TORONTO - Centerra Gold Inc. ('Centerra' or the 'Company') (TSX: CG) today reported its third quarter 2020 results.
Key events and operating results of the third quarter included: Net earnings of $205.7 million and $0.70 per common share (basic).
Cash flow from operations of $358.8 million, and free cash flowNG of $281 million.
Cash position of $484.2 million at quarter end with total liquidity of $984.2 million.
Production totalled 241,448 ounces of gold and 23.3 million pounds of copper.
Production costs per ounce of gold sold and production costs per pound of copper sold were $386 per ounce and $0.95 per pound, respectively.
All-in sustaining costs on a by-product basis per ounce soldNG were $528 per ounce.
Guidance Update: No change to gold production guidance targeted at 740,000 to 820,000 ounces. Guidance for full year all-in sustaining costs on a by-product basis per ounce soldNG has been reduced to $740 to $790 (previously $820 to $870 per ounce).
The Kumtor Mine is on target to achieve both production and cost guidance for 2020.
We continue to advance work on the Kumtor technical report.
Quarterly Dividend of CAD$0.05 per common share.
All references in this document denoted with NG, indicate a non-GAAP term which is discussed under 'Non-GAAP Measures' and reconciled to the most directly comparable GAAP measure.
Commentary
Scott Perry, President and Chief Executive Officer of Centerra stated, 'We continue to stay vigilant at all of our operations to prevent an outbreak and avoid the spread of the COVID-19 virus and to ensure the health, safety and well-being of our employees, contractors and communities. We are also carefully observing the unfolding political events in the Kyrgyz Republic in order to ensure uninterrupted operations at Kumtor.'
'At our Oksut operation, we have celebrated a recent safety milestone, when on July 19, 2020, Oksut achieved 3 million consecutive hours without a lost time injury. Our continued commitment to Work Safe Home Safe is a driving force behind achieving such milestones.'
'The strong operating performance at Kumtor and Mount Milligan continued into this quarter and our Oksut Mine demonstrated the additional value it brings to our operating portfolio on all metrics; production, low cost and free cash flow generation. We have re-affirmed our Company-wide full year gold production guidance of 740,000 to 820,000 ounces with year to date production of 651,614 ounces and expect to be near the upper end of guidance for the year. We have reduced our all-in sustaining costs on a by-product basis per ounce soldNG guidance to $740 to $790 per ounce from previously issued guidance of $820 to $870 per ounce, due to performance to date at both the Mount Milligan and Oksut mines. The Mount Milligan Mine in the first nine months of 2020 also achieved an important milestone, producing the highest level of concentrate tonnes (138,972 tonnes) since the start of the operations in 2014. We continue to advance the Kumtor technical report, with additional work being incorporated into the new life of mine plan with respect to mining costs, recoveries and waste rock stability assessments.'
'Our operations in the quarter delivered consolidated gold production of 241,448 ounces at all-in sustaining costsNG on a by-product basis of $528 per ounce sold in the quarter. Kumtor had another strong quarter producing 140,182 ounces of gold at all-in sustaining costsNG on a by-product basis of $639 per ounce sold. Mount Milligan produced 49,854 ounces of gold and 23.3 million pounds of copper at all-in sustaining costsNG on a by-product basis of $165 per ounce sold. Oksut continued to ramp up production, producing 51,412 ounces of gold, during the quarter, at an all-in sustaining costsNG on a by-product basis of $416 per ounce. Oksut year to date, is our lowest cost mine with an all-in sustaining costsNG on a by-product basis of $433 per ounce.'
'Financially, the Company generated $358.8 million of cash from operations for the third quarter of 2020, which includes $208.3 million from Kumtor, $70.4 million from Mount Milligan and $85.4 million from Oksut. During the third quarter of 2020, Kumtor, Mount Milligan and Oksut delivered free cash flow from mine operationsNG of $157.3 million, $63.1 million and $74.1 million, respectively. Company-wide, free cash flowNG in the third quarter of 2020 was $281 million resulting in year-to-date free cash flowNG of $526.9 million and we finished the quarter with cash of $484.2 million and no debt.'
Guidance
Consolidated gold production in the first nine months of 2020 was 651,614 ounces compared to the full year guidance range of 740,000 to 820,000 ounces, which remains unchanged.
Centerra has reduced its consolidated 2020 guidance for production costs per ounce of gold sold to $410 to $460 per ounce and its guidance for all-in sustaining costs on a by-product basis per ounce soldNG to $740 to $790 per ounce from previously issued guidance of $450 to $500 per ounce and $820 to $870 per ounce, respectively, as a result of lower operating costs at the Mount Milligan and higher production at the Oksut Mine.
Mount Milligan's 2020 guidance for production costs per ounce of gold sold has been lowered to $730 to $780 per ounce and its guidance for all-in sustaining costs on a by-product basis per ounce soldNG has been lowered to $750 to $800 per ounce from previously issued guidance of $750 to $800 per ounce and $885 to $935 per ounce, respectively, due to decreased milling and mining costs.
Oksut's 2020 guidance for production costs per ounce of gold sold has been lowered to $345 to $395 per ounce and its guidance for all-in sustaining costs on a by-product basis per ounce soldNG has been reduced to $500 to $550 per ounce from previously issued guidance of $375 to $550 per ounce and $650 to $700 per ounce, respectively. This reduction is due to a combination of positive grade and tonne reconciliations, and effective cost control during this initial year of production.
COVID-19 Update
Centerra continues to prioritize the health, safety and well-being of its employees, contractors, communities, and other stakeholders during the current outbreak of COVID-19 and to take steps to minimize the effect of the pandemic on its business. The Company has established strict COVID-19 protocols at its mine sites to help prevent infection and reduce the potential transmission of COVID-19, implemented travel restrictions, and has temporarily closed various administration offices including its head office in Toronto. In addition, operating mine sites continue to assess the resiliency of their supply chains, increase mine site inventories of key materials and develop and implement contingency plans to allow for continued operations.
COVID-19 has not materially negatively affected Centerra's operations. Employee absences due to COVID-19 and other illnesses have so far been successfully managed. Though such absences at Kumtor resulted in a reduction in mining capacity in the second and third quarters of 2020, they are not expected to materially affect Kumtor's 2020 production and costs.
The Company notes that the effects of COVID-19 on its business continue to change rapidly. The measures enacted to date reflect the Company's best assessment at this time but will remain flexible and be revised as necessary or advisable and/or as recommended by the public health and governmental authorities.
Kyrgyz Republic
Despite political and social disruption in the Kyrgyz Republic following its recent Parliamentary election held during the first week of October 2020, operations at the Kumtor Mine continue. Mining and gold production continue at targeted rates, and regular gold shipments are being made. No disruptions have occurred to the mine's supply chain as borders are open for cargo and customs is functioning normally.
The Company understands that other mining companies within the Kyrgyz Republic experienced property damage and interruption in their operations in connection with protests that occurred following the October 4, 2020 parliamentary elections. While Kumtor did not experience any material issues at its offices or mine site, the Company and Kumtor will continue to remain on alert. The Company is monitoring the situation and is taking all the necessary precautions to ensure the safety of its personnel and operations. Centerra and Kumtor will continue to cooperate and work with the Kyrgyz Government and state agencies to ensure uninterrupted operation of the mine.
An interim government led by Prime Minister Sadyr Japarov has been installed in the Kyrgyz Republic and, following the resignation of former President Sooronbai Jeenbekov, Mr. Japarov is also acting President. The Company further understands that new presidential elections have been scheduled for January 10, 2021 but that new parliamentary elections are yet to be scheduled.
Exploration Update
Exploration activities in the third quarter of 2020 included drilling, surface sampling, geological mapping and geophysical surveying at the Company's various projects (including earn-in properties), targeting gold and copper mineralization in Canada, Turkey, Finland, USA and the Kyrgyz Republic. In the third quarter of 2020, the Company ceased exploration activities in Mexico. The Company has expanded its 2020 exploration program when compared to 2019 and is primarily focused on brownfield exploration at Kumtor, Mount Milligan and Oksut. Exploration expenditures totalled $11.7 million in the third quarter of 2020, which reflect the impact of delays associated with COVID-19, compared to $7.6 million in the same quarter of 2019.
Selected drill program results and intercepts are highlighted in the supplementary data at the end of this news release. The drill collar locations and associated graphics are available at the following link:
About Centerra
Centerra Gold Inc. is a Canadian-based gold mining company focused on operating, developing, exploring and acquiring gold properties in North America, Asia and other markets worldwide and is one of the largest Western-based gold producers in Central Asia. Centerra operates three mines, the Kumtor Mine in the Kyrgyz Republic, the Mount Milligan Mine in British Columbia, Canada and the Oksut Mine in Turkey. Centerra's shares trade on the Toronto Stock Exchange (TSX) under the symbol CG. The Company is based in Toronto, Ontario, Canada.
Contact:
John W. Pearson
Tel: (416) 204-1953
Email: john.pearson@centerragold.com
This Management Discussion and Analysis ('MD&A') has been prepared as of November 3, 2020, and is intended to provide a review of the financial position and results of operations of Centerra Gold Inc. ('Centerra' or the 'Company') for the three and nine months ended September 30, 2020 in comparison with the corresponding periods ended September 30, 2019. This discussion should be read in conjunction with the Company's unaudited condensed consolidated interim financial statements and the notes thereto for the three and nine months ended September 30, 2020 prepared in accordance with International Financial Reporting Standards ('IFRS'). This MD&A should also be read in conjunction with the Company's audited annual consolidated financial statements for the years ended December 31, 2019 and 2018, the related MD&A and the Annual Information Form for the year ended December 31, 2019 (the '2019 Annual Information Form'). The Company's unaudited condensed consolidated interim financial statements and the notes thereto for the three and nine months ended September 30, 2020, 2019 Annual Report and 2019 Annual Information Form are available at www.centerragold.com and on the System for Electronic Document Analysis and Retrieval ('SEDAR') at www.sedar.com. In addition, this discussion contains forward looking information regarding Centerra's business and operations. Such forward-looking statements involve risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by such forward looking statements.
Caution Regarding Forward-Looking Information
Information contained in this document which are not statements of historical facts, and the documents incorporated by reference herein, may be 'forward-looking information' for the purposes of Canadian securities laws. Such forward-looking information involves risks, uncertainties and other factors that could cause actual results, performance, prospects and opportunities to differ materially from those expressed or implied by such forward looking information. The words 'believe', 'expect', 'anticipate', 'contemplate', 'plan', 'intends', 'continue', 'budget', 'estimate', 'may', 'will', 'schedule', 'understand' and similar expressions identify forward-looking information. These forward-looking statements relate to, among other things: statements regarding 2020 Outlook, including guidance on production, cost and capital spend for the remainder of 2020, and the assumptions used in preparing; the impact, if any, of the Kyrgyz Parliamentary election annulment and the aftermath on the Kumtor mine; planned exploration for the remainder of 2020; possible impacts to its operations relating to COVID-19; the Company's expectations regarding having sufficient liquidity for 2020; the planned mill shut down at the Kumtor mine scheduled for the fourth quarter of 2020; the Company's expectation regarding having sufficient water at Mount Milligan in the medium term, and its plans for a long term solution; time frame for completing the remaining construction at the Oksut Mine and expectations regarding litigation involving the Company including the HRS litigation impacting the Mount Milligan Mine, and the litigation involving the Greenstone Gold Property.
Forward-looking information is necessarily based upon a number of estimates and assumptions that, while considered reasonable by Centerra, are inherently subject to significant technical, political, business, economic and competitive uncertainties and contingencies. Known and unknown factors could cause actual results to differ materially from those projected in the forward-looking information. Factors and assumptions that could cause actual results or events to differ materially from current expectations include, among other things: (A) strategic, legal, planning and other risks, including: political risks associated with the Company's operations in the Kyrgyz Republic, Turkey and Canada; the failure of the Kyrgyz Republic Government to comply with its continuing obligations under the Strategic Agreement, including the requirement that it comply at all times with its obligations under the Kumtor Project Agreements, allow for the continued operation of the Kumtor Mine by KGC and KOC and not take any expropriation action against the Kumtor Mine; actions by the Kyrgyz Republic Government or any state agency or the General Prosecutor's Office that serve to restrict or otherwise interfere with the payment of funds by KGC and KOC to Centerra; resource nationalism including the management of external stakeholder expectations; the impact of changes in, or to the more aggressive enforcement of, laws, regulations and government practices, including unjustified civil or criminal action against the Company, its affiliates or its current or former employees; risks that community activism may result in increased contributory demands or business interruptions; the risks related to outstanding litigation affecting the Company; the impact of the delay by relevant government agencies to provide required approvals, expertise and permits; potential impact on the Kumtor Project of investigations by Kyrgyz Republic instrumentalities; the impact of constitutional changes in Turkey; the impact of any sanctions imposed by Canada, the United States or other jurisdictions against various Russian and Turkish individuals and entities; potential defects of title in the Company's properties that are not known as of the date hereof; the inability of the Company and its subsidiaries to enforce their legal rights in certain circumstances; the presence of a significant shareholder that is a state-owned company of the Kyrgyz Republic; risks related to anti-corruption legislation; risks related to the concentration of assets in Central Asia; Centerra not being able to replace mineral reserves; Indigenous claims and consultative issues relating to the Company's properties which are in proximity to Indigenous communities and potential risks related to kidnapping or acts of terrorism; (B) risks relating to financial matters, including: sensitivity of the Company's business to the volatility of gold, copper and other mineral prices, the use of provisionally-priced sales contracts for production at Mount Milligan, reliance on a few key customers for the gold-copper concentrate at Mount Milligan, use of commodity derivatives, the imprecision of the Company's mineral reserves and resources estimates and the assumptions they rely on, the accuracy of the Company's production and cost estimates, the impact of restrictive covenants in the Company's credit facilities which may, among other things, restrict the Company from pursuing certain business activities or making distributions from its subsidiaries, the Company's ability to obtain future financing, the impact of global financial conditions, the impact of currency fluctuations, the effect of market conditions on the Company's short-term investments, the Company's ability to make payments including any payments of principal and interest on the Company's debt facilities depends on the cash flow of its subsidiaries and (C) risks related to operational matters and geotechnical issues and the Company's continued ability to successfully manage such matters, including the movement of the Davidov Glacier, waste and ice movement and continued performance of the buttress at the Kumtor mine; the occurrence of further ground movements at the Kumtor mine and mechanical availability; the risk of having sufficient water to continue operations at the Mount Milligan mine and achieve expected mill throughput; the success of the Company's future exploration and development activities, including the financial and political risks inherent in carrying out exploration activities; inherent risks associated with the use of sodium cyanide in the mining operations; the adequacy of the Company's insurance to mitigate operational risks; mechanical breakdowns; the Company's ability to replace its mineral reserves; the occurrence of any labour unrest or disturbance and the ability of the Company to successfully re-negotiate collective agreements when required; the risk that Centerra's workforce and operations may be exposed to widespread epidemic including, but not limited to, the COVID-19 pandemic; seismic activity in the vicinity of the Company's properties; long lead times required for equipment and supplies given the remote location of some of the Company's operating properties; reliance on a limited number of suppliers for certain consumables, equipment and components; the ability of the Company to address physical and transition risks from climate change and sufficiently manage stakeholder expectations on climate-related issues; the Company's ability to accurately predict decommissioning and reclamation costs; the Company's ability to attract and retain qualified personnel; competition for mineral acquisition opportunities; risks associated with the conduct of joint ventures/partnerships and the Company's ability to manage its projects effectively and to mitigate the potential lack of availability of contractors, budget and timing overruns and project resources.
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 November 3, 2020. 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.
CENTERRA GOLD INC. 
