Centerra Gold Inc. (“Centerra” or the “Company”) (TSX: CG and NYSE:
CGAU) today reported its first quarter 2023 results.
Significant financial and operating results of
the first quarter ended March 31, 2023 included:
- Net loss for the
quarter of $73.5 million, or $0.34 per common share, including (net
of tax): a non-cash reclamation expense at the care and maintenance
sites of $15.6 million, or $0.07 per common share, exploration and
evaluation costs at the Goldfield project of $11.7 million, or
$0.06 per common share, and stand-by cash costs at the Öksüt Mine
of $7.8 million, or $0.04 per common share. Mining costs at the
Öksüt Mine were expensed in the period due to the focus on waste
stripping activities with limited mining, crushing and stacking of
ore. Adjusted net lossNG for the quarter was $52.9 million, or
$0.24 per common share.
- Cash used in operating
activities and free cash flow deficitNG
for the quarter of $99.8 million and $105.9 million, respectively,
were primarily due to working capital requirements at the
Molybdenum Business Unit and the suspension of production
activities at the Öksüt Mine. Total operating cash flow deficit for
the quarter was driven by a $75.8 million increase in working
capital. Mount Milligan Mine generated cash from mine operating
activities and free cash flowNG of $27.6 million and $24.6 million,
respectively, for the quarter. Cash used in operating activities at
the Öksüt Mine was $20.8 million for the quarter. Cash used in
operating activities at the Molybdenum Business Unit was $76.6
million for the quarter, primarily due to an increase in working
capital, as a result of higher molybdenum prices. This is expected
to partially reverse through the remainder of the year if
molybdenum prices remain at their current levels.
- Gold
production and
copper production for the quarter
at the Mount Milligan Mine was 33,215 ounces and 13.4 million
pounds, respectively. Lower production during the quarter was
driven by lower plant throughput primarily due to a planned mill
maintenance shutdown as well as material handling issues during
winter months. Additionally, sequencing of the mining phases during
the quarter resulted in lower than expected ore grades and
differences in the ore-waste transition zone which also impacted
feed grades and metal recoveries. Due to mining activities
remaining at expected production rates for the quarter, the Company
continues to be on track to access the higher grade copper and gold
from Phase 7 and Phase 9 in the second half of the year but given
lower than planned production during the first quarter, the Company
expects 2023 gold production to be near the low end of guidance.
Copper production for the year is expected to be at the mid-point
of guidance.
- The regulatory review of
Öksüt Mine’s amended Environmental Impact Assessment (“EIA”)
remains on track. The Company completed its technical
review meeting with local authorities at the end of March and
posted its EIA for public comment in late April, with no
significant comments received. With all review steps now completed,
the EIA has been submitted for final ministry approval.
- The Company’s mercury
abatement retrofit to the Öksüt Mine’s ADR plant was
completed. The system was tested in March 2023 under the
supervision of the Turkish Ministry of Environment Urbanization and
Climate Change. Subject to receipt of the final regulatory
approvals and the restart of the ADR plant, the Company will be in
a position to begin processing the gold-in-carbon inventory on hand
of approximately 100,000 recoverable ounces. The ADR plant has the
capacity to produce gold at a rate of approximately 35,000 ounces
per month.
- Goldfield Project
significantly advanced drilling activities in the first
quarter of 2023, with the large portion of drilling costs that were
planned for the year incurred during the quarter. The Company
remains on track to issue an initial resource estimate by mid year
2023, followed by an updated resource estimate accompanied by a
feasibility study.
- New President and CEO Paul
Tomory joined the Company effective May 1, 2023.
- Strong balance
sheet with a cash and cash equivalents position at the
quarter-end of $412.1 million.
- Gold production
costs for the quarter of $1,124 per ounce, due to higher
allocation of costs to gold from changes in the relative market
prices of gold and copper, and mill shutdown activities.
- Copper production
costs for the quarter of $2.66 per pound.
- All-in sustaining costs on
a by-product basisNG for the quarter of
$1,383 per ounce, due to higher gold production costs at the Mount
Milligan Mine.
- Quarterly dividend
declared of CAD$0.07 per common share.
Chair of the Board of Directors and CEO
Discussion
Michael Parrett, Chair of the Board of Directors
stated, “On behalf of the Board and our fellow shareholders I would
like to thank Paul Wright for his leadership of Centerra as the
Interim President and CEO, since September 2022. We look forward to
Paul’s continued insight, input, and contribution on the Board of
Directors. I am also pleased to welcome Paul Tomory who assumed the
role of President and Chief Executive Officer on May 1, 2023. We
are delighted to have him lead Centerra at this significant stage
of the Company’s journey.”
Paul Tomory, President and Chief Executive
Officer of Centerra stated, “Since starting as President and Chief
Executive Officer on May 1, 2023, having spent time with our
corporate and sites teams, and having visited the Mount Milligan
Mine, I am excited for the future of the Company. Over the weeks
and months ahead, I look forward to visiting the Öksüt Mine and our
US assets and engaging with many of our shareholders and other
stakeholders, with a focus on delivering sustainable value and
growth at Centerra.”
Paul Tomory continued, “In the first quarter of
2023, the Company continued to demonstrate that safety remains
Centerra’s top priority, with a number of our sites achieving
milestones without a lost time or reportable injury. In Turkiye,
I’m pleased to announce that we have completed the mercury
abatement retrofit to the Öksüt Mine’s ADR plant and that the
system has been tested under the supervision of the Turkish
ministry. The regulatory review of Öksüt Mine’s amended EIA remains
on track; all review steps have been completed and it has been
submitted for final ministry approval. Subject to receipt of the
final approvals of the EIA and ADR plant, the Company will be well
positioned to begin processing the approximately 100,000
recoverable ounces of gold-in-carbon inventory on hand. We will
then be able to shift our focus to the additional approximately
200,000 recoverable ounces of gold in the Öksüt Mine’s gold in ore
stockpiles and on the heap leach pad.”
Paul Tomory stated,“Pivoting to Centerra’s other
operating mine in British Colombia, there were lower levels of
copper and gold production at the Mount Milligan Mine in the first
quarter due to a combination of the grade profile delivered to the
mill from mine sequencing that also impacted lower metal
recoveries, a planned mill maintenance shutdown and challenges with
material handling during winter months. As a result, the Company
now expects gold production to be near the low end of guidance
whilst copper production is currently tracking towards the
mid-point of guidance. Mine sequencing remains on track to access
the higher-grade copper and gold ore in the second half of the year
resulting in back-end weighted production.”
Paul Tomory concluded, “Lastly, I’m happy to
announce that Lisa Wilkinson has joined the Company as Vice
President, Investor Relations & Corporate Communications, and
will lead these functions going forward.”
Update on Öksüt Mine
Operations
In March 2022, Centerra announced it had
temporarily suspended gold doré bar production at the Öksüt Mine
due to mercury detected in the gold room at the ADR plant. From the
date of suspension of gold room operations through to the end of
2022, the Company built up gold-in-carbon inventory of
approximately 100,000 recoverable ounces and 200,000 recoverable
ounces of gold in ore stockpiles and on the heap leach pad. For the
gold-in-carbon inventory, substantially all the production costs
have already been incurred. Once operations resume, the ADR plant
is expected to have sufficient production capacity to process up to
approximately 35,000 ounces of gold per month.
The Company has completed construction of a
mercury abatement system to allow processing of mercury-bearing
ores. In February and March 2023, the ADR facility underwent
inspection and testing by the Turkish Ministry of Environment,
Urbanization and Climate Change (the “Ministry of Environment”) and
the Ministry of Labour and Social Security. The Company continues
to work with relevant authorities to obtain the required approvals
to restart gold room operations at the ADR plant.
Permitting
Following inspection by and several discussions
with the Ministry of Environment in 2022, the Company determined
that an updated EIA should be prepared and submitted to clarify
various production and other capacity limits for the Öksüt Mine and
to align the EIA production levels with current operating plans.
The updated EIA was submitted in January 2023. The Company
completed its technical review meeting with local authorities at
the end of March and posted its EIA for public comment in late
April, with no significant comments received. With all review steps
now completed, the EIA has been submitted for final ministry
approval. The Company continues to work with Turkish officials and
other stakeholders on the approval of its EIA and other permits
that may be required to allow for a timely full restart of all
operations.
The Öksüt Mine suspended leaching of ore on the
heap leach pad and ceased using activated carbon on site as of late
August 2022 though mining, crushing and stacking activities
continued in line with existing EIA limits for the remainder of
2022. After building substantial inventories of gold-in-carbon, ore
stacked on the heap leach pad and ore stockpiles, crushing and
stacking activities were paused during the first quarter of 2023
until the new EIA is received. The Öksüt Mine is currently focusing
mining activities on the Phase 5 pit wall pushback to expand the
Keltepe pit.
In January 2023, the Öksüt Mine received notice
of approval of its operating license extension application for a
period of ten years, as well as approval of an enlarged grazing
land permit to allow for the expansion of the Keltepe and Güneytepe
pits, as planned.
As noted above, Centerra is involved in several
permitting processes with Turkish regulatory authorities and notes
that a general election in Türkiye on May 14, 2023 could result in
administrative delays to such processes. The Company will continue
to diligently pursue approvals of an amended EIA and all required
permits for the Öksüt Mine.
Conference Call
Centerra invites you to join its 2023 first
quarter conference call on Monday, May 15, 2023 at 11:00 AM Eastern
Time. The call is open to all investors and the media. To join the
call, please dial toll-free in North America 1 (800) 954-0651.
International participants may access the call at +1 (416)
620-9188. Presentation slides will be available on Centerra’s
website at www.centerragold.com. Alternatively, an audio feed
webcast will be broadcast live by Notified and can be accessed live
at Centerra’s website at www.centerragold.com. A recording will be
available after the call and via telephone until midnight Eastern
Time on May 29, 2023 by calling +1 (416) 626-4100 or (800) 558-5253
and using passcode 22026857.
Non-GAAP and Other Financial Measures
This MD&A contains “specified financial
measures” within the meaning of NI 52-112, specifically the
non-GAAP financial measures, non-GAAP ratios and supplementary
financial measures described below. Management believes that the
use of these measures assists analysts, investors and other
stakeholders of the Company in understanding the costs associated
with producing gold and copper, understanding the economics of gold
and copper mining, assessing operating performance, the Company’s
ability to generate free cash flow from current operations and on
an overall Company basis, and for planning and forecasting of
future periods. However, the measures have limitations as
analytical tools as they may be influenced by the point in the life
cycle of a specific mine and the level of additional exploration or
other expenditures a company has to make to fully develop its
properties. The specified financial measures used in this MD&A
do not have any standardized meaning prescribed by IFRS and may not
be comparable to similar measures presented by other issuers, even
as compared to other issuers who may be applying the World Gold
Council (“WGC”) guidelines. Accordingly, these specified financial
measures should not be considered in isolation, or as a substitute
for, analysis of the Company’s recognized measures presented in
accordance with IFRS.
Definitions
The following is a description of the non-GAAP
financial measures, non-GAAP ratios and supplementary financial
measures used in this MD&A:
- All-in sustaining
costs on a by-product basis per ounce is a non-GAAP ratio
calculated as all-in sustaining costs on a by-product basis divided
by ounces of gold sold. All-in sustaining costs on a by-product
basis is a non- GAAP financial measure calculated as the aggregate
of production costs as recorded in the condensed consolidated
statements of (loss) earnings, refining and transport costs, the
cash component of capitalized stripping and sustaining capital
expenditures, lease payments related to sustaining assets,
corporate general and administrative expenses, accretion expenses,
asset retirement depletion expenses, copper and silver revenue and
the associated impact of hedges of by-product sales revenue. When
calculating all-in sustaining costs on a by- product basis, all
revenue received from the sale of copper from the Mount Milligan
Mine, as reduced by the effect of the copper stream, is treated as
a reduction of costs incurred. A reconciliation of all-in
sustaining costs on a by-product basis to the nearest IFRS measure
is set out below. Management uses these measures to monitor the
cost management effectiveness of each of its operating mines.
- All-in
sustaining costs on a co-product basis per ounce of gold or per
pound of copper, is a non-GAAP ratio calculated as all-in
sustaining costs on a co-product basis divided by ounces of gold or
pounds of copper sold, as applicable. All-in sustaining costs on a
co-product basis is a non-GAAP financial measure based on an
allocation of production costs between copper and gold based on the
conversion of copper production to equivalent ounces of gold. The
Company uses a conversion ratio for calculating gold equivalent
ounces for its copper sales calculated by multiplying the copper
pounds sold by estimated average realized copper price and dividing
the resulting figure by estimated average realized gold price. For
the first quarter ended March 31, 2023, 423 pounds of copper were
equivalent to one ounce of gold. A reconciliation of all-in
sustaining costs on a co-product basis to the nearest IFRS measure
is set out below. Management uses these measures to monitor the
cost management effectiveness of each of its operating mines.
- Sustaining
capital expenditures and Non-sustaining capital expenditures are
non-GAAP financial measures. Sustaining capital expenditures are
defined as those expenditures required to sustain current
operations and exclude all expenditures incurred at new operations
or major projects at existing operations where these projects will
materially benefit the operation. Non-sustaining capital
expenditures are primarily costs incurred at ‘new operations’ and
costs related to ‘major projects at existing operations’ where
these projects will materially benefit the operation. A material
benefit to an existing operation is considered to be at least a 10%
increase in annual or life of mine production, net present value,
or reserves compared to the remaining life of mine of the
operation. A reconciliation of sustaining capital expenditures and
non-sustaining capital expenditures to the nearest IFRS measures is
set out below. Management uses the distinction of the sustaining
and non-sustaining capital expenditures as an input into the
calculation of all-in sustaining costs per ounce and all-in costs
per ounce.
- All-in costs on
a by-product basis per ounce is a non-GAAP ratio calculated as
all-in costs on a by-product basis divided by ounces sold. All-in
costs on a by-product basis is a non-GAAP financial measure which
includes all- in sustaining costs on a by-product basis,
exploration and study costs, non-sustaining capital expenditures,
care and maintenance and other costs. A reconciliation of all-in
costs on a by-product basis to the nearest IFRS measures is set out
below. Management uses these measures to monitor the cost
management effectiveness of each of its operating mines.
- Adjusted net
(loss) earnings is a non-GAAP financial measure calculated by
adjusting net (loss) earnings as recorded in the condensed
consolidated statements of (loss) earnings for items not associated
with ongoing operations. The Company believes that this generally
accepted industry measure allows the evaluation of the results of
income-generating capabilities and is useful in making comparisons
between periods. This measure adjusts for the impact of items not
associated with ongoing operations. A reconciliation of adjusted
net (loss) earnings to the nearest IFRS measures is set out below.
Management uses this measure to monitor and plan for the operating
performance of the Company in conjunction with other data prepared
in accordance with IFRS.
- Free cash flow
(deficit) is a non-GAAP financial measure calculated as cash
provided by operating activities from continuing operations less
property, plant and equipment additions. A reconciliation of free
cash flow to the nearest IFRS measures is set out below. Management
uses this measure to monitor the amount of cash available to
reinvest in the Company and allocate for shareholder returns.
- Free cash flow
(deficit) from mine operations is a non-GAAP financial measure
calculated as cash provided by mine operations less property, plant
and equipment additions. A reconciliation of free cash flow from
mine operations to the nearest IFRS measures is set out below.
Management uses this measure to monitor the degree of self-funding
of each of its operating mines and facilities.
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:
(Unaudited - $millions, unless otherwise
specified) |
Three months ended March 31, |
Consolidated |
Mount Milligan |
Öksüt |
2023 |
|
2022 |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
Production costs attributable to gold |
43.8 |
|
47.1 |
|
43.8 |
|
26.0 |
|
— |
|
21.1 |
|
Production costs attributable to copper |
40.8 |
|
32.6 |
|
40.8 |
|
32.6 |
|
— |
|
— |
|
Total production costs excluding molybdenum segment, as
reported |
84.6 |
|
79.7 |
|
84.6 |
|
8.6 |
|
— |
|
21.1 |
|
Adjust for: |
|
|
|
|
|
|
|
|
|
|
|
|
Third party smelting, refining and transport costs |
1.9 |
|
3.2 |
|
1.9 |
|
3.0 |
|
— |
|
0.2 |
|
By-product and co-product credits |
(54.6 |
) |
(75.5 |
) |
(54.6 |
) |
(75.5 |
) |
— |
|
— |
|
Adjusted production costs |
31.9 |
|
7.4 |
|
31.9 |
|
(13.9 |
) |
— |
|
21.3 |
|
Corporate general administrative and other costs |
14.7 |
|
12.3 |
|
0.1 |
|
0.1 |
|
— |
|
— |
|
Reclamation and remediation - accretion (operating sites) |
0.9 |
|
1.6 |
|
0.5 |
|
0.5 |
|
0.4 |
|
1.1 |
|
Sustaining capital expenditures |
4.9 |
|
14.7 |
|
1.8 |
|
12.6 |
|
3.1 |
|
2.1 |
|
Sustaining lease payments |
1.5 |
|
1.5 |
|
1.3 |
|
1.3 |
|
0.2 |
|
0.2 |
|
All-in sustaining costs on a by-product basis |
53.9 |
|
37.5 |
|
35.6 |
|
0.6 |
|
3.7 |
|
24.7 |
|
Exploration and study costs |
15.3 |
|
8.2 |
|
0.4 |
|
3.4 |
|
0.4 |
|
0.4 |
|
Non-sustaining capital expenditures |
— |
|
0.9 |
|
— |
|
0.9 |
|
— |
|
— |
|
Care and maintenance and other costs |
12.9 |
|
2.4 |
|
— |
|
— |
|
9.5 |
|
— |
|
All-in costs on a by-product basis |
82.1 |
|
49.0 |
|
36.0 |
|
4.9 |
|
13.6 |
|
25.1 |
|
Ounces sold (000s) |
39.0 |
|
94.9 |
|
39.0 |
|
40.2 |
|
— |
|
54.7 |
|
Pounds sold (millions) |
15.3 |
|
19.4 |
|
15.3 |
|
19.4 |
|
— |
|
— |
|
Gold production costs ($/oz) |
1,124 |
|
497 |
|
1,124 |
|
647 |
|
n/a |
|
386 |
|
All-in sustaining costs on a by-product basis ($/oz) |
1,383 |
|
395 |
|
914 |
|
15 |
|
n/a |
|
451 |
|
All-in costs on a by-product basis ($/oz) |
2,107 |
|
516 |
|
924 |
|
121 |
|
n/a |
|
459 |
|
Gold - All-in sustaining costs on a co-product basis ($/oz) |
1,603 |
|
735 |
|
1,134 |
|
819 |
|
n/a |
|
451 |
|
Copper production costs ($/pound) |
2.66 |
|
1.68 |
|
2.66 |
|
1.68 |
|
n/a |
|
n/a |
|
Copper - All-in sustaining costs on a co-product basis
($/pound) |
2.67 |
|
2.11 |
|
2.67 |
|
2.11 |
|
n/a |
|
n/a |
|
Adjusted net (loss) earnings is a non-GAAP financial
measure and can be reconciled as follows:
|
Three months ended March 31, |
($millions, except as noted) |
|
2023 |
|
|
2022 |
|
Net (loss) earnings |
$ |
(73.5 |
) |
$ |
89.4 |
|
Adjust for items not associated with ongoing operations: |
|
|
Kumtor Mine legal costs and other related costs |
|
— |
|
|
6.5 |
|
Reclamation expense (recovery) at sites on care and
maintenance |
|
15.6 |
|
|
(42.0 |
) |
Income and mining tax adjustments(1) |
|
5.0 |
|
|
2.5 |
|
Adjusted net (loss) earnings |
$ |
(52.9 |
) |
$ |
56.4 |
|
Net (loss) earnings per share - basic |
$ |
(0.34 |
) |
$ |
0.30 |
|
Net (loss) earnings per share - diluted |
$ |
(0.34 |
) |
$ |
0.30 |
|
Adjusted net (loss) earnings per share -
basic |
$ |
(0.24 |
) |
$ |
0.19 |
|
Adjusted net (loss) earnings per share -
diluted |
$ |
(0.24 |
) |
$ |
0.19 |
|
(1) Income tax adjustments reflect the impact of a one-time
income tax levied by the Turkish government and impact of foreign
currency translation on deferred income taxes at the Öksüt
Mine.
Free cash flow (deficit) is a non-GAAP financial measure
and can be reconciled as follows:
|
Three months ended March 31, |
Consolidated |
Mount Milligan |
Öksüt |
Molybdenum |
Other |
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|
2022 |
|
|
2021 |
|
|
2023 |
|
|
2022 |
|
Cash (used in) provided by operating
activities(1) |
$ |
(99.8 |
) |
$ |
28.3 |
|
$ |
27.6 |
|
$ |
20.8 |
|
$ |
(20.8 |
) |
$ |
63.6 |
|
$ |
(76.6 |
) |
$ |
(19.8 |
) |
$ |
(30.0 |
) |
|
(36.3 |
) |
Deduct: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant & equipment additions(1) |
|
(6.1 |
) |
|
(19.2 |
) |
|
(3.0 |
) |
|
(14.4 |
) |
|
(3.1 |
) |
|
(2.2 |
) |
|
— |
|
|
(0.3 |
) |
|
— |
|
|
(2.3 |
) |
Free cash flow (deficit) |
$ |
(105.9 |
) |
$ |
9.1 |
|
$ |
24.6 |
|
$ |
6.4 |
|
$ |
(23.9 |
) |
$ |
61.4 |
|
$ |
(76.6 |
) |
$ |
(20.1 |
) |
$ |
(30.0 |
) |
$ |
(38.6 |
) |
(1) As presented in the Company’s condensed consolidated
statements of cash flows.
Sustaining capital expenditures and non-sustaining
capital expenditures are non-GAAP measures and can be reconciled as
follows:
|
Three months ended March 31, |
Consolidated |
Mount Milligan |
Öksüt |
Molybdenum |
Other |
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Additions to PP&E(1) |
$ |
8.0 |
|
$ |
210.2 |
|
$ |
4.3 |
|
$ |
9.7 |
|
$ |
3.7 |
|
$ |
(0.5 |
) |
$ |
— |
|
$ |
0.2 |
|
$ |
— |
|
$ |
200.7 |
|
Adjust for: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs capitalized to the ARO assets |
|
(2.9 |
) |
|
13.3 |
|
|
(1.8 |
) |
|
3.7 |
|
|
(1.1 |
) |
|
1.9 |
|
|
— |
|
|
— |
|
|
— |
|
|
7.7 |
|
Costs capitalized to the ROU assets |
|
(0.1 |
) |
|
(0.2 |
) |
|
(0.1 |
) |
|
— |
|
|
— |
|
|
(0.2 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Costs relating to the acquisition of Goldfield Project |
|
— |
|
|
(208.2 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(208.2 |
) |
Other(2) |
|
(0.1 |
) |
|
0.9 |
|
|
(0.6 |
) |
|
0.0 |
|
|
0.5 |
|
|
0.9 |
|
|
— |
|
|
0.2 |
|
|
— |
|
|
(0.2 |
) |
Capital expenditures |
$ |
4.9 |
|
$ |
16.0 |
|
$ |
1.8 |
|
$ |
13.4 |
|
$ |
3.1 |
|
$ |
2.1 |
|
$ |
— |
|
$ |
0.4 |
|
$ |
— |
|
$ |
0.1 |
|
Sustaining capital expenditures |
|
4.9 |
|
|
15.1 |
|
|
1.8 |
|
|
12.5 |
|
|
3.1 |
|
|
2.1 |
|
|
— |
|
|
0.4 |
|
|
— |
|
|
0.1 |
|
Non-sustaining capital expenditures |
|
— |
|
|
0.9 |
|
|
— |
|
|
0.9 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
(1) As presented in the Company’s condensed consolidated
financial statements.(2) Includes reclassification of insurance and
capital spares from supplies inventory to PP&E.
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. 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.
For more information:
Lisa Wilkinson Vice President, Investor Relations &
Corporate Communications(416) 204-3780
lisa.wilkinson@centerragold.com |
Shae FrosstManager, Investor Relations (416)
204-2159shae.frosst@centerragold.com |
Additional information on Centerra is available on the
Company’s website at www.centerragold.com and at SEDAR at
www.sedar.com and EDGAR at www.sec.gov/edgar.
Management’s Discussion and
Analysis
For the Three months ended March 31, 2023 and
2022
This Management’s Discussion and Analysis
(“MD&A”) has been prepared as of May 12, 2023 and is intended
to provide a review of the financial position and results of
operations of Centerra Gold Inc. (“Centerra” or the “Company”) for
the three months ended March 31, 2023 in comparison with the
corresponding periods ended March 31, 2022. This discussion should
be read in conjunction with the Company’s audited financial
statements and the notes thereto for the year ended December 31,
2022 prepared in accordance with International Financial Reporting
Standards (“IFRS”) available at www.centerragold.com and on the
System for Electronic Document Analysis and Retrieval (“SEDAR”) at
www.sedar.com and EDGAR at www.sec.gov/edgar. In addition, this
discussion contains forward-looking information regarding
Centerra’s business and operations. Such forward- looking
statements involve risks, uncertainties and other factors that
could cause actual results to differ materially from those
expressed or implied by such forward-looking statements. See
“Caution Regarding Forward-Looking Information” below. All dollar
amounts are expressed in United States dollars (“USD”), except as
otherwise indicated. All references in this document denoted with
NG indicate a “specified financial measure” within the meaning of
National Instrument 52-112 Non-GAAP and Other Financial Measures
Disclosure of the Canadian Securities Administrators. None of these
measures is a standardized financial measure under IFRS and these
measures might not be comparable to similar financial measures
disclosed by other issuers. See section “Non-GAAP and Other
Financial Measures” below for a discussion of the specified
financial measures used in this document and a reconciliation to
the most directly comparable IFRS measure.
Caution Regarding Forward-Looking
Information
Information contained in this document which is
not a statement of historical fact, and the documents incorporated
by reference herein, may be “forward-looking information” for the
purposes of Canadian securities laws and within the meaning of the
United States Private Securities Litigation Reform Act of 1995.
Such forward-looking information involves risks, uncertainties and
other factors that could cause actual results, performance,
prospects and opportunities to differ materially from those
expressed or implied by such forward-looking information. The words
“assume”, “anticipate”, “believe”, “budget”, “contemplate”,
“continue”, “de-risk”, “estimate”, “expand”, “expect”, “explore”,
“forecast”, “future”, “in line”, “intend”, “may”, “on track”,
“optimize”, “plan”, "potential", “restart”, “result”, “schedule”,
“seek”, “subject to”, “target”, “understand”, “update”, “will”, and
similar expressions identify forward-looking information. These
forward-looking statements relate to, among other things:
statements regarding 2023 Outlook and 2023 Guidance, including
production, costs, capital expenditures, sales, forecasts, interest
rates, depreciation, depletion and amortization expenses and taxes;
expectations regarding copper credits and gold, copper and
molybdenum prices in 2023; the expected trend of the Company’s
performance toward achieving guidance; including expectations that
2023 production at the Mount Milligan Mine will be back-end
weighted and that Mount Milligan Mine is on track to access higher
grades in the second half of 2023, including expectations that 2023
production at the Mount Milligan Mine will be back-end weighted and
that Mount Milligan Mine is on track to access higher grades in the
second half of 2023; expected cash outflows at the Oksut Mine for
2023; completion of mercury abatement, containment and safety work
in the gold room of the ADR plant at the Öksüt Mine; the expected
restart of gold room operations, related regulatory approvals and
the expected timing thereof; the capacity of the Öksüt Mine’s ADR
plant to process inventories of loaded gold in carbon; expectations
concerning the exploration plans and drilling programs at the
Company’s mines and projects and the timing thereof; the Company’s
intention to earn-in to Phase 2 at the Oakley Project; strategic
options for the Molybdenum BU, including a potential restart of the
Thompson Creek Mine, net cash required to maintain the business and
expectations for molybdenum prices; including the reversal of
working capital as a result thereof; expectations for ongoing
activities at the Goldfield project, including drilling, resource
estimation and a feasibility study; expected lower corporate
payroll costs; expected lower costs related to the implementation
of a new enterprise resources planning software system; and
expectations regarding contingent payments to be received from the
sale of Greenstone Partnership.
Forward-looking information is necessarily based
upon a number of estimates and assumptions that, while considered
reasonable by Centerra, are inherently subject to significant
technical, political, business, economic and competitive
uncertainties and contingencies. Known and unknown factors could
cause actual results to differ materially from those projected in
the forward- looking information. Factors and assumptions that
could cause actual results or events to differ materially from
current expectations include, among other things: (A) strategic,
legal, planning and other risks, including: political risks
associated with the Company’s operations in Türkiye, the USA and
Canada, including potential uncertainty or delays resulting from
upcoming presidential and parliamentaryy elections in Türkiye and
their potential to disrupt or delay Turkish bureaucratic processes
and decision making; resource nationalism including the management
of external stakeholder expectations; the impact of changes in, or
to the more aggressive enforcement of, laws, regulations and
government practices, including unjustified civil or criminal
action against the Company, its affiliates, or its current or
former employees; risks that community activism may result in
increased contributory demands or business interruptions; the risks
related to outstanding litigation affecting the Company; risks of
actions taken by the Kyrgyz Republic, or any of its
instrumentalities, in connection with the Company’s prior ownership
of the Kumtor Mine or the Global Arrangement Agreement; including
unjustified civil or criminal action against the Company, its
affiliates, or its current or former employees; risks that Turkish
regulators pursue aggressive enforcement of the Öksüt Mine’s
current EIA and permits or that the Company experiences delay or
disruption in its applications for new or amended EIA or other
permits, including the formal issuance thereof; the impact of any
sanctions imposed by Canada, the United States or other
jurisdictions against various Russian and Turkish individuals and
entities; potential defects of title in the Company’s properties
that are not known as of the date hereof; the inability of the
Company and its subsidiaries to enforce their legal rights in
certain circumstances; risks related to anti-corruption
legislation; Centerra not being able to replace mineral reserves;
Indigenous claims and consultative issues relating to the Company’s
properties which are in proximity to Indigenous communities; and
potential risks related to kidnapping or acts of terrorism; (B)
risks relating to financial matters, including: sensitivity of the
Company’s business to the volatility of gold, copper and other
mineral prices; the use of provisionally-priced sales contracts for
production at the Mount Milligan Mine; reliance on a few key
customers for the gold-copper concentrate at the Mount Milligan
Mine; use of commodity derivatives; the imprecision of the
Company’s mineral reserves and resources estimates and the
assumptions they rely on; the accuracy of the Company’s production
and cost estimates; the impact of restrictive covenants in the
Company’s credit facilities which may, among other things, restrict
the Company from pursuing certain business activities or making
distributions from its subsidiaries; changes to tax regimes; the
Company’s ability to obtain future financing; the impact of global
financial conditions; the impact of currency fluctuations; the
effect of market conditions on the Company’s short-term
investments; the Company’s ability to make payments, including any
payments of principal and interest on the Company’s debt
facilities, which depends on the cash flow of its subsidiaries; and
(C) risks related to operational matters and geotechnical issues
and the Company’s continued ability to successfully manage such
matters, including the stability of the pit walls at the Company’s
operations; the integrity of tailings storage facilities and the
management thereof, including as to stability, compliance with
laws, regulations, licenses and permits, controlling seepages and
storage of water where applicable; the risk of having sufficient
water to continue operations at the Mount Milligan Mine and achieve
expected mill throughput; changes to, or delays in the Company’s
supply chain and transportation routes, including cessation or
disruption in rail and shipping networks whether caused by
decisions of third-party providers or force majeure events
(including, but not limited to, flooding, wildfires, earthquakes,
COVID-19, or other global events such as wars); the success of the
Company’s future exploration and development activities, including
the financial and political risks inherent in carrying out
exploration activities; inherent risks associated with the use of
sodium cyanide in the mining operations; the adequacy of the
Company’s insurance to mitigate operational and corporate risks;
mechanical breakdowns; the occurrence of any labour unrest or
disturbance and the ability of the Company to successfully
renegotiate collective agreements when required; the risk that
Centerra’s workforce and operations may be exposed to widespread
epidemic including, but not limited to, the COVID-19 pandemic;
seismic activity including earthquakes; wildfires; long lead-times
required for equipment and supplies given the remote location of
some of the Company’s operating properties and disruptions caused
by global events; reliance on a limited number of suppliers for
certain consumables, equipment and components; the ability of the
Company to address physical and transition risks from climate
change and sufficiently manage stakeholder expectations on
climate-related issues; the Company’s ability to accurately predict
decommissioning and reclamation costs and the assumptions they rely
upon; the Company’s ability to attract and retain qualified
personnel; competition for mineral acquisition opportunities; risks
associated with the conduct of joint ventures/partnerships; and,
the Company’s ability to manage its projects effectively and to
mitigate the potential lack of availability of contractors, budget
and timing overruns and project resources. For additional risk
factors, please see section titled “Risks Factors” in the Company’s
most recently filed Annual Information Form (“AIF”) available on
SEDAR at www.sedar.com and EDGAR at www.sec.gov/edgar.
There can be no assurances that forward-looking
information and statements will prove to be accurate, as many
factors and future events, both known and unknown could cause
actual results, performance or achievements to vary or differ
materially from the results, performance or achievements that are
or may be expressed or implied by such forward-looking statements
contained herein or incorporated by reference. Accordingly, all
such factors should be considered carefully when making decisions
with respect to Centerra, and prospective investors should not
place undue reliance on forward-looking information.
Forward-looking information is as of May 12, 2023. Centerra assumes
no obligation to update or revise forward-looking information to
reflect changes in assumptions, changes in circumstances or any
other events affecting such forward-looking information, except as
required by applicable law.
TABLE OF CONTENTS
Overview Overview of Consolidated
Financial and Operational HighlightsOverview of
Consolidated Results Outlook
Recent Events and Developments Liquidity
and Capital Resources Financial
Performance Financial Instruments
Balance Sheet Review Operating Mines and
Facilities Quarterly Results – Previous Eight
Quarters Accounting Estimates, Policies and
Changes Disclosure Controls and Procedures and
Internal Control Over Financial ReportingNon-GAAP
and Other Financial Measures Qualified Person & QA/QC –
Production, Mineral Reserves and Mineral Resources |
12351011121415152222232327 |
Overview
Centerra’s Business
Centerra is a Canada-based mining company
focused on operating, developing, exploring and acquiring gold and
copper properties worldwide. Centerra’s principal operations are
the Mount Milligan gold-copper mine located in British Columbia,
Canada (the “Mount Milligan Mine”), and the Öksüt gold mine located
in Türkiye (the “Öksüt Mine”). The Company also owns the Goldfield
District Project (the “Goldfield Project”) in Nevada, United
States, the Kemess Underground Project (the “Kemess Project”) in
British Columbia, Canada as well as exploration properties in
Canada, the United States of America and Türkiye and has options to
acquire exploration joint venture properties in Canada, Türkiye,
and the United States. The Company owns and operates a Molybdenum
Business Unit (the “Molybdenum BU”), which includes the Langeloth
metallurgical processing facility, operating in Pennsylvania, USA
(the “Langeloth Facility”), and two primary molybdenum mines on
care and maintenance: the Thompson Creek Mine in Idaho, USA, and
the Endako Mine (75% ownership) in British Columbia, Canada.
As of March 31, 2023, Centerra’s significant subsidiaries were
as follows:
Entity |
Property - Location |
Current Status |
Ownership |
Thompson Creek Metals Company Inc. |
Mount Milligan Mine - Canada |
Operation |
100% |
|
Endako Mine - Canada |
Care and maintenance |
75% |
Öksüt Madencilik A.S. |
Öksüt Mine - Türkiye |
Operation |
100% |
Langeloth Metallurgical Company LLC |
Langeloth - USA |
Operation |
100% |
Gemfield Resources LLC |
Goldfield Project - USA |
Advanced exploration |
100% |
AuRico Metals Inc. |
Kemess Project - Canada |
Care and maintenance |
100% |
Thompson Creek Mining Co. |
Thompson Creek Mine - USA |
Care and maintenance |
100% |
The Company’s common shares are listed on the
Toronto Stock Exchange and the New York Stock Exchange and trade
under the symbols “CG” and “CGAU”, respectively.
As of May 12, 2023, there are 218,807,695 common
shares issued and outstanding, options to acquire 3,634,354 common
shares outstanding under the Company’s stock option plan, and
1,740,079 restricted share units outstanding under the Company’s
restricted share unit plan (exercisable on a 1:1 basis for common
shares).
Overview of Consolidated Financial and Operating
Highlights
($millions, except as
noted) |
Three months ended March
31, |
|
2023 |
|
2022 |
% Change |
Financial Highlights |
|
|
|
Revenue |
226.5 |
|
295.2 |
(23 |
)% |
Production costs |
204.3 |
|
144.2 |
42 |
% |
Depreciation, depletion, and amortization ("DDA") |
18.5 |
|
37.5 |
(51 |
)% |
Earnings from mine operations |
3.7 |
|
113.5 |
(97 |
)% |
Net (loss) earnings |
(73.5 |
) |
89.4 |
(182 |
)% |
Adjusted net (loss) earnings(1) |
(52.9 |
) |
56.4 |
(194 |
)% |
Cash (used in) provided by operating activities |
(99.8 |
) |
28.3 |
(453 |
)% |
Free cash flow (deficit) |
(105.9 |
) |
9.1 |
(1264 |
)% |
Adjusted free cash flow (deficit) |
(105.9 |
) |
19.1 |
(654 |
)% |
Additions to property, plant and equipment (“PP&E”) |
8.0 |
|
210.2 |
(96 |
)% |
Capital expenditures - total(1) |
4.9 |
|
16.0 |
(69 |
)% |
Sustaining capital expenditures(1) |
4.9 |
|
15.1 |
(68 |
)% |
Non-sustaining capital expenditures(1) |
— |
|
0.9 |
(100 |
)% |
Net (loss) earnings per common share - $/share basic(2) |
(0.34 |
) |
0.30 |
(213 |
)% |
Adjusted net (loss) earnings per common share - $/share
basic(1)(2) |
(0.24 |
) |
0.19 |
(226 |
)% |
Operating highlights |
|
|
|
Gold produced (oz) |
33,215 |
|
93,784 |
(65 |
)% |
Gold sold (oz) |
38,990 |
|
94,909 |
(59 |
)% |
Average market gold price ($/oz) |
1,890 |
|
1,879 |
1 |
% |
Average realized gold price ($/oz )(3) |
1,446 |
|
1,687 |
(14 |
)% |
Copper produced (000s lbs) |
13,355 |
|
20,558 |
(35 |
)% |
Copper sold (000s lbs) |
15,332 |
|
19,449 |
(21 |
)% |
Average market copper price ($/lb) |
4.05 |
|
4.53 |
(11 |
)% |
Average realized copper price ($/lb)(3) |
3.42 |
|
3.77 |
(9 |
)% |
Molybdenum sold (000s lbs) |
3,347 |
|
2,887 |
16 |
% |
Average market molybdenum price ($/lb) |
32.95 |
|
19.08 |
73 |
% |
Unit costs |
|
|
|
Gold production costs ($/oz) |
1,124 |
|
497 |
126 |
% |
All-in sustaining costs on a by-product basis ($/oz)(1) |
1,383 |
|
395 |
250 |
% |
All-in costs on a by-product basis ($/oz)(1) |
2,107 |
|
516 |
308 |
% |
Gold - All-in sustaining costs on a co-product basis ($/oz)(1) |
1,603 |
|
735 |
118 |
% |
Copper production costs ($/lb) |
2.66 |
|
1.68 |
58 |
% |
Copper - All-in sustaining costs on a co-product basis –
($/lb)(1) |
2.67 |
|
2.11 |
27 |
% |
(1) Non-GAAP financial measure. All per unit
costs metrics are expressed on a metal sold basis. See discussion
under “Non-GAAP and Other Financial Measures”.(2) As at March 31,
2023, the Company had 218,737,013 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.
Overview of Consolidated Results
First Quarter 2023 compared to First Quarter
2022
Net loss of $73.5 million was recognized in the
first quarter 2023, compared to net earnings of $89.4 million in
the first quarter 2022. The decrease in net earnings was primarily
due to:
- lower earnings
from mine operations of $3.7 million in the first quarter of 2023
compared to earnings from mine operations of $113.5 million in the
first quarter of 2022 primarily due to no ounces of gold sold at
the Öksüt Mine as well as lower gold ounces and copper pounds sold,
lower average realized gold and copper prices and higher production
costs at the Mount Milligan Mine.
- Higher
production costs at the Mount Milligan Mine were primarily due to
higher mining and milling costs. Mining costs were impacted by
higher labour costs due to inflationary pressures, higher spending
on equipment spare parts from additional maintenance on mobile
equipment, higher consumption of diesel and explosives due to areas
mined, higher diesel prices and approximately $4.5 million less in
mining costs capitalized to the the Tailings Storage Facility
(“TSF”). Higher milling costs were primarily due to liner
replacement and related contractor costs of approximately $5.5
million associated with general mill shutdown which was performed
in the first quarter of 2023 but not in the first quarter of 2022.
A decrease in earnings from mine operations was partially offset by
a decrease in DD&A at the Mount Milligan Mine due to the
increase in proven and probable reserves in 2022 and lower tonnes
processed;
- a reclamation
expense of $15.6 million in the first quarter of 2023 compared to
reclamation recovery of $42.0 million in the first quarter of 2022,
primarily due to a decrease in the risk-free interest rates applied
to discount the estimated future reclamation cash flows;
- higher other
operating expenses primarily attributable to standby-by costs of
$10.4 million at the Öksüt Mine expensed in the period instead of
being capitalized to production inventory due to the focus on waste
stripping activities in the period and limited mining, crushing and
stacking of ore; and
- higher
exploration and development costs of $17.9 million in the first
quarter of 2023 compared to $8.2 million in the first quarter of
2022 primarily related to various drilling activities and technical
studies undertaken at the Goldfield Project the Oakley Project and
project advancement work at the Thompson Creek Mine.
The decrease in net earnings was partially
offset by lower income tax expense primarily resulting from
suspension of operations at the Öksüt Mine. The decrease in income
tax expense was partially offset by a one-time income tax of
approximately $5.0 million levied by the Turkish government on
taxpayers eligible to claim Investment Incentive Certificate
benefits in 2022. In addition, the decrease in net earnings was
partially offset by higher non-operating income primarily
attributable to litigation and related costs incurred in connection
with the seizure of the Kumtor Mine incurred in the first quarter
of 2022 that did not occur in 2023 and higher interest income
earned on the Company’s cash balance in the first quarter of 2023
from rising interest rates.
Adjusted net lossNG of $52.9 million was
recognized in the first quarter of 2023, compared to adjusted net
earningsNG of $56.4 million in the first quarter of 2022. The
decrease in adjusted net earningsNG was primarily due to lower
earnings from mine operations, higher reclamation expense at care
and maintenance sites, higher non-operating expenses and higher
exploration and development costs, partially offset by lower
non-operating expenses as outlined above.
The adjusting items to net loss in the first
quarter of 2023 were:
- $5.0 million of current income tax
expense resulting from the introduction by the Turkish government
of a one- time income tax levied on taxpayers eligible to claim
Investment Incentive Certificate benefits in 2022; and
- $15.6 million of
reclamation provision revaluation expense at sites on care and
maintenance at the Endako Mine, Kemess Project and the Thompson
Creek Mine primarily attributable to a decrease in the risk-free
interest rates applied to discount the estimated future reclamation
cash flows.
The adjusting items to net earnings in the first
quarter of 2022 were:
- $42.0 million reclamation provision
revaluation recovery at sites on care and maintenance in the
Molybdenum BU primarily attributable to an increase in the
risk-free interest rates applied to discount the estimated future
reclamation cash flows;
- $6.5 million legal
and other costs directly related to the seizure of the Kumtor Mine;
and
- $2.5 million of
income tax adjustments resulting from foreign currency exchange
rate impact on the deferred income taxes related to the Öksüt
Mine.
Cash used in operating activities was $99.8
million in the first quarter of 2023, compared to cash provided by
operating activities of $28.3 million in the first quarter of 2022.
The decrease in cash provided by operating activities was primarily
due to a $65.3 million increase in working capital requirements at
the Molybdenum BU arising from higher molybdenum prices. Other
contributing factors were no ounces of gold sold at the Öksüt Mine
as well as lower average realized gold and copper prices, lower
gold ounces and copper pounds sold and higher production costs at
the Mount Milligan Mine as noted above. In addition, there was an
unfavourable working capital change at the Öksüt Mine from the
timing of vendor payments. The unfavourable working capital change
at the Molybdenum BU is expected to partially reverse over the
course of 2023 as sales are collected and concentrate purchases are
finalized at lower anticipated molybdenum prices. The overall
decrease in cash provided by operating activities was partially
offset by a favourable working capital change at the Mount Milligan
Mine due to the effect of the timing of concentrate shipments and
lower income taxes paid primarily resulting from no gold ounces
sold at the Öksüt Mine.
Free cash flow deficitNG of $105.9 million was
recognized in the first quarter of 2023, compared to free cash
flowNG of $9.1 million in the first quarter of 2022. The
decrease in free cash flowNG was primarily due to lower cash
provided by operating activities as outlined above, partially
offset by lower sustaining capital expendituresNG.
2023 Outlook
The Company’s 2023 outlook was disclosed in the
MD&A for the year ended December 31, 2022 filed on SEDAR at
www.sedar.com and EDGAR at www.sec.gov/edgar. At the Öksüt Mine,
construction of the mercury abatement system is complete, and the
Company is working with the applicable authorities in Türkiye to
obtain final approval of the updated Environmental Impact
Assessment (“EIA”).
The full year 2023 outlook for the Mount
Milligan Mine, as previously disclosed on February 23, 2023, and
comparative actual results for the three months ended March 31,
2023 are set out in the following table:
Mount Milligan Mine(1) |
Units(2) |
Three months ended March 31,
2023 |
2023Guidance |
Production |
|
|
|
Unstreamed gold production |
(Koz) |
22 |
104 -111 |
Streamed gold production |
(Koz) |
12 |
56 - 59 |
Total gold production(3) |
(Koz) |
33 |
160 - 170 |
Unstreamed copper production |
(Mlb) |
11 |
49 - 57 |
Streamed copper production |
(Mlb) |
3 |
11 - 13 |
Copper production(3) |
(Mlb) |
13 |
60 - 70 |
Costs(4) |
|
|
|
Gold production costs |
($/oz) |
1,124 |
900 - 950 |
All-in sustaining costs on a by-product basisNG |
($/oz) |
914 |
1,075 - 1,125 |
All-in costs on a by-product basisNG |
($/oz) |
924 |
1,125 - 1,175 |
All-in sustaining costs on a co-product basisNG |
($/oz) |
1,134 |
1,150 - 1,200 |
Copper production costs |
($/lb) |
2.66 |
1.90 - 2.15 |
All-in sustaining costs on a co-product basisNG |
($/lb) |
2.67 |
2.75 - 3.00 |
Capital Expenditures |
|
|
|
Additions to PP&E |
($M) |
4.3 |
65 - 70 |
Total Capital ExpendituresNG |
($M) |
1.8 |
65 - 70 |
SustainingNG |
($M) |
1.8 |
65 - 70 |
Non-sustainingNG |
($M) |
— |
— |
Depreciation, depletion and amortization |
($M) |
17.3 |
65 - 80 |
British Columbia mineral tax |
($M) |
0.6 |
1 - 3 |
- 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 $1,750 per ounce and a
blended copper price of $3.85 per pound for the remaining three
quarters ending December 31, 2023 ($1,600 per ounce and $3.55 per
pound in the previous guidance), the Mount Milligan Mine’s average
realized gold and copper price for the remaining three quarters of
2023 would be $1,250 per ounce and $2.99 per pound, respectively,
compared to average realized prices of $1,446 per ounce and
$3.42 per pound in the three months period ended March 31, 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 March
31, 2023 and a market price of $3.75 per pound for the unhedged
portion for the remainder of 2023.
- Unit costs include a credit for
forecasted copper sales treated as by-product for all-in sustaining
costs. Production for copper and gold reflects estimated
metallurgical losses resulting from handling of the concentrate and
metal deductions levied by smelters.
- Gold and copper production at the
Mount Milligan Mine assumes recoveries of 66% and 81%,
respectively. 2023 gold ounces and copper pounds sold are expected
to be consistent with production.
- Units noted as ($/oz) relate to
gold ounces and ($/lb) relate to copper pounds.
The full year 2023 outlook for the Goldfield
Project, Kemess Project, the Molybdenum BU and corporate
administration, as previously disclosed, and comparative actual
results for three months ended March 31, 2023 are set out in the
following table:
Other Costs |
Units |
Three months ended March 31, 2023 |
2023Guidance |
Goldfield Project - Project Development Costs |
($M) |
4.0 |
15 - 20 |
Goldfield Project - Exploration Costs |
($M) |
7.7 |
10 |
Other Exploration Projects(1) |
($M) |
6.2 |
12 - 18 |
Total Exploration and Project
Development(2) |
($M) |
17.9 |
50 - 65 |
Kemess Project Care & Maintenance Costs |
($M) |
3.1 |
15 - 17 |
Molybdenum BU Free Cash Flow DeficitNG(3) |
($M) |
76.6 |
45 - 80 |
Corporate Administration Costs(4) |
($M) |
14.8 |
40 - 45 |
- 2023 costs
include $2.6 million costs related to project advancement work at
the Thompson Creek Mine.
- The exploration
and project development costs include both expensed exploration and
project development costs as well as capitalized exploration costs
and exclude business development expenses. Approximately $2.7
million and $0.5 million ($3.0 million and $1.0 million in the
previous guidance) of these capitalized exploration costs are also
included in the full year 2023 sustaining capital expendituresNG
estimates for Mount Milligan Mine and Öksüt Mine, respectively. No
exploration costs were capitalized in the three months period ended
March 31, 2023.
- Includes an
additional cash outflow to cover increased working capital
requirements at the Langeloth Roasting Facility, which is expected
to partially reverse as a large portion of cash tied up in working
capital becomes released during the remaining nine months of 2023
if molybdenum prices remain at their current levels.
- 2023 actual costs
include severance costs of $1.2 million and share-based
compensation costs of $3.1 million.
Mount Milligan Mine Production
Profile
Mount Milligan Mine’s production the first
quarter of 2023 was impacted by mine sequencing and lower gold
grades than planned when mining was occurring in an ore-waste
transition zone, with this lower grade ore also impacting plant
recoveries. The Company remains on track to access the higher grade
copper and gold from Phase 7 and Phase 9 in the second half of the
year, but given the lower than planned production during the first
quarter, the Company expects 2023 gold production to be near the
low end of guidance. Copper production is tracking towards the
mid-point of guidance for the year. Mount Milligan Mine’s 2023 gold
production and copper production is expected to be back-end
weighted, driving a higher proportion of concentrate sales into the
fourth quarter of 2023. The Company expects approximately 30% to
35% of concentrate sales to occur in the fourth quarter of
2023.
Mount Milligan Mine Cost
Profile
Mount Milligan Mine gold production costs are
expected to be in the range of $900 to $950 per ounce sold in 2023,
which is unchanged from the previous guidance. Mount Milligan Mine
gold production costs in the three months ended March 31, 2023 were
$1,124 per ounce sold, higher than the guidance range, primarily
due to planned mill shutdown costs, lower amounts capitalized to
the TSF and the mine’s production profile. The Company expects
increased gold production levels later in 2023 and higher
allocation of costs to the TSF of approximately $14 to $16 million,
which are expected to result in lower average costs per ounce.
Copper production costs at the Mount Milligan
Mine are unchanged from the previous guidance and expected to be in
the range of $1.90 to $2.15 per pound sold for the 2023 year
compared to $2.66 per copper pound sold in the three months ended
March 31, 2023. Similar to the gold production profile, copper
production is expected to increase later in 2023, driving full year
copper production costs per pound lower than the amounts realized
in the three months ended March 31, 2023.
The Mount Milligan Mine’s all-in sustaining
costs on a by-product basisNG in 2023 are expected to be in the
range of $1,075 to $1,125 per ounce sold. Mount Milligan
Mine’s all-in sustaining costs on a by-product basisNG were $914
per ounce sold for the three months ended March 31, 2023. All-in
sustaining costs on a by-product basisNG for the remaining nine
months ending December 31, 2023 are expected to be higher compared
to the three months ended March 31, 2023 due to lower copper
by-product credits estimated for the remaining nine months of 2023
from lower expected average realized copper price of $2.99 per
pound after reflecting the concentrate refining and treatment
costs, Mount Milligan Streaming Arrangement, and existing hedges in
place as of March 31, 2023 and increased capital expenditures
through the remainder of 2023 due to timing of projects.
Mount Milligan Mine Capital Expenditures
Additions to PP&E, an IFRS accounting figure
includes certain non-cash additions to PP&E such as changes in
future reclamation costs and capitalization of leases. Capital
expendituresNG, which comprise sustaining capital expendituresNG
and non-sustaining capital expendituresNG, exclude such non-cash
additions to PP&E. The Mount Milligan Mine’s planned additions
to PP&E in 2023 are unchanged from the previous guidance and
expected to be in the range of $65 to $70 million compared to
$4.3 million in the three months ended March 31, 2023. Planned
total capital expendituresNG in 2023 are unchanged from the
previous guidance and expected to be in the range of $65 to $70
million, compared to capital expendituresNG of $1.8 million in the
three months ended March 31, 2023. Most of the capital expenditures
are expected to be incurred during the remainder of 2023, due to
the timing of major projects and TSF additions.
Mount Milligan Mine Depreciation, Depletion and
Amortization (DD&A)
Mount Milligan Mine’s planned DD&A included
in costs of sales for 2023 is unchanged from the previous guidance
and expected to be in the range of $65 to $80 million, compared to
$17.3 million for the three months ended March 31, 2023.
Mount Milligan Mine Current Taxes
The Mount Milligan Mine is subject to the
British Columbia mineral tax, which is unchanged from the previous
guidance and estimated to be between $1 and $3 million in 2023
compared to $0.6 million for the three months ended March 31,
2023.
Öksüt Mine
Due to the continued suspension of gold
production activities at the Öksüt Mine, the Company did not issue
2023 guidance. It is estimated that the Öksüt Mine will incur
average cash expenditures of approximately $7 to $10 million per
month to maintain partial mining operations while its doré bar
production remains suspended. Cash expenditures incurred during the
three months ended March 31, 2023 were $23.8 million, in line with
this expectation. The Company recorded $9.5 million in cash standby
costs due to limited mining, crushing and stacking of ore
activities in the period. Other cash expenditures during the period
included $3.1 million for capital expendituresNG, $2.6 million in
cash costs allocated to product inventory related to stockpiled and
stacked ore, with the remainder related to advance payments to
vendors and other working capital changes. As of March 31, 2023,
the carrying value of stored gold-in-carbon inventory was $46.9
million.
Molybdenum Business Unit
The Company’s costs at the Molybdenum BU’s care
and maintenance sites in the three months ended March 31, 2023 were
$7.3 million. The Company’s full year 2023 expenditures for the
Molybdenum BU’s care and maintenance sites are estimated to be
between $30 and $35 million, which is unchanged from the previous
guidance.
The Company’s actual expenditures at the Endako
Mine in the three-month period ended March 31, 2023 were $1.1
million with no costs for reclamation expenditures. The full year
2023 expenditures at the Endako Mine are expected to be between $12
to $15 million including approximately $6 to $8 million of care and
maintenance costs and $6 to $7 million of reclamation expenditures
primarily relating to work on the closure spillway for Tailings
Pond 2.
The Company’s expenditures at the Thompson Creek
Mine for the three months ended March 31, 2023 were $6.2 million,
including $3.6 million for care and maintenance and $2.6 million
costs related to project advancement work. The full year 2023
expenditures at the Thompson Creek Mine are expected to be
approximately $18 to $20 million, including $9 to $10 million
of care and maintenance costs and $9 to 10 million of costs
associated with project advancement including early site works,
project de-risking activities such as geotechnical drilling, and
additional engineering costs as the Company continues to assess a
potential restart of the mine. The molybdenum price has fluctuated
significantly in recent months from around $15 per pound in August
2022 to $38 per pound in early February 2023 and reducing to
approximately $24.50 per pound by March 31, 2023. The Company
continues to progress its pre-feasibility study on a restart of the
Thompson Creek Mine.
During the three months ended March 31, 2023,
the significant increase in the molybdenum prices in excess of $35
per pound resulted in additional cash outflow to cover increased
working capital requirements to purchase molybdenum concentrate at
the Langeloth Roasting Facility. The additional investment in
working capital during the first quarter of 2023 at the Langeloth
Roasting Facility amounted to $67 million. With the recent decline
of molybdenum prices and the large portion of molybdenum
concentrate purchased in the first quarter of 2023 still subject to
final pricing as of March 31, 2023 over the next few months, it is
expected that the sale prices of most molybdenum products will
closely approximate final purchase prices of the molybdenum
concentrate and result in a large portion of the investment in
working capital being released during the remaining nine months of
2023.
The free cash flow deficitNG at the Molybdenum
BU for the three-month ended March 31, 2023 was $76.6 million. The
full year 2023 free cash flow deficitNG at the Molybdenum BU is
expected to be in the range of $45 to $80 million, which is
unchanged from the previous guidance, inclusive of care and
maintenance expenses, reclamation expenditures, Thompson Creek
project advancement activities, and required investments in
Langeloth working capital, which are highly dependent on market
molybdenum prices.
Exploration Expenditures (excluding
Project Development costs)
In the three months ended March 31, 2023 total
exploration expenditures were $11.3 million including $7.7 million
towards the Goldfield Project. Total exploration expenditure
estimates for the full year of 2023 are unchanged from the previous
guidance and expected to be $35 to $45 million, including $10
million towards the Goldfield Project, and $25 to $35 million
for all other exploration projects. A large portion of the planned
Goldfield drilling took place during the first quarter of 2023.
Goldfield Project
The Goldfield Project cost estimates include
both exploration and project development costs and are unchanged
from the previous guidance and expected to be in the range of $25
to $30 million for 2023 including $15 to $20 million for project
development costs and $10 million for exploration costs as outlined
above. In the three months ended March 31, 2023 project development
costs and exploration costs related to the Goldfield Project, all
of which were expensed, amounted to $11.7 million, including $4.0
million for project development costs and $7.7 million for
exploration costs. With a large proportion of the meters planned
for 2023 drilled in the first quarter, ongoing exploration
activities in the second quarter will focus on supporting the
completion of an initial resource estimate by mid-year 2023
followed by an updated resource estimate accompanied by feasibility
study.
Kemess Project
The Kemess Project will continue to be on a care
and maintenance in 2023, with care and maintenance costs expected
to be in the range from $15 to $17 million, which is unchanged from
the previous guidance. Care and maintenance costs incurred in three
months ended March 31, 2023 were $3.1 million. The guidance for the
year includes engineering design and construction costs associated
with the decommissioning of the Kemess South TSF sedimentation pond
and associated works.
Corporate Administration
Corporate and administration expenses in the
three months ended March 31, 2023 were $14.8 million, including
$1.1 million for severance related costs and stock-based
compensation expense of $3.1 million. The higher stock-based
compensation in the first quarter of 2023 reflects an increase in
the Company’s share price during the quarter. The higher costs
incurred in the first quarter of 2023 are expected to be partially
offset by lower payroll related costs associated with streamlining
of the Company’s corporate structure, and lower costs related to
the implementation of a new enterprise resource planning (“ERP”)
system in the remaining nine months of 2023. The planned full year
2023 corporate and administration expenses are unchanged from the
previous guidance and expected to be in the range of $40 to $45
million (including $6 to $8 million of stock-based compensation
expenses).
2023 Material Assumptions
Other material assumptions or factors not
mentioned above but used to forecast production and costs for the
remaining nine months ending December 31, 2023, after giving effect
to the hedges in place as at March 31, 2023, include the
following:
- a market gold
price of $1,750 per ounce ($1,600 per ounce in the previous
guidance), and an average realized gold price at the Mount Milligan
Mine of $1,250 per ounce ($1,192 per ounce in the previous
guidance) after reflecting the Mount Milligan Streaming Arrangement
(i.e., 35% of the Mount Milligan Mine’s gold is sold to Royal Gold
for $435 per ounce) and gold refining costs.
- a market price
of $3.75 per pound ($3.25 per pound in the previous guidance) for
the unhedged portion of copper production, representing a blended
copper price of $3.85 per pound ($3.55 in the previous guidance)
that gives effect to the hedges in place as at March 31, 2023
resulting in an average realized copper price at the Mount Milligan
Mine of $2.99 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.
- exchange rates are unchanged from
the previous guidance and set as follows: $1USD:$1.30 CAD,
$1USD:18.0 Turkish lira.
- diesel fuel price
assumption of $0.96/litre or CAD$1.25/litre ($1.00/litre or
CAD$1.30/litre in the previous guidance) at the Mount Milligan
Mine.
Mount Milligan Streaming Arrangement
Production at the Mount Milligan Mine is subject
to the Mount Milligan Streaming Arrangement. To satisfy its
obligations under the Mount Milligan Streaming Arrangement the
Company purchases refined gold and copper warrants and arranges for
their delivery to Royal Gold. The difference between the cost of
the purchases of refined gold and copper warrants, and the
corresponding amounts payable to the Company under the Mount
Milligan Streaming Arrangement is recorded as a reduction of
revenue and not a cost of operating the mine.
Other Material Assumptions
Other material assumptions used in forecasting
production and costs for 2023 can be found under the heading
“Caution Regarding Forward-Looking Information” in this document.
Production, cost, and capital expenditure forecasts for the rest of
2023 are forward-looking information and are based on key
assumptions and subject to material risk factors that could cause
actual results to differ materially, and which are discussed under
the heading “Risks That Can Affect Centerra’s Business” in the
Company’s most recent AIF.
2023 Sensitivities
Mount Milligan Mines’ costs and cash flows for
the rest of 2023 are sensitive to changes in certain key inputs.
The company has estimated the impact of any such changes on Mount
Milligan Mine’s costs and cash flows as follows:
|
|
Impact on($ millions) |
Impact on($ per ounce sold) |
|
|
ProductionCosts
&Taxes |
CapitalCosts |
Cash flows |
All-in sustaining costs on a by-product basis per
ounceNG |
Gold price(1)(2) |
$50/oz |
0.1 - 0.2 |
— |
3.5 - 4.0 |
0.1 - 0.2 |
Copper price(1)(2) |
-10% |
0.2 - 0.3 |
— |
4.5 - 7.5 |
40.0 - 60.0 |
+10% |
0.7 - 0.9 |
— |
18.5 - 21.5 |
155.0 - 165.0 |
Diesel fuel(1) |
10% |
0.8 - 1.1 |
0.1 - 0.2 |
0.9 - 1.3 |
6.0 - 7.5 |
Canadian dollar(1)(3) |
10 cents |
4.0 - 5.1 |
0.6 - 0.7 |
4.6 - 5.8 |
40.0 - 45.0 |
(1) Includes the effect of the Company’s copper, diesel fuel and
Canadian dollar hedging programs, with current exposure coverage as
of March 31, 2023 of approximately 43%, 60% and 78%,
respectively.
(2) Excludes the effect of 24,952 ounces of gold
with an average provisional price of $1,976 per ounce and 17.7
million pounds of copper with an average provisional price of $4.10
per pound outstanding under contracts awaiting final settlement in
future months as of March 31, 2023.
(3) 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.
Recent Events and
Developments
Update on Öksüt Mine
Operations
In March 2022, Centerra announced it had
temporarily suspended gold doré bar production at the Öksüt Mine
due to mercury detected in the gold room at the adsorption,
desorption and recovery (“ADR”) plant. From the date of suspension
of gold room operations through to the end of 2022, the Company
built up gold-in-carbon inventory of approximately 100,000
recoverable ounces and 200,000 recoverable ounces of gold in ore
stockpiles and on the heap leach pad. For the gold-in-carbon
inventory, substantially all of the production costs have already
been incurred. Once operations resume, the ADR plant is expected to
have sufficient production capacity to process up to approximately
35,000 ounces of gold per month.
The Company has completed construction of a
mercury abatement system to allow processing of mercury-bearing
ores. In February and March 2023, the ADR facility underwent
inspection and testing by the Turkish Ministry of Environment,
Urbanization and Climate Change (the “Ministry of Environment”) and
the Ministry of Labour and Social Security. The Company continues
to work with relevant authorities to obtain the required approvals
to restart gold room operations at the ADR plant.
Permitting
Following the inspection by and several
discussions with the Ministry of Environment in 2022, the Company
determined that an updated EIA should be prepared and submitted to
clarify various production and other capacity limits for the Öksüt
Mine and to align the EIA production levels with current operating
plans. The updated EIA was submitted in January 2023. The Company
completed its technical review meeting with local authorities at
the end of March and posted its EIA for public comment in late
April, with no material comments received. With all review steps
now completed, the EIA has been submitted for final ministry
approval. The Company continues to work with Turkish officials and
other stakeholders on the approval of its EIA and other permits
that may be required to allow for a timely full restart of all
operations.
The Öksüt Mine suspended leaching of ore on the
heap leach pad and ceased using activated carbon on site effective
late August 2022 though mining, crushing and stacking activities
continued in line with existing EIA limits for the remainder of
2022. After building substantial inventories of gold-in-carbon, ore
stacked on the heap leach pad and ore stockpiles, crushing and
stacking activities were paused in the first quarter of 2023 until
the new EIA is received. The Öksüt Mine is currently focusing
mining activities on the Phase 5 pit wall pushback to expand the
Keltepe pit.
In January 2023, the Öksüt Mine received notice
of approval of its operating license extension application for a
period of 10 years as well as approval of an enlarged grazing land
permit to allow expansion of the Keltepe and Güneytepe pits, as
planned.
As noted above, Centerra is involved in several
permitting processes with Turkish regulatory authorities and notes
that a general election in Türkiye on May 14, 2023 could result in
administrative delays to such processes. The Company will continue
to diligently pursue approvals of an amended EIA and all required
permits for the Öksüt Mine.
Executive Management
Changes
In March 2023, the Company announced the
appointment of Paul Tomory as its new President and Chief Executive
Officer, effective May 1, 2023. Upon Mr. Tomory assuming his role,
Mr. Wright ceased to be the Interim President and CEO and resumed
his responsibilities as an independent member of the Board of
Directors.
Exploration Update
Exploration expenditures in the first quarter of 2023 were $11.3
million. The activities were primarily focused on drilling programs
at the Goldfield Project in Nevada and greenfield projects in the
USA and Türkiye.
Goldfield Project
At the Goldfield Project, the planned 2023
drilling programs, including approximately 40,000 metres of Reverse
Circulation (“RC”) and diamond drilling, commenced early in the
first quarter of 2023, principally targeting gold mineralization
below and adjacent to the known resources at the Gemfield deposit
and the Goldfield Main deposit. RC and diamond drilling completed
in the first quarter of 2023 included exploration, infill, and
geotechnical (oriented core) holes, totalling 28,459 metres of
drilling in 125 drill holes.
At the Gemfield deposit, drill assay results
identified extensions of gold mineralization to the east, west, and
south of the known resource. To the west and south of the deposit,
the mineralization is relatively deep and forms broad zones of low
to moderate grade sulphide gold mineralization associated with
quartz/alunite alteration. Gold mineralization to the east and
northeast of the deposit is predominately shallower and oxidized
and is associated with alunite and quartz/alunite alteration.
At the Goldfield Main deposit, drill assay
results were consistent with nearby historic drill intercepts,
confirming and slightly expanding the known mineralization along
the splay structures present within the deposit.
Oakley Project
The Oakley Project is an earn-in joint venture
with Excellon Resources Inc. and is located 21 kilometers south of
Oakley, Idaho. During the first quarter of 2023, Centerra completed
its Phase-1 earn-in of a 51% interest in the property and provided
notice of its intention to commence the Phase-2 earn-in to acquire
an additional 19% interest in the property by spending $3.0 million
on exploration and making an option payment of $0.3 million over
the subsequent three years.
The 2022-2023 exploration drilling program at
the property commenced in the middle of the third quarter of 2022
and was completed in the middle of the first quarter of 2023. In
total, 12 diamond drill holes were completed for 2,721 metres at
the Cold Creek and Blue Hill Creek prospects.
At the Blue Hill Creek prospect, wide intervals
of gold mineralization were intercepted within silicified Tertiary
conglomerate to the west of the previously known surficial gold
mineralization. These intercepts have expanded the zone of known
gold mineralization over 100 metres to the west of previous drill
intercepts and have shown that the host conglomerate unit is
significantly thicker than previously thought, which significantly
enhances the potential of the area to host mineralization.
Liquidity and Capital Resources
The Company’s total liquidity position as March
31, 2023 was $810.2 million, representing a cash balance of $412.1
million and $398.1 million available under a corporate credit
facility. Credit Facility availability is reduced by outstanding
letters of credit, amounting to $1.9 million as at March 31,
2023.
First Quarter 2023 compared to First Quarter
2022
See the Overview of Consolidated Results section in this
MD&A for the discussion of cash used in operating
activities.
Cash used in investing activities of $8.1
million was recognized in the first quarter of 2023 compared to
cash used in investing activities from operations of $194.0 million
in the first quarter of 2022. The decrease is primarily related to
the acquisition of the Goldfield Project of $176.7 million in the
first quarter of 2022 and lower PP&E additions at the Mount
Milligan Mine in first quarter of 2023 compared to 2022, partially
offset by an increase in restricted cash balances.
Cash used in financing activities during the
first quarter of 2023 was $12.0 million compared to $13.1 million
in the first quarter of 2022. The decrease was primarily due to
lower dividends paid of $11.2 million as compared to $12.3 million
in the first quarter of 2022 as a result of reduced share
count.
Financial Performance
First Quarter 2023 compared to First
Quarter 2022
Revenue of $226.5 million was recognized in the
first quarter of 2023 compared to $295.2 million in the first
quarter of 2022. The decrease in revenue was primarily due to no
ounces of gold sold at the Öksüt Mine, as well as both lower gold
ounces and copper pounds sold and lower average realized gold and
copper prices at the Mount Milligan Mine. The overall decrease in
revenue was partially offset by higher average realized molybdenum
prices and an increase in the pounds of molybdenum sold at the
Molybdenum BU.
Gold production was 33,215 ounces in the first
quarter of 2023 compared to 93,784 ounces in the first quarter of
2022. Gold production in the first quarter of 2023 included 33,215
ounces of gold from the Mount Milligan Mine compared to 39,093
ounces in the first quarter of 2022, primarily due to lower mill
throughput and slightly lower recoveries. Production for 2023 at
the Mount Milligan Mine is expected to be back-end weighted. There
were no gold ounces produced at the Öksüt Mine in the first quarter
of 2023 compared to 54,691 ounces in the first quarter of 2022, due
to the continued suspension of gold room operations at the ADR
plant.
Copper production at the Mount Milligan Mine was
13.4 million pounds in the first quarter of 2023 compared to 20.6
million pounds in the first quarter of 2022. The decrease was
primarily due to lower mill throughput, lower copper head grades
and lower recoveries.
The Langeloth Facility roasted 3.9 million
pounds and sold 3.3 million pounds of molybdenum in the first
quarter of 2023, compared to 1.1 million pounds and 2.9 million
pounds, respectively in the first quarter of 2022. This increase in
the molybdenum roasted and sold was primarily due to an unplanned
acid plant shut down in the first quarter of 2022.
Cost of sales of $222.8 million was recognized
in the first quarter of 2023 compared to $181.7 million in the
first quarter of 2022. The increase was primarily attributable to
higher production costs at the Mount Milligan Mine and higher
production costs at the Molybdenum BU as a result of higher average
molybdenum prices paid to purchase third-party molybdenum
concentrate to be processed and an increase in pounds of molybdenum
roasted and sold. Partially offsetting the overall increase in cost
of sales was lower DDA primarily attributable to lower tonnes
processed and an increase in proven and probable reserves at the
Mount Milligan Mine, as well as no cost of sales at the Öksüt Mine
due to continued suspension of operations.
Gold production costs were $1,124 per ounce in
the first quarter of 2023 compared to $497 per ounce in the first
quarter of 2022. The increase was primarily due to lower gold
ounces sold at the Mount Milligan Mine, no gold ounces sold at the
Öksüt Mine and higher production costs at the Mount Milligan Mine
due to higher overall production costs and a higher allocation of
costs to gold production costs due to the relative changes in the
market prices of gold and copper. Higher production costs at the
Mount Milligan Mine were impacted by mine sequencing and other
timing factors during the quarter, in addition to the effects of
inflation on labour and consumable costs when compared to the first
quarter of 2022. A planned mill shutdown to replace liners was
executed during the first quarter of 2023, with total costs of
approximately $5.5 million. Additionally, there were minimal tonnes
placed as part of the TSF step-out activities during the first
quarter of 2023, resulting in approximately $0.5 million in mining
costs being capitalized to the TSF. Higher capitalization to the
TSF is expected in future periods. Mining costs were also impacted
by higher spending on equipment spare parts from additional
maintenance on mobile equipment, higher consumption of diesel and
explosives in the period due to areas mined and higher diesel
prices. No gold production costs were reported at the Öksüt Mine in
the first quarter of 2023 as there were no gold ounces sold.
All-in sustaining costs on a by-product basisNG
were $1,383 per ounce in the first quarter of 2023 compared to $395
per ounce in the first quarter of 2022. The increase in all-in
sustaining costs on a by-product basisNG was primarily due to
higher operating costs from higher production costs per ounce at
the Mount Milligan Mine as noted above and a decrease in by-product
credits as a result of lower copper pounds sold and lower average
realized copper prices. The overall increase in all-in sustaining
costs on a by-product basisNG was partially offset by a decrease in
sustaining capital expendituresNG.
All-in costs on a by-product basisNG were $2,107
per ounce in the first quarter of 2023 compared to $516 per ounce
in the first quarter of 2022. The increase was primarily due to
higher all-in sustaining costs on a by-product basisNG as noted
above, higher standby costs at the Öksüt Mine expensed in the
period due to the focus on waste stripping activities and limited
mining, crushing and stacking of ore in the period and higher
exploration and project development costs.
Expensed exploration and evaluation expenditures
of $17.9 million were recognized in the first quarter of 2023
compared to $8.2 million in the first quarter of 2022. The increase
was primarily due to drilling activities and technical studies
undertaken as part of project development activities at the
Goldfield Project. The total expenditures of $17.9 million
recognized in the first quarter of 2023 comprised of $4.0 million
of project development costs at the Goldfield Project ($nil in the
first quarter of 2022), $7.7 million of drilling and related costs
at the Goldfield Project ($nil in the first quarter of 2022) and
$2.6 million of drilling and related costs at the Thompson Creek
Mine ($nil in the first quarter of 2022) which comprised
geotechnical drilling and additional engineering costs to assess a
potential restart of the mine.
Reclamation expense was $15.6 million in the
first quarter of 2023 compared to reclamation recovery of $42.0
million in the first quarter of 2022. The reclamation expense of
$15.6 million at sites on care and maintenance was primarily
attributable to a decrease in the risk-free interest rates applied
to discount the estimated future reclamation cash flows at the
Endako Mine, Thompson Creek Mine and Kemess Project.
Other operating expenses were $12.9 million in
the first quarter of 2023 compared to $3.5 million in the first of
2022. The increase in other operating expenses was primarily due to
the standby costs of $10.4 million at the Öksüt Mine expensed in
the period due to the focus on waste stripping activities and
limited mining, crushing and stacking of ore in the period.
Other non-operating income of $3.2 million was
recognized in the first quarter of 2023 compared to other
non-operating expenses of $5.3 million in the first quarter of
2022. The increase is primarily attributable to litigation and
related costs incurred in connection with the seizure of the Kumtor
Mine incurred in the first quarter of 2022 that did not occur in
2023 and higher interest income earned on the Company’s cash
balance in the first quarter of 2023 from rising interest
rates.
The Company recognized an income tax expense of
$8.0 million in the first quarter of 2023, comprising current
income tax expense of $6.6 million and a deferred income tax
expense of $1.4 million, compared to an income tax expense
of $29.2 million in the first quarter of 2022, comprising
current income tax expense of $37.5 million and deferred income tax
recovery of $8.3 million. The decrease in income tax expense
primarily resulted from suspension of operations at the Öksüt Mine.
The decrease in income tax expense was partially offset by a
one-time income tax levied by the Turkish government on taxpayers
eligible to claim Investment Incentive Certificate benefits in
2022.
Financial Instruments
The Company seeks to manage its exposure to
fluctuations in diesel fuel prices, commodity prices and foreign
exchange rates by entering into derivative financial instruments
from time-to-time. The hedge positions for each of these programs
as at March 31, 2023 are summarized as follows:
|
|
|
Average Strike Price |
Settlements (% of exposure
hedged)(1) |
As at March 31, 2023 |
Instrument |
Unit |
Type |
Q2 - Q4 2023 |
2024 |
2025 |
Q2 - Q4 2023 |
2024 |
2025 |
Total position(2) |
Fair value ($'000's) |
|
|
|
|
|
|
|
|
|
|
|
FX
Hedges |
USD/CAD zero-cost collars |
CAD |
Fixed |
$1.26/$1.33 |
$1.28/$1.36 |
$1.32/$1.37 |
$243.0 M (52%) |
$183.0 M |
$90.0 M |
$516.0 M |
(6,765 |
) |
USD/CAD
forward contracts |
CAD |
Fixed |
1.29 |
1.32 |
1.35 |
$125.0 M(26%) |
$145.0 M |
$72.0 M |
$342.0 M |
(5,480 |
) |
Total |
|
|
|
|
|
$368.0 M (78%) |
$328.0 M |
$162.0 M |
$858.0 M |
(12,245 |
) |
|
|
|
|
|
|
|
|
|
|
|
Fuel
Hedges |
ULSD zero-cost collars |
Barrels |
Fixed |
$97/$108 |
$98/$110 |
N/A |
20,500 (16%) |
10,500 |
N/A |
31,000 |
115 |
|
ULSD
swap contracts |
Barrels |
Fixed |
$95 |
$98 |
$106 |
56,100 (44%) |
42,900 |
16,800 |
115,800 |
663 |
|
Total |
|
|
|
|
|
76,600 (60%) |
53,400 |
16,800 |
146,800 |
778 |
|
|
|
|
|
|
|
|
|
|
|
|
Copper
Hedges(2): |
Copper
zero-cost collars |
Pounds |
Fixed |
$4.00/$4.92 |
$4.00/$5.06 |
N/A |
14.9 M (43%) |
9.9 M |
N/A |
24.8 M |
4,368 |
|
|
|
|
|
|
|
|
|
|
|
|
Gold/Copper Hedges (Royal Gold
deliverables):(3) |
Gold forward contracts |
Ounces |
Float |
N/A |
N/A |
N/A |
17,720 |
N/A |
N/A |
17,720 |
1,723 |
|
Copper
forward contracts |
Pounds |
Float |
N/A |
N/A |
N/A |
0.8M |
N/A |
N/A |
0.8 M |
58 |
|
(1) Percentage of exposure hedged is calculated with reference
to the expected expenditure to be incurred in Canadian dollars,
fuel consumed and copper pounds sold as outlined in the “Outlook”
section and is subject to change.(2) The copper hedge ratio is
based on the forecasted copper pounds sold, net of the Mount
Milligan Streaming Arrangement.(3) Royal Gold hedging program with
a market price determined on closing of the contract.
The realized (loss) gain recorded in the condensed consolidated
statements of (loss) earnings was as follows:
|
Three months ended March 31, |
($ millions) |
2023 |
|
2022 |
% Change |
Foreign exchange hedges |
(3,438 |
) |
2,069 |
(266 |
)% |
Fuel hedges |
840 |
|
1,883 |
(55 |
)% |
The Company’s zero-cost copper collars are
settled based on monthly average copper prices, protecting a price
floor with participation to the upside of the call strike price.
See more details on the Company’s policy and accounting treatment
in in note 14 of the condensed consolidated interim financial
statements for the three months ended March 31, 2023.
As at March 31, 2023, Centerra has not entered
into any off-balance sheet arrangements with special purpose
entities, nor does it have any unconsolidated affiliates.
Balance Sheet Review |
|
($millions) |
March 31, 2023 |
December 31, 2022 |
Total Assets |
2,219.8 |
2,335.9 |
Total Liabilities |
495.8 |
525.6 |
Current Liabilities |
223.3 |
274.8 |
Non-current Liabilities |
272.5 |
250.8 |
Total Equity |
1,724.0 |
1,810.3 |
Cash as at March 31, 2023 was $412.1 million
compared to $531.9 million as at December 31, 2022. The decrease
was primarily due to a free cash flow deficitNG of $105.9 million,
driven mainly by increases in working capital, and dividends paid
of $11.2 million during the quarter ended March 31, 2023.
Amounts receivable as at March 31, 2023 were
$139.7 million compared to $92.2 million at December 31, 2022. The
increase was primarily due to an increase in molybdenum sales and
timing of cash collection on these sales. The increase was
partially offset by the decrease in amounts receivable from gold
and copper concentrate sales at the Mount Milligan Mine.
Total inventories as at March 31, 2023 were
$297.1 million compared to $316.8 million at December 31, 2022. The
decrease was primarily due to the decrease in molybdenum inventory
at the Molybdenum Business Unit primarily due to a decline in
molybdenum prices at the end of the period, resulting in a
mark-to-market adjustment of $21.9 million.
The carrying value of PP&E as at March 31,
2023 was $1.26 billion compared to $1.27 billion at December 31,
2022. The decrease in carrying value of PP&E was primarily due
to the depreciation and depletion of PP&E of $21.9 million in
the normal course of the operations during the period. The decrease
is partially offset by the additions of $8.0 million related to
ongoing capital projects at the existing mines and projects.
Accounts payable and accrued liabilities as at
March 31, 2023 were $163.7 million compared to $199.4 million at
December 31, 2022. The decrease was primarily due to lower trade
payables and accrued expenses due to effect of timing of vendor
payments and a decrease in mark-to-market payables relating to the
purchase of molybdenum from molybdenum prices declining at the end
of the period. The decrease was partially offset by the higher
provision for share-based compensation primarily due to the effect
of an increase in the Company’s share price and new grants during
the first quarter of 2023.
The other current liabilities as at March 31,
2023 were $54.9 million compared to $73.5 million at December 31,
2022. The decrease was primarily due to deferred revenue recognized
at Mount Milligan Mine related to an advance payment received on
the gold and copper concentrate for which no revenue was recognized
in December 2022. There was no deferred revenue recorded at March
31, 2023. In addition, there was a decrease in the fair value of
derivative liabilities and a decrease in the current portion of the
provision for reclamation for the Endako Mine and Kemess Project
from the timing of reclamation activities.
The long-term portion of the provision for
reclamation as at March 31, 2023 was $251.8 million compared to
$227.9 million at December 31, 2022. The increase was primarily due
to a decrease in the risk-free interest rates applied to discount
the estimated future reclamation cash flows.
Operating Mines and
Facilities
Mount Milligan Mine
The Mount Milligan Mine is an open-pit mine
located in north central British Columbia, Canada producing a gold
and copper concentrate. Production at the Mount Milligan Mine is
subject to an arrangement with Royal Gold pursuant to which Royal
Gold is entitled to purchase 35% of the gold produced and 18.75% of
the copper production at the Mount Milligan Mine for $435 per ounce
of gold delivered and 15% of the spot price per metric tonne of
copper delivered. To satisfy its obligations under the Mount
Milligan Streaming Arrangement, the Company purchases refined gold
ounces
and copper warrants and arranges for delivery to
Royal Gold. The difference between the cost of the purchases of
refined gold ounces and copper warrants and the corresponding
amounts payable to the Company under the Mount Milligan Streaming
Arrangement is recorded as a reduction of revenue and not a cost of
operating the mine.
Mount Milligan Mine Financial and Operating
Results
|
Three months ended March 31, |
($millions, except as noted) |
2023 |
|
2022 |
|
% Change |
Financial Highlights: |
|
|
|
Gold revenue |
56.4 |
|
58.5 |
|
(4 |
)% |
Copper revenue |
52.4 |
|
73.3 |
|
(29 |
)% |
Other by-product revenue |
2.1 |
|
2.3 |
|
(9 |
)% |
Total revenue |
110.9 |
|
134.1 |
|
(17 |
)% |
Production costs |
84.6 |
|
58.6 |
|
44 |
% |
Depreciation, depletion, and amortization ("DDA") |
17.3 |
|
23.5 |
|
(26 |
)% |
Earnings from mine operations |
9.0 |
|
52.0 |
|
(83 |
)% |
Earnings from operations(1) |
6.9 |
|
45.6 |
|
(85 |
)% |
Cash provided by mine operations |
27.6 |
|
20.8 |
|
33 |
% |
Free cash flow from mine operations(2) |
24.6 |
|
6.4 |
|
284 |
% |
Additions to property, plant and equipment |
4.3 |
|
9.7 |
|
(56 |
)% |
Capital expenditures - total(2) |
1.8 |
|
13.4 |
|
(87 |
)% |
Sustaining capital expenditures(2) |
1.8 |
|
12.5 |
|
(86 |
)% |
Non-sustaining capital expenditures(2) |
— |
|
0.9 |
|
(100 |
)% |
Operating Highlights: |
|
|
|
Tonnes mined (000s) |
11,321 |
|
10,651 |
|
6 |
% |
Tonnes ore mined (000s) |
3,869 |
|
4,992 |
|
(22 |
)% |
Tonnes processed (000s) |
4,705 |
|
5,251 |
|
(10 |
)% |
Process plant head grade gold (g/t) |
0.34 |
|
0.35 |
|
(3 |
)% |
Process plant head grade copper (%) |
0.17 |
% |
0.23 |
% |
(26 |
)% |
Gold recovery (%) |
65.5 |
% |
67.9 |
% |
(4 |
)% |
Copper recovery (%) |
78.8 |
% |
81.9 |
% |
(4 |
)% |
Concentrate produced (dmt) |
30,524 |
|
44,932 |
|
(32 |
)% |
Gold produced (oz) (3) |
33,215 |
|
39,093 |
|
(15 |
)% |
Gold sold (oz)(3) |
38,990 |
|
40,204 |
|
(3 |
)% |
Average realized gold price - combined ($/oz)(3)(4) |
1,446 |
|
1,456 |
|
(1 |
)% |
Copper produced (000s lbs)(3) |
13,355 |
|
20,558 |
|
(35 |
)% |
Copper sold (000s lbs)(3) |
15,332 |
|
19,449 |
|
(21 |
)% |
Average realized copper price - combined ($/lb)(3)(4) |
3.42 |
|
3.77 |
|
(9 |
)% |
Unit Costs: |
|
|
|
Gold production costs ($/oz) |
1,124 |
|
647 |
|
74 |
% |
All-in sustaining costs on a by-product basis ($/oz)(2) |
914 |
|
15 |
|
5993 |
% |
All-in costs on a by-product basis ($/oz)(2)(5) |
924 |
|
121 |
|
664 |
% |
Gold - All-in sustaining costs on a co-product basis ($/oz)(2) |
1,134 |
|
819 |
|
38 |
% |
Copper production costs ($/lb) |
2.66 |
|
1.68 |
|
58 |
% |
Copper - All-in sustaining costs on a co-product basis
($/lb)(2) |
2.67 |
|
2.11 |
|
27 |
% |
(1) Includes exploration and evaluation costs
and marketing and selling costs.(2) Non-GAAP financial measure. See
discussion under “Non-GAAP and Other Financial Measures”.(3) Mount
Milligan production and sales are presented on a 100%-basis. Under
the Mount Milligan Streaming Arrangement, Royal Gold is entitled to
35% of gold ounces sold and 18.75% of copper sold. Royal Gold pays
$435 per ounce of gold delivered and 15% of the spot price per
metric tonne of copper delivered.(4) This supplementary financial
measure within the meaning of 52-112 is calculated as a ratio of
revenue from the consolidated financialstatements and units of
metal sold includes the impact from the Mount Milligan Streaming
Arrangement, copper hedges and mark-to-market adjustments on metal
sold that had not yet settled under contract.(5) Includes the
impact from the Mount Milligan Streaming Arrangement and the impact
of copper hedges.
First Quarter 2023 compared to First
Quarter 2022
Earnings from mine operations of $9.0 million
were recognized in the first quarter of 2023 compared to $52.0
million in the first quarter of 2022. The decrease was primarily
due to lower gold ounces and copper pounds sold, lower average
realized gold and copper prices, and higher operating costs,
partially offset by lower DD&A due to the increase in proven
and probable reserves in 2022 and lower tonnes processed.
Mount Milligan Q1 cash provided by mine
operations ($ millions)
Cash provided by mine operations of $27.6
million was recognized in the first quarter of 2023 compared to
$20.8 million in the first quarter of 2022. The increase was
primarily due to favourable working capital change, partially
offset by lower average realized gold and copper prices, lower gold
ounces and copper pounds sold and higher production costs. The
favourable working capital change in the first quarter of 2023
compared to the first quarter of 2022 was primarily related to the
timing of cash collection on concentrate shipments.
Free cash flowNG from mine operations of $24.6
million was recognized in the first quarter of 2023 compared to
$6.4 million in the first quarter of 2022 primarily due to an
increase in cash provided by mine operations and lower sustaining
capital expendituresNG.
During the first quarter of 2023, mining
activities were carried out in phases 4, 6, 7, and 9 of the open
pit, with phase 6 being mainly composed of top soil stripping.
Total tonnes mined were 11.3 million tonnes in the first quarter of
2023 compared to 10.7 million tonnes in the first quarter of 2022
due to productivity gains from improved cycle times from shorter
haul distances.
Total process plant throughput for the first
quarter of 2023 was 4.7 million tonnes, averaging 52,278 tonnes per
calendar day compared to 5.3 million tonnes, averaging 58,346
tonnes per calendar day in the first quarter of 2022. The decrease
in throughput in the first quarter of 2023 was primarily due to
lower SAG mill runtime due to a liner replacement shutdown while no
shutdown occurred in the first quarter of 2022.
Gold production was 33,215 ounces in the first
quarter of 2023 compared to 39,093 ounces in the first quarter of
2022. The lower gold production is attributed to lower mill
throughput and lower recoveries. During the first quarter of 2023,
the average gold head grade and recovery were 0.34 g/t and 65.5%
compared to 0.35 g/t and 67.9% in the first quarter of 2022. Total
copper production was 13.4 million pounds in the first quarter of
2023 compared to 20.6 million pounds in the first quarter of 2022.
The decrease in copper production is attributed to lower mill
throughput, lower copper head grades and lower recoveries. During
the first quarter of 2023, the average copper grade and recovery
were 0.17% and 78.8% compared to 0.23% and 81.9% in the first
quarter of 2022. The copper and gold grades in this part of the
orebody are lower than the average reserves and grades encountered
in certain transition zone areas of the ore body were lower than
planned which impacted copper and gold recoveries. In addition, in
the first quarter of 2023 a higher proportion of high grade gold
low grade copper ore was fed to the mill than in past quarters
which resulted in an elevated pyrite- chalcopyrite ratio and
required a higher degree of selectivity in the flotation circuit to
produce the target grade of copper concentrate.
Gold production costs were $1,124 per ounce in
the first quarter of 2023 compared to $647 per ounce in the first
quarter of 2022. The increase was primarily due to higher overall
production costs and a higher allocation of costs to gold
production costs due to the relative changes in the market prices
of gold and copper and a slight decrease in gold ounces sold.
Higher production costs at the Mount Milligan Mine were impacted by
mine sequencing and other timing factors during the quarter, in
addition to general inflation on labour and consumable costs when
compared to the first quarter of 2022. A planned mill shutdown to
replace liners was executed during the first quarter of 2023 at the
total cost of approximately $5.5 million, while no shutdown
occurred in the first quarter of 2022. Additionally, due to mine
sequencing there were minimal tonnes placed as part of the TSF
step-out activities during the first quarter of 2023, resulting in
approximately $4.5 million less mining costs being capitalized to
the TSF between the periods. This impact is expected to reverse in
future periods as more mining costs are capitalized to the TSF.
Mining costs were also impacted by higher spending on equipment
spare parts from additional maintenance on mobile equipment, higher
consumption of diesel and explosives in the period due to areas
mined and higher diesel prices.
Copper production costs were $2.66 per pound in
the first quarter of 2023 compared to $1.68 per pound in the first
quarter of 2022. The increase was primarily due to overall higher
production costs and a decrease in copper pounds sold, partially
offset by a lower allocation of costs to copper production costs
due to the relative changes in the market prices of gold and
copper.
Mount Milligan Q1 All-in sustaining costs
on a by-product basis per ounceNG
($/oz)
All-in sustaining costs on a by-product basisNG
were $914 per ounce in the first quarter of 2023 compared to $15
per ounce in the first quarter of 2022. The increase was primarily
due to higher operating costs due to higher mining and milling
costs as noted above, lower copper credit as a result of lower
copper pounds sold and lower average realized copper prices as well
as slightly lower gold ounces sold, partially offset by lower
sustaining capital expendituresNG.
All-in costs on a by-product basisNG were $924
per ounce in the first quarter of 2023 compared to $121 per ounce
in the first quarter of 2022. The increase was due to higher
all-in-sustaining costs on a by-product basisNG as noted above,
partially offset by a decrease in non-sustaining capital
expenditures and exploration costs due to less drilling
activity.
Öksüt Mine
The Öksüt Mine is located in Türkiye
approximately 300 kilometres southeast of Ankara and 48 kilometres
south of Kayseri, the provincial capital. The nearest
administrative centre is at Develi, located approximately 10
kilometres north of the mine site. The Öksüt Mine achieved
commercial production on May 31, 2020.
As outlined in the Recent Events and
Developments section in this MD&A above, the Öksüt Mine
suspended gold doré bar production at the Öksüt Mine in early March
2022 due to mercury having been detected in the gold room at the
ADR plant and subsequently suspended normal leaching operations in
August 2022. As a result, some of the results for the three months
ended March 31, 2023 are not directly comparable to the
corresponding prior period.
Öksüt Mine Financial and Operating Results
|
Three months ended March 31, |
($millions, except as noted) |
2023 |
|
2022 |
|
% Change |
Financial Highlights: |
|
|
|
Revenue |
— |
|
101.6 |
|
(100 |
)% |
Production costs |
— |
|
21.1 |
|
(100 |
)% |
Depreciation, depletion, and amortization ("DDA") |
— |
|
12.6 |
|
(100 |
)% |
Earnings from mine operations |
— |
|
67.9 |
|
(100 |
)% |
(Loss) earnings from operations(1) |
(10.8 |
) |
67.4 |
|
(116 |
)% |
Cash (used in) provided by mine operations |
(20.8 |
) |
63.6 |
|
(133 |
)% |
Free cash (deficit) flow from mine operations(2) |
(23.8 |
) |
61.4 |
|
(139 |
)% |
Additions to property, plant and equipment |
3.7 |
|
(0.5 |
) |
840 |
% |
Capital expenditures - total(2) |
3.1 |
|
2.1 |
|
48 |
% |
Sustaining capital expenditures(2) |
3.1 |
|
2.1 |
|
48 |
% |
Non-sustaining capital expenditures(2) |
— |
|
— |
|
0 |
% |
Operating Highlights: |
|
|
|
Tonnes mined (000s) |
823 |
|
2,800 |
|
(71 |
)% |
Tonnes ore mined (000s) |
113 |
|
1,566 |
|
(93 |
)% |
Ore mined - grade (g/t) |
1.69 |
|
1.63 |
|
4 |
% |
Ore crushed (000s) |
78 |
|
911 |
|
(91 |
)% |
Tonnes of ore stacked (000s) |
77 |
|
963 |
|
(92 |
)% |
Heap leach grade (g/t) |
2.66 |
|
1.59 |
|
67 |
% |
Heap leach contained ounces stacked |
6,582 |
|
49,111 |
|
(87 |
)% |
Gold produced (oz) |
— |
|
54,691 |
|
(100 |
)% |
Gold sold (oz) |
— |
|
54,704 |
|
(100 |
)% |
Average realized gold price ($/oz)(3) |
n/a |
|
1,857 |
|
0 |
% |
Unit Costs: |
|
|
|
Gold production costs ($/oz) |
n/a |
|
386 |
|
0 |
% |
All-in sustaining costs on a by-product basis ($/oz)(2) |
n/a |
|
451 |
|
0 |
% |
All-in costs on a by-product basis ($/oz)(2) |
n/a |
|
459 |
|
0 |
% |
(1) Includes exploration and evaluation costs.(2) Non-GAAP
financial measure. See discussion under “Non-GAAP and Other
Financial Measures”.(3) This supplementary financial measure,
within the meaning of 52-112, is calculated as a ratio of revenue
from the consolidated financial statements and units of metal
sold.
First Quarter 2023 compared to First
Quarter 2022
No earnings from mine operations were reported
in the first quarter of 2023 as a result of no ounces of gold sold
due to the suspension of gold room operations at the ADR plant.
Earnings from mine operations were $67.9 million in the first
quarter of 2022.
Cash used in mine operations of $20.8 million
was recognized in the first quarter of 2023, compared to cash
provided by mine operations of $63.6 million in the first quarter
of 2022. The decrease was primarily due to no ounces of gold sold,
standby costs and an unfavorable working capital change due to
timing of vendor payments. Cash standby costs of $9.5 million were
expensed in the period due to the focus on waste stripping
activities and limited mining, crushing and stacking of ore in the
period. Partially offsetting the decrease in cash provided by mine
operations were lower income taxes paid.
Free cash flow deficit from mine operationsNG of
$23.8 million was recognized in the first quarter of 2023, compared
to the free cash flow from mine operationsNG of $61.4 million in
the first quarter of 2022. The decrease was primarily due to a
decrease in cash provided by mine operations due to no ounces of
gold sold during the quarter.
Mining activities in the first quarter of 2023
were carried out in phase 5 of the Keltepe pit and in phase 2 of
the Güneytepe pit. Total tonnes mined were 0.8 million tonnes in
the first quarter of 2023 compared to 2.8 million tonnes in the
first quarter of 2022. The decrease in tonnes mined was primarily
due to unfavourable weather conditions and not receiving an
enlarged grazing land permit until February 2023 that would
otherwise have allowed the Company to start the expansion of the
footprint of the current pits sooner. Mining activities in the
first quarter of 2023 were almost exclusively focused on pit
stripping and waste removal from the Keltepe pit.
Crushing and stacking activities were paused in
early January 2023 pending approval of the new EIA as the mine has
built up significant inventories of gold as gold-in-carbon, ore on
the heap leach pad, and ore in stockpiles. As of March 31, 2023,
there was a balance of recoverable ounces of approximately 100,000
in the stored gold-in-carbon inventory, unchanged from as at
December 31, 2022. In addition, the Öksüt Mine had approximately
200,000 recoverable ounces of gold in ore stockpiles and on the
heap leach pad as at March 31, 2023, similar to that as at December
31, 2022. The Öksüt Mine stacked 0.1 million tonnes at an average
grade of 2.66 g/t, containing 6,582 ounces of gold in the first
quarter of 2023, compared to 1.0 million tonnes stacked at an
average grade of 1.59 g/t, containing 49,111 ounces of gold in the
first quarter of 2022.
No gold production was reported in the first
quarter of 2023 due to the suspension of gold room operations at
the ADR plant. Gold production in the first quarter of 2022 was
54,691 ounces. No gold production costs were reported in the first
quarter of 2023. Gold production costs per ounce were $386 in the
first quarter of 2022.
As of March 31, 2023, the weighted average cost
in gold-in-carbon inventory per recoverable ounce, which excludes
royalty costs, was $442, unchanged from as at December 31, 2022.
The weighted average cost in inventory per recoverable ounce
includes a portion of production costs and an attributable portion
of DDA capitalized to production inventory.
ADR plant
inventory |
|
March 31, 2023 |
|
December 31,
2022 |
Weighted average production cost in inventory per recoverable
ounce |
$ |
232 |
$ |
232 |
Weighted average DDA in inventory per recoverable ounce |
|
210 |
|
210 |
Weighted average cost in inventory per recoverable ounce |
$ |
442 |
$ |
442 |
In the first quarter of 2023, the Company has
not experienced any significant impact on the operation of the
Öksüt Mine from the earthquake in the southeastern portion of the
country.
All-in sustaining costs on a by-product basisNG
or all-in costs on a by-product basisNG per ounce were not reported
in the first quarter of 2023 as no ounces of gold were sold. All-in
sustaining costs on a by-product basisNG and all-in costs on a
by-product basisNG in the first quarter of 2022 were $451 and $459
per ounce, respectively.
Molybdenum Business Unit
The Molybdenum BU includes the Langeloth
Facility in Pennsylvania and two North American molybdenum mines
that are currently on care and maintenance: the Thompson Creek Mine
in Idaho and the 75%-owned Endako Mine in British Columbia. The
Company continues to evaluate strategic options for the Molybdenum
Business Unit, including a potential restart of the Thompson Creek
Mine and potential modifications to the Langeloth Facility
operating model.
Molybdenum BU Financial and Operating
Results
|
Three months ended March 31, |
($millions, except as noted) |
2023 |
|
2022 |
|
% Change |
Financial Highlights: |
|
|
|
Total revenue |
115.6 |
|
59.6 |
|
94 |
% |
Production costs |
119.7 |
|
64.5 |
|
86 |
% |
Depreciation, depletion, and amortization ("DDA") |
1.2 |
|
1.5 |
|
(20 |
)% |
Loss from mine operations |
(5.3 |
) |
(6.4 |
) |
(17 |
)% |
Care and maintenance costs - Molybdenum mines |
4.7 |
|
3.7 |
|
27 |
% |
Reclamation expense (recovery) |
13.1 |
|
(42.0 |
) |
131 |
% |
Other operating expenses |
3.2 |
|
0.4 |
|
700 |
% |
Net (loss) earnings from operations |
(26.3 |
) |
31.4 |
|
(184 |
)% |
Cash used in operations |
(76.6 |
) |
(19.8 |
) |
(287 |
)% |
Free cash flow deficit from operations(1) |
(76.6 |
) |
(20.1 |
) |
(281 |
)% |
Additions to property, plant and equipment |
— |
|
0.2 |
|
100 |
% |
Total capital expenditures(1) |
— |
|
0.4 |
|
(100 |
)% |
Operating Highlights: |
|
|
|
Mo purchased (lbs) |
4,184 |
|
3,023 |
|
38 |
% |
Mo roasted (lbs) |
3,901 |
|
1,138 |
|
243 |
% |
Mo sold (lbs) |
3,347 |
|
2,887 |
|
16 |
% |
Average market Mo price ($/lb) |
32.95 |
|
19.08 |
|
73 |
% |
(1) Non-GAAP financial measure. See discussion under “Non-GAAP
and Other Financial Measures”.
First Quarter 2023 compared to First
Quarter 2022
Net loss from operations of $26.3 million were
recognized in the first quarter of 2023 compared to net earnings of
$31.4 million in the first quarter of 2022. The increase in net
loss from operations was mainly due to a reclamation expense during
the first quarter of 2023 compared to a reclamation recovery during
the first quarter of 2022 from a decrease in the risk-free interest
rates applied to the underlying future reclamation cash flows in
the first quarter of 2023. Included in the net loss from operations
was the impact of finalizing some of molybdenum concentrate
purchased in the fourth quarter of 2022 that was open to
provisional pricing adjustments as at December 31, 2022.
Cash used by operations of $76.6 million was
recognized in the first quarter of 2023, compared to cash used in
operations of $19.8 million in the first quarter of 2022. The
increase in cash used by operations is primarily due to an
unfavorable working capital movement from molybdenum concentrate
purchased at increased molybdenum prices and increase in the value
of accounts receivable outstanding due to increased sales prices
for finished molybdenum products. This working capital build-up is
expected to partially reverse over the course of 2023 if molybdenum
prices remain at their current levels. The total working capital
balance of the Molybdenum BU was $171.9 million at March 31, 2023
compared to $105.9 million at December 31, 2022.
Free cash flow deficit from operationsNG of
$76.6 million was recognized in the first quarter of 2023, compared
to free cash flow deficit from operationsNG of $20.1 million in the
first quarter of 2022. The decrease was primarily due to higher
cash used in operations as noted above.
The Langeloth Facility roasted 3.9 million
pounds and sold 3.3 million pounds of molybdenum in the first
quarter of 2023, compared to 1.1 million pounds and 2.9 million
pounds, respectively in the first quarter of 2022. This increase in
the molybdenum roasted and sold was primarily due to an unplanned
acid plant shut down in the first quarter of 2022.
In the first quarter of 2023, the market
molybdenum price was volatile, averaging $32.95 per pound with the
peak price of $38.00 per pound in February 2023, and reaching
$24.00 per pound on March 31, 2023. Subsequent to March 31, 2023,
molybdenum prices declined. This downward movement has a positive
impact on pounds purchased at higher provisional prices in the
first quarter of 2023 that are expected to settle at lower prices
in the second quarter of 2023, resulting in an expected cash
inflow. At March 31, 2023, there were 2.1 million pounds of
purchased molybdenum outstanding under contracts awaiting final
settlement in the second quarter of 2023. All these pounds were
adjusted to a market price of $24.17 per pound at the end of the
quarter, resulting in a decrease to molybdenum inventory of $21.9
million from previously recorded provisional prices.
Quarterly Results – Previous Eight Quarters
$millions, except per share data |
2023 |
2022 |
2021 |
quarterly data unaudited |
Q1 |
Q4 |
Q3 |
Q2 |
Q1 |
Q4 |
Q3 |
Q2 |
Revenue |
227 |
|
208 |
|
179 |
|
168 |
|
295 |
|
251 |
|
221 |
|
202 |
|
Net (loss) earnings(1) |
(73 |
) |
(130 |
) |
(34 |
) |
(3 |
) |
89 |
|
275 |
|
28 |
|
33 |
|
Basic (loss) earnings per share |
(0.34 |
) |
(0.59 |
) |
(0.14 |
) |
(0.01 |
) |
0.30 |
|
0.93 |
|
0.09 |
|
0.11 |
|
Diluted (loss) earnings per share |
(0.34 |
) |
(0.59 |
) |
(0.15 |
) |
(0.01 |
) |
0.30 |
|
0.92 |
|
0.09 |
|
0.10 |
|
(1) Net loss in Q4 2022 reflects the impact of non-cash
impairment loss at the Kemess Project. Net earnings in Q4 2021
reflects the impact of impairment reversal at the Mount Milligan
Mine.
Accounting Estimates, Policies and Changes
Accounting Estimates
The preparation of the Company’s consolidated
financial statements in accordance with IFRS requires management to
make estimates and judgments that affect the amounts reported in
the consolidated financial statements and accompanying notes.
Management’s estimates and underlying
assumptions are reviewed on an ongoing basis. Any changes or
revisions to estimates and underlying assumptions are recognized in
the period in which the estimates are revised and in any future
periods affected. Changes to these critical accounting estimates
could have a material impact on the consolidated financial
statements.
The key sources of estimation uncertainty and
judgment used in the preparation of the consolidated financial
statements that might have a significant risk of causing a material
adjustment to the carrying value of assets and liabilities and
earnings are outlined in note 4 of the consolidated financial
statements for the year ended December 31, 2022.
Accounting Policies and Changes
The accounting policies applied in the condensed
consolidated interim financial statements for the three months
ended March 31, 2023 are consistent with those used in the
company’s consolidated financial statements for the year ended
December 31, 2022.
Disclosure Controls and Procedures and Internal Control
Over Financial Reporting
The Company’s management, including the CEO and
CFO, is responsible for the design of disclosure controls and
procedures (“DC&P”) and internal controls over financial
reporting (“ICFR”). Centerra adheres to the Committee of Sponsoring
Organizations of the Treadway Commission’s (“COSO”) revised 2013
Internal Control Framework for the design of its ICFR. There were
no changes in the Company’s internal control over financial
reporting that occurred during the quarter ended March 31, 2023
that have materially affected, or are reasonably likely to
materially affect, the Company’s internal control over financial
reporting with exception of the implementation of a new ERP system
at the Company's North American operations. The Company implemented
the ERP system to improve standardization and automation, and not
in response to a deficiency in its internal control over financial
reporting. The Company believes that the implementation of the ERP
system and related changes to internal controls will enhance its
internal controls over financial reporting while providing the
ability to scale its business in the future. Management employed
appropriate procedures to ensure internal controls were in place
during and after the conversion.
The evaluation of DC&P and ICFR was carried
out under the supervision of and with the participation of
management, including Centerra’s CEO and CFO. Based on these
evaluations, the CEO and the CFO concluded that the design of these
DC&P and ICFR was effective throughout the three months ended
March 31, 2023.
Non-GAAP and Other Financial Measures
This MD&A contains “specified financial
measures” within the meaning of NI 52-112, specifically the
non-GAAP financial measures, non-GAAP ratios and supplementary
financial measures described below. Management believes that the
use of these measures assists analysts, investors and other
stakeholders of the Company in understanding the costs associated
with producing gold and copper, understanding the economics of gold
and copper mining, assessing operating performance, the Company’s
ability to generate free cash flow from current operations and on
an overall Company basis, and for planning and forecasting of
future periods. However, the measures have limitations as
analytical tools as they may be influenced by the point in the life
cycle of a specific mine and the level of additional exploration or
other expenditures a company has to make to fully develop its
properties. The specified financial measures used in this MD&A
do not have any standardized meaning prescribed by IFRS and may not
be comparable to similar measures presented by other issuers, even
as compared to other issuers who may be applying the World Gold
Council (“WGC”) guidelines. Accordingly, these specified financial
measures should not be considered in isolation, or as a substitute
for, analysis of the Company’s recognized measures presented in
accordance with IFRS.
Definitions
The following is a description of the non-GAAP
financial measures, non-GAAP ratios and supplementary financial
measures used in this MD&A:
- All-in sustaining
costs on a by-product basis per ounce is a non-GAAP ratio
calculated as all-in sustaining costs on a by-product basis divided
by ounces of gold sold. All-in sustaining costs on a by-product
basis is a non- GAAP financial measure calculated as the aggregate
of production costs as recorded in the condensed consolidated
statements of (loss) earnings, refining and transport costs, the
cash component of capitalized stripping and sustaining capital
expenditures, lease payments related to sustaining assets,
corporate general and administrative expenses, accretion expenses,
asset retirement depletion expenses, copper and silver revenue and
the associated impact of hedges of by-product sales revenue. When
calculating all-in sustaining costs on a by- product basis, all
revenue received from the sale of copper from the Mount Milligan
Mine, as reduced by the effect of the copper stream, is treated as
a reduction of costs incurred. A reconciliation of all-in
sustaining costs on a by-product basis to the nearest IFRS measure
is set out below. Management uses these measures to monitor the
cost management effectiveness of each of its operating mines.
- All-in sustaining
costs on a co-product basis per ounce of gold or per pound of
copper, is a non-GAAP ratio calculated as all-in sustaining costs
on a co-product basis divided by ounces of gold or pounds of copper
sold, as applicable. All-in sustaining costs on a co-product basis
is a non-GAAP financial measure based on an allocation of
production costs between copper and gold based on the conversion of
copper production to equivalent ounces of gold. The Company uses a
conversion ratio for calculating gold equivalent ounces for its
copper sales calculated by multiplying the copper pounds sold by
estimated average realized copper price and dividing the resulting
figure by estimated average realized gold price. For the first
quarter ended March 31, 2023, 423 pounds of copper were equivalent
to one ounce of gold. A reconciliation of all-in sustaining costs
on a co-product basis to the nearest IFRS measure is set out below.
Management uses these measures to monitor the cost management
effectiveness of each of its operating mines.
- Sustaining
capital expenditures and Non-sustaining capital expenditures are
non-GAAP financial measures. Sustaining capital expenditures are
defined as those expenditures required to sustain current
operations and exclude all expenditures incurred at new operations
or major projects at existing operations where these projects will
materially benefit the operation. Non-sustaining capital
expenditures are primarily costs incurred at ‘new operations’ and
costs related to ‘major projects at existing operations’ where
these projects will materially benefit the operation. A material
benefit to an existing operation is considered to be at least a 10%
increase in annual or life of mine production, net present value,
or reserves compared to the remaining life of mine of the
operation. A reconciliation of sustaining capital expenditures and
non-sustaining capital expenditures to the nearest IFRS measures is
set out below. Management uses the distinction of the sustaining
and non-sustaining capital expenditures as an input into the
calculation of all-in sustaining costs per ounce and all-in costs
per ounce.
- All-in costs on
a by-product basis per ounce is a non-GAAP ratio calculated as
all-in costs on a by-product basis divided by ounces sold. All-in
costs on a by-product basis is a non-GAAP financial measure which
includes all- in sustaining costs on a by-product basis,
exploration and study costs, non-sustaining capital expenditures,
care and maintenance and other costs. A reconciliation of all-in
costs on a by-product basis to the nearest IFRS measures is set out
below. Management uses these measures to monitor the cost
management effectiveness of each of its operating mines.
- Adjusted net
(loss) earnings is a non-GAAP financial measure calculated by
adjusting net (loss) earnings as recorded in the condensed
consolidated statements of (loss) earnings for items not associated
with ongoing operations. The Company believes that this generally
accepted industry measure allows the evaluation of the results of
income-generating capabilities and is useful in making comparisons
between periods. This measure adjusts for the impact of items not
associated with ongoing operations. A reconciliation of adjusted
net (loss) earnings to the nearest IFRS measures is set out below.
Management uses this measure to monitor and plan for the operating
performance of the Company in conjunction with other data prepared
in accordance with IFRS.
- Free cash flow
(deficit) is a non-GAAP financial measure calculated as cash
provided by operating activities from continuing operations less
property, plant and equipment additions. A reconciliation of free
cash flow to the nearest IFRS measures is set out below. Management
uses this measure to monitor the amount of cash available to
reinvest in the Company and allocate for shareholder returns.
- Free cash flow
(deficit) from mine operations is a non-GAAP financial measure
calculated as cash provided by mine operations less property, plant
and equipment additions. A reconciliation of free cash flow from
mine operations to the nearest IFRS measures is set out below.
Management uses this measure to monitor the degree of self-funding
of each of its operating mines and facilities.
- Average realized
gold price is a supplementary financial measure calculated by
dividing the different components of gold sales (including third
party sales, mark-to-market adjustments, final pricing adjustments
and the fixed amount received under the Mount Milligan Streaming
Arrangement) by the number of ounces sold. Management uses this
measure to monitor its sales of gold ounces against the average
market gold price.
- Average realized
copper price is a supplementary financial measure calculated by
dividing the different components of copper sales (including third
party sales, mark-to-market adjustments, final pricing adjustments
and the fixed amount received under the Mount Milligan Streaming
Arrangement) by the number of pounds sold. Management uses this
measure to monitor its sales of gold ounces against the average
market copper price.
- Total liquidity
is a supplementary financial measure calculated as cash and cash
equivalents and amount available under the corporate credit
facility. Credit Facility availability is reduced by outstanding
letters of credit. Management uses this measure to determine if the
Company can meet all of its commitments, execute on the business
plan, and to mitigate the risk of economic downturns.
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:
(Unaudited - $millions, unless otherwise
specified) |
Three months ended March 31, |
Consolidated |
Mount Milligan |
Öksüt |
2023 |
|
2022 |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
Production costs attributable to gold |
43.8 |
|
47.1 |
|
43.8 |
|
26.0 |
|
— |
|
21.1 |
|
Production costs attributable to copper |
40.8 |
|
32.6 |
|
40.8 |
|
32.6 |
|
— |
|
— |
|
Total production costs excluding molybdenum segment, as
reported |
84.6 |
|
79.7 |
|
84.6 |
|
58.6 |
|
— |
|
21.1 |
|
Adjust for: |
|
|
|
|
|
|
|
|
Third party smelting, refining and transport costs |
1.9 |
|
3.2 |
|
1.9 |
|
3.0 |
|
— |
|
0.2 |
|
By-product and co-product credits |
(54.6 |
) |
(75.5 |
) |
(54.6 |
) |
(75.5 |
) |
— |
|
— |
|
Adjusted production costs |
31.9 |
|
7.4 |
|
31.9 |
|
(13.9 |
) |
— |
|
21.3 |
|
Corporate general administrative and other costs |
14.7 |
|
12.3 |
|
0.1 |
|
0.1 |
|
— |
|
— |
|
Reclamation and remediation - accretion (operating sites) |
0.9 |
|
1.6 |
|
0.5 |
|
0.5 |
|
0.4 |
|
1.1 |
|
Sustaining capital expenditures |
4.9 |
|
14.7 |
|
1.8 |
|
12.6 |
|
3.1 |
|
2.1 |
|
Sustaining lease payments |
1.5 |
|
1.5 |
|
1.3 |
|
1.3 |
|
0.2 |
|
0.2 |
|
All-in sustaining costs on a by-product basis |
53.9 |
|
37.5 |
|
35.6 |
|
0.6 |
|
3.7 |
|
24.7 |
|
Exploration and study costs |
15.3 |
|
8.2 |
|
0.4 |
|
3.4 |
|
0.4 |
|
0.4 |
|
Non-sustaining capital expenditures |
— |
|
0.9 |
|
— |
|
0.9 |
|
— |
|
— |
|
Care and maintenance and other costs |
12.9 |
|
2.4 |
|
— |
|
— |
|
9.5 |
|
— |
|
All-in costs on a by-product basis |
82.1 |
|
49.0 |
|
36.0 |
|
4.9 |
|
13.6 |
|
25.1 |
|
Ounces sold (000s) |
39.0 |
|
94.9 |
|
39.0 |
|
40.2 |
|
— |
|
54.7 |
|
Pounds sold (millions) |
15.3 |
|
19.4 |
|
15.3 |
|
19.4 |
|
— |
|
— |
|
Gold production costs ($/oz) |
1,124 |
|
497 |
|
1,124 |
|
647 |
|
n/a |
|
386 |
|
All-in sustaining costs on a by-product basis ($/oz) |
1,383 |
|
395 |
|
914 |
|
15 |
|
n/a |
|
451 |
|
All-in costs on a by-product basis ($/oz) |
2,107 |
|
516 |
|
924 |
|
121 |
|
n/a |
|
459 |
|
Gold - All-in sustaining costs on a co-product basis ($/oz) |
1,603 |
|
735 |
|
1,134 |
|
819 |
|
n/a |
|
451 |
|
Copper production costs ($/pound) |
2.66 |
|
1.68 |
|
2.66 |
|
1.68 |
|
n/a |
|
n/a |
|
Copper - All-in sustaining costs on a co-product basis
($/pound) |
2.67 |
|
2.11 |
|
2.67 |
|
2.11 |
|
n/a |
|
n/a |
|
Adjusted net (loss) earnings is a non-GAAP financial
measure and can be reconciled as follows:
|
Three months ended March 31, |
($millions, except as noted) |
|
2023 |
|
|
2022 |
|
Net (loss) earnings |
$ |
(73.5 |
) |
$ |
89.4 |
|
Adjust for items not associated with ongoing operations: |
|
|
Kumtor Mine legal costs and other related costs |
|
— |
|
|
6.5 |
|
Reclamation expense (recovery) at sites on care and
maintenance |
|
15.6 |
|
|
(42.0 |
) |
Income and mining tax adjustments(1) |
|
5.0 |
|
|
2.5 |
|
Adjusted net (loss) earnings |
$ |
(52.9 |
) |
$ |
56.4 |
|
Net (loss) earnings per share - basic |
$ |
(0.34 |
) |
$ |
0.30 |
|
Net (loss) earnings per share - diluted |
$ |
(0.34 |
) |
$ |
0.30 |
|
Adjusted net (loss) earnings per share -
basic |
$ |
(0.24 |
) |
$ |
0.19 |
|
Adjusted net (loss) earnings per share -
diluted |
$ |
(0.24 |
) |
$ |
0.19 |
|
(1) Income tax adjustments reflect the impact of a one-time
income tax levied by the Turkish government and impact of foreign
currency translation on deferred income taxes at the Öksüt
Mine.
Free cash (deficit) flow is a non-GAAP financial measure
and can be reconciled as follows:
|
Three months ended March 31, |
Consolidated |
Mount Milligan |
Öksüt |
Molybdenum |
Other |
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Cash (used in) provided by operating
activities(1) |
$ |
(99.8 |
) |
$ |
28.3 |
|
$ |
27.6 |
|
$ |
20.8 |
|
$ |
(20.8 |
) |
$ |
63.6 |
|
$ |
(76.6 |
) |
$ |
(19.8 |
) |
$ |
(30.0 |
) |
$ |
(36.3 |
) |
Deduct: |
|
|
|
|
|
|
|
|
|
|
Property, plant & equipment additions(1) |
|
(6.1 |
) |
|
(19.2 |
) |
|
(3.0 |
) |
|
(14.4 |
) |
|
(3.1 |
) |
|
(2.2 |
) |
|
— |
|
|
(0.3 |
) |
|
— |
|
|
(2.3 |
) |
Free cash (deficit) flow |
$ |
(105.9 |
) |
|
9.1 |
|
$ |
24.6 |
|
$ |
6.4 |
|
$ |
(23.9 |
) |
$ |
61.4 |
|
$ |
(76.6 |
) |
$ |
(20.1 |
) |
$ |
(30.0 |
) |
$ |
(38.6 |
) |
(1) As presented in the Company’s condensed consolidated
statements of cash flows.
Sustaining capital expenditures and non-sustaining
capital expenditures are non-GAAP measures and can be reconciled as
follows:
|
Three months ended March 31, |
Consolidated |
Mount Milligan |
Öksüt |
Molybdenum |
Other |
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Additions to PP&E(1) |
$ |
8.0 |
|
$ |
210.2 |
|
$ |
4.3 |
|
$ |
9.7 |
|
$ |
3.7 |
|
$ |
(0.5 |
) |
$ |
— |
|
$ |
0.2 |
|
$ |
— |
|
$ |
200.7 |
|
Adjust for: |
|
|
|
|
|
|
|
|
|
|
Costs capitalized to the ARO assets |
|
(2.9 |
) |
|
13.3 |
|
|
(1.8 |
) |
|
3.7 |
|
|
(1.1 |
) |
|
1.9 |
|
|
— |
|
|
— |
|
|
— |
|
|
7.7 |
|
Costs capitalized to the ROU assets |
|
(0.1 |
) |
|
(0.2 |
) |
|
(0.1 |
) |
|
— |
|
|
— |
|
|
(0.2 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Costs relating to the acquisition of Goldfield Project |
|
— |
|
|
(208.2 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(208.2 |
) |
Other(2) |
|
(0.1 |
) |
|
0.9 |
|
|
(0.6 |
) |
|
— |
|
|
0.5 |
|
|
0.9 |
|
|
— |
|
|
0.2 |
|
|
— |
|
|
(0.2 |
) |
Capital expenditures |
$ |
4.9 |
|
$ |
16.0 |
|
$ |
1.8 |
|
$ |
13.4 |
|
$ |
3.1 |
|
$ |
2.1 |
|
$ |
— |
|
$ |
0.4 |
|
$ |
— |
|
$ |
0.1 |
|
Sustaining capital expenditures |
|
4.9 |
|
|
15.1 |
|
|
1.8 |
|
|
12.5 |
|
|
3.1 |
|
|
2.1 |
|
|
— |
|
|
0.4 |
|
|
— |
|
|
0.1 |
|
Non-sustaining capital expenditures |
|
— |
|
|
0.9 |
|
|
— |
|
|
0.9 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
(1) As presented in the note 14 of the Company’s condensed
consolidated financial statements.(2) Includes reclassification of
insurance and capital spares from supplies inventory to
PP&E.
Qualified Person & QA/QC –
Non-Exploration (including Production information)
Jean-Francois St-Onge, Professional Engineer,
member of the Professional Engineer of Ontario (PEO) and Centerra’s
Senior Director, Technical Services, has reviewed and approved the
scientific and technical information related to mineral reserves
contained in this news release. Mr. St-Onge is a Qualified Person
within the meaning of Canadian Securities Administrator’s NI 43-101
Standards of Disclosure for Mineral Projects.
Lars Weiershäuser, PhD, PGeo, and Centerra’s
Director of Geology, has reviewed and approved the scientific and
technical information related to mineral resources estimates
contained in this news release. Dr. Weiershäuser is a Qualified
Person within the meaning of Canadian Securities Administrator’s NI
43-101 Standards of Disclosure for Mineral Projects.
All mineral reserve and resources have been
estimated in accordance with the standards of the Canadian
Institute of Mining, Metallurgy and Petroleum and NI 43-101.
All other 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 NI 43-101 and
were reviewed, verified, and compiled by Centerra’s geological and
mining staff under the supervision of W. Paul Chawrun, Professional
Engineer, member of the Professional Engineers of Ontario (PEO) and
Centerra’s Executive Vice President and Chief Operating Officer and
Anna Malevich, Professional Engineer, member of the Professional
Engineers of Ontario (PEO) and Centerra’s Senior Director, Projects
each of whom is a qualified person for the purpose of NI
43-101.
The Mount Milligan Mine is described in a
technical report pursuant to NI 43-101 dated November 7, 2022 (with
an effective date of December 31, 2021) and filed on SEDAR at
www.sedar.com and EDGAR at www.sec.gov/edgar. The technical report
describes the exploration history, geology, and style of gold
mineralization at the Mount Milligan deposit. Sample preparation,
analytical techniques, laboratories used, and quality assurance and
quality control protocols used during the exploration drilling
programs are done consistent with industry standards while
independent certified assay labs are used.
The Öksüt Mine is described in a technical
report pursuant to NI 43-101 dated September 3, 2015 and filed on
SEDAR at www.sedar.com. The technical report describes the
exploration history, geology, and style of gold mineralization at
the Öksüt deposit. Sample preparation, analytical techniques,
laboratories used, and quality assurance and quality control
protocols used during the exploration drilling programs are done
consistent with industry standards while independent certified
assay labs are used.
Centerra Gold Inc.Condensed Consolidated
Interim Statements of Financial Position |
|
|
March
31,2023 |
|
December
31,2022 |
|
(Expressed in thousands of United States
dollars) |
|
|
Assets |
|
|
Current assets |
|
|
Cash and cash equivalents |
$ |
412,068 |
|
$ |
531,916 |
|
Amounts receivable |
|
139,747 |
|
|
92,161 |
|
Inventories |
|
297,056 |
|
|
316,799 |
|
Other current assets |
|
45,202 |
|
|
49,784 |
|
|
|
894,073 |
|
|
990,660 |
|
Property, plant and equipment |
|
1,257,428 |
|
|
1,272,792 |
|
Deferred income tax assets |
|
59,700 |
|
|
61,900 |
|
Other non-current assets |
|
8,586 |
|
|
10,557 |
|
|
|
1,325,714 |
|
|
1,345,249 |
|
Total assets |
$ |
2,219,787 |
|
$ |
2,335,909 |
|
Liabilities and shareholders' equity |
|
|
Current liabilities |
|
|
Accounts payable and accrued liabilities |
$ |
163,701 |
|
$ |
199,433 |
|
Income tax payable |
|
4,731 |
|
|
1,890 |
|
Other current liabilities |
|
54,899 |
|
|
73,529 |
|
|
|
223,331 |
|
|
274,852 |
|
Deferred income tax liabilities |
|
7,922 |
|
|
8,719 |
|
Provision for reclamation |
|
251,775 |
|
|
227,867 |
|
Other non-current liabilities |
|
12,809 |
|
|
14,180 |
|
|
|
272,506 |
|
|
250,766 |
|
Shareholders' equity |
|
|
Share capital |
|
888,505 |
|
|
886,479 |
|
Contributed surplus |
|
30,083 |
|
|
29,564 |
|
Accumulated other comprehensive loss |
|
(7,609 |
) |
|
(3,323 |
) |
Retained earnings |
|
812,971 |
|
|
897,571 |
|
|
|
1,723,950 |
|
|
1,810,291 |
|
Total liabilities and shareholders' equity |
$ |
2,219,787 |
|
$ |
2,335,909 |
|
Commitments and contingencies |
|
|
|
|
|
Centerra Gold Inc.Condensed Consolidated
Interim Statements of (Loss) Earnings and Comprehensive (Loss)
Income |
|
Three months ended March 31, |
|
(Expressed in thousands of United States
dollars) |
|
2023 |
|
|
2022 |
|
Revenue |
$ |
226,529 |
|
$ |
295,223 |
|
Cost of sales |
|
|
Production costs |
|
204,293 |
|
|
144,225 |
|
Depreciation, depletion and amortization |
|
18,508 |
|
|
37,489 |
|
Earnings from mine operations |
|
3,728 |
|
|
113,509 |
|
Exploration and evaluation costs |
|
17,910 |
|
|
8,160 |
|
Corporate administration |
|
14,792 |
|
|
12,278 |
|
Care and maintenance expense |
|
7,834 |
|
|
6,759 |
|
Reclamation expense (recovery) |
|
15,566 |
|
|
(41,964 |
) |
Other operating expenses |
|
12,890 |
|
|
3,494 |
|
(Loss) earnings from operations |
|
(65,264 |
) |
|
124,782 |
|
Other non-operating (income) expenses |
|
(3,180 |
) |
|
5,323 |
|
Finance costs |
|
3,368 |
|
|
892 |
|
(Loss) earnings before income tax |
|
(65,452 |
) |
|
118,567 |
|
Income tax expense |
|
7,998 |
|
|
29,167 |
|
Net (loss) earnings |
$ |
(73,450 |
) |
$ |
89,400 |
|
Other Comprehensive Loss |
|
|
Items that may be subsequently reclassified to
earnings: |
|
|
Changes in fair value of derivative instruments |
|
(4,286 |
) |
|
(1,755 |
) |
Other comprehensive loss |
|
(4,286 |
) |
|
(1,755 |
) |
Total comprehensive (loss) income |
$ |
(77,736 |
) |
$ |
87,645 |
|
(Loss) earnings per share: |
|
|
Basic |
$ |
(0.34 |
) |
$ |
0.30 |
|
Diluted |
$ |
(0.34 |
) |
$ |
0.30 |
|
Cash dividends declared per common share (C$) |
$ |
0.07 |
|
$ |
0.07 |
|
|
|
|
|
|
|
|
Centerra Gold Inc.Condensed Consolidated
Interim Statements of Cash Flows |
|
Three months ended March 31, |
|
(Expressed in thousands of United States
dollars) |
2023 |
|
2022 |
|
Operating activities |
|
|
Net (loss) earnings |
$ |
(73,450) |
|
$ |
89,400 |
|
Adjustments: |
|
|
|
Depreciation, depletion and amortization |
20,435 |
|
38,793 |
|
Reclamation expense (recovery) |
15,566 |
|
(41,964 |
) |
Share-based compensation expense |
3,121 |
|
2,281 |
|
Finance costs |
3,368 |
|
891 |
|
Income tax expense |
7,998 |
|
29,167 |
|
Income taxes paid |
(1,130 |
) |
(24,423 |
) |
Other |
68 |
|
(1,032 |
) |
|
(24,024 |
) |
93,113 |
|
Changes in working capital |
(75,762 |
) |
(64,829 |
) |
Cash (used in) provided by operating
activities |
(99,786 |
) |
28,284 |
|
Investing activities |
|
|
Property, plant and equipment additions |
(6,102 |
) |
(19,158 |
) |
Acquisition of the Goldfield Project |
— |
|
(176,737 |
) |
Proceeds from disposition of property, plant and equipment |
1,472 |
|
1,905 |
|
Increase in restricted cash |
(3,424 |
) |
— |
|
Cash used in investing activities |
(8,054 |
) |
(193,990 |
) |
Financing activities |
|
|
Dividends paid |
(11,150 |
) |
(12,272 |
) |
Payment of borrowing costs |
(580 |
) |
(623 |
) |
Repayment of lease obligations |
(1,542 |
) |
(1,713 |
) |
Proceeds from issuances of common shares |
1,264 |
|
1,520 |
|
Cash used in financing activities |
(12,008 |
) |
(13,088 |
) |
Decrease in cash during the period |
(119,848 |
) |
(178,794 |
) |
Cash at beginning of the period |
531,916 |
|
947,230 |
|
Cash at end of the period |
$ |
412,068 |
|
$ |
768,436 |
|
The condensed consolidated interim financial
statements for the period ended March 31, 2023 and 2022 and the
MD&A for the three months ended March 31, 2023 and 2022 have
been filed on SEDAR at www.sedar.com and EDGAR at www.sec.gov/edgar
and are available on the Company’s website at:
www.centerragold.com.
Supplementary Information: First Quarter 2023
Exploration Update
Mount Milligan Mine
At the Mount Milligan Mine, the planned 2023
exploration drilling programs commenced at the end of the first
quarter of 2023, targeting porphyry-style gold-copper
mineralization below and adjacent to the current ultimate open-pit
boundary, as well as continuing to test targets with potential for
shallower porphyry-style gold-copper mineralization and high
gold-low copper style mineralization peripheral to the current
pits.
The planned 2023 resource expansion, brownfield,
and greenfield diamond drilling programs at the Mount Milligan Mine
total 28,500 metres in 62 drill holes. Resource expansion and
brownfield exploration targets include zones on the western margin
of the open pit, i.e., Goldmark and North Slope zones, where
positive drilling results were returned in previous drilling
campaigns.
Öksüt Mine
At the Öksüt Mine, exploration activities
consisted of the commencement of an assessment of the potential for
porphyry- style copper-gold ± supergene/hypogene copper at depth on
the Öksüt property.
The planned 2023 exploration drilling programs
at the Öksüt Mine, totaling up to 20,000 metres of RC and diamond
drilling, are expected to commence late in the second quarter of
2023, targeting oxide gold mineralization at prospects peripheral
to the known deposits. Additionally, deep diamond drill holes will
be drilled to test for porphyry-style gold- copper mineralization
at depth within the property.
Throughout the first quarter of 2023, assay results were
returned for holes drilled in the fourth quarter of 2022.
Goldfield Project
Refer to section “Recent Events and Developments” within the
MD&A for the period ended March 31, 2023.
Oakley Project
Refer to section “Recent Events and Developments” within the
MD&A for the period ended March 31, 2023.
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 Oakley Project have been
filed on SEDAR at www.sedar.com, EDGAR at www.sec.gov/edgar, are
available on the Company’s website at www.centerragold.com, and are
available at the following link:
Qualified Person & QA/QC – Exploration
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
Cheyenne Sica, Member of the Association of Professional
Geoscientists Ontario and Exploration Manager, Canada at Centerra
Gold Inc., who is the qualified person for the purpose of NI
43-101. Sample preparation, analytical techniques, laboratories
used, and quality assurance and quality control protocols used
during the exploration drilling programs are done consistent with
industry standards while independent certified assay labs are used.
The Mount Milligan Mine is described in the Company’s most recent
AIF, which is available on SEDAR at www.sedar.com and EDGAR at
www.sec.gov/edgar and in a technical report dated November 7, 2022
(with an effective date of December 31, 2021) prepared in
accordance with NI 43-101, which is available on SEDAR at
www.sedar.com.
Exploration information, and related scientific
and technical information, in this document, with respect to the
Öksüt Mine were prepared, reviewed, verified, and compiled in
accordance with NI 43-101 by Malcolm Stallman, Member of the
Australian Institute of Geoscientists and Vice President,
Exploration at Centerra Gold Inc., who is the qualified person for
the purpose of NI 43-101. Sample preparation, analytical
techniques, laboratories used, and quality assurance and quality
control protocols used during the exploration drilling programs are
done consistent with industry standards while independent certified
assay labs are used. The Öksüt Mine is described in the Company’s
most recent AIF, which is available on SEDAR at www.sedar.com and
EDGAR at www.sec.gov/edgar, and in a technical report dated
September 3, 2015 (with an effective date of June 30, 2015)
prepared in accordance with NI 43-101, which is available on SEDAR
at www.sedar.com.
Exploration information and other related
scientific and technical information in this news release regarding
the Goldfield Project and the Oakley Project were prepared in
accordance with the standards of NI 43-101 and were prepared,
reviewed, verified, and compiled by Boris Kotlyar, a member with
the American Institute of Professional Geologists and Chief
Geologist, Global Exploration at Centerra Gold Inc., 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 while
independent certified assay labs are used. The Goldfield Project is
described in the Company’s most recent AIF, which is available on
SEDAR at www.sedar.com and EDGAR at www.sec.gov/edgar.
Charts accompanying this announcement are available at:
https://www.globenewswire.com/NewsRoom/AttachmentNg/d242a571-2fcf-4a4c-9b01-3055d853a265
https://www.globenewswire.com/NewsRoom/AttachmentNg/9b8033e5-8af0-421d-b1b2-6934e6ea9c66
https://www.globenewswire.com/NewsRoom/AttachmentNg/7ba4c320-d111-4cbd-8636-695a1b2f9277
A PDF accompanying this announcement is available
at http://ml.globenewswire.com/Resource/Download/85a525b9-0df4-4e2e-bc16-8b28913f8f2f
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