Centerra Gold Inc. (Centerra) and Kumtor Gold Company (KGC) have summed up their operating results in the third quarter of 2015. In the nine months of 2015, the Kumtor mine produced 390,084 ounces* or 12,132.98 kg of gold. The Company has contributed more than 6.3 billion soms in taxes and mandatory payments.
Gold Production and Sales
Gold production for the third quarter of 2015 was 103,701 ounces of gold compared to 95,265 ounces of gold in the comparative period of 2014. During the third quarter of 2015, Kumtor’s average mill head grade was 2.83 g/t with a recovery of 75.7%, compared to 3.05 g/t and a recovery of 72.7% for the same period of 2014. Approximately 1.5 million tonnes were processed in the third quarter of 2015, 5% higher than the comparative period of 2014 due to higher mill availability and higher hourly throughput.
Gold sales in the third quarter of 2015 were 100,994 ounces, or 3.14 tonnes. Total revenues from gold sales in the third quarter of 2015 were $113.5 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 sustaining costs per ounce sold***, which excludes revenue-based tax, for the third quarter of 2015 decreased 10% to $1,000 compared to $1,110 in the comparative period of 2014. The decrease results primarily from more ounces sold and lower operating costs, partially offset by higher capitalized stripping costs in the third quarter of 2015 as ore in cut-back 17 was exposed late in the quarter.
All-in costs per ounce sold***, which excludes revenue-based tax, for the third quarter of 2015 was $1,014 compared to $1,274 in the comparative period of 2014, representing a decrease of 20%. The decrease is mainly due to lower mining, milling and site support costs and a further reduction in growth capital*** spending for the infrastructure relocation at Kumtor as the Company incurred significant expenditures during the comparative period for the new camp facilities which were substantially completed by the end of June 2015.
Capital expenditures in the third quarter of 2015 totaled $80.7 million which includes $14.4 million of sustaining capital*** mainly on equipment rebuilds and overhauls, $1.4 million invested in growth capital*** and $64.9 million for capitalized stripping ($49.1 million cash). Capital expenditures in the comparative quarter of 2014 totaled $82.9 million, consisting of $14.2 million for sustaining capital***, $15.2 million for growth capital*** and $53.5 million of capitalized stripping ($38.5 million cash).
Operating Results of the Kumtor Project
|Unaudited ($ millions, except as noted)||Three Months Ended September 30||Nine Months Ended June 30|
|2015||2014||% Change||2015||2014||% Change|
|Revenue from gold sales to Kyrgyzaltyn – $ millions||113,5||117,0||(3%)||460,1||348,4||32%|
|Cost of sales-cash||33,5||43,8||(24%)||104,2||111,4||(6%)|
|Cost of sales-non-cash||39,3||41,1||(4%)||151,6||161,5||(6%)|
|Cost of sales – $/oz sold***||721||916||(21%)||658||1 002||(34%)|
|Tonnes mined – 000s||41 944||48 649||(14%)||124 109||148 938||(17%)|
|Tonnes ore mined – 000s||1 136||1 422||(20%)||2 642||2 025||30%|
|Tonnes milled – 000s||1 496||1 426||5%||4 225||4 338||(3%)|
|Average mill head grade – g/t||2,83||3,05||(7%)||3,63||2,68||35%|
|Recovery – %||75,7%||72,7%||4%||78,4%||74%||6%|
|Gold produced – ounces||103 701||95 265||9%||390 084||276 058||41%|
|Gold produced – kg||3 225,5||2 963,1||9%||12 133||8 586,4||41%|
|Gold sold – ounces||100 994||92 645||9%||388 968||272 303||43%|
|Gold sold – kg||3 141,3||2 881,6||9%||12 098,3||8 469,6||43%|
|Average realized gold price – $/oz***||1 124||1 263||(11%)||1 183||1 279||(8%)|
|Capital expenditures (sustaining)***||14,4||14,2||1%||38,6||35,3||9%|
|Capital expenditures (growth)***||1,4||15,2||(91%)||11,8||28,6||(59%)|
|Capital expenditures (stripping)***||64,9||53,5||21%||198,4||228,5||(13%)|
|Adjusted operating costs – $/oz sold***||369||539||(32%)||304||476||(36%)|
|All-in sustaining costs – $/oz sold***||1 000||1 110||(10%)||791||1 205||(34%)|
|All-in costs – $/oz sold***||1014||1 274||(20%)||821||1 310||(37%)|
|All-in costs (including taxes) – $/oz sold***||1 171||1 451||(19%)||987||1 489||(34%)|
* – One Troy ounce equals to 31.10348 grammes.
** – Unless specified otherwise, all dollar figures in this news release are in US dollars.
*** –”Adjusted operating costs”, “all-in sustaining costs”, “all-in cash costs” pre-tax and including tax as well as “sustaining capital”, “growth capital”, “average realized price” and “cost of sales” per ounce sold are non-GAAP measures. See discussion under “Non-GAAP Measures” in Centerra’s news release of October 27, 2015.
Payments to the Kyrgyz National Budget and Mandatory Contributions
During the Nine Months of 2015, contributions to the national budget in taxes, deductions to the Social Fund and other mandatory payments have totaled 6.3 billion soms.
Kumtor’s Contributions in Taxes and Mandatory Payments for the Nine Months of 2015
|Q1 2015||Q2 2015||Q3 2015|
|Gross Proceeds Tax||35 893,58||24 145,87||14 119,17|
|Issyk-Kul Development Fund||2 761,04||1 857,37||1 086,09|
|Employee Income tax||1 320,84||1 189,87||945,90|
|Social Insurance Fund||5 022,92||4 561,54||4 051,58|
|Tax on nonresident companies||165,10||134,74||186,79|
|Other taxes and mandatory payments||65,89||90,03||163,33|
|Total||45 710,74||32 194,88||20 718,31|
|US$ official exchange rate to the Kyrgyz Soms||63,8736||62,0788||68,8359|
|Equivalent of payments effected in thousand Kyrgyz Soms||2 919 709,30||1 998 619,26||1 426 163,20
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 490,000 and 520,000 ounces in 2015.
At Kumtor, 2015 total capital expenditures, excluding capitalized stripping, are forecast to be $75 million ($77 million in the prior guidance). Forecast for sustaining capital*** has increased to $58 million from $54 million in the prior guidance due to higher costs on component replacement of the heavy duty mine equipment ($2 million) and additional costs for a conversion of one Liebherr shovel to a backhoe excavator ($2 million).
Growth capital*** investment at Kumtor for 2015 has been reduced to $17 million ($23 million in the prior guidance) reflecting a delayed start to constructing the new Heavy Duty Maintenance Shop which is now scheduled for completion in second quarter of 2016.
The projected cash component of capitalized stripping costs related to the development of the open pit is expected to decrease to $158 million from $162 million (in the prior guidance) reflecting lower labour and diesel costs. Total capitalized stripping, including DD&A, is forecasted at $207 million ($212 million in the prior guidance) in 2015.
On October 27, 2015, the Centerra Gold Inc. announced that its Board of Directors declared a quarterly dividend of C$ 0.04 per common share, payable on December 3, 2015 to shareholders of record on November 26, 2015.
Ian Atkinson, President and CEO of Centerra Gold stated, “Kumtor again performed well during the quarter producing 103,701 ounces of gold and mining accessed the upper parts of the SB Zone as expected. We are on track to meet our production guidance and have lowered our all-in sustaining3 and all-in cost3 guidance reflecting lower diesel fuel prices, favourable exchange rates and overall better operating performance at Kumtor. Financially, the Company is in good shape with cash, cash equivalents and short-term investments of $537 million or $461 million, net of debt, at September 30, 2015.”
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 September 30, 2015, has produced approximately 10.255 million ounces or 319 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, North America 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 November 17, 2015, Kyrgyzstan’s interests were estimated at $432 million.