Centerra Gold Inc. (TSX: CG) (NYSE: CGAU) reported its fourth quarter and full-year 2022 results.

Significant financial and operating results of the fourth quarter and year ended December 31, 2022 included:

• Net loss for the quarter of $130.1 million or $0.59 per common share (basic), including a non-cash impairment loss on the Kemess Project of $138.2 million (net of tax). The Kemess Project impairment loss was recorded as the Company is now classifying the project as non-core with no exploration or development-related expenditures incurred in 2022 or committed for future years. An adjusted loss^NG of $13.7 million or $0.06 per common share (basic). Net loss for the year of $77.2 million or $0.29 per common share (basic) and an adjusted net loss^NG of $9.4 million or $0.04 per common share (basic).
• Cash used in operating activities and free cash flow deficit^NG for the quarter of $9.8 million and $25.3 million, respectively was primarily due to a temporary suspension of leaching activities at the Öksüt Mine. Cash used in operating activities at the Öksüt Mine was $11.9 million for the quarter with continued mining and stacking of ore. Mount Milligan Mine generated cash provided by mine operating activities and free cash flow^NG of $26.5 million and $15.6 million for the quarter, respectively. Cash used in operating activities and free cash flow deficit^NG for the year were $2.0 million and $82.9 million, respectively.
• In January 2023, the Öksüt Mine received notice of approval of its operating license extension application for a period of 10 years as well as approval of an enlarged grazing land permit to allow expansion of the open pits. The regulatory review of Öksüt Mine’s amended Environmental Impact Assessment (“EIA”), which was submitted in mid-January 2023 for regulatory review, remains on track.
• The Company’s mercury abatement retrofit to the Öksüt Mine’s ADR plant is complete. Upon restart of the ADR plant, and after receiving regulatory approvals, the Company will be in a position to process the gold-in-carbon inventory on hand of approximately 100,000 recoverable ounces. The ADR plant has capacity to produce gold at a rate of approximately 35,000 ounces per month.
• The Company continues to evaluate strategic options for the Molybdenum Business Unit, including a potential restart of the Thompson Creek Mine with improving global molybdenum prices. The Company plans to issue a Prefeasibility Study (“PFS”) on a restart of the Thompson Creek Mine in the third quarter of 2023.
• Goldfield Project drilling activities continued in the fourth quarter of 2022. The Company plans to issue an initial resource estimate by mid-year 2023 followed by an updated resource estimate accompanied by a Feasibility Study.
• The Company completed full rollout of Responsible Gold Mining Principles in the fourth quarter of 2022.
• Strong balance sheet with a cash position at the year-end of $531.9 million.
• Returns to shareholders of $22.6 million for the quarter and $58.9 million for the year, through dividends and the buyback of shares under a Normal Course Issuer Bid (“NCIB”).
• Gold production for the quarter of 53,222 ounces, solely from the Mount Milligan Mine.
• Copper production for the quarter of 16.9 million pounds.
• Gold production costs for the quarter of $790 per ounce.
• Copper production costs for the quarter of $2.00 per pound.
• All-in sustaining costs on a by-product basis^NG for the quarter of $987 per ounce.
• All-in costs on a by-product basis^NG for the quarter of $1,572 per ounce due to higher exploration and project development costs incurred primarily at the Company’s Goldfield Project.
• Quarterly Dividend declared of CAD$0.07 per common share.

The Company’s 2022 full-year results on a continuing basis, and previously disclosed full-year 2022 guidance are summarized below:

CEO Discussion

Paul Wright, Interim President and Chief Executive Officer of Centerra stated, “In 2022, the Company continued to demonstrate that safety remains Centerra’s top priority, with a number of our sites achieving milestones without a lost time injury. We put a strategy in place to improve safety performance at the Mount Milligan Mine during the year and subsequent to the year-end, the Mount Milligan Mine’s team achieved one million hours worked without a lost time injury.”

“Despite all other challenges in 2022, I want to highlight Mount Milligan Mine’s record annual mill throughput in 2022 of 21.3 million tonnes. The Company continues to optimize the life of mine plan for Mount Milligan and anticipates increases in both gold and copper production for 2024 and 2025 when compared to the annual figures included in the most recent Technical Report for the mine. To streamline our corporate structure, we recently implemented changes that will lead to the closure of our regional Prince George office and reduced workforce levels at the corporate office in Toronto.”

“I’m also pleased to say that steady progress is being made at the Öksüt Mine toward a restart of operations. The retrofit of the ADR plant at the Öksüt Mine, was completed early in 2023, and we continue to work with the Turkish officials on the restart of gold room operations at the ADR plant as well as an updated EIA for the mine. We have received a 10-year operating license extension for the Öksüt Mine as well as the approval of an enlarged grazing land permit. The people of Türkiye continue to deal with the devastating impact of the earthquakes and aftershocks that occurred in the southeastern portion of the country in early February. An emergency response team from the Öksüt Mine assisted the Turkish state emergency preparedness authorities and regional disaster response organizations during the search and rescue stage. The Company continues to provide equipment and material support to the ongoing recovery activities where possible. Centerra offers its condolences to the people of Türkiye and all those that have lost loved ones in this natural disaster.”

Update on Öksüt Mine Operations

In March 2022, Centerra announced it had temporarily suspended gold doré bar production at the Öksüt Mine due to mercury detected in the gold room at the ADR plant. From the date of suspension of gold room operations through to August 2022, the Company continued to process ore into gold-in-carbon and had approximately 100,000 recoverable ounces of stored gold-in-carbon as of December 31, 2022, having incurred substantially all associated production costs (excluding royalty charges). In addition, the Öksüt Mine had approximately 200,000 recoverable ounces of gold in ore stockpiles and on the heap leach pad as at December 31, 2022. The Company has completed construction of a mercury abatement system to allow processing of mercury-bearing ores with capital costs below the original $5 million budget and it continues to work with relevant authorities to obtain the required approvals to restart gold room operations at the ADR plant. Once operations resume, the ADR plant is expected to have sufficient production capacity to process up to approximately 35,000 ounces of gold per month.

Permitting

Following inspection by the Ministry of Environment, Urbanization and Climate Change (the “Ministry of Environment”) and several further discussions, the Company determined that an updated EIA should be prepared and submitted to clarify various production and other capacity limits and to align the EIA production levels with current operating plans. The Öksüt Mine suspended leaching of ore on the heap leach pad and ceased using activated carbon on site effective late August 2022 though mining, crushing and stacking activities continued in line with existing EIA limits for the remainder of 2022.

The Öksüt Mine has built substantial inventories of gold-in-carbon, ore stacked on the heap leach pad and ore stockpiles and has therefore paused crushing and stacking activities. The Öksüt Mine is currently focusing mining activities on the Phase 5 pit wall pushback to expand the Keltepe pit.

The Öksüt Mine’s application to update its EIA was submitted to regulators at the end of August 2022 and the new updated EIA was submitted in January 2023. The Company is working with Turkish officials and other stakeholders on the regulatory review and approval of its EIA and other permits that may be required to allow for a timely full restart of all operations.

In January 2023, the Öksüt Mine received notice of approval of its operating license extension application for a period of 10 years as well as approval of an enlarged grazing land permit to allow expansion of the Keltepe and Güneytepe pits as planned.

Exploration Update

Exploration activities in the fourth quarter of 2022 included drilling, surface sampling, geological mapping and geophysical surveying at the Company’s various projects and earn-in properties, targeting gold and copper mineralization in Canada, Türkiye, and the United States of America. Exploration expenditures in the fourth quarter of 2022 were $16.2 million. The activities were primarily focused on expanded drilling programs at the Mount Milligan Mine in British Columbia, the Öksüt Mine in Türkiye, the Goldfield Project in Nevada, and greenfield projects in the USA and Türkiye.

At the Mount Milligan Mine, 27 diamond drill holes, totalling 10,516 metres, were completed in the fourth quarter of 2022, including brownfield exploration drilling (8,003 metres in 17 drill holes) and resource expansion drilling (2,513 metres in ten drill holes). The 2022 drill programs at the Mount Milligan Mine targeted porphyry-style gold-copper mineralization below and adjacent to the current ultimate open-pit boundary, as well as continued to test targets with potential for shallower porphyry-style gold-copper mineralization and high gold-low copper style mineralization peripheral to the current pits.

The planned 2023 exploration drilling programs at the Mount Milligan Mine are expected to commence late in the first quarter of 2023, targeting porphyry-style gold-copper mineralization on the northern and southwestern margins of the current ultimate open pit, and peripheral greenfield targets within the Mount Milligan claim block.

At the Öksüt Mine, 43 diamond drill holes and 18 reverse circulation (“RC”) drill holes, totalling 15,840 metres, were completed in the fourth quarter of 2022. Exploration drilling activities were mainly undertaken at the Keltepe, Güneytepe, Keltepe North, Keltepe Northwest, and Keltepe North-Northwest deposits with the aim of expanding known oxide gold mineralization resources. Drilling also continued testing peripheral targets, such as the Yelibelen, Büyüktepe, and Boztepe prospects.

The planned 2023 exploration drilling programs at the Öksüt Mine are expected to commence early in the second quarter of 2023, targeting oxide gold mineralisation proximal to the known deposits and the potential for porphyry-style gold- copper mineralization at depth within the property.

At the Goldfield Project, 21 diamond drill holes and 134 RC drill holes, totaling 35,259 metres of drilling, were completed in the fourth quarter of 2022. Completed holes include 26,590 metres in 117 exploration, infill, and resource expansion holes, 3,995 metres in 18 condemnation drill holes, 2,920 metres in ten metallurgical holes, 1,512 metres in eight geotechnical holes, and two water monitoring wells for 241 metres.

The planned 2023 exploration drilling programs at the Goldfield Project commenced early in the first quarter of 2023, principally targeting extensions to gold mineralization proximal to the known deposits.

Non-GAAP and Other Financial Measures

This document contains “specified financial measures” within the meaning of NI 52-112, specifically the non-GAAP financial measures and non-GAAP ratios described below. Management believes that the use of these measures assists analysts, investors and other stakeholders of the Company in understanding the costs associated with producing gold and copper, understanding the economics of gold and copper mining, assessing operating performance, the Company’s ability to generate free cash flow from current operations and on an overall Company basis, and for planning and forecasting of future periods. However, the measures have limitations as analytical tools as they may be influenced by the point in the life cycle of a specific mine and the level of additional exploration or other expenditures a company has to make to fully develop its properties. The specified financial measures used in this document do not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other issuers, even as compared to other issuers who may be applying the World Gold Council (“WGC”) guidelines. Accordingly, these specified financial measures should not be considered in isolation, or as a substitute for, analysis of the Company’s recognized measures presented in accordance with IFRS.

Definitions:

The following is a description of the non-GAAP financial measures and non-GAAP ratios used in this news release:

• All-in sustaining costs on a by-product basis per ounce is a non-GAAP ratio calculated as all-in sustaining costs on a by-product basis divided by ounces of gold sold. All-in sustaining costs on a by-product basis is a non-GAAP financial measure calculated as the aggregate of production costs as recorded in the consolidated statements of loss, refining and transport costs, the cash component of capitalized stripping and sustaining capital expenditures, lease payments related to sustaining assets, corporate general and administrative expenses, accretion expenses, asset retirement depletion expenses, copper and silver revenue and the associated impact of hedges of by-product sales revenue (added in the current period and applied retrospectively to the previous period). When calculating all-in sustaining costs on a by-product basis, all revenue received from the sale of copper from the Mount Milligan Mine, as reduced by the effect of the copper stream, is treated as a reduction of costs incurred. A reconciliation of all-in sustaining costs on a by-product basis to the nearest IFRS measure is set out below. Management uses these measures to monitor the cost management effectiveness of each of its operating mines.
• All-in sustaining costs on a co-product basis per ounce of gold or per pound of copper, is a non-GAAP ratio calculated as all-in sustaining costs on a co-product basis divided by ounces of gold or pounds of copper sold, as applicable. All-in sustaining costs on a co-product basis is a non-GAAP financial measure based on an allocation of production costs between copper and gold based on the conversion of copper production to equivalent ounces of gold. The Company uses a conversion ratio for calculating gold equivalent ounces for its copper sales calculated by multiplying the copper pounds sold by estimated average realized copper price and dividing the resulting figure by estimated average realized gold price. For the fourth quarter and year ended December 31, 2022, 394 pounds and 450 pounds, respectively, of copper were equivalent to one ounce of gold. A reconciliation of all-in sustaining costs on a co-product basis to the nearest IFRS measure is set out below. Management uses these measures to monitor the cost management effectiveness of each of its operating mines.
• Sustaining capital expenditures and Non-sustaining capital expenditures are non-GAAP financial measures. Sustaining capital expenditures are defined as those expenditures required to sustain current operations and exclude all expenditures incurred at new operations or major projects at existing operations where these projects will materially benefit the operation. Non-sustaining capital expenditures are primarily costs incurred at ‘new operations’ and costs related to ‘major projects at existing operations’ where these projects will materially benefit the operation. A material benefit to an existing operation is considered to be at least a 10% increase in annual or life of mine production, net present value, or reserves compared to the remaining life of mine of the operation. A reconciliation of sustaining capital expenditures and non-sustaining capital expenditures to the nearest IFRS measures is set out below. Management uses the distinction of the sustaining and non-sustaining capital expenditures as an input into the calculation of all-in sustaining costs per ounce and all-in costs per ounce.
• All-in costs on a by-product basis per ounce is a non-GAAP ratio calculated as all-in costs on a by-product basis divided by ounces sold. All-in costs on a by-product basis is a non-GAAP financial measure which includes all-in sustaining costs on a by-product basis, exploration and study costs, non-sustaining capital expenditures, care and maintenance and predevelopment costs. A reconciliation of all-in costs on a by-product basis to the nearest IFRS measures is set out below. Management uses these measures to monitor the cost management effectiveness of each of its operating mines.
• Adjusted net (loss) earnings is a non-GAAP financial measure calculated by adjusting net (loss) earnings as recorded in the consolidated statements of loss and comprehensive loss for items not associated with ongoing operations. The Company believes that this generally accepted industry measure allows the evaluation of the results of continuing income-generating capabilities and is useful in making comparisons between periods. This measure adjusts for the impact of items not associated with ongoing operations. A reconciliation of adjusted net (loss) earnings to the nearest IFRS measures is set out below. Management uses this measure to monitor and plan for the operating performance of the Company in conjunction with other data prepared in accordance with IFRS.
• Free cash flow (deficit) from operations is a non-GAAP financial measure calculated as cash provided by operating activities from continuing operations less property, plant and equipment additions. A reconciliation of free cash flow from continuing operations to the nearest IFRS measures is set out below. Management uses this measure to monitor the amount of cash available to reinvest in the Company and allocate for shareholder returns.
• Free cash flow (deficit) from mine operations is a non-GAAP financial measure calculated as cash provided by mine operations less property, plant and equipment additions. A reconciliation of free cash flow from mine operations to the nearest IFRS measures is set out below. Management uses this measure to monitor the degree of self-funding of each of its operating mines and facilities.

Certain unit costs, including all-in sustaining costs on a by-product basis (including and excluding revenue-based taxes) per ounce, are non-GAAP ratios which include as a component certain non-GAAP financial measures including all-in sustaining costs on a by-product basis which can be reconciled as follows:

⁽¹⁾ Non-sustaining capital expenditures are distinct projects designed to have a significant increase in the net present value of the mine. In the current quarter, non-sustaining capital expenditures include costs related to the installation of the staged flotation reactors at the Mount Milligan Mine.

Certain unit costs, including all-in sustaining costs on a by-product basis (including and excluding revenue-based taxes) per ounce, are non-GAAP ratios which include as a component certain non-GAAP financial measures including all-in sustaining costs on a by-product basis which can be reconciled as follows:

⁽¹⁾   Non-sustaining capital expenditures are distinct projects designed to have a significant increase in the net present value of the mine. In the current year, non-sustaining capital expenditures include costs related to the installation of the staged flotation reactors at the Mount Milligan Mine.
⁽²⁾   Presented on a continuing operations basis, excluding the results from the Kumtor Mine.
⁽³⁾   Results from the period ended December 31, 2021 from the Kumtor Mine are prior to the seizure of the mine on May 15, 2021.

Adjusted net (loss) earnings is a non-GAAP financial measure and can be reconciled as follows:

⁽¹⁾ Income tax adjustments reflect the impact of foreign currency translation on deferred income taxes and an election made under local legislation to account for inflation and increase the tax value of Öksüt Mine’s assets

Free cash flow (deficit) from continuing operations and adjusted free cash flow (deficit) from continuing operations are non-GAAP financial measures and can be reconciled as follows:

• As presented in the Company’s consolidated statements of cash flows.

⁽¹⁾   As presented in the Company’s consolidated statements of cash flows.

Sustaining capital expenditures and non-sustaining capital expenditures are non-GAAP measures and can be reconciled as follows:

⁽¹⁾   As presented in the Company’s consolidated financial statements.
⁽²⁾   Includes reclassification of insurance and capital spares from supplies inventory to PP&E.

⁽¹⁾   As presented in the Company’s consolidated financial statements.
⁽²⁾   Includes reclassification of insurance and capital spares from supplies inventory to PP&E.

About Centerra

Centerra Gold Inc. is a Canadian-based mining company focused on operating, developing, exploring and acquiring gold and copper properties in North America, Türkiye, and other markets worldwide. Centerra operates two mines: the Mount Milligan Mine in British Columbia, Canada, and the Öksüt Mine in Türkiye. The Company also owns the Goldfield Project in Nevada, United States, the Kemess Underground Project in British Columbia, Canada, and owns and operates the Molybdenum Business Unit in the United States and Canada.