Centerra Gold Reports Fourth Quarter and Full-Year 2021 Results Full Year Cash Provided by Operating Activities from Continuing Operations of $270.9 million and Free Cash FlowNG from Continuing Operations of $178.4 million.
NEWS RELEASE
Centerra Gold Reports Fourth Quarter and Full-Year 2021 Results Full Year Cash Provided by Operating Activities from Continuing Operations of $270.9 million and Free Cash FlowNG from Continuing Operations of $178.4 million.
All figures are in United States dollars and all production figures are on a 100%-basis and continuing operations basis, unless otherwise stated. This news release contains forward-looking information regarding Centerra Gold’s business and operations. See “Caution Regarding Forward-Looking Information” in Centerra Gold’s Management’s Discussion & Analysis for the year ended December 31, 2021 (“MD&A”) included in this press release. 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 specified measures is a standardized financial measure under International Financial Reporting Standards (“IFRS”) and these measures might not be comparable to similar financial measures disclosed by other issuers. See “Non-GAAP and Other Financial Measures” in the MD&A included in this press release for a discussion of the specified financial measures used in this document and a reconciliation to the most directly comparable IFRS measure.
Toronto, Canada, February 25, 2022: Centerra Gold Inc. (“Centerra” or the “Company”) (TSX: CG and NYSE: CGAU) today reported its fourth quarter and full-year 2021 results.
Significant financial and operating results of the fourth quarter and year ended December 31, 2021 included:
- Net loss for the year of $381.8 million or $1.29 per common share (basic), including a $926.4 million loss on the change of control of the Kumtor Mine, and an impairment reversal at the Mount Milligan Mine of $117.3 million (net of tax).
- Adjusted net earningsNG for the year of $233.6 million or $0.79 per common share (basic), inclusive of earnings from operations from the Kumtor Mine prior to the loss of control event.
- Net earnings from continuing operations and adjusted net earningsNG from continuing operations for the year of $446.9 million or $1.51 per common share (basic) and $149.3 million or $0.50 per common share (basic), respectively.
• Net earnings and adjusted net earningsNG for the quarter of $274.9 million or $0.93 per common share (basic) and $35.4 million or $0.12 per common share (basic), respectively.
- Cash provided by operating activities from continuing operation for the quarter of $61.8 million.
- Free cash flowNG from continuing operation for the quarter of $38.7 million.
- Gold production from continuing operations for the quarter of 91,197 ounces.
- Copper production from continuing operations for the quarter of 17.0 million pounds.
- Gold production costs from continuing operations for the quarter of $550 per ounce.
- Copper production costs from continuing operations for the quarter of $1.79 per pound.
- All-in sustaining costs on a by-product basisNG from continuing operations for the quarter of $591 per ounce. All-in costs on a by-product basisNG from continuing operations for the quarter of $732 per ounce.
- Strong balance sheet with cash position at the year-end of $947.2 million.
- Centerra remains engaged in discussions and negotiations with representatives of the Government of the Kyrgyz Republic to resolve the outstanding disputes related to Kumtor Mine and the Company continues to pursue legal proceedings in several jurisdictions.
- Quarterly Dividend declared of CAD$0.07 per common share.
On February 22, 2022, and subsequent to the year ended December 31, 2021, the Company announced that it has entered into an agreement to acquire Gemfield Resources LLC, owner of the Goldfield Project from Waterton Nevada Splitter, LLC. Total consideration consists of approximately $175 million in cash at closing and a $31.5 million deferred milestone payment payable the earlier of 18 months following the acquisition date and a construction decision with respect to the Goldfield Project among other things.
The Company’s 2021 full-year results on a continuing basis, and previously disclosed full-year 2022 guidance are summarized below:
| (On continuing operations basis)(1) | 2021 Guidance | 2021 Full-Year 2022 Guidance results | ||
| Production | ||||
| Total gold production | (Koz) | 270 - 310 | 308 | 400 - 450 |
| Total copper production | (Mlb) | 70 - 80 | 73 | 70 - 80 |
| Costs | ||||
| Gold production costs | ($/oz) ($/oz) ($/oz) ($/oz) ($/lb) ($/lb) | 600 - 650 700 - 750 | 604 649 785 891 | 500 - 550 600 - 650 700 - 750 750 - 800 |
| All-in sustaining costs on a by-product basisNG All-in costs on a by-product basisNG All-in sustaining costs on a co-product basisNG Copper production costs | ||||
| 850 - 900 | ||||
| 900 - 950 | ||||
| 1.45 - 1.60 2.10 - 2.25 | 1.51 1.94 | 1.70 - 1.85 2.40 - 2.55 | ||
| All-in sustaining costs on a co-product basisNG | ||||
| Cash Flows(2) | — — | |||
| Cash provided by operating activities | ($M) ($M) | 270.9 178.4 | 300 - 350 200 - 250 | |
| Free cash flowNG |
(1)
For the discussion of significant differences in the forward-looking and historical non-GAAP measures, refer to the “Outlook” section (2)
Cash provided by operating activities from discontinued operations and net cash flow from discontinued operations for the year were $143.9 million and $47.8 million, respectively.
Commentary
Scott Perry, President and Chief Executive Officer of Centerra stated, “As always, safety remains our top priority, and we are pleased that in its first full year of operation, the Öksüt Mine achieved two million hours of work without a lost time injury. While we experienced some setback in our safety journey at the Mount Milligan Mine, we put a strategy in place to improve the current performance. Additionally, we continue to maintain rigorous health protocols at all of our operations to help prevent the spread of COVID-19.”
“The Mount Milligan Mine and Öksüt Mine paved the way for our strong operating performance in 2021. Record performance at the Mount Milligan Mine and an impressive first full calendar year of operations at the Öksüt Mine, enabled us to achieve the upper end of our gold production guidance, producing more than 308,141 ounces in the year, at gold production costs of $604 per ounce and all-in sustaining costs on a by-product basisNG of $649 per ounce. Gold production of 196,438 ounces at Mount Milligan was at the upper end of its 2021 gold production guidance, as the mine achieved the highest throughput since it started operations in 2014. Mount Milligan achieved this record year while maintaining a low cost operation with gold production costs and all-in-sustaining cost on a by-product basisNG of $683 and $508 per ounce sold, respectively. In its first full year of operations, the Öksüt Mine favourably outperformed both its gold production and all-in-sustaining cost on a by-product basisNG guidance, achieving 111,703 ounces of gold production at $668 per ounce, respectively. The Öksüt Mine’s gold production costs of $457 per ounce sold were at the low end of the 2021 guidance range.”
“Financially, the Company generated cash provided by operating activities of $271 million, including a record $269 million generated at the Mount Milligan Mine, in addition to $132 million generated at the Öksüt Mine. The Company ended the year with a cash balance of $947 million.”
“In 2022, we expect to see continued strong operational performance at the Mount Milligan and Öksüt Mines, with a significant increase in gold production and cash generation. We anticipate consolidated gold production in 2022 to range from 400,000 to 450,000 ounces compared to 308,141 ounces of gold production in 2021. We expect to achieve this higher production level, while maintaining our low cost model with 2022 gold production costs and all-in sustaining costs on a by-product basisNG expected to be $500 to $550 per ounce and $600 to $650 per ounce, respectively, in line with 2021. Cash provided by operating activities and free cash flowNG in 2022 are expected to be between $300 to $350 million and $200 to $250 million, respectively, an increase from the $271 million and $178 million in 2021, respectively.”
“Subsequent to year-end, we announced the acquisition of Gemfield Resources which will assist in replenishing Centerra’s pipeline by adding the Goldfield Project to our portfolio. Host to a land package with an upside potential for expansion, the Goldfield Project is positioned to deliver another source of meaningful cash flow to Centerra in the future. We continue to invest in greenfield and brownfield exploration, with increased drilling programs at the Mount Milligan and Öksüt Mines, where we have seen promising results. This is reflected in the increased mineral resources of contained ounces of gold and pounds of copper at the Mount Milligan Mine as at December 31, 2021.”
“Based on the Company’s continued strong financial position, operating results and cash flows, the Board approved a quarterly dividend of CAD$0.07 per share on February 24, 2022 to shareholders of record on March 11, 2022.”
“We have a well-established track record of delivering results and outperforming gold production guidance, which speaks to the quality of our assets and gives us confidence in our outlook at the core operations. In such regard, 2022 will be an exciting year for Centerra and we expect to see continued strong operational performance at the Mount Milligan and Öksüt Mines, with increased gold production levels and meaningful generation of cash provided by operating activities and free cash flowNG.”
Exploration Update
Exploration activities in the fourth quarter of 2021 included drilling, surface sampling, geological mapping and geophysical surveying at the Company’s various projects and earn-in properties, targeting gold and copper mineralization in Canada, Turkey, Finland and the United States of America.
Exploration expenditures at the Company’s continuing operations for the year and for the quarter were $37.4 million and $9.2 million, respectively. The activities were focused on expanded drilling programs at the Mount Milligan Mine and the Öksüt Mine, as well as at the Sivritepe Project, which is a greenfield exploration property located in north-eastern Turkey.
In the fourth quarter of 2021, exploration drilling (2,853 metres in four drill holes) and resource expansion drilling (12,592 metres in 18 drill holes) continued at the Mount Milligan Mine. Following previous successful in-pit and near-pit exploration drilling programs, the resource expansion drilling was designed to develop and upgrade resources and reserves in the MBX, WBX and DWBX zones below and to the west of the current ultimate open-pit boundary. There is potential for additional resources to exist in these areas and assays obtained throughout the fourth quarter of 2021 returned multiple intersections of potentially economic gold and copper porphyry mineralization outside of the current ultimate open-pit boundary. The Company announced updated reserves and resources for the Mount Milligan Mine as at December 31, 2021 which showed an increase in mineral resources of contained ounces of gold and pounds of copper. The results from the 2021 drilling program will be used in an updated resource model to support a new National Instrument 43-101 Standards of Disclosure for Mineral Projects technical report for the Mount Milligan Mine, planned to be released in the second quarter of 2022, and a new life-of-mine plan.
In 2022, drilling at the Mount Milligan Mine will continue to target gold and copper porphyry mineralization below and adjacent to the current ultimate open-pit boundary, as well as continue to test targets with potential for shallower mineralization peripheral to the current pits.
At the Öksüt Mine, exploration activities comprised resource expansion drilling (7,399 metres in 35 drill holes) and exploration drilling (5,413 metres in 20 drill holes). Drilling activities were undertaken to provide greater confidence to the resources and reserves within the Keltepe and Güneytepe deposits in support of an updated resource model and new life-of-mine plan. Exploration drilling activities completed in 2021 expanded oxide gold mineralization at the Keltepe North and Keltepe Northwest deposits and provided encouragement that it may be possible to join these two deposits in the future. In addition, a new zone of oxide gold mineralization (Keltepe North-Northwest) was discovered just to the east of the Keltepe North and Keltepe Northwest deposits.
In 2022, drilling at the Öksüt Mine will continue to target potential expansion of oxide gold mineralization at the Keltepe North, Keltepe Northwest, and Keltepe North-Northwest deposits and focus on new oxide gold mineralization at targets peripheral to the known deposits.
Selected drill program results and intercepts are highlighted in the supplementary data at the end of this news release. The drill collar locations and associated graphics are available at the following link:
https://ml.globenewswire.com/media/63702a77-3ee8-4dac-b4c3-ccff21f3d4a7/document/?v=02242022094200
About Centerra
Centerra Gold Inc. is a Canadian-based gold mining company focused on operating, developing, exploring and acquiring gold properties in North America, Turkey, and other markets worldwide. Centerra operates two mines: the Mount Milligan Mine in British Columbia, Canada, and the Öksüt Mine in Turkey. While the Company still owns the Kumtor Mine in the Kyrgyz Republic, it is currently no longer under the Company’s control. The Company also owns the predevelopment stage Kemess Project in British Columbia, Canada and owns and operates the Molybdenum Business Unit in the United States. 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.
Conference Call
Centerra invites you to join its 2021 fourth quarter conference call on Friday, February 25, 2022 at 9:00 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) 757-5680. International participants may access the call at +1 (416) 981-9004. Results summary presentation slides are available on Centerra’s website at www.centerragold.com. Alternatively, an audio feed webcast will be broadcast live by Notified (formerly Intrado) and can be accessed live at Centerra’s website at www.centerragold.com. A recording of the call will be available on Centerra’s website at www.centerragold.com shortly after the call and via telephone until midnight Eastern Standard Time on March 4, 2022 by calling +1 (416) 626-4100 or 1 (800) 558-5253 and using passcode 21989633.
For more information:
Toby Caron Treasurer and Director, Investor Relations (416) 204-1694 [email protected]
Shae Frosst Manager, Investor Relations (416) 204-2159 [email protected]
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 Years Ended December 31, 2021 and 2020
This Management’s Discussion and Analysis (“MD&A”) has been prepared as of February 24, 2022 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 and twelve month periods ended December 31, 2021 in comparison with the corresponding periods ended December 31, 2020. This discussion should be read in conjunction with the Company’s audited financial statements and the notes thereto for the year ended December 31, 2021 prepared in accordance with International Financial Reporting Standards (“IFRS”). The Company’s audited financial statements and the notes thereto for the year ended December 31, 2021, are 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 “believe”, “expect”, “anticipate”, “contemplate”, “plan”, “intends”, “continue”, “budget”, “estimate”, “may”, “will”, “schedule”, “understand” and similar expressions identify forward-looking information. These forward-looking statements relate to, among other things: statements regarding 2022 Outlook and 2022 Guidance, including outlook on production (including the timing thereof), cost, free cash flow and capital spend in 2022, and the assumptions used in preparing such guidance and outlook, including those discussed under “2022 Material Assumptions”; the impact of the seizure of the Kumtor Mine on the Company’s other operations and businesses; the outcome of arbitration and other proceedings initiated by the Company regarding the unlawful seizure by the Kyrgyz Government of the Kumtor Mine in May, 2021, or the outcome or effect of the legacy environmental and tax disputes and criminal investigations relating to the Kumtor Mine, or the outcome of any future discussions or negotiations to resolve any or all of the disputes relating to the Kumtor Mine and the potential terms and conditions (including legal and regulatory requirements and approvals in connection therewith) of any such resolution; possible impacts to its operations relating to COVID-19; the Company’s expectation regarding having sufficient water at Mount Milligan in the medium-term for its targeted throughput and its plans for a long-term water solution; the Company’s continued evaluation of potential activity at the Kemess East Project; expectations regarding the resources and reserves within the Keltepe and Güneytepe deposits in support of an updated resource model and new life-of-mine plan; expectations regarding the future joining of the Keltepe North and Keltepe Northwest deposits; the Company’s expectations regarding exploration results in connection with the Sivritepe Project and 2XFred Project; expectations in respect of the acquisition of Gemfield Resources LLC, owner of the Goldfield District Project (the “Goldfield Project”), including the completion and the anticipated benefits and strategic rationale of the transaction and future prospects in respect of the Goldfield Project; the Company’s expectations of adequate liquidity and capital resources for 2022; 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 Turkey, the USA and Canada; 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, including the potential failure to negotiate a mutually-acceptable outcome of disputes relating to the Kumtor Mine and any negotiations or resolution between Centerra and the Kyrgyz Republic and the potential terms and conditions (including legal and regulatory requirements and approvals in connection therewith) of any such resolution; risks that an arbitrator will reject the Company’s claims against the Kyrgyz Republic and/or Kyrgyzaltyn JSC (“Kyrgyzaltyn”) or that such claims may not be practically enforceable against the Kyrgyz Republic and/or Kyrgyzaltyn; risks related to the continued imposition by the Kyrgyz Government of external management on the Company’s wholly-owned subsidiary, Kumtor Gold Company CJSC (“KGC”) or the prolongation of such external management, including risks that the external manager materially damages the Kumtor Mine’s operations; the inability of the external management of KGC to obtain equipment, spare parts, consumables or other supplies; the Kyrgyz Republic Government taking further steps to nationalize or expropriate the Kumtor Mine, and/or utilizing the purported environmental and tax claims being asserted against KGC to strip KGC of its assets; the ongoing failure of the Kyrgyz Republic Government to comply with its continuing obligations under the investment agreements governing the Kumtor Mine and not take any expropriation action against the Kumtor Mine; risks that the Kyrgyz Government undertake further unjustified civil or criminal action against the Company, its affiliates, or its current or former employees; the impact of constitutional changes in Turkey; 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; the presence of a significant shareholder that is a state-owned company of the Kyrgyz Republic; 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; completion of the acquisition of the Goldfield Project in accordance with, and on the timeline contemplated by, the terms and conditions of the relevant agreements in respect thereof, management’s assessment of the effects of the successful completion of the proposed acquisition of the Goldfield Project and the making of a determination to proceed with the development of the Goldfield Project on terms acceptable to Centerra; (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, 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 or COVID-19, respectively); 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; wildfires; long lead-times required for equipment and supplies given the remote location of some of the Company’s operating properties; 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; 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 February 25, 2022. 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 ....................................................................................................................................................................... 1 Overview of Consolidated Financial and Operational Highlights .......................................................................... 3 Overview of Consolidated Results .............................................................................................................................. 4 Outlook ......................................................................................................................................................................... 6 Recent Events and Developments ............................................................................................................................... 11 Risks That Can Affect Centerra's Business .............................................................................................................. 15 Market Conditions ....................................................................................................................................................... 17 Financial Performance ................................................................................................................................................ 19 Financial Instruments .................................................................................................................................................. 22 Balance Sheet Review .................................................................................................................................................. 23 Liquidity and Capital Resources ................................................................................................................................ 24 Contractual Obligations .............................................................................................................................................. 25 2022 Liquidity and Capital Resources Analysis ........................................................................................................ 26 Operating Mines and Facilities ................................................................................................................................... 26 Discontinued Operations ............................................................................................................................................. 37 Quarterly Results – Previous Eight Quarters ........................................................................................................... 38 Related Party Transactions .................................................................................................................. 38 Accounting Estimates, Policies and Changes ............................................................................................................ 39 Disclosure Controls and Procedures and Internal Control Over Financial Reporting ........................................ 39 Non-GAAP and Other Financial Measures ............................................................................................................... 40 Mineral Reserves and Mineral Resources ................................................................................................................. 47 Qualified Person & QA/QC – Production, Mineral Reserves and Mineral Resources ......................................... 48
Overview
Vision and Strategy
Centerra’s vision is to build a team-based culture of excellence that responsibly delivers sustainable value and growth.
Centerra aims to meaningfully grow its low-cost operating portfolio, while building a great place to work, with care and consideration for the environment and the communities in which the Company operates. Centerra aims to achieve this overall strategy through the following strategic imperatives:
- Driving growth: Identifying, critically evaluating, and executing targeted growth opportunities to ensure the organization is best positioned for sustainable growth and value-creation.
- Optimizing existing assets: leveraging the Company’s existing operations with consistent performance, focusing on activities that generate the most value.
- Creating a great place to work: attracting, retaining, and developing diverse skilled talent to create a collaborative and inclusive environment.
- Improving the Company’s environmental social governance (“ESG”) profile: maintaining and enhancing value for all of Centerra’s stakeholders by embedding ESG principles across the enterprise throughout the mine life cycle and by delivering on the Company’s targets.
Centerra’s Business
Centerra is a Canadian-based gold mining company focused on operating, developing, exploring and acquiring gold properties in North America, Turkey, and other markets worldwide. Centerra’s principal continuing operations are the Mount Milligan gold-copper mine located in British Columbia, Canada (the “Mount Milligan Mine”), and the Öksüt gold mine located in Turkey (the “Öksüt Mine”). The Company also owns the pre-development stage Kemess project (the “Kemess Project”) in British Columbia, Canada as well as exploration properties in Canada, the United States of America and Turkey and has options to acquire exploration joint venture properties in Canada, Finland, Turkey, 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 in care and maintenance: the Thompson Creek Mine in Idaho, USA, and the Endako Mine (75% ownership) in British Columbia, Canada.
Prior to May 15, 2021, the Company also consolidated the results of the Kumtor Mine, located in the Kyrgyz Republic, through its wholly-owned subsidiary, Kumtor Gold Company CJSC (“KGC”). Although the Company remains the rightful owner of KGC, the seizure of the Kumtor Mine and the continuing actions by the Kyrgyz Republic and Kyrgyzaltyn have resulted in the following: (i) the carrying value of the net assets of the mine were derecognized from the Company’s balance sheet, (ii) no value was ascribed to the Company’s interest in KGC, (iii) the Company recognized a loss on the change of control in the second quarter of 2021 and (iv) results of the Kumtor Mine’s operations are now presented as a discontinued operation in the Company’s financial statements.
As of December 31, 2021, Centerra’s significant subsidiaries are 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 - Turkey Operation 100% Langeloth Metallurgical Company LLC Langeloth - USA Operation 100% AuRico Metals Inc. Kemess Project - Canada Pre-development 100% Thompson Creek Mining Co. Thompson Creek Mine - USA Care and maintenance 100% Kumtor Gold Company CJSC Kumtor Mine - Kyrgyz Republic Discontinued operation 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 February 24, 2022, there are 297,233,839 common shares issued and outstanding, options to acquire 3,076,614 common shares outstanding under the Company’s stock option plan, and 933,718 restricted share units outstanding under the Company’s restricted share unit plan (exercisable on a 1:1 basis for common shares). Based on its public filings, as of February 24, 2022, Kyrgyzaltyn beneficially owned 77,401,766 common shares of the Company.
Overview of Consolidated Financial and Operating Highlights
| ($millions, except as noted) | Three months ended December 31 | Year ended December 3 | 1 | |||
| 2021 | 2020 | % Change | 2021 | 2020 | % Change | |
| Financial Highlights (continuing operations basis, except as noted) | 212.1 | 18 % | 900.1 | 721.3 | 25 % | |
| Revenue Production costs Depreciation, depletion, and amortization | 251.1 | |||||
| 132.0 31.0 | 99.2 25.0 | 33 % 24 % | 487.7 410.0 | 19 % 26 % | ||
| 120.5 | 95.8 | |||||
| Earnings from mine operations | 88.1 | 87.9 | 0 % | 292.0 215.5 446.9 16.1 | 35 % | |
| Net earnings from continuing operations | 274.9 | 31.6 40.9 63.6 95.2 | 770 % | 2669 % 115 % (311) % 193 % (49) % (1) % 6 % 14 % (78) % | ||
| Adjusted net earnings from continuing operations(1) | 35.4 | (13) % | 149.3 | 69.5 392.4 408.5 461.9 272.4 168.9 168.9 657.6 | ||
| Net earnings (loss) from discontinued operations | — | (100) % | (828.7) | |||
| Net earnings (loss)(2) | 274.9 35.4 61.8 38.7 44.0 | 189 % (66) % (27) % (21) % (10) % | (381.8) 233.6 270.9 | |||
| Adjusted net earnings(1)(2) | 104.5 | |||||
| Cash provided by operating activities from continuing operations | 84.3 48.7 48.7 97.6 | |||||
| Free cash flow from continuing operations(1) Adjusted free cash flow from continuing operations(1) | 178.4 | |||||
| 192.6 143.9 | ||||||
| Cash provided by operating activities from discontinued operations | — | (100) % | ||||
| Net cash flow from discontinued operations(3) | — 28.1 (100) % 47.8 46.9 65.8 (29) % 118.9 28.1 40.4 (30) % 93.3 | 428.9 | (89) % | |||
| Additions to property, plant and equipment (“PP&E”) Capital expenditures - total(1) | 140.7 | (15) % | ||||
| 110.7 57.0 53.7 | (16) % 54 % (90) % 2651 % (193) % 113 % (50) % | |||||
| Sustaining capital expenditures(1) | 25.7 2.4 | 28.0 12.4 | (8) % (81) % 764 % 186 % (14) % (66) % | 88.0 5.3 | ||
| Non-sustaining capital expenditures(1) | ||||||
| Net earnings from continuing operations per common share - basic(4) | 0.93 0.93 | 0.11 | 1.51 (1.29) | 0.05 | ||
| Net earnings (loss) per common share - $/share basic(2)(4) | 0.32 0.14 0.35 | 1.39 0.24 1.57 | ||||
| Adjusted net earnings from continuing operations per common share - basic(1)(4) | 0.12 0.12 | 0.50 0.79 | ||||
| Adjusted net earnings per common share - $/share basic(1)(2)(4) | ||||||
| Operating highlights (continuing operations basis) | ||||||
| Gold produced (oz) | 91,197 90,312 1,795 | 82,044 73,309 1,876 | 11 % 23 % (4) % | 308,141 314,757 1,799 | 267,923 259,603 1,772 | 15 % 21 % 2 % |
| Gold sold (oz)(5) | ||||||
| Average market gold price ($/oz)(6) | ||||||
| Average realized gold price ($/oz )(7) | 1,504 1,650 (9) % 1,485 1,508 (2) % 16,993 20,376 (17) % 73,275 82,816 (12) % 17,184 18,975 (9) % 78,017 80,477 (3) % 4.40 3.27 35 % 4.23 2.80 51 % 3.59 2.79 29 % 2.92 2.22 32 % | |||||
| Copper produced (000s lbs) Copper sold (000s lbs) | ||||||
| Average market copper price ($/lb)(6) | ||||||
| Average realized copper price ($/lb)(7) | ||||||
| Molybdenum sold (000s lbs) Average market molybdenum price ($/lb) | 2,361 | 3,610 | (35) % 110 % | 11,461 | 13,667 | (16) % 84 % |
| 18.89 | 9.01 | 15.98 | 8.68 | |||
| Unit costs (continuing operations basis) | ||||||
| Gold production costs ($/oz) | 550 591 732 829 | 537 813 1,144 1,070 | 2 % | 604 649 785 891 | 615 718 1,116 954 | (2) % |
| All-in sustaining costs on a by-product basis ($/oz)(1) | (27) % | (10) % | ||||
| All-in costs on a by-product basis ($/oz)(1) | (36) % | (30) % | ||||
| Gold - All-in sustaining costs on a co-product basis($/oz)(1) Copper production costs ($/lb) Copper - All-in sustaining costs on a co-product basis – ($/lb)(1) | (23) % | (7) % | ||||
| 1.79 2.34 | 1.31 1.80 | 37 % | 1.51 1.94 | 1.24 1.48 | 22 % | |
| 30 % | 31 % |
(1)
Non-GAAP financial measure. See discussion under “Non-GAAP and Other Financial Measures”.
(2)
Inclusive of the results from the Kumtor Mine prior to the loss of control on May 15, 2021.
(3)
Calculated as the sum of cash flow provided by operating activities from discontinued operations, cash flow used in investing activities from discontinued operations and cash flow used in financing activities from discontinued operations.
(4)
As at December 31, 2021, the Company had 297,064,750 common shares issued and outstanding, of which 26.1% were held by Kyrgyzaltyn.
(5)
Includes 6,654 ounces of gold in 2020, which were sold prior to achieving commercial production at the Öksüt Mine on May 31, 2020.
(6)
Average for the period as reported by the London Bullion Market Association (“LBMA”) US-dollar Gold P.M. Fix Rate and London Metal Exchange (“LME”). (7)
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 and includes the impact from the Mount Milligan Streaming Arrangement and the impact of copper hedges.
Overview of Consolidated Results
Although the Company remains the rightful legal owner of KGC, due to the seizure of the Kumtor Mine and the continuing actions by the Kyrgyz Republic and Kyrgyzaltyn, the Company derecognized the assets and liabilities of the Kumtor Mine in the statements of financial position and presented its financial and operating results prior to the loss of control as discontinued operations for the three months and year ended December 31, 2021 and 2020. As a result, the Company’s consolidated results from continuing operations discussed in this MD&A (including prior periods) exclude the Kumtor Mine’s operations, unless otherwise noted.
Fourth Quarter 2021 compared to Fourth Quarter 2020
Net earnings of $274.9 million were recognized in the fourth quarter of 2021, compared to net earnings from continuing operations of $31.6 million in the fourth quarter of 2020. The increase in net earnings was primarily due to a $117.3 million impairment reversal at the Mount Milligan Mine (net of tax), the recognition of a $144.0 million deferred tax asset related to the Mount Milligan Mine and a $25.0 million incremental gain recognized on the sale of the Company’s interest in the Greenstone Gold Mines Partnership (“Greenstone Partnership”). The increase was partially offset by higher current income tax expense related to the Öksüt Mine. The Company did not report any earnings related to discontinued operations in the fourth quarter of 2021. Net earnings from discontinued operations were $63.6 million in the fourth quarter of 2020.
Adjusted net earningsNG of $35.4 million were recognized in the fourth quarter of 2021, compared to adjusted net earningsNG from continuing operations of $40.9 million in the fourth quarter of 2020. The slight decrease in adjusted net earningsNG was primarily due to a decrease in gold sold at the Öksüt Mine and a decrease in the copper sold at the Mount Milligan Mine, partially offset by an increase in gold sold at the Mount Milligan Mine.
The most significant adjusting items to net earnings in the fourth quarter of 2021 were:
- $11.3 million in legal and other costs directly related to the seizure of the Kumtor Mine;
- $24.2 million reclamation provision revaluation expense at sites on care and maintenance in the Molybdenum BU, resulting primarily from the change in estimated future reclamation cash flows and a decrease in the discount rate applied to these cash flows;
- $132.7 million of income tax adjustments related primarily to the recognition of a deferred tax asset related to the Mount Milligan Mine;
- $117.3 million, net of tax, related to the impairment reversal of the Mount Milligan Mine; and
- $25.0 million gain on the sale of the Greenstone project as a result of the construction decision milestone at the Greenstone project, triggering an additional payment to the Company by no later than December 2023.
The most significant adjusting item to net earnings from continuing operations in the fourth quarter of 2020 was a $9.3 million reclamation provision revaluation expense at sites on care and maintenance in Molybdenum BU, primarily due to a decrease in the discount rate being applied to the estimated future reclamation cash flows.
Cash provided by operating activities was $61.8 million in the fourth quarter of 2021, compared to cash provided by operating activities from continuing operations of $84.3 million in the fourth quarter of 2020. The decrease in cash provided by operating activities was primarily due to an unfavourable working capital change at the Molybdenum BU from an increase in product inventory held and a higher average molybdenum price and an increase in income taxes paid of $9.6 million, primarily related to the Öksüt Mine. The Company did not report any cash flows related to discontinued operations in the fourth quarter of 2021. Cash provided by operating activities from discontinued operations was $97.6 million in the fourth quarter of 2020.
Free cash flowNG of $38.7 million was recognized in the fourth quarter of 2021, compared to free cash flowNG from continuing operations of $48.7 million in the fourth quarter of 2020. The decrease in free cash flowNG was primarily due to lower cash provided by operating activities, partially offset by slightly lower sustaining capital expendituresNG.