Centerra Gold Inc. (TSX: CG) reported its second quarter 2020 results. Key events and operating results of the second quarter included:

• Net earnings of $80.7 million and adjusted net earnings^NG of $97.8 million, $0.27 and $0.33 per common share (basic), respectively.
• Cash flow from operations was $268.1 million.
• Production totalled 219,692 ounces of gold and 19.1 million pounds of copper.
• Production costs per ounce of gold sold were $410 per ounce.
• Production costs per pound of copper sold were $1.20 per pound.
• All-in sustaining costs on a by-product basis per ounce sold^NG were $804 per ounce.
• Cash position of $212 million at quarter end with total liquidity of $712 million. As at June 30, 2020, the Company’s $500 million corporate credit facility was undrawn.
• Commercial production achieved on May 31, 2020 at the Öksüt Mine which generated positive operating cash flow of $13.5 million and free cash flow^NG of $5.0 million during the quarter.
• Robust spring melt at Mount Milligan resulting in stored water inventory in excess of 6 million cubic metres at the end of the second quarter.
• An updated Kumtor 43-101 technical report is expected to be released in the fall of 2020.
• No change to 2020 production and cost guidance and a modification to growth capital^NG guidance.
• Quarterly Dividend increased by 25% to C$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. At our Öksüt operation, we have celebrated a recent safety milestone, when on July 19, 2020, Öksüt achieved 3 million work 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 achieved commercial production during the quarter. Our operations in the quarter delivered consolidated gold production of 219,692 ounces at all-in sustaining costs^NG on a by-product basis of $804 per ounce sold in the quarter. Kumtor had another strong quarter producing 173,245 ounces of gold at all-in sustaining costs^NG on a by-product basis of $696 per ounce sold. Mount Milligan produced 35,656 ounces of gold and 19.1 million pounds of copper at all-in sustaining costs^NG on a by-product basis of $679 per ounce sold and Öksüt produced 10,791 ounces of gold, 5,619 ounces were commercial production. During the quarter, Öksüt’s all-in sustaining costs^NG on a by-product basis was $537 per ounce, being our lowest cost mine in the quarter.”

“Financially, the Company generated $268.1 million of cash from operations for the second quarter of 2020, which includes $220.4 million from Kumtor, $41.6 million from Mount Milligan and $13.5 million from Öksüt. During the second quarter of 2020, Kumtor, Mount Milligan and Öksüt delivered free cash flow^NG of $156.9 million, $34.4 million and $5.0 million, respectively. Company-wide, free cash flow^NG in the second quarter of 2020 was $169.1 million and we finished the quarter with cash of $212.2 million and no debt outstanding after repaying our corporate revolving credit facility in the quarter.”

“The decision of Centerra’s Board to increase the quarterly dividend by 25% to C$0.05 per common share announced today and planned into the future was based on our strong operating performance and the higher gold price environment, both of which contributed to our growing free cash flow and a debt-free balance sheet as at June 30, 2020.”

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. Centerra has taken a series of measures to provide its employees with accurate information, help prevent infection and reduce the potential transmission of COVID-19, including activation of a global crisis management team, frequent communication with and compassionate support of all our people, travel restrictions, and the temporary closure of various administration offices including our head office in Toronto. Each Centerra site rapidly and successfully implemented proactive measures to minimize the impact of COVID-19 on operations, including strict protocols for access to operating sites, temperature checks and questioning upon entry, increased cleaning and hygiene protocols, modifications to work shifts and accommodation at site and an offsite quarantine facility established specifically for employees travelling to the Kumtor Mine site. In addition, our operating mine sites continue to assess the resiliency of their supply chain, are increasing mine site inventories of key materials and developing contingency plans to allow for continued operations. 

The Company completed a company-wide COVID-19 employee survey in June to obtain feedback from employees on Centerra’s response to the pandemic and most importantly, on whether the Company is keeping employees well-informed and providing adequate support both physically and emotionally. The responses company-wide were favorable and Centerra will continue to address concerns and adapt its practices as necessary throughout the stages of this crisis.

While the majority of Centerra’s operating sites are currently operating without significant interruption, there has been an increase in the infection rates of COVID-19 and other illnesses in the Kyrgyz Republic which is beginning to have an impact on the available workforce for the Kumtor Mine. While Kumtor’s performance during the second quarter was unaffected, the Company is putting in place measures to manage the reduced workforce at Kumtor by mining waste below capacity while maintaining gold production levels by processing stockpiles as planned for the year.  For further details on the impact of COVID-19 on Centerra’s operating sites and development projects please see “Operating Mines and Facilities” and “Pre-Development Projects”.

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 second 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, Mexico, Turkey, Finland, USA and the Kyrgyz Republic. 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 $6.6 million in the second quarter of 2020, which included the impact of delays associated with COVID-19, compared to $6.3 million in the same quarter of 2019.

Kumtor Mine

The 2020 planned drilling program at Kumtor includes 55,000 metres of exploration and 15,000 metres of infill drilling, which are focused on priority primary and potential targets. Primary targets include various zones of the Central, Southwest and Sarytor deposits (areas) based on enhanced geological modelling from the recently updated Kumtor resource block model, and positive drilling results from 2018 and 2019. In addition, the 2020 planned drilling program at Kumtor includes the underexplored segments of the Kumtor Gold Trend – the Northeast targets, Bordoo, Akbel and conceptual targets (Hope Zone and others). An exploration potential update will be included in an updated Kumtor 43-101 technical report expected to be released in the fall of 2020.

In April, due to COVID-19 preventive measures, exploration drilling at Kumtor was temporarily suspended, resuming in June 2020. Due to the delay, a certain portion of the planned drilling program could be deferred to 2021.

During the second quarter of 2020, exploration drilling programs continued with the completion of fifteen diamond drill holes for 4,663 metres. Exploration drilling focused on testing zones of sulfide and oxide mineralization along the corridor between the Central and Southwest pits (Kosholuu, Hope and Southwest Oxide Deep zones), on the periphery of the Sarytor Pit, Northeast targets and Muzdusuu area.

Southwest Deposit (Area)

In the second quarter of 2020, a total of eleven diamond drill holes were completed in the Southwest area for a total of 2,902 metres.

Three drill holes have been completed between Southwest and Central pits in the Hope Zone for a total of 508 metres. Results from recent drilling have delineated a lens-shaped oxide gold mineralization. This mineralization extends along the hanging wall of the Kumtor Lower Thrust for more than 400 metres and is opened in both directions along the main NE strike.

Hole SW-20-319 intersected broad dispersed gold mineralization in Tertiary sediments.

Significant intersections are reported below:

In the Kosholuu Zone, three drill holes were completed for a total of 708.2 metres. Selected best intercepts are listed below.

Five drill holes were completed for a total of 1,686.5 metres in the Hope Zone and tested inferred oxide mineralization. A selected best intercept is listed below:

Sarytor Deposit (Area)

In the second quarter, drilling was not conducted at the Sarytor area, but results were obtained for the hole drilled in the first quarter. Significant intervals are shown below.

Northeast Deposit (Area)

In the Northeast area, one diamond drill hole was completed during this quarter and results were obtained for previously completed reverse circulation (RC) drilling.

A few broad and low-grade intervals of sulfide and oxide mineralization were intersected. Oxide mineralization was identified in the northwestern part of the area, along the tectonic mélange zone.

Muzdusuu Area

Four diamond drill holes were completed in the Muzdusuu Area for a total of 1,040 metres. Results were also obtained for holes completed in the first quarter. Drilling in the Muzdusuu Area (outside Central Pit) is designed to explore for oxide and mixed gold mineralization along the Kumtor Lower Thrust. A few drill holes intersected broad intervals (up to 68 metres) of a mixed (oxide + sulfide) gold mineralization.

Hole DM2067 has tested inferred dispersed gold mineralization target in the Tertiary sediments (Parking Lot target) and intersected broad interval of a low-grade mineralization.

Significant intervals are shown below.

The above mineralized intercepts were calculated using a cut-off grade of 1.0 g/t Au for sulfide and 0.1 g/t Au for oxide mineralization, minimum interval of 4.0 metres and a maximum internal dilution interval of 5.0 metres. The true widths for sulfide mineralized intervals reported represent approximately 70 to 95% of the stated down hole interval. Significant assay intervals reported for oxide mineralization represent apparent widths due to the uncertainty of the nature of the mineralization at the time of reporting. Drill collar locations and associated graphics are available at the following link: http://ml.globenewswire.com/Resource/Download/8e9ad544-6c3b-4ea5-b386-8e57ddd0746d

A full listing of the drill results, drill hole locations and plan map (including the azimuth, dip of drill holes, and depth of the sample intervals) for the Kumtor Mine have been filed on the System for Electronic Document Analysis and Retrieval (“SEDAR”) at www.sedar.com and are available at the Company’s web site www.centerragold.com.

Mount Milligan Mine

The 2020 planned drilling program at Mount Milligan includes 17,500 metres (at approximately 40 drill sites) in five target zones of in-pit exploration, 10,000 metres of brownfield exploration and 3,000 metres of greenfield exploration. In March, due to COVID-19 preventive measures, exploration drilling at Mount Milligan was temporarily suspended and resumed in June 2020, with no impact to the planned drilling programs anticipated for the remainder of 2020. In the second quarter, two drill holes were completed in the Great Eastern Fault target area (20-1240, 20-2141), and one was in progress, totalling 1,274 metres drilled. Assay results were returned for two drill holes during the quarter and best weighted average intersections are reported below.

Saddle/66 Gap zone (In-Pit)

DDH 20-1237 and 20-1238 tested for an extension of mineralization into a gap in known reserves between the Saddle and 66 zones; and a deep geophysical target. DDH 20-1237 was abandoned at 26.8 metres for technical reasons. Significant pyrite mineralization in both drill holes is related to dykes (monzonite and trachyte) proximal to faults. The deep interval in 20-1238 was intersected in the immediate footwall of Harris fault.

The above mineralized intercepts were calculated using a cut-off grade of 0.1 g/t Au and a maximum internal dilution interval of 4 metres. Significant assay intervals reported represent apparent widths due to the undefined geometry of mineralization in this zone, relationship between fault blocks, and conceptual nature of the exploration target. Drill collar locations and associated graphics are available at the following link: 

http://ml.globenewswire.com/Resource/Download/8e9ad544-6c3b-4ea5-b386-8e57ddd0746d

Greenfield exploration (MAX project)

The 2020 greenfield Phase-1 drilling program was completed in the second quarter of 2020 at the Max project. The Max project consists of a block of 12 mineral claims (4,869 ha) under option from Jama Holdings Inc., 21 kilometres south of the Mount Milligan mine processing facilities and adjoins the Mount Milligan property on the south. The program was supported by helicopter in June 2020, completing seven drill holes (3,573 metres) from five pads in two target areas. The prospect has similar geology, structure, geophysical and geochemical signature as the Mount Milligan MBX deposit. Assay results are pending.

A full listing of the drill results, drill hole locations and plan map (including the azimuth, dip of drill holes, and depth of the sample intervals) for the Mount Milligan Mine have been filed on the System for Electronic Document Analysis and Retrieval (“SEDAR”) at www.sedar.com and are available at the Company’s web site www.centerragold.com.

Öksüt Mine

The 2020 planned drilling program at Öksüt includes 20,000 metres of diamond drilling, focused on near pit resource expansion and other oxide gold targets. The 2020 diamond drilling program has been designed to:

• expand the oxide gold resources around the known deposits at Keltepe and Güneytepe as well as at Keltepe North and Keltepe North-West,
• further test the oxide gold potential at Yelibelen, Büyüktepe, Boztepe and other targets,
• further delineate the supergene copper mineralization at depth, and test other deeper targets.

Drilling, which commenced towards the end of the second quarter of 2020 with one exploration hole being completed for 246 metres at the periphery of Güneytepe, will continue into the third quarter of 2020. 

The 2020 planned drilling program has not been impacted by the COVID-19 preventive measures at the Öksüt mine site. 

Assay results have been received for the completed drill hole. The highlights are:

The above mineralized intercepts were calculated using a cut-off grade of 0.2 g/t Au and a maximum internal dilution interval of 5 metres. The true widths of the mineralized intervals reported represent approximately 60 to 90% of the stated downhole interval. Drill collar locations and associated graphics are available at the following link: http://ml.globenewswire.com/Resource/Download/8e9ad544-6c3b-4ea5-b386-8e57ddd0746d

A full listing of the drill results, drill hole locations and plan map (including the azimuth, dip of drill holes, and depth of the sample intervals) for the Öksüt Gold Mine have been filed on the System for Electronic Document Analysis and Retrieval (“SEDAR”) at www.sedar.com and are available at the Company’s web site www.centerragold.com.

Kemess Project

The 2020 Kemess brownfield drilling program is focused on the Kemess North Trend and comprises three drill holes (2,700 metres) at the Nugget historic resource to test for mineralization up-dip of the 2019 drilling and up to three drill holes (2,000 metres) at the Kemess East resource to test for an extension of known mineralization. Drilling at Kemess East will attempt to reuse and extend 2017 drill holes, or alternatively, a single drill hole (2,000 metres) may be drilled from surface. In late June, crews mobilized to site and began preparations, but no drill core was produced. The program is expected to run until late August.

Other Projects

During the second quarter of 2020, greenfield exploration programs targeting gold and copper were ongoing in Canada, Turkey, Mexico, USA and Finland.

Qualified Person & QA/QC – Exploration

Exploration information and related scientific and technical information in this document regarding the Kumtor Mine were prepared in accordance with the standards of National Instrument 43-101 (“NI 43-101”) and were prepared, reviewed, verified and compiled by Boris Kotlyar, a member with the American Institute of Professional Geologists (AIPG), Chief Geologist, Global Exploration with Centerra, who is the qualified person for the purpose of NI 43-101. Sample preparation, analytical techniques, laboratories used, and quality assurance-quality control protocols used during the exploration drilling programs are done as described in the Kumtor Technical Report dated December 31, 2014. The Kumtor deposit is described in the 2019 Annual Information Form and the Kumtor Technical Report, which are both filed on SEDAR at www.sedar.com.  

Exploration information and related scientific and technical information in this document regarding the Mount Milligan Mine were prepared in accordance with the standards of NI 43-101 and were prepared, reviewed, verified and compiled by C. Paul Jago, Member of the Engineers and Geoscientists British Columbia, Exploration Manager at Centerra’s Mount Milligan Mine, who is the qualified person for the purpose of NI 43-101. Sample preparation, analytical techniques, laboratories used, and quality assurance quality control protocols used during the exploration drilling programs are done consistent with industry standards and independent certified assay labs are used. The Mount Milligan deposit is described in the 2019 Annual Information Form and a technical report dated March 26, 2020 (with an effective date of December 31, 2019) prepared in accordance with NI 43-101, both of which are available on SEDAR at www.sedar.com.  

Exploration information and related scientific and technical information in this document regarding the Öksüt Gold Mine were prepared, reviewed, verified and compiled in accordance with NI 43-101 by Mustafa Cihan, Member of the Australian Institute of Geoscientists (AIG), Exploration Manager Turkey at Centerra’s Turkish subsidiary Centerra Madencilik A.Ş., who is the qualified person for the purpose of NI 43-101. Sample preparation, analytical techniques, laboratories used, and quality assurance-quality control protocols used during the exploration drilling programs are done consistent with industry standards and independent certified assay labs are used. The Öksüt deposit is described in Centerra’s most recently filed Annual Information Form and in a technical report dated September 3, 2015 (with an effective date of June 30, 2015) prepared in accordance with NI 43-101, both of which are available on SEDAR at www.sedar.com.

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 two flagship assets, the Kumtor Mine in the Kyrgyz Republic, the Mount Milligan Mine in British Columbia, Canada and has a third operating gold mine, the 100%-owned Öksüt Mine in Turkey. Centerra’s shares trade on the Toronto Stock Exchange. The Company is based in Toronto, Ontario, Canada.