Centerra Gold Inc. (TSX: CG) and Kumtor Operating Company have summed up the results of the 3rd quarter of 2011. During the period between July and September 2011 Kumtor produced 141,217 ounces1, or 4,392 kg of gold. Since the beginning of 2011, the Company has produced 444,460 ounces, or 13,824 kg of gold.
During the first nine months of 2011, it has contributed KGS 5.378 billion in taxes and mandatory payments.
Gold Production and Sales
At the Kumtor mine, gold production was 141,217 ounces in the third quarter of 2011. In the first nine months of 2011 gold production was 444,460 ounces representing a 31% increase from the same period of 2010.
The increase in gold production was the result of higher grades and higher recoveries in the third quarter of 2011. The mill head grade averaged 4.01 g/t with a recovery of 80.2% in the third quarter of 2011. During the quarter, ore tonnage processed increased 3% to 1.4 million tonnes as compared with the same period of 2010.
Gold sales to Kyrgyzaltyn JSC were 146,765 ounces or 4,565 kg in the third quarter of 2011 and 457,597 ounces or 14,233 kg in the first nine months of 2011.
Revenue was $250.3 million2 in the third quarter of 2011 and $701.4 million in the first nine months of 2011. The Company’s gross revenue increased largely due to higher gold sales and an increased realized gold price. The average realized gold price was $1,705 per ounce in the third quarter of 2011. For other operating results see Table 1.
Gold produced by the Kumtor mine is purchased at the mine site by Kyrgyzaltyn JSC for processing at its refinery in the Kyrgyz Republic pursuant to a Gold and Silver Sales Agreement signed by KOC, Kyrgyzaltyn and the Government of the Kyrgyz Republic. Kyrgyzaltyn JSC enjoys the exclusive right to sell refined gold and silver both in and outside the Kyrgyz Republic.
Production Cost and Capital Expenditures
In the third quarter of 2011, total production cost, including depreciation and amortization, was $120.0 million.
Capital expenditures in the third quarter of 2011 were $34.4 million. They consisted of $9.3 million of sustaining capital, predominantly spent for the major overhaul program for heavy duty equipment, the tailings dam lift and other projects.
Growth capital investment totaled $25.1 million which was mainly spent on underground development, pre-stripping capitalization, commissioning of new CAT 789 haul trucks, purchase of drilling equipment and other projects.
Exploration expenditures totaled $3.5 million for the third quarter of 2011 and $10.7 million for the first nine months of 2011. During the third quarter of 2011, exploration drilling programs continued in the Kumtor Central Pit and on the Kumtor concession area.
A complete listing of the drill results and supporting maps for the Kumtor pit have been filed on the System for Electronic Document Analysis and Retrieval (‘SEDAR’) at: www.sedar.com (SEDAR) and http://file.marketwire.com/release/CGQ3-2011Exploration1103.pdf, and are also available at the Company’s web site at: www.centerragold.com.
The underground development at Kumtor continued in the third quarter of 2011 with a total advance of 503 metres. Year-to-date total development advance is 1,394 metres. Decline #1 (SB Zone decline) advanced 260 metres in the third quarter and is now approximately 1.7 kilometres in length out of a total planned development of 2.6 kilometres. Decline #2 advanced 157 metres in the third quarter towards the SB Zone and totals 964 metres in length out of a total planned development of 1.8 kilometres. The Stockwork Drive advanced 86 metres in the third quarter to a total length of 515 metres enabling further delineation drilling.
Outlook for 2011
The Kumtor mine is expected to produce 580,000 to 600,000 ounces (18 to 18.7 tonnes) in 2011 revised from the prior guidance of 550,000 to 600,000 ounces.
The capital expenditures for 2011 are estimated to be $186 million, including $152 million of growth capital and $34 million of sustaining capital.
Growth capital investment at Kumtor will be spent primarily on the purchase of seven CAT 789 haul trucks ($21 million), purchase of equipment for the North Wall expansion project ($25 million) and pre-stripping costs related to the development of the open pit ($54 million). Also, $50 million is included in growth capital investment for the development of the underground, of which $43 million has been allocated to advance the two underground declines to continue to develop the SB Zone and Stockwork Zone, as well as, $2 million for delineation drilling and $5 million for capital purchases and other costs.
The largest sustaining capital spending will be on the major overhaul maintenance of the heavy duty mine equipment ($20 million), expenditures for the shear key, buttress and tailings dam construction works ($5 million) and for equipment replacement and other items ($9 million).
Planned exploration expenditures in the Kyrgyz Republic are approximately $14 million, which is higher than the prior guidance of $13 million due to increased drilling activity.
Robert Wunder, President of Kumtor Operating Company, stated: “We are satisfied with the significant operating results achieved at Kumtor in the past quarter. We have managed to reach our planned volume of continued mining operations set at 500,000 tonnes of waste rock per day. The revised gold production guidance at Kumtor has been increased to 580,000 to 600,000 ounces”.
Payments to the KR National Budget and Mandatory Contributions
During the first nine months of 2011, contributions to the Kyrgyz Republic’s national budget in taxes as well as those to the Social Fund and other mandatory payments totaled $119.5 million. According to the official National Bank exchange rate as of September 30, 2011, this is more than KGS 5.378 billion. (See Table 2). Indicated payments do not include received by Kyrgyzaltyn OJSC dividends in the amount of $ 30.2 millions, paid to shareholders of Centerra Gold Inc.in May, 2011.
For reference: mandatory contributions in the nine months of 2010 were KGS 4,530.2 million.
Other Corporate Developments
Centerra has become a supporting company of the Extractive Industries Transparency Initiative (“EITI”). Centerra is active in promoting EITI principles both in the Kyrgyz Republic and Mongolia. The Company’s mines operating in these countries were among the first to support the EITI principles, adopt the Initiative’s reporting guidelines and contribute to the improvement of EITI infrastructures in the countries where Centerra mines are operating.
As part of its evolving corporate responsibility efforts, Centerra Gold Inc. contributed $10 million during the quarter for the construction and repair of twenty-seven schools throughout the Kyrgyz Republic.
In addition, Kumtor Operating Company has reached a settlement with the Kyrgyz Social Fund to pay $14.1 million of contributions in respect of the high-altitude premium covering the year 2010 and the first nine months of 2011. Going forward, the Company will pay such contributions to the Social Fund of the Kyrgyz Republic, a portion of which will be paid by the employer and a portion of which will be paid by its employees.
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Kumtor Operating Results
ended September 30
ended September 30
|Gold produced – ounces||141,217||68,757||105%||444,460||339,369||31%|
|Gold produced – kg||4,392||2,139||105%||13,824||10,556||31%|
|Gold sold – ounces||146,765||66,490||121%||457,597||358,461||28%|
|Gold sold – kg||4,565||2,068||121%||14,233||11,149||28%|
|Average realized gold price – $/oz||1,705||1,237||38%||1,533||1,159||32%|
|Revenue from gold sales to Kyrgyzaltyn – $ millions||250.3||82.2||205%||701.4||415.3||69%|
|Total production cost (with depletion and amortization ) – $millions||120.0||73.2||64%||281.0||212.6||32%|
|Revenue-based tax + Issyk-Kul Development Fund – $millions||32.7||20.3||61%||105.4||88.7||19%|
|Capital expenditures – $millions||34.4||70.3||(51%)||152.3||133.2||14%|
|Exploration expenditures – $millions||3.5||3.3||6%||10.7||7.8||37%|
|Tonnes mined – 000s||38,702||30,714||26%||113,480||86,905||31%|
|Tonnes ore mined – 000s||2,889||774||273%||4,925||2,953||67%|
|Average mining grade – g/t||3.05||1.89||61%||3.43||3.51||(2%)|
|Tonnes milled – 000s||1,429||1,390||3%||4,365||4,290||2%|
|Average mill head grade – g/t||4.01||1.57||155%||3.79||3.10||22%|
|Recovery – %||80.2||73.4||9%||81.8||76.4||7%|
Kumtor Project’s contributions in taxes and mandatory payments
in the first nine months of 2011
|ended September 30, 2011||in ths. USD|
|Issyk-Kul Development Fund||8,312.9|
|Social Insurance Fund||8,289.6|
|Tax of nonresident companies||833.2|
|Other taxes and mandatory payments||49.0|
|US$ official exchange rate to the Kyrgyz Som as of September 30, 2011||45.0008|
|Equivalent of payments effected in Kyrgyz Soms||5,377,996|
Note: Under the Agreement on New Terms of April 24, 2009, the revenue-based tax and contributions to the Issyk-Kul Development Fund are estimated based on actual cash revenues from sales during the specified period.
The Kumtor open pit mine, located in the Kyrgyz Republic, is the largest gold mine in Central Asia operated by a Western-based producer. It has been operating since May 1997 and so far has produced more than 8.2 million ounces, or approximately 256 tonnes of gold.
Kumtor Operating Company is the operator of the Kumtor project responsible for the entire production cycle.
Centerra Gold Inc. is a growth-oriented, gold Company focused on acquiring, exploring, developing and operating gold properties primarily in Asia, the former Soviet Union and other emerging markets worldwide. Centerra is a leading North American-based gold producer and the largest Western-based gold producer in Central Asia and the former Soviet Union. Centerra’s shares trade on the Toronto Stock Exchange under the symbol CG. The Company is based in Toronto, Canada.
Kyrgyzaltyn JSC is Centerra’s largest shareholder owning approximately 33% of the common shares (77,401,766). As of November 24, 2011, the value of Kyrgyzaltyn’s interest exceeded $1.52 billion.
Additional information on Centerra as well as the full text of Centerra’s news release about Third Quarter Results are available on SEDAR at www.sedar.com and the Company’s website at www.centerragold.com.
(1) One Troy ounce equals to 31.1034768 grams.
(2) Unless specified otherwise, all dollar figures in this news release are in US dollars.
For further information, please contact Media Relations, KOC