Centerra Gold Records Second Quarter 2018 Net Earnings of $43.5 million; Closes Sale of Royalty Portfolio; and Öksüt Construction on Track for First Gold Pour in Early 2020
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NEWS RELEASE
Centerra Gold Records Second Quarter 2018 Net Earnings of $43.5 million;
Closes Sale of Royalty Portfolio; and
Öksüt Construction on Track for First Gold Pour in Early 2020
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
periods ended June 30, 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 are 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, August 1, 2018: Centerra Gold Inc. (“Centerra” or “Company”) (TSX: CG) today
reported net earnings of $43.5 million or $0.15 per common share (basic) on revenues of $243.3 million in
the second quarter of 2018. The second quarter of 2018 results include a pre-tax gain of $28.0 million on
the sale of the Company’s royalty portfolio and $9.4 million on the recognition of the final instalments from
the sale of the Altan Tsagaan Ovoo property (“ATO property”). Excluding these items, adjusted earningsNG
in the second quarter of 2018 were $1.0 million or nil per common share (basic). During the same period
in 2017, the Company reported net earnings of $23.4 million or $0.08 per common share (basic) on revenues
of $279.2 million. Excluding the write-down of the Company’s Mongolian assets of $41.3 million ($39.7
million after tax), adjusted earnings NG in the second quarter of 2017 were $63.1 million or $0.22 per
common share (basic).
2018 Second Quarter Highlights
• Produced a total of 130,183 ounces of gold, including 83,803 ounces at Kumtor and 46,380 ounces
at Mount Milligan.
• Sold a total of 140,427 ounces of gold in the quarter, including 90,620 ounces at Kumtor and 49,807
ounces at Mount Milligan.
• Mount Milligan produced 16.5 million pounds of copper during the period and sold 12.7 million
pounds of copper.
• Company-wide all-in sustaining costs on a by-product basis per ounce soldNG were $996, excluding
revenue-based tax in the Kyrgyz Republic and income tax.
• Progressed construction of the Öksüt Project providing main road access and initiating site
preparation.
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• All conditions precedent on the $150 million Öksüt credit facility were satisfied on June 26, 2018
with an initial draw of $15 million occurring on June 29, 2018.
• Construction permit received for the Kemess Project on July 6, 2018. Pre -construction activities
continue. No construction decision has yet been made.
• Sold the Company’s gold royalty portfolio for $155 million, recognizing a gain of $28.0 million.
• Recognized the final instalments of the purchase price receivable from the sale of the ATO property
with an additional $9.4 million after tax gain recognized in the quarter on the sale; the total gross
proceeds increased to $19.8 million and a total after tax gain recognized on the sale of $16.3 million.
• Sold a silver stream on the Kemess Project for $45 million with first of four stream payments to be
received when a construction decision is made on the project.
• Cash provided by operating activities before changes in working capitalNG of $47.6 million.
• Cash, cash equivalents, restricted cash and short -term investments at June 30, 2018 were $215.5
million.
Mount Milligan Water Matters
Mount Milligan c ontinues to face potential limitations due to water supply, a situation exacerbated by
minimal inflow from snow melt and less than expected precipitation experienced in 2018. Centerra has
applied to British Columbia regulators to access additional water sources through July 2020. While the
Company fully expects to receive the necessary approvals, the timing of such approval is uncertain and
outside the control of the Company.
In addition to these water matters, throughput in the third quarter of 2018 will be reduced as a result of a
10-day unscheduled shutdown of the primary crusher for maintenance in July and a scheduled 5- day BC
Hydro maintenance shutdown in September.
If regulatory approvals to access water sources are not received as expected and given the expected
maintenance shutdowns, the Mount Milligan mill would need to operate only one ball mill to conserve
water and throughput would be reduced to approximately 30,000 tpd for the fourth quarter. At that rate,
the outlook for 2018 production at Mount Milligan would be reduced to 175,000-195,000 payable ounces
of gold and 40-47 million payable pounds of copper.
If however the Company receives approval to access short-term water sources in the fourth quarter of 2018,
second half throughput could be increased.
See “Operating Mines and Facilities – Mount Milligan Mine – Water Availability” and “2018 Outlook” for
further details.
Sale of Royalty Portfolio and Kemess silver stream
On May 17, 2018, the Company announced that its wholly -owned subsidiary , AuRico Metals Inc.
(“AuRico” or “AMI”), entered into agreements to sell AMI’s royalty portfolio (the “Royalty Sale”) and a
silver stream on the Kemess Project (the “Kemess Stream”) for combined aggregate proceeds of $200
million. The Royalty Sale, for up- front cash proceeds of $155 million, was subject to customary
adjustments, including an economic effective date of April 1, 2018. The Royalty Sale was completed and
funds received on June 27, 2018. A pre -tax gain of $28.0 million was recorded in the C ompany’s second
quarter 2018 results.
The Kemess Stream consists of the sale of 100% of the silver production from the Kemess Project for cash
consideration of $45 million as advance payments, payable in tranches starting on the public announcement
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by Centerra that its board of directors has approved a construction decision with respect to the Kemess
underground development project and the three succeeding anniversaries of such date. Accounting for this
sale will commence once conditional payments are received.
Sale of ATO Property – Remaining Instalments
On January 31, 2017, the Company entered into a definitive agreement to sell the ATO property, located in
Eastern Mongolia for gross proceeds of $19.8 million. Upon closing of the agreement in September 2017,
the Company received a first instalment and recorded a pre-tax gain of $9.8 million ($6.9 million after-tax).
The remaining balance is scheduled to be received in payments of $5 million on each of September 30,
2018 and September 30, 2019. At the time of closing, the Company delayed recognition of the gain on the
final two instalments of the sale due to payment uncertainties. Following completion of the purchaser’s
initial public offering in the second quarter of 2018, the Company recorded an after-tax gain of $9.4 million
in the current quarter.
Subsequent to June 30, 2018
On July 6, 2018 the Company’s subsidiary, AuRico Metals Inc., received the amended Mines Act Permit
from the Province of British Columbia Ministry of Energy, Mines & Petroleum Resources approving the
mine plan and reclamation program for the Kemess Underground Project. Subject to certain conditions on
future reclamation and bonding requirements, this permit allows the Company to commence construction
activities associated with the water treatment and water discharge system, and would allow the Company
to commence construction if a decision to proceed with the development of the project is made by the
Company’s board of directors. The Company is still awaiting receipt of other p ermits, including the
Effluent Discharge Permit and the Air Emissions Permit. No construction decision has, as yet, been made
on the Kemess Project. See “Other Corporate Developments” and “Development Projects – Kemess
Underground Project”.
Commentary
Scott Perry, President and Chief Executive Officer of Centerra stated, “We had another safe quarter at our
operations and construction sites as our employees embrace our Work Safe – Home Safe program. We
continue to roll out phase two of the program as we drive to zero harm within the work place.”
“The operations produced a total of 130,183 ounces of gold and 16.5 million pounds of copper in the
quarter. Kumtor’s gold production was lower as expected but Mount Milligan achieved better than
expected mill throughput which led to higher than planned gold and copper production. At Mount Milligan,
the additional volumes of water from the spring melt allowed us to ramp up mill throughput quicker
enabling the mill to achieve an average of 52,081 tonnes per operating day during the quarter. The mill
performed very well during the quarter with little to no unplanned downtime and achieved an average
throughput of greater than 60,000 tpd over a 30 consecutive day period. As a matter of fact, it achieved a
record daily throughput in excess of 75,000 tonnes per day for 2 days in a row.”
“Company-wide our all-in sustaining costs (before taxes)NG were $996 per ounce for the quarter bringing
year-to-date to $963 per ounce. The higher cost quarter was planned due to the processing of lower grade
materials at Kumtor. Kumtor remains on track to access the higher grade material in the fourth quarter.”
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“Construction activity also continued at the Öksüt Project in Turkey with main access road construction,
site road construction and the clearing of top soil for various installations including the heap leach pad site
and other site infrastructure. The Company met all conditions of the $150 million OMAS credit facility
with the initial draw occurring in the quarter.”
“Another significant milestone was achieved just after the quarter end with the Kemess Project receiving
the amendment to its Mines Act Permit, thereby approving the underground mine plan and reclamation
program for the Kemess Underground Project. We are still waiting receipt of other permits, but are very
pleased with the overall progress at Kemess. ”
“Financially, the business delivered approximately $48 million of consolidated cash provided by operations
before changes in working capitalNG in the quarter. Kumtor and Mount Milligan generated $52 million and
$21 million respectively, before working capital changes.”
Exploration Update
Exploration expenditures in the second quarter of 2018 totaled $4.8 million compared to $2.4 million in the
same quarter of 2017. Exploration activities during the second quarter included drilling, trenching, surface
sampling, geological mapping and geophysical surveying at the Company’s various projects.
Kyrgyz Republic
Kumtor Mine
Kumtor has designed and initiated a two-year 60,000 metre drill program to test potential extensions of
gold mineralization along the Kumtor trend. The program is focused within the Central, South-West and
Sarytor pits and the North-East Target area. A new budget of $18 million has been allocated to the program
with $6.5 million for 2018 and $11.5 million budgeted for 2019.
Drilling in 2018 is planned to test near surface targets, including the Hockey Stick Zone, the north-west
periphery of the Central Pit and the corridor between the Central Pit and South-West Pit.
During the second quarter of 2018 five diamond drill holes were completed for a total of 824 metres at the
southwest end of the Central Pit (Hockey Stick Zone). The first two holes failed due to poor ground
conditions and were terminated well above the inferred mineralized zone. Assay results have returned for
one hole which intersected similar mineralization style to the ore body near the surface of the current open
pit. A significant intercept was identified:
D1783: 9.9 metres @ 5.75 g/t Gold (“Au”) from 207.8 metres.
Drilling will continue in the Central Pit in the Hockey Stick Zone followed up with a 1,700 metre program
in the South-West Area.
The above mineralized intercept was calculated using a cut-off grade of 1.0 g/t Au, minimum interval of 4.0
m and a maximum internal dilution interval of 5.0 metres. Drill collar locations and associated graphics
are available at the following link:
http://resource.globenewswire.com/Resource/Download/e538193a-2842-4a0c-9ee7-0117eb4ffc94
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A listing of the drill results, drill hole locations and plan map for the Kumtor 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.
Canada
Mount Milligan Mine
Exploration activities in the second quarter of 2018 at Mount Milligan included near-pit infill and expansion
drilling in multiple zones of the porphyry copper-gold deposit, the start of brownfield exploration drilling
(within the mine lease), start of greenfield exploration drilling (outside the mine lease) and geophysical
surveying.
The near-pit diamond drilling program was completed in the second quarter for a total of 10,595 metres in
28 drill holes. Assay results continue to demonstrate significant intervals of copper and gold in under-drilled
areas within and under the ultimate pit. Selected best results include:
18-1064: 42.9 metres @ 0.54 g/t Au, 0.12% Copper (“Cu”) from 111.9 metres;
18-1067: 28.7 metres @ 0.58 g/t Au, 0.09% Cu from 534.0 metres;
18-1068: 97.3 metres @ 0.41 g/t Au, 0.18% Cu from 225.0 metres;
18-1069: 100.8 metres @ 0.42 g/t Au, 0.36% Cu from 23.0 metres;
18-1071: 102.0 metres @ 0.30 g/t Au, 0.25% Cu from 184.0 metres;
18-1072: 75.0 metres @ 0.24 g/t Au, 0.16% Cu from 237.0 metres;
18-1074: 124.0 metres @ 0.41 g/t Au, 0.33% Cu from 57.5 metres;
18-1075: 43.8 metres @ 0.28 g/t Au, 0.28% Cu from 15.2 metres;
18-1076: 22 metres @ 0.28 g/t Au, 0.48% Cu from 123.6 metres.
The 2018 brownfield exploration drilling program is focused on three target areas within the mine lease up
to a kilometre west of the ultimate pit. Drilling was initiated and is targeting coincident geophysical
anomalies and copper-gold grades similar to those in the current resource at Mount Milligan. Four drill
holes have been completed for 2,037 metres. Assay results are pending.
The 2018 greenfield exploration (off mine lease) was initiated in the second quarter and included a ground-
based Induced Polarization (IP) geophysical survey east of the mine lease and the start of a helicopter
supported drilling program. The drill program is testing coincident geophysical targets in two areas outside
the mine lease, being the D2 target about 3 kilometres to the west and the Mitzi Target 3 kilometres north
of the mine. Two drill holes for 977 metres have been completed in the D2 zone west of the mine lease.
Assay results are pending.
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:
http://resource.globenewswire.com/Resource/Download/e538193a-2842-4a0c-9ee7-0117eb4ffc94
1 University Avenue, Suite 1500 6
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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.
Turkey
Öksüt Gold Project
At the Öksüt Gold Project, drilling activities commenced in the second quarter with one drill rig at Keltepe
NW and then continued to the western edge of the Keltepe Pit. Five drill holes were completed totaling
1,110 metres. The 2018 drilling program is designed to upgrade resources and test for supergene copper
mineralization at depth in the immediate area west of the Keltepe Pit, as well as to target gold and porphyry
style Cu-Au mineralization in the surrounding prospects at Keltepe NW, Yelibelen and Büyüktepe and
Boztepe.
All the drill holes completed so far have intercepted Au mineralization, with some of the better intervals
being:
Keltepe (Testing western pit wall for resource expansion/conversion)
ODD0307: 24 metres @ 0.93 g/t Au from 66 metres;
Including 8.9 metres @ 1.77 g/t Au from 72.6 metres;
Keltepe NW (Exploration, testing oxide gold)
ODD0304A: 25.9 metres @ 0.41 g/t Au from 76.5 metres.
These intercepts warrant additional drilling and a second drill rig is scheduled to be on site at the beginning
of the third quarter of 2018.
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 collar locations and associated graphics are available at the
following link:
http://resource.globenewswire.com/Resource/Download/e538193a-2842-4a0c-9ee7-0117eb4ffc94
A listing of the drill results, drill hole locations and plan map for the Öksüt Gold 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.
Greenfields Exploration
Yamaç Project
Exploration activities at the Yamaç Project in Turkey during the second quarter of 2018 included a 360 line
kilometres aeromagnetic survey, a 1.4 square kilometre 3D IP survey in the northern area of previous
drilling and detailed geological mapping. The permitting process is ongoing for further step-out drill testing
at 200 metre step-outs which is anticipated to start in the third quarter of 2018.
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Other Projects
During the second 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 Kumtor Mine were prepared in accordance with the standards of National Instrument 43-101 (“NI 43-
101”) and were prepared, reviewed, verified and compiled by Boris Kotlyar, a member with the American
Institute of Professional Geologists (AIPG), Chief Geologist, Global Exploration with Centerra Gold Inc.,
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. The
Kumtor deposit is described in Centerra’s most recently filed Annual Information Form and a technical
report dated March 20, 2015 (with an effective date of December 31, 2014), which are both filed on SEDAR
at www.sedar.com.
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. The
Mount Milligan deposit is described in Centerra’s most recently filed Annual Information Form and a
technical report dated March 22, 2017 (with an effective date of December 31, 2016) prepared in accordance
win NI 43-101, both of which are available on SEDAR at www.sedar.com.
Exploration information and other related scientific and technical information in this news release regarding
the Öksüt Project were prepared in accordance with the standards of the Canadian Institute of Mining,
Metallurgy and Petroleum and National Instrument 43-101 (NI 43-101) and were prepared, reviewed,
verified and compiled by Mustafa Cihan, Member 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 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 Öksüt deposit is described in
Centerra’s most recently filed Annual Information Form and in a technical report dated September 3, 2015
(with an effective date of June 30, 2015) prepared in accordance with NI 43-101 both of which are available
on SEDAR at www.sedar.com.
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This Management Discussion and Analysis (“MD&A”) has been prepared as of July 31, 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 and six months ended June 30, 2018 in comparison with the corresponding periods
ended June 30, 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 and six months ended June 30, 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 and six months ended June 30, 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.
1. 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 Metal lurgical Company LLC (“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. 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 i n 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 July 31, 2018, there are 291,937,809 common shares issued and outstanding and options to acquire
6,136,396 common shares outstanding under its stock option plan.
2. Market Conditions
Gold Price
During the second quarter of 2018, the gold price decreased by 7%, falling from $1,341 as at March 31 to
$1,253 per ounce as at June 30. The average gold price for the second quarter was $1,306 per ounce, $48