Centerra Gold Reports 2017 First Quarter Net Earnings of $57 Million
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NEWS RELEASE
Centerra Gold Reports 2017 First Quarter Net Earnings of $57 Million
This news release contains forward-looking information that is subject to the risk factors and assumptions set
out under “Caution Regarding Forward-looking Information. It should be read in conjunction with the
Company’s unaudited interim condensed consolidated financial statements and the notes thereto for the three-
month period ended March 31, 2017. The consolidated financial statements of Centerra are prepared in
accordance with International Financial Reporting Standards as issued by the International Accounting
Standards Board. All figures are in United States dollars unless otherwise stated.
All references in this document denoted with NG, indicate a non-GAAP term which is discussed under
“Non-GAAP Measures”.
Toronto, Canada, May 1, 2017: Centerra Gold Inc. (TSX: CG) today reported net earnings of $57.0
million or $0.20 per common share (basic) on revenu es of $285.3 million in the first quarter of 2017,
compared to net earnings of $18.1 million or $0.08 per common share (basic) on revenues of $73.2
million for the same period in 2016.
2017 First Quarter Highlights
Produced a total of 172,644 ounces of gold, in cluding 127,400 ounces at Kumtor (an increase of
47% from the same period of 2016) and 45,244 ounces at Mount Milligan.
Sold a total of 187,914 ounces of gold in the quarter, including 134,682 ounces at Kumtor and
53,232 ounces at Mount Milligan.
Mount Milligan produced 12.6 million pounds of copper during the period and sold 13.6 million
pounds of copper.
Company-wide all-in sustaining costs on a by-product basis per ounce soldNG for the first quarter
were $756, excluding revenue-based tax in the Kyrgyz Republic and income tax.
Cash provided by operating activities before changes in working capitalNG of $118 million.
Cash generated from operations totaled $72.4 million.
Cash, cash equivalents and short-term inv estments at March 31, 2017 was $357.8 million
(including $273.9 million of restricted cash and investments at Kumtor).
On track to achieve 2017 production and cost guidance
Commentary
Scott Perry CEO of Centerra Gold stated, “While the Company had a good quarter operationally and
financially, it was over shadowed by a tragic event which occurred in April at Kumtor when an employee
was fatally injured while inspecting a light vehicle in the field. This tragedy reinforces our commitment
to our Company-wide safety leadership program “Work Safe, Home Safe” which we continue to roll out
to all our sites.
On the operational front, the Company produced 172 ,644 ounces of gold and 12.6 million pounds of
copper in the quarter at a strong all-in sustaining cost on a by-product basis of $756 per ounce sold NG,
reflecting Mount Milligan achieving all-in sustaining costs on a by-product basis of $530 per ounce
soldNG which are in the lower quartile of costs in the industry. Financially, bot h operations generated a
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significant amount of cash from operations before working capital changes NG during the quarter, Mount
Milligan generated $32 million and Kumtor generated $102.4 million.
Over the quarter we continued to see incremental im provements on a monthly basis at Mount Milligan in
both increased mill throughput and recoveries. During this period, the Company also formed an
Operational Review Team to identify business process improvements opportunities at all our sites. An
initial review at Kumtor and Mount Milligan identifie d several meaningful projects with short-to-medium
term financial and operational bene fits. Subsequently we mobilized subject matter experts to further
evaluate and commence executing on some of these projects.
The Company continues to advance its discussions w ith the Government of the Kyrgyz Republic to
resolve all outstanding issues affecting the Kumtor Pr oject in a manner that will be fair to all of its
stakeholders.”
Exploration Update
Exploration expenditures in the first quarter of 2017 totaled $1.7 million compared to $2.0 million in the
same quarter of 2016. Exploration activities during th e quarter included trenching, geological mapping,
soil/chip and channel sampling, and geophysics at the Company’s various projects.
Mexico
Glor Project
A deep trenching program was completed at the Glor Project in Sonora, Mexico, a joint venture with
Riverside Resources Inc. with just over 3,000 metr es excavated and sampled. Trenching results are
encouraging and indicate that the Pitaya prospect , of the Glor Project, may represent a potential bulk
minable target.
As a result of the positive trenching results, 2,000 metres of diamond drilling is planned for the second
quarter of 2017 with seven or eight drill holes.
Other Projects
Centerra continues to advance other exploration projects in Turkey, Armenia, Canada, Mexico, Nicaragua
and Sweden. During the period, exploration drill permits were received for the Öksüt and Yamaç projects
in Turkey.
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This Management Discussion and Analysis (“MD&A”) has been prepared as of May 1, 2017, and is intended
to provide a review of the financial position and results of operations of Centerra Gold Inc. (“Centerra” or
the “Company”) for the three months ended March 31, 2017 in comparison with the corresponding period
ended March 31, 2016. This discussion should be read in conjunction with the Company’s unaudited
condensed consolidated interim financial statements and the notes thereto for the three months ended March
31, 2017. This MD&A should also be read in conjunction with the Company’s audited annual consolidated
financial statements for the years ended December 31 , 2016 and 2015, the relate d MD&A and the Annual
Information Form for the year ende d December 31, 2016 (the “2016 An nual Information Form”). The
Company’s unaudited condensed consolidated interim financial statements and the notes thereto for the three
months ended March 31, 2017, 2016 Annual Report and 2016 Annual Information Form are available at
www.centerragold.com and on the System for Electronic Document Analysis and Retrieval (“SEDAR”) at
www.sedar.com.
1. Overview
Centerra is a gold mining company focused on ope rating, developing, expl oring and acquiring gold
properties in North America, Asia, and other market s worldwide. Centerra is a leading Canadian-based
gold producer and is one of the largest Western-based gold producers in Central Asia. Centerra’s principal
operations are the Kumtor Project located in the Ky rgyz Republic and the Mount Milligan Mine located
in British Columbia, Canada.
The Company’s significant wholly-owned subsid iaries include Kumtor Gold Company (“KGC” or
“Kumtor”) in the Kyrgyz Republic, Thompson Creek Metals Company Inc. (“Thompson Creek”) in
Canada, Langeloth Metallurgical Company LLC (“La ngeloth”) and Thompson Creek Mining Co. in the
United States of America (USA), Öksüt Madencilik Sa nayi vi TicaretA.S. (“OMAS”) in Turkey and
Boroo Gold LLC and Centerra Gold Mongolia LLC (“CGM”) in Mongolia. Additionally, the Company
holds, through Thompson Creek, a 75% joint venture in terest in the Endako Mine in British Columbia,
Canada. It also owns a 50% partnership inter est in Greenstone Gold Mines LP (the“Greenstone
Partnership”) which owns the Greenstone Gold de velopment property including the Hardrock deposit,
located in Ontario, Canada. See “Operating Mines and Projects”, “Development Projects” and “Other
Corporate Developments” for further details.
The Company has also entered into ag reements to earn an interest in joint venture exploration properties
located in Portugal, Canada, Mexico, Sweden and Nicaragua.
Centerra’s shares trade on the Toronto Stock Exch ange (TSX) under the symbol CG. The Company is
headquartered in Toronto, Ontario, Canada.
2. Market Conditions
Gold Price
During the first quarter of 2017, the gold price fluctuated between a low of $1,151 per ounce and a high
of $1,257 per ounce. The average gold price for the quarter was $1,219 per ounce, a $36 per ounce
increase compared to the first quarter of 2016 average of $1,183 per ounce, and a $1 per ounce decrease
compared to the fourth quarter of 2016 average.
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Over the course of 2016, gold prices increased with im proved investor demand off the back of political
uncertainty and continued expectations that U.S. benc hmark interest rates would remain at relatively low
levels. However, following the U.S. election in th e fourth quarter of 2016, gold prices came under
pressure as market participants quickly discounted th e uncertainty that was previously assumed with a
Trump Administration. Subsequently, the first quarter of 2017 saw a reversal of this latter trend as the
new U.S. Administration ran into early challenges.
Copper Price
During the first quarter of 2017, the copper price fluc tuated between a low of $2.49 per pound and a high
of $2.76 per pound. The average copper price for the quarter was $2.65 per pound, a $0.53 per pound
increase compared to the first quarter of 2016 average of $2.12 per pound, and a $0.28 per pound increase
compared to the fourth quarter of 2016.
After reaching a six year low of $1.94 per pound in the first quarter of 2016, copper prices stabilized and
witnessed a significant increase in the fourth quarter of 2016 as a result of mine labour disruptions along
with improved investor sentiment as a result of expecta tions on infrastructure spending with the new U.S.
Administration.
Foreign Exchange Rates
USD to CAD
The average U.S. dollar exchange rate weakened by 3. 5% at the end of the first quarter of 2017 compared
to the first quarter of 2016, ranging from 1.25 to 1.46 with an average of 1.33. The relative weakness of
the U.S. dollar over the course of 2016 was largely due to a recovery in oil prices from the first quarter of
2016 price of approximately $30 per barrel. While th e U.S. dollar was relatively stable versus the
Canadian dollar over the first quarter of 2017, late in the period, the U.S dollar began to show signs of
more consistent appreciation as a result of a March 2017 U.S. rate hike, cautious rhetoric from the Bank
of Canada, and rising trade concerns resulting fro m a looming North American Free Trade Agreement
(NAFTA) renegotiation and domestic fears regarding th e possible introduction of a border adjustment tax
from the new U.S. Administration.
USD to Kyrgyz Som
The average U.S. dollar exchange rate weakened by 6. 5% at the end of the first quarter of 2017 compared
to the first quarter of 2016, ranging from 67.02 to 75.90 with an average of 70.50. The Kyrgyz som is
being pulled up by strengthening currencies with the c ountry’s main trading partners – mainly Russia.
The strengthening in the Russian ruble reflects higher oil prices and an improving economic situation.
Foreign Exchange Transactions
The Company receives its revenues through the sal e of gold, copper and molybdenum in U.S.
dollars. The Company has operations in the Kyrgyz Republic, Turkey, Mongolia, and Canada (where the
Mount Milligan Mine and its corporate head office are also located). During the first three months of
2017, the Company incurred combined expenditures (including capital) totalling approximately $262
million. Approximately $147 million of this (56%) wa s in currencies other than the U.S. dollar. The
percentage of Centerra’s non-U.S. dollar costs, by currency was, on average, as follows: 53% in
Canadian dollars, 39% in Kyrgyz soms, 5% in Euros, and 3% in Turkish lira, Mongolian tugriks and
British pounds. The average value of the Turkish lira depreciated against the U.S. dollar by approximately
5% from its value at December 31, 2016. The Australian dollar, Russian ruble, Canadian dollar and Euro
appreciated against the U.S. dollar by approximately 5%, 5%, 2% and 1% respectively from their value at
December 31, 2016. The net impact of these movements in the first quarter of 2017, after taking into
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account currencies held at the beginning of th e year, was to increase annual costs by $1.2
million (increase of $1.3 million in the first three months of 2016).
3. Consolidated Highlights Summary
($ millions, except as noted)
F inancial Highlights % Change
Revenue $ 285.3 $ 73.2 290%
Cost of sales 171.9 31.5 447%
Earnings from mine operations 107.9 38.5 180%
Earnings from operations 65.5 18.5 254%
Net earnings $ 57.0 $ 18.1 215%
Cash provided by operations 72.5 9.4 671%
Cash provided by operations before changes in working capital (3 ) 118.1 27.2 334%
Capital expenditures (sustaining) (3 ) 19.8 23.2 (15%)
Capital expenditures (growth) (3 ) 1.4 5.1 (73%)
Capital expenditures (stripping) 62.5 14.1 344%
Total assets $ 2,685.2 $ 1,674.2 60%
Long-term debt and long-term lease obligation 380.0 - 100%
Cash, short-term investments and restricted cash 357.8 515.0 (31%)
Share Data
Earnings per common share - $ basic (2 ) $ 0.20 $ 0.08 150%
Earnings per common share - $ diluted (2 ) $ 0.20 $ 0.07 186%
Per O unce Data (except as noted)
Average gold spot price - $/oz (3 ) 1,219 1,183 3%
Average copper spot price - $/lbs(3 ) 2.65 2.12 25%
Average realized gold price - Kumtor (third party) - $/oz (3 ) 1,219 1,186 3%
Average realized gold price (combined) - $/oz (3 ) 1,172 1,186 (1%)
Operating Highlights
G old produced – ounces poured 172,644 86,444 100%
Gold sold – ounces sold 187,914 61,744 204%
P ayable Copper P roduced (000's lbs) 12,595 - 100%
Copper S ales (000's payable lbs) 13,612 - 100%
Operating costs (on a sales basis) 151.7 19.1 696%
Un it C osts
Adj uste d operat ing costs - $/oz so ld (3 )(4 ) $ 340 $ 372.31 (9%)
Gold - All -in susta in ing costs on a by-pro duct bas is – $/oz so ld (3 )(4 ) $ 756 $ 1,015 (25%)
Gold - All-in sustaining costs on a by-product basis (including taxes) – $/oz sold (3 ) $ 885 $ 1,187 (25%)
Gold - All-in sustaining costs on a co-product basis (including taxes) – $/oz sold (3 )(4 ) $ 795 $ - -
Copper - All-in sustaining costs on a co-product basis (including taxes) – $/pound sold (3 )(4 ) $ 1.86 $ - -
2017 2016 (6 )
T hree months ended March 31,
(1) As at March 31, 2017, the Company had 291,278,437 common shares issued and outstanding (291,280,283 common shares as of May
1, 2017). As of May 1, 2017, Centerra had 5,280,976 share options outstanding under its share option plan with exercise prices ranging
from Cdn$3.82 per share to US$59.51 per share, with expiry dates between 2017 and 2024.
(2) Average for the period as reported by the London Bullion Market Association (US dollar Gold P.M. Fix Rate) and London Metal
Exchange (LME).
(3) Adjusted operating costs, all-in sustaining costs on a by-produc t basis (excluding and including taxes) per ounce sold, cash pr ovided by
operation before changes in working capital, as well as average realized gold price per ounce and average realized copper price per
pound are non-GAAP measures and are discussed under “Non-GAAP Measures”.
(4) Excludes Molybdenum business.
(5) No comparative results for Thompson Creek operations have been presented.
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4. Overview of Consolidated Results
First Quarter 2017 compared to First Quarter 2016
The Company recorded net earnings of $57.0 million in the first quarter of 2017, compared to net
earnings of $18.1 million in the comparative quarter of 2016, reflecting higher gold ounces sold at
Kumtor, the addition of the Mount Milligan ope rations, higher average realized gold prices NG and lower
operating costs, partially offset by higher share-based compensation charges.
Production:
Gold production for the first quart er of 2017 totalled 172, 644 ounces. Gold production at Kumtor was
127,400 ounces in the first quarter of 2017, 47% higher than the 86,444 ounces produced in the
comparative quarter of 2016. The increase in ounces pour ed at Kumtor is a result of milling higher grade
ore from stockpiles, compared to the lower grade ore mined and processed from the initial benches in cut-
back 17 during the comparative period. During th e quarter, Mount Milligan produced 45,244 ounces of
gold and 12.6 million pounds of copper
Safety and Environment:
Centerra had one reportable injury in the first quar ter of 2017, consisting of a lost time injury to a
contractor employee at Kumtor. Subsequent to the quarter-end, on April 11, 2017, an employee suffered
fatal injuries at the Kumtor mine. The Company is cooperating with relevant Kyrgyz Republic officials
who are investigating this incident.
There were no reportable releases to the environment during the first quarter of 2017.
Financial Performance:
The increase in revenue for the first quarter of 2017 resulted from more gold ounces sold (187,914 ounces
compared to 61,744 ounces in the first quarter of 2016) , partially offset by a 1% lower combined average
realized gold price NG during the quarter ($1,172 per ounce compared to $1,186 per ounce in the same
quarter of 2016). The increase in gold ounces sold at Kumtor (134,681 ounces compared to 61,744
ounces in the same quarter of 2016) is partly due to delays experienced in shipments to Kyrgyzaltyn JSC
(“Kyrgyzaltyn”) in the first quarter of 2016 while Kyrgyzaltyn held contractual discussions with its off-
take bank: Kumtor ended the first quarter of 2016 with approximately 33, 165 ounces of gold doré on
hand, which was subsequently sold in the second qua rter of 2016. Mount Milligan sold 53,232 ounces of
gold and 13.6 million pounds of copper during the fi rst quarter of 2017 which contributed $84.7 million
in revenues. The molybdenum business contributed $36.5 million in revenues during the first quarter of
2017.
The increase in cost of sales in the first quarter of 2017 ($171.9 million compared to $31.5 million in the
first quarter of 2016) resulted mainly from the signifi cant increase in ounces sold from the Kumtor mine
and also reflects the addition of Mount Milligan (gold and copper sales) and the molybdenum business .
Depreciation, depletion and amortization (“DD&A”) associated with production was $54.3 million in the
first quarter of 2017 as compared to $12.4 million in the same period of 2016, mainly as a result of higher
sales.
Operating Costs:
Operating costs (on a sales basis) increased to $151.7 million in the first quarter of 2017 compared to
$19.1 million in the same period of 2016, reflecting greater ounces sold at Kumtor and lower operating
costs for diesel and consumables at Kumtor, partially offset by labour cost increases plus the addition of
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Mount Milligan and molybdenum business costs. Opera ting costs in the first quarter of 2016 were also
reduced by the partial reversal of an inventory impairment recorded at the end of 2015.
The Kumtor operation continues to benefit from curr ent favourable diesel prices and lower consumption
during the quarter and the Kyrgyz som has also continue d to trade at historical lows at 72 soms per 1
USD. The benefit of lower diesel prices, lower cons umption and favourable rate of the Kyrgyz som to
Kumtor is significant as diesel and the impact of costs paid in soms account for approximately 17% and
25% of total operating costs at Kumtor, respectively.
Centerra’s all-in sustaining costs on a by-product basis per ounce of gold soldNG, which excludes revenue-
based tax and income tax, for the first quarter of 2017 decreased to $756 from $1,015 in the comparative
period mainly as a result of more ounces sold at Kumtor ($110 per ounce), lower sustaining capital NG
spending ($59 per ounce) and the positive impact from the addition of Mount Milligan ($89 per ounce).
This was partially offset by higher spending on capitalized stripping and incremental administration costs,
as a result of the Thompson Creek acquisition.
The increased sales volume at Kumtor in the first quar ter of 2017 was due primarily to higher production
resulting from higher grades of ore processed from the stockpiles as compared to the same period of 2016
(3.53 g/t compared to 2.27 g/t) and slightly better recoveries (76% compared to 75%).
5. Liquidity and Capital Resources
The Company believes its cash on hand and working capita l at March 31, 2017, together with future cash
flows from operations and cash provided by the Compa ny’s existing credit facilities will be sufficient to
fund its anticipated operating cash requirements, although there can be no assurance of this. See “Caution
Regarding Forward-Looking Information”.
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Cashflow:
Unaudited ($ millions, except as noted)
Three months ended March 31,
2017 2016 % Change
Cash provided by operations before changes in working capitalNG 118.0 27.2 334%
- Changes in working capital (45.6) (17.8) (161%)
Cash provided by operating activities 72.4 9.4 666%
Cash used in investing activities:
- Capital additions (cash) (69.0) (35.4) (94%)
- Short-term investment purchased, net (25.0) (19.6) (28%)
- other investing items (10.9) (3.7) (195%)
Cash used in investing activities (104.9) (19.6) (434%)
Cash used in financing activities:
- Debt repayment (37.5) - (100%)
- Dividends declared and paid - (7.2) 100%
- Payment of interest and borrowing costs (8.7) (3.5) (143%)
Cash used in financing activities (46.2) (10.7) (330%)
Decrease in cash and cash equivalents (78.7) (20.8) (278%)
In the first quarter of 2017, Centerra generated c ash provided by operations before working capital
changesNG of $118.0 million, compared to $27.2 million in the prior period. At March 31, 2017, the
major working capital difference compared to the pr ior-period was an outstanding concentrate receivable
of $30 million at Mount Milligan which was collected in April 2017.
The Company generated $72.4 million in cash from operations in the first quarter of 2017, an increase of
$63 million compared to the first quarter of 2016 , mainly as a result of higher ounces sold. The increased
sales reflect increased production from Kumtor and the contribution of Mount Milligan in the first quarter
of 2017 whereas the comparative quarter of 2016 was impacted by the delayed gold shipments to
Kyrgyzaltyn in March of that quarter.
Cash used in investing activities in creased to $104.9 million in the firs t quarter of 2017 as compared to
$19.6 million the first quarter of 2016, reflecting an increase in capital spending (mainly additional
stripping at Kumtor) and an increase in net purchases of short-term investments compared to the same
quarter in 2016.
Cash used in financing of $46.2 million in the firs t quarter of 2017 was $35.5 million higher than the
amount spent in the first quarter of 2016, and refl ected debt repayments and higher borrowing charges
related to the Company’s new credit facilities (discussed below). In February 2017, Centerra repaid $25
million on its Corporate Facility (defined below) with EBRD (defined below) and in March 2017 made its
first principal payment of $12.5 million on the Centerra B.C. Facility (defined below).
Cash, cash equivalents, restricted cash and short- term investments at March 31, 2017 decreased to $357.8
million (including $273.9 million of restricted cash and investments at Kumtor) from $408.8 million at
December 31, 2016 (including $247.8 million of restricted cash at Kumtor).
The restricted amounts at March 31, 2017 includes $248.8 million of cash and $25.1 million of short-term
investments at Centerra’s Kyrgyz Republic operati ng subsidiary, KGC. KGC is subject to an interim
order of the Bishkek Inter-District Court in th e Kyrgyz Republic prohibiting KGC from taking any
actions relating to certain financ ial transactions, including transferring property or assets, declaring or
paying dividends or making loans to Centerra. Th e interim order purports to secure KGC’s potential