Centerra Gold 2014 First Quarter Results
NEWS RELEASE
Centerra Gold 2014 First Quarter Results
This news release contains forward-looking information that is subject to the risk factors and assumptions set out on page 22 and in our Cautionary Note Regarding Forward-looking Information on page 28. It should be read in conjunction with the Company’s unaudited interim consolidated financial statements and notes for the three-month periods ended March 31, 2014 and associated Management’s Discussion and Analysis. The condensed interim financial statements of Centerra are prepared in accordance with International Accounting Standard 34, Interim Financial Reporting, as issued by the International Accounting Standards Board and the Company’s accounting policies as described in note 3 of its annual consolidated financial statements for the year ended December 31, 2013. All figures are in United States dollars unless otherwise stated.
To view Management’s Discussion and Analysis and the Financial Statements and Notes for the three-months ended March 31, 2014, please visit the following link:
http://media3.marketwire.com/docs/CG2014-Q1MDA.pdf Toronto, Canada, May 6, 2014: Centerra Gold Inc. (TSX: CG) today reported net earnings for the first quarter of 2014 of $2.1 million or $0.01 per common share (basic), compared to $51.4 million or $0.22 per common share (basic) in the comparative quarter of 2013. The decrease in earnings reflects lower average realized gold price1, increased depreciation, depletion and amortization (DD&A) at Kumtor and lower ounces sold in 2014.
2014 First Quarter Highlights
- Announced positive Öksüt Preliminary Economic Assessment (PEA), executive summary available on the Company’s website.
- Commenced Öksüt feasibility study.
- Produced 116,669 ounces of gold in the quarter, including 102,933 ounces at Kumtor and 13,736 ounces at Boroo, compared to 115,220 ounces in the same period in 2013.
- Cash provided by operations increased to $101.6 million compared to $92.0 million in the first quarter of 2013.
- All-in sustaining costs per ounce sold1 of $1,109, which excludes revenue-based tax in the Kyrgyz Republic, compared to $1,068 in the same period in 2013.
- Reported all-in costs per ounce sold1, which excludes revenue-based tax in the Kyrgyz Republic and income taxes, for the quarter of $1,158 compared to $1,278 for the first quarter of 2013.
- Kyrgyz Parliament adopted a resolution on the Kumtor restructuring as described in the previously announced Heads of Agreement (HOA).
Commentary
Ian Atkinson, President and CEO of Centerra Gold commented, “Operationally we are on track to achieve our gold production guidance for the year. Both operations performed well during the quarter with Kumtor producing almost 103,000 ounces of gold and Boroo nearly 14,000 ounces. Financially, cash provided by operations was $101.6 million for the first quarter and our cash, cash equivalents and short-term investments grew to over $436 million net of debt at March 31.”
“During the quarter, the Kyrgyz Parliament adopted a resolution on the Kumtor restructuring as described in the HOA but the resolution also contained a number of recommendations that were materially inconsistent with the terms of the HOA. In mid-March, the Kyrgyz parliamentary coalition was dissolved and a new coalition and government were formed. The Company expects to continue its discussions with the Government regarding the potential restructuring transaction to resolve all outstanding concerns relating to the Kumtor Project. However, the Company continues to maintain that any agreement to resolve matters must be fair to all of Centerra’s shareholders.”
“At the Öksüt Project, we are moving ahead with a feasibility study after announcing the positive results of the PEA study. The Keltepe deposit is still open to the south in the direction of the Güneytepe deposit and we have additional exploration targets on our land package which we are going to follow-up with additional exploration and exploration drilling this year. We are targeting to achieve initial gold production in late 2016.”
Kumtor Developments
In early February 2014, the south arm of the Davidov glacier, located at the southernmost portion of the Kumtor Central Pit, advanced beyond anticipated rates. In response to the increased movement, a buttress was constructed from run of mine waste material beginning in late February. The buttress is located at the bottom of the Davidov glacier on the edge of the ultimate pit design and has, thus far, been effective to reduce the rate of movement to manageable levels. While the Company believes that the buttress is working effectively, further monitoring and study will be required and there can be no assurance that the buttress will ultimately stop or sufficiently slow down the movement of the Davidov glacier.
No additional cost was incurred to build the buttress, since run of mine waste material was used and the waste hauls were shorter. If the buttress functions as expected, it is anticipated that it will reduce the amount of ice to be mined in the future.
On February 6, 2014, the Parliament of the Kyrgyz Republic considered the non-binding Heads of Agreement between Centerra, the Government of the Kyrgyz Republic and Kyrgyzaltyn JSC (“Kyrgyzaltyn”) in connection with a potential restructuring transaction under which Kyrgyzaltyn would exchange its 32.7% equity interest in Centerra for a 50% interest in a joint venture company that would own the Kumtor Project. Following its consideration, Parliament adopted a resolution that appears to support the concept of the restructuring described in the HOA but also contains a number of recommendations that are materially inconsistent with the terms of the HOA. See “Other Corporate Developments - Kyrgyz Republic” for details.
Kumtor continues to work with the relevant Kyrgyz governmental agencies to obtain formal approval for its 2014 annual mine plan. Such agencies are required to be reasonable in their consideration of mine plan approvals under the terms of the agreements governing the Kumtor project. In addition, Kumtor has received a letter from the State Inspectorate for Environmental and Technical Safety (SIETS) which suggests that mine operations could be suspended, though no formal order to suspend operations has been received at this time. In this regard, the Company notes that successive Kyrgyz governments have emphasized the strategic importance to the Kyrgyz Republic of the continued operation of the Kumtor mine. See “Other Corporate Developments – Kyrgyz Republic” for details.
On April 23, 2014, the Company understands that the Parliament of the Kyrgyz Republic passed a law prohibiting activities which affect glaciers in the Kyrgyz Republic (the “Glacier Law”). Centerra has not yet received the official version of the Glacier Law and notes that several of its provisions are unclear, though it appears to contain provisions for the payment of compensation for damages to glaciers, at rates to be determined by the Government. The Glacier Law must be signed by the President of the Kyrgyz Republic before it will take effect.
Consolidated Financial and Operating Highlights
| Three Months Ended March 31 (5) | |||
|---|---|---|---|
| Financial Summary ($ millions, except as noted) | 2014 | 2013 | % Change |
| Revenue | $ 148.0 | $ 192.3 | (23%) |
| Cost of sales | 109.1 | 91.1 | 20% |
| Regional office administration | 5.7 | 5.6 | 2% |
| Earnings from mine operations | 33.2 | 95.5 | (65%) |
| Revenue-based taxes | 18.4 | 20.8 | (12%) |
| Other operating expenses | 1.9 | 1.9 | 0% |
| Exploration and business development | 2.6 | 7.2 | (64%) |
| Corporate administration | 6.5 | 6.7 | (3%) |
| Earnings from operations | 3.8 | 58.9 | (94%) |
| Other (income) and expenses | (0.2) | 1.3 | (115%) |
| Finance costs | 1.4 | 1.3 | 8% |
| Earnings before income taxes | 2.6 | 56.3 | (95%) |
| Income tax expense | 0.6 | 4.9 | (88%) |
| Net earnings | $ 2.1 | $ 51.4 | (96%) |
| Earnings per common share (basic) - $/share | $ 0.01 | $ 0.22 | (100%) |
| Earnings per common share (diluted) - $/share | - | $ 0.21 | (100%) |
| Weighted average common shares outstanding - basic (thousands) (1) | 236,391 | 236,376 | 0% |
| Weighted average common shares outstanding - diluted (thousands)(1) | 236,649 | 236,964 | (0%) |
| Cash provided by operations | 101.6 | 92.0 | 10% |
| Capital expenditures (2) | 98.9 | 103.9 | (5%) |
| Operating Summary | |||
| Gold produced – ounces poured | 116,669 | 115,220 | 1% |
| Gold sold – ounces sold | 114,493 | 118,745 | (4%) |
| Average realized gold price - $/oz (4) | 1,293 | 1,619 | (20%) |
| Average gold spot price - $/oz (3) | 1,293 | 1,631 | (21%) |
| Cost of sales - $/oz sold (4) | 953 | 767 | 24% |
| Adjusted operating costs - $/oz sold (4) | 429 | 448 | (4%) |
| All-in sustaining costs – $/oz sold (4) | 1,109 | 1,068 | 4% |
| All-in costs – $/oz sold (4) | 1,158 | 1,278 | (9%) |
| All-in costs (including taxes) – $/oz sold (4) | 1,319 | 1,497 | (12%) |
(1) As at March 31, 2014, the Company had 236,392,976 common shares issued and outstanding.
(2) Includes capitalized stripping of $88.1 million in first quarter of 2014 ($74.3 million in first quarter of 2013).
(3) Average for the period as reported by the London Bullion Market Association (US dollar Gold P.M. Fix Rate).
(4) Average realized gold price, cost of sales per ounce sold, adjusted operating costs per ounce sold, all-in sustaining costs per ounce sold, all-in costs per ounce sold and all-in costs (including taxes) per ounce sold are non-GAAP measures and are discussed under “Non-GAAP Measures”.
(5) Results may not add due to rounding.
First Quarter 2014 compared to First Quarter 2013
- Gold production for the first quarter of 2014 totaled 116,669 ounces compared to 115,220 ounces in the comparative quarter. The increase in ounces poured reflects higher production at Kumtor due to drawing down in-circuit inventory, partially offset by lower production at Boroo from lower mill grades and fewer ounces under primary leach.
- All-in sustaining costs per ounce sold1, which excludes revenue-based tax in the Kyrgyz Republic, were $1,109 in the first quarter of 2014 compared to $1,068 in the comparative quarter of 2013. The increase in unit costs for the 2014 period reflects 4% lower ounces sold than the comparative period.
- All-in costs per ounce sold1, which excludes revenue-based tax in the Kyrgyz Republic and income taxes, for 2014 were $1,158 compared to $1,278 in 2013. The decrease is mainly due to lower spending on sustaining and growth capital1 at Kumtor, lower operating costs at Boroo and lower exploration spending, partially offset by lower ounces sold and higher capitalized stripping costs at Kumtor. Excluding capitalized stripping, the cash component of capital expenditures at Kumtor decreased by $18.8 million in the first quarter of 2014 as the mine completed its mining fleet expansion in 2013.
- Revenue for the first quarter of 2014, decreased to $148.0 million from $192.3 million in the comparative quarter of 2013, primarily from a 20% lower average realized gold price in the first quarter of $1,293 per ounce compared to $1,619 per ounce in the same quarter of 2013. Sales volumes were also slightly lower (114,493 ounces in the first quarter of 2014 compared to 118,745 ounces in the first quarter of 2013).
- Cost of sales increased to $109.1 million in the first quarter of 2014, compared to $91.1 million in the comparative period of 2013, mainly as a result of the higher DD&A at Kumtor. The DD&A associated with production increased to $66.7 million in the first quarter of 2014 from $43.8 million in the comparative quarter of 2013. The increase in DD&A resulted from processing higher cost ore from cut-back 15 compared to ore from cut-back 14B which was processed in the first quarter of 2013. Access to ore from cut-back 15 required more stripping of ice and waste thereby resulting in increased amortization of capitalized stripping as the ore was mined and stockpiled. Capitalized stripping for cutback 15 totaled 142 million tonnes, whereas 61 million tonnes were stripped and capitalized for cutback 14B. In addition, the expanded mobile fleet at Kumtor was fully commissioned in 2013 thereby attaching a higher equipment cost to the ore from cut-back 15.
- Exploration and business development expenditures in the first quarter of 2014 totaled $2.6 million compared to $7.2 million in the same period of 2013, representing mainly exploration spending in both years. The decrease in exploration spending in the first quarter of 2014 reflects that the Company’s major drilling programs have not yet commenced this year and because of the cessation of all exploration activities at Kumtor in the fourth quarter of 2013. Drilling programs planned for 2014 at the Öksüt property in Turkey and the ATO property in Mongolia are expected to begin in the second quarter of 2014.
- Cash provided by operations was $101.6 million in the first quarter of 2014 compared to $92.0 million in the same period of 2013 as a result of lower working capital levels, partially offset by lower earnings in the first quarter of 2014. Working capital decreased in the first quarter of 2014 by $22.3 million due to the timing of and payment for gold shipments and a reduction of gold inventory.
- Capital expenditures spent and accrued in the first quarter of 2014 were $98.9 million, which included sustaining capital1 of $8.6 million, growth capital1 of $2.2 million and $88.1 million of capitalized stripping costs ($62.4 million cash). Capital expenditures in the same quarter of 2013 were $103.9
million, which included $13.3 million for sustaining capital1 and $16.3 million for growth capital1 and capitalized stripping of $74.3 million ($53.4 million cash).
Centerra’s cash, cash equivalents and short-term investments increased to $512.2 million at the end of March 2014 from $501.5 million at December 31, 2013. At March 31, 2014, the Company had drawn $76 million on its $150 million revolving credit facility with the European Bank for Reconstruction and Development (EBRD), leaving a balance of $74 million undrawn at March 31, 2014. The amount drawn is due to be repaid on August 11, 2014 or, at the Company’s discretion, repayment of the loan may be further extended until February 2015. Centerra believes, based on its current forecast, that it has sufficient cash and investments to carry out its business plan in 2014 (see “2014 Outlook”).
Consolidated Unit Operating Costs:
| Three months Ended March 31, (4) | |||
|---|---|---|---|
| (unaudited - $ millions, except as noted) | 2014 | 2013 | % Change |
| All-in Costs: | |||
| Operating costs (on a sales basis) (1) | 42.4 | 47.3 | (10%) |
| Regional office administration | 5.7 | 5.6 | 2% |
| Community costs related to current operations | 1.0 | 0.4 | 150% |
| Refining fees | 0.7 | 0.6 | 17% |
| By-product credits | (0.7) | (0.7) | (10%) |
| Adjusted operating costs (2) | 49.1 | 53.2 | (8%) |
| Corporate general and administrative costs | 6.4 | 6.7 | (4%) |
| Accretion expense | 0.4 | 0.2 | 100% |
| Capitalized stripping and ice unload - cash | 62.4 | 53.4 | 17% |
| Capital expenditures (sustaining) (2) | 8.6 | 13.3 | (35%) |
| All-in Sustaining Costs (2) | 126.9 | 126.8 | 0% |
| Capital expenditures (growth) (2) | 2.2 | 16.3 | (87%) |
| Other costs (3) | 3.5 | 8.6 | (59%) |
| All-in Costs (2) | 132.6 | 151.8 | (13%) |
| Revenue-based tax and income taxes | 18.4 | 25.9 | (29%) |
| All-in Costs - including taxes (2) | 151.0 | 177.7 | (15%) |
| Ounces sold - oz | 114,493 | 118,746 | (4%) |
| Adjusted Operating Costs - $/oz sold (2) | 429 | 448 | (4%) |
| All-in Sustaining Costs - $/oz sold (2) | 1,109 | 1,068 | 4% |
| All-in Costs - $/oz sold (2) | 1,158 | 1,278 | (9%) |
| All-in Costs - including taxes - $/oz sold (2) | 1,319 | 1,497 | (12%) |
(1)
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. Operating costs (on a sales basis) is the same as the cash component of cost of sales.
(2) Adjusted operating costs, all-in sustaining costs, all-in costs, all-in costs – including taxes (in $ millions and per ounce), as well as adjusted operating costs per ounce sold and capital expenditures (sustaining) and capital expenditures (growth) are non-GAAP Measures and are discussed under “Non-GAAP Measures”.
(3) Other costs include global exploration expenses, business development expenses and project development costs not related to current operations.
(4) Results may not add due to rounding.
Operations Update - Summary of Key Operating Results
| Three Months Ended March 31 | |||
|---|---|---|---|
| Kumtor Operating Results | 2014 | 2013 | % Change |
| Revenue - $ millions | 131.7 | 148.7 | (11%) |
| Cost of sales - $ millions (1) | 95.1 | 66.3 | 44% |
| Cost of sales - $/oz sold (3) | 933 | 723 | 29% |
| Tonnes mined - 000s | 50,762 | 40,184 | 26% |
| Tonnes ore mined – 000s | 143 | 209 | (32%) |
| Tonnes milled - 000s | 1,482 | 1,473 | 1% |
| Average mill head grade - g/t | 2.65 | 2.69 | (1%) |
| Recovery - % | 76.2 | 74.1 | 3% |
| Gold produced – ounces | 102,933 | 89,618 | 15% |
| Gold sold – ounces | 101,915 | 91,617 | 11% |
| Average realized gold price(3) – $/oz sold | 1,292 | 1,623 | (20%) |
| Adjusted operating costs (3) - $/oz sold | 361 | 398 | (9%) |
| All-in sustaining costs (3)-$/oz sold | 1,058 | 1,111 | (5%) |
| All-in costs (3)-$/oz sold | 1,077 | 1,329 | (19%) |
| All-in costs including taxes (3)-$/oz sold | 1,257 | 1,556 | (19%) |
| Capital expenditures(sustaining)(3)-$ millions | 8.3 | 11.7 | (29%) |
| Capital expenditures (growth)(2) (3) - $ millions | 1.9 | 16.1 | (88%) |
| Boroo Operating Results | |||
| Revenue - $ millions | 16.4 | 43.6 | (62%) |
| Cost of sales - $ millions (1) | 14.0 | 24.9 | (44%) |
| Cost of sales - $/oz sold (3) | 1,113 | 918 | 21% |
| Tonnes mined - 000s | - | - | |
| Tonnes mined heap leach - 000s | - | - | |
| Tonnes stacked heap leach – 000s | - | 268 | (100%) |
| Tonnes leached – 000s | 613 | 1,803 | (66%) |
| Tonnes milled - 000s | 581 | 572 | 2% |
| Average mill head grade - g/t | 0.66 | 1.54 | (57%) |
| Recovery - % | 61.3 | 54.0 | 14% |
| Gold produced – mill - ounces | 7,013 | 15,230 | (54%) |
| Gold produced – heap leach - ounces | 6,723 | 10,372 | (35%) |
| Gold sold – ounces | 12,578 | 27,129 | (54%) |
| Average realized gold price(3) – $/oz sold | 1,301 | 1,606 | (19%) |
| Adjusted operating costs (3) - $/oz sold | 977 | 618 | 58% |
| All-in sustaining costs (3)-$/oz sold | 1,001 | 665 | 51% |
| All-in costs (3)-$/oz sold | 1,001 | 665 | 51% |
| All-in costs including taxes (3) -$/oz sold | 1,001 | 854 | 17% |
| Capital expenditures (Boroo)(3)-$ millions | 0.2 | 1.2 | (86%) |
| Capital expenditures (Gatsuurt)(3)-$ millions | 0.3 | 0.1 | 207% |
(1)
Cost of sales excludes regional office administration.
(2)
Excludes capitalized stripping.
(3)
Adjusted operating costs per ounce sold, all-in sustaining costs per ounce sold, all-in costs per ounce sold, all-in costs (including taxes) per ounce sold, as well as average realized gold price per ounce sold and cost of sales per ounce sold, are non-GAAP measures and are discussed under “Non-GAAP Measures”.
Kumtor
At the Kumtor mine in the Kyrgyz Republic, gold production in the first quarter of 2014 was 102,933 ounces of gold compared to 89,618 ounces in the comparative quarter of 2013 as Kumtor processed ore from cutback 15 that was mined and stockpiled during the fourth quarter of 2013. During the first quarter of 2014, Kumtor’s mill head grade averaged 2.65 g/t with a recovery of 76.2%, compared with 2.69 g/t and a recovery of 74.1% for the same quarter in 2013. The increase in gold production was primarily due to drawing down the gold in-circuit inventory in the quarter.
During the first quarter of 2014, Kumtor’s mining fleet focused on stripping waste to establish access to the south portion of the Kumtor pit (cut-back 16) that is expected to provide high-grade ore at the end of the third quarter of 2014. In addition, Kumtor accelerated its planned mining of waste material in cut-back 17 which was used to construct the buttress discussed earlier. The total waste and ore mined for the first quarter of 2014 was 50.8 million tonnes compared to 40.2 million tonnes in the comparative period of 2013, representing an increase of 26%. The significant increase reflects the increased mining fleet capacity at Kumtor.
All-in sustaining costs per ounce sold1, which excludes revenue-based tax, were $1,058 in the first quarter of 2014 compared to $1,111 in the comparative quarter of 2013. The decrease results from lower sustaining capital1 expenditures, higher production and sales partially offset by increased capitalized stripping in the current period.
All-in costs per ounce sold1, which excludes revenue-based tax and income tax, for the first quarter of 2014 decreased 19% to $1,077 compared to $1,329 in the comparative period of 2013. The decrease in all-in costs1 is due to an 11% increase in gold sold for the first quarter of 2014 and a $14.2 million, or $155 per ounce reduction in growth capital1 expenditures (excluding capitalized stripping) as the Company received the last of the mining equipment for the expanded mining fleet at Kumtor in the comparative period of 2013.
Capital expenditures spent and accrued in the first quarter of 2014 were $98.4 million which includes $8.3 million of sustaining capital1, $1.9 million invested in growth capital1 mainly for relocating infrastructure and $88.1 million for capitalized stripping ($62.4 million cash). Capital expenditures the comparative quarter of 2013 totaled $102.2 million, consisting of $11.7 million for sustaining capital1 and $16.1 million for growth capital1 excluding $74.3 million of capitalized stripping ($53.4 million cash).
Boroo/Gatsuurt
At the Boroo mine in the first quarter of 2014, gold production was 13,736 ounces, compared to 25,602 ounces in the same period of 2013. The lower gold production results mainly from processing lower grade ore through the mill and having lower tonnage of ore under leach in the first quarter of 2014. The mill head grade averaged 0.66 g/t with a recovery of 61.3% in the first quarter of 2014, compared to 1.54 g/t with a recovery of 54% in the same period of 2013. Additionally, fewer ounces were poured from the heap leach operation (6,723 ounces vs. 10,372 ounces) due to having fewer tonnes placed under primary leach in the first quarter of 2014.
All-in sustaining costs per ounce sold1 were $1,001 in the first quarter of 2014 compared to $665 in the comparative quarter of 2013. The increase in all-in sustaining costs1 is primarily due to the 54% decrease in ounces sold at Boroo year-over-year, partially offset by lower adjusted operating costs1 and lower sustaining capital1 expenditures.
All-in costs per ounce sold1, which excludes income taxes, were $1,001 in the first quarter of 2014 compared to $665 in the same quarter of 2013 reflecting the lower production and resulting reduction in gold sales which was partially offset by lower adjusted operating costs1 and lower sustaining capital1 expenditures.
During the first quarter of 2014 exploration expenditures in Mongolia decreased to $0.4 million from $1.0 million in the same period in 2013. At the ATO property in Mongolia the drilling program is expected to start in the second quarter of 2014.
The Gatsuurt project remained under care and maintenance in the first quarter of 2014 due to continued delays in permitting resulting from the Water and Forest Law which prohibits mining and exploration activities in water basin and forested areas. The Company continued discussions with the Mongolian Government regarding the Gatsuurt project during the first quarter. The Company expects that the Mongolian Parliament will consider the designation of Gatsuurt as a strategic deposit in the first half of 2014. If Parliament ultimately approves this designation, it would have the effect of excluding Gatsuurt from the application of the Mongolian Water and Forest Law and would allow Mongolia to acquire up to a 34% interest in Gatsuurt. The terms of such participation would be subject to further negotiations with the Government. See “Other Corporate Developments- Mongolia”.
1 Non-GAAP measure, see discussion under “Non-GAAP Measures”.
Non-GAAP Measures
This news release contains the following non-GAAP financial measures: all-in sustaining costs per ounce sold, all-in costs per ounce sold, all-in costs including taxes per ounce sold, adjusted operating costs per ounce sold, cost of sales per ounce sold, capital expenditures (sustaining), capital expenditures (growth) and average realized gold price. These financial measures do not have any standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other issuers, even as compared to other issuers who may also be applying the World Gold Council (WGC) guidelines, which can be found on the WGC website at http://www.gold.org .
Management believes that the use of these non-GAAP measures will assist analysts, investors and other stakeholders of the Company in understanding the costs associated with producing gold, understanding the economics of gold mining, assessing our operating performance, our ability to generate free cash flow from current operations and to generate free cash flow on an overall Company basis, and for planning and forecasting of future periods. However, the new measures do have limitations as analytical tools as they may be influenced by the point in the life cycle of a specific mine, and the level of additional exploration or expenditures a company has to make to fully develop its properties. Accordingly, these non-GAAP measures should therefore not be considered in isolation, or as a substitute for, analysis of our results as reported under GAAP.
Definitions
The following is a description of the Non-GAAP measures used in this news release. The definitions are consistent with the WGC’s Guidance Note on these non-GAAP measures:
- Operating costs include mine operating costs such as mining, processing, site support, royalties and operating taxes (except at Kumtor where revenue-based taxes are excluded), but exclude depreciation, depletion and amortization (DD&A), reclamation costs, financing costs, capital development and exploration.
- Adjusted operating costs per ounce sold include operating costs, regional office administration, community costs related to current operations, refining fees and by-product credits.
- All-in sustaining costs per ounce sold include adjusted operating costs, the cash component of capitalized stripping costs, regional office administration costs, accretion expenses, and sustaining capital. The measure incorporates costs related to sustaining production.
- All-in costs per ounce sold include all-in sustaining costs and additional costs for growth capital, corporate general and administrative expenses, global exploration expenses and social development costs not related to current operations.
- All-in cost per ounce sold exclude the following:
- Working capital (except for adjustments to inventory on a sales basis).
- All financing charges (including capitalized interest).
- Costs related to business combinations, asset acquisitions and asset disposals.
- Other non-operating income and expenses including interest income, bank charges, and foreign exchange gains and losses.
- All-in costs including taxes per ounce sold measure includes revenue-based taxes at Kumtor and income taxes at Boroo.
- Capital expenditures (Sustaining) is a capital expenditure necessary to maintain existing levels of production. The sustaining capital expenditures maintain the existing mine fleet, mill and other facilities so that they function at levels consistent from year to year.
- Capital expenditures (Growth) is capital expended to expand the business or operations by increasing productive capacity beyond current levels of performance.
- Average realized gold price is calculated by dividing revenue derived from gold sales by the number of ounces sold.
Adjusted Operating Cost per Ounce Sold, All-in Sustaining Costs per Ounce Sold and All-in Costs per Ounce Sold (including and excluding taxes) are non-GAAP measures and can be reconciled as follows:
1) By operation (unaudited) Three months ended March 31, ($ millions, unless otherwise specified) 2014 2013 Kumtor:
Cost of sales, as reported $ 95.1 $ 66.3 Less: Non-cash component 63.5 34.1 Cost of sales, cash component $ 31.6 $ 32.1 Adjust for: Regional office administration 4.4 4.1 Refining fees 0.6 0.5 By-product credits (0.6) (0.6)
Community costs related to current operations 0.8 0.4 Adjusted Operating Costs $ 36.8 $ 36.5 Accretion expense 0.3 0.2 Capitalized stripping and ice unload 62.4 53.4 Capital expenditures (sustaining) 8.3 11.7 All-in Sustaining Costs $ 107.8 $ 101.8 Capital expenditures (growth) 1.9 16.1 Exploration expense (0.0) 2.4 Other project costs not related to current operations - 1.4 All-in Costs $ 109.7 $ 121.7 Revenue-based taxes 18.4 20.8 All-in Costs (including taxes) $ 128.1 $ 142.6 Ounces sold (000) 101.9 91.6 Adjusted Operating Costs per ounce sold $ 361 $ 398 All-in Sustaining Costs per ounce sold $ 1,058 $ 1,111 All-in Costs per ounce sold $ 1,077 $ 1,329 All-in Costs (including taxes) per ounce sold $ 1,257 $ 1,556
Boroo:
Cost of sales, as reported $ 14.0 $ 24.9 Less: Non-cash component 3.1 9.7 Cost of sales, cash component $ 10.9 $ 15.2 Adjust for: Regional office administration 1.3 1.5 Refining fees 0.1 0.1 By-product credits (0.1) (0.1)
Community costs related to current operations 0.1 0.0 Adjusted Operating Costs $ 12.3 $ 16.8 Accretion expense 0.1 0.1 Capitalized stripping - - Capital expenditures (sustaining) 0.2 1.2 All-in Sustaining Costs $ 12.6 $ 18.0 Capital expenditures (growth) - - Exploration expense - - Other project costs not related to current operations - - All-in Costs $ 12.6 $ 18.0 Income taxes 5.1 All-in Costs (including taxes) $ 12.6 $ 23.2 Ounces sold (000) 12.6 27.1 Adjusted Operating Costs per ounce sold $ 977 $ 617 All-in Sustaining Costs per ounce sold $ 1,001 $ 665 All-in Costs per ounce sold $ 1,001 $ 665
All-in Costs (including taxes) per ounce sold
$ 1,001 $ 854