Centerra Gold Favourably Revises 2017 Guidance and Reports Net Earnings of $23 Million for the Second Quarter 2017
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NEWS RELEASE
Centerra Gold Favourably Revises 2017 Guidance and Reports Net Earnings of
$23 Million for the Second Quarter 2017
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
and six month period ended June 30, 2017. 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.
All references in this document denoted with NG, indicate a non-GAAP term which is discussed under
“Non-GAAP Measures”.
Toronto, Canada, July 31, 2017: Centerra Gold Inc. (TSX: CG) t oday reported net earnings of $23.4
million or $0.08 per common share (basic) on revenues of $279.2 million in th e second quarter of 2017,
compared to net earnings of $2.9 million or $0. 01 per common share (basic) on revenues of $160.4
million for the same period in 2016. In the second quarter of 2017, the Company adjusted its Mongolian
assets carrying value and recorded a pre-tax asset impairment of $41.3 million or $0.14 per common share
(basic).
The Company’s results include Thompson Creek operati ons for the three and six months ended June 30,
2017. Comparative results for the same periods in 2016 do not include Thompson Creek operations, as
the Company closed the acquisition of Thompson Creek Metals Inc. on October 20, 2016.
2017 Second Quarter Highlights
Produced a total of 195,719 ounces of gold, in cluding 138,623 ounces at Kumtor (an increase of
42% from the same period of 2016) and 57,096 ounces at Mount Milligan.
Sold a total of 188,225 ounces of gold in the quarter, including 135,235 ounces at Kumtor and
52,990 ounces at Mount Milligan.
Mount Milligan produced 15.1 million pounds of copper during the period and sold 14.4 million
pounds of copper.
Reduced carrying value of the Mongolian assets by $41.3 million (pre-tax).
Company-wide all-in sustaining costs on a by-product basis per ounce soldNG for the second
quarter were $742, excluding revenue-based tax in the Kyrgyz Republic and income tax.
Cash provided by operating activities before changes in working capitalNG of $121.9 million
(including $102.6 million from Kumtor and $29.9 million from Mount Milligan).
Cash generated from operations totaled $142.8 million.
Cash, cash equivalents and short-term invest ments at June 30, 2017 was $401.4 million
(including $299.2 million of restricted cash and investments at Kumtor).
Favourably revised gold production guidance at Kumtor to 525,000 to 555,000 ounces and
company-wide gold production guidance to 785,000 to 845,000 ounces.
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Lowered all-in sustaining cost NG guidance for Kumtor to $751 to $795 per ounce sold and
company-wide all-in sustaining costs on a by-product basis per ounce sold NG guidance to $693 to
$747.
Commentary
Scott Perry, CEO of Centerra Gold stated, “Duri ng the second quarter we continued to deploy our
Company-wide safety leadership program “Work Safe, Home Safe” to all our sites, but as we reported on
in the first quarter report this was over shadowed by a fatality in early April at Kumtor.”
“On the operational front, we had an excellent quarter producing 195,719 ounces of gold and 15.1 million
pounds of copper at a leading all-in sustaining cost on a by-product basis of $742 per ounce sold NG,
reflecting Mount Milligan achieving all-in sustaining costs on a by-product basis per ounce sold NG of
$473. At Mount Milligan over the quarter we are seeing the results of our continuous improvement
program as the mine achieved increased grades, recoveries and mill throughput with the mill achieving an
average daily throughput of 55,600 tonnes in June.”
“Financially, both operations generated a significa nt amount of cash from operations before working
capital changes NG during the quarter, Mount Milligan gene rated $29.9 million and Kumtor generated
$102.6 million.”
“With our second quarter earnings release today, the Company increased its gold production guidance for
Kumtor for the year to 525,000 – 555,000 ounces and Company-wide gold production to 785,000 to
845,000 ounces. We also lowered our expected all-in sustaining cost NG guidance at Kumtor to $751 to
$795 per ounce sold and Company-wide all-in sust aining costs on a by-product basis per ounce sold NG
guidance to $693 to $747. We are well positioned to achieve our revised gold production and cost
guidance for the year, ranking the Company in the bottom quartile on the global gold producers All-In
Sustaining Cost curve.”
“The Company continues to advance its discussions with the Government of the Kyrgyz Republic to
resolve all outstanding issues affecting the Kumtor Pr oject in a manner that will be fair to all of its
stakeholders.”
Exploration Update
Exploration activities during the quarter included drilling, trenching, geological mapping, soil/chip and
channel sampling, and geophysics at the Company’s various projects. Expenditures for second quarter of
2017 totalled $2.4 million compared to the second quar ter of 2016 of $3.1 million ($4.2 million in the
first half of 2017 compared to $5.1 million in the comparative period of 2016).
Turkey
Öksüt Gold Project
Drilling activities have restarted at Öksüt with eight drill holes completed for 970 metres. Results were
received for two holes testing the step-out from Keltepe NW and for two holes from the Güneytepe infill.
Assays from the first two holes were disappointing w ith no significant intercepts. The infill holes were
positive with better intervals being:
ODD0279 40.7 metres @ 0.44 g/t gold (“Au”) from 36.0 metres to 76.7 metres
ODD0280 107.5 metres @ 0.74g/t Au from 19.0 metres to 126.5 metres
including 26.7 metres @ 1.72 g/t Au from 25.0 metres to 51.7 metres
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Objectives for the 3,000 metre drill program are to upgrade the resources at Keltepe and Güneytepe, as
well as to confirm oxide mineralization at Keltepe NW, Yelibelen and Büyüktepe.
The above mineralized intercepts were calculated using a cut-off grade of 0.2 g/t Au and a maximum
internal dilution interval of 5.0 metres. Drill colla r locations and associated graphics are available at
the following link: http://media3.marketwire.com/docs/CGQ22017LOC.pdf
A listing of the drill results, drill hole locations and pl an map for the Öksüt 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.
Mexico
Glor Project
Nine drill holes have been completed at the Pitaya Targ et for a total of 1,942 metres. Results from this
program are mixed with only narrow anomalous gold in tervals identified, but these have added to the
understanding of the controls on the gold mineralization.
Additional field work is warranted with the goal of identifying drill targets for a second round of drilling
prior to the end of the year.
Other Projects
During the quarter, exploration drill permits have been received for the Yamaç Project in Turkey, Klippen
Project in Sweden and the Kapuyt Project in Armenia. Drilling activities are expected to start at these
properties in the third quarter.
Centerra continues to advance various exploration projects in Turkey, Armenia, Mexico, Nicaragua and
Sweden.
Qualified Person & QA/QC - Exploration
Exploration information and other related scientific and technical information in this news release
regarding the Öksüt Project were prepared in accordan ce with the standards of the Canadian Institute of
Mining, Metallurgy and Petroleum and National Inst rument 43-101 (NI 43-101) and were prepared,
reviewed, verified and compiled by Mustafa Cihan, Me mber of the Australian Institute of Geoscientists
(AIG), Exploration Manager at Centerra’s Turkish subsidiary Öksüt Madencilik A.Ş., who is the qualified
person for the purpose of NI 43-101. Sample prepara tion, analytical techniques, laboratories used and
quality assurance-quality control protocols used du ring 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 July 31, 2017, 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 and six months ended June 30, 2017 in comparison with the corresponding
period ended June 30, 2016. This discussion should be read in conjunction with the Company’s unaudited
condensed consolidated interim financial statements and the notes thereto for the three and six months ended
June 30, 2017. This MD&A should also be read in conjunction with the Company’s audited annual
consolidated financial statements for the years ende d December 31, 2016 and 2015, the related MD&A and
the Annual Information Form for the year ended Decembe r 31, 2016 (the “2016 Annu al Information Form”).
The Company’s unaudited condensed consolidated interim financial statements and the notes thereto for the
three and six months ended June 30, 2017, 2016 Annual Report and 2016 Annual Information Form are
available at www.centerragold.com and on the System for Electronic Document Analysis and Retrieval
(“SEDAR”) at www.sedar.com. 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.
All references in this document denoted with NG, indicate a non-GAAP term which is
discussed under “Non-GAAP Measures”.
1. Overview
Centerra is a gold mining company focused on ope rating, developing, expl oring and acquiring gold
properties in North America, Asia, and other market s worldwide. Centerra is a leading Canadian-based
gold producer and is one of the largest Western-based gold producers in Central Asia. Centerra’s principal
operations are the Kumtor Project located in the Ky rgyz Republic and the Mount Milligan Mine located
in British Columbia, Canada.
The Company’s significant wholly-owned subsid iaries include Kumtor Gold Company (“KGC” or
“Kumtor”) in the Kyrgyz Republic, Thompson Creek Metals Company Inc. (“Thompson Creek”) in
Canada, Langeloth Metallurgical Company LLC (“La ngeloth”) and Thompson Creek Mining Co. in the
United States of America (USA), Öksüt Madencilik Sa nayi 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 in terest in the Endako Mine in British Columbia,
Canada. It also owns a 50% partnership inter est in Greenstone Gold Mines LP (the“Greenstone
Partnership”) which owns the Greenstone Gold de velopment 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 interests in joint venture exploration properties
located in Canada, Mexico, Sweden and Nicaragua.
Centerra’s shares trade on the Toronto Stock Exch ange (TSX) under the symbol CG. The Company is
headquartered in Toronto, Ontario, Canada.
2. Market Conditions
Gold Price
During the second quarter of 2017, the gold price fluc tuated between a low of $1,220 per ounce and a
high of $1,294 per ounce. The average gold price for the second quarter of $1,257 per ounce, was
comparable to the second quarter of 2016 average of $1,259 per ounce, and a $38 per ounce increase
compared to the first quarter of 2017 average.
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Over the course of the second quarter of 2017, geopolitical uncertainty saw increased investor demand for
gold placing upward pressure on spot prices. However, gold remained below $1,300 per ounce as market
participants prepared for the second rate hike by th e US Federal Reserve in June 2017, along with the
potential for additional monetary tightening in the second half of the year.
Copper Price
The average copper price for the quarter was $2.57 per pound, a $0.42 per pound increase compared to
the second quarter of 2016 average of $2.15 per po und, and a $0.08 per pound decrease compared to the
first quarter of 2017.
Early in the second quarter of 2017, copper prices retreated, but recovered into the end of the quarter with
renewed optimism on Chinese demand, the world’s largest consumer of the metal.
Foreign Exchange Rates
USD to CAD
The average U.S. dollar exchange rate for the second quarter of 2017 strengthened by 4% when compared
to the average of the second quarter of 2016 (1.29), with rates in the second quarter of 2017 ranging from
1.30 to 1.37 and averag ing 1.34. The relative weakness of the U. S. dollar over the course of 2016 was
largely due to a recovery in oil prices from the first quarter of 2016 price of approximately $30 per barrel.
The first half of the second quarter of 2017 saw the a ppreciation of the U.S. dollar, with uncertainty in
Canada around U.S. government policy (specifically trade concerns resulting fro m North American Free
Trade Agreement (“NAFTA”) renegot iations and fears regarding the possible introduction of a border
adjustment tax) and cautious language from the Bank of Canada. The exchange rate reached a 14-month
high of 1.38 in the month of May. Indications from the Bank of Canada in the second half of the quarter
led many to believe an interest rate hike in Ca nada was imminent, causing the Canadian dollar to
strengthen and close the quarter at 1.30. The Bank of Canada announced an interest rate hike on July 12,
2017, further strengthening the Canadian dollar.
USD to Kyrgyz Som
The average U.S. dollar exchange rate for the second qua rter of 2017 was consistent with the average of
the second quarter of 2016 (68.4), with rates in the second quarter of 2017 ranging from 67.1 to 69.1 and
averaging 68.1. The Kyrgyz som continues to be pulled up by the strengthening of currencies of the
Kyrgyz Republic’s main trading partners – mainly Russia. The strengthening in the Russian ruble reflects
higher oil prices and an improving economic situation.
Foreign Exchange Transactions
The Company receives its revenues through the sal e of gold, copper and molybdenum in U.S.
dollars. The Company has operations in the Ky rgyz Republic, Turkey, Mongolia, United States of
America and Canada (where the Mount Milligan Mine and its corporate head office are also
located). During the first six months of 2017, the Company incurred combined expenditures (including
capital) totalling approximately $568 million. A pproximately $285 million of this (50%) was in
currencies other than the U.S. dolla r. The percentage of Centerra’s non-U.S. dollar costs, by currency
was, on average, as follows: 50% in Canadian dollars , 41% in Kyrgyz soms, 6% in Euros, and 3% in
Turkish lira, Mongolian tugriks and British pounds. Th e average value of the Turkish lira depreciated
against the U.S. dollar by approximately 3% from its value at December 31, 2016. The Euro, Mongolian
tugrik, British pound, Kyrgyz som and Canadian dollar appreciated against the U.S. dollar by
approximately 3%, 2%, 2%, 1% and 1%, respectivel y, from their value at December 31, 2016. The net
impact of these movements in the six months ended June 30 2017, after taking into account currencies
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held at the beginning of the year, was to increase an nual costs by $2.7 million (increase of $7.7 million in
the six months ended June 30 2016).
3. Consolidated Highlights Summary
($ millions, except as noted)
F inancial Highlights % Change % Change
Revenue $ 279.2 160.4 74% $ 564.5 233.3 142%
Cost of sales 165.2 116.8 41% 337.1 147.9 128%
Earnings from mine operations 108.5 40.5 168% 216.4 79.1 174%
Asset Impairment 41.3 - 100% 41.3 - 100%
Earnings from operations 24.2 1.3 1801% 89.7 19.8 354%
Net earnings $ 23.4 $ 2.9 715% $ 80.4 $ 21.0 282%
Cash provided by operations 142.8 57.2 150% 211.1 66.7 216%
Cash provided by operations before changes in working capital (3 ) 121.9 59.2 106% 244.7 86.4 183%
Capital expenditures (sustaining) (3 ) 18.9 13.7 38% 38.5 36.9 4%
Capital expenditures (grow th) (3 ) 9.8 14.4 (32%) 14.3 24.0 (40%)
Capital expenditures (stripping) 64.3 25.6 151% 128.9 39.7 225%
Total as sets $ 2,667.4 1,711.8 56% $ 2,667.4 1,711.8 56%
Long-term debt and long-term lease obligation 358.1 - 100% 358.1 - 100%
Cash, short-term investments and restricted cash 401.4 542.9 (26%) 401.4 542.9 (26%)
Share Data
Earnings per common share - $ basic (1 ) $ 0.08 0.01 700% $ 0.28 0.09 211%
Earnings per common share - $ diluted (1 ) $ 0.08 - 100% $ 0.27 0.08 238%
Per Ounce Data (except as noted)
Average gold spot price - $/oz (2 ) 1,257 1,260 0% 1,238 1,223 1%
Average copper spot price - $/lbs (2 ) 2.57 - 100% 2.61 - 100%
Average realized gold price - Kumtor (third party) - $/oz (3) 1,247 1,264 (1%) 1,233 1,238 0%
Average realized gold price (combined) - $/oz (3 ) 1,165 1,264 (8%) 1,169 1,238 (6%)
Operating Highlights
G old produced – ounces poured 195,719 97,724 100% 368,364 185,316 99%
Gold sold – ounces sold 188,225 127,909 47% 376,139 189,653 98%
Payable Copper Produced (000's lbs) 15,062 - 100% 27,658 - 100%
Copper S ales (000's payable lbs) 14,358 - 100% 27,970 - 100%
Operating costs (on a sales basis) (3 ) 84.1 60.4 39% 170.0 79.1 115%
Unit Costs
Adjusted operating costs - $/oz sold (3 )(4 ) $ 337 $ 512 (34%) $ 339 $ 467 (27%)
Gold - All -ins u s t aining costs on a by-product basis– $/oz
sold (3)(4) $ 742 $ 822 (10%) $ 746 $ 885 (16%)
Gold - All-in sustaining costs on a by-product basis (including
taxes) – $/oz sold (3) (4) $ 858 $ 1,000 (14%) $ 869 $ 1,060 (18%)
Gold - All-in sustaining costs on a co-product basis (including
taxes) – $/oz sold (3)(4) $ 789 $- - $ 792 $- -
Copper - All-in sustaining costs on a co-product basis
(including taxes) – $/pound sold (3 )(4 ) $ 1.58 $ - - $ 1.68 $ - -
2017 2016 (5 )
T hree months ended June 30, Six months ended June 30,
2017 2016 (5 )
(1) As at June 30, 2017, the Company had 291,281,206 common shares issued and outstanding (291,283,176 common shares as of July 31,
2017). As of July 31, 2017, Centerra had 5,228,696 share options outstanding under its share option plan with exercise prices ranging
from Cdn$3.82 per share to Cdn$42.71 per share, with expiry dates between 2017 and 2024.
(2) Average for the period as reported by the London Bullion Market Association (US dollar Gold P.M. Fix Rate) and London Metal
Exchange (LME).
(3) Capital expenditures (sustaining and growth), operating costs ( on a sales basis), adjusted operating costs per ounce sold, all- in
sustaining costs on a by-product or co-product basis (for gold a nd copper, in each case excluding and including taxes) per ounc e sold,
cash provided by operation before changes in working capital, as well as average realized gold pr ice per ounce and average real ized
copper price per pound are non-GAAP measures and are discussed under “Non-GAAP Measures”.
(4) Excludes Molybdenum business.
(5) No comparative results for Thompson Creek operations have been presented.
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4. Overview of Consolidated Results
Second Quarter 2017 compared to Second Quarter 2016
The Company recorded net earnings of $23.4 million in the second quarter of 2017, compared to net
earnings of $2.9 million in the comparative quarter of 2016, reflecting an asset impairment in Mongolia,
more gold ounces sold at Kumtor and the addition of the Mount Milligan operations, partially offset by
lower average realized gold pricesNG.
Production:
Gold production for the second quarter of 2017 totalle d 195,719 ounces. Gold production at Kumtor was
138,623 ounces in the second quarter of 2017, 42% higher than th e 97,724 ounces produced in the
comparative quarter of 2016. The increase in ounces pour ed at Kumtor is a result of milling higher grade
ore from stockpiles, compared to the lower grade ore mined and processed from the initial benches in cut-
back 17 during the comparative period. During th e quarter, Mount Milligan produced 57,096 ounces of
gold and 15.1 million pounds of copper
Safety and Environment:
Centerra had three reportable injuries in the second qua rter of 2017, which included a fatal injury of a
maintenance employee at Kumtor on April 11, 2017. Investigations involving the Kyrgyz State
Inspectorate for Environmental and Technical Safety have been completed and no charges are expected to
be filed. There were also two medical aid injuries in the quarter.
There were no reportable releases to the environmen t during the second quarter of 2017. However, on
July 9, 2017, a reportable spill occurred at Kumtor wh en a diesel fuel truck rolled over a safety berm on
the technical road on its way to the mine site. Approximately 8.8 tonnes of diesel leaked and was
contained, with no release in any water ways. Clean- up of the affected area was completed on the same
day. Kumtor continues to work closely with local authorities to complete the investigation.
Financial Performance:
Revenue increased by 73% to $279.2 million in the second quarter of 2017 as a result of more gold
ounces sold (188,225 ounces compared to 127,909 ounces in the second quarter of 2016), partially offset
by a 8% lower combined average realized gold price NG during the quarter ($1,165 per ounce compared to
$1,264 per ounce in the same quarter of 2016). Th e increase in gold ounces sold at Kumtor (135,235
ounces compared to 127,909 ounces in the same quarter of 2016) reflects the processing of higher grade
ore from stockpiles. In the second quarter of 2016, lower grade ore was mined and processed from the
initial benches in cut-back 17. Mount Milligan so ld 52,990 ounces of gold and 14.4 million pounds of
copper during the second quarter of 2017 which contri buted $78.0 million in revenues. The molybdenum
business contributed $32.6 million in revenues during the second quarter of 2017.
Cost of sales increased by 40% in the second quart er of 2017 ($165.2 million compared to $116.8 million
in the second quarter of 2016) mainly resulting fro m the significant increase in ounces sold from the
Kumtor mine and also reflecting the addition of Mount Milligan (gold and copper sales) and the
molybdenum business. Depreciation, depletion and am ortization (“DD&A”) associated with production
was $50.8 million in the second quarter of 2017 as compar ed to $56.4 million in the same period of 2016,
primarily due to processing the higher grade and lower cost cut-back 17 ore in the second quarter of 2017,
compared to the higher cost ore from cut-back 16 a nd from the initial benches of cut-back 17 that was
processed in the comparative period of 2016, partially offset by higher sales and the addition of Mount
Milligan and the molybdenum business in the second quarter of 2017.
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The Company reduced the carrying value of its Mongo lian assets by $41.3 million (pre-tax) in the second
quarter of 2017 to reflect the receipt of prelim inary results from the ongoing technical and economic
studies related to the Gatsuurt Project (incorporatin g updated capital and operating costs and the current
Mongolian tax and royalty regime) which were initiate d in 2016. As a result, the Company has reduced
the carrying value of the Mongolian assets to their estimated recoverable value of approximately $60
million. The Company is continuing to work on such studies to optimize the project and its value.
Operating Costs:
Operating costs (on a sales basis) increased to $84. 1 million in the second quarter of 2017 compared to
$60.4 million in the same period of 2016, reflecting greater ounces sold at Kumtor and lower operating
costs for consumables, partially o ffset by labour cost increases at Kumtor plus the addition of Mount
Milligan and molybdenum business costs.
Centerra’s all-in sustaining costs on a by-product basis per ounce of gold soldNG, which excludes revenue-
based tax and income tax, for the second quarter of 2017 decreased to $742 from $822 in the comparative
period mainly as a result of more ounces sold at Ku mtor ($10 per ounce) and the positive impact from the
addition of Mount Milligan ($106 per ounce). This was partially offset by higher capitalized stripping
and spending on maintenance and labour at Kumtor a nd incremental administration costs, as a result of
the Thompson Creek acquisition ($36 per ounce).
The increased sales volume at Kumtor in the second quarter of 2017 was due primarily to increased gold
production resulting from higher grades of ore processed from the stockpiles as compared to the same
period of 2016 (3.53 g/t compared to 2.63 g/t) and better recoveries (79.3% compared to 71.9%).
First Half 2017 compared to First Half 2016
Production:
Gold production for the first half of 2017 totalle d 368,364 ounces. Gold production at Kumtor was
266,023 ounces in the first half of 2017, 44% higher than the 184,168 ounces produced in the first half of
2016. The increase in ounces poured at Kumtor is a result of milling higher grade ore from stockpiles
(3.53 g/t compared to 2.46 g/t) and realizing highe r recoveries (77.6% compared to 73.3%) compared to
the same period in 2016. During the first half of 201 7, Mount Milligan produced 102,340 ounces of gold
and 27.7 million pounds of copper.