Centerra Gold Commences Construction at Öksüt and Records First Quarter 2018 Net Earnings of $9 million
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NEWS RELEASE
Centerra Gold Commences Construction at Öksüt and
Records First Quarter 2018 Net Earnings of $9 million
This news release contains forward-looking information that is subject to the risk factors and assumptions set out
under “Caution Regarding Forward-looking Information”. It should be read in conjunction with the Company’s
unaudited interim condensed consolidated financial statements and the notes thereto for the three months ended
March 31, 2018. The consolidated financial statements of Centerra Gold Inc. are prepared in accordance with
International Financial Reporting Standards as issued by the International Accounting Standards Board. All figures
are in United States dollars and all production figures a
re on a 100% basis, unless otherwise stated.
All references in this document denoted with NG, indicate a non-GAAP term which is discussed
under “Non-GAAP Measures”, included in the Company’s MD&A herein, and reconciled to
the most directly comparable GAAP measure.
Toronto, Canada, May 1, 2018: Centerra Gold Inc. (“Centerra”) (TSX: CG) today reported net earnings
of $9.0 million or $0. 03 per common share (basic) on revenues of $ 235.4 million in the first quarter of
2018. The first quarter 2018 results include charges of $4.4 million related to the acquisition of AuRico
Metals Inc. Excluding this item, adjusted earningsNG in the first quarter of 2018 were $13.5 million or $0.05
per common share (basic). During the same period in 201 7, the Company repor ted net earnings (and
adjusted earningsNG) of $57.0 million or $0.20 per common share (basic) on revenues of $285.3 million.
2018 First Quarter Highlights
Closed the AuRico Metals Inc. acquisition on January 8, 2018.
Started construction of the Öksüt Project in Turkey late-March, after receiving the pastureland
permit, investment incentive certificate and Board approval during the quarter.
Partially restarted mill processing operations at Mount Milligan, operating both ball mill circuits at
40,000 tpd at the end of the first quarter.
On February 1, 2018, entered into a $500 million, four-year senior secured revolving credit facility
with a lending syndicate of eight financial institutions as lenders, replacing prior facilities. See
“Liquidity – Credit Facilities”.
Produced a total of 129,764 ounces of gold, including 100,220 ounces at Kumtor and 29,544 ounces
at Mount Milligan.
Sold a total of 132,432 ounces of gold in the quarter, including 116,919 ounces at Kumtor and
15,513 ounces at Mount Milligan.
Mount Milligan produced 6.1 million pounds of copper during the period and sold 4.5 million
pounds of copper.
Company-wide all-in sustaining costs on a by-product basis per ounce soldNG were $932, excluding
revenue-based tax in the Kyrgyz Republic and income tax reflecting the lower sales volumes.
Cash provided by operating activities before changes in working capitalNG of $66.6 million.
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Cash, cash equivalents, restricted cash and short-term investments at March 31, 2018 were $123.4
million.
Value of royalty portfolio enhanced by mineral reserve increases at Kirkland Lake Gold’s
Fosterville operation.
Commentary
Scott Perry, President and Chief Executive Officer of Centerra stated, “I am pleased to report that the roll-
out of our Work Safe – Home Safe program has been fully embraced across the organization and we are
now embarking on our drive to zero harm within the work place. We are seeing the early benefits of this
safety program where on April 11 th, 2018, our Kumtor operation achieved a significant milestone of one
full year and 6 million man-hours without incurring a lost time injury.”
“Another significant milestone achieved during the quarter was that we commenced construction activity
at the Öksüt Project in Turkey. Our site contractor mobilized their equipment and crews and started work
on the main access road to site. Work will continue to ramp up over the summer and we will report back
with regular updates on the construction activity at Öksüt.”
“As we reported earlier, we have restarted mill processing activities at the Mount Milligan Mine. Currently,
our team on site has both of the ball mill circuits operating at an average throughput of approximately
40,000 tonnes per day while we wait for additional volumes of water from the upcoming freshet (spring
melt). Once the freshet is underway, we plan to increase the throughput to our targeted average of 55,000
tonnes per calendar day throughput for the second half of the year.”
“With Mount Milligan back up and running, the Company produced a total of 129,764 ounces of gold in
the quarter and 6.1 million pounds of copper. Due to the lower production volumes and the corresponding
lower sales volumes our all-in sustaining costs (before taxes)NG were skewed higher this quarter coming in
at $932 per ounce. The costs were higher, since Mount Milligan continued to mine through the mill
shutdown and had fixed costs to cover during the period, but Kumtor achieved all-in sustaining costs (before
taxes)NG of $758 per ounce in the quarter. As production increases at both sites and sales increase in the
second half of the year, we expect to see our all-in sustaining costs come down significantly to be more in
line with normal operating levels.”
“Financially, the operations delivered in the quarter approximately $67 million of cash provided by
operations before changes in working capitalNG. Kumtor generated $85 million while Mount Milligan had
a
use of cash of only $7 million before working capital changes despite the mill being shutdown for 6 weeks
and then operating at less than half capacity for a significant portion of the quarter.”
Select First Quarter 2018 Developments
Acquisition of AuRico Metals Inc.
On January 8, 2018, the Company completed the acquisition (the “AuRico Acquisition”) of 100% of the
outstanding shares of AuRico Metals Inc. (“AuRico”). AuRico was a North American-based mining
development and royalty company with interests in the Kemess Underground project (the “Kemess
Underground”), a feasibility stage underground gold-copper project in British Columbia, Canada, and the
Kemess East project (together “Kemess Project”).
The AuRico Acquisition was completed by way of a Plan of Arrangement under the Business Corporations
Act (Ontario), whereby the Company acquired all of the issued and outstanding AuRico common shares for
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Cdn$1.80 per share in cash consideration, representing an aggregate transaction value of approximately
Cdn$307 million ($247 million).
AuRico’s holdings also included a free cash-flow generating royalty portfolio which includes a 1.5% net
smelter return (“NSR”) royalty on the Young-Davidson gold mine in Ontario and a 2.0% NSR royalty on
the Fosterville mine in Australia. The value of the royalty portfolio has increased with the significant
growth in mineral reserves at the Fosterville Mine operated by Kirkland Lake Gold Ltd. At December 31,
2017, mineral reserves at Fosterville increased by 65% to 1.7 million ounces of gold at 23.1 g/t from
Kirkland Lake’s June 30, 2017 mid-year estimate. The Swan Zone mineral reserve doubled to over a million
ounces of gold at 61.2 g/t (see Kirkland Lake’s news release dated February 20, 2018).
Prior to the acquisition, the Kemess Underground project achieved the following milestones in 2017:
March 2017 – granted an Environmental Assessment (EA) Certificate from the Canadian
Environmental Assessment Agency and the British Columbia Environmental Assessment Office
May 2017 – signed an Impact Benefit Agreement (“IBA”) with an alliance of three First Nations
groups – the Takla Lake First Nations, Tsay Key Dene First Nation and the Kwadacha First Nation
(collectively known as “Tse Key Nay” or “TKN”)
August 2017 – submitted construction permit applications with the Major Mines Permitting Office
In addition, the Kemess East project announced in May 2017 the results of a preliminary economic
assessment (“PEA”) supporting an 11 million tonne per annum panel cave underground mine. A PEA is
preliminary in nature and includes inferred mineral resources that are considered too speculative
geologically to have the economic considerations applied to them that would enable them to be categorized
as mineral reserves, and there is no certainty that the PEA will be realized.
See “Development Projects – Kemess Underground Project” for further details.
Mount Milligan - Mill Shutdown and Partial Restart
On December 27, 2017, the Company reported that, due to a lack of sufficient fresh water resources, mill
processing operations at the Mount Milligan mine had been temporarily suspended. Milling operations
restarted, at a reduced capacity, on February 5, 2018 utilizing one ball mill to minimize water requirements.
Following a ramp-up period, mill operations achieved sustainable mill throughput levels of approximately
30,000 tonnes per day by mid-February.
On March 23, 2018, the second ball mill was restarted following a build-up of water in Mount Milligan’s
tailings storage facility (TSF) due to faster than expected thawing of ice in the TSF as well as pumping of
water from groundwater sources, tower drains and nearby Philip Lake.
By the end of the first quarter 2018, milling operations had achieved a throughput of 40,000 tpd.
As at April 30, 2018, the Company has made two shipments of copper/gold concentrates in 2018 with a
gross value of approximately $74 million.
See “Mount Milligan Mine” for further details.
Exploration Update
Exploration expenditures in the first quarter of 2018 totaled $2.4 million compared to $1.7 million in the
same quarter of 2017. Exploration activities during the first quarter included drilling, trenching, geological
mapping, geophysics, surface sampling and geophysics at the Company’s various projects.
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Mount Milligan Mine
Exploration activities in the first quarter of 2018 at Mount Milligan included till drilling and near-pit infill
diamond drilling south-west of the current Mount Milligan pit. A total of 3,445 metres in ten diamond drill
holes was completed. Assay result have been returned from four drill holes. Selected best results are:
18-
1052: 16.1 metres @ 0.20 g/t Au, 0.11% Cu from 155.9 metres;
18-1053: 110.6 metres @ 0.30 g/t Au, 0.35% Cu from 127.8 metres;
18-1054: 26.9 metres @ 0.32 g/t Au, 0.27% Cu from 249.4 metres;
18-1055: 41.5 metres @ 0.24 g/t Au, 0.13% Cu from 216.5 metres;
18-1057: 149.9 metres @ 0.46 g/t Au, 0.43% Cu from 178.5 metres
including 10.0 metres @ 1.42 g/t Au, 1.05% Cu and 2 metres @ 1.11 g/t Au, 0.79
% Cu;
18-1059: 110.0 metres @ 1.73 g/t Au, 0.04 % Cu from 6.1 metres
including 38.6 metres @ 4.15 Au, 0.07% Cu and 11.95 metres 1.35 g/t Au,
0.05% Cu.
The above mineralized intercepts were calculated using a cut-off grade of 0.1 g/t Au and a maximum
internal dilution interval of 4 metres. Drill collar locations and associated graphics are available at the
following link:
http://resource.globenewswire.com/Resource/Download/ad0cf0b8-e356-4550-b2a1-edb6119644e0
A listing of the drill results, drill hole locations and plan map for the Mount Milligan Mine 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 www.centerragold.com.
Greenfields Exploration
Turkey
Yamaç Project
The phase one drilling program at the Yamaç Project in northern Turkey was finalized in the first quarter
of 2018 with the completion of 863 metres in three diamond drill holes (YDD007-009). The Yamaç Project
is an early-stage exploration project located approximately 170 kilometres northwest of Ankara in
Zonguldak Province, Turkey. Porphyry-style copper-gold ± molybdenum mineralization was identified in
t
he area through regional reconnaissance (stream sediment sampling and rock chip sampling) and land
tenure was acquired in early 2015.
Final assay results have been received for holes YDD007-009 with the following anomalous intercepts
being recorded:
YDD007: Au - 16.20 metres @ 0.825g/t Au from 6.40 metres;
including 1.00 metres @ 9.219g/t Au from 15.40 metres;
YDD007: Cu - 45.30 metres @ 0.19% Cu from 60.70 metres;
YDD008: Cu - 26.00 metres @ 0.26% Cu from 16.00 metres;
YDD009: Cu - 3.00 metres @ 0.11% Cu from 147.00 metres.
The above mineralized intercepts were calculated using a cut-off grade of 0.1 g/t Au, 0.1 % Cu, a minimum
width of 3.0 metres, and a maximum internal dilution interval of 3.0 metres. Drill collar locations and
associated graphics are available at the following link:
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A listing of the drill results, drill hole locations and plan map for Yamaç Project 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 www.centerragold.com.
Other Projects
During the first quarter of 2018, exploration programs targeting gold and copper were ongoing in Turkey,
Armenia, Canada, Mexico, Nicaragua and Sweden.
Qualified Person & QA/QC - Exploration
Exploration information and other related scientific and technical information in this news release regarding
the Mount Milligan Mine were prepared in accordance with the standards of National Instrument 43-101
(“NI 43-101”) and were prepared, reviewed, verified and compiled by C. Paul Jago, Member of the
Engineers and Geoscientists British Columbia, Exploration Manager at Centerra’s Mount Milligan Mine,
who is the qualified person for the purpose of NI 43-101. Sample preparation, analytical techniques,
laboratories used and quality assurance-quality control protocols used during the exploration drilling
programs are done consistent with industry standards and independent certified assay labs are used.
Ex
ploration information and other related scientific and technical information in this news release regarding
the Yamaç Project were prepared in accordance with the standards of the Canadian Institute of Mining,
Metallurgy and Petroleum and National Instrument 43-101 and were prepared, reviewed, verified and
compiled by Malcolm Stallman, a Member of the Australian Institute of Geoscientists(AIG), Director
Exploration at Centerra’s Turkish subsidiary Centerra Madencilik A.Ş., who is the qualified person for the
purpose of NI 43-101. Sample preparation, analytical techniques, laboratories used and quality assurance
quality control protocols used during the exploration drilling programs are done consistent with industry
standards and independent certified assay labs are used.
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This Management Discussion and Analysis (“MD&A”) has been prepared as of April 30, 2018, and is intended
to provide a review of the financial position and results of operations of Centerra Gold Inc. (“Centerra” or the
“Company”) for the three months ended March 31, 2018 in comparison with the corresponding periods ended
March 31, 2017. This discussion should be read in conjunction with the Company’s unaudited condensed
consolidated interim financial statements and the notes thereto for the three months ended March 31, 2018
prepared in accordance with International Financial Reporting Standards (“IFRS”). This MD&A should also
be read in conjunction with the Company’s audited annual consolidated financial statements for the years ended
December 31, 2017 and 2016, the related MD&A and the Annual Information Form for the year ended December
31, 2017 (the “2017 Annual Information Form”). The Company’s unaudited condensed consolidated interim
financial statements and the notes thereto for the three months ended March 31, 2018, 2017 Annual Report and
2017 Annual Information Form are available at www.centerragold.com and on the System for Electronic
Document Analysis and Retrieval (“SEDAR”) at www.sedar.com. In addition, this discussion contains forward-
looking information regarding Centerra’s business and operations. Such forward-looking statements involve
risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or
implied by such forward looking statements. See “Risk Factors” and “Caution Regarding Forward-Looking
Information” in this discussion. All dollar amounts are expressed in United States dollars (“USD”), except as
otherwise indicated.
Overview
Centerra is a Canadian-based gold mining company focused on operating, developing, exploring and
acquiring gold properties worldwide and is one of the largest Western-based gold producers in Central Asia.
Centerra’s principal operations are the Kumtor Gold Mine located in the Kyrgyz Republic and the Mount
Milligan Gold-Copper Mine located in British Columbia, Canada.
The Company’s significant wholly-owned subsidiaries include Kumtor Gold Company (“KGC” or
“Kumtor”) in the Kyrgyz Republic, Thompson Creek Metals Company Inc. (“Thompson Creek”) and
AuRico Metals Inc. (“AuRico”) in Canada, Langeloth Metallurgical Company L LC (“Langeloth”) and
Thompson Creek Mining Co. in the United States of America, Öksüt Madencilik Sanayi vi TicaretA.S.
(“OMAS”) in Turkey and Boroo Gold LLC and Centerra Gold Mongolia LLC (“CGM”) in Mongolia.
Additionally, the Company holds, through Thompson Creek, a 75% joint venture interest in the Endako
Mine in British Columbia, Canada, and through AuRico a royalty portfolio which includes a 1.5% net
smelter return (“NSR”) royalty on the Young-Davidson gold mine in Ontario and a 2.0% NSR royalty on
the Fosterville mine in Australia. The Company also owns a 50% partnership interest in Greenstone Gold
Mines LP (the “Greenstone Partnership”) which owns the Greenstone Gold development property including
the Hardrock deposit, located in Ontario, Canada. See “Operating Mines and Facilities”, “Development
Projects” and “Other Corporate Developments” for further details.
The Company has also entered into agreements to earn an interest in joint venture exploration properties
located in Mexico, Sweden and Nicaragua. In addition, the Company has exploration properties in
Armenia, Canada and Turkey.
Centerra’s common shares are listed for trading on the Toronto Stock Exchange under the symbol CG. As
of April 30, 2018 , there are 291,822,674 common shares issued and outstanding and options to acquire
6,208,732 common shares outstanding under its stock option plan.
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Market Conditions
Gold Price
During the first quarter of 2018, the spot gold price fluctuated between a low of $1,308 per ounce and a
high of $1,341 per ounce. The average spot gold price for the first quarter was $1,329 per ounce, an increase
of $110 per ounce from the first quarter of 2017 average ($1,219 per ounce), and a $54 per ounce increase
compared to the fourth quarter of 2017 average ($1,275 per ounce).
Copp
er Price
The average spot copper price for the quarter was $3.15 per pound, a $0.50 per pound increase compared
to the first quarter of 2017 average of $2.65 per pound, and a $0.06 per pound increase compared to the
fourth quarter of 2017 average ($3.09 per pound).
Molybdenum Price
The average molybdenum price for the quarter was $12.22 per pound, a $4.92 per pound increase compared
to the first quarter of 2017 average of $7.30 per pound, and a $3.47 per pound increase compared to the
fourth quarter of 2017 average ($8.75 per pound).
Foreign Exchange Rates
USD to CAD
The average U.S. dollar exchange rate for the first quarter of 2018 (1.26), although weakening towards the
end of the quarter, was relatively flat when compared to the average of the fourth quarter of 2017 (1.25),
with rates in the first quarter ranging from 1.23 to 1.31. The Bank of Canada executed one domestic interest
rate hike in the first quarter of 2018, raising the key overnight rate target from 1.0% to 1.25%. The low
point for the Canadian dollar was in mid-March, before slightly recovering and closing the quarter at 1.29.
USD to Kyrgyz Som
The average U.S. dollar exchange rate for the first quarter of 2018 was relatively consistent with the average
of the first quarter of 2017 (69.2), with rates in the quarter ranging from 67.9 to 69.4 and averaging 68.5.
The Kyrgyz som continues to be influe
nced by currencies of the Kyrgyz Republic’s main trading partners
– mainly Russia.
Foreign Exchange Transactions
The Company receives its revenues through the sale of gold, copper and molybdenum in U.S. dollars. The
Company has operations in the Canada, where its corporate head office is also located, Kyrgyz Republic,
Turkey, Mongolia and the United States of America. During the first three months of 2018, the Company
incurred combined expenditures (excluding the purchase of AuRico and including capital) totalling
approximately $449 million. Approximately $152 million of this (34%) was in currencies other than the
U.S. dollar. Centerra’s non-U.S. dollar costs includes 47% in Canadian dollars, 42% in Kyrgyz soms, 5%
in Turkish lira, and 4% in Euros. The average value of the Canadian dollar and Turkish lira both depreciated
against the U.S. dollar by approximately 1% from their value at December 31, 2017. The Euro and Kyrgyz
som appreciated against the U.S. dollar by approximately 2% and 1%, respectively, over the same period.
The net impact of these movements in the three months ended March 31, 2018 was to decrease annual costs
by $0.1 million (increase of $1.2 million in the three months ended March 31, 2017).
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Consolidated Financial and Operational Highlights
Unaudited ($ millions, except as noted) Three months ended March 31,
Financial Highlights 2018 2017 % Change
Revenue $ 235.4 $ 285.3 (18%)
Cost of sales 152.8 171.9 (11%)
Standby costs 10.8 - 100%
Earnings from mine operations 68.9 109.3 (37%)
Finance costs 14.8 7.7 91%
Net earnings (loss) $ 9.0 $ 57.0 (84%)
Adjusted earnings (3) 13.5 57.0 (76%)
Cash provided by (used in) operations (39.7) 72.5 (155%)
Cash provided by operations before changes in working capital (3) 66.6 118.1 (44%)
Capital expenditures (sustaining) (3) 24.7 18.6 33%
Capital expenditures (growth) (3) 3.4 4.0 (14%)
Capital expenditures (stripping) 38.5 62.5 (39%)
Total assets $ 2,862.9 $ 2,686.1 7%
Long-term debt and lease obligation 313.4 380.0 (18%)
Cash, cash equivalents and restricted cash 123.4 357.8 (65%)
Per Share Data
Earnings per common share - $ basic (1) $ 0.03 $ 0.20 (84%)
Earnings per common share - $ diluted (1) $ 0.03 $ 0.20 (84%)
Adjusted earnings per common share - $ basic (1)(3) $ 0.05 $ 0.20 (76%)
Adjusted earnings per common share - $ diluted (1)(3) $ 0.05 $ 0.20 (76%)
Per Ounce Data (except as noted)
Average gold spot price - $/oz(2) 1,329 1,219 9%
Average copper spot price - $/lbs(2) 3.15 2.65 19%
Average realized gold price (Kumtor) - $/oz(3) 1,309 1,219 7%
Average realized gold price (Mount Milligan - combined) - $/oz(3) 1,037 1,054 (2%)
Average realized gold price (Consolidated) - $/oz(3) 1,277 1,172 9%
Average realized copper price (Consolidated) - $/lbs(3) 2.22 2.10 6%
Operating Highlights
Gold produced – ounces 129,764 172,644 (25%)
Gold sold – ounces 132,432 187,914 (30%)
Payable Copper Produced (000's lbs) 6,143 12,595 (51%)
Copper Sales (000's payable lbs) 4,506 13,612 (67%)
Operating costs (on a sales basis) (3) (4) 111.5 117.6 (5%)
Unit Costs
Operating costs (on a sales basis) - $/oz sold (3) (4) $ 842 $ 626 35%
Adjusted operating costs on a by-product basis - $/oz sold(3)(4) $ 446 $ 340 31%
Gold - All-in sustaining costs on a by-product basis – $/oz sold(3)(4) $ 932 $ 750 24%
Gold - All-in sustaining costs on a by-product basis (including taxes) – $/oz sold(3) (4) $ 1,097 $ 879 25%
Gold - All-in sustaining costs on a co-product basis (before taxes) – $/oz sold(3)(4) $ 903 $ 795 14%
Copper - All-in sustaining costs on a co-product basis (before taxes) – $/pound sold(3)(4) $ 3.08 $ 1.86 66%