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Centerra Gold Achieves 2023 Production Guidance; Begins 2024 with Over $600 Million in Cash and Cash Equivalents; Announces 2024 Outlook

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Centerra Gold Achieves 2023 Production Guidance; Begins 2024 with Over $600 Million in Cash and Cash Equivalents; Announces 2024 Outlook

 

 

 

 

 

Centerra Gold Inc. (TSX: CG) (NYSE: CGAU) announces preliminary production results for the fourth quarter and full year ended December 31, 2023, and issues 2024 guidance. Centerra will release its fourth quarter and full year 2023 operating and financial results after the market closes on Thursday February 22, 2024.

 

2023 Fourth Quarter and Full Year Highlights

  • Fourth quarter 2023 gold production was 129,259 ounces.
  • Full year 2023 gold production was 350,317 ounces, which was near the midpoint of the 2023 gold production guidance range of 340,000 to 360,000 ounces, as published on July 31, 2023.
  • Copper production was 19.7 million pounds in the fourth quarter 2023, and 61.9 million pounds for the full year 2023, in line with the 2023 copper production guidance range of 60 to 70 million pounds, as published on January 16, 2023.
  • As at December 31, 2023, unaudited preliminary cash and cash equivalents was $613 million.
  • Consolidated full year 2023 production costs and all-in sustaining costs (“AISC”) on a by-product basisNG are expected to be near the midpoint of the previously disclosed guidance ranges of $700 to $750 per ounce and $1,000 to $1,050 per ounce, respectively.

 

2024 Guidance Highlights

  • 2024 gold production guidance of 370,000 to 410,000 ounces, an 11% increase from the midpoint of guidance year-over-year.
  • 2024 copper production guidance of 55 to 65 million pounds.
  • 2024 gold production cost guidance of $800 to $900 per ounce and AISC on a by-product basisNG guidance of $1,075 to $1,175 per ounce.
  • 2024 sustaining capitalNG guidance of $100 to $125 million and non-sustaining capitalNG guidance of $8 to $15 million.
  • 2024 exploration guidance of $35 to $45 million, including $17 to $22 million of brownfield exploration, and $18 to $23 million of greenfield and generative exploration programs.

 

President and CEO, Paul Tomory, commented, “We ended the year with strong operating performance from Öksüt and Mount Milligan, which allowed us to achieve our production guidance for both gold and copper for the year. We generated strong free cash flow for a second consecutive quarter, with our cash and cash equivalents exceeding $600 million. Looking ahead to 2024, we are forecasting higher gold production compared to last year, and we expect to continue to generate strong cash flow from operations.”

 

“Our team is focused on several key areas in 2024, including the completion of Mount Milligan’s site-wide optimization program in the second half of the year, which is focused on assessments of safety, productivity, and cost efficiency opportunities. We will be initiating a Preliminary Economic Assessment at Mount Milligan to evaluate the substantial resources with the goal to unlock value beyond the current 2035 mine life, targeted for the first half of 2025. We are also expecting to complete a feasibility study for the Thompson Creek molybdenum mine restart in mid-2024, as well as an initial resource estimate at the Goldfield Project by the end of 2024. In the year ahead, we expect to continue to deliver on our strategic plan that will drive future value and growth for Centerra.”

 

2023 Preliminary Production Results

 

  Q4 2023 Full Year 2023 2023 Full Year Guidance(1)
Total Gold Production (oz) 129,259 350,317 340,000 – 360,000
Mount Milligan (oz) 40,503 154,391 150,000 – 160,000
Öksüt (oz) 88,756 195,926 190,000 – 200,000
Total Copper Production (Mlbs) 19.7 61.9 60 – 70

(1) As disclosed with the Q3 2023 financial results on October 31, 2023 (LINK).

 

2024 Guidance

 

  2024 Guidance 2023 Consolidated Actuals
Mount Milligan(5,6) Öksüt(6) Consolidated Q3 2023 YTD(2) Q4 2023(3) FY 2023(4)
Production  
Total Gold Production (koz) 180 – 200 190 – 210 370 – 410  221 129 350
Total Copper Production (Mlbs) 55 – 65 n/a 55 – 65 42 20 62
Costs  
Gold Production Cost ($/oz) 950 – 1,050 650 – 750 800 – 900  820
AISC on a by-product basisNG ($/oz) 1,075 – 1,175 900 – 1,000 1,075 – 1,175  1,122
Capital Expenditures  
Additions to PP&E 55 – 65 40 – 50 108 – 140 54
Total capital expenditures 55 – 65 40 – 50 108 – 140 52    
Sustaining capital expendituresNG ($M) 55 – 65 40 – 50 100 – 125  49
Non-sustaining capital expendituresNG ($M) 0 0 8 – 15  3
Other Items  
Depreciation and amortization ($M) 90 – 100 45 – 55 140 – 165  84
Current income tax paid ($M) 1 – 5 85 – 95 86 – 100  9
General and administrative expenses ($M) n/a n/a 37 – 42(1)  33

 

(1) General and administrative expenses include $8 to $10 million of stock-based compensation.
(2) Nine months ended September 30, 2023.
(3) Three months ended December 31, 2023.
(4) Twelve months ended December 31, 2023.
(5) The Mount Milligan Mine is subject to an arrangement with RGLD Gold AG and Royal Gold, Inc. (together, “Royal Gold”) which entitles Royal Gold to purchase 35% and 18.75% of gold and copper produced, respectively, and requires Royal Gold to pay $435 per ounce of gold and 15% of the spot price per metric tonne of copper delivered (“Mount Milligan Streaming Arrangement”) in the presented periods. Using an assumed market gold price of $1,850 per ounce and a blended copper price of $3.50 per pound for 2024, Mount Milligan Mine’s average realized gold and copper price for 2024 would be $1,355 per ounce and $2.94 per pound, respectively, compared to average realized prices of $1,431 per ounce and $3.01 per pound in 2023, when factoring in the Mount Milligan Streaming Arrangement and concentrate refining and treatment costs. The blended copper price of $3.50 per pound factors in copper hedges in place as of December 31, 2023.
(6) In 2024, gold and copper production at the Mount Milligan Mine is projected with recoveries estimated at 64% and 78%, respectively. Gold production at the Öksüt Mine assumes recoveries of approximately 76%. Unit costs include a credit for forecasted copper sales treated as by-product for all-in sustaining costsNG and all-in costsNG. Production for copper and gold reflects estimated metallurgical losses resulting from handling of the concentrate and metal deductions levied by smelters.

 

Mount Milligan

 

Mount Milligan’s 2024 gold production is expected to be in the range of 180,000 to 200,000 ounces, a 22% increase of the midpoint year-over-year, driven by mine sequencing and higher gold grades. Copper production is expected to be 55 to 65 million pounds in 2024. As previously disclosed with the third quarter 2023 financial results on October 31, 2023, the Company deferred processing a portion of the elevated pyrite bearing high-grade gold, low-grade copper ore mined in Phase 7 to 2024, for blending purposes. This is expected to result in overall higher gold grades this year. In 2024, gold and copper recoveries are expected to be similar to those achieved in 2023. Additional metallurgical reviews are ongoing, aimed at increasing gold and copper recoveries. Both gold and copper production are expected to be evenly weighted throughout the year, however gold and copper sales will be weighted more towards the second half of 2024, resulting in lower AISC on a by-product basisNG in this period.

 

In 2024, gold production costs at Mount Milligan are expected to be $950 to $1,050 per ounce and AISC on a by-product basisNG is expected to be $1,075 to $1,175 per ounce. In the fourth quarter of 2023, Centerra embarked on a site-wide optimization program at Mount Milligan, focused on a holistic assessment of occupational health and safety, as well as improvements in mine and plant operations. This program is focused on all aspects of the operation to maximize the potential of the orebody, setting up Mount Milligan for long-term success to 2035 and beyond. Some examples of initiatives include:

  • Occupational health and safety: improvements through a complete engagement of the operating team, with a focus on improving employee retention and reduced turnover.
  • Mine: improvements of the load/haul cycle, productivity, enhanced mine maintenance practices and refinement of the geology-metallurgy model; working towards seamless integration of mine and plant operations.
  • Plant: continuous improvement in the overall operability of the plant, flotation circuit, consumables, materials handling systems, and blending consistency of feed to the plant. The Company expects these actions to enhance plant throughput and recovery.

 

The Company is encouraged by the preliminary cash flow improvement estimates from the first phases of work on the program. Estimates of the potential cost savings from the asset optimization review are still being developed and are not included in Mount Milligan’s 2024 cost guidance ranges.

 

In 2024, Mount Milligan is expected to have between $55 and $65 million in additions to plant, property, and equipment, all of which are sustaining capitalNG. This includes capital carried over from 2023, equipment rebuilds, and annual capital related to the tailings storage facility (“TSF”).

 

Öksüt

 

At Öksüt, 2024 gold production is expected to be in the range of 190,000 to 210,000 ounces, which is unchanged from the previously disclosed life of mine (“LOM”) plan, published on September 18, 2023 (LINK). Gold production is expected to be weighted more towards the first half of 2024, as the elevated leach pad inventories and stockpiles are processed through the adsorption, desorption, and recovery (“ADR”) plant.

 

In 2024, gold production costs at Öksüt are expected to be $650 to $750 per ounce and AISC on a by-product basisNG is expected to be $900 to $1,000 per ounce, $50 per ounce higher, and $100 per ounce higher, than previously disclosed in the LOM plan. The increase is related to higher royalty rates based on the current elevated gold price environment, a slight increase in sustaining capital, and a new multi-year contract with the existing mining and hauling services provider.

 

In 2024, Öksüt is expected to have between $40 and $50 million in additions to plant, property, and equipment, all of which is sustaining capitalNG. This includes capital stripping, heap leach construction, and equipment purchases. The increase in sustaining capital compared to the previously disclosed LOM plan is related to deferred stripping as a result of the new mining and hauling services contract.

 

The Turkish corporate income tax rate applicable to Öksüt is 25%. In 2024, Öksüt’s current income tax paid is expected to be between $85 and $95 million, which includes withholding tax related to repatriation of earnings. Income tax payments in Türkiye are typically paid in cash on a one-quarter lag and the Turkish Government State royalty payment is made in the second quarter on an annual basis. In 2024, tax payments for the fourth quarter 2023 and the first quarter 2024 will both be paid in the second quarter of 2024. As a result, cash flows at Öksüt in the second quarter of 2024 will be impacted by the tax and royalty payments.

 

Molybdenum Business Unit

 

In 2024, the care and maintenance and reclamation expenditures for the Molybdenum Business Unit (“MBU”) are expected to be between $21 and $28 million. This includes $15 to $18 million of reclamation expenditures at the Endako Mine (“Endako”), $5 to $7 million of care and maintenance costs at Endako, and $1 to $3 million of care and maintenance costs for the first six months of 2024 at the Thompson Creek Mine (“Thompson Creek”). Substantially all reclamation costs planned in 2024 have been included in the reclamation provision as at December 31, 2023.

 

For the first six months of 2024, project development costs at Thompson Creek are expected to be $17 to $20 million of expensed costs related to stripping and general and administrative expenses, and $7 to $12 million of non-sustaining capitalized costsNG related to equipment purchases and refurbishments. The Company continues to progress work on the Thompson Creek feasibility study, which is expected to be completed by mid-2024. Upon completion of the FS, the Company will update the Thompson Creek guidance as necessary.

 

In 2024, cash from operations at the Langeloth Metallurgical Facility (“Langeloth”) is expected to be between positive $20 million and negative $25 million, with movements in working capital dependent on market molybdenum prices. Sustaining capital expendituresNG at Langeloth in 2024 are expected to be $5 to $10 million and are related to a planned acid plant maintenance shutdown that routinely occurs every several years.

 

Goldfield Project

 

In 2024, Goldfield Project development costs are expected to be $9 to $13 million related to exploration drilling and metallurgical test work. The Company is focused on exploration programs on the large land package with a focus on oxide and transition material. Contingent on exploration success and metallurgical testwork results throughout the year, the Company expects an initial resource estimate at the Goldfield Project by the end of 2024.

 

Kemess Project

 

In 2024, the Kemess Project will continue to be on care and maintenance. Care and maintenance costs are expected to be $12 to $14 million and reclamation costs are expected to range from $12 to $16 million. Reclamation activities are expected to be focused on decommissioning of the Kemess South TSF sedimentation pond and associated works. These activities were originally planned for 2023, but were deferred to 2024 due to the high occurrence of wildfires in British Columbia last year. Substantially all reclamation costs planned in 2024 have been included in the reclamation provision as at December 31, 2023.

 

Exploration Expenditures

 

In 2024, exploration expenditures are expected to be $35 to $45 million, including $17 to $22 million of brownfield exploration and $18 to $23 million of greenfield and generative exploration programs. The exploration targets for brownfield projects include further drilling and testing work at Mount Milligan, as well as Goldfield and Oakley Projects.

 

2024 Material Assumptions

 

Material assumptions or factors used to forecast production and costs for 2024, after giving effect to the hedges in place as at December 31, 2023, include the following:

  • A market gold price of $1,850 per ounce and an average realized gold price at Mount Milligan of $1,355 per ounce after reflecting the streaming arrangement with Royal Gold (35% of Mount Milligan’s gold at $435 per ounce).
  • A market price of $3.50 per pound for the unhedged portion of copper production. This equates to a blended copper price of $3.50 per pound, reflecting a minimum projected impact of a reduced volume of copper hedges in place for 2024. Realized copper price at the Mount Milligan Mine is estimated to average to $2.94 per pound after reflecting the Mount Milligan Streaming Arrangement (18.75% of the Mount Milligan Mine’s copper is sold at 15% of the spot price per metric tonne), and copper treatment and refining costs.
  • A molybdenum price of $20.00 per pound.
  • Exchange rates: $1USD:$1.33 Canadian dollar; $1USD:30.00 Turkish lira.
  • Diesel fuel price assumption: $1.06 per litre (CAD$1.41 per litre) at Mount Milligan.

 

Other Material Assumptions

 

Other material assumptions used in forecasting production and costs for 2024 can be found under the heading “Caution Regarding Forward-Looking Information” in this document. Production, cost, and capital forecasts for 2024 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 under the heading “Risk Factors” in the Company’s most recent Annual Information Form.

 

2024 Sensitivities

 

  Impact on
($ millions)
Impact on
($ per ounce sold)
Production Costs & Taxes Capital Costs Revenues Cash Flows AISC on a by-product basis per ounceNG
Gold price(1) -$50/oz
+$50/oz
8.5 – 10.5
8.5 – 10.5

15.5 – 17.0
15.5 – 17.0
7.0 – 8.5
7.0 – 8.5
10 – 12
10 – 12
Copper price(1) -10%
+10%
0.3 – 0.5
0.3 – 1.0

8.5 – 11.0
18.0 – 21.0
8.0 – 11.0
17.5 – 20.5
20 – 30
45 – 55
Diesel fuel(1) 10 % 1.0 – 1.5 0.5 – 1.0 1.5 – 2.5 4 – 6
Canadian dollar(1) (2) 10 cents 18.5 – 20.0 0.1 – 0.2 18.5 – 20.0 45 – 55
Turkish lira(3) 1 lira 0.2 – 0.5 0.1 – 0.2 0.3 – 0.7 1 – 2

(1) Includes the effect of the Company’s copper, diesel fuel and Canadian dollar hedging programs, with current exposure coverage as of December 31, 2023 of approximately 20%, 51% and 78%, respectively.
(2) Appreciation of the currency against the US dollar results in higher costs and lower cash flow and earnings, depreciation of the currency against the US dollar results in decreased costs and increased cash flow and earnings.
(3) Assumes an increase in the Turkish Lira will be partially offset by inflation.

 

Qualified Person

 

The scientific and technical information presented in this document, including the production estimates, 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 and were prepared, reviewed, verified, and compiled by Centerra’s geological and mining staff under the supervision of Paul Chawrun, P.Eng., who is a member of the Professional Engineers Ontario and Centerra’s Executive Vice President and Chief Operating Officer, who is a qualified person for the purpose of NI 43-101.

 

About Centerra Gold

 

Centerra Gold Inc. is a Canadian-based gold 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 District Project in Nevada, United States, the Kemess Project in British Columbia, Canada, and owns and operates the Molybdenum Business Unit in the United States and Canada.

 

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:

 

  Nine months ended September 30,
  Consolidated Mount Milligan Öksüt
(Unaudited – $millions, unless otherwise specified) 2023   2022   2023   2022   2023   2022
Production costs attributable to gold 178.8   125.9   135.3   104.8   43.5   21.1
Production costs attributable to copper 106.0   94.3   106.0   94.3    
Total production costs excluding molybdenum segment, as reported 284.8   220.2   241.3   199.1   43.5   21.1
Adjust for:            
Third party smelting, refining and transport costs 7.8   8.6   7.4   8.4   0.4   0.2
By-product and co-product credits (137.5 ) (169.5 ) (137.2 ) (169.5 ) (0.3 )
Adjusted production costs 155.1   59.3   111.5   38.0   43.6   21.3
Corporate general administrative and other costs 32.8   35.7   0.1   0.6    
Reclamation and remediation – accretion (operating sites) 4.3   5.4   1.8   1.3   2.5   4.1
Sustaining capital expenditures 48.1   54.6   27.6   43.2   20.5   11.4
Sustaining lease payments 4.3   4.3   3.8   3.9   0.5   0.4
All-in sustaining costs on a by-product basis 244.6   159.3   144.8   87.0   67.1   37.2
Exploration and study costs 50.4   42.6   4.2   10.1   1.3   2.5
Non-sustaining capital expenditures 2.9   2.0     1.5    
Care and maintenance and other costs 23.0   9.1       14.2   0.4
All-in costs on a by-product basis 320.9   213.0   149.0   98.6   82.6   40.1
Ounces sold (000s) 218.1   192.7   119.3   138.0   98.8   54.7
Pounds sold (millions) 43.5   58.0   43.5   58.0    
Gold production costs ($/oz) 820   653   1,134   759   440   386
All-in sustaining costs on a by-product basis ($/oz) 1,122   826   1,214   629   679   680
All-in costs on a by-product basis ($/oz) 1,471   1,105   1,249   713   836   732
Gold – All-in sustaining costs on a co-product basis ($/oz) 1,168   1,062   1,300   958   679   680
Copper production costs ($/pound) 2.43   1.63   2.43   1.63   n/a n/a
Copper – All-in sustaining costs on a co-product basis ($/pound) 2.78   2.04   2.78   2.04   n/a n/a

 

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

 

  Nine months ended September 30,
  Consolidated Mount Milligan Öksüt Molybdenum Other
    2023     2022     2023     2022   2023     2022     2023   2022   2023     2022  
Additions to PP&E(1) $ 53.8   $ 247.2   $ 25.4   $ 34.6 $ 23.4   $ 9.1   $ 0.6 $ 1.0 $ 4.4   $ 202.5  
Adjust for:                    
Costs capitalized to the ARO assets   1.0     18.1     2.5     9.9   (1.5 )   1.90             6.3  
Costs capitalized to the ROU assets   (2.7 )   (0.2 )   (0.1 )     (1.2 )   (0.2 )       (1.4 )    
Costs relating to the acquisition of Goldfield Project       (208.2 )                         (208.2 )
Other(2)   (0.2 )   0.9     (0.2 )   0.2   (0.2 )   0.6       0.1   0.2      
Capital expenditures $ 51.9   $ 57.8   $ 27.6   $ 44.7 $ 20.5   $ 11.4   $ 0.6 $ 1.1 $ 3.2   $ 0.6  
Sustaining capital expenditures   49.0     55.8     27.6     43.2   20.5     11.4     0.6   1.1   0.3     0.1  
Non-sustaining capital expenditures   2.9     2.0         1.5               2.9     0.5  

 

(1) As presented in note 14 of the Company’s condensed consolidated financial statements.
(2) Includes reclassification of insurance and capital spares from supplies inventory to PP&E.

 

Posted February 14, 2024

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