Operating Results of the 3rd Quarter of 2014

Centerra Gold Inc. (Centerra) and Kumtor Gold Company (KGC) have summed up their operating results in the first quarter of 2015. In the first three months of 2015, KGC produced 164,272 ounces* or 5,109 kg of gold and contributed more than 2,92 billion soms in taxes and mandatory payments.

Gold Production and Sales

Gold production for the first quarter of 2015 was 164,272 ounces compared to 102,933 ounces in the comparative quarter of 2014. The increase in ounces poured during 2015 was due to processing higher grade mill feed and achieving higher recoveries than in the comparative quarter. During the quarter, Kumtor’s mill processed a blend of the higher grade ore mined during the quarter and the stockpiled ore mined from cutback 16 during the fourth quarter of 2014. Approximately 1.2 million tonnes were processed in the quarter, which was 21% lower than the comparative quarter of 2014 due the scheduled mill shutdown to replace the ring gear and the SAG and Ball Mill liners in the first quarter of 2015. Kumtor’s average mill head grade was 5.13 g/t with a recovery of 81.0% in the quarter, compared to 2.65 g/t with a recovery of 76.2% for the same period of 2014.

Gold sales in the first quarter of 2015 were 169,185 ounces, or 5.26 tonnes. Total revenues from gold sales in the first quarter of 2015 were $205.0 million**.

The Dore bars produced by the Kumtor mine are purchased by Kyrgyzaltyn JSC for processing at the Kara-Balta refinery pursuant to a Gold and Silver Sales Agreement signed by KGC, 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 costs and capital expenditures

All-in costs per ounce sold***, which excludes revenue-based tax, for the first quarter of 2015 was $673 compared to $1,077 in the comparative period of 2014, representing a decrease of 38%. The decrease is mainly due to the reduction in all-in sustaining cost***, partially offset by an increase in growth capital*** spending for the infrastructure relocation at Kumtor.

Capital expenditures in the first quarter of 2015 totaled $86.4 million which includes $12.4 million of sustaining capital*** mainly on equipment rebuilds and overhauls, $6.5 million invested in growth capital*** mainly on infrastructure relocation and $67.5 million for capitalized stripping ($51.7 million cash). Capital expenditures the comparative quarter of 2014 totaled $98.3 million, consisting of $8.3 million for sustaining capital***, $1.9 million for growth capital*** and $88.1 million of capitalized stripping ($62.4 million cash).

All-in sustaining costs per ounce sold***, which excludes revenue-based tax, for the first quarter of 2015 decreased 40% to $634 compared to $1,058 in the comparative period of 2014. The decrease results primarily from higher ounces sold, lower operating costs, and lower capitalized stripping costs, partially offset by higher spending on sustaining capital*** for equipment rebuilds and overhauls.

Operating Results for the Kumtor Project

Three month ended March 31
2015 2014 Change
Revenue from gold sales to Kyrgyzaltyn – $ millions** 205.0 131.7 56%
Cost of sales*** – $millions 106.7 95.1 12%
Cost of sales*** – $/oz sold 631 933 32%
Tonnes mined – 000s 41,731 50,762 (18%)
Tonnes ore mined – 000s 1,339 143 836%
Tonnes milled – 000s 1,175 1,482 (21%)
Average mill head grade – g/t 5.13 2.65 94%
Recovery – % 81.0 76.2 6%
Gold produced – ounces* 164,272 102,933 60%
Gold produced – kg 5,109 3,202 60%
Gold sold – ounces* 169,185 101,915 66%
Gold sold – kg 5,262 3,169 66%
Average realized gold price*** – $/oz sold 1,212 1,292 (6%)
Capital expenditures (sustaining)*** – $millions 12.4 8.3 49%
Capital expenditures (growth)***  – $millions 6.5 1.9 242%
Capital expenditures (stripping)***- $millions 67.5 88.1 (23%)
Adjusted operating costs*** – $/oz sold 254 361 (30%)
All-in sustaining costs*** – $/oz sold 634 1,058 (40%)
All-in costs***- $/oz sold 673 1,077 (38%)
All-in costs including taxes*** – $/oz sold 842 1,257 (33%)

One Troy ounce equals to 31,10348 grammes.

** Unless specified otherwise, all dollar figures in this news release are in US dollars.

*** –”Adjusted operating costs”, “all-in sustaining costs”, “all-in cash costs” pre-tax and including tax as well as “average realized price” and “cost of sales” per ounce sold are non-GAAP measures. See discussion under “Non-GAAP Measures” in Centerra’s news release of February 19, 2015.

Payments to the Kyrgyz National Budget and Mandatory Contributions

During the first three months of 2015, contributions to the national budget in taxes, deductions to the Social Fund and other mandatory payments have totaled 2,92 billion soms.

Kumtor’s Contributions in Taxes and Mandatory Payments for the First Three Months of 2015

As of March 31, 2015 USD thousands
Gross Proceeds Tax 35,893.58
Issyk-Kul Development Fund 2,761.04
Pollution Tax 310.00
Employee Income Tax 1,320.84
Contributions to the KR Social Fund 5,022.92
Customs Administration Fee 171.36
Tax on nonresident companies 165.10
Other taxes and mandatory payments 24.48
Total 45,669.32
US$ official exchange rate to the Kyrgyz Soms as of March 31, 2015 54,52
Equivalent of payments effected in thousands Kyrgyz Soms 2,917,063.98

 

Note: Under the Agreement on New Terms dated as of April 24, 2009, the revenue-based tax and contributions to the Issyk-Kul Region Development Fund are estimated based on actual cash revenues from sales during the period under review.

Outlook for 2015

The Kumtor mine is expected to produce between 470,000 and 520,000 ounces in 2015. Kumtor’s 2015 production guidance range is lower than that outlined in the life of mine plan set out in the Kumtor technical report filed on December 20, 2012 (the “2012 life of mine plan”) primarily as a result of negative block model reconciliation, as previously disclosed, timing of ore release due to deferral of capital for mine haulage equipment and lower than expected metallurgical recovery. During 2015, Kumtor will continue the development and waste mining from cut-back 17 which is expected to provide an increase in the grade of ore at the end of the third quarter of 2015 compared to the lower grade stockpiled ore currently being processed and uncover the high-grade ore in the third quarter of 2016.

At Kumtor, 2015 total capital expenditures, excluding capitalized stripping, are forecast to be $75 million. Spending on sustaining capital*** of $49 million relates primarily to the major overhaul maintenance of the heavy duty mine equipment ($36 million), construction to raise the tailings dam ($7 million) and other items ($6 million). Growth capital*** investment at Kumtor for 2015 is forecast at $26 million and includes the relocation of certain infrastructure at Kumtor related to the KS-13 life-of-mine expansion plan amounting to $25 million and dewatering projects ($1 million). The cash component of capitalized stripping costs related to the development of the open pit is expected to be $185 million of the $234 million total capitalized stripping in 2015.

Quarterly Dividend

On April 30, 2015, the Centerra Gold Inc. announced that its Board of Directors declared a quarterly dividend of C$0.04 per common share, payable on June 4, 2015 to shareholders of record on May 21, 2015.

Commentary

Ian Atkinson, President and CEO of Centerra Gold stated, “I am pleased to report that we are on track to achieve our production and cost guidance for the year. At Kumtor, the operation performed well during the quarter exceeding our expectations for gold production as it produced 164,272 ounces. In the Kyrgyz Republic, the Company continues to work toward a resolution of all outstanding matters affecting the Kumtor Project. Any proposed resolution would need to be fair to all shareholders of Centerra and to receive all necessary legal and regulatory approvals under the Kyrgyz Republic and Canadian laws.”

* * *

The Kumtor open pit mine, located in the Kyrgyz Republic, is the largest gold mine in Central Asia operated by a Western-based gold producer. It has been operating since May 1997 and, as of September 30, 2014, has produced approximately 10.3 million ounces or 311 tonnes of gold.

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

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

The Kyrgyz Republic, via Kyrgyzaltyn JSC, is Centerra’s largest shareholder owning 77,401,766 shares (about 33%). As of November 17, 2014, Kyrgyzstan’s interests were estimated at more than $336 million.

Currently, Centerra has two producing gold mines in the Kyrgyz Republic and Mongolia. The Company also owns the Gatsuurt development project in Mongolia, the Öksüt Gold Project, Turkey, and has interests in the promising exploration properties in Mongolia, Turkey and Western Canada.

Additional information on Centerra and the full text of the news release on the results of the third quarter of 2014 are available on SEDAR at www.sedar.com and the corporate websites at www.centerragold.com and www.kumtor.kg.