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| Share Name | Share Symbol | Market | Type |
|---|---|---|---|
| Manitou Capital Corp | TSXV:MOU | TSX Venture | Common Stock |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0 | - |
Hot Features
Premium
This news release contains forward-looking information that is subject to the
risk factors and assumptions set out on page 28 and in the Cautionary Note
Regarding Forward-looking Information on page 39. It should be read in
conjunction with the Company's unaudited interim condensed consolidated
financial statements and notes for the three and nine months ended September 30,
2013 and associated Management's Discussion and Analysis. The condensed interim
financial statements of Centerra are prepared in accordance with International
Accounting Standard 34, Interim Financial Reporting, as issued by the
International Accounting Standards Board. The Company's accounting policies are
described in note 3 to its annual consolidated financial statements for the year
ended December 31, 2012. The Company's September 30, 2013 condensed interim
financial statements give effect to the adoption of new accounting standards
effective January 1, 2013 as described in note 2 of the financial statements.
All figures are in United States dollars.
To view Management's Discussion and Analysis and the Financial Statements and
Notes for the three and nine months ended September 30, 2013, please visit the
following link: http://media3.marketwire.com/docs/CG2013-Q3MDA.pdf.
Centerra Gold Inc. (TSX:CG) today reported a net loss for the third quarter of
2013 of $1.8 million, or $0.01 per share (basic and diluted), compared to a net
loss of $33.7 million, or $0.14 per share (basic and diluted) in the comparative
quarter of 2012. The year-over year change reflects higher gold sales due to
higher gold production at both of the Company's operations, partially offset by
the lower average realized gold price(1) in the third quarter of 2013. The 2012
third quarter results were affected by the seven week mill shutdown at Kumtor
and a $11.4 million charge for abnormal mining costs associated with the
unplanned removal of ice and waste from the high movement area at Kumtor.
(1) Non-GAAP measure, see discussion under "Non-GAAP Measures".
2013 Third Quarter Highlights
-- Entered into a non-binding memorandum of understanding with the
Government of the Kyrgyz Republic regarding a potential restructuring
transaction under which Kyrgyzaltyn JSC would exchange its 32.7% equity
interest in Centerra and $100 million payable to Centerra by way of
adjustments to future joint venture distributions otherwise due to
Kyrgyzaltyn for a 50% interest in a joint venture company that would own
the Kumtor Project. On October 23, 2013 the Kyrgyz Parliament passed a
decree with respect to the memorandum of understanding, in which
Parliament rejected the memorandum of understanding and instructed the
Government to (among other things) continue negotiations with Centerra
with a view to improving the Kyrgyz Republic's position and increasing
its interest in the joint venture project to no less than 67%.
-- Successfully rotated the ball mill ring gear at Kumtor during the
scheduled shutdown in August 2013 after identifying a number of cracks
in the ring gear teeth during an inspection in June 2013. The mill is
currently operating at full capacity.
-- Produced 113,840 ounces of gold in the quarter, including 90,289 ounces
at Kumtor and 23,551 ounces at Boroo, compared to 42,723 ounces (23,786
ounces and 18,938 ounces at Kumtor and Boroo, respectively) in the same
period in 2012.
-- Increased revenue to $155 million in the quarter from $68.8 million in
the same quarter of 2012.
-- Used $8.5 million cash in operations during the third quarter, but for
the nine months ending September 30, 2013 cash provided by operations
totaled $124.4 million.
-- Increased annual consolidated gold production guidance to 635,000 to
685,000 ounces, which reflects increased forecasted production at Boroo.
Commentary
Ian Atkinson, President and CEO of Centerra Gold stated, "Following discussions
with the Kyrgyz Government and their advisors, we announced on September 9, 2013
that we had entered into a non-binding memorandum of understanding, but on
October 23, 2013 the Kyrgyz Parliament rejected the memorandum of understanding
and instructed the Government to continue negotiations with Centerra with a view
to increasing the Kyrgyz Republic's interest in the joint venture project that
would own the Kumtor project to no less than 67%. The Company expects to
continue its discussions with the Government regarding a potential restructuring
transaction to resolve all outstanding concerns relating to the Kumtor Project,
however we maintain that any agreement to resolve matters must be fair to all of
Centerra's shareholders."
"Operationally Kumtor and Boroo performed well in the quarter. Kumtor rotated
the ring gear on the ball mill and the mill is currently operating at full
capacity. At Boroo we completed the scheduled maintenance of the heap leach
liner and the heap leach facility is back in full operation. The Boroo mine had
another good quarter, achieving 23,551 ounces of gold production, which brings
year-to-date gold production at Boroo to 76,214 ounces. Boroo's performance has
enabled us to increase our gold production guidance for the mine to
approximately 85,000 ounces from 65,000 to 75,000 ounces for the year."
Update on Negotiations with the Kyrgyz Republic Government
On September 9, 2013, the Company announced that it had entered into a
non-binding memorandum of understanding between the Kyrgyz Republic government
(the "Government") and Kyrgyzaltyn JSC (the "MOU") in connection with a
potential restructuring transaction under which (among other things) Kyrgyzaltyn
would exchange its 32.7% equity interest in Centerra and $100 million payable to
Centerra by way of adjustments to future joint venture distributions otherwise
due to Kyrgyzaltyn for a 50% interest in a joint venture company that would own
the Kumtor project. See "Other Corporate Developments - Kyrgyz Republic -
Negotiations between Kyrgyz Republic and Centerra" for further information
regarding the MOU.
On October 23, 2013, the Kyrgyz Republic parliament ("Parliament") passed a
decree (the "Decree") with respect to the MOU. The Company has not yet received
a final official copy of the Decree and the following disclosure relates to a
final draft of the Decree which the Company understands was passed. In the
Decree, Parliament rejects the MOU and orders the Government to (among other
things) continue negotiations with Centerra with a view to improving the Kyrgyz
Republic's position and increasing its interest in the joint venture project to
no less than 67%, to provide for the project to develop the Kumtor mine using
underground mining methods, and to provide for the establishment and financing
of a centre to monitor the preservation of glaciers. In the Decree, Parliament
also recommends that the Kyrgyz Republic General Prosecutor's Office consider
pursuing allegations that management of the former parent company of Centerra,
Centerra, Kumtor Operating Company, and Kumtor Gold Company violated
environmental regulations and committed "other offenses", and that precious
metal reserves (silver, tellurium, and other associated components) at the
Kumtor deposit were deliberately understated.
In the Decree, Parliament has requested that the Government and the General
Prosecutor's Office report to Parliament on these matters by December 23, 2013.
The Decree provides that if a mutually acceptable solution on the outstanding
matters cannot be reached, the Government is ordered to initiate a process to
cancel the 2009 agreements governing the Kumtor project (the "Kumtor Project
Agreements").
The Company disputes the allegations raised in the Decree and continues to
believe that the Kumtor Project Agreements are legal, valid and enforceable
obligations. The Kumtor Project Agreements were reviewed and approved by the
Government and the Parliament, and were the subject of a positive decision by
the Kyrgyz Republic Constitutional Court and a legal opinion by the Kyrgyz
Republic Ministry of Justice. Such agreements provide for all disputes relating
to the Kumtor project for all disputes to be resolved by international
arbitration, if necessary.
Centerra understands that the Government continues to support the MOU.
The Company expects to continue its discussions with the Government regarding a
potential restructuring transaction to resolve all outstanding concerns relating
to the Kumtor Project. However it maintains that any agreement to resolve
matters must be fair to all of Centerra's shareholders. Any definitive agreement
for a potential restructuring remains subject to Centerra Special Committee and
Board approval, as well as compliance with all applicable legal and regulatory
requirements and approvals, including an independent formal valuation and
minority shareholder approval. While Centerra expects to continue discussions,
there can be no assurance that any transaction will be consummated or that
Centerra will be able to successfully resolve any of the matters currently
affecting the Kumtor Project. The inability to successfully resolve matters,
including obtaining all necessary approvals, and/or further actions of the
Kyrgyz Republic Government and/or Parliament, could have a material adverse
impact on Centerra's future cash flows, earnings, results of operations and
financial conditions.
For further information on the status of negotiations, please see "Other
Corporate Developments - Kyrgyz Republic - Negotiations between Kyrgyz Republic
and Centerra".
Management Changes
Centerra is sorry to announce that David A Groves, Vice President Global
Exploration has decided to leave the Company effective November 30, 2013 for
personal reasons.
Consolidated Financial and Operating Summary
---------------------------------------------------------------------------
Three Months Ended September 30
---------------------------------------------------------------------------
Financial Summary ($
millions, except as noted) 2013 2012 Restated(4) % Change
---------------------------------------------------------------------------
Revenue $ 155.0 $ 68.8 125%
---------------------------------------------------------------------------
Cost of sales 111.7 53.9 107%
---------------------------------------------------------------------------
Abnormal mining costs - 11.4 100%
---------------------------------------------------------------------------
Mine standby costs - - 0%
---------------------------------------------------------------------------
Regional office
administration 6.1 5.3 16%
----------------------------===================================------------
Earnings (loss) from mine
operations 37.2 (1.8) 2159%
---------------------------------------------------------------------------
Revenue-based taxes 16.4 6.2 166%
---------------------------------------------------------------------------
Other operating expenses 2.3 5.2 (56%)
---------------------------------------------------------------------------
Exploration and business
development 7.4 9.5 (22%)
---------------------------------------------------------------------------
Corporate administration 8.6 7.8 10%
----------------------------===================================------------
Earnings (loss) from
operations 2.6 (30.4) 109%
---------------------------------------------------------------------------
Other (income) and expenses (1.1) (0.1) 901%
---------------------------------------------------------------------------
Finance costs 1.2 1.1 18%
----------------------------===================================------------
Earnings (loss) before
income taxes 2.4 (31.3) 108%
---------------------------------------------------------------------------
Income tax expense 4.2 2.3 80%
----------------------------===================================------------
Net earnings (loss) $ (1.8) $ (33.7) 95%
----------------------------===================================------------
---------------------------------------------------------------------------
Earnings (loss) per common
share - $ basic $ (0.01) $ (0.14) 93%
---------------------------------------------------------------------------
Earnings (loss) per common
share - $ diluted $ (0.01) $ (0.14) 93%
---------------------------------------------------------------------------
Weighted average common
shares outstanding - basic
(thousands) 236,385 236,376 0%
---------------------------------------------------------------------------
Weighted average common
shares outstanding -
diluted (thousands) 236,385 236,376 0%
---------------------------------------------------------------------------
Cash provided by (used in)
operations (8.5) (25.4) 67%
---------------------------------------------------------------------------
Capital expenditures (1) 80.6 97.5 (17%)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Operating Summary
---------------------------------------------------------------------------
Gold produced - ounces 113,840 42,723 166%
---------------------------------------------------------------------------
Gold sold - ounces 115,941 41,251 181%
---------------------------------------------------------------------------
Average realized gold price
- $/oz(3) 1,337 1,667 (20%)
---------------------------------------------------------------------------
Average gold spot price -
$/oz (2) 1,326 1,652 (20%)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Cost of sales - $/oz sold
(3) 963 1,307 (26%)
---------------------------------------------------------------------------
Operating cash costs - $/oz
produced(3) 699 1,093 (36%)
---------------------------------------------------------------------------
All-in cash costs (pre-tax)
- $/oz produced(3) 1,426 3,604 (60%)
---------------------------------------------------------------------------
All-in cash costs (including
taxes) - $/oz produced(3) 1,604 3,791 (58%)
---------------------------------------------------------------------------
--------------------------------------------------------------------------
Nine Months Ended September 30
--------------------------------------------------------------------------
Financial Summary ($
millions, except as noted) 2013 2012 Restated(4) % Change
--------------------------------------------------------------------------
Revenue $ 475.5 $ 292.3 63%
--------------------------------------------------------------------------
Cost of sales 287.5 215.4 33%
--------------------------------------------------------------------------
Abnormal mining costs - 15.9 100%
--------------------------------------------------------------------------
Mine standby costs - 4.6 100%
--------------------------------------------------------------------------
Regional office
administration 17.6 15.4 14%
----------------------------==================================------------
Earnings (loss) from mine
operations 170.4 41.0 316%
--------------------------------------------------------------------------
Revenue-based taxes 50.7 30.2 68%
--------------------------------------------------------------------------
Other operating expenses 6.4 29.5 (78%)
--------------------------------------------------------------------------
Exploration and business
development 20.8 27.0 (23%)
--------------------------------------------------------------------------
Corporate administration 22.5 18.3 23%
----------------------------==================================------------
Earnings (loss) from
operations 70.0 (64.0) 209%
--------------------------------------------------------------------------
Other (income) and expenses 3.1 (0.1) 100%
--------------------------------------------------------------------------
Finance costs 3.7 2.7 38%
----------------------------==================================------------
Earnings (loss) before
income taxes 63.2 (66.6) 195%
--------------------------------------------------------------------------
Income tax expense 12.1 6.4 88%
----------------------------==================================------------
Net earnings (loss) $ 51.1 $ (73.0) 170%
----------------------------==================================------------
--------------------------------------------------------------------------
Earnings (loss) per common
share - $ basic $ 0.22 $ (0.31) 171%
--------------------------------------------------------------------------
Earnings (loss) per common
share - $ diluted $ 0.21 $ (0.31) 168%
--------------------------------------------------------------------------
Weighted average common
shares outstanding - basic
(thousands) 236,380 236,367 0%
--------------------------------------------------------------------------
Weighted average common
shares outstanding -
diluted (thousands) 236,847 236,367 0%
--------------------------------------------------------------------------
Cash provided by (used in)
operations 124.4 (35.7) 448%
--------------------------------------------------------------------------
Capital expenditures (1) 289.9 377.7 (23%)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Operating Summary
--------------------------------------------------------------------------
Gold produced - ounces 328,486 167,760 96%
--------------------------------------------------------------------------
Gold sold - ounces 327,864 175,172 87%
--------------------------------------------------------------------------
Average realized gold price
- $/oz(3) 1,450 1,669 (13%)
--------------------------------------------------------------------------
Average gold spot price -
$/oz (2) 1,456 1,652 (12%)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Cost of sales - $/oz sold
(3) 877 1,230 (29%)
--------------------------------------------------------------------------
Operating cash costs - $/oz
produced(3) 582 835 (30%)
--------------------------------------------------------------------------
All-in cash costs (pre-tax)
- $/oz produced(3) 1,440 3,246 (56%)
--------------------------------------------------------------------------
All-in cash costs (including
taxes) - $/oz produced(3) 1,633 3,457 (53%)
--------------------------------------------------------------------------
(1) Includes capitalized stripping of $56.4 million in the third quarter of
2013 ($67.3 million in the third quarter of 2012) and $207.9 million in
the nine months ended September 30, 2013 ($202.4 million in the nine
months ended September 30, 2012).
(2) Average for the period as reported by the London Bullion Market
Association (US dollar Gold P.M. Fix Rate).
(3) Non-GAAP measure, see discussion under "Non-GAAP Measures".
(4) Restated to reflect the impact of new accounting standards adopted
effective January 1, 2013.
Results of Operations
Third Quarter 2013 versus Third Quarter 2012
Revenue for the third quarter of 2013, increased 125% to $155.0 million from
$68.8 million in the comparative quarter of 2012, primarily as a result of
higher sales volumes (115,941 ounces in the third quarter of 2013 compared to
41,251 ounces in the third quarter of 2012) that was partially offset by a 20%
decrease in average realized gold price(1) at $1,337 per ounce compared to
$1,667 per ounce in the same quarter of 2012. The higher sales volumes reflect
the increase in gold production at both operations.
Gold production for the third quarter of 2013 totaled 113,840 ounces compared to
42,723 ounces in the comparative quarter. The 166% increase in ounces poured was
mainly due to the increased production at Kumtor, as compared to the same
quarter of 2012, which was impacted by a seven week mill shutdown at Kumtor, and
the resumption of heap leach operations at Boroo in October 2012.
Cost of sales was $111.7 million in the third quarter of 2013, compared to $53.9
million in the comparative period of 2012, mainly as a result of higher sales
volumes. Operating costs(1) in the third quarter of 2013 were higher than the
comparative quarter reflecting higher production levels at Kumtor as compared to
the comparative period which was impacted by a seven week shutdown of the mill,
significant mining of ice and waste, higher operating costs for the expanded
mining fleet at Kumtor, higher labour costs, resulting from inflationary
increases provided for in the collective bargaining agreements which were
finalized in December, 2012, and the addition of costs at Boroo from the
resumption of heap leach operations.
Depreciation, depletion and amortization associated with production increased to
$44.9 million in the third quarter of 2013 from $12.5 million in the comparative
quarter of 2012 primarily due to the higher ounces sold which resulted in higher
depreciation for assets depreciated using the units of production method. The
basis for depreciation has increased due to the expanded mobile fleet at Kumtor
and higher deferred stripping costs at Kumtor.
Other operating expenses for the third quarter of 2013 totaled $2.3 million
compared to $5.2 million in the comparative quarter of 2012. In the third
quarter of 2013, the Company spent $2.2 million on corporate social
responsibility ("CSR") programs in the Kyrgyz Republic and in Mongolia, compared
to $0.1 million spent on CSR programs in the comparative quarter of 2012, mainly
in the Kyrgyz Republic. The Company also incurred $5.0 million in the third
quarter of 2012 for the care and maintenance of the underground development
project at Kumtor while the Company conducted a detailed study on the potential
for expanding the limits of the ultimate pit.
Exploration expenditures for the third quarter of 2013 were $7.4 million dollars
compared to $9.5 million in the third quarter of 2012. Exploration expenditures
in the third quarter of 2013 reflect on-going drilling programs at the Oksut
project in Turkey and the ATO Project in Mongolia and reduced spending on
drilling at Kumtor.
Corporate administration costs in the third quarter of 2013 were $8.6 million
compared to $7.8 million in the same quarter of 2012, reflecting increased
activity on the Company's projects and an increase in share-based compensation
costs resulting from an increase in the share price. Share-based compensation
expense was $1.9 million in the third quarter of 2013 compared to $1.3 million
in the third quarter of 2012.
Centerra reported $16.4 million in the third quarter of 2013 for revenue-based
tax expense at Kumtor compared to $6.2 million in the same period of 2012, and
$4.2 million in the third quarter of 2013 for income tax expense at Boroo
compared to $2.3 million in the same period of 2012. The increase in
revenue-based tax expense reflects the higher volumes sold in the third quarter
of 2013 at Kumtor resulting in increased revenue. The increase of $1.9 million
in Boroo's income tax expense resulted from the higher earnings achieved in the
third quarter of 2013.
Cash used in operations in the third quarter of 2013 totaled $8.5 million
compared to $25.4 million used in operations in the same period of 2012, mainly
as a result of the increased earnings in 2013, offset by increases in working
capital requirements.
Capital expenditures spent and accrued in the third quarter of 2013 amounted to
$80.6 million, which includes $16 million of sustaining capital(1), $8.1 million
invested in growth capital(1) and $56.4 million of capitalized stripping.
Capital expenditures in the comparative quarter of 2012 totaled $97.5 million,
consisting of $14.2 million of sustaining capital(1), $16.0 million of growth
capital(1) and $67.3 million of capitalized stripping.
Centerra's cash and cash equivalents and short-term investments at the end of
September 2013 decreased to $236.8 million, compared to cash and short-term
investments of $382.1 million at December 31, 2012. At September 30, 2013, the
Company had drawn $76 million on its $150 million revolving credit facility with
the European Bank for Reconstruction and Development (EBRD), leaving a balance
of $74 million undrawn. The amount drawn is due to be repaid on February 8,
2014. Centerra believes, based on its current forecast, that it has sufficient
cash and investments to carry out its business plan in 2013 (see "Outlook for
2013").
(1) Non-GAAP measure, see discussion under "Non-GAAP Measures".
All-in cash costs per ounce produced(1) - Consolidated
----------------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30 September 30
----------------------------------------------------------------------------
$ millions, except as noted 2013 2012 (3) 2013 2012 (3)
----------------------------------------------------------------------------
Operating cash costs (1) $ 79.6 $ 46.7 $ 191.2 $ 140.0
Abnormal mining costs - cash - 8.1 - 10.9
Capitalized stripping and
ice unload - cash 40.7 47.5 150.7 147.3
------------------------------------------------
Operating cash costs and
capitalized stripping 120.3 102.3 341.9 298.3
Sustaining capital (cash)
(1) 15.8 14.2 47.7 32.4
Growth capital (cash)(1) 8.1 15.9 33.9 140.1
------------------------------------------------
Operating cash costs
including capital 144.2 132.5 423.5 470.8
------------------------------------------------
Corporate and other cash
costs (2) 18.1 21.5 49.4 73.8
------------------------------------------------
All-in Cash Costs - pre-
tax(1) $ 162.3 $ 154.0 $ 472.9 $ 544.5
------------------------------------------------
Revenue-based tax and income
tax 20.3 8.0 63.4 35.4
------------------------------------------------
All-in Cash Costs -
including taxes(1) $ 182.6 $ 162.0 $ 536.3 $ 580.0
----------------------------------------------------------------------------
Ounces poured 113,840 42,723 328,486 167,760
Operating cash cost - $/oz
produced (1) $ 699 $ 1,093 $ 582 $ 835
------------------------------------------------
All-in Cash Costs (pre-tax)
- $/oz produced (1) $ 1,426 $ 3,604 $ 1,440 $ 3,246
------------------------------------------------
------------------------------------------------
All-in Cash Costs (including
taxes) - $/oz produced(1) $ 1,604 $ 3,791 $ 1,633 $ 3,457
------------------------------------------------
----------------------------------------------------------------------------
(1) Non-GAAP measure, see discussion under "Non-GAAP Measures".
(2) Corporate and other cash costs include corporate general and
administrative expenses, global exploration expenses, and community
investments which are only reflected in the all-in cash cost amounts
reported at the consolidated level.
(3) Operating cash costs and capitalized stripping for 2012 were restated
for the impact of the adoption of IFRIC 20.
Operating cash costs per ounce produced(1) in the third quarter of 2013
decreased to $699 compared to $1,093 per ounce in the comparative period of
2012. The decrease in 2013 reflects the impact of higher production levels at
Kumtor, higher grades processed at both operations and the resumption of lower
cost heap leach operations at Boroo, partially offset by higher labour costs in
the third quarter of 2013.
On a pre-tax basis, all-in cash costs per ounce produced(1) for the third
quarter of 2013 were $1,426 and includes all cash costs directly related to gold
production, excluding taxes. This compares to pre-tax all-in cash costs(1) of
$3,604 per ounce produced in the third quarter of 2012. The decrease is mainly
due to higher gold production in 2013, 21% lower capital spending and 16% lower
corporate and other cash costs. Growth capital(1) spending (excluding
capitalized stripping) decreased from $15.9 million in the third quarter of 2012
to $8.1 million in the third quarter of 2013 reflecting the expansion of the
mining fleet at Kumtor during the comparative period of 2012. Corporate and
other cash costs(2) were down from $21.5 million in the third quarter of 2012 to
$18.1 million in the third quarter of 2013, primarily as a result of lower
exploration spending in the third quarter of 2013 and the charge incurred in the
third quarter of 2012 due to the underground at Kumtor being placed under care
and maintenance.
(1) Non-GAAP measure, see discussion under "Non-GAAP Measures".
(2) Corporate and other cash costs include corporate general and administrative
expenses, global exploration expenses, and community investments which are only
reflected in the all-in cash cost amounts reported at the consolidated level.
Mining Operations
-----------------------------------------
Three Months Ended
September 30
----------------------------------------------------------------------------
Kumtor Operating Results 2013 2012 (5) % Change
----------------------------------------------------------------------------
Gold sold - ounces 86,699 26,626 226%
----------------------------------------------------------------------------
Average realized gold price -
$/oz(3) 1,347 1,651 (18%)
----------------------------------------------------------------------------
Revenue - $ millions 116.8 44.0 166%
----------------------------------------------------------------------------
Cost of sales - $ millions (1) 86.0 38.0 126%
----------------------------------------------------------------------------
Cost of sales - $/oz sold (1)(3) 991 1,427 (31%)
----------------------------------------------------------------------------
Tonnes mined - 000s 41,741 35,943 16%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Tonnes ore mined - 000s 2,087 412 407%
----------------------------------------------------------------------------
Average mining grade - g/t (2) 2.78 2.25 24%
----------------------------------------------------------------------------
Tonnes milled - 000s 1,312 581 126%
----------------------------------------------------------------------------
Average mill head grade - g/t (2) 3.04 1.78 71%
----------------------------------------------------------------------------
Recovery - % 76.4 75.1 2%
----------------------------------------------------------------------------
Gold produced - ounces 90,289 23,786 280%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating cash cost - $/oz produced
(3) 709 1,338 (47%)
----------------------------------------------------------------------------
All-in cash cost (pre-tax) - $/oz
produced(3) 1,395 4,911 (72%)
----------------------------------------------------------------------------
All-in cash cost including tax-$/oz
produced (3) 1,576 5,170 (70%)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Capital expenditures - $ millions
(4) 77.7 96.8 (20%)
----------------------------------------------------------------------------
Exploration expenditures - $
millions 0.9 3.5 (74%)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Boroo Operating Results
----------------------------------------------------------------------------
Gold sold - ounces 29,242 14,625 100%
----------------------------------------------------------------------------
Average realized gold price -
$/oz(3) 1,306 1,698 (23%)
----------------------------------------------------------------------------
Revenue - $ millions 38.2 24.8 54%
----------------------------------------------------------------------------
Cost of sales - $ millions (1) 25.7 15.9 62%
----------------------------------------------------------------------------
Cost of sales - $/oz sold (1)(3) 880 1,089 (19%)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total tonnes mined - 000s - 1,821 -
----------------------------------------------------------------------------
Tonnes mined heap leach - 000s - 121 -
----------------------------------------------------------------------------
Tonnes stacked heap leach - 000s 1,078 - -
----------------------------------------------------------------------------
Tonnes leached - 000s 803 - -
----------------------------------------------------------------------------
Tonnes ore milled - 000s 604 576 5%
----------------------------------------------------------------------------
Average mill head grade - g/t (2) 1.04 1.62 (36%)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Recovery - % 58.5 60.9 (4%)
----------------------------------------------------------------------------
Gold produced - ounces 23,551 18,938 24%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating cash cost - $/oz produced
(3) 659 787 (16%)
----------------------------------------------------------------------------
All-in cash cost (pre-tax) - $/oz
produced(3) 765 812 (6%)
----------------------------------------------------------------------------
All-in cash cost including tax-$/oz
produced (3) 932 908 3%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Capital expenditures - $ millions
(Boroo) (4) 2.7 0.5 440%
----------------------------------------------------------------------------
Capital expenditures - $ millions
(Gatsuurt) 0.2 0.1 100%
----------------------------------------------------------------------------
Exploration expenditures-$ millions
(Mongolia) 1.9 2.7 (30%)
----------------------------------------------------------------------------
-----------------------------------------
Nine Months Ended
September 30
----------------------------------------------------------------------------
Kumtor Operating Results 2013 2012 (5) % Change
----------------------------------------------------------------------------
Gold sold - ounces 248,635 129,051 93%
----------------------------------------------------------------------------
Average realized gold price -
$/oz(3) 1,456 1,671 (13%)
----------------------------------------------------------------------------
Revenue - $ millions 362.0 215.7 68%
----------------------------------------------------------------------------
Cost of sales - $ millions (1) 217.9 166.9 31%
----------------------------------------------------------------------------
Cost of sales - $/oz sold (1)(3) 876 1,294 (32%)
----------------------------------------------------------------------------
Tonnes mined - 000s 129,827 109,425 19%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Tonnes ore mined - 000s 3,095 491 530%
----------------------------------------------------------------------------
Average mining grade - g/t (2) 2.53 2.09 21%
----------------------------------------------------------------------------
Tonnes milled - 000s 4,136 3,209 29%
----------------------------------------------------------------------------
Average mill head grade - g/t (2) 2.63 1.66 58%
----------------------------------------------------------------------------
Recovery - % 73.6 72.6 1%
----------------------------------------------------------------------------
Gold produced - ounces 252,272 125,799 101%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating cash cost - $/oz produced
(3) 589 828 (29%)
----------------------------------------------------------------------------
All-in cash cost (pre-tax) - $/oz
produced(3) 1,478 3,388 (56%)
----------------------------------------------------------------------------
All-in cash cost including tax-$/oz
produced (3) 1,678 3,628 (54%)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Capital expenditures - $ millions
(4) 281.3 368.0 (24%)
----------------------------------------------------------------------------
Exploration expenditures - $
millions 5.3 8.9 (40%)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Boroo Operating Results
----------------------------------------------------------------------------
Gold sold - ounces 79,229 46,121 72%
----------------------------------------------------------------------------
Average realized gold price -
$/oz(3) 1,432 1,660 (14%)
----------------------------------------------------------------------------
Revenue - $ millions 113.5 76.6 48%
----------------------------------------------------------------------------
Cost of sales - $ millions (1) 69.5 48.5 43%
----------------------------------------------------------------------------
Cost of sales - $/oz sold (1)(3) 878 1,051 (17%)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total tonnes mined - 000s - 6,195 -
----------------------------------------------------------------------------
Tonnes mined heap leach - 000s - 143 -
----------------------------------------------------------------------------
Tonnes stacked heap leach - 000s 2,373 - -
----------------------------------------------------------------------------
Tonnes leached - 000s 3,688 - -
----------------------------------------------------------------------------
Tonnes ore milled - 000s 1,800 1,802 (0%)
----------------------------------------------------------------------------
Average mill head grade - g/t (2) 1.23 1.07 15%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Recovery - % 57.5 67.5 (15%)
----------------------------------------------------------------------------
Gold produced - ounces 76,214 41,961 82%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating cash cost - $/oz produced
(3) 559 855 (35%)
----------------------------------------------------------------------------
All-in cash cost (pre-tax) - $/oz
produced(3) 652 1,047 (38%)
----------------------------------------------------------------------------
All-in cash cost including tax-$/oz
produced (3) 818 1,172 (30%)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Capital expenditures - $ millions
(Boroo) (4) 7.5 9.1 (18%)
----------------------------------------------------------------------------
Capital expenditures - $ millions
(Gatsuurt) 0.6 0.3 100%
----------------------------------------------------------------------------
Exploration expenditures-$ millions
(Mongolia) 3.6 7.0 (49%)
----------------------------------------------------------------------------
(1) Cost of sales excludes regional office administration.
(2) g/t means grams of gold per tonne.
(3) Non-GAAP measure, see discussion under "Non-GAAP Measures".
(4) Includes capitalized stripping of $56.4 million and $207.9 million for
the three and nine months ended September 30, 2013 at Kumtor ($67.3 million
and $195.1 million at Kumtor and nil and $7.3 million at Boroo for the three
and nine months ended September 30, 2012, respectively).
(5) Operating cash costs and capitalized stripping for 2012 at Kumtor were
restated to reflect the impact of the adoption of IFRIC 20.
Kumtor
At the Kumtor mine in the Kyrgyz Republic, gold production in the third quarter
was 90,289 ounces compared to 23,786 ounces in the same quarter in 2012. The
increase in ounces poured was mainly due to accessing and mining higher grade
ore in cut-back 15 where 2.1 million tonnes of ore were mined with an average
grade of 2.78 g/t. During the third quarter of 2013, Kumtor's average mill head
grade was 3.04 g/t with a recovery of 76.4%, compared with 1.78 g/t and a
recovery of 75.1% for the same quarter in 2012. Tonnage processed was
approximately 1.3 million tonnes for the third quarter of 2013 up significantly
from the comparative period in 2012, which was impacted by a seven week mill
shutdown.
The abnormal movement in the waste-rock dump, which began in mid-March 2013, has
slowed to normal levels in the third quarter of 2013. There has been no impact
on planned 2013 gold production. A revised 2013 waste-rock dumping plan has been
approved by the appropriate Kyrgyz regulatory authorities, and is being
followed. See "Other Corporate Developments - Kyrgyz Republic - Kumtor Waste
Dump Movement".
Operating cash cost per ounce produced(1) in the third quarter of 2013 decreased
to $709 compared to $1,338 per ounce in the comparative period of 2012. The
decrease in the 2013 third quarter reflects the impact of significantly higher
production levels, which resulted in a 280% increase in ounces produced than the
comparative quarter of 2012. This was partially offset by higher mining costs as
the mine ceased capitalizing stripping as it commenced mining ore earlier in
2013 than the comparative period.
In the third quarter of 2013, operating cash costs(1) at Kumtor increased by
$32.2 million to $64.1 million, excluding the capitalization of stripping
activities and the expensing of unloading activities (increased by $18.2 million
including capitalized stripping and unloading expense), compared to $31.9
million in the comparative quarter of 2012. The increased cost of mining
activities in 2013 is primarily related to the increased tonnage moved as the
higher density material incurred higher diesel and blasting costs. Labour costs
also increased as a result of the new collective bargaining agreement ratified
in December 2012. Other increases include increased tire requirements and
maintenance due to the expanded equipment fleet and increased consumption of
consumables and electricity by the mill.
Pre-tax all-in cash costs per ounce produced(1) were $1,395 in the third quarter
of 2013 compared to $4,911 in the same quarter of 2012. The decrease is due to
both higher production and a reduction in growth capital spending(1 ). Kumtor
expects to mine and process significantly higher volumes and grade of ore during
the fourth quarter and expects its all-in cash costs(1) to decrease in the
fourth quarter of 2013. See "Outlook for 2013".
Exploration expenditures totaled $0.9 million for the third quarter of 2013,
compared to $3.5 million reported in the third quarter 2012.
Capital expenditures spent and accrued in the third quarter of 2013 at Kumtor
amounted to $77.7 million which includes $13.3 million of sustaining capital(1),
$8.1 million invested in growth capital(1) for relocation of infrastructure and
$56.4 million for capitalized stripping. Capital expenditures in the comparative
quarter of 2012 totaled $96.8 million, consisting of $13.6 million of sustaining
capital(1) and $83.2 million of growth capital(1) including $67.3 million of
capitalized stripping.
During an inspection in June 2013, an increased number of cracks were observed
in the ring gear of the Kumtor ball mill as compared to the previous inspection
in April 2013. As a result the ring gear was rotated during a scheduled shutdown
in August 2013, and is currently operating at full capacity. The Company
continues to monitor the ring gear. In the event that the ball mill cannot
continue to operate with the current ring gear, a spare ring gear is available
on site, although it is expected to operate at only 95% to 97% of the capacity
of the current ring gear. A replacement ring gear has been ordered and is
expected to be delivered in the third quarter of 2014.
Boroo/Gatsuurt
At the Boroo mine in Mongolia, gold production was 23,551 ounces of gold in the
third quarter of 2013 compared to 18,938 ounces of gold in the third quarter of
2012. The increase in gold production was due to the resumption of activities at
the heap leach operation, which contributed 10,929 ounces. The higher mill
throughput achieved in the third quarter of 2013 was partially offset by lower
average mill head grade of 1.04 g/t with a recovery of 58.5% in the third
quarter of 2013, compared to 1.62 g/t with a recovery of 60.9% in the same
period of 2012. Boroo processed lower grade stockpiled ore in the third quarter
of 2013, compared to Pit 6 higher grade ore processed in the same quarter of
2012.
Operating cash costs(1) at Boroo increased by $0.6 million to $15.5 million in
the third quarter of 2013, compared to the same period in 2012. There were no
costs incurred for mining in the third quarter of 2013 as compared to $4.4
million in 2012.
Operating cash costs per ounce produced(1) in the third quarter of 2013 were
$659 compared to $787 per ounce in the same period of 2012. The decrease of 16%
was a result of an 82% increase in production partially offset by higher
operating costs(1) resulting primarily from the resumption of heap leaching
operations.
Boroo's all-in cash costs per ounce produced (pre-tax)(1) for the third quarter
of 2013 were $765 and included all costs directly related to gold production
except for income tax paid in Mongolia. The same pre-tax all-in cash costs(1)
for the third quarter of 2012 were $812 per ounce produced. The decrease in the
pre-tax all-in cash costs(1) was primarily the result of the increase in
production, reflecting the resumption of heap leaching operations and no mining
activity in the third quarter of 2013. In the comparative quarter of 2012,
mining costs accounted for $233 per ounce produced.
Capital expenditures spent and accrued at Boroo and Gatsuurt in the third
quarter of 2013 was $2.9 million compared to $0.6 million in the same period of
2012. Capital expenditures in 2013 primarily relate to sustaining capital(1) for
tailings dam construction work ($2.7 million) at Boroo.
The Gatsuurt project remained under care and maintenance in the third quarter of
2013 due to continued delays in permitting resulting from the Water and Forest
Law which prohibits mining and exploration activities in water basin and
forested areas. Further development of the project is subject to resolution of
the impact of the Water and Forest Law on the Gatsuurt project, and receiving
all required approvals and regulatory commissioning from the Mongolian
Government.
Centerra understands that, in May 2013, the Mongolian Government proposed to
Parliament that seven deposits, including Gatsuurt, be added to the list of
"mineral deposits of strategic importance". Centerra believes that such a
designation, which is subject to the approval of Parliament, would have the
effect of exempting Gatsuurt from the application of the Water and Forest Law.
Centerra expects that Parliament and/or any relevant committees of Parliament
will consider this matter further in the fourth quarter of 2013 during the fall
sitting of Parliament. If Parliament ultimately approves this designation, it
would allow the Government of Mongolia to acquire up to a 34% interest in
Gatsuurt. The terms of any such participation would be subject to negotiations
with the Government. See "Other Corporate Developments- Mongolia - Gatsuurt".
During the third quarter of 2013, exploration expenditures in Mongolia were $1.9
million compared to $2.7 million in the same period of 2012. The 2013
exploration expenditures were largely on activities at the Company's ATO project
located in eastern Mongolia.
(1) Non-GAAP measure, see discussion under "Non-GAAP Measures".
All-in cash costs(1)
----------------------------------------------------------------------------
Three months ended Nine months ended
KUMTOR September 30 September 30
----------------------------------------------------------------------------
$ millions, except as
noted 2013 2012(3) 2013 2012(3)
----------------------------------------------------------------------------
Operating cash costs (1) $ 64.1 $ 31.8 $ 148.6 $ 104.1
Abnormal mining costs -
cash - 8.1 - 10.9
Capitalized stripping
and ice unload - cash 40.7 47.5 150.7 141.0
----------------------------------------------------
Operating cash costs and
capitalized stripping 104.7 87.4 299.3 256.1
Sustaining capital
(cash)(1) 13.3 13.6 40.1 30.3
Growth capital (cash)(1) 7.9 15.8 33.4 139.8
----------------------------------------------------
Operating cash costs
including capital 125.9 116.8 372.7 426.2
----------------------------------------------------
Corporate and other cash
costs(2) - - - -
----------------------------------------------------
All-in Cash Costs (pre-
tax) (1) $ 125.9 $ 116.8 $ 372.7 $ 426.2
----------------------------------------------------
Revenue-based tax 16.4 6.2 50.7 30.2
----------------------------------------------------
All-in Cash Costs
(including taxes) (1) $ 142.3 $ 123.0 $ 423.4 $ 456.4
----------------------------------------------------
----------------------------------------------------------------------------
Ounces poured 90,289 23,786 252,272 125,799
All-in Cash Costs (pre-
tax)- $/oz produced (1) $ 1,395 $ 4,911 $ 1,478 $ 3,388
All-in Cash Costs
(including taxes) -
$/oz produced (1) $ 1,576 $ 5,170 $ 1,678 $ 3,628
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three months ended Nine months ended
BOROO September 30 September 30
----------------------------------------------------------------------------
$ millions, except as
noted 2013 2012 2013 2012
----------------------------------------------------------------------------
Operating cash costs (1) $ 15.5 $ 14.9 $ 42.6 $ 35.9
Capitalized stripping -
cash - - - 6.3
----------------------------------------------------
Operating cash costs and
capitalized stripping 15.5 14.9 42.6 42.2
Sustaining capital
(cash) (1) 2.5 0.5 7.1 1.7
Growth capital (cash)
(1) - - - -
----------------------------------------------------
Operating cash costs
including capital 18.0 15.4 49.7 43.9
----------------------------------------------------
Corporate and other cash
costs(2) - - - -
----------------------------------------------------
All-in Cash Costs (pre-
tax) (1) $ 18.0 $ 15.4 $ 49.7 $ 43.9
----------------------------------------------------
Income tax 3.9 1.8 12.7 5.2
----------------------------------------------------
All-in Cash Costs
(including taxes) (1) $ 21.9 $ 17.2 $ 62.4 $ 49.2
----------------------------------------------------
----------------------------------------------------------------------------
Ounces poured 23,551 18,938 76,214 41,961
All-in Cash Costs (pre-
tax)- $/oz produced (1) $ 765 $ 812 $ 652 $ 1,047
All-in Cash Costs
(including taxes) -
$/oz produced(1) $ 932 $ 908 $ 818 $ 1,172
----------------------------------------------------------------------------
(1) Non-GAAP measure, see discussion under "Non-GAAP Measures".
(2) Corporate and other cash costs include corporate general and
administrative expenses, global exploration expenses and community
investments which are only reflected in the all-in cash cost amounts
reported at the consolidated level.
(3) Operating cash costs and capitalized stripping for 2012 were restated to
reflect the impact on adoption of IFRIC 20.
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/CG_Maps.pdf or visit the Company's web site
at: www.centerragold.com.
Kyrgyz Republic
During the third quarter of 2013, exploration drilling was limited to a single
drill hole in the Saddle Zone of the Central Pit. Exploration drilling ceased in
late July 2013, and condemnation and geotechnical drilling continued with one
drill rig through mid-September 2013.
Kumtor Pit
The Company completed one drill hole during the third quarter at Kumtor. Hole
D1721 was completed in the Saddle Zone to infill an area within the Kumtor KS-13
pit. The hole returned 3.2 g/t gold over 3 metres, 1.7 g/t gold over 13.6 metres
and 3.1 g/t gold over 4 metres. These results are consistent with nearby holes
in the Saddle Zone and will not impact year-end resource estimates.
There is no exploration drilling planned for the fourth quarter.
True widths for the mineralized zones are from 70% to 95% of the stated intercept.
A complete listing of the drill results and supporting maps for the Kumtor pit
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.
Mongolia
ATO Project
During the third quarter of 2013, fieldwork was completed at the ATO deposit,
the nearby Mungu prospect and at several targets in the greater ATO district. A
reverse circulation (RC) drill rig and a diamond drill rig operated during the
quarter and completed 94 shallow RC "scout" holes and 9 diamond drill holes,
respectively. The RC scout holes returned a number of geochemical anomalies in
bedrock south of the ATO deposit that will be followed up with deeper drilling.
Diamond drilling results from Mungu continued to outline a zone of gold-silver
mineralization within altered, brecciated and sulfide-bearing rhyolite. Further
work, including oriented core drilling, is planned at Mungu in the fourth
quarter to ascertain mineral controls and true widths of drill intercepts.
One of two diamond drill holes completed at ATO on the northern end of Pipe 4
returned:
ATO-260 0.3 g/t gold and 132 g/t silver over 8.6 metres
0.5 g/t gold and 54 g/t silver over 54.4 metres
The drill holes tested an area in the northeast corner of Pipe 4 where a narrow
zone of high precious-metal values remains open towards Mungu.
At ATO, true widths for mineralized zones are from 20 to 50% of stated down-hole
intervals.
A complete listing of the drill results and supporting maps for the ATO project
has 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.
Turkey
Oksut Project
At the Oksut Project, drillers completed 28 diamond drill holes. Better results
received from infill holes ODD120-148 at Keltepe (formerly Ortacam North)
include:
ODD123 (infill): 1.2 g/t gold over 69.9 metres
ODD125 (infill): 1.1 g/t gold over 61.5 metres
ODD126 (infill): 2.7 g/t gold over 154.2 metres
ODD128 (infill): 1.5 g/t gold over 78.5 metres
ODD129 (infill): 0.7 g/t gold over 129.0 metres
ODD132 (infill): 1.6 g/t gold over 93.0 metres
1.0 g/t gold over 54.4 metres
ODD133 (infill): 0.8 g/t gold over 170.5 metres
ODD135 (infill): 0.8 g/t gold over 88.0 metres
ODD136 (infill): 0.6 g/t gold over 156.0 metres
ODD137 (infill): 0.7 g/t gold over 73.9 metres
ODD138 (infill): 2.7 g/t gold over 67.6 metres
ODD138A (infill): 1.2 g/t gold over 40.6 metres
0.7 g/t gold over 41.6 metres
ODD142 (infill): 1.5 g/t gold over 108.4 metres
1.1 g/t gold over 124.2 metres
ODD148 (infill): 0.8 g/t gold over 94.4 metres
Results from holes ODD123, 125, 138 and 138A expand the Keltepe deposit to the
south and east and are expected to have a positive impact on year-end resource
estimates. Keltepe remains open to the south. Drilling will continue at Oksut in
the fourth quarter of 2013 with five drill rigs.
True widths for the mineralized zones are from 50% to 90% of the stated intercept.
A complete listing of the drill results and supporting maps for the Oksut
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.
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/CG_Maps.pdf or visit the Company's web site
at: www.centerragold.com.
Qualified Person & QA/QC
The exploration information and related scientific and technical information in
this news release were prepared in accordance with the standards of the Canadian
Institute of Mining, Metallurgy and Petroleum and National Instrument 43-101 -
Standards of Disclosure for Mineral Projects ("NI 43-101") and were prepared,
reviewed, verified and compiled by Centerra's geological and mining staff under
the supervision of David Groves, Certified Professional Geologist, Centerra's
Vice-President, Global Exploration, 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 production information and related scientific and technical information in
this news release, 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 Dan Redmond,
Ontario Professional Geoscientist, Centerra's Director, Technical Services -
Mining, who is the qualified person for the purpose of NI 43-101.
The Kumtor deposit is described in a technical report dated December 20, 2012,
which is 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 during the drilling programs at
the Kumtor site prior to April 2013 are described in the technical report.
Other Corporate Developments
The following is a summary of corporate developments with respect to matters
affecting the Company and its subsidiaries in the Kyrgyz Republic and Mongolia.
A summary discussion of certain regulatory matters affecting the Kumtor Project
follows the discussion of events that occurred in the third quarter of 2013. For
a more complete discussion of these matters impacting Kumtor, and for
outstanding matters in Mongolia and at the corporate level, see the Company's
prior public disclosure, in particular, its news release on 2013 first quarter
results dated May 8, 2013, the news release dated September 9, 2013 and its 2012
Annual Information Form. Each of these documents can be found on www.sedar.com.
Kyrgyz Republic
Negotiations between Kyrgyz Republic and Centerra
As previously disclosed, the Kyrgyz Republic Parliament passed resolution #2805
on February 21, 2013, which, among other things, recommended that the Kyrgyz
Government conduct consultations and negotiations with Centerra to find mutually
acceptable solutions with respect to the Kumtor Project and the issues raised in
the Parliamentary and State Commission reports. The resolution set a deadline of
June 1, 2013 for the Government to return to the Parliament with information on
how to implement the Parliament's recommendations in the resolution. The
original deadline of June 1, 2013 was extended by resolution #3169-V for three
months, and Parliament set a deadline of September 10, 2013 for the Government
to present final agreements incorporating the mutually acceptable solution.
Resolution #3169-V also provides that if a mutually acceptable solution has not
been agreed to, the Government is instructed to develop and submit a draft law
"On Denunciation of the Agreement for the Kumtor Project" for review by the
Kyrgyz Republic Parliament.
Following discussions with representatives of the Kyrgyz Government in the third
quarter, Centerra announced on September 9, 2013 that it had entered into a
non-binding memorandum of understanding ("MOU") with the Government of the
Kyrgyz Republic in connection with a potential restructuring transaction under
which Kyrgyzaltyn would exchange its 32.7% equity interest in Centerra for an
interest in a joint venture company that would own the Kumtor Project. The MOU
recorded the status of negotiations that had been ongoing between management of
Centerra and the Kyrgyz Republic advisory working group up until that time and
provided, among other things, that the following principles would guide the
potential restructuring transaction:
-- Kyrgyzaltyn would receive a 50% interest in the joint venture company
that would own the Kumtor Project in exchange for its 32.7% equity
ownership in Centerra and US$100 million which will be provided to
Centerra by way of an adjustment to joint venture distributions
otherwise due to Kyrgyzaltyn.
-- The adjustment to joint venture distributions otherwise due to
Kyrgyzaltyn would occur over 10 years commencing in 2015 (in 2014 only
interest would be paid) with an appropriate interest rate.
-- All of the state agency environmental claims against the Kumtor Project
would be resolved prior to the restructuring, by Centerra's
implementation of certain recommendations contained in a report provided
to the Government working group by a third-party environmental
consultant, and consistent with the laws and procedures of the Kyrgyz
Republic and existing agreements between the parties.
-- The agreements entered into between, among others, Centerra, Kyrgyzaltyn
and Government of the Kyrgyz Republic in 2009 (the "Kumtor Project
Agreements") would remain in full force and effect, including the tax
regime set out in such agreements.
-- The Board of the joint venture company would be composed of an equal
number of Centerra and Kyrgyzaltyn representatives. Major decisions of
the joint-venture company would be subject to discussion and approval by
the Board of the joint venture company.
-- Centerra would remain the operator/manager of the Kumtor Project
pursuant to an operating agreement which would contain terms and
provisions which are typical of such agreements.
-- The operating agreement would also include provisions for compensation
for services provided by Centerra and Kyrgyzaltyn.
-- Kyrgyzaltyn would receive six million warrants to acquire Centerra
shares, with an exercise price of CDN$10, exercisable for two years.
The Kyrgyz Parliament ("Parliament") considered the MOU on October 23, 2013 and
passed a decree (the "Decree") with respect to the MOU. The Company has not yet
received a final official copy of the Decree and the following disclosure
relates to a final draft of the Decree which the Company understands was passed.
In the Decree, Parliament rejects the MOU and orders the Government to (among
other things) continue negotiations with Centerra with a view to improving the
Kyrgyz Republic's position and increasing its interest in the joint venture
project to no less than 67%, to provide for the project to develop the Kumtor
mine using underground mining methods, and to provide for the establishment and
financing of a centre to monitor the preservation of glaciers. In the Decree,
Parliament also recommends that the Kyrgyz Republic General Prosecutor's Office
consider pursuing allegations that management of the former parent company of
Centerra, Centerra, Kumtor Operating Company, and Kumtor Gold Company violated
environmental regulations and committed "other offenses", and that precious
metal reserves (silver, tellurium, and other associated components) at the
Kumtor deposit were deliberately understated.
In the Decree, Parliament has requested that the Government and the General
Prosecutor's Office report to Parliament on these matters by December 23, 2013.
The Decree provides that if a mutually acceptable solution on the outstanding
matters cannot be reached, the Government is ordered to initiate a process to
cancel the Kumtor Project Agreements.
The Company disputes the allegations raised in the Decree and continues to
believe that the Kumtor Project Agreements are legal, valid and enforceable
obligations. The Kumtor Project Agreements were reviewed and approved by the
Government and the Parliament, and were the subject of a positive decision by
the Kyrgyz Republic Constitutional Court and a legal opinion by the Kyrgyz
Republic Ministry of Justice. Such agreements provide for all disputes relating
to the Kumtor project to be resolved by international arbitration, if necessary.
Centerra further understands that the Government continues to support the MOU.
Centerra expects to continue its discussions with the Government regarding a
potential restructuring transaction to resolve all outstanding concerns relating
to the Kumtor Project, however it maintains that any agreement to resolve
matters must be fair to all of Centerra's shareholders. Any definitive agreement
for a potential restructuring remains subject to Centerra Special Committee and
Board approval, as well as compliance with all applicable legal and regulatory
requirements and approvals, including an independent formal valuation and
minority shareholder approval. While Centerra expects to continue discussions,
there can be no assurance that any transaction will be consummated or that
Centerra will be able to successfully resolve any of the matters currently
affecting the Kumtor Project. The inability to successfully resolve matters,
including obtaining all necessary approvals, and/or further actions of the
Kyrgyz Republic Government and/or Parliament, could have a material adverse
impact on Centerra's future cash flows, earnings, results of operations and
financial conditions.
Environmental Claims
As previously disclosed, on June 7, 2013 Kumtor Operating Company ("KOC")
received four court claims filed by the State Inspectorate Office for
Environmental and Technical Safety ("SIETS") with the Bishkek Inter-district
court. The SIETS environmental claims sought to enforce the previously disclosed
environmental claims issued by SIETS in December 2012, seeking compensation in
the aggregate amount of $152 million in relation to (i) placement of waste rock
on glaciers; (ii) unpaid use of water from Petrov Lake; (iii) unaccounted
industrial and household waste; and (iv) damages caused to land resources (top
soil). KOC submitted materials requesting the court reject the claims based on
the arbitration clause in the Amended and Restated Investment Agreement between
(among others) the Kyrgyz Republic Government and KOC dated June 6, 2009, which
requires all such disputes to be resolved through international arbitration. The
Bishkek Inter-district court dismissed the claims for enforcement on the basis
that the arbitration clause in the Restated Investment Agreement requires all
such disputes to be resolved through international arbitration.
On June 20, 2013, SIETS appealed the decision of the Bishkek Inter-district
court to the Bishkek City Court. On September 16 and 26 and October 2, 2013, the
Bishkek City Court rejected the appeal on the waste rock claim and returned the
SIETS appeal on the other three claims because the appeal documentation was
improperly signed by representatives of SIETS, however it is possible that the
decisions of the Bishkek City Court may be further appealed and/or restarted
with proper documentation.
With respect to the claim commenced by the State Agency for Environmental
Protection and Forestry under the Government of the Kyrgyz Republic ("SAEPF")
for the aggregate amount of approximately $315 million, KOC continues to be in
discussions with SAEPF regarding the claim.
As previously disclosed, KOC believes the claims are exaggerated and without
merit. The Kumtor Project has been the subject of systematic audits and
investigations over the years by Kyrgyz and international experts, including by
an independent internationally recognized expert who carried out a due diligence
review of Kumtor's performance on safety, health and environmental matters at
the request of Centerra's Safety, Health and Environmental Committee of the
Board of Directors. The report of this expert released in October 2012 can be
found on the Kumtor website at http://www.kumtor.kg/en/ under the "Environment"
section.
There can be no assurance that the Company will be able to successfully resolve
any of these matters discussed above. The inability to successfully resolve
matters could have a material adverse impact on the Company's future cash flows,
earnings, results of operations and financial conditions.
Kumtor Waste Dump Movement
As previously disclosed in May 2013, the abnormal waste dump movement
experienced at Kumtor has required Kumtor to develop and implement alternative
waste rock dumps at the Kumtor mine and to revise its mine development plan.
During the third quarter of 2013, Kumtor received final regulatory approval for
a revised 2013 annual mining plan that, among other things, allows for the
placement of waste rock in the Sarytor Valley, the Davidov Valley and the Lysi
Valley. Kumtor is currently working in accordance with the revised plan.
Movement of the Central Valley Waste Dump was forecasted in the 2012 Kumtor
Technical Report. The Company continues to make progress in relocating and
reconstructing certain infrastructure at Kumtor which was, or is currently, in
the path of the Central Valley Waste Dump.
Conclusion
There are several outstanding issues affecting the Kumtor Project, which require
consultation and co-operation between the Company and Kyrgyz regulatory
authorities. The Company has benefited from a close and constructive dialogue
with Kyrgyz authorities during project operations and remains committed to
working with them to resolve these issues in accordance with the Kumtor Project
Agreements, which provide for all disputes to be resolved by international
arbitration, if necessary. However, there are no assurances that the Company
will be able to successfully resolve any or all of the outstanding matters
affecting the Kumtor Project. There are also no assurances that continued
discussions between the Kyrgyz Government and Centerra will result in a mutually
acceptable solution regarding the Kumtor project, that any agreed upon proposal
for restructuring would receive the necessary legal and regulatory approvals
under Kyrgyz law and/or Canadian law, and that the Kyrgyz Republic Government
and/or Parliament will not take actions that are inconsistent with the
Government's obligations under the Kumtor Project Agreements, including adopting
a law "denouncing" or purporting to cancel or invalidate the Kumtor Project
Agreements or laws enacted in relation thereto. The inability to successfully
resolve the current outstanding matters, including the outstanding environmental
claims against Kumtor, could have a material adverse impact on the Company's
future cash flows, earnings, results of operations and financial conditions. See
"Cautionary Note Regarding Forward-looking Information".
Mongolia
Boroo Heap Leach
As previously disclosed, the Company's Boroo project experienced a minor,
non-reportable excursion of heap leach solution from its heap leach pad in June
2013. The Company undertook immediate remedial action, including the shutdown of
heap leach cell number 4 (which was believed to be the cause of the excursion)
to contain the excursion and notified all relevant authorities. On September 4,
2013, the Company was allowed to re-start cell number 4 of the heap leach after
the completion of all regulatory investigations into this incident. No material
impact to Centerra's financial results has resulted or are expected to result
from this incident.
Gatsuurt
Centerra continues to be in discussions with the Mongolian Government regarding
the development of the Gatsuurt property. Centerra remains reasonably confident
that the economic and development benefits resulting from its exploration and
development activities will ultimately result in the Mongolian Water and Forest
Law having a limited impact on the Gatsuurt project, in particular, and other of
the Company's Mongolian activities, including the ATO deposit. As previously
disclosed, the Mongolian Water and Forest Law prohibits mineral prospecting,
exploration and mining in water basins and forestry areas in Mongolia.
Centerra understands that, in May 2013, the Mongolian Government added seven
deposits, including Gatsuurt, to the list of "mineral deposits of strategic
importance". Such a designation, which is subject to the approval of the
Mongolian Parliament, would have the effect of excluding the Gatsuurt deposit
from the application of the Water and Forest Law. Centerra expects that
Parliament and/or any relevant committees of Parliament will consider this
matter further in the fourth quarter of 2013. If the Mongolian Parliament
ultimately approves this designation, it would allow the Government of Mongolia
to acquire up to a 34% interest in Gatsuurt. The terms of any such participation
would be subject to negotiations with the Mongolian Government.
There can be no assurance, however, that the Water and Forest Law will not have
a material impact on Centerra's Mongolian operations. Unless the Water and
Forest Law is repealed or amended such that the law no longer applies to the
Gatsuurt project or Gatsuurt is designated by the Parliament of Mongolia as a
"mineral deposit of strategic importance" that is exempt from the Water and
Forest Law, mineral reserves at Gatsuurt may have to be reclassified as mineral
resources or eliminated entirely and the Company may be required to write-off
the associated investment in Gatsuurt and Boroo (where Gatsuurt ore is planned
to be milled).
Corporate
Enforcement Notice by Sistem
The claim commenced in March 2011 by a Turkish company, Sistem Muhenkislik
Insaat Sanayi Ticaret SA ("Sistem") which alleges that the shares in Centerra
owned by Kyrgyzaltyn are, in fact, legally and beneficially owned by the Kyrgyz
Republic continues to be subject to proceedings in the Ontario courts. Centerra
is not a party to the proceedings, but understands that the matter is being
scheduled for consideration on its merits.
Pursuant to a Court Order issued by the Ontario Superior Court of Justice (as
amended from time to time, and most recently amended on June 5, 2013) (the
"Court Order"), Centerra is holding in trust (for the credit of the Sistem court
proceedings) dividends otherwise payable to Kyrgyzaltyn. Effective as of June 6,
2013, when a dividend was paid by Centerra, the maximum amount to be held in
trust, as set out in the Court Order (Cdn$11.3 million), has been reached. As of
September 30, 2013, Centerra holds in trust, for the benefit of the Sistem court
proceeding, approximately Cdn$11.4 million, which includes interest.
Background Description of Outstanding Kumtor Matters
The disclosure below is a summary description of the outstanding matters
affecting the Kumtor Project. For a more detailed description, see the Company's
prior disclosure, in particular, its news release on 2013 first quarter results
dated May 8, 2013 and its 2012 Annual Information Form. Both of these documents
can be found on www.sedar.com.
Parliamentary Commission and Report
On February 15, 2012, the Kyrgyz Parliament established an interim Parliamentary
Commission to inspect and review: (i) Kumtor's compliance with Kyrgyz
operational and environmental laws, as well as community standards, and (ii)
state regulation over the Kumtor project's activities. The Parliamentary
Commission issued its report (the "Parliamentary Report") on June 18, 2012 and
made a number of assertions regarding the operation of the Kumtor project,
including alleging non-compliance by the Kumtor project with Kyrgyz
environmental laws, particularly at Kumtor's tailings facility, the Davidov
glacier and the Sarychat-Ertash State Reserve which is in the vicinity of the
Kumtor project. The Parliamentary Commission alleges that the violations have
resulted in substantial monetary damages.
The Kyrgyz Parliament met in late June 2012 to consider the Parliamentary Report
and adopted Resolution 2117-V that took note of the Parliamentary Report and
declared the Kumtor Project Agreements to be contrary to the interests of the
Kyrgyz Republic. Resolution 2117-V also called for the formation of a State
Commission to "assess the environmental, industrial and social damage" caused by
the Kumtor project and to initiate the renegotiation of the current Kumtor
project agreements "in order to protect economic and environmental interests".
As contemplated in Resolution 2117-V, on July 5, 2012, the Kyrgyz Government
cancelled Government Decree #168, which provided Kumtor with land use rights
over the surface of the Kumtor concession area for the duration of the restated
concession agreement effective June 6, 2009 (the Restated Concession Agreement).
Based on advice from Kyrgyz legal counsel, the Company believes that the
purported cancellation of land rights is in violation of the Kyrgyz Republic
Land Code, because the Land Code provides that land rights can only be
terminated by court decision and on the listed grounds set out in the Land Code.
Kumtor has communicated this to the Kyrgyz Republic and requested the issuance
of a new land use certificate in light of the rights and obligations under the
restated investment agreement dated June 6, 2009 between Centerra and the Kyrgyz
Republic (the Restated Investment Agreement). No response has been received from
the Kyrgyz Government. Pursuant to the Restated Investment Agreement, the Kumtor
project is guaranteed all necessary access to the Kumtor concession area,
including all surface lands as are necessary or desirable for the operation of
the Kumtor project. The Restated Investment Agreement also provides for the
payment of quarterly land use and access fees.
In response to the Parliamentary Report's allegations of non-compliance with
environmental laws, in August 2012, the Board of Directors of Centerra retained
an independent internationally recognized consultant to carry out a due
diligence review of Kumtor's performance on safety, health and environmental
matters. The report issued in October 2012 concluded that "no major or
materially significant environmental issues were identified". The report of this
expert can be found on the Kumtor website at http://www.kumtor.kg/en/ under the
"Environment" section.
State Commission and Report
In response to Resolution 2117-V passed by the Parliament, the Kyrgyz Government
established a state commission (the "State Commission") for the purpose of
reviewing the Parliamentary Report as well as inspecting and reviewing Kumtor's
compliance with Kyrgyz operational and environmental laws and community
standards. The State Commission was comprised of three working groups,
responsible for (i) legal matters; (ii) social and economic matters; and (iii)
environmental and technical matters. The State Commission released its report
(the "State Commission Report") in late December 2012 following five months of
study. The State Commission Report included a large number of allegations,
including allegations that the Kumtor project was violating Kyrgyz legislation
relating to environmental and subsoil legislation and caused environmental
damage to water and land resources.
Environmental Claims
In December 2012, KOC received four claims from the State Inspectorate Office
for Environmental and Technical Safety ("SIETS") relating to alleged
environmental damages at the Kumtor project. The claims are for an aggregate
amount of approximately $152 million and include:
-- a claim for approximately $142 million for alleged damages in relation
to the placement on waste dumps of waste rock from mining operations
(2000 to 2011),
-- a claim for approximately $4 million for use of water resources for the
period of 2000 to 2011,
-- a claim for approximately $2.8 million for waste placed in the tailings
management facility and for emissions for 2009-2011, which claim was
subsequently withdrawn,
-- a claim for approximately $2.3 million for alleged damages caused to
land resources at the time of initial construction of Kumtor.
In addition, KOC has also received a directive from SIETS requiring that actions
be taken to correct various alleged environmental and technical violations
discovered in its review.
On February 21, 2013, KOC announced the receipt of a claim from the State Agency
for the Environmental Protection and Forestry for the amount of approximately
$315 million for alleged damage in relation to waste placed in the tailings
management facility, waste rock dumps, and for the generation, management and
treatment of other types of wastes. The claim covers the period from 1996 to
2011.
The Company notes that the Kumtor Project Agreements provide a complete listing
of all taxes and payments to be made to the Kyrgyz Republic, including a fixed
environmental charge. Accordingly, no other tax, duties, or other obligations
are to be paid to the Kyrgyz Republic, however they may be characterized.
In addition, Centerra, the Kyrgyz Republic and others entered into a release
agreement (the Release Agreement) dated June 6, 2009, whereby, subject to
certain exceptions which we believe are not applicable in the circumstances, the
Kyrgyz Republic released Centerra from any and all claims, and damages with
respect of any matter (including any tax or fiscal matters) arising or existing
prior to the date of the Release Agreement, whether such matters were known or
unknown at such time, and the Kyrgyz Republic agreed not to commence any actions
or assert any demands for such actions or demands so released.
Kyrgyz Republic Advisory Committee and Requests to Negotiate
On February 21, 2013, the Kyrgyz Parliament adopted Resolution #2805 which among
other things, recommended that the Government ensure the continuous operation of
the Kumtor mine, and within three months of the date of the resolution, conduct
negotiations with Centerra with a view to revising the Kumtor Project Agreements
to return to conditions that existed prior to the restructuring of the project
in 2003, but subject to the application of the current Kyrgyz legislation, and
to enter into new project agreements. The resolution provided a deadline of June
1, 2013 for the Government to return to Parliament, which subsequently was
extended to September 10, 2013 (as discussed above).
The Draft Law on Denunciation
On April 9, 2013 an initiative group chaired by Mr. Beknazarov A.A. submitted a
draft Law on Denunciation for consideration by Parliament. The draft law
"denounces" the Agreement on New Terms for the Kumtor Project ("ANT") entered on
April 24, 2009, and recognizes as invalid all other agreements associated with
the ANT (namely, the Kumtor Project Agreements), and calls for the Government to
bring all of its decisions in accordance with the Law on Denunciation. To date,
the Law on Denunciation has not been considered by Parliament. Based on Kyrgyz
media reports, an opposition party in the Parliament, the Respublika faction,
has endorsed the Law on Denunciation. The Law on Denunciation was referenced in
Resolution #3169-V (discussed above).
The Company believes that the adoption of a law that denounces or purports to
invalidate the Kumtor Project Agreements would be a breach of the Government's
obligations under the Kumtor Project Agreements. The Company believes that the
Kumtor Project Agreements are legal, valid and enforceable obligations. The
agreements were reviewed and approved by the Government and the Parliament, and
were the subject of a positive decision by the Kyrgyz Republic Constitutional
Court and a legal opinion by the Kyrgyz Republic Ministry of Justice.
Furthermore, under the Kumtor Project Agreements, the Government agreed to use
its best efforts to reverse or annul any actions of public officials (including
state agencies) which conflict with the rights and benefits granted to Kumtor
under the Kumtor Projects Agreements.
There can be no assurance that the Company will be able to successfully resolve
any of these matters discussed above. The inability to successfully resolve
matters could have a material adverse impact on the Company's future cash flows,
earnings, results of operations and financial conditions.
For a full discussion of risk factors that could have a material effect on the
profitability, future cash flow, earnings, results of operations, stated mineral
reserves or financial conditions of the Company, please see "Risks that can
affect our business" in the 2012 Annual Information Form available on SEDAR at
www.sedar.com and see also the discussion below under the heading "Cautionary
Note Regarding Forward-looking Information".
Outlook for 2013
Due to the current lower gold price environment the Company has reviewed its
spending plans for 2013 and reduced planned expenditures at its operations and
corporate office.
Production
Centerra's 2013 consolidated gold production has been revised to a range between
635,000 to 685,000 ounces, which is higher than the previous guidance of 615,000
to 675,000 ounces reflecting the higher gold production expected to be achieved
at the Boroo mine.
In 2013, between 50% to 58% of Kumtor's gold production is expected to occur in
the fourth quarter creating a potential variability to Kumtor's 2013 production
guidance. Centerra estimates that the Kumtor mine will produce between 550,000
and 600,000 ounces in 2013, which is unchanged from the previous guidance. Ore
production in the fourth quarter is planned to come from the high-grade SB Zone
ore that has several years of production history. The high-grade ore exposed by
the cut-back 15 in the SB Zone was accessed as planned at the end of the third
quarter of 2013. Mining at Kumtor is currently estimated to be on track to meet
the 2013 production guidance.
At the Boroo mine, gold production is forecast to increase to approximately
85,000 ounces from the previous guidance of 65,000 to 75,000 ounces. The new
production guidance reflects increased production achieved at the Boroo mine in
the first nine months of the current year in both the mill and heap leach
operations. The forecasted annual production at Boroo includes approximately
40,000 ounces from heap leaching and 45,000 ounces from the mill. The Boroo mill
is expected to process ore stockpiles during the last quarter of the year with
an average grade of 0.70 g/t. The 2013 forecast assumes no mining activities at
Boroo or Gatsuurt, and no gold production from Gatsuurt.
Unit Cash Costs:
Centerra's 2013 operating cash costs(1) and all-in cash costs per ounce
produced(1) measures have been revised from the previous guidance disclosed in
the Company's news release of July 31, 2013. The revisions to the forecast are
explained in more detail below.
The new ranges for all-in costs on a pre-tax(1) basis are as follows:
----------------------------------------------------------------------------
2013 Operating 2013 All-in Cash
2013 Production Cash Costs(1) ($ Costs (pre-tax)(1)
Forecast per ounce ($ per ounce
(ounces of gold) produced) produced)
----------------------------------------------------------------------------
Kumtor 550,000 - 600,000 $ 330 - 360 $ 820 - 895
----------------------------------------------------------------------------
approximately approximately approximately
Boroo 85,000 $680 $775
----------------------------------------------------------------------------
Consolidated 635,000 - 685,000 $ 375 - 400 $ 930 - 1,000
----------------------------------------------------------------------------
(1) Non-GAAP measure, see discussion under "Non-GAAP Measures".
Centerra's 2013 unit cash costs have been revised from the previous guidance
disclosed in the Company's news release of July 31, 2013, reflecting reductions
in certain spending activities and increased production forecasted at Boroo. The
revised estimates for revenue-based tax at Kumtor and current income tax at
Boroo reflect a lower gold price assumption of $1,250 forecasted for the last
quarter of 2013, which is unchanged from previous guidance. Based on this
revised estimate, the Company is forecasting operating cash costs per ounce
produced(1 ) and all-in production costs per ounce produced(1) as follows:
(1) Non-GAAP measure, see discussion under "Non-GAAP Measures".
----------------------------------------------------------------------------
All-in Cash Costs(1) Kumtor Boroo Consolidated
----------------------------------------------------------------------------
($ per ounce ($ per ounce ($ per ounce
produced) produced) produced)
----------------------------------------------------------------------------
Operating cash costs $ 330 - 360 $ 680 $ 375 - 400
----------------------------------------------------------------------------
Capitalized stripping costs
- cash 340 - 370 - 295 - 320
----------------------------------------------------------------------------
Operating cash and stripping
costs $ 670 - 730 $ 680 $ 670 - 720
----------------------------------------------------------------------------
Sustaining capital (cash) 115 - 125 95 110 - 120
----------------------------------------------------------------------------
Growth capital (cash) 35 - 40 - 35 - 40
----------------------------------------------------------------------------
Operating cash costs
including capital $ 820 - 895 $ 775 $ 815 - 880
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Corporate and other cash
costs(2) - - 115 - 120
----------------------------------------------------------------------------
All-in cash costs (pre-
tax)(1) $ 820 - 895 $ 775 $ 930 - 1,000
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Revenue-based tax and income
tax(3) $ 190 - 205 $ 150 $ 185 - 195
----------------------------------------------------------------------------
----------------------------------------------------------------------------
All-in cash costs (including
taxes)(1, 3) $1,010 - 1,100 $ 925 $1,115 - 1,195
----------------------------------------------------------------------------
(1) Non-GAAP measure, see discussion under "Non-GAAP Measures".
(2) Corporate and other cash costs per ounce produced include corporate
general and administrative expenses, global exploration expenses, and
community investments which are only reflected in the all-in cash cost
amounts reported at the consolidated level.
(3) Revenue-based tax and income tax reflect actual amounts for the first
nine months of 2013 and a forecasted gold price assumption from $1,250
per ounce sold for the last three months of 2013.
2013 Exploration Expenditures:
Forecasted exploration expenditures for 2013 total approximately $30 million,
which is $2 million lower from the previous guidance of July 31, 2013.
Exploration expenditures at Kumtor are now estimated at $6.0 million, $0.5
million lower from the previous guidance as a result of the cessation of
exploration drilling starting in the third quarter 2013.
In Mongolia, $6.5 million is forecasted for exploration programs in the greater
ATO district.
Exploration spending in Turkey will be approximately $9 million as work focuses
on expanding and upgrading the Oksut gold deposit resource, advancing ongoing
metallurgical test work and initiating detailed environmental and technical
project studies. Funds are also allocated to a number of early-stage exploration
projects in Turkey and Cyprus.
In Russia, expenditures are expected to total approximately $6.0 million in 2013.
A China 2013 exploration program of $2 million will fund the drilling of targets
developed on the Laogouxi Joint Venture project and generative exploration
programs in several prospective areas. Generative programs will also continue in
Russia and Turkey and in several new regions to increase the Company's pipeline
of projects.
2013 Capital Expenditures
Centerra's projected capital expenditures for 2013, excluding capitalized
stripping, have been revised to $101 million from the previous guidance of $107
million, including $77 million of sustaining capital(1) and $24 million of
growth capital(1). The distribution of the capital between the projects has been
updated as described below.
Projected capital expenditures (excluding capitalized stripping) include:
----------------------------------------------------------------------------
2013 Growth Capital(1) 2013 Sustaining Capital(1)
Projects (millions of dollars) (millions of dollars)
----------------------------------------------------------------------------
Kumtor mine $ 22 $ 68
----------------------------------------------------------------------------
Mongolia 2 9
----------------------------------------------------------------------------
Consolidated Total $ 24 $ 77
----------------------------------------------------------------------------
Kumtor
At Kumtor, 2013 total capital expenditures, excluding capitalized stripping, are
forecast to be $90 million ($97 million in the previous guidance) including $68
million of sustaining capital(1) ($67 million in the previous guidance). The
largest sustaining capital(1) spending will be the major overhaul maintenance of
the heavy duty mine equipment ($27 million), purchase of new mining equipment
($23 million), tailings dam construction raise ($5 million) and other items ($13
million).
Growth capital(1) investment at Kumtor for 2013 is forecast at $22 million ($30
million in the previous guidance), which includes the relocation of certain
infrastructure at Kumtor related to the KS-13 life-of-mine expansion plan
amounting to $17 million ($26 million in previous guidance) and other items
amounting to $5 million ($4 million in the previous guidance). The relocation of
the Kumtor mine camp, fuel farm and other infrastructure has been deferred to
2014 and, therefore, the capital cost of $9 million estimated to be spent in
2013 in the previous guidance has been deferred to 2014.
The cash component of capitalized stripping costs related to the development of
the open pit is expected to be $203 million in 2013 ($196 million in the
previous guidance).
Mongolia (Boroo and Gatsuurt)
At Boroo, 2013 sustaining capital(1) expenditures are expected to be $9 million
($8 million in the previous guidance) primarily for raising the tailings dam at
Boroo amounting to $6 million ($5 million in the previous guidance) and for
maintenance rebuilds and overhauls.
Growth capital(1) for the Gatsuurt deposit is forecast at $2 million (unchanged
from the previous guidance) with $1 million related to environmental studies and
$1 million for additional technical and legal work related to the project.
(1) Non-GAAP measure, see discussion under "Non-GAAP Measures".
2013 Corporate Administration and Community Investment
Corporate and administration expense forecast for 2013 has been revised to $32
million from the previous guidance of $35 million, which includes $31 million
forecasted for the corporate and administration costs, and $1 million for the
business development activities ($2 million in the previous guidance).
Total planned community investments for 2013 are unchanged from the previous
guidance of $11.5 million, which includes $6.5 million for donations, and
sustainable development projects in the various communities in which Centerra
operates and $5 million for strategic community investment projects. Note that
these costs are not included in operating cash costs(1 ) but have been reflected
in all-in cash costs(1).
Taxes
Pursuant to the Restated Investment Agreement, Kumtor's operations are not
subject to corporate income taxes. The agreement replaced the prior tax regime
applicable to the Kumtor Project with a simplified tax regime effective January
1, 2008. This simplified regime, which assesses tax at 13% on gross revenue
(plus 1% for the Issyk-Kul Oblast Development Fund) effective January 2009, was
approved and enacted by the Parliament of the Kyrgyz Republic on April 30, 2009.
The corporate income tax rate for Centerra's Mongolian subsidiary, Boroo Gold
Company, is 25% for taxable income over 3 billion Mongolian tugriks
(approximately $1.8 million at the September 30, 2013 foreign exchange rate)
with a tax rate of 10% for taxable income up to that amount. Following the
expiration of the Boroo Stability Agreement in July 2013, Boroo Gold Company's
corporate income tax rate was unchanged, however the royalty paid to the
government increased from 5% to a rate varying between 5% and 10% based on the
price of gold, to a maximum of 10% for gold prices at or above $1,300 an ounce.
Production, cost and capital forecasts for 2013 are forward-looking information
and are based on key assumptions and subject to material risk factors that could
cause actual results to differ materially and which are discussed herein under
the headings "Material Assumptions & Risks" and "Caution Regarding
Forward-Looking Information" and under the heading "Risk Factors" in the
Company's 2012 Annual Information Form.
Sensitivities:
Centerra's revenues, earnings and cash flows for the fourth quarter of 2013 are
sensitive to changes in certain variables and the Company has estimated the
impact of any such changes on revenues, net earnings and cash from operations.
(1) Non-GAAP measure, see discussion under "Non-GAAP Measures".
----------------------------------------------------------------------------
Impact on
($ millions)
------------------------------------------
Earnings
Change before
Costs Revenues Cash flow income tax
----------------------------------------------------------------------------
Gold Price $ 50/oz 2.6 17.7 15.1 15.1
----------------------------------------------------------------------------
Diesel Fuel (1) 10% 2.7 - 2.7 2.7
----------------------------------------------------------------------------
Kyrgyz som (2) 1 som 0.5 - 0.5 0.5
----------------------------------------------------------------------------
Mongolian tugrik(2) 25 tugrik 0.1 - 0.1 0.1
----------------------------------------------------------------------------
Canadian dollar (2) 10 cents 0.6 - 0.6 0.6
----------------------------------------------------------------------------
(1) a 10% change in diesel fuel price equals $8/oz produced
(2) appreciation of currency will result in higher costs and lower cash flow
and earnings, depreciation of currency results in decreased costs and
increased cash flow and earnings
Material Assumptions & Risks:
Material assumptions or factors used to forecast production and costs for the
fourth quarter of 2013 include the following:
-- a gold price of $1,250 per ounce,
-- exchange rates:
-- $1USD:$1.05 CAD
-- $1USD:48.5 Kyrgyz som
-- $1USD:1,650 Mongolian tugriks
-- $1USD:0.78 Euro
-- diesel fuel price assumption:
-- $0.75/litre at Kumtor
-- $1.30/litre at Boroo
The Company cannot give any assurances in this regard.
The assumed diesel price of $0.75/litre at Kumtor assumes that no Russian export
duty will be paid on the fuel exports from Russia to the Kyrgyz Republic. Diesel
fuel is sourced from separate Russian suppliers for both sites and only loosely
correlates with world oil prices. The diesel fuel price assumptions were made
when the price of oil was approximately $108 per barrel.
Other material assumptions were used in forecasting production and costs for the
fourth quarter of 2013. The Company cannot give any assurances in this regard.
These material assumptions include the following:
-- that discussions between the Kyrygz Republic Government and Centerra
will result in a mutually satisfactory solution to the outstanding
matters affecting the Kumtor project, and which is fair to all of
Centerra's shareholders, and that such proposal will receive all
necessary legal and regulatory approvals under Kyrgyz law and/or
Canadian law.
-- any recurrence of political or civil unrest in the Kyrgyz Republic will
not impact operations, including movement of people, supplies and gold
shipments to and from the Kumtor mine and/or power to the mine site.
-- the activities of the Parliament and Government, referred to under the
heading "Other Corporate Developments - Kyrgyz Republic" do not have a
material impact on operations or financial results.
-- the previously disclosed environmental claims received from the Kyrgyz
regulatory authorities in the aggregate amount of $467 million and any
further claims referred to under the heading "Other Corporate
Developments - Kyrgyz Republic - Environmental Claims", are resolved
without material impact on Centerra's operations or financial results.
-- the movement in the Central Valley Waste Dump at Kumtor, referred to
under the heading "Other Corporate Developments - Kyrgyz Republic -
Kumtor Waste Dump Movement", will be managed to ensure continued safe
operations, without impact to gold production, including the successful
demolition of buildings and relocation of certain other infrastructure
as planned.
-- grades and recoveries at Kumtor will remain consistent with the annual
and life-of-mine plans to achieve the forecast gold production.
-- the Company is able to manage the risks associated with the increased
height of the pit walls at Kumtor.
-- the timing of the infrastructure move at Kumtor not impacting the
maintenance of the mobile fleet and its availability.
-- the dewatering program at Kumtor continues to produce the expected
results and the water management system works as planned.
-- the Company is able to satisfactorily manage the ice movement and to
unload the ice and waste in the southeast portion of the Kumtor pit.
-- the Kumtor ball mill and the rotated ring gear or replacement ring gear
continue to operate as expected.
-- prices of key consumables are not significantly higher than prices
assumed in planning,
-- precious metal prices and costs remain stable and do not result in an
impairment to the Company's asset valuations.
-- no unplanned delays in or interruption of scheduled production from our
mines, including due to civil unrest, natural phenomena, regulatory or
political disputes, equipment breakdown or other developmental and
operational risks, and
-- all necessary permits, licenses and approvals are received in a timely
manner.
Production and cost forecasts and capital estimates are forward-looking
information and are based on key assumptions and subject to material risk
factors. If any event arising from these risks occurs, the Company's business,
prospects, financial condition and results of operations and cash flows could be
adversely affected. Additional risks and uncertainties not currently known to
the Company, or that are currently deemed immaterial, may also materially and
adversely affect the Company's business operations, prospects, financial
condition, results of operations or cash flows and the market price of
Centerra's shares. See the section entitled "Cautionary Note Regarding
Forward-Looking Information" in this news release and also the Risk Factors
listed in the Company's 2012 Annual Information Form, available on SEDAR at
www.sedar.com.
Non-GAAP Measures
This news release contains the following non-GAAP financial measures: average
realized gold price; costs of sales per ounce sold; operating costs; operating
cash costs and operating cash costs per ounce produced; sustaining capital;
growth capital; all-in costs; all-in cash costs (pre-tax) and all-in cash costs
(pre-tax) per ounce produced; and all-in cash costs including taxes and all-in
cash costs including taxes per ounce produced.
These financial measures do not have any standardized meaning prescribed by GAAP
and are therefore unlikely to be comparable to similar measures presented by
other issuers.
These measures have been included because certain investors use this information
to assess performance and also to determine the ability of Centerra to generate
cash flow for use in investing and other activities. In particular, the
inclusion of operating cash cost per ounce produced, all-in cash costs per ounce
produced and cost of sales per ounce sold may enable investors to better
understand year-over-year changes in production costs, which in turn affect
profitability and cash flow.
All-In Cash Costs
The Company believes an all-in cash cost measure more fully reflects the actual
cash cost of producing gold than the former Gold Institute total cash cost
measure. The new measure does have limitations as an analytical tool as it may
be distorted in periods where significant capital investments are being made to
expand for future growth or where significant cash mining costs are being
expended on stripping to benefit future periods. This new measure should
therefore not be considered in isolation, or as a substitute for, analysis of
our results as reported under GAAP.
Management uses all-in cash cost per ounce produced to evaluate current
operating performance and for planning and forecasting of future periods.
Management believes that the presentation of this new measure is useful for the
investor because it allows investors to view results in a manner similar to the
method used by management.
Definitions
The following is a description of the Non-GAAP measures used in this news
release and its reconciliation to the most directly comparable measure
calculated in accordance with GAAP and presented in the Company's financial
statements:
-- Operating cash costs include mine operating costs such as mining,
processing, administration, royalties and operating taxes (except at
Kumtor where revenue-based taxes are excluded), but exclude
depreciation, depletion and amortization (DD&A), reclamation costs,
financing costs, capital development and exploration. Certain amounts of
stock-based compensation have been excluded as well. All-in cash costs
includes operating cash costs, plus capitalized stripping and total
sustaining and growth capital spent and accrued.
-- Operating costs include operating cash costs plus DD&A.
-- Operating cash costs per ounce produced is calculated by dividing
operating cash costs by the ounces produced.
-- All-in cash costs per ounce produced includes operating cash costs,
capitalized stripping, sustaining and growth capital, corporate general
and administrative expenses, global exploration expenses and community
investments. The measure is presented including and excluding revenue-
based taxes at Kumtor and income taxes at Boroo.
-- Cost of sales per ounce sold is calculated by dividing cost of sales by
the number of ounces of gold sold for the relevant period.
-- Sustaining capital is a capital expenditure necessary to maintain
existing levels of production. The sustaining capital expenditures
maintain the existing mine fleet, mill and other facilities so that they
function at levels consistent from year to year.
-- Growth capital is capital expended to expand the business or operations
by increasing productive capacity beyond current levels of performance.
-- Average realized gold price is calculated by dividing revenue derived
from gold sales by the number of ounces sold.
Industry measure
The World Gold Council released on June 27, 2013 guidance regarding the non-GAAP
measures "All-In Sustaining Costs" and "All-In Costs". The Company is reviewing
the recommended measures and assessing their impact. The Company may modify the
calculation of its "all-in cash cost" measure to conform to the industry's
standard following its review.
Operating Cash Cost per Ounce Produced can be reconciled as follows:
----------------------------------------------------------------------------
(Unaudited) Three months ended Nine months ended
September 30, September 30,
($ millions, unless
otherwise specified) 2013 2012 2013 2012
------------------------ ------------------------
(restated) (restated)
(1) (1)
Centerra:
--------------------------
Cost of sales, as reported $ 111.7 $ 53.9 $ 287.5 $ 215.4
Less: Non-cash component 44.9 12.5 120.4 46.1
------------------------ ------------------------
------------------------ ------------------------
Cost of sales, cash
component $ 66.8 $ 41.4 $ 167.1 $ 169.3
Adjust for: Refining fees
and by-product credits (0.1) (0.1) (0.5) (0.5)
Regional office
administration 6.1 5.2 17.6 15.4
Mining Standby Costs - - - 4.6
Non-operating costs - - - -
Inventory movement 6.8 0.3 7.0 (48.8)
------------------------ ------------------------
Operating cash cost $ 79.6 $ 46.8 $ 191.2 $ 140.0
Ounces poured (000) 113.8 42.7 328.5 167.8
Operating cash cost per
ounce produced $ 699 $ 1,093 $ 582 $ 835
Kumtor:
--------------------------
Cost of sales, as reported $ 86.0 $ 38.0 $ 217.9 $ 166.9
Less: Non-cash component 37.7 7.6 97.0 36.1
------------------------ ------------------------
Cost of sales, cash
component $ 48.3 $ 30.4 $ 120.9 $ 130.8
Adjust for: Refining fees
and by-product credits (0.1) (0.1) (0.3) (0.4)
Regional office
administration 4.8 3.9 13.3 11.4
Mining Standby Costs - - - 4.6
Non-operating costs - - - -
Inventory movement 11.1 (2.3) 14.7 (42.3)
------------------------ ------------------------
------------------------ ------------------------
Operating cash cost $ 64.1 $ 31.9 $ 148.6 $ 104.1
Ounces poured (000) 90.3 23.8 252.3 125.8
Operating cash cost per
ounce produced $ 709 $ 1,338 $ 589 $ 828
Boroo:
--------------------------
Cost of sales, as reported $ 25.7 $ 15.9 $ 69.5 $ 48.5
Less: Non-cash component 7.2 4.9 23.4 10.0
------------------------ ------------------------
Cost of sales, cash
component $ 18.5 $ 11.0 $ 46.2 $ 38.5
Adjust for: Refining fees
and by-product credits (0.1) - (0.1) (0.1)
Regional office
administration 1.3 1.3 4.3 4.0
Mining Standby Costs - - - -
Non-operating costs - - - -
Inventory movement (4.2) 2.6 (7.7) (6.5)
------------------------ ------------------------
Operating cash cost $ 15.5 $ 14.9 $ 42.6 $ 35.9
Ounces poured (000) 23.6 18.9 76.2 42.0
Operating cash cost per
ounce produced $ 659 $ 787 $ 559 $ 855
----------------------------------------------------------------------------
(1) restated as a result of the adoption of IFRIC 20
Total capital and capitalized stripping presented in the All-In Cash Cost
calculation can be reconciled as follows:
----------------------------------------------------------------------------
Third Quarter Kumtor Boroo All other Consolidated
----------------------------------------------------------------------------
($ millions)
(Unaudited)
----------------------------------------------------------------------------
2013
----------------------------------------------------------------------------
Capitalized stripping
-cash $ 40.7 $ - $ - $ 40.7
----------------------------------------------------------------------------
Sustaining capital -
cash 13.3 2.5 - 15.8
----------------------------------------------------------------------------
Growth capital - cash 7.9 - 0.2 8.1
----------------------------------------------------------------------------
Net decrease in
accruals included in
additions to PP&E (1.8) - - (1.8)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total - Additions to
PP&E(1) $ 60.1 $ 2.5 $ 0.2 $ 62.8 (1)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
2012
----------------------------------------------------------------------------
Capitalized stripping
- cash $ 47.5 $ - $ - $ 47.5
----------------------------------------------------------------------------
Sustaining capital -
cash 13.6 0.5 0.1 14.2
----------------------------------------------------------------------------
Growth capital - cash 15.8 - 0.1 15.9
----------------------------------------------------------------------------
Net increase in
accruals included in
additions to PP&E 4.4 - - 4.4
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total - Additions to
PP&E(1) $ 81.3 $ 0.5 $ 0.2 $ 82.0 (1)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
First Nine Months Kumtor Boroo All other Consolidated
----------------------------------------------------------------------------
($ millions)
(Unaudited)
----------------------------------------------------------------------------
2013
----------------------------------------------------------------------------
Capitalized stripping
-cash $ 150.7 $ - $ - $ 150.7
----------------------------------------------------------------------------
Sustaining capital -
cash 40.1 7.1 0.4 47.6
----------------------------------------------------------------------------
Growth capital - cash 33.4 - 0.5 33.9
----------------------------------------------------------------------------
Net decrease in
accruals included in
additions to PP&E (9.5) - - (9.5)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total - Additions to
PP&E(1) $ 214.7 $ 7.1 $ 0.9 $ 222.7(1)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
2012
----------------------------------------------------------------------------
Capitalized stripping
- cash $ 141.0 $ 6.3 $ - $ 147.3
----------------------------------------------------------------------------
Sustaining capital -
cash 30.3 1.7 0.4 32.4
----------------------------------------------------------------------------
Growth capital - cash 139.8 - 0.3 140.1
----------------------------------------------------------------------------
Net increase in
accruals included in
additions to PP&E 5.0 - - 5.0
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total - Additions to
PP&E(1) $ 316.1 $ 8.0 $ 0.7 $324.8 (1)
----------------------------------------------------------------------------
(1) As reported in the Company's Consolidated Statement of Cash Flows as
"Investing Activities - Additions to property, plant & equipment".
Corporate and other cash costs presented in the All-In Cash Costs
calculation can be reconciled as follows:
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three months ended Nine months ended
Unaudited September 30 September 30
($ millions) 2013 2012 2013 2012
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Other operating
expenses $ 2.3 $ 5.1 $ 6.4 $ 29.5
Exploration and
business development 7.3 9.5 20.8 27.0
Corporate
administration 8.6 7.8 22.5 18.3
----------------------------------------------------------------------------
Non-cash items -
depreciation (0.1) (0.9) (0.3) (1.0)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total Corporate and
other cash costs (1) $ 18.1 $ 21.5 $ 49.4 $ 73.8
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) As reported on the Consolidated Statements of Earnings (Loss) and
Comprehensive Income (Loss) for the reported periods.
Centerra Gold Inc.
Condensed Consolidated Statements of Financial Position
(Unaudited)
September 30, December 31,
2013 2012
------------------------------------------------------------ --------------
------------------------------------------------------------ --------------
(Expressed in Thousands of United States
Dollars) (Restated)
Assets
Current assets
Cash and cash equivalents $ 198,987 $ 334,115
Short-term investments 37,792 47,984
Amounts receivable 65,167 75,338
Inventories 300,575 292,565
Prepaid expenses 54,207 49,317
---------------- --------------
656,728 799,319
Property, plant and equipment 745,611 625,923
Goodwill 129,705 129,705
Restricted cash 11,030 6,087
Other assets 21,941 23,270
Long-term inventories 6,642 10,094
---------------- --------------
914,929 795,079
---------------- --------------
Total assets $ 1,571,657 $ 1,594,398
---------------- --------------
---------------- --------------
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable and accrued liabilities $ 34,560 $ 63,940
Short-term debt 75,435 74,617
Revenue-based taxes payable 12,990 18,643
Taxes payable 5,279 5,180
Current portion of provision for
reclamation 5,788 5,257
---------------- --------------
134,052 167,637
Dividend payable 10,960 5,949
Provision for reclamation 49,337 49,911
Deferred income tax liability 1,175 1,808
---------------- --------------
61,472 57,668
Shareholders' equity
Share capital 660,469 660,420
Contributed surplus 19,499 36,243
Retained earnings 696,165 672,430
---------------- --------------
1,376,133 1,369,093
---------------- --------------
Total liabilities and shareholders' equity $ 1,571,657 $ 1,594,398
---------------- --------------
---------------- --------------
Centerra Gold Inc.
Condensed Consolidated Statements of Earnings (loss) and Comprehensive
Income (loss)
(Unaudited) Three months ended Nine months ended
September 30, September 30,
2013 2012 2013 2012
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(Expressed in Thousands of
United States Dollars) (Restated) (Restated)
(except per share amounts)
Revenue from Gold Sales $154,975 $ 68,786 $ 475,455 $ 292,276
Cost of sales 111,681 53,924 287,456 215,421
Abnormal mining costs - 11,392 - 15,914
Mine standby costs - - - 4,585
Regional office
administration 6,108 5,276 17,598 15,402
----------------------------------------------------------------------------
Earnings (loss) from mine
operations 37,186 (1,806) 170,401 40,954
Revenue-based taxes 16,352 6,153 50,680 30,199
Other operating expenses 2,279 5,158 6,375 29,487
Exploration and business
development 7,354 9,465 20,783 26,981
Corporate administration 8,590 7,787 22,536 18,252
----------------------------------------------------------------------------
Earnings (loss) from operations 2,611 (30,369) 70,027 (63,965)
Other (income) expenses, net (1,071) (107) 3,050 (77)
Finance costs 1,244 1,056 3,745 2,716
----------------------------------------------------------------------------
Earnings (loss) before income
taxes 2,438 (31,318) 63,232 (66,604)
Income tax expense 4,219 2,343 12,109 6,445
----------------------------------------------------------------------------
Net Earnings (loss) and
comprehensive income (loss) $ (1,781) $ (33,661) $ 51,123 $ (73,049)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Basic earnings (loss) per
common share $ (0.01) $ (0.14) $ 0.22 $ (0.31)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Diluted earnings (loss) per
common share $ (0.01) $ (0.14) $ 0.21 $ (0.31)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Centerra Gold Inc.
Condensed Consolidated
Statements of Cash Flows Three months ended Nine months ended
(Unaudited) September 30, September 30,
2013 2012 2013 2012
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(Expressed in Thousands of
United States Dollars) (Restated) (Restated)
Operating activities
Net earnings (loss) $ (1,781) $ (33,661) $ 51,123 $ (73,049)
Items not requiring
(providing) cash:
Depreciation, depletion
and amortization 44,988 13,111 120,602 50,349
Finance costs 1,244 1,056 3,745 2,716
Loss on disposal of
equipment 109 61 2,261 471
Share-based compensation
expense 679 478 2,242 1,631
Change in long-term
inventory (980) 1,641 3,452 1,641
Change in provision (78) (213) (227) 737
Income tax expense 4,219 2,343 12,109 6,445
Other operating items (385) 60 (557) (543)
------------------------------------------------
48,015 (15,124) 194,750 (9,602)
Change in operating
working capital (55,354) (8,763) (61,849) 5,929
Prepaid revenue-based
taxes utilized (paid) 77 - 3,922 (30,155)
Income taxes paid (1,217) (1,545) (12,456) (1,886)
------------------------------------------------
Cash provided by (used in)
operations (8,479) (25,432) 124,367 (35,714)
------------------------------------------------
Investing activities
Additions to property,
plant and equipment (62,807) (77,999) (222,726) (320,815)
Net (purchase) redemption
of short-term investments (29,795) 28,234 10,192 370,668
Purchase of interest in
Oksut Gold Project- net
of cash acquired - - (19,742) -
Increase in restricted
cash (103) (2,633) (4,943) (2,812)
Decrease (Increase) in
long-term other assets 1,664 (314) 1,330 (7,822)
Proceeds from disposition
of equipment 154 - 181 47
------------------------------------------------
Cash (used in) provided by
investing (90,887) (52,712) (235,708) 39,266
------------------------------------------------
Financing activities
Dividends paid (9,283) (6,429) (22,379) (15,667)
Payment of interest and
other borrowing costs - (451) (1,408) (1,185)
Proceeds from short term
debt - 76,000 - 76,000
Proceeds from common
shares issued for cash - 21 - 169
------------------------------------------------
Cash (used in) provided by
financing (9,283) 69,141 (23,787) 59,317
------------------------------------------------
(Decrease) increase in cash
during the period (108,649) (9,003) (135,128) 62,869
Cash and cash equivalents at
beginning of the period 307,636 267,411 334,115 195,539
----------------------------------------------
Cash and cash equivalents at
end of the period $ 198,987 $ 258,408 $ 198,987 $ 258,408
------------------------------------------------
------------------------------------------------
Cash and cash equivalents
consist of:
Cash $ 70,501 $ 59,750 $ 70,501 $ 59,750
Cash equivalents 128,486 198,658 128,486 198,658
------------------------------------------------
$ 198,987 $ 258,408 $ 198,987 $ 258,408
------------------------------------------------
------------------------------------------------
Centerra Gold Inc.
Condensed Consolidated Statements of Shareholders' Equity
(Unaudited)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(Expressed in Thousands of United States Dollars, except share information)
Number of Share
Common Capital Contributed
Shares Amount Surplus
----------------------------------------------------------------------------
Balance at January 1, 2012
(restated) 236,339,041 $ 660,117 $ 33,994
----------------------------------------------------------------------------
Share-based compensation
expense - - 1,631
Shares issued on exercise of
stock options 30,752 235 (87)
Shares issued on redemption of
restricted share units 6,218 68 -
Dividend declared - - -
Net loss for the period - - -
----------------------------------------------------------------------------
Balance at September 30, 2012
(restated) 236,376,011 $ 660,420 $ 35,538
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Balance at January 1, 2013
(restated) 236,376,011 $ 660,420 $ 36,243
----------------------------------------------------------------------------
Share-based compensation
expense - - 2,242
Adjustment for acquisition of
30% non-controlling interest
(note 3) - - (18,986)
Shares issued on redemption of
restricted share units 11,849 49 -
Dividend declared - - -
Net earnings for the period - - -
----------------------------------------------------------------------------
Balance at September 30, 2013 236,387,860 $ 660,469 $ 19,499
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------
----------------------------------------------------------------
(Expressed in Thousands of United States Dollars, except share
information)
Retained
Earnings Total
----------------------------------------------------------------
Balance at January 1, 2012
(restated) $ 844,348 $ 1,538,459
----------------------------------------------------------------
Share-based compensation
expense - 1,631
Shares issued on exercise of
stock options - 148
Shares issued on redemption of
restricted share units - 68
Dividend declared (18,650) (18,650)
Net loss for the period (73,049) (73,049)
----------------------------------------------------------------
Balance at September 30, 2012
(restated) $ 752,649 $ 1,448,607
----------------------------------------------------------------
----------------------------------------------------------------
Balance at January 1, 2013
(restated) $ 672,430 $ 1,369,093
----------------------------------------------------------------
Share-based compensation
expense - 2,242
Adjustment for acquisition of
30% non-controlling interest
(note 3) - (18,986)
Shares issued on redemption of
restricted share units - 49
Dividend declared (27,390) (27,390)
Net earnings for the period 51,123 51,123
----------------------------------------------------------------
Balance at September 30, 2013 $ 696,163 $ 1,376,131
----------------------------------------------------------------
----------------------------------------------------------------
Cautionary Note Regarding Forward-looking Information
Information contained in this news release which are not statements of
historical facts, and the documents incorporated by reference herein, may be
"forward-looking information" for the purposes of Canadian securities laws. Such
forward-looking information involves risks, uncertainties and other factors that
could cause actual results, performance, prospects and opportunities to differ
materially from those expressed or implied by such forward looking information.
The words "believe", "expect", "anticipate", "contemplate", "target", "plan",
"intends", "continue", "budget", "estimate", "may", "will", "schedule" and
similar expressions identify forward-looking information. These forward-looking
statements relate to, among other things, the successful resolution of
outstanding matters in the Kyrgyz Republic (discussed under the heading "Other
Corporate Development - Kyrgyz Republic") to the benefit of all shareholders
including matters relating to the State Commission report, government
resolutions and decrees, discussions with the Kyrgyz Government on the Kumtor
Project Agreements and a possible restructuring of the Kumtor project into a
joint venture, the resolution of environmental claims received by Kumtor in
December 2012 and February 2013 for the aggregate amount of $467 million, and
the draft Kyrgyz law on denunciation having no material impact on Kumtor
operations, the Company's ability to successfully demolish certain buildings and
relocate other infrastructure at Kumtor and to maintain the availability of the
Kumtor mobile fleet, the Company's ability to manage the movement of the Central
Valley Waste Dump, the Company's ability to access and mine the high-grade ore
in the SB Zone at Kumtor, statements regarding guidance under the heading
"Outlook for 2013" relating to, among other things, the continued operation of
Kumtor ball mill with the current rotated ring gear and/or spare ring gear, the
Company's future production for the fourth quarter of 2013, including estimates
of cash operating costs and all-in unit cash costs, exploration plans and
expenditures and the success thereof, capital expenditures, mining plans at
Kumtor, statements regarding having sufficient cash and investments to carry out
the Company's business plans for 2013, the outcome of discussions with the
Mongolian government on the potential development of the Company's Gatsuurt
deposit and the strategic designation status of the Gatsuurt deposit, future
planned exploration expenditures; the Company's business and political
environment and business prospects; and the timing and development of new
deposits.
Forward-looking information is necessarily based upon a number of estimates and
assumptions that, while considered reasonable by Centerra, are inherently
subject to significant political, business, economic and competitive
uncertainties and contingencies. Known and unknown factors could cause actual
results to differ materially from those projected in the forward looking
information. Factors that could cause actual results or events to differ
materially from current expectations include, among other things: (A) political
and regulatory risks, including the political risks associated with the
Company's principal operations in the Kyrgyz Republic and Mongolia, resource
nationalism, the impact of changes in, or to the more aggressive enforcement of,
laws, regulations and government practices in the jurisdictions in which the
Company operates, the impact of any actions taken by the Government and
Parliament relating to the Kumtor Project Agreement and any proposals to
restructure the Kumtor project into a joint venture, the impact of any actions
taken by the Kyrgyz authorities relating to allegations of environmental
violations and other offences and the deliberate understatement of the reserves
by management, any impact on the purported cancellation of Kumtor's land use
rights at the Kumtor Project, the effect of the Water and Forest Law on the
Company's operations in Mongolia, the effect of the 2006 Mongolian Minerals Law
on the Company's Mongolian operations, the effect of the November 2010
amendments to the 2006 Mongolian Minerals Law on the royalties payable in
connection with the Company's Mongolian operations, the impact of continued
scrutiny from Mongolian regulatory authorities on the Company's Boroo project,
the impact of changes to, or the increased enforcement of, environmental laws
and regulations relating to the Company's operations, the Company's ability to
successfully negotiate an investment agreement for the Gatsuurt project to
complete the development of the mine and the Company's ability to obtain all
necessary permits and commissions needed to commence mining activity at the
Gatsuurt project;
(B) risks related to operational matters and geotechnical issues, including the
movement of the Central Valley Waste Dump, the waste and ice movement at the
Kumtor Project and the Company's continued ability to successfully manage such
matters, the occurrence of further ground movements at the Kumtor Project, the
timing of the infrastructure move potentially impacting the maintenance of the
mobile fleet and its availability, the ability of the Company to access and mine
the high-grade or in the SB Zone, the success of the Company's future
exploration and development activities, including the financial and political
risks inherent in carrying out exploration activities, the adequacy of the
Company's insurance to mitigate operational risks, mechanical breakdowns, the
Company's ability to obtain the necessary permits and authorizations to (among
other things) raise the tailings dam at the Kumtor Project to the required
height, 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, seismic activity in the
vicinity of the Company's operations in the Kyrgyz Republic and Mongolia, long
lead times required for equipment and supplies given the remote location of the
Company's properties, reliance on a limited number of suppliers for certain
consumables, equipment and components, illegal mining on the Company's Mongolian
properties, 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, and the possibility of failure of the ring
gear and spare ring gear at the Kumtor ball mill;
(C) risks relating to financial matters including the sensitivity of the
Company's business to the volatility of gold prices, the impact of declining
gold prices and rising costs on the Company's asset valuation leading to
potential impairment, 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 revolving credit facility which may, among other things, restrict
the Company from pursuing certain business activities, 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 (D) risks related to environmental and
safety matters, including the ability to continue obtaining necessary operating
and environmental permits, licenses and approvals, the impact of the significant
environmental claims made in December 2012 and February 2013 relating to the
Kumtor Project, inherent risks associated with using sodium cyanide in the
mining operations; legal and other factors such as litigation, defects in title
in connection with the Company's properties, the Company's ability to enforce
its legal rights, risks associated with having a significant shareholder, and
possible director conflicts of interest. There may be other factors that cause
results, assumptions, performance, achievements, prospects or opportunities in
future periods not to be as anticipated, estimated or intended. See "Risks that
can affect our business" in the Company's 2012 Annual Information Form available
on SEDAR at www.sedar.com.
Furthermore, market price fluctuations in gold, as well as increased capital or
production costs or reduced recovery rates may render ore reserves containing
lower grades of mineralization uneconomic and may ultimately result in a
restatement of reserves. The extent to which resources may ultimately be
reclassified as proven or probable reserves is dependent upon the demonstration
of their profitable recovery. Economic and technological factors which may
change over time always influence the evaluation of reserves or resources.
Centerra has not adjusted mineral resource figures in consideration of these
risks and, therefore, Centerra can give no assurances that any mineral resource
estimate will ultimately be reclassified as proven and probable reserves.
Mineral resources are not mineral reserves, and do not have demonstrated
economic viability, but do have reasonable prospects for economic extraction.
Measured and indicated resources are sufficiently well defined to allow
geological and grade continuity to be reasonably assumed and permit the
application of technical and economic parameters in assessing the economic
viability of the resource. Inferred resources are estimated on limited
information not sufficient to verify geological and grade continuity or to allow
technical and economic parameters to be applied. Inferred resources are too
speculative geologically to have economic considerations applied to them to
enable them to be categorized as mineral reserves. There is no certainty that
mineral resources of any category can be upgraded to mineral reserves through
continued exploration.
There can be no assurances that forward-looking information and statements will
prove to be accurate, as many factors and future events, both known and unknown
could cause actual results, performance or achievements to vary or differ
materially, from the results, performance or achievements that are or may be
expressed or implied by such forward-looking statements contained herein or
incorporated by reference. Accordingly, all such factors should be considered
carefully when making decisions with respect to Centerra, and prospective
investors should not place undue reliance on forward looking information.
Forward-looking information is as of October 30, 2013. 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.
About Centerra
Centerra Gold Inc. is a gold mining company focused on operating, developing,
exploring and acquiring gold properties primarily in Asia, the former Soviet
Union and other emerging markets worldwide. Centerra is the largest
Western-based gold producer in Central Asia. Centerra's shares trade on the
Toronto Stock Exchange (TSX) under the symbol CG. The Company is based in
Toronto, Ontario, Canada.
Conference Call
Centerra invites you to join its 2013 third quarter conference call on Thursday,
October 31, 2013 at 11:00am Eastern Time. The call is open to all investors and
the media. To join the call, please dial toll-free in North America (800)
272-5460 or International participants dial +1 (416) 981-9095. Alternatively, an
audio feed of the conference call is being webcast by Thomson Reuters and can be
accessed live on the Company's website at: www.centerragold.com. An audio
recording of the call will be available on Centerra's website
www.centerragold.com shortly after the call and via telephone until midnight on
Thursday November 7, 2013 by calling (416) 626-4100 or (800) 558-5253 and using
passcode 21673422.
Additional information on Centerra is available on the Company's web site at
www.centerragold.com and at SEDAR at www.sedar.com.
To view Management's Discussion and Analysis and the Financial Statements and
Notes for the six and nine month periods ended September 30, 2013, please visit
the following link:
http://media3.marketwire.com/docs/CG2013-Q3MDA.pdf
FOR FURTHER INFORMATION PLEASE CONTACT:
Centerra Gold Inc.
John W. Pearson
Vice President, Investor Relations
(416) 204-1241
john.pearson@centerragold.com
www.centerragold.com
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