Centerra Gold Inc. (TSX: CG) reported its third quarter 2020 results. Key events and operating results of the third quarter included:
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.
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 Öksüt operation, we have celebrated a recent safety milestone, when on July 19, 2020, Öksüt 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 Öksüt 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 Öksüt 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. Öksüt 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. Öksüt 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 Öksüt. During the third quarter of 2020, Kumtor, Mount Milligan and Öksüt 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.”
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 Öksüt 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.
Öksüt’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.
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. For more details, please refer to “Operating Mines and Facilities – Kumtor Mine” in the Company’s management’s discussions and analysis dated November 3, 2020.
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.
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 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 Öksüt. 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:
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. The Company is based in Toronto, Ontario, Canada.
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