Basic Operating Results of Kumtor Operating Company’s Activities in 2011

published: 15 March 2012

Basic Operating Results of Kumtor Operating Company's Activities in 2011At the Kumtor mine, gold production was 583,156 ounces*, or 18.1 tonnes for the full year 2011. Gold sales at Kumtor were 599,494 ounces, or 18.6 tonnes.

In 2011, mining rates were 29% higher than the previous year while ore production grew by 4%. The mill head grade in the past twelve months averaged 3.79 g/t with a recovery of 80.8%.

Capital expenditures were $180.7 million**, while exploration expenditures totaled $12.7 million for the full year 2011. Taxes and other mandatory payments have exceeded $173.7 million, or more than 8 billion soms.

For other operating and financial results see Tables #2 and #3.

The final product of the Kumtor mine, the Dore bars***, is purchased 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.


Reserves and Resources

In 2011, exploration continued in the Central Pit area and within the concession area.

Due to the aggressive exploration program, including one in the Central Pit area, the reserves are approximately 6.3 million contained ounces, despite the processing of 709,000 contained ounces in 2011. Exploration in the southwest portion of the SB Zone has shown an increase of reserves amenable to open pit mining.

To view the graphics, maps/drill sections and complete drill results discussed in this news release, please visit the following link (SEDAR) or visit the Company’s web site at: www.centerragold.com

Table 1

Reserves and resources at Kumtor****

Reserves and resources at Kumtor as of December 31, 2011

Thousands of tonnes

Grade(g/t)

Contained gold

Mining Method

Thousands of oz

Tonnes

Gold reserves:
– proven 3,023 1.6 153 4.76 OP*****
– probable 56,671 3.4 6,125 190.51 OP
Total Reserves 59,694 3.3 6,278 195.27 OP
Resources:
– measured 43,262 2.3 3,141 97.70 OP
– indicated 22,687 2.3 1,658 51.57 OP
Total Measured and Indicated Resources 65,949 2.3 4,799 149.27 OP
Inferred Resources
– Central Pit**** 9,195 2.4 694 21.59 OP
– Underground Stockwork Zone 1,633 12.0 629 19.56 UG5
– Underground SB Zone 4,040 13.6 1,760 54.74 UG
Total Inferred Resources 14,868 6.5 3,083 95.89


**** – The reserves and resources include those of the open-pit area as well as of the Southwest, Northeast and Sarytor deposits.
***** – “OP” means open pit and “UG” means underground.

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Table 2

Basic Operating and Financial Results

Three Months Ended December 31

Year Ended December 31

2011

2010

Change

2011

2010

Change

Gold produced – ounces 138,696 228,433 (39%) 583,156 567,802 3%
Gold produced – kg 4,313.9 7,105.1 (39%) 18,138.2 17,660.6 3%
Gold sold – ounces 141,897 209,929 (32%) 599,494 568,390 5%
Gold sold – kg 4,413.5 6,529.5 (32%) 18,646.4 17,678.9 5%
Average realized gold price – $/oz 1,689 1,376 23% 1,570 1,239 27%
Revenue from gold sales to Kyrgyzaltyn – $ millions 239.7 288.9 (17%) 941.1 704.3 34%
Total production cost
(with depletion and amortization ) – $millions
112.1 79.7 41% 392.1 291.5 35%
Revenue-based tax + Issyk-Kul Development Fund – $millions 36.7 13.8 166% 142.1 102.5 39%
Capital expenditures – $millions 28.5 53.3 (47%) 180.7 186.5 (3%)
Exploration expenditures – $millions 2.7 3.7 (27%) 12.7 11.5 10%
Tonnes mined – 000s 37,124 29,561 26% 150,605 116,466 29%
Tonnes ore mined – 000s 1,095 2,812 (61%) 6,020 5,765 4%
Tonnes milled – 000s 1,450 1,303 11% 5,815 5,594 4%
Average mill head grade – g/t 3.80 7.06 (46%) 3.79 4.02 (6%)
Recovery – % 77.6 84.1 (8%) 80.8 79.5 2%

 


Contributions to the Kyrgyz national budget and other mandatory payments

During the twelve months of 2011, payments to the Kyrgyz national budget, including taxes, contributions to the Social Fund and other mandatory payments by the Company, exceeded $173.8 million, which, according to the KR National Bank’s exchange rate as of December 31, 2011, is equivalent to approximately 8.08 billion soms.

Table 3

Kumtor Gold Project’s Contributions in Taxes and Mandatory Payments for the full year 2011

As of December 31, 2011

USD thousands

Revenue-based tax 131,271.0
Issyk-Kul Development Fund 10,790.1
Pollution tax 310.0
Income tax 5,022.2
Social Insurance Fund 24,268.8
Customs 1,080.7
Tax on nonresident companies 950.3
Other taxes and mandatory payments 69.5
Total 173,762.7
US$ official exchange rate to the Kyrgyz Soms
as of December 31, 2010
46.4847
Equivalent of payments effected in million Kyrgyz Soms 8,077.308

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


Annual Dividend

As previously disclosed, in May 2011 Centerra Gold Inc. (Centerra) paid dividends to all shareholders registered with the TSX.

Kyrgyzaltyn JSC, Centerra’s largest shareholder (about 33%), received a net revenue of $30,167,000 in May 2011.


Other payments

At the KR Government’s request, Kumtor contributed $10 million for the construction and renovation of schools in Kyrgyzstan in September, 2011.


Payments effected within the Kyrgyz Republic

In 2011, payments within the Kyrgyz Republic (including taxes, refining charges, payments to local suppliers of goods and services, infrastructure payments, charities, etc.) exceeded $383 million.

During the period between 1994 and 2011, Kumtor Gold Project’s payments within the Kyrgyz Republic have totaled $1.852 billion.

For general payments within the Kyrgyz Republic see Table #4.


The Company’s impact on the macroeconomic characteristic of the Kyrgyz Republic

According to the KR National Statistics Commitee’s preliminary reports,

● Kumtor’s share in GDP in 2011 was – 11.7%;
● Kumtor’s share in the total industrial output is – 26.1%;
● Gold’s share in the national exports in 2011 was –51.1%.

Table 4

Kumtor Gold Project’s Payments Made within the Kyrgyz Republic

USD millions

2011

1994 – 2011

Taxes, customs & other mandatory payments 138.394 524.259
Social Insurance Fund 24.269 72.476
Issyk-Kul Development Fund 10.790 23.036
Licenses & permits 0.280 2.019
Pollution tax and payments to the Environment Protection Agency 0.310 3.439
Payments to Kyrgyzaltyn 0.607 11.421
Refinery 2.947 34.197
Revenue from the sale of Centerra shares 86.000
Dividends 30.167 44.413
Purchases in the Kyrgyz Republic:
– supplies & services
79.953 482.836
– foods 4.949 41.193
Kyrgyz-infrastructure-related payments:
– electricity
12.429 108.399
roads outside the mine site 1.559 33.802
Tamga-Kumtor power-transmission line 41.612
KOC employees’ net wage 64.793 312.076
Sanatoria treatment 0.120 0.608
Education, scholarships & training 0.109 3.765
Sponsorships & charities 1.211 9.866
Government contributions 10.000 10.000
Region’s Sustainable Development Program 0.286 2.205
Payments to communities 4.400
Total 383.172 1,852.023


Outlook for 2012

The Kumtor mine is expected to produce 575,000 to 625,000 ounces (17.8 – 19.4 tonnes) of gold.

The 2012 production profile at Kumtor differs from last year. Kumtor’s 2012 gold production is forecast to have 12% of gold production being recovered in the first quarter, 20% in the second quarter, 25% in the third quarter and 43% in the fourth quarter.

Achieving the 2012 production is dependent on the timely delivery of new mining equipment and successfully maintaining the mining rates of the waste and ice in the southeast portion of the pit to gain access to the higher grade ore.

At Kumtor, 2012 total capital expenditures are forecast to be $373 million, including $328 million of growth capital investment and $45 million of sustaining capital.

The largest sustaining capital spending will be the major overhaul maintenance of the heavy duty mine equipment ($21 million), expenditures for dewatering and infrastructure ($8 million), tailings dam construction works ($4 million), effluent treatment plant relocation ($5 million), for equipment replacement and other items ($7 million).

Growth capital investment will largely include the development of the open pit ($128 million), purchase of new mining equipment including 25 CAT 789 haul trucks, 4 drills and 4 Hitachi 3600 shovels ($126 million), and other items ($11 million). Also, $63 million will be spent on capital purchases and underground development.

The underground development project at Kumtor is on track to achieve the connection of Decline #1 with Decline #2 in the third quarter of 2012. Decline #1 has approximately 125 metres of development advance remaining and Decline #2 has approximately 660 metres of development advance remaining to join the two declines. An additional 708 metres of development advance is required in order to access the SB Zone. First ore from the SB Zone is expected in the second quarter of 2013.

Exploration expenditures in 2012 are expected to be $15 million.


Commentary

Michael Fischer, President of Kumtor Operating Company, commented: “We achieved our gold production guidance for 2011 and showed good performance in occupational safety. In 2012, we have new tasks to accomplish. We must significantly expand and renew our mining fleet, achieve the connection of the declines and focus on preparations for handling higher-grade material in the fourth quarter, when we access the ore body in the southeast portion of the pit. That is why Kumtor’s 2012 planned mining sequence results in a production profile with the smallest portion of the gold production occurring at the beginning of the year and the largest portion occurring at the end of 2012. We hope we will succeed in achieving our gold production guidance in spite of the work stoppage in February 2012”.

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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 December 31, 2011, has produced approximately 8.4 million ounces or 260.7 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 March 1, 2012, Kyrgyzstan’s interests are estimated at more than $1,546,000,000.

Currently, Centerra has two producing gold mines located in the Kyrgyz Republic and Mongolia. Also, also has interests in promising exploration properties located in Mongolia, Turkey, China and Russian Federation.

The full text of the news release on the 2011 results is available on SEDAR at www.sedar.com and the Centerra’s website at www.centerragold.com . Additional information about Kumtor is available on the corporate website www.kumtor.kg

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*One Troy ounce equals to 31.10348 grams

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

***– The Dore bar, Kumtor’s final product, contains up to 85% of gold as well as silver, iron, zinc, copper and nickel.

For further information please contact Media Relations, KOC

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