Kumtor 2021 Results

Kumtor 2021 Results

published: 28 March 2022

The Kumtor open pit mine, located in the Kyrgyz Republic, is one of the largest gold mines in Central Asia and is in the top highest mines in the world. The mine has been producing gold since 1997 and has produced over 13.6 million ounces of gold as of December 31, 2021.

Temporary external management was introduced at Kumtor Gold Company CJSC by the Order of the Cabinet of Ministers of the Kyrgyz Republic dated May 17, 2021. On the same day, Tengiz Bolturuk, an experienced manager with a Canadian Professional Engineer (P.Eng.) license and extensive experience in the mining industry around the world, was appointed as the Temporary External Manager of Kumtor Gold Company CJSC.

On the date of the introduction of external management, only USD 46 thousand of balance shown on the accounts of Kumtor Gold Company in the banks of the Kyrgyz Republic, although it is one of the largest enterprises in the country. Despite all the difficulties encountered during the transition to external management, the new management of Kumtor Gold Company ensured smooth operation of the Kumtor Mine and stable functioning of all divisions of the Company. Kumtor has fulfilled all its obligations to the budget, suppliers and employees on time and in full without any additional sources of funding.

At the meeting of the Cabinet of Ministers of the Kyrgyz Republic in January 2022, the Temporary External Manager of Kumtor Gold Company CJSC Tengiz Bolturuk presented the 2021 company’s performance report with good results.

The 2021 year-end operating performance results comprised 103 percent of the target performance. The growth of operating performance results in 2021 is primarily due to the fact that uninterrupted mining operations were ensured during the period of temporary external management. All mining operations at the Kumtor Mine are conducted in compliance with safety regulations.

Tonnes mined were 202.5 million tonnes in 2021, which is twice higher compared to tonnes mined in 2020. At the same time, tonnes of ore mined also increased. Tonnes of ore mined were 4.79 million tonnes and contained 14.7 tonnes of gold, which is 6.8 times higher in terms of ore mined and 3.1 times higher in terms of gold grade compared to the same period of 2020. During the period of temporary external management in 2021, tonnes mined were 126.8 million tonnes, of which tonnes of ore mined were 3.2 million tonnes with an average gold grade of 3.63 g/t.

During the twelve months of 2021, the Kumtor mine produced 468,136 ounces of gold. The gold sales comprised 102 percent of the target – in 2021 Kumtor Gold Company sold 1.7% or 8 thousand 21 ounces of gold more compared to the forecast of Centerra Gold Inc., the excess cost comprised USD 14.3 million. Total revenues from gold sales in 2021 comprised USD 856 million, of which revenues during the period of temporary external management comprised USD 621 million.

Kumtor Gold Company pays all taxes and mandatory payments to the country’s budget on time and in full. In 2021, Kumtor Gold Company paid taxes and other mandatory payments to the Kyrgyz budget in the amount of USD 160.3 million compared to the target of USD 107.2 million. The actual payment was USD 53.1 million or 50.7 percent higher than the budget target.

After taxes, according to the 2021 year-end performance results, the net revenue from Kumtor comprised USD 323.7 before the recognition of annual tax expenses for the development of the mineral base of the Kyrgyz Republic and intra-group loan transactions. Previously, the Canadian Company Centerra Gold Inc. did not pay annual tax on the development of the mineral base equal to 4% of Gross Proceeds to the country’s budget. In 2021, the new Kumtor Management allocated USD 32.9 million from the revenue received in excess of the target budget taxes to pay this additional tax.

In 2021, during the period of temporary external management of Kumtor Gold Company, 78% of profits were reached or USD 251.3 million out of USD 323.6 million. After deducting an additional annual tax on the development of the mineral base and a provision for intra-group loan transactions, the net profit for the period of temporary external management from May 17, 2021 to December 31, 2021 was USD 185.4 million.

Under the management of Tengiz Bolturuk, measures were taken to reduce the cost of mining operations at Kumtor Gold Company. At the end of 2021, the aggregate cash costs, including taxes, were reduced by USD 222 per ounce of gold compared to the plan, from USD 1,374 to USD 1,152, which represents savings of 16.1%.

During the period of temporary external management, the Kumtor Mine has sharply reduced ancillary ice mining activities to ensure environment protection. In 2021, ice development have decreased by 2.5 times or 60% compared to 2020. In 2021, only 1.73 million tonnes of ice were mined compared to 4.38 million tonnes mined by Centerra in 2020, which is 253% less than in 2020. In December 2021, Kumtor Gold Company could completely abandon the practice of ice mining.

Over the past period of temporary external management, Tengiz Bolturuk was able to make changes in technologies with minimal investment expenditure in order to ensure rational use of available resources.  In the summer of 2021, a plan was developed to increase the process water supply to the Gold Mill up to 80-85%, which would significantly reduce the consumption of glacial meltwater from Petrov Lake. A 60% supply of water from the Pit in summertime has been achieved for the Mill process needs. Besides that, additional water supply to the Mill will now be provided by pumping water seeping from the waste dumps in the Lysyi Creek Valley based on results of water tests carried out to determine its suitability for use in the technological process. This practice will allow to increase the water supply to the Mill in winter time up to 500-550 m3/hour. As a result, Kumtor intends to use recycled water, water from the pit and other sources all year round and completely stop supplying water for process needs from the Petrov Lake.

During the period of temporary external management in 2021, the Mill processed 3,813.5 thousand tonnes of ore with an average grade of 3.31 g/t. The gold recovery amounted to 79.9% and 324,728 troy ounces of gold were poured. These achievements have been accomplished through a professional approach and choosing the right development strategy to increase the Mill throughput. Old-fashioned and inefficient equipment as well as obsolete chemicals were replaced by new ones, contracts with suppliers who supplied substandard reagents and services were terminated, the qualifications of employees were improved, and new technologies were introduced. The technological circuit for flotation concentrate leaching was changed, which allowed to increase the amount of recoverable gold and reduce the consumption of lime by 200 tons and the consumption of sodium cyanide by 40 tons. Sodium cyanide cost reductions resulted in reagent savings of USD 1.3 million at the end of 2021.

In the near future, the new management of Kumtor Gold Company plans to implement sustainable development projects that will improve the technology for processing preg-robbing ores and increase gold recovery.

During the period of external management, work was initiated to modify the mine development strategy. A project is being developed to switch to an underground mining operation in order to preserve glaciers and reduce the environmental impact. Centerra Gold Inc was developing the Kumtor mine using open pit mining practices. As a result, it is necessary to mine between 41 and 60 tonnes of waste rock to extract 1 tonne of gold-bearing ore. Kumtor Gold Company is in the first place in the world among mining companies on this indicator. The usual global average stripping ratio ranges from 2 to 7 tonnes of waste per 1 tonne of ore. For example, this ratio is 1: 2 at Oksut Mine in Turkey and 1:1 at Mount Milligan Mine in Canada.

Preliminary data suggests that ore grade will be 4.5 g/t through underground mining, thus exceeding twice the ore grade when using open pit mining. Accordingly, the production cost per 1 ounce of gold is expected to be lower than that of open pit mining, despite traditionally higher operating costs for underground mining.

Underground mining will allow to abandon unsustainable mining practices, stop the destruction of Kumtor glaciers, reduce environmental damage, and mine gold-bearing ore selectively with a very low stripping and dilution ratio of 1 to 2 or 1 to 3 maximum, i.e. to use a more environmentally and economically advantageous method.

Kumtor Gold Company has established a new department to implement the underground gold mining project. Staffing of the department by highly skilled professionals is ongoing.

Efforts have been also commenced on tailings re-processing project to recover gold from the liquid and solid phases of the tailings. Since 1997, the Kumtor Gold Recovery Mill has processed more than 134 million tonnes of ore. The average tailings gold grade is 0.7 g/t. Accordingly, over the entire period of the Mill operation, which is more than 25 years, some 106 tonnes of gold have been disposed into the tailings pond. Even if the gold recovery from the tailings is 40-50%, this would secure 40 to 50 additional tonnes of gold for the country. Revenue from gold sales will be between USD 2.2 billion and USD 2.8 billion (at a gold price of USD 1,700 per ounce). The cost of gold recovery from tailings is expected to be USD 350 per ounce, and respectively the net profit from tailings processing could be approximately USD 1.7 billion to USD 2.3 billion. The period of tailings processing will be 10-12 years. To implement this project, a work plan has been developed that includes the drilling of exploration holes, which is already in progress. Exploration activities will allow sampling of mature tailings and, based on the results of sample assays, determining the quantity and distribution of gold in the tailings. Construction and commissioning of a special plant for recovery of gold from mature tailings is planned for the next few years.