Centerra Gold Reports Second Quarter Results, Net Earnings of $71 million or 30 cents per share
NEWS RELEASE
Centerra Gold Reports Second Quarter Results, Net Earnings of $71 million or 30 cents per share
This news release contains forward-looking information that is subject to the risk factors and assumptions set out on page 19 and in our Cautionary Note Regarding Forward-looking Information on page 27. The financial figures in this news release are presented under International Financial Reporting Standards (“IFRS”) see “Conversion to IFRS” on page 21. All figures are in United States dollars.
To view the Management’s Discussion and Analysis and the Financial Statements and Notes for the three and six month periods ended June 30, 2011, please visit the following link:
http://file.marketwire.com/release/CCG728FS.pdf
Toronto, Canada, July 28, 2011: Centerra Gold Inc. (TSX: CG) today reported net earnings of $71.1 million or $0.30 per common share on revenues of $243.8 million compared to a net earnings of $30.7 million or $0.13 per common share based on revenues of $152.2 million in the same quarter last year.
Consolidated gold production for the second quarter of 2011 totaled 155,166 ounces at a total cash cost of $513 per ounce produced compared to 121,728 ounces at a total cash cost of $616 per ounce produced in the corresponding quarter of 2010. Cash provided by operations, net of working capital changes, was $118.5 million compared to $76.5 million in the second quarter of 2010. (Total cash cost is a non-GAAP measure and is discussed under “Non-GAAP Measures” in this news release.)
Second Quarter Highlights
- Special and annual dividend payment of $99.3 million
- Consolidated gold production of 155,166 ounces
- Cash provided by operations of $118.5 million or $0.50 per share
- Maintaining consolidated gold production and cost guidance for 2011
- Exploration discovery in Eastern Mongolia, the ATO property, additional 35 drill holes completed in June and five holes were deepened.
Commentary
Steve Lang, President and CEO of Centerra Gold stated, “We are maintaining our gold production and cost guidance for the year after another solid quarter of operating performance at our mines. During the quarter, Centerra's Board declared a special dividend and increased our annual dividend
1 University Avenue, Suite 1500 Toronto, ON M5J 2P1 tel 416-204-1953 fax 416-204-1954 www.centerragold.com based on our strong cash flow and the continuing high gold price. The Company’s cash balances are growing even after significant capital investment.”
“On July 11, we announced a significant discovery in Eastern Mongolia at our Altan Tsagaan Ovoo (ATO) property. We are very excited about this new discovery in what we view as a new emerging mineral district. The 35 additional drill holes completed in June continue to demonstrate high-grade mineralization from surface and that there is good continuity in the mineralization and also the drilling continues to expand Pipe #4. As indicated in our earlier news release our Board has approved a $6 million increase in the Company's 2011 exploration budget from $34 million to $40 million, with $4 million of this additional funding allocated for further work on the ATO property,” he concluded.
Financial and Operating Summary
| Three Months Ended June 30 | Six Months Ended June 30 | |||||
|---|---|---|---|---|---|---|
| Financial and Operating Summary | 2011 | 2010 | % Change | 2011 | 2010 | % Change |
| Revenue - $ millions | 243.8 | 152.2 | 60% | 494.0 | 407.7 | 21% |
| Cost of sales - $ millions (1) | 105.9 | 79.8 | 33% | 167.7 | 158.1 | 6% |
| Net earnings - $ millions | 71.1 | 30.7 | 131% | 207.7 | 154.6 | 34% |
| Earnings per common share - $ basic and diluted | 0.30 | 0.13 | 131% | 0.88 | 0.66 | 33% |
| Cash provided by operations - $ millions | 118.5 | 76.5 | 55% | 261.0 | 158.8 | 64% |
| Capital expenditures - $ millions | 48.6 | 54.7 | (11%) | 120.8 | 83.8 | 44% |
| Weighted average common shares outstanding - basic (thousands) | 236,021 | 234,992 | 0% | 235,951 | 234,926 | 0% |
| Weighted average common shares outstanding - diluted (thousands) | 236,353 | 235,567 | 0% | 236,281 | 235,512 | 0% |
| Average gold spot price - $/oz | 1,506 | 1,197 | 26% | 1,445 | 1,152 | 25% |
| Average realized gold price - $/oz | 1,527 | 1,200 | 27% | 1,452 | 1,143 | 27% |
| Gold sold – ounces | 159,642 | 126,797 | 26% | 340,271 | 356,636 | (5%) |
| Cost of sales - $/oz sold (1) | 663 | 629 | 5% | 493 | 443 | 11% |
| Gold produced – ounces | 155,166 | 121,728 | 27% | 335,882 | 332,767 | 1% |
| Total cash cost - $/oz produced(2) (3) | 513 | 616 | (17%) | 436 | 441 | (1%) |
| Total production cost - $/oz produced(2) (3) | 625 | 757 | (17%) | 541 | 557 | (3%) |
(1) As a result of the IFRS conversion, cost of sales for 2011 and its comparative year now includes depreciation, depletion and amortization related to operations.
(2) Total cash cost and total production cost are non-GAAP measures and are discussed under “Non-GAAP Measures”.
(3) As a result of Kumtor’s Restated Investment Agreement signed in 2009, total cash cost and total production cost per ounce measures for both years exclude production-based and revenue-based taxes.
Revenues for the second quarter of 2011 were $243.8 million compared to $152.2 million during the same period one year ago. Second quarter 2011 revenue reflects a 26% increase in ounces sold (159,642 ounces versus 126,797 ounces) and a 27% increase in realized gold price ($1,527 per ounce in the second quarter of 2011 versus $1,200 per ounce in the second quarter of 2010) in the period.
Gold production for the second quarter of 2011 was 155,166 ounces compared to 121,728 ounces reported in the second quarter of 2010. The increase in gold production reflects 54% higher gold production at the Kumtor mine. At Kumtor, the increase in production was the result of higher throughput and the processing of higher grade material with the associated higher recoveries. Gold production at Boroo was lower in the second quarter 2011 due to processing low-grade stockpiled ore with lower recoveries as mining operations ceased at the end of November 2010. The heap leach operation at Boroo remained idle during the quarter.
Centerra’s total cash cost per ounce of gold produced was $513 in the second quarter of 2011 compared to $616 in the second quarter of 2010. The year-over-year decrease in unit cash costs was primarily due to 54% higher gold production at Kumtor, partially offset with increased operating costs at Kumtor and reduced operating levels at Boroo (see “Operations Update”). (Total cash cost is a non-GAAP measure and is discussed under “Non-GAAP Measures” in this news release.)
Cash provided by operations was $118.5 million for the second quarter of 2011 compared to $76.5 million for the prior year second quarter. The increase reflects increased earnings as a result of higher gold sales volumes and higher average realized gold prices.
Capital expenditures spent and accrued in the second quarter of 2011 amounted to $48.6 million of which $8.4 million was spent on sustaining capital projects. Growth capital totaled $40.2 million, mainly invested at Kumtor relating to capitalization of pre-stripping activities ($15.1 million), the purchase of haul trucks, shovels and drills ($11.1 million) and the underground development ($10.2 million). Capital expenditures in the comparative quarter of 2010 totaled $54.7 million, consisting of $12.9 million of sustaining capital and $41.8 million of growth capital.
Exploration expenditures for the second quarter of 2011 were $11.3 million dollars compared to $6.9 million in the second quarter of 2010 mainly reflecting increased drilling activity in Mongolia at the Altan Tsagaan Ovoo (ATO) property and at the Company’s other exploration joint venture projects.
Net earnings for the second quarter of 2011 was $71.1 million, or $0.30 per share, compared to $30.7 million or $0.13 per share for the same period in 2010, reflecting higher realized gold prices and higher ounces sold and produced at Kumtor, partially offset by lower volumes at Boroo.
Centerra’s cash and cash equivalents and short-term investments at the end of June 2011 increased to $464.7 million, compared to cash and short-term investments of $413.0 million at December 31, 2010. As of June 30, 2011, the Company had an undrawn revolving credit facility available of $150.0 million.
Operations Update
| Three Months Ended June 30 | Six Months Ended June 30 | |||||
|---|---|---|---|---|---|---|
| Kumtor Operating Results | 2011 | 2010 | % Change | 2011 | 2010 | % Change |
| Gold sold – ounces | 144,687 | 91,204 | 59% | 310,832 | 291,971 | 6% |
| Revenue - $ millions | 221.2 | 109.8 | 101% | 451.1 | 333.1 | 35% |
| Average realized gold price – $/oz | 1,529 | 1,204 | 27% | 1,451 | 1,141 | 27% |
| Cost of sales - $ millions (1) | 92.9 | 59.9 | 55% | 141.2 | 123.8 | 14% |
| Cost of sales - $/oz sold (1) | 642 | 657 | (2%) | 454 | 424 | 7% |
| Tonnes mined - 000s | 38,271 | 28,654 | 34% | 74,779 | 56,191 | 33% |
| Tonnes ore mined – 000s | 1,448 | 791 | 83% | 2,036 | 2,179 | (7%) |
| Average mining grade - g/t (2) | 2.68 | 2.68 | 0% | 3.97 | 4.09 | (3%) |
| Tonnes milled - 000s | 1,545 | 1,434 | 8% | 2,936 | 2,900 | 1% |
| Average mill head grade - g/t (2) | 3.27 | 2.74 | 19% | 3.68 | 3.83 | (4%) |
| Recovery - % | 82.6 | 77.5 | 7% | 82.6 | 77.0 | 7% |
| Gold produced – ounces | 139,077 | 90,050 | 54% | 303,244 | 270,612 | 12% |
| Total cash cost - $/oz produced (3) (4) | 507 | 639 | (21%) | 418 | 416 | 0% |
| Total production cost - $/oz produced (3) (4) | 615 | 763 | (19%) | 517 | 515 | 0% |
| Capital expenditures - $ millions | 46.0 | 39.5 | 17% | 117.9 | 62.9 | 87% |
| Boroo Operating Results | ||||||
| Gold sold – ounces | 14,955 | 35,593 | (58%) | 29,439 | 64,665 | (54%) |
| Revenue - $ millions | 22.6 | 42.4 | (47%) | 42.9 | 74.6 | (43%) |
| Average realized gold price - $/oz | 1,513 | 1,191 | 27% | 1,457 | 1,153 | 26% |
| Cost of sales - $ millions (1) | 13.0 | 19.9 | (35%) | 26.5 | 34.3 | (23%) |
| Cost of sales - $/oz sold (1) | 869 | 558 | 56% | 900 | 530 | 70% |
| Total Tonnes mined - 000s | - | 2,969 | (100%) | - | 6,062 | (100%) |
| Average mining grade (non heap leach material) g/t (2) | - - | 1.66 | (100%) | - | 1.75 | (100%) |
| Tonnes mined heap leach – 000s | - | 577 | (100%) | - | 1,355 | (100%) |
| Tonnes ore mined direct mill feed -000’s | - | 736 | (100%) | - | 1,873 | (100%) |
| Tonnes ore milled - 000s | 510 | 615 | (17%) | 1,106 | 1,238 | (11%) |
| Average mill head grade - g/t (2) | 1.35 | 2.05 | (34%) | 1.35 | 1.98 | (32%) |
| Recovery - % | 70.3 | 74.9 | (6%) | 65.5 | 73.9 | (11%) |
| Gold produced – ounces | 16,089 | 31,678 | (49%) | 32,639 | 62,155 | (47%) |
| Total cash cost - $/oz produced (3) | 568 | 549 | 3% | 607 | 550 | 10% |
| Total production cost - $/oz produced (3) | 707 | 738 | (4%) | 756 | 739 | 2% |
| Capital expenditures - $ millions (Boroo) | 2.4 | 3.2 | (24%) | 2.5 | 3.4 | (28%) |
| Capital expenditures - $ millions (Gatsuurt) | 0.1 | 11.9 | (99%) | 0.2 | 17.3 | (99%) |
(1) As a result of the IFRS conversion, cost of sales for 2011 and its comparative year now includes depreciation, depletion and amortization related to operations.
(2) g/t means grams of gold per tonne.
(3) Total cash cost and total production cost are non-GAAP Measures and are discussed under “Non-GAAP Measures”.
(4) As a result of Kumtor’s Restated Investment Agreement signed in 2009, total cash cost and total production cost per ounce measures for both years are shown excluding operating and revenue-based taxes.
Kumtor
At the Kumtor mine in the Kyrgyz Republic, gold production was 139,077 ounces in the second quarter of 2011 representing a 54% increase from the same quarter in 2010. The increase in gold production is the result of higher grades (3.27 g/t versus 2.74 g/t) and higher recoveries (82.6% versus 77.5%) in the second quarter of 2011. During the quarter, ore from cut-back 12B was uncovered in May 2011 and as a result, Kumtor began amortizing the pre-stripping costs previously capitalized. Ore tonnage processed increased 7.7% to 1.5 million tonnes in the quarter compared to the same period in 2010. The majority of the mill feed processed for the second quarter of 2011 included ore sourced from cutback 12A which resulted in a higher head grade and recovery for the quarter.
Total cash cost per ounce, a non-GAAP measure of production efficiency, was $507 in the second quarter of 2011 down from $639 in the second quarter of 2010. The quarter-over-quarter decrease in unit cash costs reflects 54% higher gold production partially offset by 22% higher cash operating costs. The total cash costs were $70.5 million in the second quarter of 2011 compared to $57.6 million in the same period of 2010. The cost increase reflects the higher mining rate achieved during the second quarter of 2011 where 34% more tonnes of waste and ore were moved with Kumtor’s expanded mining fleet. This also reflects higher operating costs due to an increase of $8.3 million in national labour costs as a result of the new collective agreement with the unionized national workforce signed in October 2010 and higher consumable costs, in particular, a $10.1 million increase in diesel costs, partially offset by higher by-product revenue from silver sales of $1.6 million. (Total cash cost per ounce produced is a non-GAAP measure and is discussed under “Non- GAAP Measures”.)
Exploration expenditures totaled $2.8 million for the second quarter of 2011, comparable to the same quarter in 2010. Exploration activity in the quarter focused on regional surface work and drilling within the Central Pit.
Capital expenditures in the second quarter of 2011 were $46.0 million, which includes $8.0 million of sustaining capital, compared to $39.5 million in the same quarter of 2010. Sustaining capital was predominantly spent on the major overhaul program for heavy duty equipment ($5.1 million), tailings dam lift ($1.5 million) and pit dewatering system ($0.6 million). Growth capital investment during the quarter totalled $38.0 million which was mainly spent on pre-stripping capitalization ($15.1 million), purchases of the new CAT 789 haul trucks ($11.0 million), underground development phase I and II ($9.7 million), underground delineation drilling ($0.5 million), purchase of container handler for Balychy Marshalling Yard ($0.5 million), waste rock dump buttress ($0.3 million) and numerous other projects ($0.9 million).
The underground development at Kumtor continued in the second quarter of 2011 with a total advance of 490 metres. Year-to-date total development advance is 891 metres. Decline #1 (SB Zone decline) advanced 193 metres in the second quarter and is now approximately 1.5 kilometres in length. Decline #2 advanced 153 metres in the second quarter towards the SB Zone and totals 807 metres in length. The Stockwork Drive advanced 144 metres in the second quarter to a total length of 429 metres.
In the Stockwork Drive, delineation drilling commenced in the second quarter and exploration drilling continues to test for extensions to the Stockwork Zone. Exploration drilling will be continued in the third quarter from Decline #1 to test the Kumtor structure beneath the Davidoff Glacier and from Decline #2 to test the Saddle Zone. Delineation drilling of the SB Zone is planned for the first quarter of 2012.
Boroo/Gatsuurt
At the Boroo mine in Mongolia, gold production was 16,089 ounces in the second quarter of 2011 compared to 31,678 ounces in the second quarter of 2010. The lower gold production is the result of processing low-grade and low recovery ore stockpiled from the open pit and heap leach operation as mining operations ceased at the end of November 2010. The heap leach operation remained idle during the second quarter 2011 awaiting issuance of the final operating permit from the Mongolian government. The milling ore grade averaged 1.35 g/t with a recovery of 70.3% in the second quarter of 2011, compared to 2.05 g/t with a recovery of 74.9% in the same quarter of 2010.
During May and June 2011, the Boroo SAG mill motor and related motor control centre had an unscheduled shut down for 35 days due to an electrical failure. Production continued without any material impact as a result of a by-pass of the SAG mill which was configured using the ball mill and a stockpile of fine material remaining from the heap leach development. The SAG mill was restarted in early June following the receipt and replacement of the damaged components.
Total cash cost per ounce produced, a non-GAAP measure of production efficiency, was $568 in the second quarter of 2011 compared to $549 in the second quarter of 2010 due to the lower gold production which was partially offset by lower operating costs. Operating costs decreased in the quarter by $8.1 million primarily due to a $5.3 million reduction in mining costs as mining operations ceased at the end of November 2010.
During the second quarter of 2011, exploration expenditures in Mongolia increased to $4.1 million from $1.5 million in the same period of 2010, reflecting significant drilling on the ATO property in northeast Mongolia. Capital expenditures spent and accrued at Boroo in the second quarter of 2011 were $2.4 million compared to $3.2 million the same quarter of 2010. This consisted of $0.3 million of sustaining capital and $2.1 million of growth capital investment spent on raising the tailings dam.
Exploration Update
To view the graphics, maps/drill sections and complete drill results discussed in this news release, please visit the following link: http://file.marketwire.com/release/CCG728a.pdf or visit the Company’s web site at: www.centerragold.com.
In the second quarter of 2011, the Company entered into three new exploration joint venture agreements covering projects located in the Amur region of Russia, Central Anatolia region of Turkey and Heilongjiang region of China.
KYRGYZ REPUBLIC
During the second quarter of 2011, exploration drilling programs continued in the Kumtor Central Pit, regional exploration drilling continued on the Kumtor concession area at the Northeast, Petrov, Bordoo and Akbel areas and surface exploration commenced on the Karasay and Koendy projects.
Kumtor Pit
In the second quarter of 2011, fourteen drill holes were completed and a further three holes are in progress at the end of the quarter to test the extent and grade of mineralization within and below the KS11 open pit design.
Eleven holes were completed to test the northeast extension of the SB Zone towards the Saddle Zone, with a number of the holes returning significant results. Some of the better intercepts are discussed below.
Holes D1533 and D1538 were drilled on section 34 and both holes returned significant results. Hole D1533 intersected 8.9 g/t Au over 31.2 metres including 19.7 g/t Au over 11.0 metres within the KS- 11 pit design and 3.8 g/t Au over 11.1 metres immediately below the KS-11 pit design bottom. Hole D1538 intersected 8.1 g/t Au over 23.3 metres including 25.7 g/t Au over 3.0 metres within the KS- 11 pit design.
Holes D1544 and D1546 were drilled on section 42 and intersected mineralization 20 to 150 metres below the KS11 pit design, with 4.9 g/t Au over 47.3 metres, 3.8 g/t Au over 17.6 metres and 7.1 g/t Au over 11.5 metres in hole D1544, and 3.9 g/t Au over 26.8 metres and 7.8 g/t Au over 5.7 metres in hole D1546.
Holes D1548 and D1549 were drilled on section 46 with hole D1548 intersecting 2.1 g/t Au over 21.9 metres within the KS-11 pit design and 9.8 g/t Au over 2.3 metres immediately below the pit design bottom. Hole D1549 intersected 6.8 g/t Au over 13.3 metres approximately 50 metres below the KS11 design pit bottom.
Holes D1541, D1552 and D1554 on sections 58, 50 and 46, respectively, were drilled as widespaced holes to test the down dip extension of the SB Zone. Hole D1541 intersected 2.4 g/t Au over 24.9 metres. Hole D1552 intersected 3.4 g/t Au over 42.1 metres including 12.2 g/t Au over 5.0 metres. Hole D1554 intersected 4.5 g/t Au over 72.3 metres including 9.8 g/t Au over 4.1 metres and 15.8 g/t Au over 6.0 metres, confirming the continuation of high-grade mineralization for 300 metres down dip of the KS11 design pit bottom.
Further drilling to delineate the depth extent of the SB Zone will continue in the third quarter whenever suitable drill locations become available.
Decline Exploration
One underground exploration hole was completed during the quarter and one hole is in progress. Drill hole UD1547 was completed on section -72 in Decline #1 to test for extensions of the mineralized structure immediately below the Davidoff glacier. Drilling intersected alteration and low grade mineralization over 116 metres including 1.6 g/t Au over 8.0 metres and 3.2 g/t Au over 4.6 metres.
Exploration drilling from Decline 1 to test below Davidoff glacier and in Decline 2 to test the Saddle Zone will be continued in the third quarter whenever drill access becomes available.
Stockwork Resource Delineation Drilling
The resource delineation program was started in the second quarter. A number of holes were stopped before reaching their target depth as a result of difficult drilling conditions. One hole was completed and two holes are in progress. Hole UD1545 intersected 3.3 g/t Au over 2.7 metres, on the southwestern edge of the Stockwork Zone. Drilling will continue in the third quarter, with the addition of a second diamond drill.
True widths for the mineralized zones are typically from 70% to 95% of the stated intercept.
Regional Exploration
Regional exploration drilling continued in the second quarter with up to three drills completing two holes in the Northeast area, three holes in the Petrov area and two holes in the Bordoo area.
Northeast Area
Two drill holes were completed during the second quarter designed as 40 metre to 80 metre spaced infill holes to confirm the extent of the mineralization within 100 to 200 metres of surface over the known 800 metre strike extent of mineralization at the Northeast Prospect. Drilling intersected 1.3 g/t Au over 7.0 metres in hole DN1532, and 1.7 g/t Au over 26.6 metres in DN 1537.
An additional two holes will be drilled in the third quarter to test for increased grades and widths of mineralization at depth at the northeastern end of the mineralized structure.
Petrov Area
Two holes were completed in the second quarter at the Petrov prospect area, which covers the northeastern-most strike extension of the Kumtor structure within the mining concession area. Hole DRP1528 intersected the Kumtor Fault but did not intersect any significant alteration or return any gold values. Hole DRP1536, designed to test a strong geophysical anomaly in the footwall stratigraphy west of the Kumtor Fault, intersected minor disseminated pyrite in weakly altered Carboniferous sandstones with no significant assays.
Prospecting and target definition work will continue in the third quarter of 2011.
Bordoo Area
Two drill holes were completed during the second quarter to test geophysical and geochemical targets in the footwall stratigraphy on the western side of the Kumtor Fault. No significant alteration or mineralization was intersected.
Karasay and Koendy Projects
Continuation of the stream sediment sampling program as well as follow-up mapping, soil sampling, geophysics and trenching on the targets identified in 2010, commenced in the second quarter on both exploration licenses. Drilling is scheduled to be carried out in the third quarter of 2011.
A complete listing of the drill results and supporting maps for the Kumtor pit and Northeast area have been filed on the System for Electronic Document Analysis and Retrieval (‘SEDAR’) at www.sedar.com and are available at the Company’s web site at: www.centerragold.com.
MONGOLIA
Field activities in Mongolia were focused on the ATO project with drilling, trenching, mapping, geochemical and geophysical surveys were carried out on the ATO prospect and in the district. Results have been very encouraging and the program has been expanded to include additional drilling, metallurgical test work and baseline environmental, social hydrological and engineering studies.
As previously disclosed in the July 11, 2011 news release, the precious and base-metal mineralization identified at the ATO prospect is in three vertically plunging, breccia pipes (Pipes #1, #2 and #4) that cut Early Jurassic sediments (conglomerates, gravels, sandstone and clay) and Permian volcaniclastic rock. The Pipes have been displaced by later faulting and cross cut by younger diorite porphyry dykes. Gold, Ag, Pb, Zn and Cu are main metals making up the mineralization.
Drilling on Pipe #1 has been completed on a 30 by 30 metre grid with 47 drill holes totaling 8,511 metres which were completed in 2010 and 44 holes and 7,575 metres drilled in 2011 for a total of 91 holes and 16,086 metres of drilling. Pipe #1 has an oval shape surface projection of approximately 200 by 300 metres oriented NE - SW. It has been drilled to a depth of 200-250 metres below surface (elevation 850 metres) where the pipe has a similar length and slightly less width. Pipe #1 has primarily Pb mineralization in the upper portion and Pb+Zn mineralization at depth. The gold distribution is consistent from surface down to the 850 metre elevation.
Drilling has been completed at Pipe #2 on a 30 by 60 metres grid and includes 12 holes totaling 2,183 metres drilled in 2010 and 21 holes totaling 2,869 metres drilled in 2011 for a total of 34 holes and 5,052 metres of drilling. Pipe #2 is also ovoid in shape but is smaller than Pipe #1 and is approximately 120 by 270 metres on surface. It is also oriented NE - SW and somewhat narrower at depth with base metal mineralization forming a high grade +5% zone at depth.
Pipe #4 was first identified in 2011 when trenching to test a geophysical target located SE of Pipe #1 returned weak base and precious metal values. Pipe #4 is being drilled on a 30 by 60 metre grid with a total of 40 holes and 7,421 metres of drilling completed to the end of the second quarter. Pipe #4 has similar geometry of 150 to 250 metres on surface oriented NE – SW. Work-to-date indicates that Pipe # 4 has a strong lateral (from NW to SE) zonation with the base metal content decreasing in this direction from +1% to the ppm level and Ag increasing with values up to several hundreds of grams per tonne.
In general, gold can be traced down to depths of 200 to 250 metres below surface to the 850 metre elevation, with base metals being traced deeper than Au. Silver is characterized by high grades in SE parts of Pipes #1 and 2. Base-precious mineralization occupies entire volume of the pipes #1, 2 and 4. Oxidation is commonly defined and coincident with the sediments and volcanics stratigraphic boundary. The pipes are located from 50 to 100 metres distance between each other.
Results for the first 124 holes drilled for which all assays results had been received by the end of May 2011 were filed on SEDAR and published on the Company’s web site to accompany the news release of 11th July 2011.
Assay results have now been received for six holes completed in May that had assays pending at the end of May. In addition as of 20th July 2011 results have been received for 30 of the 35 holes drilled and three of the five holes deepened in June. The assay results for the six holes from May and 33 holes from June and the supporting maps and sections have been filed on SEDAR and published on the Company’s web site.
Following are some of the more significant intersections from the drilling completed in late May and June:
| Centerra Gold Inc. - ATO 2011 Drilling Results | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Results from June 1st, 2011 to July 20th, 2011 | ||||||||||
| Location | Section | Drill Hole | From (m) | To (m) | Core Length (m) | Au (g/t) | Ag (g/t) | Pb % | Zn % | |
| PIPE 1 | 3 SE | ATO-125 | 0.00 | 68.00 | 68.00 | 2.03 | 9.95 | 0.27 | 0.75 | |
| includes | 10.30 | 29.00 | 18.70 | 2.01 | 10.97 | 0.29 | 0.53 | |||
| includes | 34.50 | 58.30 | 23.80 | 3.40 | 13.03 | 0.32 | 0.98 | |||
| 70.60 | 75.80 | 5.20 | 0.15 | 2.17 | 0.05 | 0.31 | ||||
| 87.20 | 105.00 | 17.80 | 0.15 | 3.63 | 0.18 | 0.61 | ||||
| 120.60 | 130.20 | 9.60 | 0.90 | 3.82 | 0.45 | 0.97 | ||||
| 4SE | ATO-127 | 0.00 | 132.75 | 132.75 | 2.66 | 17.64 | 0.90 | 1.26 | ||
| includes | 54.40 | 91.30 | 36.90 | 4.55 | 28.31 | 1.43 | 1.96 | |||
| includes | 99.75 | 121.55 | 21.80 | 4.80 | 10.45 | 1.60 | 1.74 | |||
| 5 SE | ATO-131 | 0.00 | 141.60 | 141.60 | 1.50 | 5.98 | 0.97 | 1.36 | ||
| includes | 22.40 | 32.40 | 10.00 | 1.40 | 4.55 | 1.03 | 0.99 | |||
| includes | 33.40 | 49.40 | 16.00 | 1.75 | 5.33 | 0.76 | 0.90 | |||
| includes | 50.40 | 63.40 | 13.00 | 2.16 | 9.15 | 1.48 | 2.61 | |||
| 153.60 | 178.55 | 24.95 | 1.78 | 9.80 | 1.50 | 2.87 | ||||
| 7 SE | ATO-152 | 0.00 | 7.90 | 7.90 | 1.00 | 12.86 | 0.64 | 0.12 | ||
| 23.25 | 31.35 | 8.10 | 0.15 | 4.97 | 0.02 | 0.12 | ||||
| 140.95 | 199.30 | 58.35 | 1.58 | 11.36 | 1.87 | 4.13 | ||||
| 207.10 | 214.90 | 7.80 | 0.12 | 1.57 | 0.01 | 0.04 | ||||
| 232.10 | 244.10 | 12.00 | 0.11 | 0.86 | 0.05 | 0.45 | ||||
| 256.20 | 281.20 | 25.00 | 0.30 | 6.34 | 0.72 | 3.42 | ||||
| 9 SE | ATO-138 | 0.00 | 47.90 | 47.90 | 1.20 | 11.51 | 0.94 | 0.13 | ||
| incudes | 2.70 | 17.80 | 15.10 | 2.94 | 24.39 | 2.12 | 0.09 | |||
| ATO-139 | 1.50 | 208.40 | 206.90 | 1.29 | 6.27 | 0.72 | 0.71 | |||
| incudes | 1.50 | 48.70 | 47.20 | 4.45 | 18.85 | 1.87 | 0.22 | |||
| 215.45 | 221.45 | 6.00 | 0.59 | 13.28 | 1.34 | 2.34 | ||||
| 226.45 | 231.65 | 5.20 | 0.14 | 0.71 | 0.06 | 0.09 | ||||
| PIPE 4 | 9 SE | ATO-134 | 5.50 | 74.50 | 69.00 | 1.79 | 6.50 | 0.13 | 0.15 | |
| incudes | 9.00 | 41.95 | 32.95 | 3.47 | 5.62 | 0.22 | 0.24 | |||
| ATO-143 * | 58.90 | 85.60 | 26.70 | 1.59 | 8.22 | 0.15 | 0.18 | |||
| 94.00 | 97.60 | 3.60 | 0.15 | 1.63 | 0.01 | 0.03 | ||||
| ATO-150 | 41.50 | 62.50 | 21.00 | 2.80 | 6.44 | 0.66 | 0.81 | |||
| 67.00 | 117.05 | 50.05 | 0.28 | 10.64 | 0.09 | 0.15 | ||||
| 126.05 | 132.05 | 6.00 | 0.13 | 4.20 | 0.01 | 0.02 | ||||
| 13 SE | ATO-135 | 13.00 | 30.20 | 17.20 | 0.41 | 100.00 | 0.10 | 0.34 | ||
| 37.40 | 113.00 | 75.60 | 1.96 | 5.88 | 0.16 | 0.25 | ||||
| includes | 52.50 | 67.00 | 14.50 | 4.98 | 4.62 | 0.24 | 0.35 | |||
| 15 SE | ATO-130 | 88.80 | 147.40 | 58.60 | 2.76 | 6.19 | 0.90 | 1.36 | ||
| 157.70 | 180.00 | 22.30 | 1.68 | 4.28 | 0.44 | 0.62 | ||||
| 185.00 | 191.15 | 6.15 | 0.15 | 4.21 | 0.14 | 0.31 | ||||
| ATO-140 * | 44.60 | 73.70 | 29.10 | 1.39 | 23.31 | 0.08 | 0.12 | |||
| 17 SE | ATO-154 | 86.00 | 131.00 | 45.00 | 2.18 | 4.21 | 0.74 | 1.34 | ||
| 135.00 | 155.00 | 20.00 | 0.18 | 3.14 | 0.39 | 0.73 | ||||
| Notes: | * Partial mineralized interval, only intercept within section corridor +/- 15m, along section line. | |||||||||
| Mineralized intervals are greater than 0.10 g/t Au. | ||||||||||
| Higher grade sub-intervals are greater than 1.00 g/t Au. | ||||||||||
| Individual assays are top cut to 30 g/t Au prior to composite calculation. | ||||||||||
| True widths for mineralized zones are about 20% to 50% of stated down hole interval. | ||||||||||
| This information should be read together with our news release of July 11, 2011. | ||||||||||
| Ian Atkinson, a Certified Professional Geologist, is Centerra’s qualified person for the purpose of National Instrument 43-101. | ||||||||||
| Tables are current for all holes drilled up to June 30, 2011 with assays received as of July 20, 2011. |
Drilling will continue in the third quarter of 2011 with two machines. Initially drilling will focus on completion of delineation of the mineralization in Pipe #2 and Pipe #4 and preliminary geotechnical drilling. Subsequently drilling will move to testing other exploration targets indentified in the area surrounding the ATO discovery.
RUSSIA Kara Beldyr JV
A further nine diamond drill holes were completed in the second quarter of 2011 on the Gord Zone. The drilling has confirmed the main geological features previously identified including the major fault and the alteration zones in both the foot and hanging walls and in addition cross faulting has been identified that displaces the mineralized zone on some sections by 40 to 50 metres. Visible gold was detected in both the hanging and footwall mineralization in 50% of the holes, which is significantly more than in the initial drilling.
Some of the more significant intersections from the drilling completed in the second quarter of 2011 are; KB-061: 3.1 g/t Au over 3.0 metres; KB-064: 1.8 g/t Au over 10.2 metres; KB-066: 1.3 g/t Au over 12.4 metres; KB-068: 13.1 Au g/t over 4.0 metres; KB-069: 1.9 Au g/t over 8.9 metres; KB-072: 2.5 g/t Au over 5.4 metres; KB-073: 2.7 g/t Au over 8.0 metres; KB-074: 2.6 g/t Au over 15.3 metres; and KB-075: 10.6 g/t Au over 2.0 metres.
Drilling of the Gord Zone on a 50 by 50 metre grid is now complete and further drilling of the Ezen and Camp Zones is underway.
To view the graphics, maps/drill sections and complete drill results discussed in this news release, please visit the following link: http://file.marketwire.com/release/CCG728a.pdf or visit the Company’s web site at: www.centerragold.com.
Other Corporate Developments
The following is a summary of current matters affecting the Company and its subsidiaries in the Kyrgyz Republic, Mongolia and Canada. Except for the Kyrgyz Republic Social Fund matter and further developments on the claim by Sistem (both as discussed below), no significant changes have occurred on these matters since the Company’s most recent interim disclosure documents published on April 29, 2011.
Kyrgyz Republic
The Company’s Kyrgyz Republic operating subsidiary Kumtor Operating Company (“KOC”) pays Kyrgyz Republic Social Fund (“Social Fund”) contributions in respect of the base wages of its national employees. In late 2010, the Social Fund notified KOC of its position that it should pay contributions to the Social Fund not only in respect of base wages but also in respect of the premium compensation that it is required to pay employees for work at high-altitude. The position of the Social Fund is inconsistent with its past practices and with prior audits of KOC. Following the most recent audit of KOC for 2010 operating year and completed at the end of June 2011, the Social Fund issued an act (assessment) for approximately $6.7 million for the 2010 period. This amount includes a portion assessed on the employer and an amount assessed on Kumtor’s employees. KOC has formally responded to the claim and will continue to vigorously dispute the Social Fund’s position and the quantum of the claim. The Company has accrued in its second quarter 2011 accounts $5.8 million in respect of this claim, representing the mid-point from a host of possible outcomes covering the 2010 assessed year and an estimate for the first six months of 2011.