Centerra Gold Repays $112 Million of Debt in Third Quarter 2017 and Generates $62 Million Free Cash FlowNG
1 University Avenue, Suite 1500 1
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NEWS RELEASE
Centerra Gold Repays $112 Million of Debt in Third Quarter 2017
and Generates $62 Million Free Cash FlowNG
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 nine month
period ended September 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, October 31, 2017: Centerra Gold Inc. (TSX: CG) today reported a net loss of $0.8
million or $nil per common share (basic) on revenues of $276.2 million in the third quarter of 2017. The
third quarter 2017 result includes a one-time charge of $60 million ($0.20 per share) as a result of the
settlement reached with the Government of the Kyrg yz Republic and a gain from proceeds received of
$9.8 million ($6.9 million net of tax or $0.02 per shar e) on the sale of the ATO property in Mongolia.
Excluding these items, adjusted earnings NG in the third quarter 2017 were $52.3 million or $0.18 per
common share (basic). During the same period in 2016, the Company reported net earnings (and adjusted
earningsNG) of $66.9 million or $0.28 per common share (basic) on revenues of $218.7 million.
The Company’s results include Thompson Creek ope rations for the three and nine months ended
September 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 Company Inc. on October
20, 2016.
2017 Third Quarter Highlights
Entered into a comprehensive settlement agreement with the Government of the Kyrgyz Republic
to resolve all the outstanding matters affecting the Kumtor Project. Closing expected in the
fourth quarter.
Repaid $111.9 million of debt in the quarter under the Company’s credit facilities.
Produced a total of 200,201 ounces of gold, including 138,561 ounces at Kumtor and 61,640
ounces at Mount Milligan.
Sold a total of 174,099 ounces of gold in the qua rter, including 99,514 ounces at Kumtor and
74,585 ounces at Mount Milligan. Kumtor’s gold sales to the refinery were limited in the quarter.
Mount Milligan produced 13.7 million pounds of copper during the period and sold 18.6 million
pounds of copper.
Company-wide all-in sustaining costs on a by-product basis per ounce soldNG for the third quarter
were $722, excluding revenue-based tax in the Kyrgyz Republic and income tax.
Cash generated from operations totaled $119.5 million.
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Cash provided by operating activities before changes in working capitalNG of $108.0 million
(including $74.3 million from Kumtor and $48.0 million from Mount Milligan).
Cash, cash equivalents and short-term investments at September 30, 2017 was $352.1 million.
Gold doré inventory held at Kumtor as of September 30, 2017 valued at market at $53.4 million.
Revised Company-wide gold production guidan ce for 2017 to 775,000 to 815,000 ounces
reflecting increased production guidance at Kumtor and lower payable gold production guidance
at Mount Milligan.
Completed an updated feasibility study on the Gatsuurt Project which shows total open pit
mineral reserves of 1.3 million contained ounces of gold (15.4 million tonnes at an average gold
grade of 2.7 grams per tonne gold), using a gold price assumption of $1,250 per ounce of gold.
Commentary
Scott Perry CEO of Centerra Gold stated, “During th e third quarter both of our operating sites completed
the deployment of our Company-wide safety leadership program “Work Safe, Home Safe” with every
employee. For the rest of the year we will continue to deploy the program at the balance of our sites, so
that by year-end every Centerra employee will have received training.”
“In the quarter, we achieved an important milestone when we reached a comprehensive settlement
agreement with the Government of the Kyrgyz Republic to resolve all of the outstanding matters affecting
the Kumtor Project. The settlement provides for the lifting of all restrictions on the freedom of movement
of Kumtor employees as well as the restrictions on the ability of Kumtor to distribute funds to Centerra.
The agreement also provides business certainty for fu ture mining operations at the Kumtor Project, as it
preserves all rights of Centerra and Kumtor under the Kumtor Project Agreements.”
“Operationally, we had a good qua rter producing 200,201 ounces of gold and 13.7 million pounds of
copper at a low all-in sustaining cost on a by-product basis of $722 per ounce sold NG, reflecting Mount
Milligan achieving all-in sustaining costs on a by-product basis per ounce soldNG (before tax) of $437.”
“Financially, both operations generated a significa nt amount of cash from operations before working
capital changes NG during the quarter, Mount Milligan gene rated $48.0 million and Kumtor generated
$74.3 million.”
“The lifting of Kumtor’s cash restriction along with the positive cash flow generated from both our
operations during the quarter enabled the Company to aggressively pay down its debt by approximately
$112 million. Looking forward to the fourth quarter, our production levels are expected to increase which
means the Company’s cash position should continue to grow as the operations continue to generate
positive cash flows. We are well positioned to achie ve our updated production and cost guidance for the
year, ranking the Company in the lower-cost quartile on the global gold producers All-In Sustaining Cost
curve.”
Management Changes
The Company also announces that Frank Herbert, Preside nt of Centerra will be retiring at December 31,
2017. Mr. Herbert joined Centerra in 2004 as Genera l Counsel and was named President in 2015. In
recognition of Frank’s service, Stephe n Lang, Chairman of Centerra, stated “On behalf of the Board of
Directors and the Company, I thank Frank for his l eadership, hard work and integrity as well as his
thoughtful advice and contributions to the strategic direction of the Company during his many years of
service, particularly in the area of government rela tions and negotiations with the Kyrgyz Republic and
Mongolia. We wish Frank well in his retirement.”
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As part of the Company’s succession plan, Mr. Yousef Rehman, Senior Legal Counsel, will be promoted
to General Counsel. Mr. Herbert will work with Mr. Rehman to ensure a smooth transition. Yousef
joined Centerra in 2013. Prior to joining Center ra, Yousef worked in the private sector and with
Stikeman Elliott LLP on M&A and securities transacti ons. Since joining Centerra, Yousef has been
involved in all of the Company’s significant strate gic initiatives, including the acquisition of Thompson
Creek Minerals and the recently announced Strategi c Agreement with the Kyrgyz Republic. Yousef
holds undergraduate and law degrees from the University of Toronto and was called to the Ontario Bar in
2007. Additionally, upon Mr. Herbert’s retirement, Scott Perry, CEO of Centerra will take on the added
title of President of Centerra. Mr. Perry joined Centerra and was named CEO in 2015.
Exploration Update
Exploration activities during the third quarter included drilling, geological mapping, soil/chip and channel
sampling, and geophysics at the Company’s various projects. Exploration expenditures for the third
quarter of 2017 totalled $2.5 million compared to $3.5 million in the same period of 2016 ($6.6 million in
the first nine months of 2017 compared to $8.6 million in the comparative period of 2016).
During the quarter, drilling activities were initiated at the Northern and Southern Siuna Project in
Nicaragua (Calibre JV), the Kli ppen and Käringberget project areas in Sweden (Erris Resources JV) and
the Kapyut Project in Armenia (100% owned). At the Yamaç Project in Turkey (100% owned) a drill
program is expected to commence in the fourth qu arter 2017. Centerra continues to advance other
exploration opportunities in Turkey, Armenia, Canada, Mexico, Nicaragua and Sweden.
Brownfields Exploration
Turkey
Öksüt Gold Project
Drilling activities continued during the quarter at Öksü t with 12 drill holes completed for 1,870 metres, at
a cost of $0.3 million ($0.6 million in the first nine m onths of 2017). The in-pit infill diamond drill holes
were encouraging for both the Keltepe and Güneytepe deposits with some of the better intervals being:
Keltepe (in pit)
ODD0290 from 81.8 to 231.2 metres; 148.9 metres @ 2.41 g/t gold (“Au”)
including 38.3 metres @ 5.96 g/t Au from 111 to 149.3 metres.
ODD0291 from 71.6 to 209.4 metres; 137.3 metres @ 1.47 g/t Au
including 5.5 metres @ 2.48 g/t Au and 65.4 metres @ 2.32 g/t Au
Güneytepe (in pit)
ODD0281 from the surface; 80.8 metres @ 1.23 g/t Au
ODD0282 from 21.9 to 71.5 metres 49.6 metres @ 0.58 g/t Au
including 12 metres @1.28 g/t Au
ODD0283 from the surface; 42.3 metres @ 1.07 g/t Au
ODD0284 from 72.5 to 83.7 metres 11.2 metres @ 0.35 g/t Au
These results will be incorporated into the year-end reserves/resources update.
The 2017 objectives for the 3,000 metres drill progra m were to upgrade the resources at Keltepe and
Güneytepe, as well as to confirm oxide mineralizati on at Keltepe NW, Yelibelen and Büyüktepe target
areas. The success of the infill drilling at both Kelte pe and Güneytepe has warranted an additional 1,000
metres to be added to the 2017 drill program to im prove the resource model and to close off Güneytepe
mineralization.
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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/CGQ32017LOC.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.
Canada
Mount Milligan Mine
A near pit drilling program (within the ultimate open pit) was completed in the third quarter for a total of
3,168 metres in six diamond drill holes. Drilling costs in the third quarter and first nine months of 2017
were $0.5 million and were charged to operating costs. Results for three holes were available at the end
of the quarter. Intersected mineralization and some of the better results are:
17-039 from 103 to 151 metres; 48 metres @ 0.23 g/t Au, 0.25% Cu
17-040 from 164 to 198 metres; 34 metres @ 0.39 g/t Au, 0.38% Cu
17-041 from 46 to 134 metres; 88 metres @ 0.27 g/t Au, 0.16% Cu
These results, along with the results from the remainde r of the planned program (3,650 metres), will be
incorporated into the year-end reserves/resources update.
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 lo cations and associated graphics are available at the
following link: http://media3.marketwire.com/docs/CGQ32017LOC.pdf
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.
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 preparation, 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.
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 NI 43-101 and
were prepared, reviewed, verified and compiled by C. Paul Jago, Member of the Engineers and
Geoscientists British Columbia, Expl oration 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 explora tion drilling programs are
done consistent with industry standards and independent certified assay labs are used.
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Toronto, ON
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tel. 416-204-1953
fax 416-204-1954
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Gastuurt Project Update
In October 2017, the Company completed a feasibilit y study for the Gatsuurt Project (“the Feasibility
Study”) located in central northern Mongolia. Th e Feasibility Study incorporates results from the
technical and economic studies initiated in 2016, furt her optimization studies completed in 2017, updated
capital and operating costs and the current Mongolian tax and royalty regime.
Highlights of the Feasibility Study:
Total open-pit mineral reserves of 1.3 million c ontained ounces of gold (15.4 million tonnes at an
average gold grade of 2.7 grams per tonne gold (g/t Au) using a gold price assumption of $1,250
per ounce;
Mineral reserves consist of 339, 000 contained ounces of gold in oxide material (4.9 million
tonnes grading 2.2 g/t Au) and 977, 000 contained ounces of gold in refractory sulphide material
(10.5 million tonnes grading 2.9 g/t Au);
Life-of-mine (“LOM”) gold production of 1.1 million ounces and 10 years of operations; average
annual gold production of 111,000 ounces;
Mill throughput of 4,800 tonnes per day (tpd) with average LOM mill head grade of 2.7 g/t Au
and 84.4% recovery;
Planned conventional open pit and contract mining;
LOM strip ratio of 4.7:1 (waste:ore);
Total LOM construction capital cost of $245 m illion, includes Boroo mill refurbishment ($8
million), upgrades to the existing 55 km haul road ($14 million), a new 110kv and 35kv power
line ($12 million), expansion of the existing ta ilings management facility ($21 million), water
diversion and treatment ($10 million), the addition of flotation circuit, BIOX® plant and CIP
plant ($95 million), owner’s costs ($28 million) and a contingency of $27 million;
Total LOM sustaining capitalNG of $36.6 million excluding closure costs of $13.9 million;
LOM all-in sustaining cost NG of $870 per ounce sold; after inclusion of growth capital NG, LOM
all-in costNG (excluding taxes) is $1,103 per ounce sold;
After-tax payback period of 7 years; and
After-tax net present value of (NPV) at 5% discount rate of $39.4 million, and an after-tax 9.3%
project internal rate of return (“IRR”) on a pre-finance basis.
The Company has not made a development or constr uction decision on the Gatsuurt Project and expects
to restart negotiations with the Mongolian Governme nt based on the results of the Gatsuurt Feasibility
Study.
The economic analysis in the Feasibility Study is b ased on the current Mongolian tax and royalty regime
which includes a 25% income tax, a government royalt y of 9%, a 3% estimated special royalty to the
Mongolian Government and a 3% royalty held by a previous owner of the Gatsuurt Project. The
Feasibility Study and LOM plan are subject to a number of assumptions and risks noted in the Material
Assumptions and Risks Section (stated below).
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Gatsuurt Mineral Resource and Reserve Summary
Mineral Reserves 1
Classification Tonnes (‘000) Grade (Au g/t) Ounces (000)
Probable 15,356 2.7 1,316
1) The mineral reserve has been calculated using a gold price of $1,250 per ounce and have been validated by the positive
project NPV that uses a 5% discount rate.
Mineral Resources (Exclusive of Mineral Reserves) 1
Classification Tonnes (‘000) Grade (Au g/t) Ounces (000)
Indicted 10,988 1.9 678
Classification Tonnes (‘000) Grade (Au g/t) Ounces (000)
Inferred 3,812 2.1 263
1) The mineral resources are exclusive of mineral reserves a nd have estimated on the basis of a gold price of $1,450 per
ounce. The resources have been constrained by an economic open pit in accordance with CIM best practices.
The Feasibility Study plan for mining is to occur in two phases, initially targeting the oxide material that
can be milled at the existing Boroo processing facility fo llowed by the refractory sulphide material which
requires the addition of a BIOX ® circuit. The processing plan is to refurbish the existing Boroo mill to
process the oxide material in the first three years while the BIOX ® circuit is being constructed which will
treat the refractory sulphide material in years 4 through 10. Initial capital expenditures for the processing
of the oxide material are expected to be approximately $76 million excluding contingency of $8 million.
The LOM operating cost estimates used in the Feasi bility Study on a per tonne processed basis are:
mining $10.97, ore haulage $5.37, oxide pr ocessing $11.90, sulphide processing $26.42 and
administration $8.92.
A technical report for the Gatsuurt Project will be pr epared in accordance with National Instrument 43-
101 and will be filed on SEDAR at www.sedar.com and on the Company’s websites before year-end.
Material Assumptions & Risks
Material assumptions or factors that have been used in the Mineral Reserve and Mineral Resource
estimates and the Gatsuurt Feasibility Study and LOM plan include the following:
A gold price of $1,250 per ounce,
An exchange rate of 2,200 MNT: US$1.
Other important assumptions (and corresponding risks) that are implicit in the Mineral Reserve and
Mineral Resource estimates and Gatsuurt Feasibility Study and LOM plan are as follows:
All necessary permits, licenses, and approvals, including the EA/EIS and waste dump
footprints, are received in a timely manner;
All licenses held by Centerra in relation to th e Gatsuurt Project and all related administrative
acts remain in good standing and are not revoked.
Ore tonnes, grade and metallurgical recoveries at the Gatsuurt Project remain consistent with
the LOM plan to achieve the forecast gold production;
Tax and royalty rates remain at current levels for the life of the project;
Power and water supply will remain uninterrupted during operations;
No unplanned delays in or interruption of scheduled production at the Gatsuurt Project,
including due to labour disruptions, civil unr est, natural phenomena, regulatory or political
disputes, equipment breakdown, or other developmental and operational risks; and
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The Gatsuurt Project does not make allowance for inflation, changes in exchange rates and
movements in gold prices.
Production and cost forecasts and capital estimates ar e forward-looking information and are based on key
assumptions and subject to material risk factors.
Qualified Person & QA/QC
The feasibility study was undertaken by Centerra staff w ith the assistance of several external consultants.
Reserve and resource estimates, life-of-mine plan and other scientific and technical information in this
news release were prepared in accordance with the standards of th e Canadian Institute of Mining,
Metallurgy and Petroleum and National Instrument 43-101 – Standards of Disclosure for Mineral Projects
(“NI-43-101”) and were reviewed, verified and compiled by Centerra’s geological and mining staff under
the supervision of Gordon Reid, Professional Engi neer and Centerra’s Vice-President and Chief
Operating Officer, who is the qualified person for th e purpose of NI-43-101. Sample preparation,
analytical techniques, laboratories used and qualit y assurance-quality control protocols used during the
exploration drilling programs on the Gatsuurt Project have been done consistent with industry standards
and independent certified assay labs have been used. Available quality control data indicates that the gold
assay data used for resource estimation are reliable.
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This Management Discussion and Analysis (“MD&A”) has been prepared as of October 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 nine months ended September 30, 2017 in comparison with
the corresponding period ended September 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 nine months ended September 30, 2017. This MD&A should also be read in conjunction with the
Company’s audited annual consolidated financial statements for the years ended December 31, 2016 and
2015, the related MD&A and the Annual Information Form for the year ended December 31, 2016 (the “2016
Annual Information Form”). The Company’s unaudited condensed consolidated interim financial statements
and the notes thereto for the three and nine months ended September 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 Mine locat ed in the Kyrgyz 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 , 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.
It also owns a 50% partnership interest in Greens tone Gold Mines LP (the “Greenstone Partnership”)
which owns the Greenstone Gold development prope rty including the Hardrock deposit, located in
Ontario, Canada. See “Operating Mines and Faciliti es”, “Development Projects” and “Other Corporate
Developments” for further details.
The Company also has agreements to earn interests in joint venture exploration properties located in
Canada, Mexico, Sweden and Nicaragua.
The Company’s results include Thompson Creek ope rations for the three and nine months ended
September 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 Company Inc. on October
20, 2016.
Centerra’s shares trade on the Toronto Stock Exch ange (TSX) under the symbol CG. The Company is
headquartered in Toronto, Ontario, Canada.