Centerra Gold Reports Fourth Quarter and 2014 Year-end Results

NEWS RELEASE Centerra Gold Reports Fourth Quarter and 2014 Year-end Results

This news release contains forward-looking information that is subject to the risk factors and assumptions set out on page 30 and in the Cautionary Note Regarding Forward-looking Information on page 35. It should be read in conjunction with the Company’s audited consolidated financial statements and notes for the year ended December 31, 2014 and associated Management’s Discussion and Analysis. The consolidated financial statements of Centerra are prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. 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, 2014, please visit the following link:

http://media3.marketwire.com/docs/CG2014-YEMDA.pdf

Toronto, Canada, February 19, 2015: Centerra Gold Inc. (TSX: CG) today reported a net loss of $11.3 million or $0.05 per common share (basic) in the fourth quarter of 2014 as compared to net earnings of $106.6 million or $0.45 per common share (basic) for the same period in 2013. The 2014 fourth quarter loss includes a non-cash impairment charge of $111 million (or $0.47 per share (basic)) for goodwill related to the Kyrgyz cash generating unit (CGU), primarily as a result of the decrease in reserves and resources at the Kumtor mine as announced on February 9, 2015.

2014 Fourth Quarter Highlights

• Achieved full year gold production and unit cost guidance.
• Produced 301,236 ounces of gold in the fourth quarter, including 291,635 ounces at Kumtor and 9,601 ounces at Boroo.
• All-in sustaining costs per ounce sold¹, which excludes revenue-based tax in the Kyrgyz Republic and income tax, were $436 in the fourth quarter and $853 for the full year.
• All-in costs per ounce sold¹, which excludes revenue-based tax in the Kyrgyz Republic and income tax, were $497 for the fourth quarter and $955 for the full year.
• Extended the Company’s existing US$150 million revolving credit facility with the European Bank for Reconstruction and Development ("EBRD") until February 17, 2016, on the same terms as the prior facility, LIBOR plus 2.9%.
• Reserve and resources updated at year-end resulting in a 1.65 million contained ounce decrease in total reserves, as described in the Company’s news release of February 9, 2015, substantially all of which was attributable to the decrease in reserves at Kumtor.
• Subsequent to year-end, the Gatsuurt Project in Mongolia was designated as a mineral deposit of strategic importance by the Mongolian Parliament.
• On February 5, 2015, the Company announced that it signed a definitive agreement to form a 50/50 partnership for the joint ownership and development of Premier Gold’s Trans-Canada

Property including the Hardrock Gold Project located in the Geraldton-Beardmore Greenstone Belt in northwestern Ontario.

During the fourth quarter of 2014, Centerra’s cash, cash equivalents and short-term investments increased by $157.6 million to $562.0 million from $404.4 million at the end of September 2014 ($501.5 million at December 31, 2013). As at December 31, 2014, the Company had drawn $76 million on its $150 million revolving credit facility with EBRD, leaving a balance of $74 million undrawn. The amount drawn is due to be repaid on August 11, 2015. Centerra believes, based on its current forecast, that it has sufficient cash and short-term investments to carry out its business plan in 2015 (see “2015 Outlook”).

For the full year, the Company recorded a net loss of $44.1 million or $0.19 per share (basic), as compared to net earnings of $157.7 million or $0.67 per share (basic) in 2013. The net loss in 2014 reflects a non-cash impairment charge of $111 million (or $0.47 per share (basic)) for goodwill related to the Kyrgyz CGU, fewer ounces produced and sold (ounces sold decreased 12% over 2013), lower realized gold prices ($1,241 per ounce vs. $1,355 per ounce) and higher share-based compensation, partially offset by lower cost and exploration spending.

Consolidated gold production for 2014 totaled 620,821 ounces compared to 690,720 ounces in 2013 reflecting lower gold production at both operations. In 2014, Kumtor produced 567,693 ounces and Boroo produced 53,128 ounces compared to 600,402 ounces and 90,318 ounces in 2013, respectively. The lower gold production at Kumtor was due to processing lower grades from cut-back 16 compared to the higher grades of ore processed from cut-back 15 in 2013. Boroo’s lower gold production was due to the depletion of stockpiled mill ore and the processing of lower grade ore and fewer ounces recovered from the heap leach operation as the operation transitioned to secondary leaching.

Commentary

Ian Atkinson, President and CEO of Centerra Gold stated, “I am pleased to report that we achieved our production and cost guidance for the year. The Boroo operation continued to perform well in the fourth quarter and exceeded our revised production guidance for the year. At Kumtor, the operation met its annual production guidance and during the fourth quarter produced 291,635 ounces of gold as we accessed the high-grade SB Zone which we are continuing to mine in the first quarter of 2015.”

“At the Öksüt Project in Turkey things are proceeding well. As we announced earlier, measured and indicated resources have increased to an estimated 1.4 million contained ounces of gold (40.0 million tonnes (Mt) at 1.1 grams per tonne gold (g/t Au)). Work on the environmental and social impact assessment is progressing as planned and we had our first public meeting regarding that in August last year. Additionally, we continue to work on the full feasibility study which we are targeting to complete by mid-year.”

“In the Kyrgyz Republic, the Company is continuing its discussions with the government regarding the potential restructuring of the Kumtor Project to resolve all outstanding concerns relating to the project. We are in the process of negotiating the definitive agreements to implement the restructuring as described in the Heads of Agreement signed on January 18, 2014 and are continuing discussions with the Kyrgyz Government in this regard.”

“For 2015 we are estimating consolidated gold production to be in the range of 480,000 to 535,000 ounces, no gold production from Gatsuurt has been included in this guidance. At Kumtor this year, we are expecting relatively even quarterly gold production as compared to prior years when the majority of the ounces were produced in the fourth quarter. Centerra’s projected consolidated all-in sustaining cost per ounce sold¹ (which excludes revenue-based tax in the Kyrgyz Republic and income tax) for 2015 is within a range of $898 to $1,003 and the projected range for consolidated all-in cost per ounce sold¹ (before taxes) is $1,003 to $1,121 for 2015.”

“After the quarter end, we reported the designation of Gatsuurt as a mineral deposit of strategic importance by the Mongolian Parliament and this designation allows the Gatsuurt Project to move forward within the application of the Water and Forest Law. We also announced forming a partnership with Premier Gold to develop the Trans-Canada Project in northwestern Ontario. These two projects together with our Öksüt Project represent a significant step forward for Centerra in creating a development pipeline and reducing the risk associated with over reliance on a single project,” Mr. Atkinson concluded.

Recent Developments

Kumtor Operations

• A non-cash impairment charge of $111 million was recorded at December 31, 2014 for the goodwill related to the Kyrgyz CGU primarily as a result of the reduction in Kumtor’s reserves and resources announced on February 9, 2015. The reserve decrease is a result of negative production reconciliation in 2014 at Kumtor, development of a new resource model for the Kumtor Central Pit, and design changes to the Kumtor Central Pit resulting from the new resource model and flattening of certain pit slopes.
• A new collective labour agreement was ratified and signed by Kumtor and the unionized employees on January 23, 2015. The new two year labour agreement will expire on December 31, 2016 and provides for inflation adjustments during the period. The local inflation rate will be reviewed every six months and an inflation allowance may be made with a cap of 8% per annum maximum.
• Starting in the fourth quarter of 2014, Kumtor has submitted to various Kyrgyz Republic governmental agencies for approval its 2015 annual mine plan and its ecological passport, which provides for, among other things, allowable levels of environmental emissions and discharges. The ecological passport requires renewal every five years. Similar to Kumtor’s experience in 2014, Kumtor has received correspondence from such agencies declining to review such documents and expressing concerns regarding the mining of ice at Kumtor. The Company and Kumtor dispute the reasons provided by the regulatory agencies for their refusal to review the documents. The Company notes that the current project agreements governing the Kumtor project require relevant Kyrgyz Republic Government authorities to be reasonable in relation to their approval of any mining plans submitted for approval, and with respect to permits and approvals, Kumtor is entitled to maintain, have renewed and receive such licenses, consents, permissions and approvals as are from time to time necessary or convenient for the operation of the Kumtor project. The Company intends to continue discussion with the Kyrgyz Republic Government and the applicable agencies to obtain the relevant approvals and permits but there can be no assurances that such approvals and permits will be received or that a suspension of mining will not occur. See “Other Corporate Developments - Kyrgyz Permitting and Regulatory Matters”.
• The Company continued its discussions with the Government of the Kyrgyz Republic relating to the restructuring described in the Heads of Agreement dated January 18, 2014 (the “HOA”). See “Other Corporate Developments”.

Mongolian Operations

• Discussions with the Mongolian Government regarding the Gatsuurt Project continued during the fourth quarter as to possible levels of Government ownership in the project, ultimately leading to the

January 23, 2015, announcement that the Mongolian Parliament designated the Gatsuurt Project as a mineral deposit of strategic importance. This designation allows the Gatsuurt Project to move forward within the application of the Water and Forest Law and now requires the Mongolian Parliament to approve the level of Government ownership (up to a 34% participating interest) in the project. Centerra understands that, on February 17, 2015, the Government’s proposal on state ownership of 20% was considered by Parliament but voted down and returned to the Government for review. The Company now expects that Parliament will consider a new proposal for the level of state ownership in the project during its spring session which begins in early April. The terms of such participation are subject to continued discussions between the Company and the Mongolian Government. Further development of the Gatsuurt Project will be subject to, among other things, receiving all required approvals and regulatory commissioning from the Mongolian Government. See “Other Corporate Developments – Mongolia”.

Corporate

• Centerra is subject to an order dated October 10, 2014 and amended October 20, 2014 (the “Stans Order”) from the Ontario Superior Court of Justice in favour of Stans Energy Corp. (“Stans”) which prohibits Kyrgyzaltyn JSC (“Kyrgyzaltyn”)  from, among other things: (i) selling, disposing or exchanging 47,000,000 shares (the “Frozen Shares”) of the 77,401,766 shares it holds in the capital of Centerra; (ii) obtaining share certificates in respect of such shares; or (iii) exercising its rights as a registered shareholder of Centerra in a manner that is inconsistent with or would undermine the terms of the Stans Order. The order also prohibits Centerra from, among other things, registering any transfers or issuing share certificates in respect of the Frozen Shares, and requires Centerra to hold in trust for the Stans Application (as defined below) any amounts payable to Kyrgyzaltyn in respect of dividends or distributions that Centerra is currently holding in trust for Kyrgyzaltyn or may declare or pay in the future. Accordingly, the funds held in trust for Kyrgyzaltyn in connection with the Sistem proceedings (as discussed below and in “Other Corporate Developments”) continue to be held by Centerra.
• Centerra was also served by Stans with a notice of application to the Ontario Superior Court of Justice (the “Stans Application”) which seeks to enforce a June 30, 2014 arbitral award (the “Stans Arbitration Award”) obtained by Stans against the Kyrgyz Republic from the arbitration tribunal of the Moscow Chamber of Commerce (“MCCI”) in the amount of approximately $118 million. The Stans Application seeks, among other things, an order declaring that the Kyrgyz Republic has a beneficial interest in all of the shares in Centerra held by Kyrgyzaltyn and that monies, interest, dividends and other rights of Kyrgyzaltyn in the stock of Centerra may be seized in order to satisfy the Stans Arbitration Award. We understand that the Kyrgyz Republic is appealing the Stans Arbitration Award to Russian courts in Moscow on the basis that the MCCI lacked the jurisdiction to hear the matter. This matter is scheduled to be heard in first quarter of 2015.
• In a separate proceeding, Kyrgyzaltyn has appealed to the Ontario Court of Appeal (the “Sistem Appeal”) the decision of the Ontario Superior Court of Justice in the Sistem Muhendislik Insaat Sanayi ve Ticaret AS (“Sistem”) matter, which found that the Kyrgyz Republic has a beneficial interest in the Centerra shares held by Kyrgyzaltyn. See “Other Corporate Developments”.
• If the Kyrgyz Republic does not succeed in overturning the Stans Arbitration Award in the Russian courts and Kyrgyzaltyn is unsuccessful in the Sistem Appeal, Centerra expects that Stans would likely succeed in enforcing the Stans Arbitration Award in Ontario and in seizing a sufficient number of the Centerra shares held by Kyrgyzaltyn to satisfy the Stans Arbitration Award. If Stans ultimately seizes such shares, Kyrgyzaltyn would no longer hold a sufficient number of Centerra shares to contribute to the HOA restructuring transaction such that it could receive 50% of a new Kumtor joint venture. In such circumstances, the Company believes that the restructuring of the Kumtor Project in accordance with the HOA would be impossible. See “Other Corporate Developments”.

Subsequent Event Trans-Canada Project

• Centerra announced on February 5, 2015 that it has signed definitive agreements to form a 50/50 partnership for the joint ownership and development of Premier Gold’s Trans-Canada Property including the Hardrock Gold Project located in the Geraldton-Beardmore Greenstone Belt in Ontario. The transaction is expected to close on or about March 6, 2015, subject to the receipt of applicable regulatory approvals and the satisfaction of customary conditions precedent. See the Company’s news release of February 5, 2015 available on SEDAR.
• The financial terms of the agreements are as follows:
  • Payment to Premier, upon closing, of Cdn$85 million for a 50% interest in a partnership that will hold the Trans-Canada Property.
  • Contribution by Centerra on behalf of Premier of their first Cdn$92.5 million to be spent on the project.
  • After Centerra has contributed its Cdn$92.5 million (for a total of Cdn$185 million), further funding of the project will be on a 50/50 basis.
  • Up to an additional Cdn$30 million contingent payment to Premier subject to the results of a new drill program and an updated resource calculation adding 500,000 contained ounces of gold within the Hardrock Project pit shell as defined in the August 22, 2014 Technical Report published by Premier.
• The terms of the agreement has a significant portion of the purchase price to be spent for the development and construction of the project and allows for Premier to benefit from an additional payment if the partners significantly increase the value of the project by finding more gold, unlike a purchase of shares.

Consolidated Financial and Operating Summary

(1) Includes business development of $0.7 million and $0.9 million for the three and twelve months ended December 31, 2014, respectively (nil for three and twelve months ended December 31, 2013, respectively).

(2) As at December 31, 2014, the Company had 236,403,958 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 $32.5 million and $261.1 million in the three and twelve months ended December 31, 2014 respectively ($70.8 million and $278.6 million in the three and twelve months ended December 31, 2013, respectively).

(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.

Fourth Quarter 2014 compared to Fourth Quarter 2013

• Gold production for the fourth quarter of 2014 decreased 17% to 301,236 ounces poured. The decrease in ounces poured was due to the processing of lower grade ore that was mined from cutback 16 in 2014 in comparison to the ore from cut-back 15 that was processed in the fourth quarter of 2013. During the fourth quarter of 2014, Kumtor’s average mill head grade was 7.40 g/t with a recovery of 82.2%, compared with 8.88 g/t and a recovery of 84.1% for the same quarter in 2013. Boroo recorded lower production in the fourth quarter of 2014 as it processed lower average mill

feed grades until it ultimately exhausted its stockpiled ore in early December 2014. Fewer ounces were also recovered from the heap leach operation as the operation transitioned from primary to secondary leaching midway through 2014.

• All-in sustaining costs per ounce sold¹, which excludes revenue-based tax and income tax, for the fourth quarter increased to $439 from $433 in the comparative period of 2013. The increase resulted from 19% fewer gold ounces sold and increased spending on sustaining capital¹, partially offset by a reduction in operating costs.
• All-in costs per ounce sold¹, which excludes revenue-based tax and income tax, were $501 in the fourth quarter of 2014 compared to $474 in the same period of 2013. The increase reflects fewer ounces sold, higher spending on growth and sustaining capital¹ and increased spending on the Company’s Öksüt Project, partially offset by lower capitalized stripping costs at Kumtor and lower exploration spending.
• Revenues in the fourth quarter of 2014 decreased 23% to $360.1 million, as a result of 19% fewer ounces sold (300,369 ounces in the fourth quarter of 2014 compared to 368,954 ounces in the fourth quarter of 2013).and a 6% lower realized gold price ($1,199 per ounce vs. $1,271 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 2014 was down 32% at $183.5 million compared to the same quarter of 2013. The decrease reflects fewer ounces sold at both operations and the reversal in the fourth quarter of the inventory impairment of $12.2 million recorded in the third quarter of 2014 at Kumtor.
• Operating costs (on a sales basis) decreased by $10.2 million to $71.7 million in the fourth quarter compared to the fourth quarter of 2013, reflecting lower milling, leaching and site support costs. At Boroo, leaching costs were lower as secondary leaching commenced in the third quarter of 2014 and site support costs reflected reduced personnel levels.
• Exploration expenditures in the fourth quarter totaled $3.4 million compared to $8.8 million in the same period of 2013. The decrease in the fourth quarter reflects the cessation of all exploration activities at Kumtor and reduced spending at the Company’s projects including the Öksüt project in Turkey, as the project is transitioning to the pre-development stage.
• Regional administration and corporate administration costs increased 25% and 28% respectively in the fourth quarter of 2014 as compared to the same period of 2013. The increase resulted primarily from higher share-based compensation as the Company’s share price increased in the fourth quarter of 2014 by 20% while it decreased by 10% in the comparative quarter of 2013.
• Cash provided by operations was $217.0 million in the fourth quarter of 2014 compared to $359.5 million in the same period of 2013. The decrease reflects lower earnings in the fourth quarter 2014 and a more significant reduction in working capital levels in the comparative quarter of 2013.
• Capital expenditures in the fourth quarter of 2014 were $57.7 million, which included sustaining capital¹ of $13.4 million, growth capital¹ of $11.7 million and $32.5 million of capitalized stripping costs ($24.9 million cash). Capital expenditures in the same quarter of 2013 were $86.7 million, which included $10.1 million for sustaining capital¹ and $5.9 million for growth capital¹ and capitalized stripping of $70.8 million ($50.6 million cash). In 2014, sustaining capital¹ increased due to more equipment overhauls at Kumtor. The increase in growth capital¹ in 2014 reflects spending at Kumtor, mainly related to the infrastructure relocation. The decrease in capitalized stripping in the fourth quarter of 2014 reflected lower tonnage of waste stripping as more of the mining fleet at Kumtor was committed to advancing the ore production out of cut-back 16. In the fourth quarter of 2013, the mining fleet was split between stripping cut-backs 16 and 17, and completing ore mining in cut-back 15.

Full Year 2014 compared to Full Year 2013

• Gold production for 2014 totaled 620,821 ounces compared to 690,720 ounces in the prior year, which reflects lower gold production at both operations. In 2014, Kumtor produced 567,693 ounces and Boroo produced 53,128 ounces compared to 600,402 ounces and 90,318 ounces in 2013, respectively. The lower gold production at Kumtor was due to processing lower grades from cut-back 16 compared to the higher grades of ore processed from cut-back 15 in 2013. Boroo’s lower gold production was due to the cessation of milling operations in December 2014, the processing of lower grade ore through the mill and the ultimate depletion of the stockpiled ore. In addition, fewer ounces were recovered from the heap leach operation as the operation transitioned to secondary leaching.
• All-in sustaining costs per ounce sold¹, which excludes revenue-based tax and income tax, for 2014, increased to $852 compared to $818 in the same period of 2013. The increase was a result of fewer gold ounces sold, partially offset by a reduction in operating costs.
• All-in costs per ounce sold¹, which excludes revenue-based tax at Kumtor and income tax, was $955, compared to $920 per ounce sold in 2013. The increase is primarily due to fewer ounces sold and increased spending on the Company’s Öksüt Project, partially offset by lower capitalized stripping costs at Kumtor, lower spending on sustaining capital¹ and lower exploration spending.
• Revenue for 2014, decreased to $763.3 million from $944.3 million in 2013, primarily from 12% fewer ounces sold and 8% lower average realized gold price ($1,241 per ounce compared to $1,355 per ounce in 2013).
• Cost of sales in 2014 decreased by 10% to $502.6 million due primarily to a reduction in ounces sold. DD&A associated with production, which is included in cost of sales, decreased to $282.6 million in 2014 from $309.0 million in 2013 as a result of lower DD&A levels charged at Boroo and lower amortization of capital stripping costs at Kumtor as increased amounts of ore were stockpiled.

In 2014, DD&A was $5 million lower than prior guidance of $290 million due to reflecting higher than forecasted levels of gold stockpile inventory at the end of 2014. The advanced development of cut-back 16 at Kumtor in 2014 led to increased amortization of capitalized stripping costs for that cut-back in 2014. At the same time, higher than forecasted levels of gold stockpile inventory as a result of more ore coming from cut-back 16 than planned, resulted in more DD&A costs being charged to closing gold stockpile inventory. At Boroo, DD&A expense included in costs of sales expense for 2014 was $13 million which is $2 million lower than the guidance for 2014. The decrease in the DD&A expense is mainly due to higher than forecasted estimated levels of gold inventory in the heap leach facility at the end of 2014.

• Operating costs (on a sales basis) decreased by $30.2 million to $220 million in 2014, compared to 2013, as a result of higher levels of contained ounces in the broken ore stockpiles at Kumtor at the end of 2014 which absorbed more operating costs into inventory, and lower heap leach costs at Boroo due to the completion of crushing and stacking activities in 2013. Kumtor also benefited from lower prices on tires and diesel fuel, while Boroo consumed fewer reagents. This was partially offset by the cost of the mill liner replacement at Kumtor and the drawdown of higher cost inventory at both operations in 2014.
• Other operating expenses in 2014 included pre-development spending of $6 million at the Company’s Öksüt Project, partially offset by $1.9 million income earned at Boroo for the processing of third party ore through its mill.
• During 2014, $2.4 million of standby costs were incurred as a result of placing Boroo’s mill on care and maintenance after the mill processed the last of the ore stockpiles in December 2014. The

Boroo mill will be kept on standby awaiting the finalization of agreements and permits with the Mongolian Government regarding the Gatsuurt Project.

• Exploration expenditures in 2014 totaled $14.8 million compared to $29.6 million in 2013. The decrease primarily reflects the cessation of all exploration activities at Kumtor and reduced spending on the Company’s projects in Turkey, Mongolia and Russia.
• Corporate administration costs in 2014 increased to $34.4 million from $30.6 million in 2013 due primarily to an increase in share-based compensation of approximately $6.7 million, partially offset by a decrease in expenditures. The increase in share-based compensation reflects the appreciation in the Company’s share price.
• The reduction in income tax expense of $10.6 million in 2014 was due to lower taxable income at Boroo.
• Cash provided by operations was $376.4 million in 2014 compared to $483.9 million in 2013, as a result of lower earnings partially offset by lower levels of working capital.
• Capital expenditures in 2014 were $351.2 million, which included sustaining capital¹ of $49.2 million, growth capital¹ of $40.9 million and $261.1 million of capitalized stripping costs ($187.3 million cash). Capital expenditures in the same period of 2013 were $376.6 million, which included $58.1 million for sustaining capital¹ and $39.9 million for growth capital¹ and capitalized stripping of $278.6 million ($201.3 million cash). In 2014, capital expenditures decreased 7% to $351.2 million due to a reduction in capitalized stripping of cut-back 16 as compared to cut-back 15 in the prior year and lower maintenance expense for equipment overhauls at Kumtor.

Operations Update Kumtor

(1) Adjusted operating costs, all-in sustaining costs, all-in costs and all-in costs – including taxes (in $ millions and per ounce sold), 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.

At the Kumtor mine in the Kyrgyz Republic, mining activities in the fourth quarter of 2014 continued to focus on cut-back 16. During the fourth quarter of 2014, Kumtor mined 6.6 million tonnes of ore at an average grade of 3.52 g/t from cut-back 16, compared to 4.2 million tonnes of ore mined at an average grade of 4.46 g/t in the fourth quarter of 2013.

Gold production for the fourth quarter of 2014 was 291,635 ounces compared to 348,130 ounces in the comparative quarter of 2013 due to the 17% lower average mill head grade and a 2% lower recovery rate, which were partially offset by higher throughput achieved by the mill. During the fourth quarter of 2014, Kumtor’s average mill head grade was 7.40 g/t with a recovery of 82.2%, compared with 8.88 g/t and a recovery of 84.1% for the same quarter in 2013. Kumtor’s mill processed approximately 1.5 million tonnes for the fourth quarter of 2014, which was 3% higher than the comparative quarter of 2013.

Operating costs (on a sales basis), excluding capitalized stripping, decreased 10% to $63.0 million during the fourth quarter of 2014 reflecting lower costs for explosives, diesel fuel and labour.

DD&A associated with production decreased to $108.5 million in the fourth quarter of 2014 from $185.0 million in the comparative period of 2013. The decrease in DD&A resulted primarily from the lower gold sales. In addition, Kumtor mined in 2013 more tonnes of waste stripping in cut-back 15 as compared to cut-back 16 which was mined in 2014, resulting in lower depreciation of capitalized stripping on the ounces sold in the fourth quarter of 2014.

All-in sustaining costs per ounce sold¹, which excludes revenue-based tax, for the fourth quarter of 2014 decreased 3% to $378 compared to $388 in the comparative period of 2013. The decrease results primarily from lower operating costs in the current period.

All-in costs per ounce sold¹, which excludes revenue-based tax, for the fourth quarter of 2014 was $418 compared to $407 in the comparative period of 2013, representing an increase of 3%. The increase is mainly due to an increase in growth capital spending for the infrastructure relocation at Kumtor.

Capital expenditures in the fourth quarter of 2014 were $57.4 million which includes $13.4 million of sustaining capital¹, $11.5 million invested in growth capital¹ mainly on infrastructure relocation and equipment component replacements and $32.5 million for capitalized stripping ($24.9 million cash). Capital expenditures the comparative quarter of 2013 totaled $86.2 million, consisting of $9.6 million for sustaining capital¹, $5.8 million for growth capital¹ and $70.8 million of capitalized stripping ($50.6 million cash).

Ongoing Technical Matters As previously noted in the Company’s news release of May 6, 2014, Kumtor constructed a buttress at the edge of the ultimate pit in response to increased movement of the south arm of the Davidov glacier. The buttress, which continues to be monitored, has been effective in reducing the rate of movement to manageable levels. As a result of the positioning of the buttress, the Company has reduced the width of the ultimate cut-back for the SB Zone and has reduced reserves by 358,000 contained ounces, as disclosed in the Company’s news release of February 9, 2015.

Historically, the reconciliation of the Kumtor block model has indicated that the model performed very well until 2013, but as the Company reported in February 2014, the Kumtor operation experienced negative production reconciliation during 2013, totaling 184,000 contained ounces of gold. As a result, in 2014 the Company retained an independent consultant to conduct an audit of the resource model. The work determined that the KS13 resource model was potentially biased and that Centerra should investigate different methodologies for estimating the higher grade section of the SB Zone. They also recommended that Kumtor undertake additional infill drilling in the deeper parts of the ore body which is scheduled to be completed in the first half of 2015.

Late in the third quarter of 2014, mining reached the high-grade SB Zone. The negative reconciliation experienced in the fourth quarter of 2013 re-occurred in the fourth quarter of 2014 and as a result the Company retained an independent consultant to assist in the development of a new resource model for the Kumtor Central Pit. This new resource model was used for the reserve and resource estimate in the Company’s news release of February 9, 2015. The estimate also incorporates the impact of the buttress on the pit design and updated geotechnical information that requires lower pit slope angles in some sectors of the pit. The Company is planning on carrying out further geotechnical drilling in 2015. The results of this work will be incorporated into an updated geotechnical model to determine what, if any, further revisions are required to the pit slope angles.

Using the new reserve estimates, Kumtor’s new life of mine plan (LOM) is now being optimized and will also reflect the deferral of capital related to additional mine haulage equipment (20 trucks) and the cancelation of the mill expansion, both of which were planned and described in the December 2012 technical report. The new LOM is expected to be filed on SEDAR by March 26, 2015 and will reflect an updated production profile, and updated operating and capital costs from those that were disclosed in the NI 43-101 technical report for Kumtor dated December 20, 2012.

In addition, Kumtor has experienced difficulty in achieving the gold recoveries published in the December 2012 technical report which assumed a LOM gold recovery rate of 81%. It is now estimated that going forward the average LOM gold recovery is expected to be 77%, which will be reflected in the new LOM production profile in the updated technical report. Work continues at Kumtor on implementing strategies to improve gold recoveries.

The movement in the Central Valley waste-rock dump, which began in mid-March 2013, has since decreased to manageable levels. The Company continues to make progress in relocating and reconstructing the affected infrastructure.