Centerra Gold Reports Fourth Quarter and 2015 Year-end Results
NEWS RELEASE Centerra Gold Reports Fourth Quarter and 2015 Year-end Results
This news release contains forward-looking information that is subject to the risk factors and assumptions set out on page 27 and in the note Caution Regarding Forward-looking Information on page 33 in this news release. It should be read in conjunction with the Company’s audited financial statements and notes for the year ended December 31, 2015 and associated Management’s Discussion and Analysis. The consolidated financial statements of Centerra are prepared in accordance with International Financial Reporting Standards (“IFRS”). All figures are in United States dollars unless otherwise stated.
To view Management’s Discussion and Analysis and the Audited Consolidated Financial Statements and Notes for the year ended December 31, 2015, please visit the following link:
http://media3.marketwire.com/docs/cg0224-mdafs.pdf
Toronto, Canada, February 24, 2016: Centerra Gold Inc. (TSX: CG) today reported a net loss of $2.9 million or $0.01 per common share (basic) in the fourth quarter of 2015 which includes a $27.2 million or $0.11 per share (basic) inventory impairment at the Kumtor mine. This compares to a net loss of $11.3 million or $0.05 per common share (basic) in the fourth quarter of 2014 which included a non-cash impairment charge of $111 million or $0.47 per share (basic) of goodwill related to the Kyrgyz reporting segment.
For 2015, the Company recorded net earnings of $41.6 million or $0.18 per share (basic), which includes an inventory impairment of $27.2 million ($0.11 per share (basic)) at the Kumtor mine and an $18.7 million ($0.08 per share (basic)) non-cash impairment charge of Kumtor goodwill. This compares to a net loss of $44.1 million or $0.19 per share (basic) in 2014 which included a non-cash impairment charge of $111 million or $0.47 per share (basic) for goodwill related to the Kyrgyz reporting segment. Results in 2015 were also impacted by fewer ounces produced and sold (ounces sold decreased 13% over 2014) and 6% lower average realized gold prices1 ($1,162 per ounce vs. $1,241 per ounce in 2014).
2015 Fourth Quarter and Full Year Highlights
- Exceeded full year gold production and unit cost guidance.
- Reserves increased 9% to 8.4 million contained ounces of gold (112.5 Mt at 2.3 g/t gold) at yearend, as described in the Company’s news release of February 9, 2016.
- All-in sustaining costs per ounce sold1 at the consolidated level, which excludes revenue-based tax in the Kyrgyz Republic and income tax, were $617 in the fourth quarter and $814 for the full year.
- Cash provided by operations totaled $333.6 million for the year.
- Kumtor generated $158.4 million in cash for the year after all capital expenditures and taxes in 2015, after achieving all-in sustaining costs1 of $731 per ounce sold for the year.
- Cash, cash equivalents and short-term investments total $542.2 million at December 31, 2015.
1 Non-GAAP measure, see discussion under “Non-GAAP Measures”.
1 University Avenue, Suite 1500 Toronto, ON M5J 2P1 tel 416-204-1953 fax 416-204-1954 www.centerragold.com
- Received the environmental impact assessment (“EIA’) approval and the GSM (Business Opening and Operation) permit for the Öksüt Project and applied for the land use permits.
- Purchased the 1% net smelter royalty (NSR) on Öksüt Project from Stratex International Plc for $4.9 million.
- Subsequent to year-end, the Mongolian Parliament approved the state ownership interest in the Gatsuurt Project in Mongolia, see the Company’s news release of February 4, 2016.
- Subsequent to year-end, entered into a new five-year $150 million revolving credit facility with the European Bank for Reconstruction and Development ("EBRD"), which replaced the existing revolving credit facility that was due to mature in February 2016 and $76 million was subsequently redrawn (see “Other Corporate Developments – Credit Facilities”).
During the fourth quarter of 2015, Centerra’s cash, cash equivalents and short-term investments increased by $4.8 million to $542.2 million from $537.4 million at the end of September 2015. Centerra believes, based on its current forecast, that it has sufficient cash, short-term investments and amounts currently available under its credit facilities to carry out its business plan in 2016 (see “2016 Outlook”).
In 2015, Centerra generated cash of $60.1 million, consisting of cash inflows from the Kumtor operations of $158.4 million, Boroo operations of $6.7 million and corporate activity of $9.3 million (redemption of investments net of corporate administration and other costs), partially offset by cash outflows for project development of $103.7 million (including the implementation of the Greenstone Partnership) and exploration and business development of $10.6 million.
Commentary
Scott Perry, Chief Executive Officer of Centerra Gold stated, “As we disclosed earlier we exceeded our production guidance for 2015 and I am now pleased to report that we also significantly beat our unit cost guidance for the year as our all-in sustaining costs were $814 per ounce sold1. Our lower costs reflect Kumtor exceeding its cost guidance with all-in sustaining costs1 of $731 per ounce sold for the year. Kumtor successfully implemented various cost cutting initiatives including optimizing the workforce, completing improvements to the mill which increased availability and throughput and focused on blending techniques to achieve the optimum grade profile. Additionally we saw a significant reduction in costs for diesel, as well as labor and other consumables resulting largely from favorable movements in local currencies. During the year Kumtor once again generated a significant amount of cash, after all capital expenditures and taxes, it generated $158.4 million in 2015.”
“At the Öksüt Project in Turkey things are proceeding well. We secured the EIA approval last November and our GSM permit in December and have applied for our land use permits. In late December we also bought back the Stratex 1% NSR on Öksüt production with an issue of Centerra common shares valued at $4.9 million. Work on the detailed engineering and procurement of contractors and equipment is well underway, so that once we get the necessary permits in place, our team can get started on the ground.”
“In Mongolia, Parliament passed the resolution setting the state ownership interest in Gatsuurt. As contemplated by the Minerals Law, we have agreed with Government that the state ownership would be replaced with a special royalty of 3%. This now allows us to focus on finalizing the deposit development and investment agreements on the Gatsuurt Project. We look forward to advancing Gatsuurt and are going to update the existing technical and economic studies on the project and undertake a program of exploration drilling and additional technical and hydrogeological drilling in support of eventual project development.”
“Lastly, with the addition of the Öksüt reserves, the Company’s reserve estimate increased 9% to 8.4 million ounces of contained gold (112.5 Mt at 2.3 g/t gold). While the overall global reserve grade at Kumtor came down to 2.5 g/t gold, it has not significantly impacted the mine plan or the grade profile over the next few years. We generate significant ore stockpiles during mining at Kumtor which gives us flexibility to blend higher and lower grade material for the optimal mill throughput and recovery,” Mr. Perry concluded.
Consolidated Financial and Operating Summary
| Unaudited ($ millions, except as noted) | Three months ended December 31,(7) | Year ended December 31,(7) | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Financial Highlights | 2015 | 2014 | % Change | 2015 | 2014 | % Change | ||||
| Revenue | $ | 148.3 | $ | 360.1 | (59%) | $ | 624.0 | $ | 763.3 | (18%) |
| Cost of sales | 113.4 | 183.5 | (38%) | 384.5 | 502.5 | (23%) | ||||
| Mine standby costs | 0.9 | 2.2 | 100% | 5.7 | 2.4 | 100% | ||||
| Regional office administration | 4.6 | 7.6 | (39%) | 19.1 | 25.2 | (24%) | ||||
| Earnings from mine operations | 29.4 | 166.8 | (82%) | 214.7 | 233.2 | (8%) | ||||
| Revenue-based taxes | 20.2 | 48.5 | (58%) | 84.6 | 97.2 | (13%) | ||||
| Other operating expenses (income) | 0.8 | (0.5) | (260%) | 1.9 | 3.8 | (49%) | ||||
| Pre-development project costs | 1.8 | 2.4 | (25%) | 13.2 | 6.0 | 122% | ||||
| Impairment of goodwill | - | 111.0 | 100% | 18.7 | 111.0 | 100% | ||||
| Exploration and business development (1) | 2.6 | 4.1 | (37%) | 10.6 | 15.7 | (32%) | ||||
| Corporate administration | 7.7 | 10.5 | (27%) | 35.8 | 34.8 | 3% | ||||
| (Loss) earnings from operations | (3.7) | (9.2) | (60%) | 49.9 | (35.3) | (241%) | ||||
| Other (income) expenses | (1.5) | 2.3 | (165%) | 3.4 | 1.2 | 183% | ||||
| Financing costs | 1.1 | 1.1 | 0% | 4.4 | 5.0 | (12%) | ||||
| (Loss) earnings before income taxes | (3.4) | (12.6) | (73%) | 42.1 | (41.5) | (201%) | ||||
| Income tax (recovery) expenses | (0.4) | (1.3) | (69%) | 0.4 | 2.6 | (85%) | ||||
| Net (loss) earnings | (2.9) | (11.3) | (74%) | 41.6 | (44.1) | (194%) | ||||
| (Loss) earnings per common share - $ basic (2) | $ | (0.01) | $ | (0.05) | (80%) | $ | 0.18 | $ | (0.19) | (195%) |
| (Loss) earnings per common share - $ diluted (2) | $ | (0.01) | $ | (0.05) | (80%) | $ | 0.18 | $ | (0.19) | (195%) |
| Weighted average common shares outstanding - basic (thousands) | 236,847 | 236,402 | 0% | 236,592 | 236,396 | 0% | ||||
| Weighted average common shares outstanding - diluted (thousands) | 237,346 | 236,402 | 0% | 236,951 | 236,396 | 0% | ||||
| Cash provided by operations | 47.5 | 217.0 | (78%) | 333.6 | 376.4 | (11%) | ||||
| Average gold spot price - $/oz (2)(3) | 1,106 | 1,201 | (8%) | 1,160 | 1,266 | (8%) | ||||
| Average realized gold price - $/oz(1)(4) | 1,098 | 1,199 | (8%) | 1,162 | 1,241 | (6%) | ||||
| Capital expenditures (5) | 33.6 | 57.7 | (42%) | 370.5 | 351.2 | 5% | ||||
| Operating Highlights | ||||||||||
| Gold produced – ounces | 133,664 | 301,235 | (56%) | 536,920 | 620,821 | (14%) | ||||
| Gold sold – ounces | 135,064 | 300,369 | (55%) | 536,842 | 615,234 | (13%) | ||||
| Operating costs (on a sales basis) (2)(6) | 48.6 | 72.9 | (33%) | 163.4 | 219.9 | (26%) | ||||
| Adjusted operating costs (2)(4) | 54.6 | 82.9 | (34%) | 189.8 | 251.8 | (25%) | ||||
| All-in Sustaining Costs(2)(4) | 83.1 | 132.0 | (37%) | 437.0 | 524.4 | (17%) | ||||
| All-in Costs (2)(4) | 97.4 | 150.4 | (35%) | 494.1 | 587.4 | (16%) | ||||
| All-in Costs - including taxes (2)(4) | 117.6 | 198.4 | (41%) | 578.9 | 687.5 | (16%) | ||||
| Unit Costs | ||||||||||
| Cost of sales - $/oz sold(4) | 840 | 611 | 37% | 716 | 817 | (12%) | ||||
| Adjusted operating costs - $/oz sold (2)(4) | 405 | 276 | 47% | 354 | 409 | (13%) | ||||
| All-in sustaining costs – $/oz sold(2)(4) | 617 | 439 | 40% | 814 | 852 | (4%) | ||||
| All-in costs – $/oz sold (2)(4) | 722 | 501 | 44% | 921 | 955 | (4%) | ||||
| All-in costs (including taxes) – $/oz sold (2)(4) | 872 | 661 | 32% | 1,079 | 1,119 | (4%) |
(1) Includes business development of $0.3 million and $2.2 million for the three months and year ended December 31, 2015, respectively ($0.7 million and $1.0 million for the three months and year ended December 31, 2015, respectively).
(2) As at December 31, 2015, the Company had 237,889,274 common shares issued and outstanding.
(3)
Average for the period as reported by the London Bullion Market Association (US dollar Gold P.M. Fix Rate).
(4) Adjusted operating costs, all-in sustaining costs, all-in costs and all-in costs - including taxes ($ millions and per ounce sold) as well as average realized gold price per ounce and cost of sales per ounce sold are non-GAAP measures and are discussed under “Non-GAAP Measures”.
(5) Includes capitalized stripping of $12.2 million and $210.6 million in the three months and year ended December 31, 2015, respectively ($32.5 million and $261.1 million in the three months and year ended December 31, 2014, respectively) and $75.7 million relating to implementation of the Greenstone Partnership.
(6) Operating costs (on a sales basis) are comprised of mine operating costs such as mining, processing, regional office administration, royalties and production taxes (except at Kumtor where revenue-based taxes are excluded), but excludes reclamation costs and depreciation, depletion and amortization. Operating costs (on a sales basis) represents the cash component of cost of sales associated with the ounces sold in the period.
(7)
Results may not add due to rounding.
Fourth Quarter 2015 compared to Fourth Quarter 2014
- Gold production for the fourth quarter of 2015 decreased 56% to 133,664 ounces poured compared to the same period in 2014. The decrease in ounces poured was primarily due to processing lower grade ore from stockpiles and ore released from the upper part of cut-back 17 at Kumtor compared to mining and processing high-grade ore from the bottom of cut-back 16 a year earlier. During the fourth quarter of 2015, Kumtor’s average mill head grade was 3.42 g/t with a recovery of 79.9%, compared with 7.40 g/t and a recovery of 82.2% for the same quarter in 2014. Boroo recorded lower production in the fourth quarter of 2015 as it was limited to ounces recovered from secondary heap leaching.
- All-in sustaining costs per ounce sold1, which excludes revenue-based tax and income tax, for the fourth quarter increased to $617 from $439 in the comparative period of 2014. The increase resulted from 55% fewer gold ounces sold partially offset by the reduction in operating costs.
- All-in costs per ounce sold1, which excludes revenue-based tax and income tax, were $722 in the fourth quarter of 2015 compared to $501 in the same period of 2014. The increase reflects fewer ounces sold, partially offset by lower capitalized stripping costs at Kumtor and lower spending on capital expenditures.
- Revenues in the fourth quarter of 2015 decreased 59% to $148.3 million, as a result of 55% fewer ounces sold (135,064 ounces in the fourth quarter of 2015 compared to 300,369 ounces in the fourth quarter of 2014) and an 8% lower average realized gold price1 ($1,098 per ounce vs. $1,199 per ounce). The lower amount of ounces sold is a reflection of the decrease in gold production in the fourth quarter at both operations.
- Cost of sales for the fourth quarter of 2015 was down 38% at $113.4 million compared to the same quarter of 2014. The decrease reflects fewer ounces sold at both operations, partially offset by an inventory impairment charge of $27.2 million recorded December 31, 2015 at Kumtor (no inventory impairment was recorded in the fourth quarter of 2014).
- Operating costs (on a sales basis) decreased by $24.3 million to $48.6 million in the fourth quarter compared to the fourth quarter of 2014, reflecting lower mining, milling, leaching and site support costs. At Kumtor, total consumable costs were down 32%, including a 39% reduction in diesel fuel costs and labor costs were 18% lower reflecting the favorable exchange rate.
- Exploration expenditures in the fourth quarter totaled $2.3 million compared to $3.4 million in the same period of 2014. The decrease in the fourth quarter reflects reduced spending at the Company’s projects including the Öksüt project in Turkey, as the project transitioned to the development stage during the year.
- Regional administration and corporate administration costs decreased 39% and 27%, respectively, in the fourth quarter of 2015 as compared to the same period of 2014. The decrease primarily reflects company-wide cost cutting measures initiated in 2015 in addition to the weakening of currencies in relation to the U.S. dollar. Lastly, share-based compensation was lower as the Company’s share price decreased in the fourth quarter of 2015 by 13%, while it increased by 20% in the comparative quarter of 2014.
- Cash provided by operations was $47.5 million in the fourth quarter of 2015 compared to $217.0 million in the same period of 2014. The decrease reflects the lower earnings in the fourth quarter 2015.
- Capital expenditures in the fourth quarter of 2015 were $33.6 million, which included sustaining capital1 of $11.7 million, growth capital1 of $9.7 million and $12.2 million of capitalized stripping costs ($9.1 million cash). Capital expenditures in the same quarter of 2014 were $57.7 million, which included $13.4 million for sustaining capital1 and $11.7 million for growth capital1 and capitalized stripping of $32.5 million ($24.9 million cash). In 2015, sustaining capital1 decreased due to less spending on equipment overhauls at Kumtor. The decrease in growth capital1 in 2015
reflects lower spending at Kumtor, partially offset by $6.7 million of spending on the Greenstone Gold Property and the Öksüt Project. The decrease in capitalized stripping in the fourth quarter of 2015 reflected the mining fleet at Kumtor focusing on ore production from cut-back 17 (expensed), with limited waste stripping from cut-back 18 (capitalized). In the comparable period of 2014, the mining fleet focused on the waste stripping in cut-back 17 which was capitalized.
Full Year 2015 compared to Full Year 2014
- Gold production for 2015 totaled 536,920 ounces compared to 620,821 ounces in the prior year, which reflects lower gold production at both operations. In 2015, Kumtor produced 520,695 ounces and Boroo produced 16,226 ounces compared to 567,693 ounces and 53,128 ounces in 2014, respectively. The lower gold production at Kumtor was due to processing lower grades in 2015 as compared to 2014. Boroo’s lower gold production was due to the cessation of milling operations in December 2014 and fewer ounces were recovered from the heap leach operation due to secondary leaching.
- All-in sustaining costs per ounce sold1, which excludes revenue-based tax and income tax, for 2015, decreased to $814 compared to $852 in the same period of 2014. The decrease primarily reflects a reduction in operating costs partially offset by fewer gold ounces sold.
- All-in costs per ounce sold1, which excludes revenue-based tax at Kumtor and income tax, was $921, compared to $955 per ounce sold in 2014. The decrease reflects lower operating costs, lower spending on growth capital1 at Kumtor and lower exploration costs, partially offset by additional spending in 2015 for pre-development activities at the Greenstone Gold Property and Öksüt Project.
- Revenue for 2015, decreased to $624.0 million from $763.3 million in 2014, primarily from 13% fewer ounces sold and a 6% lower average realized gold price1 ($1,162 per ounce compared to $1,241 per ounce in 2014).
- Cost of sales in 2015 decreased by 23% to $384.5 million due a reduction in ounces sold and to lower costs at Kumtor and included an inventory impairment charge of $27.2 million recorded at the end of 2015. The largest component of cost of sales, DD&A, was $221.1 million, which includes $18.4 million of non-cash inventory impairment, in the year ended December 31, 2015, compared to $282.6 million in 2014. The decrease reflects lower capitalized stripping charges per ounce from cut-back 17 ore processed in 2015, compared to higher charges for cut-back 15 ore that was processed in the comparative period.
The decrease in the cash component of cost of sales can be primarily attributed to successful cost lowering initiatives at the Kumtor mine and that ounces processed in 2015 were relatively lower cost than ounces processed in 2014. The processed ounces from cut-back 17 in 2015 had mining costs per tonne 7% lower compared to tonnes processed in the comparative period. The lower mining costs are primarily the result of lower diesel costs, due to lower global fuel prices, and favourable exchange movements leading to various cost decreases including lower labour costs. The decrease in cost was also impacted by a 7% reduction in ounces sold in 2015.
- Operating costs (on a sales basis) decreased to $163.4 million in 2015 from $220.0 million in 2014. The decrease was due to processing lower cost ounces at Kumtor, which reflects a reduction in costs for diesel, labour and other consumables as well as favourable movements in the local currency as compared to 2014, magnified by the reduction in ounces sold during the year. The decrease can also be attributed to operating costs at Boroo being significantly lower in 2015 as milling activities ceased in late 2014. Site support costs at Boroo in 2015 were lower reflecting reduced personnel levels.
- Pre-development project costs increased by $7.3 million to $13.3 million in 2015 compared to 2014. The increase in 2015 represents the commencement of spending at the Company’s Greenstone Gold Property. The increase was partially offset by lower expensed costs at the Öksüt
Project as the Company began capitalization of Öksüt project costs on August 1, 2015 following the Board of Director’s decision to move the project to development.
- Goodwill at Kumtor was impaired by $18.7 million as a result of the annual goodwill impairment test carried out as at September 1, 2015 which brought the goodwill balance to zero. The goodwill test was based on the current Kumtor life-of-mine plan and was heavily impacted by lower gold prices, as gold prices continued to decrease in the first eight months of 2015. At December 31, 2014, the Company determined that the impact of a reserve reduction at the Kumtor mine was an indicator of impairment, which resulted in an impairment test and subsequent goodwill write-down of $111.0 million.
- During 2015, $5.7 million of standby costs were incurred to maintain the mill and operation on care and maintenance ($2.4 million in 2014). This largely consisted of labour costs to maintain equipment in a ready state and administration costs. The Boroo mill will be kept on standby awaiting the finalization of agreements and permits with the Mongolian Government regarding the development of the Gatsuurt Project.
- Exploration expenditures in 2015 totaled $8.4 million compared to $14.7 million in 2014. The decrease primarily reflects the Company’s increased focus on project development and reduced spending on the Company’s exploration projects in Turkey and Mongolia.
- Corporate administration costs in 2015 were mostly unchanged from 2014 at $35.8 million. The Company spent $2.5 million more on professional fees in 2015, driven primarily by higher consulting fees, including consulting relating to the formation of the Greenstone Partnership, and unforeseen legal fees. Additionally, there was an increase in share-based compensation of approximately $1.7 million reflecting the appreciation in the Company’s share price during 2015. These increases were offset by a decrease in salaries and benefits of $1.5 million and other administration and office costs of $1.8 million, which can be partly associated with the weakening of the Canadian dollar.
- The reduction in income tax expense of 2.2 million in 2015 was due to a taxable loss at Boroo in 2015, as the mill ended processing of stockpiled ore in late 2014.
- Cash provided by operations was $333.6 million in 2015 compared to $376.4 million in 2014, as a result of lower earnings partially offset by lower levels of working capital. In total the Company generated $60.1 million of cash in 2015 after accounting for spending on administration, exploration, project development spending, which includes acquiring a 50% interest in the Greenstone Partnership, and cash generation at Kumtor of $158.4 million, after capital spending.
- Capital expenditures in 2015 were $370.5 million, which included sustaining capital1 of $51.1 million, growth capital1 of $15.7 million, $6.1 million on Öksüt Project development, $11.3 million on Greenstone Gold Property capital, $75.7 million on Greenstone Partnership acquisition and $210.6 million of capitalized stripping costs ($159.4 million cash). Capital expenditures in the same period of 2014 were $351.2 million, which included $49.2 million for sustaining capital1 and $40.9 million for growth capital1 and capitalized stripping of $261.1 million ($187.3 million cash). In 2015, higher capital expenditures resulted primarily from additional spending on development projects, offset by lower capitalized stripping and lower growth capital1 spent at Kumtor. Development project spending included acquiring the Company’s 50% interest in the Greenstone Gold Property and commencement of spending on the project, in addition to spending on the Öksüt Project, which commenced development in the third quarter of 2015.
Operations Update Kumtor
| Three months ended | ||||||
|---|---|---|---|---|---|---|
| Kumtor Operating Results | December 31,(3) | Year ended December 31,(3) | ||||
| % | % | |||||
| Unaudited ($ millions, except as noted) | 2015 | 2014 | Change | 2015 | 2014 | Change |
| Revenue | 144.5 | 346.2 | (58%) | 604.5 | 694.6 | (13%) |
| Cost of sales-cash | 46.9 | 63.1 | (26%) | 151.1 | 174.5 | (13%) |
| Cost of sales-non-cash | 65.2 | 108.5 | (40%) | 216.8 | 270.0 | (20%) |
| Cost of sales-total | 112.1 | 171.5 | (35%) | 367.9 | 444.5 | (17%) |
| Cost of sales - $/oz sold(1) | 852 | 594 | 43% | 707 | 792 | (11%) |
| Tonnes mined - 000s | 45,418 | 42,786 | 6% | 169,527 | 191,723 | (12%) |
| Tonnes ore mined – 000s | 3,941 | 6,615 | (40%) | 6,583 | 8,640 | (24%) |
| Average mining grade - g/t | 2.06 | 3.52 | (41%) | 2.25 | 3.37 | (33%) |
| Tonnes milled - 000s | 1,504 | 1,502 | 0% | 5,729 | 5,840 | (2%) |
| Average mill head grade - g/t | 3.42 | 7.40 | (54%) | 3.57 | 3.90 | (8%) |
| Recovery - % | 79.9% | 82.2% | (3%) | 78.8% | 78.0% | 1% |
| Mining costs - total ($/t mined material) | 1.13 | 1.49 | (24%) | 1.24 | 1.34 | (7%) |
| Milling costs ($/t milled material) | 9.95 | 12.28 | (19%) | 11.17 | 12.04 | (7%) |
| Gold produced – ounces | 130,610 | 291,635 | (55%) | 520,694 | 567,693 | (8%) |
| Gold sold – ounces | 131,549 | 288,851 | (54%) | 520,517 | 561,154 | (7%) |
| Average realized gold price - $/oz(1) | 1,098 | 1,198 | (8%) | 1,161 | 1,238 | (6%) |
| Capital expenditures (sustaining)(1) | 11.8 | 13.4 | (12%) | 50.5 | 48.7 | 4% |
| Capital expenditures (growth)(1) | 2.5 | 11.5 | (78%) | 14.2 | 40.1 | (65%) |
| Capital expenditures (stripping) | 12.1 | 32.5 | (63%) | 210.6 | 261.1 | (19%) |
| Capital expenditures (total) | 26.4 | 57.4 | (54%) | 275.3 | 349.9 | (21%) |
| Operating costs (on a sales basis) (2) | 46.9 | 63.1 | (26%) | 151.1 | 174.5 | (13%) |
| Adjusted operating costs (1) | 51.6 | 70.4 | (27%) | 169.5 | 199.9 | (15%) |
| All-in Sustaining Costs (1) | 72.7 | 109.0 | (33%) | 380.3 | 437.1 | (13%) |
| All-in Costs(1) | 75.2 | 120.5 | (38%) | 394.5 | 477.1 | (17%) |
| All-in Costs - including taxes(1) | 95.4 | 169.0 | (44%) | 479.1 | 574.3 | (17%) |
| Adjusted operating costs - $/oz sold (1) | 392 | 244 | 61% | 326 | 356 | (8%) |
| All-in sustaining costs – $/oz sold (1) | 553 | 378 | 46% | 731 | 779 | (6%) |
| All-in costs – $/oz sold (1) | 572 | 418 | 37% | 758 | 851 | (11%) |
| All-in costs (including taxes) – $/oz sold (1) | 725 | 585 | 24% | 921 | 1,024 | (10%) |
(1) Adjusted operating costs, all-in sustaining costs, all-in costs and all-in costs (including taxes) (in each case, on an aggregate or per ounce sold basis), as well as average realized gold price per ounce sold, cost of sales per ounce sold and capital expenditures (sustaining and growth) are non-GAAP measures and are discussed under “Non-GAAP Measures”.
(2) Operating costs (on a sales basis) is comprised of mine operating costs such as mining, processing, regional office administration, royalties and production taxes (except at Kumtor where revenue-based taxes are excluded), but excludes reclamation costs and depreciation, depletion and amortization.
(3) Results may not add due to rounding.
At the Kumtor mine in the Kyrgyz Republic, mining activities in the fourth quarter of 2015 focused on mining and stockpiling ore from cut-back 17 as mining reached ore early in the quarter, while the mill primarily processed ore from stockpiles. Cut-back 18 waste stripping also commenced during this time in accordance to the mine development plan.
The total waste and ore mined in the fourth quarter of 2015 was 45.4 million tonnes compared to 42.8 million tonnes in the comparative period of 2014. The 6% increase in tonnes is mainly attributed to mining from a higher bench elevation that resulted in shorter hauls during the fourth quarter of 2015, whereas during the comparative period mining was predominately located at the lower SB Zone, which required significant uphill haulage. This was partially offset by increased standby time due to poor weather events in the fourth quarter of 2015 as compared to the same period in 2014. During the fourth quarter of 2015, Kumtor mined 3.9 million tonnes of ore at an average grade of 2.06 g/t from cut-back 17, compared to 6.6 million tonnes of ore mined at an average grade of 3.52 g/t in the fourth quarter of 2014.
Gold production for the fourth quarter of 2015 was 130,611 ounces compared to 291,635 ounces in the comparative quarter of 2014 due to the 54% lower average mill head grade and a 3% lower recovery rate, as a result of mining and processing the high-grade ore from cut-back 16 during the fourth quarter of 2014. During the fourth quarter of 2015, Kumtor’s average mill head grade was 3.42 g/t with a recovery of 79.9%, compared with 7.40 g/t and a recovery of 82.2% for the same quarter in 2014. Kumtor’s mill processed approximately 1.5 million tonnes for the fourth quarter of 2015 similar to the comparative quarter of 2014.
Operating costs (on a sales basis)1, excluding capitalized stripping, decreased 26% to $46.9 million during the fourth quarter of 2015 reflecting processing lower cost ounces at Kumtor that was driven by a reduction in cost of diesel, reagents and labour due to favorable movements in exchange rates compared to the same period of 2014.
DD&A associated with sales decreased to $65.2 million in the fourth quarter of 2015 from $108.5 million in the comparative period of 2014, mainly due to 157,303 or 54% lower ounces sold compared to 288,851 total ounces in the fourth quarter of 2014. This was partially offset by a $14.8 million non-cash inventory impairment charge.
At December 31, 2015, Kumtor conducted its quarterly inventory valuation test against the estimated net realizable value and as result recorded an inventory impairment of $27.2 million. The inventory impairment represents the excess of the inventoried cost, including cost of the low grade material stockpiled from cut-back 17, over the amount the Company expects to realize after further processing and subsequent sale of the gold. The main reason for the impairment is that lower grade ore was released in the fourth quarter of 2015 from cut-back 17 with insufficient volumes to cover the associated mining costs thereby resulting in an impairment. It is forecasted that cut-back 17 will intersect the higher grade SB Zone ore in the third quarter of 2016, which will provide the majority of the feed to the mill until the end of the year (see the “Outlook” section for further details). When considering cut-back 17 as a whole and using current gold prices and operating costs, no inventory impairment is expected to be recorded.
All-in sustaining costs per ounce sold1, which excludes revenue-based tax, for the fourth quarter of 2015 increased to $553 compared to $378 in the comparative period of 2014. The increase results primarily from a 54% decrease in ounces sold, partially offset by the lower operating cost previously explained.
All-in costs per ounce sold1, which excludes revenue-based tax, for the fourth quarter of 2015 was $572 compared to $418 in the comparative period of 2014, representing an increase of 22%. The increase is mainly due to the factors explained above, partially offset by, reduced growth capital spending associated with the infrastructure project compared to 2014.
Capital expenditures in the fourth quarter of 2014 were $26.4 million which includes $11.8 million of sustaining capital1, $2.5 million invested in growth capital1 and $12.1 million for capitalized stripping ($9.1 million cash). Capital expenditures in the comparative quarter of 2014 totaled $57.4 million, consisting of $13.4 million for sustaining capital1, $11.5 million for growth capital1 and $32.5 million of capitalized stripping ($24.9 million cash).
Mongolia (Boroo/Gatsuurt)
| Three months ended | ||||||
|---|---|---|---|---|---|---|
| Boroo Operating Results | December 31,(3) | Year ended December 31,(3) | ||||
| Unaudited ($ millions, except as noted) | 2015 | 2014 | % Change | 2015 | 2014 | % Change |
| Revenue | 3.9 | 13.9 | (72%) | 19.4 | 68.8 | (72%) |
| Cost of sales-cash | 1.8 | 9.8 | (82%) | 12.3 | 45.5 | (73%) |
| Cost of sales-non-cash | (0.4) | 2.1 | (119%) | 4.3 | 12.7 | (66%) |
| Cost of sales-total | 1.4 | 11.9 | (88%) | 16.6 | 58.2 | (71%) |
| Cost of sales - $/oz sold(1) | 376 | 1,037 | (64%) | 1,016 | 1,076 | (6%) |
| Tonnes milled - 000s | - | 466 | (100%) | - | 2,083 | (100%) |
| Average mill head grade - g/t | - | 0.65 | (100%) | - | 0.66 | (100%) |
| Recovery - % | - | 61.0% | (100%) | - | 61.2% | (100%) |
| Milling costs ($/t milled material) | - | 8.61 | (100%) | - | 10.03 | (100%) |
| Gold produced – ounces | 3,054 | 9,600 | (68%) | 16,226 | 53,128 | (69%) |
| Gold sold – ounces | 3,515 | 11,518 | (69%) | 16,325 | 54,080 | (70%) |
| Average realized gold price - $/oz(1) | 1,102 | 1,206 | (9%) | 1,190 | 1,271 | (6%) |
| Capital expenditures (sustaining)(1) | - | - | 100% | 0.1 | 0.3 | (67%) |
| Operating costs (on a sales basis) (2) | 1.7 | 9.8 | (83%) | 12.3 | 45.4 | (73%) |
| Adjusted operating costs (1) | 3.1 | 12.4 | (75%) | 20.1 | 51.8 | (61%) |
| All-in Sustaining Costs (1) | 3.3 | 12.5 | (74%) | 20.8 | 52.6 | (60%) |
| All-in Costs(1) | 3.3 | 12.5 | (74%) | 20.8 | 52.6 | (60%) |
| All-in Costs - including taxes(1) | 3.3 | 12.0 | (73%) | 21.0 | 55.4 | (62%) |
| Adjusted operating costs - $/oz sold (1) | 904 | 1,072 | (16%) | 1,242 | 959 | 30% |
| All-in sustaining costs – $/oz sold (1) | 949 | 1,083 | (12%) | 1,287 | 973 | 32% |
| All-in costs – $/oz sold (1) | 949 | 1,083 | (12%) | 1,287 | 973 | 32% |
| All-in costs (including taxes) – $/oz sold (1) | 950 | 1,043 | (9%) | 1,298 | 1,025 | 26% |
(1)
Adjusted operating costs, all-in sustaining costs, all-in costs and all-in costs (including taxes) (in each case, on an aggregate or per ounce sold basis), as well as average realized gold price per ounce sold, cost of sales per ounce sold and capital expenditures (sustaining and growth) are non-GAAP measures and are discussed under “Non-GAAP Measures”..
(2) Operating costs (on a sales basis) is comprised of mine operating costs such as mining, processing, regional office administration, royalties and production taxes, but excludes reclamation costs and depreciation, depletion and amortization.
(3) Gold produced in the year-ended December 31, 2015 includes 3,595 ounces from the cleaning of circuits at the mill.
(4) Results may not add due to rounding.
At the Boroo mine, located in Mongolia, production was 3,054 ounces of gold in the fourth quarter of 2015 as compared to 9,601 ounces of gold in the same period of 2014. The lower gold production is the result of secondary leaching producing fewer ounces from the heap leach operation.
The Boroo mill was placed on care and maintenance in late December 2014 and shutdown activities at the mill were completed at the end of February 2015. The Company currently is keeping the mill on standby awaiting the finalization of agreements and permits for the Gatsuurt Project. See “Other Corporate Developments – Mongolia” and “Caution Regarding Forward-Looking Information”.
Operating costs (on a sales basis)1 decreased by $8.1 million to $1.7 million in the fourth quarter of 2015. The 83% reduction reflects lower activity at the project as milling activities ceased in late 2014.
All-in sustaining costs per ounce sold1 and all-in costs per ounce sold1, which excludes income tax, decreased 12% to $949 in the fourth quarter of 2015 compared to the same period in 2014. The decrease results primarily from 83% lower operating costs in the fourth quarter of 2015.
During the fourth quarter of 2015 exploration expenditures in Mongolia were $0.8 million down from $1.1 million in the same period in 2014.
The Gatsuurt Project remained under care and maintenance in the fourth quarter of 2015. Gatsuurt was designated as a mineral deposit of strategic importance by the Mongolian Parliament in January 2015. The Company continued to engage in discussions with the Mongolian Government regarding the development of the Gatsuurt Project and potential ownership of the Government. In mid-October 2015, the Company and the Government agreed to a 3% special royalty in place of the Government acquiring a 34% ownership interest in the project, subject to Parliamentary approval. On February 4, 2016, the Mongolian Parliament approved the level of state ownership in the project at 34%. Under the Minerals Law, the Government is able to substitute the state ownership with a special royalty. In this regard, the Government can now implement the previously agreed upon 3% special royalty in place of a 34% state ownership interest in Gatsuurt. See the Company’s news releases of February 4, 2016, October 27, 2015 and January 23, 2015. The Company expects to proceed with negotiating definitive agreements and to carry out additional exploration, technical and hydrogeological drilling in support of eventual project development. See “Other Corporate Developments – Mongolia”.
Project Development
Öksüt Project
At the Öksüt Project in Turkey, the Company spent $4.0 million during the fourth quarter of 2015 and $10.0 million during the year ended December 31, 2015 ($2.4 million and $6.0 million, respectively in the same periods of 2014) on development activities to progress the EIA, required by Turkish authorities and to begin detailed engineering.
In November 2015, the Company received approval of its EIA from the Turkish regulatory authorities, followed by approval of the business opening permit from local authorities in December 2015. Applications have been submitted for the land usage permits, after approval of which other required permits will be submitted. There are no assurances that the formal approval of the land use permits and other permits will be obtained by the Company in the anticipated time frame, or at all.
Subject to timely receipt of permits, the Company expects to begin development of the Öksüt Project in the second quarter of 2016 with first gold production anticipated in the third quarter of 2017. On September 3, 2015 a Technical Report for the Öksüt Project was filed on SEDAR.
In December 2015, the Company finalized a buyback of a 1% NSR related to the Öksüt production from Stratex through the issuance of 962,542 common shares of the Company, representing a value of $4.9 million. The Company had initially negotiated the royalty as part of the purchase from Stratex of the final 30% interest in the Öksüt Project in December 2012.
Greenstone Gold Property
The Company spent $4.3 million in the fourth quarter of 2015 and $17.3 million for the year ended December 31, 2015 on project development activities on the Greenstone Gold Property. During the year, work continued on the feasibility study for the Hardrock Project, including detailed engineering on the processing facility, tailings facility and critical site infrastructure. A new resource model that incorporates all available drill hole and assay data and technical input from a third party audit was completed and will be the basis for the feasibility study. The Greenstone Partnership is expected to complete the feasibility study in the first half of 2016, at which time the mineral reserve and resource inventory will be disclosed for Greenstone. When completed the Company expects to file a NI 43-101 technical report including a statement of reserves and resources, on SEDAR.
In the fourth quarter of 2015, progress was made on completing the Environmental Assessment (“EA”) and building a stronger relationship with the local communities. Subsequently, on February 1, 2016, the draft EA was submitted to the provincial and federal regulators for their initial review and comment.
Exploration Update
Turkey Öksüt Project
During the fourth quarter of 2015, nine diamond drill holes were completed to further test the Güneytepe deposit and the Keltepe NW prospect. In 2015 a total of twenty diamond drill holes were completed and focused on extending both the Keltepe and Güneytepe deposits, testing the Keltepe NW prospect area and additional targets within the project area.
Drilling in fourth quarter of 2015 at the Güneytepe deposit returned encouraging assay results as a consequence, additional drilling was performed to investigate the extents of mineralization. This new drilling has confirmed that near surface Güneytepe oxide gold mineralization remains open to the northwest.
Some of the better results from the Güneytepe holes include oxide intervals at:
- ODD0268: 1.65 g/t Au over 10.0 metres starting 35.0 metres downhole and 1.86 g/t Au over 11.3 metres starting 53.7 metres downhole;
- ODD0269: 0.41 g/t Au over 96.6 metres starting 6.0 metres downhole; and
- ODD0270: 0.72 g/t Au over 16.9 metres starting 3.1 metres downhole.
The remaining drilling during the quarter focused in the south-east and east of Keltepe NW prospect. Assay results indicate deeper oxide mineralization than what is the seen at the Keltepe deposit.
Highlights from this drilling include oxide intervals at:
- ODD0271: 4.62 g/t Au over 5.0 metres starting 117.6 metres downhole and 1.23 g/t Au over 22.1 metres starting 195.4 metres downhole;
- ODD0272: 0.74 g/t Au over 61.6 metres (EOH) from 199.7 metres downhole, including 1.40 g/t Au over 19.8m from 228.0 metres downhole;
ODD0276: 0.40 g/t Au over 16.0 metres from 152.9 metres downhole (oxide-sulphide).
- The above mineralized intercepts were calculated using a cut-off grade of 0.2 g/t Au and a maximum
internal dilution interval of 5.0 metres. Reported lengths are core lengths, true widths for mineralized intervals are about 60% to 90% of stated downhole length.
Drill collar locations and drill results tables and sections are available at the following link: