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Centerra Gold Records Net Earnings of $167.4 million or $0.57 per Common Share, Adjusted Net Earnings (Non-GAAP) of $84.2 million or $0.28 per Common Share, Cash from Operations of $153.1 million and Free Cash Flow (Non-GAAP) of $72.1 million

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Centerra Gold Records Net Earnings of $167.4 million or $0.57 per Common Share, Adjusted Net Earnings (Non-GAAP) of $84.2 million or $0.28 per Common Share, Cash from Operations of $153.1 million and Free Cash Flow (Non-GAAP) of $72.1 million

 

 

 

 

 

Centerra Gold Inc. (TSX: CG) (NYSE: CGAU) reported its first quarter 2021 results. Key events and operating results of the first quarter included:

 

  • Net earnings and adjusted net earningsNG of $167.4 million, $0.57 per common share (basic), and $84.2 million, $0.28 per common share (basic), respectively.
  • Cash flow from operations and free cash flowNG of $153.1 million and $72.1 million, respectively.
  • Cash position at quarter-end of $823.2 million with total liquidity of $1,223 million.
  • Consolidated Production of 160,346 ounces of gold and 18.6 million pounds of copper.
  • Gold production costs and copper production costs were $561 per ounce and $1.42 per pound, respectively.
  • All-in sustaining costs on a by-product basisNG and All-in costs on a by-product basisNG were $745 per ounce and $1,073 per ounce, respectively.
  • Finalized the sale of 50% interest in Greenstone Gold Mines Partnership for cash consideration of $210 million and contingent consideration of approximately $75 million.  A gain of $72.3 million was recorded on the sale (excluding contingent consideration).
  • Recent Kyrgyz Republic Developments resulted in several new legislative changes and legal claims affecting the Kumtor Mine, including a new Kyrgyz Republic law which could result in “external management” being imposed on Kumtor Gold Company (“KGC”), a $3 billion civil claim against KGC; various tax claims estimated at $352 million and several new and re-opened criminal investigations.
  • Mount Milligan water permits extension received in April 2021, extending access to surface water sources to November 2023.
  • Commenced trading on the New York Stock Exchange under the symbol “CGAU” on April 15, 2021.
  • Quarterly Dividend declared of CAD$0.05 per common share.

 

Commentary

 

Scott Perry, President and Chief Executive Officer of Centerra stated, “During the first quarter we continued to demonstrate positive safety performance as the Kumtor mine achieved one-year lost time injury free and Endako achieved six years reportable injury free. Across the organization we continue to stay vigilant with respect to the COVID-19 virus, proactively maintaining our rigorous safety protocols to prevent an outbreak and reduce the spread of the COVID-19 virus for the health and safety of our employees, contractors, communities and other stakeholders.”

 

“In the first quarter, our three operating mines continued to deliver solid performances, including the Mount Milligan mine which generated record quarterly free cash flow. Company-wide our operations in the quarter delivered gold production of 160,346 ounces at all-in sustaining costsNG on a by-product basis of $745 per ounce. The Mount Milligan mine produced 42,576 ounces of gold and 18.6 million pounds of copper at all-in sustaining costsNG on a by-product basis of $367 per ounce, making it our lowest cost producer in the quarter. The Kumtor mine produced 90,169 ounces of gold at all-in sustaining costsNG on a by-product basis of $888 per ounce and the Öksüt mine produced 27,601 ounces of gold at all-in sustaining costsNG on a by-product basis of $804 per ounce as it now enters its first full year of commercial production.”

 

“Financially, the Company generated $153.1 million of cash from operations for the first three months of 2021, which includes $89.7 million from the Mount Milligan mine, $66.7 million from the Kumtor mine and $32 million from the Öksüt mine. Company-wide free cash flowNG generated in the first quarter of 2021 totalled $72.1 million, including $80.2 million from the Mount Milligan mine, $25.7 million from the Öksüt mine and $4 million from the Kumtor mine. With the proceeds of the disposition of the Greenstone property, we finished the quarter with a cash position of $823.2 million.”

 

“Based on the Company’s financial position, strong operating results and cash flows, the Board approved on May 10, 2021, a quarterly dividend of CAD$0.05 per share.”

 

“The Company notes that there is a great deal of uncertainty regarding future production and operations at the Kumtor Mine due to recent legislative changes in the Kyrgyz Republic relating to the Kumtor Mine. Accordingly, the 2021 guidance and previously disclosed 3-year outlook should be viewed with caution. We remain on track to achieve 2021 production and cost guidance at our Mount Milligan and Öksüt mines, and the Company is expected to generate $160 million (guidance midpoint) in free cashflow, excluding the Kumtor Mine.” 

 

“The Company remains committed to trying to work with Kyrgyz Republic authorities to resolve these issues in accordance with the 2009 restated project agreements applicable to the Kumtor Mine, if the authorities are willing to do so. However, the Company will also use all legal avenues to defend itself against baseless environmental and tax cases in the Kyrgyz Republic as well against legislative changes that not only violate but fundamentally undermine the terms of the 2009 restated project agreements.”

 

“Recently, the Company successfully listed and commenced trading on the New York Stock Exchange to increase the Company’s visibility and exposure to investors in the United States.”

 

New York Stock Exchange Listing

 

Centerra’s common shares began trading on the New York Stock Exchange (NYSE) under the symbol “CGAU” on Thursday, April 15, 2021.

 

Kyrgyz Republic Update

 

As previously disclosed, the Kyrgyz Republic Parliament passed a law on May 6, 2021 which would enable the Kyrgyz Republic Government to impose “external management” on companies in the Kyrgyz Republic operating under concession agreements. The sponsor of the law, Mr. Akylbek Japarov, has acknowledged that the only project operating under a concession agreement in the Kyrgyz Republic is the Kumtor Mine and therefore this new law purports to regulate only the Kumtor Project. The Company understands that this newly adopted law on external management would apply in circumstances where Kumtor Gold Company (KGC) violates certain Kyrgyz laws relating to safety and thereby creates an immediate threat to the life or health of people. In such instances, the law would (i) enable the Prime Minister of the Kyrgyz Republic to appoint an external manager to take control of all management activities of KGC, including its bank accounts, and (ii) prohibit the Company or KGC’s board of directors from directing the external managers (or else face criminal sanctions).

 

Mr. A. Japarov is also the Chairman of the Kyrgyz Republic State Commission which was formed in February 2021 to review the activities of the Kumtor Mine and is expected to report its findings shortly.

 

The Company is also aware of other draft laws and decrees in the Kyrgyz Republic which seek to undermine the 2009 restated Kumtor project agreements and the tax and fiscal regime under which the Kumtor Mine has operated since 2009. It is unclear whether such drafts have progressed past the proposal stage.

 

On May 7, 2021, a Kyrgyz Republic court ruled against KGC in a case brought by four Kyrgyz Republic private citizens seeking a determination that KGC’s past practice of placing waste rock on glaciers was illegal. The court awarded damages of over U.S.$3 billion in favour of the Kyrgyz Republic. The Company notes that one of the claimants is the son of the current Director of the Kyrgyz Republic State Agency for Environment Protection and Forestry.

 

The Company has also received further tax assessments from the Kyrgyz Republic State Tax Service which when, combined with previous tax claims, amount to hundreds of millions of dollars.

 

As the Company has noted many times, the 2009 restated Kumtor project agreements provide a solid foundation for Kumtor’s operations and were approved by the Kyrgyz Republic Parliament and Constitutional Court in 2009. Those agreements were re-affirmed by the Government of the Kyrgyz Republic in 2017 when it entered into the Strategic Agreement on Environmental Protection and Investment Promotion which was completed and became fully effective in 2019. KGC’s operations and activities have always carefully adhered to those agreements and applicable laws. Furthermore, the Strategic Agreement included a release of the Company and KGC by the Kyrgyz Republic Government of all outstanding claims at such time, including damages for harm allegedly caused to the environment from storing production tails on glaciers. The Company therefore believes strongly that the claims advanced by the State Tax Service and such individual Kyrgyz Republic claimants are meritless and the new and draft Kyrgyz Republic laws noted above, if implemented, would clearly violate the 2009 restated project agreements and the 2009 Kyrgyz Republic laws which confirmed such agreements. The Kumtor Mine’s environmental performance adheres to international standards, including those of the European Bank for Reconstruction and Development, and has been audited multiple times by, among others, the Kyrgyz Government’s own environmental consultant, AMEC Foster Wheeler. AMEC’s reports have confirmed that the Kumtor Mine is operated in accordance with international best practice and its recommendations for improvements have been fully implemented by the Company in a manner agreed by the Kyrgyz Government in the 2017 Strategic Agreement. In terms of Kumtor’s safety record, the mine recently achieved, one year of operations free of any lost time injuries.

 

The Company believes that the actions of the Kyrgyz Republic authorities described above are a concerted effort to coerce Centerra to give up economic value or ownership of the Kumtor Mine or to falsely justify a nationalization of the Kumtor Mine. While the Company has benefited from a close and constructive dialogue with the Kyrgyz Republic authorities over many years and remains committed to trying to work with them to resolve any outstanding issues in accordance with the 2009 Restated Project Agreements applicable to the Kumtor Mine, it will not hesitate to use all legal avenues to protect its rights and interests and those of its shareholders and it intends to pursue its claim in international arbitration proceedings.

 

No assurances can be given that any of the current or future legal claims of the State Tax Service or individual claimants, disputes as to the application of current or future Kyrgyz Republic laws relating to the Kumtor Mine, the results of the State Commission review or any other future regulatory, civil or criminal claims impacting KGC or Centerra can be resolved without a material impact on the Company. See “Contingencies” for further information relating to these Kyrgyz Republic developments.

 

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. In addition, operating mine sites continue to assess the resiliency of their supply chains, maintaining increased mine site inventories of key materials. The Company has also implemented travel restrictions and has temporarily closed or limited office capacity at its various administration offices including its head office in Toronto.

 

In Turkey and the Kyrgyz Republic, the week-over-week status appears to be stabilizing, with the national daily COVID-19 case count in Turkey at approximately 25,000 (down from a high of 65,000 in recent weeks) and the national COVID-19 daily case count in the Kyrgyz Republic holding at approximately 300 cases per day. At the Öksüt mine, 17 individuals are in quarantine, primarily from the mine’s open pit mining contractor. The Turkish Government has declared a nine-day public holiday & stay-at-home period for the post Ramadan celebration in May 2021, during which blasting activities in the open pit at the Öksüt mine will be halted, resulting in a net two to three days of no mining activity.  In the Prince George region of British Columbia, Canada, near the Mount Milligan mine, daily COVID-19 case counts at approximately 150, (down from a high of approximately 200 in recent weeks). As part of the roll-out of vaccinations across Northern British Columbia, COVID-19 vaccinations were made available to Mount Milligan employees in April 2021. The majority of the Molybdenum Business Unit is located in the United States have not been materially affected by COVID-19 due, in part, to a rapid COVID-19 vaccination roll-out.

 

COVID-19 has not materially affected Centerra’s operations as employee absences due to COVID-19 and other illnesses have so far been successfully managed. 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.

 

Exploration Update

 

Exploration activities in the first quarter of 2021 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, Turkey, Finland, USA and the Kyrgyz Republic.

 

Exploration expenditures were $9.3 million in the first quarter of 2021 compared to $7.8 million in the same quarter of 2020. The increase in exploration expenditures was due to a significantly expanded drilling program at the Kumtor mine, drilling approximately 20,000 metres in the first quarter of 2021, as well as the recommencement of drilling activities at Öksüt and Mount Milligan earlier in than the prior period.

 

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: http://ml.globenewswire.com/Resource/Download/ebc019dc-6dc1-46a5-a948-2fde2391fd4f

 

About Centerra Gold

 

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 Öksüt mine in Turkey. Centerra’s shares trade on the Toronto Stock Exchange (TSX) under the symbol CG and on the New York Stock Exchange (NYSE) under the symbol CGAU. The Company is based in Toronto, Ontario, Canada.

 

Posted May 11, 2021

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