Centerra Gold Reports 2013 Fourth Quarter and Year-end Results
NEWS RELEASE Centerra Gold Reports 2013 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 32 and in our Cautionary Note Regarding Forward-looking Information on page 39. It should be read in conjunction with the Company’s audited financial statements and notes thereto for the year ended December 31, 2013 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, 2013. All figures are in United States dollars.
To view the 2013 Management’s Discussion and Analysis and the Audited Financial Statements and Notes for the year-ended December 31, 2013, please visit the following link:
http://media3.marketwire.com/docs/CG2013-YEMDA.pdf
Toronto, Canada, February 19, 2013: Centerra Gold Inc. (TSX: CG) today reported net earnings of $106.6 million or $0.45 per common share (basic) in the fourth quarter of 2013. This compares to a net loss of $70.7 million or $0.30 per common share (basic) for the same period in 2012 after a charge of $180.7 million in the fourth quarter of 2012 for the de-recognition of the underground assets at the Kumtor mine.
2013 Fourth Quarter Highlights
- Full year gold production and costs were better than guidance.
- Produced 362,234 ounces of gold in the fourth quarter, including 348,130 ounces at Kumtor and 14,104 ounces at Boroo.
- Increased revenues to $468.9 million compared to $368.5 million in the same quarter of 2012.
- All-in sustaining costs per ounce sold1 were $433 in fourth quarter and $818 for the full year.
- All-in costs per ounce sold1 were $474 in the fourth quarter and $920 for the full year.
- Increased indicated resources at the Öksüt project in Turkey by 60% to 1.1 million contained ounces of gold.
- Proven and probable gold reserves total 10.2 million ounces of contained gold.
- Cash provided by operations was $359.5 million compared to $209.1 million in the fourth quarter of 2012.
- Entered into a non-binding Heads of Agreement with the Kyrgyz Republic in connection with the potential restructuring of the Kumtor project, replaces MOU signed in September 2013.
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For the full year, the Company recorded net earnings of $157.7 million or $0.67 per share (basic), compared to a net loss of $143.7 million or $0.61 per share (basic) in 2012. The increase in earnings in 2013 reflects significantly more ounces produced and sold (ounces sold increased 78% over 2012), a $4.8 million writedown of the exploration inventory at Kumtor following the closure of the exploration program and the adoption, in the first quarter of 2013, of a new accounting policy (IFRIC 20). Adoption of IFRIC 20 resulted in retroactively capitalizing approximately $40 million of previously expensed stripping costs in 2012 thereby reducing the loss in 2012. The Company’s 2012 results have been restated as described in note 5 to the Company’s 2013 annual financial statements. The additional capitalized stripping costs in 2012 was fully amortized in 2013, resulting in the Company’s actual depreciation, depletion and amortization (DD&A) exceeding the prior DD&A guidance of February 20, 2013.
Production increases in 2013 were reported at both of the Company’s operations, but these increases were partially offset by 20% lower realized gold prices in 2013. The 2012 results reflected a charge for the derecognition of the underground assets at Kumtor of $180.7 million and the negative impact on production of the acceleration of ice and waste in the high movement area above the SB Zone which delayed the release of ore and required a re-design of the production plan in early 2012.
Consolidated gold production in 2013 totaled 690,720 ounces compared to 387,076 ounces in the prior year. Production increases in 2013 were reported at both operations; Kumtor recorded a 90% increase in ounces poured, while Boroo poured 26% more ounces in 2013. During the year, Kumtor processed higher grades and achieved higher recoveries and Boroo benefited from a full year of heap leach production (which resumed operation in October 2012). In 2012 the lower gold production was primarily due to the revised mine plan at Kumtor, which resulted from the accelerated ice and waste movements in the pit wall above the SB Zone.
Commentary
Ian Atkinson, President and CEO of Centerra stated, “Both operations exceeded their production guidance in 2013, mainly as a result of a strong fourth quarter at Kumtor and better than expected annual production from the heap leach operation at Boroo. Centerra’s performance in 2013 was well within its third quarter operating cash costs guidance, and performed better than its prior all-in cash costs1 per ounce produced guidance partly due to Boroo, which exceeded expectations, and to Kumtor’s strong production in the fourth quarter of 2013, which enabled it to exceed its guidance. From a financial standpoint, in the fourth quarter of 2013, the Company had strong net earnings of $106.2 million or $0.45 per share. Cash provided by operations was approximately $360 million during the fourth quarter and our cash and short-term investments grew to over $425 million net of our debt at year-end.”
“On February 5, 2014, we published our updated reserves and resources in which we reported that we successfully converted the majority of the inferred resources to indicated resources at the Öksüt project in Turkey through our in-fill drilling during the year and we continued to expand the resource, which now totals 1.1 million contained ounces of gold in the indicated category with an average grade of 1.2 g/t. The Company expects to complete a preliminary economic assessment in the first quarter of 2014 and if such assessment is positive, we expect to commence a feasibility study later in the year.”
“In 2014, we are expecting consolidated gold production to be in the 595,000 to 645,000 ounce range and our expected consolidated all-in sustaining costs per ounce sold1 for 2014 to be within a range of $875 to $950 and our expected consolidated all-in costs to be $989 to $1,074 per ounce sold1.”
On December 24, 2014, Centerra entered into a non-binding Heads of Agreement (the “HOA”) with the Government of the Kyrgyz Republic and Kyrgyzaltyn JSC (“Kyrgyzaltyn”) in connection with a potential restructuring transaction under which Kyrgyzaltyn would exchange its 32.7% equity interest in Centerra for a 50% interest in a joint venture company that would own the Kumtor Project. On February 6, 2014, after their review of the HOA, the Kyrgyz Parliament adopted a resolution which appears to support the concept of the restructuring described in the HOA but also contains a number of recommendations that are materially inconsistent with the terms of the HOA. Among other things, the resolution calls for further audits of the Kumtor operation and for the Government and the General Prosecutor’s Office to continue pursuing claims for environmental and economic damages, which the Company disputes. The Company has not yet received an official copy of the Parliamentary resolution. The Company expects to continue its discussions with the Government regarding a potential restructuring transaction to resolve all outstanding concerns relating to the Kumtor Project. However, the Company continues to maintain that any agreement to resolve matters must be fair to all of Centerra’s shareholders. Any definitive agreement for a potential restructuring remains subject to required approvals in the Kyrgyz Republic, including Government and Parliament of the Kyrgyz Republic, as well as Centerra Special Committee and Board approval, and compliance with all applicable legal and regulatory requirements and approvals, including a formal independent valuation and shareholder approval. See “Other Corporate Developments - Kyrgyz Republic” for further details on these developments.
As at December 31, 2013, 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, 2013. Repayment of the $76 million outstanding was subsequently extended to August 11, 2014 or, at the Company’s discretion, repayment of the loan may be further extended until February 2015.
Cash, cash equivalents and short-term investments at the end of 2013 increased to $501.5 million from $382.1 million at December 31, 2012.
Changes in Presentation of Non-GAAP Financial Performance Measures
In 2013, the Company adopted non-GAAP performance measures, “all-in cash costs1”, which were based on production. In June 2013, the World Gold Council (WGC) published guidelines for reporting all-in sustaining costs1 and all-in costs1 performance measures. Centerra reviewed the recommended measures and assessed their impact from adoption on its reporting. The WGC measures are similar to Centerra’s former presentation of all-in cash costs1 except that they include accretion expense, allocate social development costs and exploration spending to the operating sites and are based on sales of gold rather than production. The following discussion presents a detailed calculation for both measures and reconciles the transition from the old measures to the new measures that have now been adopted.
These new measures should therefore not be considered in isolation, or as a substitute for, analysis of our results as reported under GAAP. The new measures have limitations as an analytical tool as they may be distorted in periods where significant capital investments are being made to expand for future growth or where significant cash mining costs are being expended on stripping in advance of accessing ore to be processed.
Unit Cash Costs1 – Old Measure
The following table calculates Centerra’s actual all-in cash costs using the Company’s calculation methodology as presented in the first three quarters of 2013 and also compares the annual result with the Company’s most recent cost guidance for 2013 presented in its third quarter 2013 public disclosures.
| 2013 Year - Actual | |||
|---|---|---|---|
| $ millions, except as noted | Consolidated(7) | Kumtor | Boroo |
| All-in Cash Costs: | |||
| Mining (2) | 58.5 | 58.5 | - |
| Milling | 94.0 | 70.8 | 23.1 |
| Leaching | 10.6 | - | 10.6 |
| Site support | 68.1 | 60.0 | 8.1 |
| Regional administration | 23.7 | 18.1 | 5.8 |
| Royalties | 9.4 | - | 9.4 |
| Management fees and other | (0.3) | 0.6 | (0.9) |
| Refining fees | 3.8 | 3.5 | 0.3 |
| By-product credits | (4.3) | (3.8) | (0.5) |
| Operating cash costs(1) | $ 2 63.5 | $ 207.7 | $ 55.9 |
| Capitalized stripping and ice unload - cash | 201.3 | 201.3 | - |
| Operating cash costs and capitalized stripping | 464.8 | 409.0 | 55.9 |
| Sustaining capital (cash)(1) (3) | 57.7 | 49.7 | 7.4 |
| Growth capital (cash) - including Gatsuurt(1) (4) | 39.9 | 39.2 | - |
| Operating cash costs including capital | 562.4 | 497.8 | 63.4 |
| Corporate and other cash costs | 68.1 | - | - |
| All-in Cash Costs - pre-tax(1) | $ 6 30.5 | $ 497.8 | $ 63.4 |
| Revenue-based tax and income tax | 126.3 | 113.5 | 12.8 |
| All-in Cash Costs - including taxes(1) | $ 7 56.8 | $ 611.4 | $ 76.1 |
| Ounces poured | 690,720 | 600,402 | 90,318 |
| Operating cash costs - $/oz produced(1) (5) | $ 3 82 | $ 346 | $ 619 |
| All-in Cash Costs (pre-tax) - $/oz produced(1) (6) | $ 9 13 | $ 829 | $ 702 |
| All-in Cash Costs (including taxes) - $/oz produced(1) | $ 1,096 | $ 1,018 | $ 843 |
| 2013 Full Year Cost Guidance (reported October 2013): Ounces poured Operating cash costs - $/oz produced(1) All-in Cash Costs (pre-tax) - $/oz produced(1) | 635,000 - 685,000 $375 - $400 $930 - $1,000 | 550,000 - 600,000 $330 - $360 $820 - $895 | approx 85,000 approx $680 approx $775 |
(1) Non- GAAP measure see discussion under “Non-GAAP Measures”.
(2) Excludes capitalized stripping and abnormal mining costs.
(3) Sustaining capital1 is a capital expenditure necessary to maintain existing levels of production. The sustaining capital1 expenditures maintain the existing mine fleet, mill and other facilities so that they function at levels consistent from year to year.
(4) Growth capital1 is capital expended to expand the business or operations by increasing productive capacity beyond current levels of performance.
(5) Operating cash costs1 include mine operating costs such as mining, processing, administration, royalties and operating taxes (except at Kumtor where revenue-based taxes are excluded), but exclude depreciation, depletion and amortization (DD&A), reclamation costs, financing costs, capital expenditures and exploration. Operating cash costs per ounce produced is calculated by dividing operating cash costs by the ounces produced.
(6) All-in cash costs per ounce produced1 includes operating cash costs1, capitalized stripping, sustaining and growth capital1, corporate general and administrative expenses, global exploration expenses and social development costs. The measure is presented including and excluding revenue-based taxes at Kumtor and income taxes at Boroo.
(7) Consolidated numbers may not add across the columns as corporate entities are not presented in this table, given these are not significant.
The following table reconciles the prior reported measure of consolidated all-in cash costs1 to the new all-in sustaining costs1 and all-in costs1 measures for the Company’s 2013 actual results.
| $ millions, except as noted | 2013 Year - Consolidated Actual (2) | ||
|---|---|---|---|
| Old Measures | New WGC Measures | ||
| All-in Cash Costs(1) | All-in Sustaining Costs(1) | All-in Costs(1) | |
| Operating cash costs and capitalized stripping | 464.8 | 464.8 | 464.8 |
| Sustaining capital (cash) (1) | 57.7 | 57.7 | 57.7 |
| Growth capital (cash)(1) | 39.9 | 39.9 | |
| Operating cash costs including capital | 562.3 | ||
| Corporate and General Administration | 30.3 | 30.3 | 30.3 |
| Exploration and business development | 29.6 | 29.6 | |
| Community investments (social development costs) | 6.4 | 6.4 | 6.4 |
| Other expenses All-in Cash Costs - pre-tax (1) | 1.9 | 1.9 | |
| $ 630.5 | |||
| Changes in Inventories | 10.0 | 10.0 | |
| Reclamation expense | 0.9 | 0.9 | |
| All-in Sustaining Costs(1) All-in Costs(1) Revenue-based tax and Income tax All-in Cash Costs - including taxes (1) All-in Costs (including taxes)(1) Ounces poured | 126.3 | ||
| $ 570.1 | |||
| $ 641.4 126.3 | |||
| $ 756.8 | |||
| $ 767.7 | |||
| 690,720 | |||
| Ounces sold | 696,818 | 696,818 | |
| Operating cash cost - $/oz produced (1) | $ 382 | ||
| All-in Cash Costs (pre-tax) - $/oz produced (1) | $ 913 | ||
| All-in Cash Costs (including taxes) - $/oz produced (1) | $ 1,096 | ||
| All-in Sustaining Costs - $/oz sold(1) | $ 818 | ||
| All-in Costs - $/oz sold(1) | $ 920 | ||
| All-in Costs (including taxes) - $/oz sold(1) | $ 1,102 |
The impact of this change in presentation of the Company’s all-in cost performance measures was not a significant change from its previously reported measure for the reported periods. As presented in the above table, the consolidated all-in cash costs (pre-tax) per ounce produced1 (old measure) for 2013 was $913, as compared to the consolidated all-in costs per ounce sold1 (new measure) of $920. At Kumtor, all-in cash costs (pre-tax) per ounce produced1 (old measure) for 2013 was $829, as compared to the all-in costs per ounce sold1 (new measure) of $853, while at Boroo, all-in cash costs (pre-tax) per ounce produced1 (old measure) for 2013 was $701, as compared to the all-in costs per ounce sold1 (new measure) of $765. For a detailed breakdown of the all-in unit costs1 by operation please refer to the Company’s year-end MD&A.
1 Non-GAAP measure, see discussion under “Non-GAAP Measures”.
2 Numbers may not add due to rounding
The Company believes that this change in presentation brings the Company’s performance measure reporting more in-line with the rest of the gold industry and may provide investors with better comparability in assessing performance against other gold producers. It may also help investors to assess the ability of Centerra to generate cash flow for use in investing and other activities.
“All-in cash costs1”, “all-in sustaining costs1”, “all-in costs1” and “all-in costs (including taxes)1” are intended to provide additional information only and do not have standardized definitions under IFRS and should not be considered as a substitute for measures of performance prepared in accordance with IFRS (see discussion under “Non-GAAP Measures”). The all-in costs measure is presented including and excluding revenue-based taxes at Kumtor and income taxes at Boroo. A person may choose instead to treat revenue-based taxes as a royalty and include this amount as part of the all-in sustaining costs measure.
These measures are not representative of all of the Company’s cash expenditures as they do not include interest costs or dividend payments.
Any references to all-in costs1 or all-in sustaining costs1 (whether on a unit basis or not) in the remainder of this news release are under the definitions as developed by the World Gold Council (see discussion under “Non-GAAP Measures”).
Financial and Operating Summary Consolidated Highlights
| Three Months Ended December 31 | Year Ended December 31 | |||||
|---|---|---|---|---|---|---|
| Financial and Operating Summary | 2013 | 2012(5) | % Change | 2013 | 2012(5) | % Change |
| Revenue - $ millions | 468.9 | 368.5 | 27% | 944.4 | 660.7 | 43% |
| Cost of sales - $ millions (1) | 271.8 | 167.9 | 62% | 559.2 | 383.3 | 46% |
| Abnormal mining costs - $ millions | - | 8.9 | 100% | - | 24.8 | 100% |
| Regional office administration - $ millions | 6.2 | 5.6 | 11% | 23.7 | 21.0 | 13% |
| Revenue-based taxes - $ millions | 62.9 | 44.5 | 41% | 113.5 | 74.7 | 52% |
| Other operating expenses - $ millions | 1.9 | 4.8 | (60%) | 8.3 | 34.3 | (76%) |
| Loss on de-recognition of UG - $ millions | - | 180.7 | 100% | - | 180.7 | 100% |
| Exploration - $ millions | 8.8 | 11.5 | (24%) | 29.6 | 37.9 | (22%) |
| Corporate administration - $ millions | 8.1 | 8.8 | (8%) | 30.6 | 27.0 | 13% |
| Earnings (loss) before income taxes - $ millions | 107.6 | (65.5) | 264% | 170.8 | (132.0) | 229% |
| Income tax expense - $ millions | 1.0 | 5.2 | (81%) | 13.1 | 11.7 | 12% |
| Net earnings (loss) - $ millions | 106.6 | (70.7) | 251% | 157.7 | (143.7) | 210% |
| Earnings(loss) per common share - $ basic | 0.45 | (0.30) | 250% | 0.67 | (0.61) | 210% |
| Earnings(loss) per common share - $ diluted | 0.44 | (0.30) | 247% | 0.64 | (0.61) | 205% |
| Cash provided by operations - $ millions | 359.5 | 209.1 | 72% | 483.9 | 173.4 | 179% |
| Capital expenditures -$ millions | 86.7 | 86.4 | 0% | 376.6 | 464.0 | (19%) |
| Weighted average common shares outstanding - basic (thousands) (2) | 236,388 | 236,339 | 0% | 236,382 | 236,369 | 0% |
| Weighted average common shares outstanding - diluted (thousands) (2) | 236,646 | 236,339 | 0% | 236,663 | 236,369 | 0% |
| Average gold spot price(4) - $/oz | 1,276 | 1,721 | (26%) | 1,411 | 1,669 | (15%) |
| Average realized gold price(3) - $/oz | 1,271 | 1,711 | (26%) | 1,355 | 1,692 | (20%) |
| Gold produced – ounces | 362,234 | 219,316 | 65% | 690,720 | 387,076 | 78% |
| Gold sold – ounces | 368,954 | 215,361 | 71% | 696,818 | 390,533 | 78% |
| Cost of sales (3) - $/oz sold | 737 | 780 | (6%) | 803 | 982 | (18%) |
| Adjusted operating costs(3)- $/oz sold | 247 | 366 | (33%) | 402 | 747 | (46%) |
| All-in sustaining costs(3)- $/oz sold | 433 | 664 | (35%) | 818 | 1,449 | (44%) |
| All-in costs(3) - $/oz sold | 474 | 850 | (44%) | 920 | 1,991 | (54%) |
| All-in costs including taxes (3)-$/oz sold | 644 | 1,087 | (41%) | 1,102 | 2,212 | (50%) |
(1) Cost of sales excludes regional office administration.
(2) As of December 31, 2013, the Company had 236,390,219 common shares issued and outstanding.
(3) Adjusted operating costs per ounce sold, all-in sustaining costs per ounce sold, all-in costs per ounce sold, all-in costs (including taxes) per ounce sold, as well as average realized price per ounce sold and cost of sales per ounce sold, are non-GAAP measures and are discussed under “Non- GAAP Measures”.
(4) Average for the period as reported by the London Bullion Market Association (US dollar Gold P.M. Fix Rate).
(5) The 2012 comparative period was restated as a result of the adoption of IFRIC 20.
Fourth Quarter of 2013 compared to Fourth Quarter of 2012
- Gold production for the fourth quarter of 2013 was 362,234 ounces compared to 219,316 ounces in the same quarter of 2012. The increased gold production in the fourth quarter of 2013 reflects 84% higher production at Kumtor as compared to the same quarter in 2012. In the fourth quarter of 2013, Kumtor produced 58% of its annual gold production as a result of the higher grades mined and milled.
- All-in sustaining costs per ounce sold1 were $433 in the fourth quarter of 2013 compared to $664 in the comparative quarter of 2012. The decrease in the 2013 period results mainly from significantly higher production at Kumtor, partially offset by higher operating costs.
- All-in costs per ounce sold1 were $474 in the fourth quarter of 2013 compared to $850 in the same quarter of 2012. The decrease reflects the increased ounces sold from higher production and lower capital requirements at Kumtor in the 2013 quarter, partially offset by increased costs associated with the larger truck fleet.
- Revenues in the fourth quarter of 2013 increased by $100.4 million to $468.9 million from $368.5 million in the same period last year mainly as a result of 71% higher ounces sold, partially offset by 26% lower realized gold price. The average realized gold price1 in the fourth quarter of 2013 was $1,271 per ounce, a 26% decrease from $1,711 per ounce realized in the same quarter of 2012.
- Cost of sales for the fourth quarter of 2013 was $271.8 million compared to $167.9 million in the same quarter of 2012. The increase reflects significantly more ounces sold at Kumtor, higher depreciation of capitalized stripping at Kumtor, higher operating costs due to increased consumption of reagents, cyanide and power from increased throughput and head grades at Kumtor’s mill and volume increases due to the increased use of consumables for the expanded fleet at Kumtor.
DD&A included in costs of sales for the fourth quarter of 2013 of $188.7 million increased by $92.8 million compared to the same period last year, due in part to the processing and sale of more ounces in the fourth quarter of 2013 at Kumtor, partially offset by fewer ounces at Boroo. The fourth quarter of 2013 at Kumtor reflects the higher depletion of the capitalized stripping associated with cut-back 15, compared to cutback 14B that was mined in the comparative period. During the fourth quarter of 2013, Kumtor depleted the majority of the 142 million tonnes associated with cut-back 15, compared to 61 million tonnes from cut-back 14B in the comparative period. The increased DD&A charge was partially offset by mining and stockpiling greater ounces from cut-back 15 that will defer recognition of DD&A until the ounces are produced in 2014.
- There were no abnormal mining costs in the fourth quarter of 2013 compared to $8.9 million in the comparative period of 2012. Abnormal mining costs represent the cost of removing the ice and waste from the high movement unload zone necessitated by the unexpected ice movement.
- Other operating expenses for the fourth quarter of 2013 totaled $1.9 million compared to $4.8 million in the same quarter of 2012. Costs in the fourth quarter of 2012 included $2.9 million for the closure of the underground development project at Kumtor. Approximately $1.9 million was spent in the fourth quarter in 2013 and 2012 for ongoing sustainable development projects in both the Kyrgyz Republic and Mongolia.
- A 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 2012 to expand the open pit at Kumtor and as a result consume a major portion of the underground infrastructure.
- Exploration expenditures for the fourth quarter of 2013 were $8.8 million compared to $11.6 million in the same quarter of 2012 mainly reflecting a cessation of drilling activities at Kumtor and on-going drilling programs at the Öksüt project in Turkey and the ATO Project in Mongolia. All exploration drilling at Kumtor ceased in the third quarter of the year and there are no future plans for exploration work within the mining concession area or on a regional scope. As a result, the Company recognized a $4.8 million write-down of the exploration inventory in the fourth quarter.
- Cash provided by operations was $359.5 million in the fourth quarter of 2013 compared to $209.1 million in the same period of 2012. The increase over 2012 reflects increased earnings from higher production and ounces sold and a reduction in working capital levels, partially offset by lower realized gold prices and higher operating costs.
- Capital expenditures spent and accrued in the fourth quarter of 2013 were $86.7 million, which included sustaining capital1 of $10 million, growth capital1 of $5.9 million and $70.8 million of capitalized stripping costs. Capital expenditures in the same quarter of 2012 were $86.4 million, which included $11.6 million for sustaining capital1 and $24.5 million for growth capital1 and capitalized stripping of $50.3 million.
Full Year 2013 compared to Full Year 2012
- Gold production for 2013 totaled 690,720 ounces compared to 387,076 ounces in the prior year. Kumtor recorded a 90% increase in ounces poured year-over-year, while Boroo poured 26% more ounces in 2013 due to the heap leach operating for the full year. The lower ounces poured in 2012 were mainly due to the revised mine plan at Kumtor, necessitated by the accelerated ice and waste movements in the SB Zone.
- All-in sustaining costs per ounce sold1 for 2013 was $818. This compares to all-in sustaining costs1 of $1,449 per ounce sold in 2012. The decrease is mainly due to higher production and sales at both sites (significantly higher at Kumtor), lower spending on social development costs and lower mine stand-by costs.
- All-in costs per ounce sold1 for 2013 was $920, and includes all cash costs related to gold production, except for revenue-based taxes in the Kyrgyz Republic. This compares to all-in costs1 of $1,991 per ounce sold in 2012. The decrease is mainly due to higher production at both sites (significantly higher at Kumtor), lower spending on growth capital1, partially offset by higher operating costs and higher spending on capitalized stripping and ice and waste unload costs. Capital expenditures excluding capitalized stripping costs decreased by $111.9 million from $209.5 million ($536 per ounce) in 2012 to $97.6 million ($140 per ounce) in 2013 as the Kumtor mine completed the major portion of its mining fleet expansion during 2012.
- Revenues for 2013 were $944.4 million, an increase of $283.6 million compared to the same period of 2012 due to a 78% increase in ounces sold partially offset by a 20% decrease in the average realized gold price1. Gold sold was 696,818 ounces in 2013 compared to the 390,533 ounces reported in 2012. The increase reflects higher gold production at both Kumtor and Boroo. The average realized gold
price1 for 2013 was $1,355 per ounce compared to $1,692 per ounce in the same period of 2012 reflecting lower spot prices for gold throughout the year. Centerra’s average realized price1 for gold in 2013 was lower than the average spot price for the year because more than 50% of annual gold production at Kumtor was in the fourth quarter when the price of gold averaged $1,276 per ounce.
- Cost of sales was $559.2 million in 2013 compared to $383.3 million in 2012, reflecting the significantly higher ounces sold in 2013. The volumes in 2012 were significantly reduced as a result of the revised mine plan at Kumtor which led to the suspension of milling activities for part of the year. Cost of sales in 2013 included an increase in DD&A of $167 million, mainly due to higher ounces sold. Cost of sales in 2012 also included 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 at Kumtor.
DD&A associated with sales increased to $309 million in 2013 from $142.1 million in 2012 as a result of higher volumes and increased depreciation for the expanded mobile fleet at Kumtor. In addition, the Company incurred higher amortization of capitalized stripping costs at Kumtor of about $40 million resulting from the adoption of IFRIC 20. The adoption of IFRIC 20 resulted in operating costs that were previously expensed in 2012 in the amount of about $40 million being capitalized as stripping costs in 2012. The 2012 results have therefore been restated as described in Note 5 to the 2013 Audited Financial Statements. These newly capitalized costs were then amortized during 2013 as the ore in the related cutback was mined, increasing 2013 DD&A expense by approximately $40 million. .
- The Company recorded $24.8 million of abnormal mining costs at Kumtor in 2012 (nil for 2013) representing the cost of removing the ice and waste from the high movement unload zone. The costs associated with this unloading activity resulted in a significant amount of mining costs which did not relate to the production of inventory in the period and were expensed immediately as abnormal mining costs.
- Other operating expenses for 2013 totaled $8.3 million compared to $34.3 million in 2012. The 2013 amount includes spending on social development programs (corporate social responsibility (“CSR”) programs) of $6.3 million ($26.2 million in 2012) and $1.5 million spent on closure costs for the underground project at Kumtor ($7.8 million in 2012). CSR spending in 2013 was $6.2 million in the Kyrgyz Republic and $0.1 million in Mongolia. In 2012, $24 million was spent on CSR projects in the Kyrgyz Republic, including $21 million as a contribution to a national micro-credit financing program, and $2.2 million in Mongolia, including an additional contribution by Boroo to the Ulaanbaatar maternity hospital of $1.1 million. A decision was made in 2012 to close the underground project at Kumtor which resulted in closure costs being incurred in 2012 and 2013.
- Exploration expenditures in 2013 were $29.6 million compared to $37.9 million in 2012. Exploration expenditures in 2013 decreased from 2012 mainly due to the suspension of all exploration programs in the Kyrgyz Republic in the second half of 2013.
- The Company recorded a charge of $180.7 million in the fourth quarter of 2012 to reflect the derecognition of the underground assets at Kumtor following the decision to expand the open pit, as announced on November 7, 2012. The larger open pit is expected to partially consume the declines rendering them unusable for future mining activities.
- Cash provided from operations for 2013 totaled $483.9 million compared to $173.4 million in 2012, primarily as a result of significantly higher earnings at both operations in 2013, especially at Kumtor, partially offset by an increase in working capital levels.
- Capital expenditures spent and accrued in 2013 were $376.6 million as compared to $464.0 million in the prior year. Sustaining capital1 in 2013 was $58.2 million (including $49.7 million at Kumtor and $7.9 million at Boroo), compared to $44.0 million in 2012 (including $40.8 million at Kumtor and $2.6 million at Boroo). Growth capital1, excluding capitalized stripping, was $39.9 million in 2013, compared to $168.4 million the prior year, primarily reflecting $39.2 million of spending at Kumtor mainly on the infrastructure relocation project ($19.1 million), fleet expansion ($17.7 million) and spending at Gatsuurt of $0.7 million for maintenance of the site. Capitalized stripping in 2013 totaled $278.6 million ($201.3 million cash), as compared to $251.7 million ($196.7 million cash) in the prior year, spent on stripping activities in cut-backs and in the unload areas at Kumtor.
Operations Update - Summary of Key Operating Results
| Three Months Ended December 31 | Year Ended December 31 | |||||
|---|---|---|---|---|---|---|
| Kumtor Operating Results | 2013 | 2012(4) | % Change | 2013 | 2012(4) | % Change |
| Revenue - $ millions | 448.9 | 317.8 | 41% | 810.9 | 533.6 | 52% |
| Cost of sales - $ millions (1) | 255.1 | 140.0 | 82% | 473.0 | 306.9 | 54% |
| Cost of sales - $/oz sold (3) | 722 | 753 | (4%) | 786 | 974 | (19%) |
| Tonnes mined - 000s | 46,866 | 38,185 | 23% | 176,693 | 147,610 | 20% |
| Tonnes ore mined – 000s | 4,194 | 4,463 | (6%) | 7,289 | 4,955 | 47% |
| Tonnes milled - 000s | 1,460 | 1,547 | (6%) | 5,596 | 4,756 | 18% |
| Average mill head grade - g/t | 8.88 | 5.13 | 73% | 4.26 | 2.79 | 53% |
| Recovery - % | 84.1 | 77.7 | 8% | 79.3 | 75.6 | 5% |
| Gold produced – ounces | 348,130 | 189,438 | 84% | 600,402 | 315,238 | 90% |
| Gold sold – ounces | 353,252 | 185,936 | 90% | 601,887 | 314,987 | 91% |
| Average realized gold price(3) – $/oz sold | 1,271 | 1,709 | (26%) | 1,347 | 1,694 | (20%) |
| Adjusted operating costs (3) - $/oz sold | 217 | 322 | (33%) | 357 | 727 | (51%) |
| All-in sustaining costs (3)-$/oz sold | 388 | 618 | (37%) | 775 | 1,483 | (48%) |
| All-in costs (3)-$/oz sold | 407 | 783 | (48%) | 853 | 2,064 | (59%) |
| All-in costs including taxes (3)-$/oz sold | 585 | 1,023 | (43%) | 1,042 | 2,301 | (55%) |
| Capital expenditures(sustaining)-$ millions | 9.6 | 10.5 | (9%) | 49.7 | 40.8 | 22% |
| Capital expenditures (growth)(2) - $ millions | 5.8 | 24.0 | (76%) | 39.2 | 167.6 | (77%) |
| Boroo Operating Results | ||||||
| Revenue - $ millions | 20.0 | 50.6 | (61%) | 133.4 | 127.2 | 5% |
| Cost of sales - $ millions (1) | 16.7 | 27.9 | (40%) | 86.2 | 76.4 | 13% |
| Cost of sales - $/oz sold (3) | 1,064 | 948 | 12% | 908 | 1,011 | (10%) |
| Tonnes mined - 000s | - | - | - | 6,195 | (100%) | |
| Tonnes mined heap leach - 000s | - | - | - | 143 | (100%) | |
| Tonnes stacked heap leach – 000s | 271 | 456 | (41%) | 2,644 | 456 | 480% |
| Tonnes leached – 000s | 560 | 904 | (38%) | 4,248 | 904 | 370% |
| Tonnes milled - 000s | 593 | 581 | 2% | 2,394 | 2,382 | 1% |
| Average mill head grade - g/t | 0.80 | 2.07 | (61%) | 1.12 | 1.32 | (15%) |
| Recovery - % | 58.3 | 58.3 | 0% | 57.6 | 64.0 | (10%) |
| Gold produced – ounces | 14,104 | 29,878 | (53%) | 90,318 | 71,838 | 26% |
| Gold sold – ounces | 15,702 | 29,425 | (47%) | 94,931 | 75,546 | 26% |
| Average realized gold price(3) – $/oz sold | 1,272 | 1,720 | (26%) | 1,406 | 1,684 | (17%) |
| Adjusted operating costs (3) - $/oz sold | 901 | 641 | 41% | 683 | 832 | (18%) |
| All-in sustaining costs (3)-$/oz sold | 931 | 655 | 42% | 765 | 946 | (19%) |
| All-in costs (3)-$/oz sold | 931 | 672 | 39% | 765 | 952 | (20%) |
| All-in costs including taxes (3) -$/oz sold | 934 | 892 | 5% | 899 | 1,108 | (19%) |
| Capital expenditures (Boroo)(2)-$ millions | 0.4 | 0.7 | (43%) | 7.9 | 2.9 | 172% |
| Capital expenditures (Gatsuurt)-$ millions | 0.1 | 0.1 | 0% | 0.7 | 0.4 | 75% |
(1) Cost of sales excludes regional office administration.
(2)
excludes capitalized stripping.
(3)
Adjusted operating costs per ounce sold, all-in sustaining costs per ounce sold, all-in costs per ounce sold, all-in costs (including taxes) per ounce sold, as well as average realized gold price per ounce sold and cost of sales per ounce sold, are non-GAAP measures and are discussed under “Non-GAAP Measures”.
(4) The 2012 comparative period was restated as a result of the adoption of IFRIC 20.