Centerra Gold Reports 2012 Fourth Quarter and Year-end Results
NEWS RELEASE Centerra Gold Reports 2012 Fourth Quarter and Year-end Results
This news release contains forward-looking information that is subject to the risk factors and assumptions set out on page 24 and in our Cautionary Note Regarding Forward-looking Information on page 34. It should be read in conjunction with the Company’s audited financial statements and notes thereto for the year ended December 31, 2012 and the associated Management’s Discussion and Analysis. The consolidated financial statements of Centerra are prepared in accordance with International Accounting Standard 34, as issued by the International Accounting Standards Board and the Company’s accounting policies as described in note 3 of its annual consolidated financial statements for the year ended December 31, 2012.
All figures are in United States dollars.
To view the 2012 Management’s Discussion and Analysis and the Audited Financial Statements and Notes for the year-ended December 31, 2012, please visit the following link:
http://media3.marketwire.com/docs/CG2012FSMDAQ4.pdf
Toronto, Canada, February 20, 2013: Centerra Gold Inc. (TSX: CG) today reported adjusted net earnings of $112.7 million or $0.48 per share in the fourth quarter of 2012 before recognizing a one-time accounting charge of $180.7 million for the de-recognition of the underground assets at Kumtor, which results in the Company recording a net loss of $68.0 million or $0.29 per share for the period. This compares to net earnings of $79.4 million or $0.34 per common share in the same quarter of 2011.
2012 Fourth Quarter Highlights
- Increased reserves at Kumtor by 58% with the new KS-13 life-of-mine plan.
- Replaced reserves, proven and probable gold reserves now total 11.1 million ounces of contained gold.
- Agreed to acquire the remaining 30% interest for 100% ownership of the Oksut gold project in Turkey, which subsequently closed in January 2013.
- Reported initial resource estimate on the Oksut gold project of indicated resources of 682,000 contained ounces and inferred resources of 477,000 ounces of contained gold.
- Started up the heap leach operation at the Boroo mine.
- Signed a new two year Collective Bargaining Agreement at the Kumtor mine. The new Agreement expires at the end of December 2014.
- Produced 219,316 ounces of gold in the quarter, including 189,438 ounces at Kumtor and 29,878 ounces at Boroo.
- Increased revenues to $368.5 million compared to $248.0 million in the same quarter of 2011.
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- Cash provided by operations was $208.2 million compared to $60.3 million in the fourth quarter of 2011.
- Reported all-in cash cost (pre-tax) for the quarter of $839 per ounce compared to $934 for the 2011 fourth quarter.
For the full year, the Company reported an adjusted net loss of $3.3 million or $0.01 per share before recognizing a one-time accounting charge of $180.7 million for the de-recognition of the underground assets at Kumtor, which results in the Company recording a net loss of $184.0 million or $0.78 per share, compared to net earnings of $370.9 million or $1.57 per share in 2011. The 2012 results reflects the charge for the derecognition of the underground assets at Kumtor and the negative impact on production resulting from the unexpected acceleration of ice and waste in the high movement area above the SB Zone which made it unsafe to mine in this area and required a revision to the production plan for 2012 delaying the release of ore.
Consolidated gold production in 2012 totalled 387,076 ounces compared to 642,380 ounces in the prior year. The decrease in ounces poured was primarily due to the unexpected acceleration of ice and waste into the Central Pit resulting in the rescheduling of mining activities to the extension of the southwest end of the SB Zone which was discovered in 2011. This revised mining plan led to a 46% decrease in production at Kumtor year over year, which was partially offset by a 21% increase in production at Boroo where the heap leach operation was re-started in October 2012.
Commentary
Ian Atkinson, President and CEO of Centerra stated, “Recently we published our updated reserves and resources and with that we were pleased to report our initial resource estimate on the Oskut Gold Project in Turkey. We have announced an indicated resource of 682,000 contained ounces of gold and an inferred resource of 477,000 ounces of contained gold at Oksut. It is still early in the development of this project, but we are excited and expect to continue to grow the resource, with the aim to fast track it to production. From a financial standpoint, in the fourth quarter of 2012, the Company had strong adjusted net earnings of $112.7 million or $0.48 per share, before recognizing the one-time accounting charge of $180.7 million for the derecognition of the underground assets at Kumtor. The operations generated approximately $135 million of cash during the quarter and our cash and short-term investments grew during the period to $382 million. In comparing the quarter-over-quarter operating performance, both operations performed well in the quarter producing 45% more ounces in the fourth quarter of 2012 compared to the same period last year.”
“Still 2012 was a challenging year, beginning with the ice and waste movement at Kumtor, the revised mining plan, political challenges, lower than expected mill throughput and recovery, as well as lower than expected mill head grades encountered in the fourth quarter at Kumtor as we were mining the newly discovered portion of the orebody. However, as outlined in the December 2012 Kumtor technical report, the KS-13 model has proven to be a reliable indicator of mineral reserves relative to gold production and we expect that trend to continue. In 2013, we expect approximately 75% of our production at Kumtor to come from the SB Zone which has had a number of years of historical production. For 2013, consolidated gold production is expected to be in the 605,000 to 660,000 ounce range as Kumtor returns to more normal production levels.”
“The State Commission has issued its final report regarding Kumtor and has delivered it to the Kyrgyz Republic Government; and the Kyrgyz Republic Parliament. On February 20, 2013, the Parliament debated the State Commission report and discussed a draft resolution that endorses the report and calls on the Government to hold negotiations with Centerra with a view to revising the agreements governing the Kumtor project in the interests of the Kyrgyz Republic. We understand that the draft resolution recommends that if mutually advantageous terms cannot be agreed the Government should take a number of steps, including annulling legislation enacted in 2009 approving the project agreements and terminating such project agreements. See “Other Corporate Developments – Kyrgyz Republic – State Commission Activities – Parliament Review and Draft Resolution”. The Company believes that the conclusions and recommendations of State Commission relating to the Company are exaggerated or without merit and has responded in detail to the State Commission. We have always benefited from a close and constructive dialogue with the Kyrgyz authorities over the many years we have operated there and remain committed to continuing to work with them to resolve these issues in accordance with the New Project Agreements, and to the benefit of all shareholders. However, no assurances can be given that the claims and recommendations of the State Commission can be resolved without a material negative impact on the Company.”
“Finally, Centerra like many of our peers is moving toward reporting an “all-in cash cost” methodology for its gold production at Kumtor and Boroo mine operations. Having first reported along these lines with the announcement of the revised life-of-mine plan for Kumtor and with our 2012 production update and 2013 guidance, the Company believes an all-in cash cost measure more fully reflects the actual cost of producing an ounce of gold than the former Gold Institute total cash cost measure. Centerra’s projected consolidated allin cash cost (pre-tax) per ounce produced for 2013, described in our outlook, is within a range of $1,067 to $1,164, and includes all costs except revenue-based taxes in the Kyrgyz Republic and income taxes. This demonstrates the Company’s focus on maximizing margins and our leverage to increases in the gold price. We continue to focus on our exploration and business development efforts as we look for additional operating platforms in an effort to increase our future gold production, diversify our regions of operation and help us achieve our goal of producing 1.5 million ounces of gold annually.”
Year-end Gold Reserves and Resources Reserves
As reported in the Company’s news release of February 7, 2013, Centerra’s proven and probable gold reserves as of December 31, 2012, increased by 3.6 million contained ounces (before accounting for 2012 production) to 11.1 million ounces of contained gold, compared to 8.1 million ounces as of December 31, 2011. This represents an increase of 45% before accounting for 534,000 contained ounces processed at Kumtor and Boroo during 2012. The reserve increase is the result of the significant expansion of the Kumtor Central Pit, announced November 7, 2012 and is described in detail in a new NI 43-101 technical report filed on SEDAR in December 2012. All 2012 year-end reserves were estimated using a gold price of $1,350 per ounce compared to $1,200 per ounce at December 31, 2011.
Resources
As of December 31, 2012, Centerra’s measured and indicated resources total 5.1 million ounces of contained gold a decrease of 23% or 1.5 million ounces, compared to 6.6 million contained ounces as of December 31, 2011. The majority of this decrease is a result of the conversion of previously outlined Kumtor Central Pit measured and indicated open pit resources into mineral reserves as a result of the KS-13 Pit expansion. This conversion of resources to reserves has been offset by increased resources at Kumtor and the addition of 682,000 contained ounces of new indicated resources at the Oksut project (100% basis as of January 24, 2013).
Centerra’s inferred resources, as of December 31, 2012, total 4.1 million ounces of contained gold for an increase of 22,000 contained ounces over the December 31, 2011 figures. The conversion of Kumtor underground resources into reserves within the KS-13 expanded pit was offset by the addition of 477,000 contained ounces of new inferred resources at the Oksut project (100% basis) and the new high grade resources outlined below the KS-13 pit design which resulted in the increase.
2012 year-end resource estimates on the Boroo, Gatsuurt, Ulan Bulag properties in Mongolia and Kara Beldyr property in Russia remain unchanged from those outlined at the end of 2011.
Financial and Operating Summary Consolidated Highlights
| Three Months Ended December 31 | Year Ended December 31 | |||||
|---|---|---|---|---|---|---|
| Financial and Operating Summary | 2012 | 2011 | % Change | 2012 | 2011 | % Change |
| Revenue - $ millions | 368.5 | 248.0 | 49% | 660.7 | 1,020.3 | (35%) |
| Cost of sales - $ millions (1) | 165.2 | 104.1 | 59% | 387.5 | 382.3 | 1% |
| Abnormal mining costs - $ millions | 8.9 | - | 100% | 60.9 | - | 100% |
| Revenue-based taxes - $ millions | 44.5 | 33.6 | 33% | 74.7 | 131.8 | (43%) |
| Loss on de-recognition of UG - $ millions | 180.7 | - | 100% | 180.7 | - | 100% |
| Exploration - $ millions | 11.5 | 11.7 | (1%) | 37.9 | 39.6 | (4%) |
| Earnings (loss) before income taxes - $ millions | (62.8) | 80.3 | (178%) | (172.3) | 362.8 | (147%) |
| Income tax expense - $ millions | 5.2 | 0.9 | 486% | 11.7 | 8.1 | 44% |
| Net earnings (loss) - $ millions | (68.0) | 79.4 | (186%) | (184.0) | 370.9 | (150%) |
| Earnings(loss) per common share-$basic&diluted | (0.29) | 0.34 | (185%) | (0.78) | 1.57 | (150%) |
| Cash provided by operations - $ millions | 208.2 | 60.3 | 245% | 134.7 | 434.9 | (69%) |
| Capital expenditures -$ millions | 85.0 | 30.0 | 184% | 410.6 | 187.9 | 118% |
| Weighted average common shares outstanding - basic (thousands) (2) | 236,339 | 236,323 | 0% | 236,369 | 236,088 | 0% |
| Weighted average common shares outstanding - diluted (thousands) (2) | 236,339 | 236,621 | (0%) | 236,369 | 236,354 | 0% |
| Average gold spot price - $/oz | 1,721 | 1,688 | 2% | 1,669 | 1,572 | 6% |
| Average realized gold price - $/oz | 1,711 | 1,690 | 1% | 1,692 | 1,569 | 8% |
| Gold sold – ounces | 215,361 | 146,704 | 47% | 390,533 | 650,258 | (40%) |
| Cost of sales (1) (3) - $/oz sold | 767 | 709 | 8% | 992 | 588 | 69% |
| Gold produced – ounces | 219,316 | 151,562 | 45% | 387,076 | 642,380 | (40%) |
| Operating cash cost(3)(4)(5)- $/oz produced | 360 | 603 | (40%) | 663 | 502 | 32% |
| Total production cost(3)(4)(5) - $/oz produced | 998 | 820 | 22% | 1,143 | 687 | 66% |
| All-in cash cost (pre-tax) (3)(4)(5)-$/oz produced | 839 | 934 | (10%) | 1,882 | 929 | 103% |
(1) Cost of sales excludes regional office administration.
(2) As of December 31, 2012, the Company had 236,376,011 common shares issued and outstanding.
(3) Operating cash cost is comprised of mine operating costs such as mining, processing, regional office administration, royalties and production taxes (except at Kumtor where revenue-based taxes are excluded), but excludes depreciation, depletion and amortization, reclamation costs, capital investments, community investments, exploration expenses and corporate general and administration expenses. Operating cash cost, total production cost and all-in cash cost (pre-tax) per ounce produced as well as cost of sales per ounce sold are non-GAAP measures and are discussed under “Non-GAAP Measures”.
(4) As a result of Kumtor's Restated Investment Agreement signed in 2009, operating cash cost and total production cost per ounce measures exclude operating and revenue-based taxes.
(5) All-in cash cost (pre-tax) per ounce produced includes operating cash costs, sustaining and growth capital, corporate general and administrative expenses, global exploration expenses, and community investments, but excludes revenue-based taxes at Kumtor and income taxes.
Fourth Quarter of 2012 compared to Fourth Quarter of 2011
- Gold production for the fourth quarter of 2012 was 219,316 ounces compared to 151,562 ounces in the same quarter of 2011. The increased gold production in the current quarter reflects 37% higher production at Kumtor as higher throughput was achieved in the mine and mill in the fourth quarter. Boroo achieved significantly higher production (+132%) in the fourth quarter of 2012, by processing higher grades with slightly lower recoveries through the mill and recovering gold from its heap leach operations which resumed activities in October 2012 after receiving all required permits.
- Revenues in the fourth quarter of 2012 increased by $120.5 million to $368.5 million from $248 million in the same period last year mainly as a result of 47% higher ounces sold, (215,361 ounces compared to 146,704 ounces). The average gold price realized in the fourth quarter of 2012 was $1,711 per ounce, an increase from the $1,690 per ounce realized in the same quarter of 2011.
- Cost of sales for the fourth quarter of 2012 was $165.2 million compared to $104.1 million in the same quarter of 2011. The increase reflects the higher ounces sold at both sites and higher operating costs due to price increases for diesel, volume increases due to the increased use of consumables for the expanded fleet at Kumtor and the start-up of the heap leach operation at Boroo.
Depreciation, depletion and amortization (DD&A) included in costs of sales for the fourth quarter of 2012 of $91.2 million increased by $60.7 million compared to the same period last year, due in part to the processing and sale of significantly higher ounces in the fourth quarter of 2012. In addition, depreciation expense for the fourth quarter of 2012 was higher than the comparative quarter reflecting the increased depreciation from the expanded mining fleet and achieving higher throughput mining cutback 14B in the last quarter of 2012 compared to the same quarter of 2011 where lower volumes were mined in cut-back 14A.
- The Company recorded an amount of $8.9 million of abnormal mining costs at Kumtor in the fourth quarter of 2012 representing the ice and waste removal from the high movement unload zone. There were no abnormal mining costs in the comparative quarter.
- Other operating expenses for the fourth quarter of 2012 totalled $4.8 million compared to $3.6 million in the same quarter of 2011. Costs in the current quarter of 2012 include $2.9 million for the closure of the underground development project at Kumtor and $1.9 million for ongoing sustainable development projects in both countries where the Company operates.
- Exploration expenditures for the fourth quarter of 2012 were $11.5 million compared to $11.7 million in the same quarter of 2011 mainly reflecting increased drilling activity at the ATO property in Mongolia, the Dvoinoy Joint Venture in Russia and Kumtor.
- A one-time accounting charge of $180.7 million was recorded in the fourth quarter of 2012 to reflect the de-recognition of the underground assets at Kumtor. This results from the decision in early November to expand the open pit at Kumtor and as a result consume a major portion of the underground infrastructure.
- A net loss of $68.0 million was recorded in the fourth quarter of 2012 compared to net earnings of $79.4 million in the same quarter of 2011. Before the charge for the de-recognition of the underground assets, net earnings of $112.7 million were recorded. The higher earnings (pre-accounting charge) in the current quarter of 2012 reflect the increased production and sales at both operations.
- Cash provided by operations was $208.2 million in the fourth quarter of 2012 compared to $60.3 million in the same period of 2011. The increase over 2011 reflects higher earnings from higher production and ounces sold, higher realized prices and a reduction in working capital levels, partially offset by higher operating costs.
- Capital expenditures (spent and accrued) in the fourth quarter of 2012 were $85.0 million, which included sustaining capital of $11.1 million. Growth capital of $73.9 million in the fourth quarter of 2012 reflects $73.4 million of spending at Kumtor mainly on fleet expansion ($23.1 million) and the stripping of cut-back 14A ($36.8 million) and spending at Boroo of $0.3 million. Capital expenditures in the same quarter of 2011 were $30.0 million, which included $9.0 million spent and accrued on sustaining capital projects and $21.0 million invested in growth capital.
| All-in Cash Costs(1) - Consolidated | Three Months Ended December 31 | Year Ended December 31 | ||
|---|---|---|---|---|
| $ millions unless otherwise specified | 2012 | 2011 | 2012 | 2011 |
| Operating cash costs Capitalized stripping and ice unload - cash (1) Operating cash costs and capitalized stripping Sustaining capital (cash) Growth capital (cash) | 78.9 32.2 | 91.4 6.0 | 256.6 152.7 | 322.4 39.4 |
| 111.1 11.1 37.1 | 97.4 9.0 12.7 | 409.3 43.5 177.2 | 361.8 34.6 99.9 | |
| Operating Cash Costs including capital (1) | 159.3 | 119.1 | 630.0 | 496.3 |
| Corporate and other cash costs (2) | 24.6 | 22.5 | 98.5 | 100.4 |
| All-in Cash Costs (pre-tax) (1) | 183.9 | 141.6 | 728.5 | 596.7 |
| Ounces poured All-in Cash Costs (pre-tax) per ounce produced(1) | 219,316 $ 839 | 151,562 $ 934 | 387,076 $ 1,882 | 642,380 $ 929 |
(1) All-in cash costs (pre-tax), capitalized stripping – cash and sustaining and growth capital (excluding stripping) are non-GAAP Measures and are discussed under “Non-GAAP Measures”.
(2) Corporate and other cash costs include corporate general and administrative expenses, global exploration expenses, and community investments.
- Operating cash costs in the fourth quarter of 2012 was $78.9 million compared to $91.4 million in the comparative quarter of 2011. The decrease in the 2012 period results from higher capitalized stripping costs and charges for the unloading of ice and waste, partially offset by higher operating costs for labour, diesel fuel and other consumables for the expanded fleet at Kumtor.
- Operating cash costs per ounce produced was $360 in the fourth quarter of 2012 compared to $603 in the comparative quarter of 2011. The decrease in the 2012 period results mainly from significantly higher production at both sites, partially offset by higher operating costs. Operating cash costs per ounce produced is a non-GAAP measure and is discussed under “Non-GAAP Measures”.
- All-in cash costs per ounce produced pre-tax were $839 in the fourth quarter of 2012 compared to $934 in the same quarter of 2011. The decrease reflects the higher production at both sites in the 2012 quarter, partially offset by higher capitalized stripping and higher spending on capital. All-in cash costs per ounce produced is a non-GAAP measure and is discussed under “Non-GAAP Measures”.
Full Year 2012 compared to Full Year 2011
- Gold production for 2012 totalled 387,076 ounces compared to 642,380 ounces in the prior year. The decreased gold production was mainly due to the March 2012 revised mine plan at Kumtor, as a result of the accelerated ice and waste movements in the SB Zone, which led to a 46% decrease in production at Kumtor year-over-year, partially offset by a 21% increase in production at Boroo, which was positively impacted by the start-up of the heap leach operation in October 2012.
- Revenues for 2012 decreased to $660.7 million compared to $1,020.3 million in 2011 due to a 40% decrease in ounces sold (390,533 ounces compared to 650,258 ounces), partially offset by an 8% increase in the realized gold price. The reduction in sales reflects the lower gold production at Kumtor (-46%) mostly due to lower volumes as a result of the revised mine plan. The average gold price for 2012 was $1,692 per ounce, compared to $1,569 per ounce realized in 2011.
- Operating cash cost per ounce produced for 2012 increased to $663 compared to $502 per ounce in 2011. The increase in 2012 reflects the impact of lower production levels due to lower grades and recoveries from the processing of stockpiled material at Kumtor and higher operating costs at both Kumtor and Boroo as discussed in “Operations Update”. Operating cash cost per ounce produced is a non-GAAP measure and is discussed under “Non-GAAP Measures”.
- All-in cash costs per ounce produced for 2012 increased to $1,882 compared to $929 per ounce in 2011. The increase in 2012 reflects the impact of lower production levels due to lower grades and recoveries from the processing of stockpiled materials at Kumtor, higher capitalized stripping and ice and waste unloading costs, and higher spending on capital at Kumtor and higher operating costs at both Kumtor and Boroo. All-in cash costs per ounce produced is a non-GAAP measure and is discussed under “Non- GAAP Measures”.
- Cost of sales in 2012 was $387.5 million compared to $382.3 million in 2011, reflecting the processing of lower grade, higher cost, stockpiled material at Kumtor for the period to September 2012, higher operating costs for labour, diesel and other consumables and increased DD&A. Cost of sales in 2012 also includes a charge of $7.2 million representing a metal reconciliation variance between the gold content estimated in the stockpiles and the gold actually recovered through processing. In 2011 costs of sales included a charge of $5.8 million for the settlement resulting from an audit by the Kyrgyz Social Fund, relating to the calculation of the premium for work conducted at high altitude at the Kumtor project.
Depreciation, depletion, and amortization associated with production increased by 44% to $142.6 million in 2012 from $99.3 million in 2011 as a result of higher depreciation for the expanded mobile fleet at Kumtor and higher amortization of deferred stripping at both sites, partially offset by lower volumes.
- The Company recorded $60.9 million of abnormal mining costs at Kumtor in 2012 (nil in 2011) representing $24.8 million for the cost of removing the ice and waste from the high movement unload zone and $36.1 million of stripping costs during the period while little or no ore was mined.
- Other operating expenses for 2012 totalled $34.3 million, which includes $26.2 million spent on corporate social responsibility programs and $7.8 million for the closure of the underground project at Kumtor, compared to $15.5 million in 2011.
- Exploration expenditures in 2012 were $37.9 million compared to $39.6 million in 2011. Exploration expenditures in 2012 decreased slightly from 2011 reflecting reduced regional exploration programs in Kyrgyz Republic and the closure of the Reno, Nevada office and cessation of the US exploration program in mid-2012.
- A one-time accounting charge of $180.7 million was recorded in the fourth quarter of 2012 to reflect the de-recognition of the underground assets at Kumtor. This results from the decision in early November to expand the open pit at Kumtor which expansion will consume a major portion of the underground infrastructure.
- The net loss for 2012 was $184.0 million or $0.78 per share compared to net earnings of $370.9 million or $1.57 per share in 2011, reflecting the de-recognition of Kumtor’s underground assets and lower earnings at Kumtor from the revised mining plan.
- Cash provided from operations for 2012 totalled $134.7 million compared to $434.9 million in 2011, primarily as a result of significantly lower earnings at Kumtor in 2012.
- Capital expenditures (spent and accrued) in 2012 were $410.6 million, which included sustaining capital of $40.8 million. Growth capital of $367.1 million in 2012 reflects $359.0 million of spending at Kumtor mainly on fleet expansion ($117 million), the stripping of cut-back 14B and 14A ($179.8 million) and on underground development of decline 1 and 2 ($30.0 million) and spending at Boroo of $7.7 million in 2012 mainly to strip Pit 6 prior to reaching ore. Capital expenditures in 2011 were $187.9 million, which included $34.6 million spent and accrued on sustaining capital projects and $153.3 million invested in growth capital.
As at December 31, 2012, the Company had $76 million outstanding debt under its $150 million revolving credit facility with the European Bank for Reconstruction and Development (“EBRD”) leaving a balance of $74 million undrawn at December 31, 2012. The drawn amount is due to be repaid on August 8, 2013, or at the Company’s discretion, repayment of the loaned funds could be extended until February 2014.
Net cash and short-term investments decreased to $382.1 million from $568.2 million at December 31, 2011.
Operations Update - Summary of Key Operating Results
| Three Months Ended December 31 | Year Ended December 31 | |||||
|---|---|---|---|---|---|---|
| Kumtor Operating Results | 2012 | 2011 | % Change | 2012 | 2011 | % Change |
| Revenue - $ millions | 317.8 | 239.7 | 33% | 533.6 | 941.1 | (43%) |
| Gold sold – ounces | 185,936 | 141,897 | 31% | 314,987 | 599,494 | (47%) |
| Average realized gold price – $/oz | 1,709 | 1,689 | 1% | 1,694 | 1,570 | 8% |
| Cost of sales - $ millions (1) | 137.3 | 96.9 | 42% | 311.1 | 332.6 | (6%) |
| Cost of sales - $/oz sold (3) | 738 | 683 | 8% | 988 | 555 | 78% |
| Tonnes mined - 000s | 38,185 | 37,124 | 3% | 147,610 | 150,605 | (2%) |
| Tonnes ore mined – 000s | 4,463 | 1,095 | 308% | 4,955 | 6,020 | (18%) |
| Tonnes milled - 000s | 1,547 | 1,450 | 7% | 4,756 | 5,815 | (18%) |
| Average mill head grade - g/t (2) | 5.13 | 3.80 | 35% | 2.79 | 3.79 | (26%) |
| Recovery - % | 77.7 | 77.6 | 0% | 75.6 | 80.8 | (6%) |
| Gold produced – ounces | 189,438 | 138,696 | 37% | 315,238 | 583,156 | (46%) |
| Operating cash cost (3) (4) - $/oz produced | 341 | 580 | (41%) | 655 | 482 | 36% |
| Total production cost (3) (4)-$/oz produced | 1,021 | 808 | 26% | 1,175 | 673 | 75% |
| All-in cash cost (pre-tax) (3) (5)-$/oz produced | 760 | 769 | (1%) | 1,808 | 768 | 135% |
| Capital expenditures - $ millions | 83.9 | 28.5 | 195% | 399.9 | 180.7 | 121% |
| Boroo Operating Results | ||||||
| Revenue - $ millions | 50.6 | 8.3 | 512% | 127.2 | 79.3 | 60% |
| Gold sold – ounces | 29,425 | 4,807 | 512% | 75,546 | 50,764 | 49% |
| Average realized gold price - $/oz | 1,720 | 1,719 | 0% | 1,684 | 1,562 | 8% |
| Cost of sales - $ millions (1) | 27.9 | 7.2 | 286% | 76.4 | 49.7 | 54% |
| Cost of sales - $/oz sold (3) | 948.0 | 1,504 | (37%) | 1,011.0 | 979 | 3% |
| Total tonnes mined - 000s | 0 | 0 | - | 6,338 | 0 | 100% |
| Tonnes mined heap leach – 000s | 0 | 0 | - | 143 | 0 | 100% |
| Tonnes stacked heap leach - 000s | 456 | 100% | - | 456 | 0 | 100% |
| Tonnes ore mined direct mill feed -000’s | 0 | 0 | - | 907 | 0 | 100% |
| Tonnes ore milled - 000s | 581 | 629 | (8%) | 2,382 | 2,340 | 2% |
| Average mill head grade - g/t (2) | 2.07 | 1.09 | 90% | 1.32 | 1.11 | 19% |
| Recovery - % | 58.3 | 66.5 | (12%) | 64.0 | 68.9 | (7%) |
| Gold produced – ounces | 29,878 | 12,866 | 132% | 71,838 | 59,224 | 21% |
| Operating cash cost (3) - $/oz produced | 479 | 849 | (44%) | 699 | 694 | 1% |
| Total production cost (3)-$/oz produced | 846 | 951 | (11%) | 999 | 828 | 21% |
| All-in cash cost (pre-tax) (3) (5)-$/oz produced | 502 | 940 | (47%) | 820 | 800 | 3% |
| Capital expenditures (Boroo) - $ millions | 0.7 | 1.1 | (39%) | 9.8 | 6.3 | 55% |
| Capital expenditures (Gatsuurt) - $ millions | 0.1 | 0.0 | 504% | 0.4 | 0.3 | 39% |
(1) Cost of sales excludes regional office administration.
(2)
g/t means grams gold per tonne.
(3)
Operating cash cost is comprised of mine operating costs such as mining, processing, regional office administration, royalties and production taxes (except at Kumtor where revenue-based taxes are excluded), but excludes depreciation, depletion and amortization, reclamation costs, capital investments, community investments, exploration expenses and corporate general and administration expenses. Operating cash cost, total production cost and all-in (pre-tax) cost produced as well as cost of sales per ounce sold are non-GAAP Measures and are discussed under “Non- GAAP Measures”.
(4)
Kumtor’s operating cash cost and total production cost per ounce measures exclude operating and revenue-based taxes.
(5) All-in cash cost (pre-tax) per ounce produced for Kumtor and Boroo includes operating cash cost, sustaining and growth capital, but excludes corporate general and administrative expenses, global exploration expenses, and community investments, revenue-based taxes at Kumtor and income taxes.
| All-in Cash Costs (1) - Kumtor | Three Months Ended December 31 | Year Ended December 31 | ||
|---|---|---|---|---|
| $ millions unless otherwise specified | 2012 | 2011 | 2012 | 2011 |
| Operating cash costs Capitalized stripping and ice unload - cash (1) Operating cash costs and capitalized stripping Sustaining capital (cash) Growth capital (cash) | 64.6 32.2 | 80.4 6.0 | 206.5 146.4 | 281.3 39.4 |
| 96.8 10.5 36.6 | 86.4 7.8 12.4 | 352.9 40.8 176.4 | 320.7 32.2 95.0 | |
| Operating Cash Costs including capital (1) | 143.9 | 106.6 | 570.1 | 447.9 |
| Corporate and other cash costs (2) | - | - | - | - |
| All-in Cash Costs (pre-tax) (1) (3) | 143.9 | 106.6 | 570.1 | 447.9 |
| Ounces poured All-in Cash Costs (pre-tax) per ounce produced (1) (3) | 189,438 $ 760 | 138,696 $ 769 | 315,238 $ 1,808 | 583,156 $ 768 |
| All-in Cash Costs (1) - Boroo | Three Months Ended December 31 | Year Ended December 31 | ||
|---|---|---|---|---|
| $ millions unless otherwise specified | 2012 | 2011 | 2012 | 2011 |
| Operating cash costs Capitalized stripping - cash (1) Operating cash costs and capitalized stripping Sustaining capital (cash) Growth capital (cash) | 14.3 0.0 | 10.9 0.0 | 50.2 6.3 | 41.1 0.0 |
| 14.3 0.4 0.3 | 10.9 0.9 0.3 | 56.5 2.1 0.3 | 41.1 1.8 4.5 | |
| Operating Cash Costs including capital (1) | 15.0 | 12.1 | 58.9 | 47.4 |
| Corporate and other cash costs (2) | - | - | - | - |
| All-in Cash Costs (pre-tax) (1) (3) | 15.0 | 12.1 | 58.9 | 47.4 |
| Ounces poured All-in Cash Costs (pre-tax) per ounce produced (1) (3) | 29,878 $502 | 12,866 $940 | 71,838 $820 | 59,224 $800 |
(1) All-in cash costs (pre-tax), capitalized stripping –cash and sustaining and growth capital (excluding stripping) are non-GAAP Measures and are discussed under “Non-GAAP Measures”.
(2) Corporate and other cash costs include corporate general and administrative expenses, global exploration expenses, and community investments.
(3) All-in cash costs (pre-tax) for Kumtor and Boroo exclude corporate and other cash costs.
Kumtor
At the Kumtor mine, gold production was 189,438 ounces in the fourth quarter of 2012, compared to 138,696 ounce in the same quarter in 2011. The increased production for the fourth quarter of 2012 was due to processing the higher grade ore available from cutback 14B. In comparison, in the fourth quarter of 2011 Kumtor processed consistent grades from the then newly accessed cutback 12B. Mill head grades for the fourth quarter of 2012 were 5.13 g/t with a recovery of 77.7%, versus 3.80 g/t and a recovery of 77.6% for the same quarter in 2011. Tonnes processed in the fourth quarter of 2012 were 1,547,463, 7% higher than the same period of 2011 as the Company increased mill availabilities and throughput following the seven week mill shutdown in the third quarter when extensive maintenance and remediation work was completed.
Operating cash costs including capitalized stripping and ice unloading at Kumtor (see “Non-GAAP Measures”) in the fourth quarter of 2012 increased by $10.3 million due to higher mining costs, which increased by $8.6 million as a result of the 11% increase in the material mined by the expanded mine fleet which moved higher grade ore from the SB Zone. Other costs increased by $1.7 million relating to higher site support costs and higher labour costs.
Operating cash costs per ounce produced was $341 in the fourth quarter of 2012 compared to $580 in the comparative quarter of 2011. The decrease in per ounce costs in the 2012 period is the result of increased capitalized stripping and ice unload and 37% higher production partially offset by increased operating costs discussed above. Operating cash costs per ounce produced is a non-GAAP measure and is discussed under “Non-GAAP Measures”.
All-in cash costs per ounce produced were $760 in the fourth quarter of 2012 compared to $769 in the same quarter of 2011. The decrease reflects the higher production in the 2012 quarter, partially offset by higher capitalized stripping and higher spending on capital. All-in cash costs per ounce produced is a non-GAAP measure and is discussed under “Non-GAAP Measures”.
Exploration expenditures totaled $2.9 million for the fourth quarter of 2012, which is similar to the comparative quarter of 2011. Exploration activity focused on drilling of the southwest extension of the SB Zone and deeper portions of the SB Zone below the Central Pit. Underground exploration drilling from Declines 1 and 2 ended in November 2012, following the Company’s decision to expand the Kumtor Central Pit and cease underground development activities.
During the fourth quarter of 2012, capital expenditures were $83.9 million, which included $10.5 million of sustaining capital spent mainly on the heavy equipment overhaul program ($6.1 million), the effluent treatment plant relocation ($3.4 million) and other projects ($1.0 million). Growth capital investment totalled $76.0 million mainly on capitalized stripping ($36.8 million), purchase of six CAT 789 Haul Trucks ($23.1 million) associated with the new KS-13 life-of-mine plan, purchase of four Hitachi shovels ($12.0 million), expansion of the fuel farm at the new marshaling yard ($0.9 million) and numerous other minor projects ($0.6 million). Capital expenditures in 2011 were $28.5 million, which included $7.8 million spent and accrued on sustaining capital projects and $20.7 million invested in growth capital.
Abnormal mining costs at Kumtor for the fourth quarter of 2012 were $8.9 million representing the ice and waste removal from the high movement unload zone, which is required to resume mining the southeast section of the pit and to access the higher grade ore in 2013.
During the fourth quarter of 2012, the Company recorded a one-time charge of $180.7 million for the derecognition of the underground assets at Kumtor following the decision to expand the open pit. The larger open pit will partially consume the declines rendering them unusable for future mining activities.
Other operating expenses were incurred in the fourth quarter for the closure of the underground operation at Kumtor in the amount of $2.9 million. Kumtor will incur further closure costs for the underground during the first quarter of 2013.
Boroo
At the Boroo mine in the fourth quarter of 2012, gold production was 29,878 ounces, compared to 12,866 ounces in the same period of 2011. The production increase of 12,614 ounces is a result of processing higher grade ore from Pit 6 with an average mill head grade of 2.07 g/t compared to 0.86 g/t last year and the addition of 7,486 ounces of production from the heap leap operation which resumed in October 2012.
Operating costs at Boroo were up $3.8 million quarter-over-quarter primarily due to increased costs for mining ($0.4 million), heap leaching ($1.9 million) and royalties ($1.8 million), partially offset by a decrease in milling costs ($0.2 million). Heap leaching costs were higher due to stacking, crushing and processing activities which commenced in the fourth quarter in 2012. Royalties increased in 2012 due to the additional 24,618 ounces sold in the 2012 fourth quarter. Milling cost decreased mainly due to lower consumption of consumables.
Operating cash costs per ounce produced in the fourth quarter 2012 was $479 compared to $849 per ounce for 2011. The decrease in the unit cash cost is a result of the higher production partially offset by higher operating cost incurred for heap leach operations in the fourth quarter of 2012. Operating cash costs per ounce produced is a non-GAAP measure and is discussed under “Non-GAAP Measures”.
Boroo’s all-in cash costs per ounce produced for the fourth quarter of 2012 is $502 and includes all costs directly related to gold production except for income tax paid in Mongolia. The same all-in cash costs measure for 2011 was $940 per ounce produced. The decrease in all-in cash costs is due to the 21% increase in production partially offset by higher costs at Boroo year-over-year. All-in cash costs per ounce produced is a non-GAAP measure and is discussed under “Non-GAAP Measures”.
During the fourth quarter of 2012 exploration expenditures in Mongolia decreased to $3.0 million from $4.2 million in the same period in 2011. The majority of the exploration work in the fourth quarter 2012 was conducted at the ATO property in eastern Mongolia.
During the fourth quarter of 2012, capital expenditures at Boroo were $0.7 million, $0.4 million of sustaining capital and $0.4 million of growth capital.
Other Corporate Developments
The following is a summary of corporate developments with respect to matters affecting the Company and its subsidiaries in the Kyrgyz Republic, Mongolia and Canada:
Kyrgyz Republic
Since the Company’s most recent quarterly news release dated November 7, 2012, there have been several developments with respect to the state commission established by the Kyrgyz Government for the purpose of inspecting and reviewing Kumtor’s compliance with Kyrgyz operational and environmental laws and regulations and community standards (the “State Commission”). In particular, the following developments have occurred, each of which will be discussed below in greater detail: (a) The State Commission released its final report (the “State Commission Report”) on December 25, 2012; (b) Kumtor received five claims from