Operating Results of the 2nd Quarter of 2015

Operating Results of the 2nd Quarter of 2015

published: 11 August 2015

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 second quarter of 2015. In the first six months of 2015, the Kumtor mine produced 286,383 ounces* or 8,907.51 kg of gold. The Company has contributed more than 4.8 billion soms in taxes and mandatory payments.

Gold Production and Sales

Gold production for the second quarter of 2015 was 122,111 ounces compared to 77,860 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 first quarter and the stockpiled ore mined from cut-back 16 during the fourth quarter of 2014. Approximately 1.6 million tonnes were processed in the second quarter of 2015, which was 9% more than the comparative quarter of 2014 due to higher mill availability and higher hourly throughput. Kumtor’s average mill head grade was 3.26 g/t with a recovery of 77.5% in the quarter, compared to 2.35 g/t with a recovery of 73.2% for the same period of 2014.

Gold sales in the second quarter of 2015 were 118,789 ounces, or 3.69 tonnes. Total revenues from gold sales in the second quarter of 2015 were $141.6 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 second quarter of 2015 was $868 compared to $1,658 in the comparative period of 2014, representing a decrease of 48%. The decrease is mainly due to more ounces sold, lower operating and capitalized stripping costs, and a reduction in growth capital*** spending for the infrastructure relocation at Kumtor as the Company completed the new camp facilities in June 2015.

Capital expenditures in the second quarter of 2015 totaled $81.7 million which includes $11.8 million of sustaining capital*** mainly on equipment rebuilds and overhauls, $3.9 million invested in growth capital*** and $66.0 million for capitalized stripping ($49.5 million cash). Capital expenditures the comparative quarter of 2014 totaled $111.3 million, consisting of $13.0 million for sustaining capital*** , $11.4 million for growth capital*** and $86.9 million of capitalized stripping ($61.5 million cash).

All-in sustaining costs per ounce sold***, which excludes revenue-based tax, for the second quarter of 2015 decreased 45% to $835 compared to $1,511 in the comparative period of 2014. The decrease results primarily from higher ounces sold, lower operating costs, and lower capitalized stripping costs due to lower waste tonnes mined.

Operating Results of the Kumtor Project


Unaudited ($ millions, except as noted) Three Months Ended June 30 Six Months Ended June 30
2015 2014 % Change 2015 2014 % Change
Revenue  from gold sales to Kyrgyzaltyn – $ millions 141.6 99.8 42% 346.6 231.4 50%
Cost of sales-cash 32.8 36.0 (9%) 70.7 67.6 5%
Cost of sales-non-cash 43.5 56.9 (24%) 112.3 120.5 (7%)
Cost of sales – $/oz sold*** 642 1,195 (46%) 635 1,047 (39%)
Tonnes mined – 000s 40,434 49,527 (18%) 82,165 100,289 (18%)
Tonnes ore mined – 000s 168 460 (63%) 1,506 602 150%
Tonnes milled – 000s 1,554 1,430 9% 2,729 2,912 (6%)
Average mill head grade – g/t 3.26 2.35 39% 4.06 2.50 62%
Recovery – % 77.5% 73.2% 6% 79.4% 74.8% 6%
Gold produced – ounces 122,111 77,860 57% 286,383 180,793 58%
Gold produced – kg 3,798.08 2,421.72 57% 8,907.51 5,623.29 58%
Gold sold – ounces 118 789 77 743 53% 287 974 179 658 60%
Gold sold – kg 3 694,75 2 418,08 53% 8 957,00 5 587,99 60%
Average realized gold price – $/oz*** 1,192 1,284 (7%) 1,204 1,288 (7%)
Capital expenditures (sustaining)*** 11.8 12.9 (9%) 24.3 21.2 15%
Capital expenditures (growth)*** 3.9 11.4 (66%) 10.3 13.4 (23%)
Capital expenditures (stripping)*** 66.0 86.9 (24%) 133.5 175.0 (24%)
Adjusted operating costs – $/oz sold*** 317 551 (43%) 280 443 (37%)
All-in sustaining costs – $/oz sold*** 835 1,511 (45%) 717 1,254 (43%)
All-in costs – $/oz sold*** 868 1,658 (48%) 753 1,328 (43%)
All-in costs (including taxes) – $/oz sold*** 1,035 1,838 (44%) 922 1,508 (39%)

*– 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 July 28, 2015.

Payments to the Kyrgyz National Budget and Mandatory Contributions

During the second quarter of 2015, contributions to the national budget in taxes, deductions to the Social Fund and other mandatory payments have totaled 2,0 billion soms.

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


As of June 30, 2015 USD thousands
Revenue-based tax $60,039.45
Issyk-Kul Development Fund $4,618.42
Pollution tax $310.00
Employee Income tax $2,510.71
Social Insurance Fund $9,584.46
Customs $386.82
Tax on nonresident companies $299.84
Other taxes and mandatory payments $155.92
Total $77,905.61
US$ official exchange rate to the Kyrgyz Soms as of June 30, 2015 62,0788
Equivalent of payments effected in thousands Kyrgyz Soms 4,836,286.94


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.

At Kumtor, 2015 total capital expenditures, excluding capitalized stripping, are forecast to be $77 million ($75 million in the prior guidance). Forecast spending on sustaining capital*** has increased to $54 million from $49 million in the prior guidance due to an unbudgeted purchase of a replacement production drill ($2 million), installation of a fiber optic cable to the mine site ($1 million), higher costs on the major overhaul maintenance of the heavy duty mine equipment ($1 million), and other items ($1 million).

Growth capital*** investment at Kumtor for 2015 has been reduced to $23 million ($26 million in the prior guidance) reflecting lower relocation costs of certain infrastructure at Kumtor contemplated in the previous life-of-mine.

The projected cash component of capitalized stripping costs related to the development of the open pit is expected to decrease to $162 million from $185 million (in the prior guidance) reflecting lower labour and diesel costs. Total capitalized stripping, including depreciation, depletion and amortization, is forecast at $212 million ($234 million in the prior guidance) in 2015.

Quarterly Dividend

On July 28, 2015, the Centerra Gold Inc. announced that its Board of Directors declared a quarterly dividend of C$0.04 per common share, payable on August 27, 2015 to shareholders of record on August 13, 2015.


Ian Atkinson, President and CEO of Centerra Gold stated, “Kumtor performed well during the quarter producing 122,111 ounces of gold, keeping us on track to achieve our production and cost guidance for the year. Financially, Centerra is in good shape with cash, cash equivalents and short-term investments of approximately $582 million or $505 million, net of debt, at June 30, 2015. During the second quarter cash provided by operations was $114.3 million.”

“On July 3, 2015, Kumtor received extensions to its permits for emissions into the atmosphere and waste disposal into the tailings management facility to the end of the year. The Company continues to work toward a resolution of all outstanding matters affecting the Kumtor Project. As we have stated previously any proposed resolution would need to be fair to all shareholders of Centerra.”


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 June 30, 2015, has produced approximately 10.152 million ounces or 315.8 tonnes of gold.

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

Centerra Gold Inc. is a North-American based gold mining company focused on operating, developing, exploring and acquiring gold properties in Asia, Canada and other markets worldwide. Centerra 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 based in Toronto, Ontario, Canada.

The Kyrgyz Republic, via Kyrgyzaltyn JSC, is Centerra’s largest shareholder owning 77,401,766 shares (about 33%). As of August 11, 2015, Kyrgyzstan’s interests were estimated at $ 383 million.

Additional information on Centerra and the full text of the news release on the results of the second quarter of 2015 are available on SEDAR at www.sedar.com and the corporate websites at www.centerragold.com and www.kumtor.kg.