Results of the 1st Quarter of 2011

published: 13 May 2011

Centerra Gold Inc. (TSX: CG) and Kumtor Operating Company have summed up the results of the 1st quarter 2011. During the first three months of 2011, Kumtor produced 164 167 ounces¹ or 5106 kg of gold. Since the beginning of 2011, the Company has contributed more than $52 million2 in taxes and mandatory payments.

Gold Production and Sales

At the Kumtor mine, gold production in the first quarter of 2011 was 164,167 ounces. Gold production exceeded plan due to greater than anticipated gold in-process inventory at the end of the fourth quarter of 2010 as well as to the fact that the operation processed higher than expected gold grade through the mill with its associated higher than anticipated metallurgical recovery in the quarter. Yet, gold production in the first quarter of 2011 was lower (down 16,395 ounces) as compared with the similar period of 2010 as the result of scheduled mill equipment replacement.

In the first quarter of 2011, the mill head grade averaged 4.12 g/t at a recovery of 82.6%.

Gold sales at Kumtor in the first quarter of 2011 were 166,145 ounces, or 5,167.69 kg. The average realized gold price was for the period under review was $1,384 per ounce while revenue was $229.9 million.

In the first quarter of 2011, production costs, including depreciation and amortization, totalled $71.3 million.

The Dore bars, produced by the Kumtor mine are 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. For other production figures see Table 1.

Capital Expenditures

Capital expenditures in the first quarter of 2011 totalled $71.9 million and consisted of $6.7 million of sustaining capital, predominantly spent on the heavy duty equipment overhaul program. Growth capital investment totalled $65.2 million spent mainly on the purchase of CAT 789 haul trucks, pre-stripping capitalization, underground development of Decline #1 and Decline #2 and the purchase of Liebherr shovels.

The SB Zone underground decline (Decline #1) has now advanced a total of 1,280 metres, advancing 200 metres in the quarter. The Stockwork Zone underground decline (Decline #2) has advanced a total of 928 metres (including the second heading, the Stockwork Decline), advancing 194 metres in the quarter. The Stockwork Decline has advanced a total of 270 metres (95 metres in the first quarter).

Exploration Update

Exploration expenditures in the first quarter of 2011 grew to $4.1 million due to intensified exploration drilling programs.

During the first quarter of 2011, exploration drilling programs continued in the Kumtor Central Pit and the Northeast and Southwest deposits as well as on the Kumtor concession area.

A complete listing of the drill results and supporting maps for the Kumtor pit and Northeast area have been filed on the System for Electronic Document Analysis and Retrieval (‘SEDAR’) at www.sedar.com and are available at the Company’s web site at: www.centerragold.com.

Payments to the Kyrgyz National Budget and Mandatory Contributions

During the first three months of 2011, contributions to the national budget in taxes, deductions to the Social Fund and other mandatory payments have totaled more than $52.3 million. (see Table 2).

Outlook for 2011

The Kumtor mine is expected to produce 550,000 to 600,000 ounces, or 17.1 to 18.6 tonnes of gold in 2011. It is expected that the higher than anticipated production realized in the first quarter will not continue in future quarters this year.

During 2011, total capital expenditures are forecast to be $206 million which includes $170 million of growth capital investment and $36 million of sustaining capital.

Growth capital investment is expected to be spent primarily on the purchase of seven CAT 789 haul trucks ($21 million), purchase of remaining equipment for the North Wall expansion project ($28 million), pre-strip costs related to the development of the open pit ($63 million) and a waste dump expansion project ($3 million), and other projects. $52 million is included in growth capital investment for the underground growth capital.

The largest sustaining capital spending will be on the major overhaul maintenance of the heavy duty mine equipment ($19 million), expenditures for the shear key, buttress and tailings dam construction works ($5 million) and for equipment replacement and other items ($12 million).

Planned exploration expenditures in 2011 are approximately $13 million.

Annual Dividend

As previously disclosed (see Centerra’s news release of May 2, 2011), the Board of Directors of Centerra Gold Inc. has declared a dividend totaling Cdn$94.4 million (approximately US$99.3 million at the current exchange rate). The dividend is payable on May 18, 2011 to shareholders of record on May 12, 2011, in an amount of Cdn$0.40 per common share, comprised of Cdn$0.30 per common share as a special dividend and Cdn$0.10 per common share as an annual dividend.

“The decision of Centerra’s Board to declare the special dividend was based on our strong operating performance and the high gold price, which have created substantial operating cash flow, and, even after significant capital investment, is resulting in growing cash balances. We believe that this dividend will benefit all of our shareholders, and particularly Kyrgyzaltyn JSC, Centerra’s largest shareholder,” said Steve Lang, President and CEO of Centerra Gold.

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 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, as of March 31, 2011, has produced approximately 8,0 million ounces, or 247 tonnes of gold.

Kumtor Operating Company is the operator of the Kumtor project responsible for the entire production cycle.

Centerra Gold Inc. is a gold mining company focused on operating, developing, exploring and acquiring gold properties primarily in Asia, the former Soviet Union and other emerging markets worldwide. Centerra is a leading North American-based gold producer and is the largest Western-based gold producer in Central Asia. Centerra’s shares trade on the Toronto Stock Exchange (TSX) under the symbol CG. The Company is headquartered in Toronto, Canada.

The Kyrgyz Republic, via Kyrgyzaltyn JSC, is Centerra’s largest shareholder owning 77,401,766 shares (about 33%). As of May 13, 2011, Kyrgyzstan’s interests are estimated at more than $1.5 billion.

Additional information on Centerra and the full text of the news release on the results of the first quarter of 2011 are available on SEDAR at www.sedar.com and the Company’s website at www.centerragold.com..

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