Centerra Gold Exceeds 2019 Gold Production Guidance Producing 783,308 Ounces and Announces 2020 Outlook including Öksüt Mine Production
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NEWS RELEASE
Centerra Gold Exceeds 2019 Gold Production Guidance Producing 783,308 Ounces and
Announces 2020 Outlook including Öksüt Mine Production
This news release contains forward-looking information that is subject to assumptions and risk factors set out under the
headings “Material Assumptions” and “Caution Regarding Forward-looking Information”. All production figures are
on a 100% basis. All figures are in United States dollars unless otherwise stated.
All references in this document denoted with NG, indicate a non-GAAP term which is discussed under “Non-GAAP
Measures”.
Toronto, Canada, February 11, 2020: Centerra Gold Inc. (“Centerra”) (TSX: CG) reports fourth quarter and
annual production exceeding the upper end of 2019 annual gold production guidance.
The Company has planned an earnings conference call and webcast for March 26, 2020 at 10:00 am Eastern
Time to discuss 2019 financial and operational results. In late March 2020, the Company expects to issue an
updated technical report for the Mount Milligan Mine, 2019 year-end mineral reserves and resources, and 2019
fourth quarter and year-end financial results. As discussed below, we continue to expect to report a material
reduction of Mount Milligan’s mineral reserves and resources with a resultant effect on the life of the mine.
2019 Fourth Quarter and Annual Highlights
• Gold production in the fourth quarter was 194,507 ounces including 148,523 ounces of gold
produced by the Kumtor Mine and 45,984 ounces of gold produced by the Mount Milligan Mine.
• Full year 2019 gold production was 783,308 ounces, which exceeded the upper end of guidance,
including 600,201 ounces of gold produced by the Kumtor Mine and 183,107 ounces of gold produced
by the Mount Milligan Mine.
• Copper production of 18.1 million pounds in the fourth quarter and 71.1 million pounds for the
full year 2019 was within guidance range.
• All-in sustaining costs on a by-product basis per ounce soldNG (“AISC”) is expected to be below
the annual guidance range of $713 to $743.
• Repaid Debt, including $27 million promissory note with Caterpillar Financial Services in the fourth
quarter resulting in liquidity of approximately $615 million at the end of 2019. On January 30, 2020,
the Company repaid the $78 million drawn balance on the Öksüt project finance facility using lower
cost funds from its corporate credit facility and then cancelled the $150 million facility, which resulted
in the release of $25 million of restricted cash.
2020 Guidance Highlights
• Gold production guidance of 740,000 to 820,000 ounces reflecting the commencement and ramp up
of gold production at the Öksüt Mine in Turkey.
• Copper production guidance of 80 to 90 million pounds reflecting expectations that Mount Milligan
Mine will operate with no mill water constraints for the entire year.
• Cost of sales attributable to gold per ounce sold guidance of $450 to $500 per ounce (new guidance
reporting metric).
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• All-in sustaining costs on a by-product basis per ounce soldNG guidance of $820 to $870 per ounce
is up from 2019 primarily due to an increase in AISC at Kumtor as it processes lower grade material
from its surface stockpiles. AISC at Mount Milligan is expected to also be higher than 2019 as a result
of lower grades partially offset by the effect of higher mill availability forecast for 2020 on gold and
copper production. The commencement of operations at the lower cost Öksüt operation is expected to
favourably impact Company-wide AISC in 2020.
• Total capital spending of $169 million excluding capitalized stripping is down significantly from
2019 guidance due to the majority of Öksüt spending having been completed.
• Total capitalized stripping of $236 million including the cash component of $173 million at Kumtor
primarily for mining cut-back 20 and $20 million at Öksüt.
• Expanded exploration budget to $50 million which is up significantly from 2019, with 70% focused
on brownfield exploration at our existing operations.
As previously disclosed, the Company is completing a comprehensive technical review of the Mount Milligan
Mine. Our objective is to publish an updated NI 43-101 technical report in late March 2020. The extent of any
change in mineral reserves and resources cannot be precisely determined until a ll of the relevant studies and
modelling are completed, including studies to optimize the economics of the mine and further work to
incorporate results of the Company’s exploration drilling through 2019. However, based upon the work
performed to date, the Company’s expectation continues to be that Mount Milligan’s mineral reserves and
resources will be materially reduced with a resultant effect on the mine life.
Scott Perry, President and Chief Executive Officer of Centerra stated, “ In light of the tragic event which
occurred at Kumtor in December 2019, we are more than ever committed to ever-increasing our safety efforts.
In early January we held our first annual Centerra Gold Safety Week. The entire leadership team including
myself travelled to all our sites for a one-day operations stand down to focus on safety at each site.”
“In 2019, the Company exceeded its consolidated gold production guidance , delivering more than 783,000
ounces of gold. Given our actual gold production, our all-in sustaining costs per ounce soldNG is expected to be
below the lower end of our 2019 guidance range.”
“For 2020, we are estimating consolidated gold production to be in the range of 740,000 to 820,000 ounces and
80 million to 90 million pounds of payable copper production from Mount Milligan. This reflects the addition
of Öksüt gold production as it ramps up during the year. Centerra’s consolidated all-in sustaining cost on a by-
product basis per ounce soldNG for 2020 is expected to be in the range of $820 to $870 per ounce.”
2020 Outlook
See “Material Assumptions” for material assumptions or factors used to forecast production and costs for 2020.
2020 Gold Production Guidance
Centerra’s 2020 gold production is expected to be between 740,000 to 820,000 ounces.
Kumtor’s gold production is expected to be in the range of 520,000 to 560,000 ounces. A comprehensive mill
shutdown for the planned replacement of the SAG Mill girth gear, SAG Mill pinion and B all Mill electrical
motor occurred in December 2019 and the mill was successfully restarted in early-January. This is expected to
lower production levels in the first quarter of 2020, which will ramp up quarter-over-quarter with the delivery
of ore from current stockpiles on surface.
At Mount Milligan, the Company expects to achieve an average daily throughput of approximately 55,000
tonnes per calendar day for the full year . Crusher maintenance was completed during January. Further mill
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maintenance downtime is scheduled for the first quarter (9 -days) and third quarter (8- days) to complete SAG
Mill relines and other maintenance work. Mount Milligan’s total (streamed and unstreamed) payable gold
production is forecast to be in the range of 140,000 to 160,000 ounces. During the first half of 2020, lower than
the expected 2020 average gold and copper grades are planned to be processed resulting in lower first half
production. Copper and gold grades and metal production is expected to increase over the second half of 2020.
At Öksüt, first gold pour occurred on January 31 and 2020 gold p roduction is expected to be in the range of
80,000 to 100,000 ounces with gold production expected to ramp up over the course of the year.
2020 Copper Production
Centerra expects total (streamed and unstreamed) payable copper production from the Mount Milligan Mine to
be in the range of 80 to 90 million pounds.
Centerra’s 2020 production is currently forecast as follows:
Kumtor Mount
Milligan(1) Öksüt Centerra
Gold
Unstreamed Gold Payable Production (Koz) 520-560 91-104 80-100 691-764
Streamed Gold Payable Production (Koz)(1) – 49-56 – 49-56
Total Gold Payable Production (Koz)(2) 520-560 140-160 80-100 740-820
Copper
Unstreamed Copper Payable Production (Mlb) – 65-73 – 65-73
Streamed Copper Payable Production (Mlb)(1) – 15-17 – 15-17
Total Copper Payable Production(3) – 80-90 – 80-90
1) The Mount Milligan Streaming Arrangement entitles Royal Gold to 35% and 18.75% of gold and copper sales,
respectively, from the Mount Milligan mine. Under the Mount Milligan Streaming Arrangement, Royal Gold will pay
$435 per ounce of gold delivered and 15% of the spot price per metric tonne of copper delivered.
2) Gold production assumes recoveries of 82.4% at Kumtor, 64% at Mount Milligan and approximately 60% at Öksüt.
3) Copper production assumes 81.9% recovery for copper at Mount Milligan.
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2020 All-in Sustaining Unit Costs NG
Centerra’s 2020 sales and all-in sustaining costs per ounce sold NG, calculated on a by-product basis, are
forecasted as follows:
Kumtor Mount
Milligan(2) Öksüt Centerra(2)(4)
Ounces sold forecast (Kounce) 520-560 140-160 80-100 740-820
Cost of sales attributable to
gold ($/ounce)
$300-$360 $750-$800 $375-$550
$300-$360 $750-$800 $375-$550 $450-$500
All-in sustaining costs on a
by-product basis ($/ounce) (1) (2) $750-$800 $885-$935 $650-$700 $820-$870
Revenue-based tax and taxes ($/ounce) (3) $190-$205 $2-$4 $1-$2 $193-$211
All-in sustaining costs on a by-product basis,
including taxes ($/ounce) (1) (2) (3) $940-$1,005 $887-$939 $651-$702 $1,013-$1,081
Gold - All-in sustaining costs on a
co-product basis ($/ounce) (1) (2) $750-$800 $970-$1,220 $650-$700 $825-$925
Copper - Cost of sales attributable to
copper ($/pound) – $1.30-$1.40 – $1.30-$1.40
Copper – All-in sustaining costs on a
co-product basis ($/pound) (1) (2) – $1.70-$2.10 – $1.70-$2.10
1) All-in sustaining costs per ounce sold, all-in sustaining costs per ounce sold on a by-product basis, all-in sustaining costs on a
by-product basis including taxes per ounce sold and all-in sustaining costs on a co-product basis (gold and copper) on a per
unit basis are non-GAAP measures and are discussed under “Non-GAAP Measures”.
2) Mount Milligan payable production and ounces sold are on a 100% basis (the Mount Milligan Streaming Arrangement entitles
Royal Gold to 35% and 18.75% of gold and copper sales, respectively). Unit costs and consolidated unit costs include a credit
for forecasted copper sales treated as by-product for all-in sustaining costs and all-in sustaining costs plus taxes. The copper
sales are based on a copper price assumption of $2.60 per pound sold for Centerra’s 81.25% share of copper production and
the remaining 18.75% of copper revenue at $0.39 per pound (15% of spot price, assuming spot at $2.60 per pound),
representing the Mount Milligan Streaming Arrangement. Payable production for copper and gold reflects estimated
metallurgical losses resulting from handling of the concentrate and payable metal deductions, subject to metal content, levied
by smelters.
3) I ncludes revenue-based tax at Kumtor, British Columbia mineral tax at Mount Milligan and income tax at Öksüt based on a
forecast gold price assumption of $1,350 per ounce sold.
4) Results in chart may not add due to rounding.
Cost of Sales per ounce is included as a new guidance measure and is different from the AISC measure but is
considered the nearest GAAP measure. AISC is defined in the non- GAAP section and includes the cash
component of cost of sales, as well as other items that are not part of cost of sales, namely sustaining capital,
capitalized stripping, corporate administration costs and various “other costs”, and for Mount Milligan, a credit
for copper sales ranging from $175 to $197 million. At Mount Milligan, “other costs” include approximately
$20 million for treatment and refining charges and $10 million for marketing costs. In 2020, at Kumtor, “other
costs” include approximately $10 million as contributions to various development funds in the Kyrgyz
Republic.
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2020 Capital Spending
Projected capital expenditures (excludes capitalized stripping) include:
Projects ($ millions) Sustaining Capital Growth Capital
Kumtor Mine 49 18
Mount Milligan Mine 55 -
Öksüt Mine - 29
Kemess Underground Project - 13
Other(1) 5 -
Consolidated Total $109 $60
1) Thompson Creek Mine, Endako Mine (75% ownership), Langeloth facility and Corporate
Kumtor
Spending on sustaining capital of $49 million relates primarily to major overhauls, purchase of vehicles and
dewatering projects.
Growth capital investment at Kumtor for 2020 is forecast at $ 18 million which includes capital expenditures
for tailings dam lift and effluent treatment plant costs.
The cash component of capitalized stripping costs related to the development of the open pit is expected to be
$173 million of the $215 million total capitalized stripping estimated in 2020.
Mount Milligan
Sustaining capital expenditures are forecast to be $55 million and relate primarily to tailings storage facility
costs, major overhauls and water management costs.
Öksüt
Growth capital investment for 2020 is forecast at $29 million which includes capital expenditures to complete
the construction of the site.
The cash component of capitalized stripping costs related to the development of the open pit is expected to be
$20 million of the $21 million total capitalized stripping estimated in 2020.
Kemess Underground Project
In 2020, total spending at Kemess is estimated at $35 million, including $22 million for care and maintenance
for the year. The Company has authorized $13 million of capitalized pre-construction spending at the Kemess
Underground Project, with further spending subject to board approval.
Greenstone Gold Property
The 2020 expenditures relating to the Greenstone Gold Property (50- 50 joint venture with P remier Gold)
including the Hardrock Project continue to be under review given the ongoing legal dispute between the
Company and Premier Gold.
2020 Exploration Expenditures
Planned exploration expenditures for 2020 are expected to be $50 million, including approximately $32 million
for brownfields exploration (Kumtor - $20 million, Mount Milligan - $7 million, Öksüt - $3 million and Kemess
- $2 million) and the balance for greenfields and generative exploration programs.
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2020 Corporate Administration
Corporate and administration expense for 2020 is forecast to be $32 million to $38 million (including $6 million
to $8 million of stock-based compensation expense).
2020 Depreciation, Depletion and Amortization
Consolidated depreciation, depletion and amortization (DD&A) expense included in costs of sales expense for
2020 is forecasted to be in the range of $295 to $345 million, including Kumtor’s DD&A expense of $235 to
$255 million, Mount Milligan’s DD&A expense of $40 million to $60 million, and Öksüt’s DD&A expense of
$20 to $30 million.
2020 Taxes
Pursuant to the Restated Investment Agreement, Kumtor’s operations are not subject to corporate income taxes.
Instead, the Restated Investment Agreement imposes a tax of 13% on gross revenue plus 1% for the Issyk-Kul
Oblast Development Fund. The Mount Mill igan operations are subject to corporate income tax and British
Columbia mineral tax. At Öksüt, income tax is expected to be between $1 to $2 million. Corporate income tax
for 2020 is forecast to be nil, while British Columbia mineral tax is forecast to be between $2 and $4 million.
2020 Financing Costs
Financing costs for 2020 are expected to be $5 to $7 million. At December 31, 2019 the Company’s cash
balance was approximately $43 million (excluding $28 million of restricted cash) and the outstanding debt
balance was $78 million (Öksüt facility). At the end of 2019, the CAT lease facility was repaid and the Öksüt
facility was repaid on January 30, 2020 using lower cost funds from its corporate credit facility. In 2020, the
Company expects to initially utilize the corporate credit facility and expedite the repayment of its corporate
facility using available cash flow.
Molybdenum Business Unit
In 2020, the Company expects that the Langeloth metallurgical roasting facility, forming part of the
molybdenum business, will not generate sufficient operating margins to cover the costs of its two molybdenum
mines on care and maintenance, this assumption is based on a decline in the molybdenum price late in 2019 .
Care and maintenance expenses related to the Molybdenum unit are currently estimated to be between $12 and
$14 million for 2020.
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Sensitivities
Centerra’s revenues, earnings and cash flows for 2020 are sensitive to changes in certain key inputs or
currencies. The Company has estimated the impact of any such changes on revenues, net earnings and cash
from operations.
Change
Impact on
($ millions)
Impact on
($ per ounce
sold)
Operating
Costs &
Taxes
Capital
Costs
Financing
Costs Revenues Cash
flows
Net Earnings
(after tax)
AISC(2)(3) on
by-product
basis
Gold price $50/oz 5.1 – 5.6 - 1.5 – 1.6 34.5 – 38.2 27.9 – 31.0 27.9 – 31.0 0.2 – 0.5
Copper price 10% 4.7 – 5.3 - 0.6 – 0.7 17.0 – 19.0 11.7 – 13.0 11.7 – 13.0 21 - 23
Diesel fuel 10% 4.9 – 6.0 - - - 4.9 – 6.0 4.9 – 6.0 7 - 8
Kyrgyz
som(1) 1 som 1.2 - 1.6 - - - 1.2 - 1.6 1.2 - 1.6 1.5 – 2.0
Turkish
Lira(1) 1 lira 4.0 – 5.0 1.5 - 2.5 - - 5.5 - 7.5 4.0 – 5.0 8 - 9
Canadian
dollar(1) 10 cents 8.5 – 10.0 4.1 – 4.8 - - 12.6 – 14.8 8.5 – 10.0 13 - 15
1) Appreciation of currency against the U.S. dollar will result in higher costs and lower cash flow and earnings,
depreciation of currency against the U.S. dollar results in decreased costs and increased cash flow and earnings.
2) Non-GAAP measure. See discussion under “Non-GAAP Measures”.
3) AISC is calculated over the full year ounces sold forecast.
Production, cost and capital forecasts for 2020 are forward-looking information and are based on key
assumptions and subject to material risk factors that could cause actual results to differ materially and which
are discussed herein under the headings “Material Assumptions” and “Caution Regarding Forward-Looking
Information” in this document and under the heading “Risks That Can Affect Our Business” in the Company’s
most recently filed Annual Information Form.
Material Assumptions
Material assumptions or factors used to forecast production and costs for 2020 include the following:
• a gold price of $1,350 per ounce
• a copper price of $2.60 per pound
• a molybdenum price of $10.75 per pound
• exchange rates:
o $1USD:$1.30 Canadian dollar,
o $1USD:69.50 Kyrgyz som,
o $1USD:5.50 Turkish lira,
o $1USD:0.85 Euro,
• diesel fuel price assumption:
o $0.50/litre at Kumtor,
o $0.81/litre (CAD$1.06/litre) at Mount Milligan.
The assumed diesel price of $0.50/litre at Kumtor assumes that no Russian export duty will be paid on the fuel
exports from Russia to the Kyrgyz Republic. Diesel fuel for Kumtor is sourced from separate Russian suppliers.
The diesel fuel price assumes a price of oil of approximately $66 per barrel. Crude oil is a component of diesel
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fuel purchased by the Company, such that changes in the price of Brent crude oil generally impacts diesel fuel
prices. The Company established a hedging strategy to manage changes in diesel fuel prices on the cost of
operations at the Kumtor Mine with the objective to hedge approximately 75% of Kumtor’s 2020 diesel
purchases.
Other material assumptions used in forecasting production and costs for 2020 can be found under the heading
“Caution Regarding Forward-Looking Information” in this document. Production, cost and capital forecasts for
2020 are forward-looking information and are based on key assumptions and subject to material risk factors
that could cause actual results to differ materially and which are discussed under the heading “Risks That Can
Affect Our Business” in the Company’s most recent Annual Information Form.
Qualified Person & QA/QC – Production Information
The production information and other scientific and technical information presented in this document, including
the production estimates were prepared in accordance with the standards of the Canadian Institute of Mining,
Metallurgy and Petroleum and NI 43-101 and were prepared, reviewed, verified and compiled by Centerra’s
geological and mining staff. Gordon Reid, Professional Engineer, consultant and former Chief Operating
Officer, is the qualified person for the purpose of NI 43-101. Unless otherwise noted below, 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.
The Kumtor deposit is described in a NI 43-101 technical report dated March 20, 2015 and filed on SEDAR at
www.sedar.com. The technical report describes the exploration history, geology and style of gold
mineralization at the Kumtor deposit. Sample preparation, analytical techniques, laboratories used and quality
assurance-quality control protocols used are described in the technical report.
The Mount Milligan deposit is described in a NI 43- 101 technical report dated March 22, 2017 and filed on
SEDAR at www.sedar.com. The technical report describes the exploration history, geology and style of gold
mineralization at the Mount Milligan deposit. 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.
The Öksüt deposit is described in a NI 43-101 technical report dated September 3, 2015 and filed on SEDAR
at www.sedar.com. The technical report describes the exploration history, geology and sty le of gold
mineralization at the Öksüt deposit. 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.
Non-GAAP Measures
This document contains the following non-GAAP financial measures: all-in sustaining costs per ounce sold on
a by- product basis, all -in sustaining costs per ounce sold on a by- product basis including taxes, and all -in
sustaining costs per ounce sold on a co- product basis. 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 be applying the World Gold Council (“WGC”)
guidelines, which can be found at http://www.gold.org.