Centerra Gold Reports 2009 Results; Fourth Quarter Earnings of $0.60 per share Increased Gold Reserves by 26% to 7.3 million Contained Ounces (This news release contains forward-looking information that is subject to the risk factors and assumptions set out on page 17 and in
NEWS RELEASE Centerra Gold Reports 2009 Results;
Fourth Quarter Earnings of $0.60 per share Increased Gold Reserves by 26% to 7.3 million Contained Ounces
(This news release contains forward-looking information that is subject to the risk factors and assumptions set out on page 17 and in our Cautionary Note Regarding Forward-looking Information on page 26. All figures are in United States dollars.)
Toronto, Canada, February 23, 2010: Centerra Gold Inc. (TSX: CG) today reported quarterly net earnings of $140.0 million or $0.60 per common share based on revenues of $323.9 million. This compares to earnings of $61.4 million or $0.28 per common share before an impairment charge of $18.8 million on revenues of $241.3 million in the same quarter of last year. After the impairment charge to write-down the goodwill in the Mongolian operating unit to fair value, the net earnings for the fourth quarter of 2008 were $42.6 million or $0.20 per common share.
Centerra’s consolidated gold production for the fourth quarter of 2009 totaled 296,048 ounces at a total cash cost of $276 per ounce compared to 284,045 ounces at a total cash cost of $316 per ounce in the corresponding quarter of 2008. The increase in gold production was the result of higher gold production at both of the Company’s operations primarily due to the processing of higher grade material along with achieving higher recoveries. (Total cash cost is a non-GAAP measure and is discussed under “Non-GAAP Measures” in this news release.)
Cash provided by operations in the fourth quarter, net of working capital changes and other operating items was $188.6 million compared to $103.3 million in the fourth quarter of 2008. The increase reflects the higher gold sales as a result of the higher average realized price of gold ($1,129 per ounce) in the fourth quarter of 2009.
2009 Fourth Quarter Highlights
- Proven and probable mineral reserves increased 26% to 7.3 million contained ounces of gold as a result of reserve increases at Kumtor and Gatsuurt. This represents an increase of 2.4 million ounces before accounting for production of 930,000 ounces of contained gold.
- Before accounting for annual production, added 2.1 million ounces of proven and probable mineral reserves at Kumtor which will extend Kumtor’s mine life to 2019. Includes the previously announced 1.3 million ounce increase at October 31, 2009.
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- Record fourth quarter gold production at Kumtor of 247,095 ounces at total cash costs of $245 per ounce.
- Fourth quarter revenue increased 104% over the third quarter to $324 million.
- Cash provided by operations of $189 million or $0.80 per share for the fourth quarter.
- Successfully completed secondary offering of 88,618,472 Centerra common shares held by Cameco Corporation, which were sold to the public at C$10.25 per share. With the transfer by Cameco of 25,300,000 common shares to Kyrgyzaltyn JSC, Cameco has now disposed of all of its holdings in Centerra.
- Expanded the Board of Directors to eleven members, and appointed John W. Lill, Aleksei A. Eliseev and Iurii I. Kosvin to the Board.
- Cash and short-term investments of $323 million as at December 31, 2009 compared to $167 million a year earlier and the Company continues to have no debt outstanding.
Commentary
Stephen Lang, President and CEO of Centerra Gold commented, “The fourth quarter was an eventful quarter for the Company. Our proven and probable reserves increased 26% to 7.3 million ounces, Kumtor set a new quarterly gold production record, we added reserves at Kumtor, extending the open pit mine life to 2019 and Cameco sold its block of stock and transferred the 25.3 million Centerra shares to the Kyrgyz Government, who now is Centerra’s largest shareholder holding 33% of the common shares. Our operations generated strong cash flow during the quarter of $188.6 million and Centerra ended the year with a balance sheet that includes $323 million in cash and short-term investments and no debt outstanding.”
“For 2010, consolidated gold production is expected to be in the 640,000 to 700,000 ounce range and total cash costs are expected in the $460 to $505 per ounce range. The production profile at Kumtor will be somewhat similar to 2009 with 43% of its gold production expected in the fourth quarter, but this year we expect a stronger first quarter at Kumtor with 28% of its annual production to be recovered,” he concluded.
For the full year 2009, the Company recorded earnings before unusual items of $109.6 million or $0.48 per common share reflecting the increased number of shares outstanding in 2009 on revenues of $685.5 million, compared to earnings before unusual items of $97.1 million or $0.45 per common share on revenues of $636.0 million in 2008. Net earnings for 2009 were $60.3 million or $0.27 per share, after reflecting a charge for unusual items of $49.3 million relating to the Kyrgyz settlement. Net earnings for 2008 were $134.8 million or $0.62 per share, after reflecting unusual items of $37.7 million (gain) relating to the reduction to fair value recorded in the second quarter of 2008 of the contingent share obligation under the expired preliminary framework agreement with the Kyrgyz Government.
Cash provided by operations in 2009 of $245.6 million represented $1.08 per share up from $166.3 million or $0.77 per share in 2008, reflecting the higher net earnings, primarily as a result of the higher average gold price realized.
Consolidated 2009 gold production of 675,592 ounces at a total cash cost of $459 per ounce exceeded the Company’s revised guidance of 620,000 to 630,000 ounces, compared with consolidated gold production of 748,888 ounces at a total cash cost of $423 per ounce for the prior year. Note that the 2008 unit cost was restated to remove revenue-based taxes. (Total cash cost is a non-GAAP measure and is discussed under “Non-GAAP Measures” in this news release.)
Year-end Reserves and Resources Reserves
As of December 31, 2009, on a 100% project basis, Centerra’s proven and probable reserves increased 26% to 7.3 million ounces of contained gold, compared to 5.8 million ounces as of December 31, 2008. This represents an increase of 2.4 million contained ounces before accounting for the processing of 930,000 contained ounces processed at Kumtor and Boroo or placed on Boroo’s heap leach pad during 2009. All 2009 year-end reserves and resources were estimated using a gold price of $825 per ounce compared to $675 per ounce in 2008.
At Kumtor, before accounting for the processing of 695,000 contained ounces produced during 2009, proven and probable reserves increased by 2.1 million contained ounces. The increase is a combination of reserve increases in the Central Pit as described in the Company’s news release of December 7, 2009 (adjusted for production in November and December 2009) and a year-end increase of the Sarytor and Southwest reserves.
As described in the December 2009 news release, the increase in the Central Pit reserves is the result of successful exploration drilling, changes in the life-of-mine plan as a result of the gold price increase and an expansion of the mining fleet at Kumtor to complete the North Wall expansion. With this fleet expansion there will be excess mining equipment capacity in the latter years of the Central Pit life-of-mine plan which could be deployed for the mining of satellite deposits. At yearend, a further review of the Sarytor and Southwest reserves and resources using the higher gold price of $825 per ounce and the availability of excess mining equipment capacity has led to pit expansions at both the Sarytor and Southwest satellite deposits. At Sarytor, proven and probable reserves increased by 442,000 contained ounces of gold to total 814,000 contained ounces of gold. At the Southwest deposit, proven and probable reserves increased by 394,000 contained ounces of gold to total 394,000 contained ounces. The Kumtor life-of-mine plan has been revised and extended a further two years to 2019 from the life-of-mine plan described in the December 2009 news release. Kumtor’s life-of-mine plan is based only on the open pit reserves and resources, and no provision has been made for production from the underground development activities.
At Boroo, before accounting for the processing of 235,000 contained ounces produced during 2009 in the Boroo mill and heap leach pad, proven and probable reserves increased by 24,000 contained ounces. In addition, a technical report was finalized to include heap leach processing in the life-ofmine plan at Boroo.
At Gatsuurt, proven and probable reserves increased by 275,000 contained ounces due to an expanded pit as a result of the higher gold price and a resulting lowering of the cut-off grades.
Resources
As of December 31, 2009, on a 100% project basis, Centerra’s measured and indicated resources decreased by 791,000 ounces over the December 31, 2008 figures to total 4.1 million ounces of contained gold (Centerra’s share is 4.0 million ounces), compared to 4.9 million ounces (Centerra’s share was 4.5 million ounces) as of December 31, 2008. The decrease from the 2008 year-end measured and indicated resources is largely attributable to conversion of resources into reserves at Kumtor and Gatsuurt as a result of using a higher gold price for reserve estimation.
The Company’s inferred resources, on a 100% project basis increased by 218,000 contained ounces year-over-year. At Kumtor, the inferred resources in the high-grade SB Zone increased to 1.8 million contained ounces of gold with an average grade of 17.0 g/t, as a result of the successful 2009 drilling of the southwest extension of the SB Zone. The strike length of the deposit was extended by a further 350 metres to the southwest of the 2008 year-end resource model. A significant portion of the new ounces identified by this drilling, 341,000 ounces of contained gold, fall within the new Kumtor open pit design and therefore are included in the new in-pit proven and probable reserves.
In addition, this southwest expansion of the Central Pit also captured 155,000 ounces of contained gold that were previously classified as part of the high-grade underground SB Zone inferred resource, that is now within the new open pit design, and therefore is included in the Kumtor central pit proven and probable reserves. The shallow drilling also identified an estimated 313,000 new ounces of contained gold beneath the 2008 open pit design that were added to the 2008 year-end high-grade underground SB Zone inferred resource. This addition, offset by the 155,000 ounces of contained gold reclassified as open pit reserves, has resulted in a net increase of an estimated 158,000 ounces of contained gold to the high-grade underground SB Zone inferred resource.
At the Sarytor and Southwest deposits, measured and indicated resources increased due to the expansion of the mineralization identified as having a reasonable expectation of economic extraction using an $825 per ounce gold price. In addition, inferred resources increased at the Sarytor and Southwest deposits.
Reconciliation of Gold Reserves and Resources
(in thousands of ounces of contained gold) (8) (9)
| December31 2008 (1) | Jan-1 to Oct-31 2009 Throughput (2) | Nov-1 to Dec-31 2009 Throughput (2) | 2009 Addition (Deletion) (3) | December 31 2009 | Centerra Share (4) | |
|---|---|---|---|---|---|---|
| Reserves – Proven and Probable | ||||||
| Kumtor (5) | 4,025 | 409 | 286 | 2,144 | 5,474 | 5,474 |
| Boroo | 778 | 188 | 47 | 24 | 567 | 567 |
| Gatsuurt (7) | 1,005 | 0 | 0 | 275 | 1,280 | 1,280 |
| Total Proven and Probable Reserves | 5,808 | 597 | 333 | 2,443 | 7,321 | 7,321 |
| Resources – Measured and Indicated | ||||||
| Kumtor (6) | 2,865 | 0 | 0 | (664) | 2,201 | 2,201 |
| Boroo | 242 | 0 | 0 | 0 | 242 | 242 |
| Gatsuurt (7) | 607 | 0 | 0 | (127) | 480 | 480 |
| REN (11) | 1,220 | 0 | 0 | 0 | 1,220 | 781 |
| Total Measured & Indicated Resources | 4,934 | 0 | 0 | (791) | 4,143 | 3,704 |
| Resources – Inferred (10) | ||||||
| Kumtor (6) | 34 | 0 | 0 | 275 | 309 | 309 |
| Kumtor Stockwork Underground | 757 | 0 | 0 | (136) | 621 | 621 |
| Kumtor SB Underground | 1,593 | 0 | 0 | 158 | 1,751 | 1,751 |
| Boroo | 233 | 0 | 0 | 0 | 233 | 233 |
| Gatsuurt (7) | 256 | 0 | 0 | (79) | 177 | 177 |
| REN (11) | 432 | 0 | 0 | 0 | 432 | 277 |
| Total Inferred Resources | 3,305 | 0 | 0 | 218 | 3,523 | 3,368 |
(1) Reserves and resources as reported in Centerra’s Annual Information Form filed in March 2009.
(2) Corresponds to mill and heap leach pad feed. The discrepancy between the 2009 throughput and 2009 ounces of gold produced is due to gold recovery in the mill and heap leach pad.
(3) Changes in reserves or resources, as applicable, are attributed to information provided by drilling and subsequent reclassification of reserves or resources, an increase in the gold price, changes in pit designs, reconciliation between the mill and the resource model, and changes to operating costs.
(4) Centerra’s equity interests as at December 31, 2009, were as follows: Kumtor 100%, Gatsuurt 100%, Boroo 100% and REN 64%.
(5) Kumtor reserves include the Central Pit and the Southwest and Sarytor Deposits.
(6) Kumtor open pit resources include the Central Pit and the Southwest Deposit and Sarytor Deposit.
(7) Gatsuurt reserves and resources include the Central Zone and Main Zone deposits.
(8) Centerra reports reserves and resources separately. The amount of reported resources does not include those amounts identified as reserves.
(9) Numbers may not add up due to rounding.
(10) Inferred mineral resources have a great amount of uncertainty as to their existence and as to whether they can be mined economically. It cannot be assumed that all or part of the inferred resources will ever be upgraded to a higher category.
(11) Centerra’s interest in the REN joint venture is subject to a purchase agreement. Upon payment in full of the purchase price, Centerra will transfer its interest to the acquiring party, Rye Patch Gold Inc. See “Exploration Update – United States – REN”.
Centerra Gold Inc.
2009 Year-end Reserve and Resource Summary (as of December 31, 2009)
| Reserves (1) (Tonnes and ounces in thousands) (11) (12) Proven Probable Total Proven and Probable Reserves | ||||
| Proven | Probable | Total Proven and Probable Reserves | ||
| Property Tonnes Grade Contained (g/t) Gold (oz) Kumtor (1) (6) (13) 1,659 2.1 113 Boroo (1) (8) 10,674 0.9 295 Gatsuurt (1) (9) - - - Total 12,333 1.0 408 | Tonnes Grade Contained (g/t) Gold (oz) 54,201 3.1 5,361 4,777 1.8 272 13,850 2.9 1,280 72,828 3.0 6,913 | Tonnes Grade Contained (g/t ) Gold (oz) 55,860 3.0 5,474 15,451 1.1 567 13,850 2.9 1,280 85,161 2.7 7,321 | Centerra Mining Share (oz) (3) Method(4) 5,474 OP 567 OP 1,280 OP 7,321 |
| Measured and Indicated Resources (2) (Tonnes and ounces in thousands) (11) (12) Measured Indicated Total Measured and Indicated Resources | ||||
| Measured | Indicated | Total Measured and Indicated Resources | ||
| Property Tonnes Grade Contained (g/t) Gold (oz) Kumtor (5) (6) (13) 18,480 2.4 1,441 Boroo (5) (8) 452 2.2 32 Gatsuurt (9) - - - REN (10) (15) - - - Total 18,932 2.4 1,473 | Tonnes Grade Contained (g/t) Gold (oz) 10,372 2.3 760 4,464 1.5 210 5,751 2.6 480 2,990 12.7 1,220 23,577 3.5 2,670 | Tonnes Grade Contained (g/t ) Gold (oz) 28,852 2.4 2,201 4,916 1.5 242 5,751 2.6 480 2,990 12.7 1,220 42,509 3.0 4,143 | Centerra Mining Share (oz)(3) Method(4) 2,201 OP 242 OP 480 OP 781 UG 3,704 |
| Inferred Resources (2) (14) (Tonnes and ounces in thousands) (11) (12) Inferred | |||
| Inferred | |||
| Property Tonnes Grade Contained (g/t) Gold (oz) Kumtor (5) (6) (13) 3,793 2.5 309 Kumtor Stockwork Underground(7) 1,700 11.4 621 Kumtor SB Underground(7) 3,203 17.0 1,751 Boroo (5) (8) 7,323 1.0 233 Gatsuurt (9) 2,260 2.4 177 REN (10) (15) 835 16.1 432 Total 19,114 5.7 3,523 | Centerra Share (oz)(3) 309 621 1,751 233 177 277 3,368 | Mining Method(4) OP UG UG OP OP UG |
(1) The reserves have been estimated based on a gold price of $825 per ounce.
(2) Mineral resources are in addition to reserves. Mineral resources do not have demonstrated economic viability.
(3) Centerra’s equity interests are: Kumtor 100%, Gatsuurt 100%, Boroo 100% and REN 64%.
(4) “OP” means open pit and “UG” means underground.
(5) Open pit resources occur outside the current ultimate pits which have been designed using a gold price of $825 per ounce.
(6) The open pit reserves and resources at Kumtor are estimated based on a cutoff grade of 1.0 gram of gold per tonne and includes the Central Pit and the Southwest and Sarytor deposits.
(7) Underground resources occur below the Central pit and are estimated based on a cutoff grade of 7.0 grams of gold per tonne.
(8) The reserves and resources at Boroo are estimated based 0.5 gram of gold per tonne cutoff grade.
(9) The reserves and resources at Gatsuurt are estimated using either a 1.2, 1.4 or 1.5 grams of gold per tonne cutoff grade depending on ore type and process method.
(10) The resources at REN are estimated based on a cutoff grade of 8.0 grams of gold per tonne.
(11) A conversion factor of 31.10348 grams per ounce of gold is used in the reserve and resource estimates.
(12) Numbers may not add up due to rounding.
(13) Kumtor reserves and resources include Sarytor and Southwest reserves of 15.1 million tonnes grading 2.5 g/t for 1,208,000 contained ounces, Sarytor and Southwest indicated resources of 4.8 million tonnes grading 2.1 g/t for 325,000 contained ounces and Sarytor and Southwest inferred resources of 3.7 million tonnes grading 2.5 g/t for 303,000 contained ounces.
(14) Inferred mineral resources have a great amount of uncertainty as to their existence and as to whether they can be mined economically. It cannot be assumed that all or part of the inferred resources will ever be upgraded to a higher category.
(15) Centerra’s interest in the REN joint venture is subject to a purchase agreement. Upon payment in full of the purchase price, Centerra will transfer its interest to the acquiring party, Rye Patch Gold Inc. See “Exploration Update – United States – REN”.
Financial and Operating Summary
Highlights
| Three Months Ended December 31 | Year Ended December 31 | |||||
|---|---|---|---|---|---|---|
| Financial and Operating Summary | 2009 | 2008 | % Change | 2009 | 2008 | % Change |
| Revenue - $ millions | 323.9 | 241.3 | 34% | 685.5 | 636.0 | 8% |
| Cost of sales - $ millions (1) | 74.1 | 113.4 | (35%) | 295.9 | 332.0 | (11%) |
| Impairment charge - $ millions | - | 18.8 | 100% | - | 18.8 | 100% |
| Earnings before unusual items - $ millions (2) | 140.0 | 42.6 | 228% | 109.6 | 97.1 | 13% |
| Earnings per common share before unusual items - $ basic and diluted | 0.60 | 0.20 | 200% | 0.48 | 0.45 | 7% |
| Unusual items (gain) - $ millions | - | - | - | 49.3 | (37.7) | (231%) |
| Net earnings - $ millions | 140.0 | 42.6 | 228% | 60.3 | 134.8 | (55%) |
| Earnings per common share - $ basic and diluted | 0.60 | 0.20 | 200% | 0.27 | 0.62 | (56%) |
| Cash provided by operations - $ millions | 188.6 | 103.3 | 83% | 245.6 | 166.3 | 48% |
| Capital expenditures -$ millions | 28.7 | 27.3 | 5% | 89.8 | 94.5 | (5%) |
| Weighted average common shares outstanding - basic (thousands) (3) | 234,857 | 216,318 | 9% | 226,699 | 216,318 | 5% |
| Weighted average common shares outstanding - diluted (thousands) (3) | 235,379 | 218,166 | 8% | 226,801 | 216,438 | 5% |
| Average gold spot price - $/oz | 1,100 | 795 | 38% | 973 | 872 | 12% |
| Average realized gold price - $/oz | 1,129 | 806 | 40% | 1,013 | 853 | 19% |
| Gold sold – ounces | 286,888 | 299,242 | (4%) | 676,394 | 745,730 | (9%) |
| Cost of sales - $/oz sold | 258 | 379 | (32%) | 438 | 445 | (2%) |
| Gold produced – ounces | 296,048 | 284,045 | 4% | 675,592 | 748,888 | (10%) |
| Total cash cost(4) (5) - $/oz produced | 276 | 316 | (12%) | 459 | 423 | 8% |
| Total production cost(4) (5) - $/oz produced | 393 | 437 | (10%) | 611 | 533 | 15% |
(1) Cost of sales excludes regional office administration.
(2) Net earnings before unusual items is a non-GAAP measure and is discussed under “Non-GAAP Measures”.
(3) As of December 31, 2009, the Company had 234,857,228 common shares issued and outstanding.
(4) Total cash cost and total production cost are non-GAAP measures and are discussed under “Non-GAAP Measures”.
(5) As a result of Kumtor's Restated Investment Agreement, total cash cost and total production cost per ounce measures for 2009 and the comparative years have been restated to exclude operating and revenue-based taxes.
Capital expenditures in the fourth quarter of 2009 amounted to $28.7 million of which $5.7 million was spent and accrued on sustaining capital projects and $23.0 million invested in growth capital. The major growth components are related to the SB Zone underground development at Kumtor ($12.1 million), and the Gatsuurt development project ($10.3 million). Capital expenditures in the same quarter of 2008 were $27.3 million, which included $16.4 million of sustaining capital and $10.9 million of growth capital.
Exploration expenditures for the fourth quarter were $8.5 million dollars compared to $7.9 million in the fourth quarter of 2008 reflecting higher spending on new exploration joint ventures in Turkey, Russia and exploration projects in the United States.
For the year 2009, capital expenditures were $89.8 million of which $40.1 million was spent and accrued on sustaining capital projects and $49.7 million invested in growth capital. The major growth capital components are related to the SB Zone underground development at Kumtor ($33.4 million) and the Gatsuurt development project ($12.9 million). For the full year 2008, capital expenditures totaled $94.5 million, which included $47.5 million of sustaining capital and $47.0 million of growth capital.
Exploration expenditures in 2009 were $25.0 million compared to $23.5 million in 2008 reflecting higher spending at the Gatsuurt project, on new exploration joint ventures in Turkey, Russia and exploration projects in the United States and an increase in exploration activities elsewhere.
Operations Update Kumtor
At the Kumtor mine, gold production was a record 247,095 ounces in the fourth quarter of 2009 representing a 4% increase from the same quarter in 2008, due to higher ore grades and increased recovery. The ore grade in the fourth quarter averaged 6.92 g/t with a recovery of 84.4% compared to 5.60 g/t with a recovery of 83.2% in the same quarter of 2008. The gold production increased 85% in fourth quarter of 2009 from the third quarter of 2009, as the high-grade SB Zone was mined in the quarter. During the fourth quarter of 2009, the Kumtor mill performed better than expected in handling the high-grade feed in the flotation, concentrate and gold recovery circuits. During December, the average mill feed grade was 10.14 g/t gold and the average recovery was 85.5%.
Total cash cost per ounce produced, a non-GAAP measure of production efficiency, decreased to $245 in the fourth quarter compared to $284 a year earlier due to lower consumable costs ($27 per ounce) and a 4% increase in production as a result of higher grades and recoveries ($12 per ounce). Total cash operating costs decreased to $60.5 million in the fourth quarter compared to $67.3 million in the fourth quarter of 2008. The cost decrease year-over-year was due to lower costs of diesel fuel ($4.6 million), maintenance materials and supplies ($1.4 million), and tires ($0.7 million), which represents $27 per ounce decrease.
Exploration expenditures totaled $2.8 million for the fourth quarter of 2009, a slight decrease from $3.4 million in the fourth quarter 2008, primarily as a result of lower drill costs.
During the fourth quarter of 2009, capital expenditures were $16.0 million, which included $3.4 million of sustaining capital spent mainly on the CAT 785 haul truck major overhaul program and on shovel rebuilds. In addition, $12.6 million was invested in growth capital mainly for the SB Zone underground development ($12.1 million) in the fourth quarter of 2009.
The SB Zone underground decline has advanced a total of 680 metres and the ground conditions are fluctuating between good and poor, with the poor ground associated with structural faults.
As planned, a second portal and decline was started from within the Central Pit. The underground development program has been revised to allow access to both the SB Zone and Stockwork Zone at the same time. The second portal and the associated infrastructure have been completed and mining development is underway. Exploration and delineation drilling of the two resources (SB Zone and Stockwork Zone) is planned for 2010.
Boroo & Gatsuurt
At the Boroo mine in the fourth quarter of 2009, gold production was 48,953 ounces, 3% better than the fourth quarter of 2008 due to higher ore grade (2.91 g/t versus 2.55 g/t in 2008) and higher mill recovery (79.1% compared to 70.7%). During the fourth quarter of 2009, the mill throughput rate exceeded plan and less transitional ore was mined from Pit 3. During the quarter, Boroo mined in an area that was less refractory in nature than anticipated. Better ore grades from the mine and the stockpiles, and better recovery lead to the higher gold production.
Total cash costs per ounce produced, a non-GAAP measure of production efficiency, decreased to $435 in the fourth quarter of 2009 from $471 in the fourth quarter of 2008. Total cash operating costs decreased to $21.3 million in the fourth quarter compared to $22.4 million in the fourth quarter of 2008, primarily as the result of lower mining, milling and leaching costs due to lower consumable costs ($22 per ounce), and a 3% increase in ounces produced (representing $14 per ounce of the decrease).
During the fourth quarter of 2009, capital expenditures at Boroo were $2.3 million of sustaining capital and no growth capital.
At the Gatsuurt project, $10.3 million of growth capital was spent in the quarter primarily related to the construction of the road to access the Gatsuurt project and connect it with the Boroo mill facilities. Late in the fourth quarter, condemnation drilling was performed at Gatsuurt to confirm waste dump locations. Development of the mine site infrastructure is continuing, though cold winter weather has reduced some construction activities. The road construction is on schedule for a second quarter 2010 completion.
Summary of Key Operating Results
| Three Months Ended December 31 | Year Ended December 31 | |||||
|---|---|---|---|---|---|---|
| Kumtor Operating Results | 2009 | 2008 | % Change | 2009 | 2008 | % Change |
| Revenue - $ millions | 263.1 | 208.5 | 26% | 523.7 | 468.3 | 12% |
| Gold sold – ounces | 231,799 | 258,642 | (10%) | 511,092 | 552,253 | (7%) |
| Average realized gold price – $/oz | 1,135 | 806 | 41% | 1,025 | 848 | 21% |
| Cost of sales - $ millions (1) | 57.4 | 96.8 | (41%) | 236.5 | 273.1 | (13%) |
| Cost of sales - $/oz sold | 248 | 374 | (34%) | 463 | 495 | (6%) |
| Tonnes mined - 000s | 25,995 | 29,000 | (10%) | 115,544 | 115,548 | (0%) |
| Tonnes ore mined – 000s | 1,759 | 1,490 | 18% | 4,464 | 4,967 | (10%) |
| Tonnes milled - 000s | 1,414 | 1,560 | (9%) | 5,780 | 5,577 | 4% |
| Average mill head grade - g/t (2) | 6.92 | 5.60 | 24% | 3.74 | 3.89 | (4%) |
| Recovery - % | 84.4 | 83.2 | 1% | 76.7 | 79.7 | (4%) |
| Gold produced – ounces | 247,095 | 236,544 | 4% | 525,042 | 556,251 | (6%) |
| Total cash cost (3) (4) - $/oz produced | 245 | 284 | (14%) | 460 | 438 | 5% |
| Total production cost (3) (4)-$/oz produced | 346 | 403 | (14%) | 593 | 548 | 8% |
| Capital expenditures - $ millions | 16.0 | 20.3 | (21%) | 73.4 | 57.1 | 28% |
| Boroo Operating Results | ||||||
| Revenue - $ millions | 60.8 | 32.8 | 85% | 161.8 | 167.7 | (4%) |
| Gold sold – ounces | 55,089 | 40,600 | 36% | 165,302 | 193,477 | (15%) |
| Average realized gold price - $/oz | 1,104 | 808 | 37% | 979 | 867 | 13% |
| Cost of sales - $ millions (1) | 16.7 | 16.6 | 1% | 59.5 | 58.9 | 1% |
| Cost of sales - $/oz sold | 303 | 409 | (26%) | 360 | 304 | 18% |
| Total tonnes mined - 000s | 3,624 | 5,039 | (28%) | 12,396 | 21,450 | (42%) |
| Tonnes mined heap leach – 000s | 1,170 | 1,037 | 13% | 3,481 | 3,629 | (4%) |
| Tonnes ore mined direct mill feed -000’s | 1,250 | 625 | 100% | 2,913 | 2,416 | 21% |
| Tonnes ore milled - 000s | 628 | 620 | 1% | 2,077 | 2,496 | (17%) |
| Average mill head grade - g/t (2) | 2.91 | 2.55 | 14% | 2.56 | 2.69 | (5%) |
| Recovery - % | 79.1 | 70.7 | 12% | 72.9 | 77.7 | (6%) |
| Gold produced – ounces | 48,953 | 47,501 | 3% | 150,550 | 192,637 | (22%) |
| Total cash cost (3) - $/oz produced | 435 | 471 | (8%) | 456 | 382 | 19% |
| Total production cost (3)-$/oz produced | 634 | 606 | 5% | 673 | 490 | 37% |
| Capital expenditures (Boroo) - $ millions | 2.3 | 6.7 | (65%) | 3.3 | 35.9 | (91%) |
| Capital expenditures (Gatsuurt) - $ millions | 10.3 | 0.1 | 10200% | 12.9 | 0.6 | 2050% |
(1)
Cost of sales for 2009 and its comparative years exclude regional office administration.
(2)
g/t means grams gold per tonne.
(3)
Total cash cost and total production cost are non-GAAP Measures and are discussed under “Non-GAAP Measures”.
(4)
As a result of Kumtor's Restated Investment Agreement, Kumtor’s total cash cost and total production cost per ounce measures for 2009 and the comparative years have been restated to exclude operating and revenue-based taxes.
Exploration Update Kyrgyz Republic
During the fourth quarter of 2009, exploration drilling programs continued in the Kumtor Central Pit and from the underground in decline 1. Regional exploration drilling continued on the Kumtor concession area at the Northeast, Muzdusuu, Southwest and Sarytor areas. During the quarter, a 140 square-kilometre exploration license contiguous to the Kumtor concession was obtained. The Karasay prospect is 15 kilometres south of the current Kumtor mining areas and fieldwork is expected to commence in the second quarter of 2010.
Kumtor Pit
In the fourth quarter of 2009, the drilling program focused on testing the southwest extension of the SB Zone outside of the planned open pit, as well as wide-spaced drill testing for strike and down dip extensions of the main mineralized horizons in the Saddle Zone and Northeast Extension Zones.
Drill results from testing the southwest extension of the SB Zone within and beyond the current planned open pit continue to confirm the extension of the Kumtor structure and mineralization. Drill hole D1373 intersected the upper zone of mineralization but had to be stopped whilst still within the zone of alteration, due to technical drilling problems. The most significant mineralization intersected in this hole was 4.4 g/t Au over 9.6 metres, including 7.5 g/t Au over 4.0 metres. This intercept, although narrower and lower grade than the high grades intersected in drill hole D1352 in the third quarter of 2009, has confirmed the extension of the structure and mineralization for a further 200 metres down dip of D1352. Drill hole D1376, drilled on section -34 of the southwest extension of the SB Zone intersected strong tectonic brecciation and alteration in the main structure position but did not return any significant values.
In the fourth quarter of 2009, drilling continued in the Saddle Zone area between the SB and Stockwork Zones of the Central Pit. Drill hole, D1371, intersected low-grade mineralization including 2.3 g/t Au over 23.5 metres and 1.6 g/t Au over 15.0 metres at 3,300 to 3,400 metre elevation.
Drilling continued in the fourth quarter to test the extension of the Kumtor structure to the northeast of the Central pit high-wall. Drill hole D1368 was drilled to test the down dip extension of the high grade mineralization intersected in the second quarter of 2009 in drill hole D1301A, which returned assays of 9.1 g/t Au over 11.0 metres, including 10.8 g/t over 8.5 metres. Drill hole D1368 intersected 8.64 g/t Au over 2.7 metres. Further drilling in the Northeast Extension area is planned for early 2010.
Decline Exploration
One additional drill hole was completed in the fourth quarter 2009, which intersected the Kumtor structure in the anticipated position below the decline but did not return any significant gold values. Exploration drilling will be resumed in early 2010.
Regional Exploration
Regional exploration drilling continued in the fourth quarter of 2009 at Northeast, Muzdusuu, Southwest and Sarytor areas.
Northeast Area
The drill program was designed to follow up on the mineralization intersected in drilling completed in 2007, 2008 and 2009. The drilling continues to give encouraging results which indicated the potential for a near surface zone of mineralization, similar in grade to the Sarytor deposit. The most significant widths and grades of mineralization intersected in the fourth quarter include:
| DN1377 | 2.8 g/t Au over 9.3 metres |
| DN1378 | 6.2 g/t Au over 2.0 metres |
| DN1379 | 2.3 g/t Au over 7.0 metres and 3.0 g/t Au over 10.8 metres |
| DN1380 | 3.4 g/t Au over 16.5 metres and 4.7 g/t Au over 5.2 metres |
| DN1381 | 3.7 g/t Au over 13.9 metres and 1.3 g/t Au over 12.1 metres |
| DN1383 | 2.5 g/t Au over 6.2 metres |
| DN1386 | 2.0 g/t Au over 6.6 metres and 4.6 g/t Au over 8.4 metres |
| DN1391 | 1.6 g/t Au over 5.4 metres and 6.2 g/t Au over 10.3 metres, including 10.8 g/t Au over 5.1 metres |
| DN1397 | 9.3 g/t Au over 23.4 metres, including 15.2 g/t Au over 11.2 metres |
The high-grade mineralization intersected in holes DN1391 and DN1397 are the first indications of the presence of high-grade mineralization at the Northeast prospect.
The mineralization intersected in holes DN1380 and DN1397 on sections 434 and 426, respectively, is higher in grade that the mineralization reported from Soviet era adit sampling in this area (1.8 g/t Au over 12.3 metres) and confirms the continuation of the mineralized structure for a further 500m along strike to the northeast the high grade mineralization in hole DN1391. Follow-up drilling along strike of both intersections is in progress.
True widths for the mineralized zones are typically from 40% to 95% of the stated intercept.
To view the graphics, maps/drill sections and complete drill results discussed in this news release, please visit the following link: http://file.marketwire.com/release/cg0223.pdf or visit the Company’s web site at: www.centerragold.com.
A complete listing of the drill results and supporting maps for the Kumtor pit 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 at: www.centerragold.com