Centerra Gold Reports Third Quarter Results
NEWS RELEASE
Centerra Gold Reports Third Quarter Results
This news release contains forward-looking information that is subject to the risk factors and assumptions set out on page 23 and in our Cautionary Note Regarding Forward-looking Information on page 31. It should be read in conjunction with the Company’s unaudited interim condensed consolidated financial statements and notes for the three and nine months ended September 30, 2012 and the associated Management’s Discussion and Analysis. The condensed interim financial statements of Centerra are prepared in accordance with International Accounting Standard 34, Interim Financial Reporting, 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, 2011.
All figures are in United States dollars.
To view the Management’s Discussion and Analysis and the Financial Statements and Notes for the three and nine month periods ended September 30, 2012 please visit the following link:
http://media3.marketwire.com/docs/CG2012FSMDAQ3.pdf
Toronto, Canada, November 7, 2012: Centerra Gold Inc. (TSX: CG) today reported a net loss of $46.8 million, or $0.20 per share based on revenues of $68.8 million. The third quarter loss includes $19.3 million ($0.08 per share) of abnormal mining costs, and other operating expenses of $5.2 million ($0.02 per share) for the care and maintenance of the underground development project at Kumtor. For the same period in 2011, the Company recorded net earnings of $83.7 million or $0.35 per common share based on revenues of $278.4 million reflecting significantly higher gold production and sales.
Consolidated gold production for the third quarter of 2012 totaled 42,723 ounces, as expected, at a total cash cost of $1,401 per ounce produced, reflecting the lower gold production as a result of the revised mine plan at Kumtor. In the corresponding quarter of 2011, consolidated gold production was 154,936 ounces at a total cash cost of $556 per ounce produced. (Total cash cost per ounce produced is a non-GAAP measure and is discussed under “Non-GAAP Measures”.)
Third Quarter Highlights
- Revised 2012 consolidated gold production guidance to 415,000 to 425,000 ounces from 450,000 to 470,000 ounces
- Completed detailed study on expanding the Kumtor open pit
- Declared and paid a Cdn$0.04 per share quarterly dividend
- Accessed ore and restarted milling activities at Kumtor
1 University Avenue, Suite 1500 Toronto, ON M5J 2P1 tel 416-204-1953 fax 416-204-1954 www.centerragold.com
- Resumed heap leach operations at Boroo after receiving regulatory approval for the mine plan for the heap leach facility
- Obtained mining license for the Altan Tsagaan Ovoo (ATO) project in Eastern Mongolia
Commentary
Ian Atkinson, President and CEO of Centerra stated, “As expected our gold production for the third quarter was low. The mill at Kumtor was shut down for seven weeks during which time scheduled and unscheduled maintenance was carried out. In mid-September, mining at Kumtor reached the ore in the southwest section of the pit and the mill re-started as planned, but production since then has been less than we expected. As we transitioned between waste and ore, we encountered an irregular till/bedrock contact, which increased the amount of till waste material mined. This impacted our planned production for the fourth quarter and has resulted in our revised production guidance for the year. By the end of October we had mined through the till/ore interface and we do not expect to have a similar issue going forward. At Boroo, better gold production was achieved in the third quarter, as the higher-grade Pit 6 ore was processed. Additionally, the heap leach facility at Boroo resumed operations after receiving regulatory approval and all required permits in September.”
“We are very excited about the new Kumtor life-of-mine plan (KS-13) which delivers a significant increase in reserves and extends the mine life by 5 years, adding substantially to the net present value of the Kumtor project. The increase in the open pit reserves is entirely within the Central Pit and is a result of the successful exploration drilling of the SB Zone over the last three years, which has doubled the strike length of the SB Zone and extended the SB Zone resource down dip, resulting in an expansion of resources. The expansion of the resources, in conjunction with the decision made in March of this year to unload the ice above the Southeast highwall of the Central Pit, created the opportunity to expand the Central Pit with the resulting significant increase in reserves, extension of the mine life and increase in the project NPV. The new KS-13 open pit design will consume most of the existing underground infrastructure and will therefore require an accounting charge of between approximately $175 million and $190 million, which the Company will recognize in the fourth quarter of 2012. The increase in reserves and mine life is expected to provide significant tax revenue to the Kyrgyz Republic of approximately $1.5 billion, over the life of the mine based on a gold price of $1,350 per ounce, along with significant employment, community development and other benefits.”
“We are continuing to work with the State Commission in the Kyrgyz Republic as it continues to examine the Kumtor project. Initially, the commission was to have completed its work by October 1st and report back to the parliament by November 1st, but it is our understanding that completion of the report has been extended and the commission is now expected to report to the Parliament by November 15th,” he concluded.
Financial and Operating Summary
| Three Months Ended September 30 | Nine Months Ended September 30 | |||||
|---|---|---|---|---|---|---|
| Financial Summary | 2012 | 2011 | % Change | 2012 | 2011 | % Change |
| Revenue - $ millions | 68.8 | 278.4 | (75%) | 292.3 | 772.4 | (62%) |
| Cost of sales - $ millions (1) | 59.1 | 110.5 | (47%) | 222.3 | 278.2 | (20%) |
| Abnormal mining costs - $ millions | 19.3 | - | 100% | 52.0 | - | 100% |
| Other operating expenses | 5.2 | 11.3 | (55%) | 29.5 | 11.9 | 148% |
| Net earnings (loss) - $ millions | (46.8) | 83.7 | (156%) | (116.0) | 291.5 | (140%) |
| Earnings (loss) per common share - $ basic and diluted | (0.20) | 0.35 | (157%) | (0.49) | 1.23 | (140%) |
| Cash provided by (used in) operations - $ millions | (38.4) | 108.2 | (136%) | (73.3) | 374.6 | (120%) |
| Capital expenditures - $ millions | 78.8 | 37.2 | 112% | 322.8 | 158.0 | 104% |
| Weighted average common shares outstanding - basic (thousands) | 236,363 | 236,126 | 0% | 236,370 | 236,009 | 0% |
| Weighted average common shares outstanding - diluted (thousands) | 236,363 | 236,413 | (0%) | 236,370 | 236,263 | 0% |
| Operating Summary | ||||||
| Gold produced – ounces | 42,723 | 154,936 | (72%) | 167,760 | 490,818 | (66%) |
| Gold sold – ounces | 41,251 | 163,283 | (75%) | 175,172 | 503,554 | (65%) |
| Average realized gold price - $/oz | 1,667 | 1,705 | (2%) | 1,669 | 1,534 | 9% |
| Average gold spot price - $/oz | 1,652 | 1,702 | (3%) | 1,652 | 1,535 | 8% |
| Cost of sales - $/oz sold (1) | 1,433 | 677 | 112% | 1,269 | 552 | 130% |
| Total cash cost - $/oz produced(2) | 1,401 | 556 | 152% | 1,060 | 474 | 124% |
| Total production cost - $/oz produced(2) | 1,996 | 857 | 133% | 1,332 | 649 | 105% |
(1) Cost of sales includes depreciation, depletion and amortization (DD&A) related to operations.
(2) Total cash cost and total production cost per ounce produced are non-GAAP measures and are discussed under “Non-GAAP Measures”.
Third Quarter of 2012 versus Third Quarter of 2011
Revenues for the third quarter of 2012 were $68.8 million compared to $278.4 million during the same period one year ago. Third quarter 2012 revenue reflects 75% lower sales (41,251 ounces versus 163,283 ounces) due to the mine plan revision at Kumtor, disclosed on March 27, 2012. The Company’s average realized gold price in the third quarter of 2012 was $1,667 per ounce compared to $1,705 per ounce in the third quarter of 2011.
Gold production for the third quarter of 2012 was 42,723 ounces compared to 154,936 ounces in the third quarter of 2011. The decline in gold production reflects the revised Kumtor mine plan, which delayed mining activities and access to the scheduled area of the higher grade SB Zone in the southeast portion of the open pit. Gold production at Boroo increased in the third quarter 2012 due to blending Pit 6 ore and stockpiled pit and heap leach ore to achieve higher mill head grades. During the quarter, Boroo received regulatory approval for the mine plan for its heap leach facility and resumed heap leach operations.
Centerra’s total cash cost per ounce of gold produced was $1,401 in the third quarter of 2012 compared to $556 in the third quarter of 2011. The year-over-year increase in unit cash costs was primarily due to lower gold production at Kumtor as a result of lower mill throughput, lower grades and recoveries from the processing of stockpiled materials and the reduced operating levels (see “Operations Update”). (Total cash cost per ounce produced is a non-GAAP measure and is discussed under “Non-GAAP Measures” in this news release.)
The Company recorded an amount of $19.3 million of abnormal mining costs in the third quarter of 2012 resulting from the increased unloading of ice and waste material in the high movement area and the impact of the revised mine plan at its Kumtor operation. See “Operations Update – Kumtor”. There were no abnormal mining costs recorded in the comparative quarter of 2011.
Other operating expenses for the third quarter of 2012 total $5.2 million and include $5.0 million for the care and maintenance of the underground development project at Kumtor. Other spending on ongoing social development programs in the various countries where the Company operates totaled $0.2 million in the third quarter of 2012, compared to $11.3 million in the same quarter of 2011, which included a $10 million contribution by Kumtor for the construction and repair of twenty-seven schools in the Kyrgyz Republic.
Exploration expenditures for the third quarter of 2012 were $9.5 million compared to $9.1 million in the third quarter of 2011 mainly reflecting increased drilling activities during the current period.
Cash used in operations, net of working capital changes, was $38.4 million compared to cash provided by operations of $108.2 million in the third quarter of 2011, primarily reflecting lower earnings at Kumtor as a result of lower sales volumes.
Capital expenditures spent and accrued of $78.8 million in the third quarter of 2012 included $14.2 million of sustaining capital and $64.6 million invested in growth capital. Kumtor spent and accrued $13.6 million on sustaining capital and $64.5 million on growth capital, mainly for the capitalization of pre-stripping activities ($48.7 million), the purchase of haul trucks and shovels ($11.1 million), underground development ($2.6 million) and other projects ($2.1 million). Boroo spent and accrued $0.5 million on sustaining capital. Capital expenditures in the comparative quarter of 2011 totaled $37.2 million, consisting of $9.9 million of sustaining capital and $27.3 million of growth capital.
Centerra’s cash and cash equivalents and short-term investments at the end of September 2012 were $260.4 million, compared to cash and short-term investments of $568.2 million at December 31, 2011. During the third quarter of 2012, the Company drew $76 million on its $150 million revolving credit facility, leaving a balance of $74 million undrawn as of September 30, 2012.
A net loss of $46.8 million was recorded in the third quarter of 2012 compared to net earnings of $83.8 million in the same quarter of 2011. The lower earnings in the current quarter of 2012 were expected and reflect the re-focus of mining operations at Kumtor to deal with ice and waste movement. The loss per share for the third quarter of 2012 was $0.20, while earnings per share of $0.35 were recorded in the same quarter of 2011.
Summary of the First Nine Months of 2012 versus First Nine Months of 2011
- Gold production for the first nine months of 2012 was 167,760 ounces compared to 490,818 ounces in the same period of 2011. The lower production at Kumtor in 2012, due to the labour disruption in early 2012 and the revised mine plan, compares to the consistent processing of higher grade material from cut-backs 12A and 12B in the comparative period of 2011.
- Total cash cost per ounce produced was $1,060 in the first nine months of 2012 compared to $474 in the comparative period of 2011. This increase is primarily due to lower production as a result of lower grades and recoveries from the processing of stockpiled materials at Kumtor. (Total cash cost per ounce produced is a non-GAAP measure and is discussed under “Non- GAAP Measures”.)
- Revenues in the first nine months of 2012 decreased to $292.3 million from $772.4 million in the same period last year mainly as a result of lower ounces sold. Ounces sold for the period totalled 175,172 compared to 503,554 in the first nine months of 2011. This was partially offset by a higher average realized gold price in the 2012 nine month period of $1,669 per ounce compared to $1,534 per ounce realized in the same period of 2011.
- Abnormal mining costs at Kumtor of $52.0 million were recorded in the first nine months of 2012 representing $15.9 million of the costs of ice and waste removal from the high movement unload zone and $36.1 million for pre-stripping activities, which are considered abnormal as the revised mine plan has deferred the ore release.
- Other operating expenses of $29.5 million in the first nine months of 2012 include $21 million contributed to a national micro-credit financing program in the Kyrgyz Republic, $5.0 million for the care and maintenance of the underground development project at Kumtor and $1.1 million for the maternity hospital project in Ulaanbaatar in Mongolia. In the same period of 2011, $11.9 million was spent, including a contribution of $10.0 million for the refurbishment of schools in the Kyrgyz Republic.
- Exploration expenditures for the first nine months of 2012 totaled $26.4 million compared to $27.9 million in the same period of 2011. In 2011, exploration expenditures reflected higher volumes of exploration drilling at Kumtor and project activity in Nevada, which has since ceased.
- Cash of $73.3 million was used in operations in the first nine months of 2012 reflecting the significantly lower earnings. In contrast, the operations generated $374.6 million of cash in the first nine months of 2011.
- Capital expenditures spent and accrued for the first nine months of 2012 totalled $322.8 million and included $32.4 million spent on sustaining capital projects and $290.4 million invested in growth projects. Expenditures in growth projects were mainly for Kumtor’s capital equipment purchases ($106 million), pre-stripping activities ($143 million), underground development project ($28.5 million) and other projects ($5.3 million), while sustaining capital was $30.3 million at Kumtor and $1.8 million at Boroo.
- The net loss in the first nine months of 2012 was $116.0 million compared to net earnings of $291.5 million in the same period of 2011, reflecting the lower earnings at Kumtor from the revised production plan. The loss per share for the nine month period in 2012 was $0.49 compared to earnings per share of $1.23 in the same period of 2011.
Operations Update
| Three Months Ended September 30 | Nine Months Ended September 30 | |||||
|---|---|---|---|---|---|---|
| Kumtor Operating Results | 2012 | 2011 | % Change | 2012 | 2011 | % Change |
| Gold sold – ounces | 26,626 | 146,765 | (82%) | 129,051 | 457,597 | (72%) |
| Average realized gold price – $/oz | 1,651 | 1,705 | (3%) | 1,671 | 1,533 | 9% |
| Revenue - $ millions | 44.0 | 250.3 | (82%) | 215.7 | 701.4 | (69%) |
| Cost of sales - $ millions (1) | 43.2 | 94.6 | (54%) | 173.8 | 235.8 | (26%) |
| Cost of sales - $/oz sold (1) | 1,623 | 645 | 152% | 1,347 | 515 | 161% |
| Abnormal mining costs - $ millions | 19.3 | - | 100% | 52.0 | - | 100% |
| Tonnes mined - 000s | 35,943 | 38,702 | (7%) | 109,425 | 113,480 | (4%) |
| Tonnes ore mined – 000s | 399 | 2,889 | (86%) | 478 | 4,925 | (90%) |
| Average mining grade - g/t (2) | 2.25 | 3.05 | (26%) | 2.09 | 3.43 | (39%) |
| Tonnes milled - 000s | 581 | 1,429 | (59%) | 3,209 | 4,365 | (26%) |
| Average mill head grade - g/t (2) | 1.78 | 4.01 | (56%) | 1.66 | 3.79 | (56%) |
| Recovery - % | 75.1 | 80.2 | (6%) | 72.6 | 81.8 | (11%) |
| Gold produced – ounces | 23,786 | 141,217 | (83%) | 125,799 | 444,460 | (72%) |
| Total cash cost - $/oz produced (3) | 1,890 | 528 | 258% | 1,128 | 452 | 150% |
| Total production cost - $/oz produced (3) | 2,664 | 845 | 215% | 1,407 | 630 | 123% |
| Capital expenditures - $ millions | 78.1 | 34.4 | 127% | 313.1 | 152.3 | 106% |
| Boroo Operating Results | ||||||
| Gold sold – ounces | 14,625 | 16,518 | (11%) | 46,121 | 45,957 | 0% |
| Average realized gold price - $/oz | 1,698 | 1,702 | (0%) | 1,660 | 1,545 | 7% |
| Revenue - $ millions | 24.8 | 28.1 | (12%) | 76.6 | 71.0 | 8% |
| Cost of sales - $ millions (1) | 15.9 | 15.9 | 0% | 48.5 | 42.5 | 14% |
| Cost of sales - $/oz sold (1) | 1,089 | 963 | 13% | 1,051 | 925 | 14% |
| Total Tonnes mined - 000s | 1,821 | - | 100% | 6,195 | - | 100% |
| Average mining grade (non heap leach material) - g/t (2) | 2.05 | - | 100% | 2.00 | - | 100% |
| Tonnes mined heap leach – 000s | 121 | - | 100% | 143 | - | 100% |
| Tonnes ore mined direct mill feed -000’s | 854 | - | 100% | 907 | - | 100% |
| Tonnes ore milled - 000s | 576 | 605 | (5%) | 1,802 | 1,711 | 5% |
| Average mill head grade - g/t (2) | 1.62 | 0.95 | 71% | 1.07 | 1.20 | (11%) |
| Recovery - % | 60.9 | 72.8 | (16%) | 67.5 | 67.9 | (1%) |
| Gold produced – ounces | 18,938 | 13,719 | 38% | 41,961 | 46,358 | (9%) |
| Total cash cost - $/oz produced (3) | 788 | 771 | 2% | 855 | 650 | 31% |
| Total production cost - $/oz produced (3) | 1,157 | 901 | 28% | 1,109 | 794 | 40% |
| Capital expenditures - $ millions (Boroo) | 0.5 | 2.7 | (83%) | 9.1 | 5.2 | 74% |
| Capital expenditures - $ millions (Gatsuurt) | 0.1 | 0.1 | 19% | 0.3 | 0.3 | 3% |
(1) Cost of sales includes depreciation, depletion and amortization related to operations.
(2) g/t means grams of gold per tonne.
(3) Total cash cost and total production cost per ounce produced are non-GAAP Measures and are discussed under “Non-GAAP Measures”.
Kumtor
At the Kumtor mine in the Kyrgyz Republic, gold production was 23,786 ounces in the third quarter of 2012 compared to 141,217 ounces in the same quarter in 2011. The decrease in gold production in the third quarter of 2012 is the result of fewer tonnes milled with lower mill head grades (1.78 g/t versus 4.01 g/t) and lower recoveries (75.1% versus 80.2%). Total tonnes milled for the third quarter of 2012 were 0.58 million tonnes compared to 1.4 million tonnes in the comparative quarter of 2011, a decrease of 59%, as very little ore was mined and the majority of the mill feed processed came from stockpiles, which were depleted in the quarter. The mill was shut down for seven weeks and during the shutdown, planned and unplanned maintenance was performed across all sections of the mill.
During the third quarter, the Company continued to mine waste from cut-back 14B and continued to unload the ice and waste material from the high movement area. In mid-September ore was accessed in cutback 14B, which resulted in 0.4 million tonnes of ore at a grade of 2.25 g/t being mined during the third quarter of 2012. As ore became available, the mill restarted on September 18th.
Kumtor recorded an amount of $19.3 million of abnormal mining costs in the third quarter of 2012 resulting from the increased unloading of ice and waste material in the high movement area and the impact of the revised mine plan at its Kumtor operation. The cost of removal of the ice and waste from the high movement area during the third quarter of 2012 was $11.4 million, expensed to abnormal mining costs. Pre-stripping activities added costs totaling $7.9 million which are considered abnormal and unrelated to current production.
During the third quarter, Kumtor suspended the development work on the underground project and placed the project on care and maintenance while conducting a detailed study on the potential for expanding the limits of the ultimate pit. Other operating expenses include $5.0 million for the care and maintenance of the underground development project. Subsequent to the third quarter of 2012, a decision was made based on the positive outcome of this study and a new expanded life-of-mine plan was approved for Kumtor with reserves of approximately 10 million ounces of contained gold (see News Release dated November 7, 2012). The new life-of-mine plan expands the Kumtor mine life by 5 years and increases reserve by 58%, and still maintains the option of underground development at a later date. The expanded Kumtor open pit encompasses a significant part of the existing SB Zone underground development and results in a revaluation of the associated capital investment. A charge of between approximately $180 million and $190 million will be recorded in the fourth quarter of 2012.
Total cash cost per ounce produced, a non-GAAP measure of production efficiency, was $1,890 in the third quarter of 2012 compared to $528 in the third quarter of 2011. The quarter-over-quarter increase in unit cash costs reflects lower gold production due to the lower throughput, grades and recoveries from the stockpiled material processed partially offset by a decrease in operating costs. The decrease in operating costs was not as significant as the lower volumes produced since waste stripping and administration and processing costs, that are fixed in nature, continued to be incurred. Total cash cost per ounce produced is a non-GAAP measure and is discussed under “Non-GAAP Measures”.
Operating cash costs (see “Non-GAAP Measures”), which include costs directly related to the production of gold bullion and include mining, milling, site administration and other related costs (including refining costs and royalties) at Kumtor increased by $4.5 million before the capitalization of higher pre-stripping costs of $35.1 million (net amount of $30.6 million lower after capitalization) for the third quarter of 2012 compared to the same quarter of 2011.
Mining costs for the third quarter of 2012, before the capitalization of pre-stripping activities, were $55.5 million, an increase of $7.0 million or 14% compared to the same quarter in 2011. The increase is the result of increased consumption and cost of diesel fuel ($0.74 per litre vs. $0.67 per litre), tire and explosives and higher labor costs due to increases in the social fund payments related to the high altitude coefficient. Milling costs for the third quarter of 2012 were $13.4 million, a decrease of $3.9 million or 23% compared to the same quarter in 2011. Costs were lower due to the lower amount of material processed as a result of the seven week mill shutdown during the third quarter of 2012.
Exploration expenditures at Kumtor for the third quarter of 2012 were $3.5 million which is similar to the comparative quarter of 2011. Exploration activity focused on drilling of the SB Zone from the Central Pit, underground exploration drilling of the Southwest Extension and SB Zones from Declines #1 and #2 and drilling at Sarytor.
At Kumtor, capital expenditures, spent and accrued for, in the third quarter of 2012 were $78.1 million compared to $34.4 million in the same quarter of 2011. The third quarter expenditures consisted of $13.6 million of sustaining capital, predominantly spent on the major overhaul program for heavy duty equipment ($5.6 million), effluent treatment plant ($2.4 million), dewatering program ($2.2 million), replacement of tractor dozer ($1.4 million), tailings dam expansion ($1.4 million) and other projects ($0.6 million). Growth capital investment totaled $64.5 million which was spent on pre-stripping capitalization ($48.7 million), purchase of Hitachi shovels ($6.0 million), purchase of CAT 789 haul trucks ($5.1 million), the underground development ($2.6 million), expanded fuel farm ($0.6 million), expanded mine auxiliary equipment ($0.6 million), and other projects ($0.9 million).
Boroo/Gatsuurt
At the Boroo mine in Mongolia, gold production was 18,938 ounces in the third quarter of 2012 compared to 13,719 ounces in the third quarter of 2011. The higher gold production is the result of processing higher grade Pit 6 ore blended with stockpiled pit and heap leach material. The average mill head grade was 1.62 g/t with a recovery of 60.9% in the third quarter of 2012, compared to 0.95 g/t with a recovery of 72.8% in the same quarter of 2011. Mining activities in Pit 6 were completed in September 2012 while milling of Pit 6 ore is expected to extend to January 2013.
During the third quarter, Boroo received regulatory approval for its mine plan for the heap leach facility and shortly thereafter resumed heap leach operations. Boroo estimates that production from the heap leach will add approximately 2,000 ounces of gold per month starting in December. See “Other Corporate Developments- Mongolia”.
Total cash cost per ounce produced, a non-GAAP measure of production efficiency, was $788 in the third quarter of 2012 compared to $771 in the third quarter of 2011 due to the higher gold production which was partially offset by higher operating costs. Operating cash costs (see “Non-GAAP Measures”) increased in the quarter by $4.5 million to $14.9 million primarily due to a $4.0 million increase in mining costs and a $0.2 million increase in costs related to the start-up of the heap leach operation.
During the third quarter of 2012, exploration expenditures in Mongolia increased to $2.7 million in the third quarter of 2012 from $2.4 million in the same period of 2011, mainly reflecting increased activity at the ATO property. Capital expenditures, spent and accrued, at Boroo in the third quarter of 2012 decreased to $0.5 million ($2.7 million in the same period of 2011 when $2.1 million capital was spent on tailings dam construction). Gatsuurt remains on care and maintenance and is not incurring any significant capital expenditures. See “Other Corporate Developments – Mongolia”.
The Gatsuurt project remained under care and maintenance during the third quarter of 2012 due to continued delays in permitting resulting from the Water and Forest Law which prohibits mining and exploration activities in water basin and forest areas. Further development of the project is subject to receiving all required approvals and regulatory commissioning from the Mongolian Government, which would allow the Gatsuurt project to move forward.
Exploration Update
To view the graphics, maps/drill sections and complete drill results discussed in this news release, please visit the following link:
http://file.marketwire.com/release/CG2012Q3ExplorationAll.pdf or visit the Company’s web site at: www.centerragold.com.
KYRGYZ REPUBLIC
During the third quarter of 2012, exploration drilling programs continued in the Kumtor Central Pit, in Declines 1 and 2, in the Kumtor Underground, and at the nearby Sarytor deposit.
Kumtor Pit
In the Central Pit, ten drill holes were completed and three other holes were abandoned short of their targets due to drilling difficulties. Another four holes were in progress at the end of the quarter. Drilling focused on infilling and expanding portions of the SB Zone within and below the new KS- 13 pit design on Sections 10, 14, 18, 22, 26 and 42.
Hole D1651 was drilled on Section 10 to test the western limits of the SB Zone below the new KS13 pit design. The hole intersected 2.8 g/t gold over 15.0 metres.
Forty metres further east on Section 14, D1645 intersected 10.6 g/t gold over 9.5 metres (including 23.7 g/t over 3.3 metres) and 4.3 g/t gold over 59.9 metres (including 15.6 g/t over 7.5 metres) at the bottom of the new KS-13 pit design.
On Section 18, D1657 intersected 5.5 g/t gold over 43.9 metres (including 21.0 g/t over 3.0 metres), 7.2 g/t gold over 29.3 metres (including 14.9 g/t over 5.0 metres) and 3.9 g/t gold over 36.8 metres (including 13.1 g/t over 5.3 metres). A short distance away, D1663 intersected 5.9 g/t gold over 37.1 metres (including 12.2 g/t over 12.4 metres), 3.8 g/t gold over 16.7 metres and 3.6 g/t gold over 107.3 metres (including 18.6 g/t over 6.0 metres). These intercepts are located approximately 250 metres below the new KS13 pit and within the SB Zone underground inferred resource.
Forty metres further east on Section 22, D1653 intersected 7.7 g/t gold over 109.3 metres (including 20.1 g/t over 15.7 metres and 16.2 g/t over 9.0 metres). This hole is located approximately 100 meters below the new KS13 pit design and within the SB Zone underground inferred resource.
On Section 26, D1646 intersected 3.3 g/t gold over 84.3 metres, and D1656 intersected 3.8 g/t gold over 95.2 metres (including 8.1 g/t over 13.5 metres) and 7.6 g/t gold over 4.5 metres. Both holes are located within the SB Zone underground inferred resource.
Two drill holes were completed on Section 46 to test the lower eastern limits of the SB Zone resource. D1647A intersected 3.2 g/t gold over 25.0 metres, 2.8 g/t gold over 29.8 metres and 5.4 g/t gold over 23 metres. Eighty metres away, D1664 intersected 4.3 g/t gold over 35.0 metres, 5.5 g/t gold over 12.5 metres and 5.7 g/t gold over 28.9 metres. These intercepts are located east of the SB Zone underground resource in an area between the SB Zone and the lower-grade Saddle Zone.
True widths for the mineralized zones are typically from 50% to 95% of the stated intercept.
Drilling will continue in the fourth quarter of 2012 from the Central Pit to infill the SB Zone and expand the resource at depth.
Decline Exploration
Nine exploration drill holes were drilled from Decline #1 and two exploration drill holes from Decline #2 during the quarter. Two drill holes were abandoned short of their targets.
In Decline #1, underground drilling was focused on delineating the western limits of the Southwest Extension within and below the new KS-13 pit on Sections -18, -14 and -10. Drill hole D1648 intersected 6.3 g/t gold over 21.9 metres (including 12.5 g/t gold over 6.7 metres) on Section -14. Six other holes located on Sections -18, -14 and -10 intersected lower grades over narrow intervals. Also two exploration holes were completed on Section 154 in the Stockwork Zone to test for extensions to the current resource. Both holes intersected low-grades over narrow intervals.
True widths for the mineralized zones are typically from 50% to 95% of the stated intercept.
Exploration drilling will continue from Decline #1 in the fourth quarter of 2012 to infill portions of the SB Zone resource and to test for extensions at depth.
Resource Delineation Drilling
In Decline #2, drilling crews completed a final infill hole in the Stockwork Zone on Section 126. UD1650 intersected 9.0 g/t gold over 4.2 metres.
Sarytor Area
Exploration drilled three holes at Sarytor during the quarter testing for higher grades at depth along the Kumtor ore horizon. SR-12-206 intersected 2.5 g/t gold over 24.4 metres. Another hole was abandoned before reaching its target, and the third hole returned no significant results.
No additional work is planned at Sarytor for the balance of the year.
Regional Exploration
As reported last quarter, the Licensing Commission of the Agency for Subsoil and Natural Resources took no action on Kumtor Gold Company’s application for renewal of the Karasay and Koendy licenses. As a result no exploration activity took place on these licenses and no work is planned for the balance of the year.
Mongolia ATO Project
Centerra Gold Mongolia was granted a mining license for the ATO project in late-August. Exploration drilling resumed at ATO in the third quarter of 2012 testing the periphery of the ATO pipe-like ore bodies and several geochemical and geophysical targets. Several new zones of mineralization have been identified and are being tested further with additional holes. Drilling will continue in the fourth quarter with two diamond drill rigs and an RC rig, which will test areas of cover north and south of the current resource.
Russia Kara Beldyr Joint Venture
During the third quarter of 2012, 2,710 metres of diamond drilling was completed in sixteen holes. Twelve holes were drilled at Camp Zone, and four holes were completed to test the Banny exploration target located between the Camp and Gord Zones. Better results include a number of intercepts from the Camp Zone:
KB138 2.8 g/t gold over 10.9 metres (including 10.4 g/t over 1 metre and 9.1 g/t over 1 metre) 7.4 g/t gold over 6.3metres (including 17.9 g/t over 1 metre and 13.2 g/t gold over 1 metre) KB139 1.8 g/t gold over 8.0 metres (including 8.3 g/t gold over 1 metre)
KB142 3.4 g/t gold over 15.5 metres (including 13.1 g/t over 1 metre and 11.9 g/t over 1 metre) 1.5 g/t gold over 10.7 metres (including 12.9 g/t over 1 metre)
KB144 3.7 g/t gold over 14.2 metres (including 16.4 g/t over 2 metre)