Centerra Gold Achieves 2017 Consolidated Gold Production Guidance, Beats Cost Guidance, Records $210 Million Net Earnings and Generates $234 Million Free Cash FlowNG and Provides 2018 Outlook
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 audited financial statements and the notes thereto for the year ended December 31, 2017. The consolidated financial statements of Centerra Gold Inc. are prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. All figures are in United States dollars and all production figures are on a 100% basis unless otherwise stated.
All references in this document denoted with NG, indicate a non-GAAP term which is discussed under “Non-GAAP Measures” and reconciled to the most directly comparable GAAP measure.
Centerra Gold Inc. (“Centerra”) (TSX: CG) reported net earnings of $130.0 million or $0.45 per common share (basic) on revenues of $358.2 million in the fourth quarter of 2017.
The fourth quarter 2017 result includes a tax benefit of $21.3 million as a result of a change in tax legislation enacted in the U.S. Excluding this item, adjusted earnings NG in the fourth quarter of 2017 were $108.7 million or $0.37 per common share (basic).
An impairment charge of the Company’s Mongolian assets of $41.3 million ($39.7 million net of tax), a tax benefit of $21.3 million resulting from the enactment of new tax legislation in the U.S. and a gain of $9.8 million ($6.9 million net of tax) on the sale of the ATO property in Mongolia.
During the same period in 2016, the Company reported net earnings of $63.6 million or $0.23 per common share (basic) on revenues of $305.7 million and adjusted earnings NG of $68.6 million or $0.24 per common share (basic). For the full year 2017, the Company recorded net earnings of $209.5 million or $0.72 per share (basic) on revenues of $1.2 billion compared to $151.5 million or $0.60 pershare (basic) on revenues of $757.7 million in 2016.
The increase in earnings in 2017 reflects a full-year of operations at Mount Milligan and increased production at Kumtor. In addition in 2017, the Company recorded charges for a settlement reached with the Kyrgyz Republic Government of $60 million, an impairment charge of the Company’s Mongolian assets of $41.3 million ($39.7 million net of tax), a tax benefit of $21.3 million resulting from the enactment of new tax legislation in the U.S. and a gain of $9.8 million ($6.9 million net of tax) on the sale of the ATO property in Mongolia. Excluding these items, adjusted earningsNG in 2017 were $281 million or $0.96 per share (basic) compared to adjusted earnings of $160.9 million or $0.64 per share (basic) in the comparative year.
_0-100424-582299309.jpeg)
2017 Fourth Quarter and Full Year Highlights
• Entered into a comprehensive settlement agreement in September 2017 with the Government of the Kyrgyz Republic to resolve all the outstanding matters affecting the Kumtor Project.
• Announced a friendly acquisition of AuRico Metals Inc. on November 7, 2017, which closed on January 8, 2018.
Offset 2017 mining depletion and increased global gold mineral reserves to 16.3 million contained ounces of gold (746.8 Mt at 0.7 g/t gold) at year-end, primarily as a result of the acquisition of AuRico Metals and successful brownfield exploration at Mount Milligan and Öksüt. Mineral reserves and mineral resources estimates are described in the Company’s news release of February 8, 2018.
• Achieved Company-wide 2017 gold production guidance producing 785,316 ounces; Kumtor produced 562,749 ounces exceeding the upper end of its favourably revised guidance, while Mount Milligan produced 222,567 ounces falling short of the lower end of its revised guidance.
• Mount Milligan produced 53.6 million pounds of copper during 2017, which was slightly below its guidance, but sold 59.7 million pounds of copper. The Mount Milligan mill was shutdown temporarily late December due to a shortage of water in the milling process. The mill was restarted utilizing one ball mill (approximately 30,000 tonnes per day) on February 5, 2018 once sufficient water became available.
• Exceeded Company-wide 2017 guidance for all-in sustaining costs on a by-product basis per ounce soldNG at $688, excluding revenue-based tax in the Kyrgyz Republic and income tax ($572 per ounce sold in the fourth quarter 2017).
• Cash generated from operations totaled $500.9 million for the year (including $416.1 million from Kumtor and $150.6 million from Mount Milligan). In the fourth quarter 2017 cash generated from operations was $170.4 million (including $160 million from Kumtor and $29.2 million from Mount Milligan).
• Cash, cash equivalents, restricted cash and short-term investments at December 31, 2017 were $416.6 million.
• Received all of the necessary permits and approvals for Kumtor’s 2018 mine plan. The approvals and permits are valid through December 31, 2018.
Subsequent to December 31, 2017
• Received approval of the pastureland permit for the Öksüt Gold Project in Turkey, the last remaining outstanding permit needed for the project’s future development. In addition, received from the Turkish Ministry of Economy an investment incentive certificate which provides Öksüt with certain tax incentives.
• Received Board approval for the construction of the Öksüt Project, subject to continued availability of the OMAS Facility (defined below). Construction is expected to commence in April 2018.
• Received an amendment to the Mount Milligan Environmental Assessment Certificate that allows for limited withdrawal of water from Philip Lake until October 2018. The Company expects to commence drawing water by the end of February and to carry out the necessary studies, and to consult with affected First Nations groups to work toward a further, longer-term amendment to the Environmental Assessment Certificate.
• On February 1, 2018, entered into a $500 million, four-year senior secured revolving credit facility with a lending syndicate of eight financial institutions as lenders, led by The Bank of Nova Scotia and National Bank of Canada. This facility amended and restated the Centerra B.C. Facility which had an outstanding amount of $190 million and replaced the $125 million AuRico Acquisition Facility which was fully drawn. See “Liquidity – Credit Facilities”.
Commentary
Scott Perry, President and Chief Executive Officer of Centerra stated, “I am pleased to report that we met our overall gold production guidance producing 785,316 ounces at an all-in sustaining costNG on a byproduct basis of $688 per ounce sold, beating the low-end of our all-in-sustaining cost guidance for the year.
Growth capital spending includes $82 million for the Öksüt Project in Turkey.
Kumtor had another strong year exceeding its revised production guidance and beating its all-insustaining cost guidance, delivering 562,749 ounces of gold production at all-in-sustaining cost on a by product basis of $698 per ounce sold in 2017. In 2017, Mount Milligan met its all-in-sustaining cost guidance at all-in-sustaining cost on a by-product basis of $505 per ounce sold but fell short of its gold and copper production producing 222,567 ounces of gold and 53.6 million pounds of copper.”
“Financially, both operations generated a significant amount of cash provided by operations before changes in working capitalNG during the year, Mount Milligan generated $138.6 million and Kumtor generated $424.3 million. The lifting of the restrictions on Kumtor’s cash along with the positive cash flow generated from both our operations during the year enabled the Company to aggressively pay down its debt by approximately $209 million.
In 2017, we generated $188 million of free cash flowNG from Kumtor and $127.4 million from Mount Milligan.” “For 2018, we are estimating consolidated gold production to be in the range of 645,000 to 715,000 ounces. Additionally, we are expecting 47 million to 52 million pounds of payable copper production from Mount Milligan for the year. At Kumtor, we are expecting gold production to be weighted more towards the backhalf of the year with approximately 45% of the production expected in the fourth quarter of 2018. At Mount Milligan we expect 60% of the production to be in the second half of the year.
Centerra’s projected consolidated all-in sustaining cost per ounce soldNG on a by-product basis for 2018 is expected to be in the range of $799 to $885 per ounce.” “Our projected capital expenditures for 2018, excluding capitalized stripping, is estimated to be $242 million which includes $100 million of sustaining capitalNG and $142 million of growth capitalNG spending.
Growth capital spending includes $82 million for the Öksüt Project in Turkey where we expect to commence construction activity in April and $36 million to advance the Kemess Underground Project with pre-construction activities. Öksüt represents the new generation of low-cost production and an important third source of cash flow for the Company.”
Centerra Gold Achieves 2017 Consolidated Gold Production Guidance, Beats Cost Guidance, Records $210 Million Net Earnings and Generates $234 Million Free Cash FlowNG and Provides 2018 Outlook
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 audited financial statements and the notes thereto for the year ended December 31, 2017. The consolidated financial statements of Centerra Gold Inc. are prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. All figures are in United States dollars and all production figures are on a 100% basis unless otherwise stated.
All references in this document denoted with NG, indicate a non-GAAP term which is discussed under “Non-GAAP Measures” and reconciled to the most directly comparable GAAP measure.
Centerra Gold Inc. (“Centerra”) (TSX: CG) reported net earnings of $130.0 million or $0.45 per common share (basic) on revenues of $358.2 million in the fourth quarter of 2017.
The fourth quarter 2017 result includes a tax benefit of $21.3 million as a result of a change in tax legislation enacted in the U.S. Excluding this item, adjusted earnings NG in the fourth quarter of 2017 were $108.7 million or $0.37 per common share (basic).
An impairment charge of the Company’s Mongolian assets of $41.3 million ($39.7 million net of tax), a tax benefit of $21.3 million resulting from the enactment of new tax legislation in the U.S. and a gain of $9.8 million ($6.9 million net of tax) on the sale of the ATO property in Mongolia.
During the same period in 2016, the Company reported net earnings of $63.6 million or $0.23 per common share (basic) on revenues of $305.7 million and adjusted earnings NG of $68.6 million or $0.24 per common share (basic). For the full year 2017, the Company recorded net earnings of $209.5 million or $0.72 per share (basic) on revenues of $1.2 billion compared to $151.5 million or $0.60 pershare (basic) on revenues of $757.7 million in 2016.
The increase in earnings in 2017 reflects a full-year of operations at Mount Milligan and increased production at Kumtor. In addition in 2017, the Company recorded charges for a settlement reached with the Kyrgyz Republic Government of $60 million, an impairment charge of the Company’s Mongolian assets of $41.3 million ($39.7 million net of tax), a tax benefit of $21.3 million resulting from the enactment of new tax legislation in the U.S. and a gain of $9.8 million ($6.9 million net of tax) on the sale of the ATO property in Mongolia. Excluding these items, adjusted earningsNG in 2017 were $281 million or $0.96 per share (basic) compared to adjusted earnings of $160.9 million or $0.64 per share (basic) in the comparative year.
2017 Fourth Quarter and Full Year Highlights
• Entered into a comprehensive settlement agreement in September 2017 with the Government of the Kyrgyz Republic to resolve all the outstanding matters affecting the Kumtor Project.
• Announced a friendly acquisition of AuRico Metals Inc. on November 7, 2017, which closed on January 8, 2018.
Offset 2017 mining depletion and increased global gold mineral reserves to 16.3 million contained ounces of gold (746.8 Mt at 0.7 g/t gold) at year-end, primarily as a result of the acquisition of AuRico Metals and successful brownfield exploration at Mount Milligan and Öksüt. Mineral reserves and mineral resources estimates are described in the Company’s news release of February 8, 2018.
• Achieved Company-wide 2017 gold production guidance producing 785,316 ounces; Kumtor produced 562,749 ounces exceeding the upper end of its favourably revised guidance, while Mount Milligan produced 222,567 ounces falling short of the lower end of its revised guidance.
• Mount Milligan produced 53.6 million pounds of copper during 2017, which was slightly below its guidance, but sold 59.7 million pounds of copper. The Mount Milligan mill was shutdown temporarily late December due to a shortage of water in the milling process. The mill was restarted utilizing one ball mill (approximately 30,000 tonnes per day) on February 5, 2018 once sufficient water became available.
• Exceeded Company-wide 2017 guidance for all-in sustaining costs on a by-product basis per ounce soldNG at $688, excluding revenue-based tax in the Kyrgyz Republic and income tax ($572 per ounce sold in the fourth quarter 2017).
• Cash generated from operations totaled $500.9 million for the year (including $416.1 million from Kumtor and $150.6 million from Mount Milligan). In the fourth quarter 2017 cash generated from operations was $170.4 million (including $160 million from Kumtor and $29.2 million from Mount Milligan).
• Cash, cash equivalents, restricted cash and short-term investments at December 31, 2017 were $416.6 million.
• Received all of the necessary permits and approvals for Kumtor’s 2018 mine plan. The approvals and permits are valid through December 31, 2018.
Subsequent to December 31, 2017
• Received approval of the pastureland permit for the Öksüt Gold Project in Turkey, the last remaining outstanding permit needed for the project’s future development. In addition, received from the Turkish Ministry of Economy an investment incentive certificate which provides Öksüt with certain tax incentives.
• Received Board approval for the construction of the Öksüt Project, subject to continued availability of the OMAS Facility (defined below). Construction is expected to commence in April 2018.
• Received an amendment to the Mount Milligan Environmental Assessment Certificate that allows for limited withdrawal of water from Philip Lake until October 2018. The Company expects to commence drawing water by the end of February and to carry out the necessary studies, and to consult with affected First Nations groups to work toward a further, longer-term amendment to the Environmental Assessment Certificate.
• On February 1, 2018, entered into a $500 million, four-year senior secured revolving credit facility with a lending syndicate of eight financial institutions as lenders, led by The Bank of Nova Scotia and National Bank of Canada. This facility amended and restated the Centerra B.C. Facility which had an outstanding amount of $190 million and replaced the $125 million AuRico Acquisition Facility which was fully drawn. See “Liquidity – Credit Facilities”.
Commentary
Scott Perry, President and Chief Executive Officer of Centerra stated, “I am pleased to report that we met our overall gold production guidance producing 785,316 ounces at an all-in sustaining costNG on a byproduct basis of $688 per ounce sold, beating the low-end of our all-in-sustaining cost guidance for the year.
Growth capital spending includes $82 million for the Öksüt Project in Turkey.
Kumtor had another strong year exceeding its revised production guidance and beating its all-insustaining cost guidance, delivering 562,749 ounces of gold production at all-in-sustaining cost on a by product basis of $698 per ounce sold in 2017. In 2017, Mount Milligan met its all-in-sustaining cost guidance at all-in-sustaining cost on a by-product basis of $505 per ounce sold but fell short of its gold and copper production producing 222,567 ounces of gold and 53.6 million pounds of copper.”
“Financially, both operations generated a significant amount of cash provided by operations before changes in working capitalNG during the year, Mount Milligan generated $138.6 million and Kumtor generated $424.3 million. The lifting of the restrictions on Kumtor’s cash along with the positive cash flow generated from both our operations during the year enabled the Company to aggressively pay down its debt by approximately $209 million.
In 2017, we generated $188 million of free cash flowNG from Kumtor and $127.4 million from Mount Milligan.” “For 2018, we are estimating consolidated gold production to be in the range of 645,000 to 715,000 ounces. Additionally, we are expecting 47 million to 52 million pounds of payable copper production from Mount Milligan for the year. At Kumtor, we are expecting gold production to be weighted more towards the backhalf of the year with approximately 45% of the production expected in the fourth quarter of 2018. At Mount Milligan we expect 60% of the production to be in the second half of the year.
Centerra’s projected consolidated all-in sustaining cost per ounce soldNG on a by-product basis for 2018 is expected to be in the range of $799 to $885 per ounce.” “Our projected capital expenditures for 2018, excluding capitalized stripping, is estimated to be $242 million which includes $100 million of sustaining capitalNG and $142 million of growth capitalNG spending.
Growth capital spending includes $82 million for the Öksüt Project in Turkey where we expect to commence construction activity in April and $36 million to advance the Kemess Underground Project with pre-construction activities. Öksüt represents the new generation of low-cost production and an important third source of cash flow for the Company.”