16,089 ounces in the second quarter of 2011. The lower gold production is the result of processing low-grade and low recovery stockpiled ore (including low-grade material originally destined for the heap leach operation). The mill head grade averaged 0.86 g/t with a recovery of 69% in the second quarter of 2012, compared to 1.35 g/t with a recovery of 70.3% in the same quarter of 2011. During the quarter, mining activities continued in Pit 6 exposing ore at the end of the second quarter of 2012. Milling of Pit 6 ore is expected to extend to January 2013. The heap leach operation remained idle during the second quarter 2012 pending final permitting and regulatory commissioning by the Mongolian government authorities.
Total cash cost per ounce produced, a non-GAAP measure of production efficiency, was $916 in the second quarter of 2012 compared to $568 in the second quarter of 2011 due to the lower gold production and higher milling costs. Operating cash costs at Boroo increased in the second quarter of 2012 by $4.9 million before the capitalization of $3.6 million for pre-stripping activities in Pit 6 (net increase of $1.3 million) compared to the same quarter in 2011. Milling costs at Boroo for the second quarter of 2012 were $5.4 million, $1.3 million or 31% higher than the same quarter in 2011. This is primarily the result of higher costs incurred for the consumption of reagents, grinding media and electricity in the second quarter of 2012 as 25% higher throughput flowed through the mill compared to the same period in 2011. During 2011, there was a shutdown of the mill caused by the SAG mill repair in May and June 2011 that reduced overall consumption of consumables.
During the second quarter of 2012, exploration expenditures in Mongolia decreased to $2.1 million from $4.1 million in the same period of 2011, reflecting lower activity on the ATO property in northeast Mongolia as the Company focused its efforts on completion of the Mongolian Reserve and Resource Report.
Capital expenditures spent and accrued at Boroo in the second quarter of 2012 increased to $4.9 million including $0.8 million of sustaining capital compared to $2.4 million, which included $0.3 million of sustaining capital in the same period of 2011. 2012 growth capital consisted of cash and non-cash Pit 6 pre-stripping activities resulting in $4.1 million of these costs capitalized in the second quarter of 2012. Minimal capital expenditures were incurred at Gatsuurt, pending resolution of permitting issues related to the Water and Forest Law as the project was put on care and maintenance.
Since June 2011, Gatsuurt's care and maintenance costs, including security contractors, have been expensed.
Exploration Update
To view the graphics, maps/drill sections and complete drill results discussed in this news release, visit the following link:http://media3.marketwire.com/docs/CG2012Q2ExplorationAll.pdf or visit the Company's web site at: www.centerragold.com.
Mongolia
ATO Project
The Mineral Reserve Authority of Mongolia (MRAM) formally accepted the ATO reserves and resources as calculated by Centerra Gold Mongolia (CGM). The ATO General Environmental Impact Assessment (GEIA) was also officially approved by the Ministry of Nature, Environment and Tourism. Authorities also outlined watershed areas within the boundaries of the exploration license.
Metallurgical test work is ongoing, and hydrological and environmental programs are progressing according to plan.Exploration drilling resumed in June following formal acceptance of the ATO reserves and resource report. Drilling is targeting extensions and feeders to the pipe-like bodies hosting the current ATO resource and possible strike extensions to the nearby Mungu prospect. Infill soil sampling, IP and trenching have outlined the surface expression of Mungu over some 600 metres of strike length. Drilling will continue at Mungu and ATO through the third quarter of 2012.
To view Management's Discussion and Analysis and the Financial Statements and Notes for the three and six months ended June 30, 2012, please visit the following link: http://media3.marketwire.com/docs/CG2012FSMDAQ2.pdf
Centerra Gold Inc. (TSX:CG) today reported a net loss of $54.6 million, or $0.23 per share based on revenues of $89.7 million. The second quarter loss includes $13.5 million ($0.06 per share) of abnormal mining costs, an other operating expense of $21.0 million ($0.09 per share) for Kumtor's contribution to a national micro-credit financing program in the Kyrgyz Republic in April and a charge of $7.2 million ($0.03 per share) for a gold metal reconciliation adjustment of the stockpiles at Kumtor. For the same period in 2011, the Company recorded net earnings of $71.1 million or $0.30 per common share based on revenues of $243.8 million in the same quarter last year reflecting significantly higher gold production and sales.
Consolidated gold production for the second quarter of 2012 totaled 52,482 ounces at a total cash cost of $885 per ounce produced reflecting lower gold production as a result of the revised mine plan at Kumtor. In the corresponding quarter of 2011, consolidated gold production was 155,166 ounces at a total cash cost of $513 per ounce produced. (Total cash cost per ounce produced is a non-GAAP measure and is discussed under "Non-GAAP Measures" in this news release.)
Commentary
Ian Atkinson, President and CEO of Centerra Gold stated, "As expected, our gold production was down for the second quarter. While Kumtor continues with its mitigation plan of moving the ice and waste material to allow access to the SB Zone on the southeast side of the pit, we continue the pre-stripping in the southwest portion of the pit and are on track to be in ore by mid-September. We expect to achieve our annual production guidance of 450,000 to 470,000 ounces of gold."
"At Kumtor, the technical and financial study of the potential for expanding the limits of the ultimate pit is continuing. However, the work done to date has produced very encouraging results and indicates that a much larger open pit is feasible, which would result in a significant addition to the open pit reserves and a substantially extended mine life. The opportunity was created by the expansion of reserves and resources in the SB Zone over the last three years, in conjunction with the decision made in March to mitigate the impact of the high movement area by offloading the upper portion of the southeast section of the pit wall."
"The expanded pit would also encompass a significant part of the existing SB underground development and would result in a revaluation of the associated capital investment. Further development work on Decline 1 has been postponed until the study is finalized. The expanded pit may require removal of additional ice and waste material that may have an impact on the short-term (2013-2014) production and financial estimates previously disclosed on May 15, 2012. Significant technical, financial and permitting factors require further study. We expect to complete the study and release its conclusions late in the third quarter."
"Unfortunately for all shareholders, Centerra's share price has been negatively impacted by the recent developments in the Kyrgyz Republic. We believe that the Kyrgyz Parliamentary Commission's report regarding the Kumtor gold project released on June 18, 2012, and its findings are without merit. We believe that Kumtor has operated in full compliance with Kyrgyz laws and meets or exceeds Kyrgyz and international environmental, safety and health standards. This has been shown over the years in systematic compliance audits by both Kyrgyz and international independent experts, who have confirmed Centerra's high level of performance. We also believe that the new agreements we signed in 2009 form a solid foundation for the successful operation of the Kumtor project. The new agreements were approved by all relevant Kyrgyz governmental authorities, including the Kyrgyz Parliament and the Constitutional Court, and all disputes in relation to the new agreements are subject to international arbitration. In response to the Parliamentary report and resolution relating to Kumtor, the Government established a State Commission to examine the parliamentary report and its conclusions, and to initiate revisions to the new agreements that may impact the relevant concession area, tax regime, local operating company management structure and other matters. The Company will work with the State Commission and Government to address the environmental matters raised in the parliamentary report and to resolve other issues identified in the parliamentary resolution in accordance with the new agreements."
…
Boroo/Gatsuurt
At the Boroo mine in Mongolia, gold production was 11,175 ounces in the second quarter of 2012 compared to 16,089 ounces in the second quarter of 2011. The lower gold production is the result of processing low-grade and low recovery stockpiled ore (including low-grade material originally destined for the heap leach operation). The mill head grade averaged 0.86 g/t with a recovery of 69% in the second quarter of 2012, compared to 1.35 g/t with a recovery of 70.3% in the same quarter of 2011. During the quarter, mining activities continued in Pit 6 exposing ore at the end of the second quarter of 2012. Milling of Pit 6 ore is expected to extend to January 2013. The heap leach operation remained idle during the second quarter 2012 pending final permitting and regulatory commissioning by the Mongolian government authorities.
Total cash cost per ounce produced, a non-GAAP measure of production efficiency, was $916 in the second quarter of 2012 compared to $568 in the second quarter of 2011 due to the lower gold production and higher milling costs. Operating cash costs at Boroo increased in the second quarter of 2012 by $4.9 million before the capitalization of $3.6 million for pre-stripping activities in Pit 6 (net increase of $1.3 million) compared to the same quarter in 2011. Milling costs at Boroo for the second quarter of 2012 were $5.4 million, $1.3 million or 31% higher than the same quarter in 2011. This is primarily the result of higher costs incurred for the consumption of reagents, grinding media and electricity in the second quarter of 2012 as 25% higher throughput flowed through the mill compared to the same period in 2011. During 2011, there was a shutdown of the mill caused by the SAG mill repair in May and June 2011 that reduced overall consumption of consumables.
During the second quarter of 2012, exploration expenditures in Mongolia decreased to $2.1 million from $4.1 million in the same period of 2011, reflecting lower activity on the ATO property in northeast Mongolia as the Company focused its efforts on completion of the Mongolian Reserve and Resource Report.
Capital expenditures spent and accrued at Boroo in the second quarter of 2012 increased to $4.9 million including $0.8 million of sustaining capital compared to $2.4 million, which included $0.3 million of sustaining capital in the same period of 2011. 2012 growth capital consisted of cash and non-cash Pit 6 pre-stripping activities resulting in $4.1 million of these costs capitalized in the second quarter of 2012. Minimal capital expenditures were incurred at Gatsuurt, pending resolution of permitting issues related to the Water and Forest Law as the project was put on care and maintenance.
Since June 2011, Gatsuurt's care and maintenance costs, including security contractors, have been expensed.
Exploration Update
To view the graphics, maps/drill sections and complete drill results discussed in this news release, visit the following link:http://media3.marketwire.com/docs/CG2012Q2ExplorationAll.pdf or visit the Company's web site at: www.centerragold.com.
Mongolia
ATO Project
The Mineral Reserve Authority of Mongolia (MRAM) formally accepted the ATO reserves and resources as calculated by Centerra Gold Mongolia (CGM). The ATO General Environmental Impact Assessment (GEIA) was also officially approved by the Ministry of Nature, Environment and Tourism. Authorities also outlined watershed areas within the boundaries of the exploration license.
Metallurgical test work is ongoing, and hydrological and environmental programs are progressing according to plan.Exploration drilling resumed in June following formal acceptance of the ATO reserves and resource report. Drilling is targeting extensions and feeders to the pipe-like bodies hosting the current ATO resource and possible strike extensions to the nearby Mungu prospect. Infill soil sampling, IP and trenching have outlined the surface expression of Mungu over some 600 metres of strike length. Drilling will continue at Mungu and ATO through the third quarter of 2012.
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