Centerra Gold Reports Third Quarter 2023 Results; Significant Free Cash Flow Drives Increased Cash Balance

Centerra Gold Inc. (TSX: CG) (NYSE: CGAU) reported its third quarter 2023 operating and financial results.

President and CEO, Paul Tomory, commented, “Centerra had a strong third quarter, with cash provided by mine operations of $144 million and $36 million, from Öksüt and Mount Milligan, respectively. In addition, the Langeloth Metallurgical Facility returned $17 million from the previous investment into working capital, all of which drove a substantial increase to our cash balance. Öksüt outperformed our expectations, producing almost 87,000 ounces in the quarter. Our 2023 consolidated gold production guidance remains on track to be between 340,000 to 360,000 ounces and we expect to continue to generate significant free cash flow in the fourth quarter, resulting in a higher cash balance by the end of the year. We remain on track for a strong finish to 2023.”

“In September, we announced positive economics for the Thompson Creek Mine restart, while simultaneously initiating a process to evaluate all strategic options for the Molybdenum Business Unit assets. We also continue to drive operational and technical improvements at Mount Milligan to unlock its full potential as our cornerstone asset. Given the results from this quarter, we are optimistic about the future of Centerra and our ability to internally fund our strategic initiatives with cash flows from operations.”

Third Quarter Highlights

Operations:

Production: Third quarter 2023 gold production of 126,221 ounces, including production of 39,554 ounces of gold from the Mount Milligan Mine and 86,667 ounces of gold from the Öksüt Mine. Copper production in the quarter was 15.0 million pounds.
Sales: Third quarter 2023 gold sales of 130,973 ounces at an average realized market price of $1,741 per ounce and copper sales of 15.4 million pounds at an average realized copper price of $2.99 per pound.
Costs: Consolidated gold production costs were $643 per ounce and all-in sustaining costs on by-product basis^NG were $827 per ounce for the quarter, with the effect of higher gold sales from Öksüt offsetting higher production costs from Mount Milligan.
Capital expenditures^NG: Third quarter 2023 additions to property, plant, equipment (“PPE”) and sustaining capital expenditures^NG were $25.0 million and $23.5 million, respectively. Sustaining capital expenditures^NGin the third quarter 2023 included capitalization to the tailings storage facility, as well as construction of a water pumping system at Mount Milligan, and deferred stripping at Öksüt.
Guidance: Centerra’s 2023 consolidated gold production guidance remains on track to be between 340,000 to 360,000 ounces. The Company is increasing gold production guidance at Öksüt and lowering it at Mount Milligan. Centerra’s 2023 copper production guidance remains unchanged at 60 to 70 million pounds and is expected to be near the low end of the range. Centerra’s 2023 consolidated gold production cost guidance is unchanged and is expected to be in the range of $700 to $750 per ounce.

Financial:

Net earnings: Net earnings of $60.6 million or $0.28 per share and adjusted net earnings^NG of $44.4 million or $0.20 per share. Adjustments include $23.1 million of reclamation provision revaluation recovery, $2.3 million unrealized foreign exchange gains related to the reclamation provision at the Endako Mine and the Kemess Project, and $9.2 million of deferred income tax expense resulting from the effect of foreign exchange rate changes on monetary assets and liabilities in the determination of taxable income related to Öksüt and Mount Milligan.
Free cash flow^NG: Cash provided by operating activities of $166.6 million and free cash flow^NG of $144.5 million, including cash provided by mine operations and free cash flow from Öksüt of $143.9 million and $133.8 million, respectively.
Cash and cash equivalents: Total liquidity of $890.2 million, representing a cash balance of $492.1 million and $398.1 million available under a corporate credit facility as at September 30, 2023.
Dividend: Quarterly dividend declared of C$0.07 per common share.

Other:

Corporate credit facility: In September 2023, the Company announced the extension of its $400 million revolving credit facility, which is currently undrawn, with a renewed four-year term maturing on September 8, 2027.
Corporate development updates: In the third quarter 2023, a deferred milestone payment of $31.5 million was paid to Waterton Nevada Splitter, LLC (“Waterton”) in connection with the February 2022 acquisition of the Goldfield Project. Partially offsetting the third quarter payment to Waterton, in the fourth quarter 2023 Centerra expects to receive a milestone payment of $25 million from a subsidiary of the Orion Mine Finance Group in relation to the sale of its 50% interest in the Greenstone Gold Mines Partnership (“Greenstone Project”) in 2021. Future payments to Centerra in relation to the Greenstone Project are payable as certain production thresholds are met.
Intention to renew normal course issuer bid: Centerra believes its share price continues to be trading in a range that does not adequately reflect the value of its assets and future prospects. As a result, subject to the approval of the Toronto Stock Exchange, Centerra intends to renew its NCIB to purchase for cancellation up to an aggregate of 18,293,896 common shares in the capital of the Company, representing 10% of the public float. As of October 31, 2023, Centerra had 215,807,212 issued and outstanding Common Shares.

Table 1 – Overview of Consolidated Financial and Operating Highlights

*($millions, except as noted)*	Three months ended September 30,					Nine months ended September 30,
	2023	2022		% Change		2023		2022		% Change
Financial Highlights
Revenue	343.9	179.0		92	%	754.9		641.9		18	%
Production costs	186.8	132.0		42	%	544.6		416.5		31	%
Depreciation, depletion, and amortization (“DDA”)	42.5	14.4		195	%	84.4		79.9		6	%
Earnings from mine operations	114.6	32.6		252	%	125.9		145.5		(13	)%
Net earnings (loss)	60.6	(33.9	)	279	%	(52.5	)	52.9		(199	)%
Adjusted net earnings (loss)⁽¹⁾	44.4	(15.9	)	379	%	(50.7	)	4.3		(1279	)%
Cash provided by (used in) operating activities	166.6	(17.0	)	1080	%	100.2		7.8		1185	%
Free cash flow (deficit)⁽¹⁾	144.4	(35.5	)	507	%	49.1		(57.6	)	185	%
Additions to property, plant and equipment (“PP&E”)	25.0	11.7		113	%	53.8		247.2		(78	)%
Capital expenditures – total⁽¹⁾	24.6	16.1		53	%	51.9		57.8		(10	)%
Sustaining capital expenditures⁽¹⁾	23.5	16.0		47	%	49.0		55.8		(12	)%
Non-sustaining capital expenditures⁽¹⁾	1.1	0.1		1000	%	2.9		2.0		45	%
Net earnings (loss) per common share – $/share basic⁽²⁾	0.28	(0.14	)	300	%	(0.24	)	0.19		(227	)%
Adjusted net earnings (loss) per common share – $/share basic⁽¹⁾⁽²⁾	0.20	(0.06	)	433	%	(0.23	)	0.02		(1250	)%
Operating highlights
Gold produced (oz)	126,221	54,134		133	%	221,058		190,646		16	%
Gold sold (oz)	130,973	56,245		133	%	218,118		192,750		13	%
Average market gold price ($/oz)	1,929	1,728		12	%	1,931		1,826		6	%
Average realized gold price ($/oz )⁽³⁾	1,741	1,204		45	%	1,642		1,470		12	%
Copper produced (000s lbs)	15,026	19,045		(21	)%	42,168		56,955		(26	)%
Copper sold (000s lbs)	15,385	19,647		(22	)%	43,548		58,019		(25	)%
Average market copper price ($/lb)	3.79	3.52		8	%	3.89		4.12		(6	)%
Average realized copper price ($/lb)⁽³⁾	2.99	2.49		20	%	3.01		2.82		7	%
Molybdenum sold (000s lbs)	2,700	3,291		(18	)%	9,077		9,406		(3	)%
Average market molybdenum price ($/lb)	23.77	16.12		47	%	26.05		17.86		46	%
Average realized molybdenum price ($/lb)	24.08	17.17		40	%	25.71		19.18		34	%
Unit costs
Gold production costs ($/oz)⁽⁴⁾	643	729		(12	)%	820		653		26	%
All-in sustaining costs on a by-product basis ($/oz)⁽¹⁾⁽⁴⁾	827	941		(12	)%	1,122		826		36	%
All-in costs on a by-product basis ($/oz)⁽¹⁾⁽⁴⁾	983	1,376		(29	)%	1,471		1,105		33	%
Gold – All-in sustaining costs on a co-product basis ($/oz)⁽¹⁾⁽⁴⁾	858	1,190		(28	)%	1,168		1,062		10	%
Copper production costs ($/lb)⁽⁴⁾	2.30	1.51		52	%	2.43		1.63		49	%
Copper – All-in sustaining costs on a co-product basis – ($/lb)⁽¹⁾⁽⁴⁾	2.73	1.78		53	%	2.78		2.04		36	%

⁽¹⁾Non-GAAP financial measure. See discussion under “Non-GAAP and Other Financial Measures”.
⁽²⁾As at September 30, 2023, the Company had 215,748,999 common shares issued and outstanding.
⁽³⁾This supplementary financial measure within the meaning of National Instrument 52-112 – Non-GAAP and Other Financial Measures Disclosure (“NI 51-112”). is calculated as a ratio of revenue from the consolidated financial statements and units of metal sold and includes the impact from the Mount Milligan Streaming Arrangement, copper hedges and mark-to-market adjustments on metal sold not yet finally settled.
⁽⁴⁾All per unit costs metrics are expressed on a metal sold basis.

2023 Outlook

Centerra’s consolidated guidance for production and unit costs remains unchanged from the previously disclosed guidance on June 30, 2023 in our second quarter report. The Company has revised its 2023 outlook for Öksüt and Mount Milligan based on updated estimates for metal production and corresponding unit costs at both mines. The Company’s updated 2023 outlook and comparative actual results for the nine months ended September 30, 2023 are set out in the tables below.

	Units	2023 Guidance – updated	Nine Months 2023 results	2023 Guidance – previous
Production
Total gold production⁽¹⁾	(Koz)	340 – 360	221	340 – 360
Mount Milligan Mine^(2)(3)(4)	(Koz)	150 – 160	114	160 – 170
Öksüt Mine	(Koz)	190 – 200	107	180 – 190
Total copper production^(2)(3)(4)	(Mlb)	60 – 70	42	60 – 70
Unit Costs⁽⁵⁾
Gold production costs⁽¹⁾	($/oz)	700 – 750	820	700 – 750
Mount Milligan Mine⁽²⁾	($/oz)	1,050 – 1,100	1,134	1,000 – 1,050
Öksüt Mine	($/oz)	425 – 475	440	450 – 500
All-in sustaining costs on a by-product basis^NG(1)(3)(4)	($/oz)	1,000 – 1,050	1,122	1,000 – 1,050
Mount Milligan Mine⁽⁴⁾	($/oz)	1,175 – 1,225	1,214	1,125 – 1,175
Öksüt Mine	($/oz)	625 – 675	679	650 – 700
All-in costs on a by-product basis^NG(1)(3)(4)	($/oz)	1,225 – 1,275	1,471	1,225 – 1,275
Mount Milligan Mine⁽⁴⁾	($/oz)	1,225 – 1,275	1,249	1,175 – 1,225
Öksüt Mine	($/oz)	725 – 775	836	750 – 800
All-in sustaining costs on a co-product basis^NG(1)	($/oz)	1,050 – 1,100	1,168	1,050 – 1,100
Mount Milligan Mine	($/oz)	1,275 – 1,325	1,300	1,225 – 1,275
Öksüt Mine	($/oz)	625 – 675	836	650 – 700
Copper production costs	($/lb)	2.15 – 2.40	2.43	2.15 – 2.40
All-in sustaining costs on a co-product basis^NG	($/lb)	2.90 – 3.15	2.78	2.90 – 3.15
Capital Expenditures
Additions to PP&E⁽¹⁾	($M)	90 – 115	53.8	90 – 115
Mount Milligan Mine	($M)	50 – 60	25.4	50 – 60
Öksüt Mine	($M)	35 – 45	23.4	35 – 45
Total Capital Expenditures^NG(1)	($M)	90 – 115	51.9	90 – 115
Mount Milligan Mine	($M)	50 – 60	27.6	50 – 60
Öksüt Mine	($M)	35 – 45	20.5	35 – 45
Sustaining Capital Expenditures^NG(1)	($M)	90 – 110	49.0	90 – 110
Mount Milligan Mine	($M)	50 – 60	27.6	50 – 60
Öksüt Mine	($M)	35 – 45	20.5	35 – 45
Non-sustaining Capital Expenditures^NG(6)	($M)	3 – 4	2.8	2.00
Depreciation, depletion and amortization⁽¹⁾	($M)	115 – 140	84.4	115 – 140
Mount Milligan Mine	($M)	65 – 80	58.6	65 – 80
Öksüt Mine	($M)	40 – 50	22.2	40 – 50
Income tax and BC mineral tax expense⁽¹⁾	($M)	80 – 90	0.0	80 – 90
Mount Milligan Mine	($M)	1 – 3	1.3	1 – 3
Öksüt Mine	($M)	75 – 85	45.2	75 – 85

Consolidated Centerra figures.
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”). Using an assumed market gold price of $1,850 per ounce and a blended copper price of $3.85 per pound for the remaining three months ending December 31, 2023 (unchanged from the previous guidance), the Mount Milligan Mine’s average realized gold and copper price for the remaining three months of 2023 would be $1,350 per ounce and $2.98 per pound, respectively, compared to average realized prices of $1,404 per ounce and $3.01 per pound in the nine months ended September 30, 2023, when factoring in the Mount Milligan Streaming Arrangement and concentrate refining and treatment costs. The blended copper price of $3.85 per pound factors in copper hedges in place as of September 30, 2023 and a market price of $3.70 per pound for the unhedged portion for the remainder of 2023 (unchanged from the previous guidance).
Gold and copper production at the Mount Milligan Mine assumes recoveries of 66% and 81%, respectively, which is unchanged from the previous guidance. Gold production at the Öksüt Mine assumes recoveries of approximately 72%. 2023 gold ounces and copper pounds sold are expected to approximate production figures.
Unit costs include a credit for forecasted copper sales treated as by-product for all-in sustaining costs^NGand all-in costs^NG. Production for copper and gold reflects estimated metallurgical losses resulting from handling of the concentrate and metal deductions levied by smelters.
Units noted as ($/oz) relate to gold ounces and ($/lb) relate to copper pounds.
Represents non-sustaining capital expenditures^NG at the Goldfield Project.

		2023 Guidance – updated	Nine Months 2023 results	2023 Guidance – previous
Project Evaluation and Exploration Costs⁽¹⁾
Goldfield Project – Project Evaluation Costs	($M)	12 – 17	12.5	15 – 20
Goldfield Project – Exploration Costs	($M)	19 – 23	21.0	16 – 20
Thompson Creek Mine – Project Evaluation Costs	($M)	12 – 13	7.6	9 – 10
Mount Milligan Mine	($M)	7 – 9	5.4	7 – 9
Öksüt Mine	($M)	1 – 2	1.3	1 – 2
Other – Greenfield and Generative⁽²⁾	($M)	13 – 16	14.3	16 – 19
Total Project Evaluation and Exploration Costs	($M)	64 – 80	62.1	64 – 80
Other Costs
Kemess Project	($M)	11 – 13	8.0	15 – 17
Corporate Administration Costs⁽³⁾	($M)	40 – 45	33.2	40 – 45
Stock-based Compensation	($M)	8 – 10	6.6	8 – 10
Other Corporate Administration Costs	($M)	32 – 35	26.6	32 – 35
Molybdenum BU Cash Used in Operations⁽⁴⁾	($M)
Thompson Creek Mine – Care and Maintenance and Project Evaluation Expenditures⁽⁵⁾	($M)	21 – 23	17.0	18 – 20
Endako Mine – Care and Maintenance and Reclamation Expenditures	($M)	9 – 12	3.8	12 – 15
Langeloth Facility – Working Capital Incremental Investment	($M)	15 – 45	15.0	15 – 45

The exploration and project evaluation costs include both expensed exploration and project evaluation costs as well as capitalized exploration costs and exclude business development expenses. $1.2 million of these capitalized exploration costs are also included in the full year 2023 sustaining capital expenditures^NG at the Mount Milligan Mine, compared to $1.2 million of capitalized exploration costs at the Mount Milligan Mine for the nine months ended September 30, 2023. In addition, $2.9 million of capitalized project evaluation costs at the Goldfield project are also included in the nine months ended September 30, 2023 and full year 2023 sustaining capital expenditures^NG.
Other exploration category includes exploration costs at the Oakley exploration property in Idaho, USA with $7.3 million actual costs in the nine months ended September 30, 2023.
2023 actual costs in the nine months ended September 30, 2023 include severance costs of approximately $2.6 million.
This is a cash-flow based metric as opposed to cost metrics related to Goldfield Project, Kemess Project, corporate administration, and other exploration projects listed in the table above.
Includes project evaluation costs listed under total project and exploration costs.

Mount Milligan

Mount Milligan produced 39,554 ounces of gold and 15.0 million pounds of copper in the third quarter of 2023. Production in the quarter was impacted by mine sequencing. While most of the ore-waste transition material was mined in the first half of 2023, some residual ore-waste transition material was mined in the third quarter 2023. In addition, recoveries were impacted by the elevated ratio of pyrite to chalcopyrite from blending low grade gold, high grade copper ore mined in phase 9 with high grade gold, low grade copper ore mined in phase 7. The Company expects medium-term recoveries for gold and copper to be similar to those achieved in 2023. The Company is currently undertaking additional metallurgical reviews aimed at increasing recoveries from current levels.

During the third quarter of 2023, mining activities were carried out in phases 5, 6, 7, and 9 of the open pit. A total of 13.4 million tonnes were mined in the third quarter of 2023. Process plant throughput for the third quarter of 2023 was 5.6 million tonnes and averaged 60,927 tonnes per day.

Mount Milligan’s gold production guidance has been lowered to 150,000 to 160,000 ounces, from 160,000 to 170,000 ounces previously. This is mainly due to mine sequencing and lower than planned gold recoveries from the elevated ratio of pyrite to chalcopyrite as discussed above. Processing a portion of the elevated pyrite bearing high grade gold, low grade copper ore mined in phase 7 is expected to be deferred to 2024 for blending purposes, which is expected to result in overall higher gold grades in 2024. Copper production of 60 to 70 million pounds remains unchanged but is expected to be near the low end of the guidance range. In 2024, the Company anticipates higher levels of gold production and similar levels of copper production compared to 2023 production guidance levels.

Gold production costs in the third quarter 2023 were $1,050 per ounce, a decrease from the second quarter 2023, driven by higher gold ounces sold. AISC on a by-product basis^NG was $1,150 per ounce, a decrease from the second quarter 2023, driven by lower gold production costs per ounce and higher by-product credits as a result of higher realized copper prices.

As a result of Mount Milligan’s reduced gold production outlook, full year 2023 gold production costs have been increased and are now expected to be $1,050 to $1,100 per ounce, up from $1,000 to $1,050 per ounce previously. Full year 2023 AISC on a by-product basis^NG guidance at Mount Milligan has also been increased and is now expected to be $1,175 to $1,225 per ounce, up from $1,125 to $1,175 per ounce previously. A full asset optimization review has been launched, with the assistance of a third-party consultant, which includes assessments of occupational health and safety, productivity and cost efficiency opportunities in concert with mine plan optimization. This review is designed to identify and drive incremental improvements in the mine’s operations and is expected to be completed in 2024.

Öksüt

Öksüt produced 86,667 ounces of gold in the third quarter of 2023. During the quarter, mining activities were focused on stripping and waste removal from phase 5 and phase 6 of the Keltepe pit, with some activities carried out in phase 2 of the Güneytepe pit. In the third quarter 2023, a total of 3.1 million tonnes were mined and 1.0 million tonnes were stacked at an average grade of 1.98 g/t, containing 62,332 ounces of gold. As at September 30, 2023, all the stored gold-in-carbon inventory had been processed. The mine continues to draw down high grade inventory from the stockpiles and to leach previously stacked high grade inventory on the heap leach pad. These ounces are expected to be processed in the coming months and into the first half of 2024.

Full year 2023 production guidance at Öksüt has been increased to 190,000 to 200,000 ounces of gold, up from 180,000 to 190,000 ounces previously, as a result of a successful ramp-up of production in the third quarter of 2023.

Gold production costs and AISC on a by-product basis^NG for the third quarter 2023 were $445 per ounce and $582 per ounce, respectively. As a result of Öksüt’s increased gold production outlook, full year 2023 gold production costs are now expected to be in the range of $425 to $475 per ounce, down from $450 to $500 per ounce previously. Full year 2023 AISC on a by-product basis^NG guidance at Öksüt has also been lowered and is now expected to be $625 to $675 per ounce, down from $650 to $700 per ounce previously.

Molybdenum Business Unit

In the third quarter 2023, the Molybdenum Business Unit sold 2.7 million pounds of molybdenum, generating revenue of $67.7 million with an average realized price of $24.08 per pound. In the first quarter of 2023, the Langeloth Facility required a $67 million investment in working capital to finance its business due to a rapid increase in molybdenum prices. Approximately $52 million of the investment in working capital has been released in the second and third quarters of 2023.

Intention to Renew NCIB

Subject to the approval of the approval of the TSX, Centerra intends to proceed with a renewal of a NCIB to purchase for cancellation up to an aggregate of 18,293,896 Common Shares, representing 10% of the public float. As of October 31, 2023, Centerra had 215,807,212 issued and outstanding Common Shares.

Centerra believes that the Common Shares continue to be trading in a price range which does not adequately reflect the value of such shares in relation to Centerra’s assets and its future prospects. As a result, Centerra believes that the NCIB will provide the Company with a flexible tool to deploy a portion of its cash balance pursuant to its capital allocation framework to, depending upon future Common Share price movements and other factors, purchase Common Shares for cancellation while preserving its strong balance sheet position.

Centerra has filed a notice of intention to renew a NCIB with the TSX and, subject to the approval of the TSX, Centerra may purchase Common Shares under the NCIB over a twelve-month period. Once the NCIB is commenced, the exact timing and amount of any purchases will depend on market conditions and other factors. Centerra will not be obligated to acquire any Common Shares and may suspend or discontinue purchases under the NCIB at any time. Any purchases made under the NCIB will be made at market price at the time of purchase through the facilities of the TSX and/or alternative Canadian trading systems in accordance with applicable securities laws and stock exchange rules. The Company’s previous NCIB authorized the purchase of up to 15,610,813 Common Shares and expired on October 12, 2023. During the period when that program operated, a total of 5,298,200 Common Shares of the Company were repurchased through the facilities of the TSX and alternative Canadian trading systems at a volume weighted average price of C$7.44 per Common Share. Centerra intends to establish an automatic share purchase plan in connection with its renewed NCIB to facilitate the purchase of Common Shares during times when Centerra would ordinarily not be permitted to purchase Common Shares due to regulatory restrictions or self-imposed black-out periods. Before entering a black-out period, Centerra may, but is not required to, instruct its designated broker to make purchases under the NCIB based on parameters set by Centerra in accordance with the automatic share purchase plan, applicable securities laws and stock exchange rules.

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.

Posted November 1, 2023

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