Kumtor’s Basic Operating Results in 2013

Kumtor’s Basic Operating Results in 2013

published: 14 March 2014

Basic Operating and Financial Results


At the Kumtor mine gold production in 2013 was 600,402 ounces1 or 18,674.6 kg. Gold sales in 2013 were 601,887 ounces or 18,720.8 kg with a revenue totaling $810.9million2. The table below displays Kumtor’s basic operating and financial results:

Three Months Ended December 31

Year Ended December 31

2013

20126

Change

2013

20126

Change
Revenue from gold sales to Kyrgyzaltyn – $ millions2 448,9 317,8 41% 810,9 533,6 52%
Cost of sales3 – $millions 255,1 140.0 82% 437.0 306,9 54%
Cost of sales4 – $/oz 722 753 (4%) 786 974 (19%)
Tonnes mined – 000s 46 866 38 185 23% 176 693 147 610 20%
Tonnes ore mined – 000s 4 194 4 463 (6%) 7 289 4 955 47%
Tonnes milled – 000s 1 460 1 547 (6%) 5 596 4 756 18%
Average mill head grade – g/t 8,88 5,13 73% 4,26 2,79 53%
Recovery – % 84,1 77,7 8% 79,3 75,6 5%
Gold produced – ounces 348 130 189 438 84% 600 402 315 238 90%
Gold produced – kg 7 717,7 5 892,2 84% 18 674,6 9 805,0 90%
Gold sold – ounces 353 252 185 936 90% 601 887 314 987 91%
Gold sold – kg  10 987,4 5 783,3 90% 18 720,8 9 797,2 91%
Average realized gold price4 – $/oz 1 271 1 709 (26%) 1 347 1 694 (20%)
Adjusted operating costs4 – $/oz 217 322 (33%) 357 727 (51%)
All-in sustaining costs4 – $/oz 388 618 (37%) 775 1 483 (48%)
All-in costs4 – $/oz   407  783 (48%)  853  2 064  (59%)
All-in costs including taxes4 – $/oz   585  1 023 (43%)  1 042  2 301  (55%)
Capital expenditures (sustaining) – $millions  9,6  10,5  (9%)  49,7  40,8  22%
Capital expenditures (growth)5  – $millions  5,8  24  (76%)  39,2  167,6  (77%)

(1) One Troy ounce equals to 31,10348 grammes.
(2) Unless specified otherwise, all dollar figures in this news release are in US dollars.
(3) Cost of sales does not include regional office administrative expenses.
(4) In 2013, the Company adopted non-GAAP performance measures recommended by the World Gold Council. See discussion under “Non-GAAP Measures” in Centerra’s news release of February 19, 2014).

“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.
(5) Excludes capitalized stripping.
(6) The 2012 comparative period was restated as a result of the adoption of IFRIC 20.

Reserves and Resources

Updated estimates on reserves and resources at Kumtor as at December 31, 2013, were disclosed in Centerra’s news release from February 5, 2014. Kumtor’s proven and probable mineral reserves total 8.51 million ounces of contained gold as of December 31, 2013 after processing 766,000 contained ounces in 2013. Kumtor’s life-of-mine plan is based only on the open pit reserves, and no provision has been made for production from the underground resources.

2013 year-end reserves and resources are shown in the table below:

Reserves and resources at Kumtor as of December 31, 20131

Thousands of tonnes

Grade(g/t)

Contained gold

Thousands of oz

Tonnes
Gold reserves:
– proven3 4 841 1,9 296 9,20
– robable3 80 345 3,2 8 220 255,68
Total Reserves 85 186 3,1 8 516 264,88
Resources:
– measured3 21 975 2,3 1 631 50,73
– indicated3 12 113 2,3 898 27,93
– indicated Stockwork UG2,4 351 10,7 121 3,76
Total Measured and Indicated Resources 34 439 2,4 2 650 82,42
Inferred Resources
– ц- Central Pit, Southwest, Sarytor and Northern deposits3 9 339 2,4 712 22,14
– Underground Stockwork Zone4 2 002 11,0 705 21,93
– Underground SB Zone4 3 413 11,2 1 229 38,23
Total Inferred Resources 14 754 5,6 2 646 82,30

(1) The reserves and resources include those of the open-pit area as well as of the Southwest, Sarytor and Northeast deposits and have been estimated based on a gold price of US$1,300 per ounce.
(2) “OP” means open pit and “UG” means underground.
(3) The open pit reserves and resources are estimated on a cut-off grade of 0.85 g/t for the Central Pit and 1.0 g/t for the Southwest, Sarytor and Northeast deposits.
(4) Underground resources occur below the Central Pit and are estimated based on a cut-off grade of 6.0 g/t.

The reserves and resources estimated by Centerra are determined in accordance with National Instrument 43-101 which is the same standard used by many international mining companies.Such reserve and resource estimates are based on mining operations continuing until the end of the current life of mine plan in 2026 and do not consider potential mining activities after that time. These estimates also formed the basis of Centerra’s discussions with the Government of the Kyrgyz Republic when they entered into the non-binding Heads of Agreement on the Kumtor Restructuring.

Payments to the Kyrgyz National Budget and Mandatory Contributions

During the twelve months of 2013, contributions to the national budget in taxes, deductions to the Social Fund and other mandatory payments exceeded $108 million, which according to the KR National Bank’s exchange rate as at December 31, 2013, amounts to approximately 5.350 billion soms.

As of December 31, 2013

USD thousands
Revenue-based tax 73 595,61
Issyk-Kul Development Fund 7 838,01
Pollution tax 310,00
Employee Income tax 4 363,09
Social Insurance Fund 20 608,90
Customs 1 122,21
Tax on nonresident companies 678,88
Other taxes and mandatory payments 77,49
Total
 108 594,19
US$ official exchange rate to the Kyrgyz Soms as of December 31, 2013
 49,2470
Equivalent of payments effected in million Kyrgyz Soms 5 347 938,07

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.

Payments within the Kyrgyz Republic

Contributions made within the Kyrgyz Republic in 2013 (including taxes, refining, domestic suppliers, infrastructure, charities, etc.) have exceeded $270 million.

In all, contributions made within the Kyrgyz Republic between 1994 and 2013 have exceeded $2.424 billion.

USD millions

2013

1994 – 2013
Taxes, customs & other mandatory payments 79,875 707,328
Social Insurance Fund 20,609 112,971
Issyk-Kul Development Fund 7,838 35,512
Licenses & permits 0,300 2,579
Pollution tax and payments to the Environment Protection Agency 0,310 4,059
Payments to Kyrgyzaltyn 0,254 11,675
Refinery 4,372 40,453
Revenue from the sale of Centerra shares – 86,000
Dividends 11,902 65,438
Purchases in the Kyrgyz Republic:
– supplies & services		 50,801 587,815
– foods 5,307 51,778
Kyrgyz-infrastructure-related payments:
– electricity		 11,253 130,593
– roads outside the mine site 2,186 37,519
– Tamga-Kumtor power-transmission line – 41,612
KOC employees’ net wage 69,358 448,010
Sanatoria treatment – 0,744
Education, scholarships & training 0,072 3,911
Sponsorships & sustainable development projects 5,935 20,927
Government contributions – 31,000
Payments to communities – 4,400
Total
 270,372 2 424,32

Assistance to the KR Government in Implementation of Social Projects

To optimize sponsorships from Kumtor Gold Company, the Government of the KR in November 2013 decided to choose Ayil Bank as the agent of the easy microcrediting project for rural residents through the special credit product Kumtor-Chakan. KGC-sponsored funds transferred from Ala-Too Finance to Ayil Bank are approximately 808 million soms. A further approximately 70 million soms was transferred as an operating credit portfolio to a group of regional microcrediting agencies.

Kumtor’s Impact on the Macroeconomic Performance of the Kyrgyz Republic

According to preliminary reports of the KR National Statistics Committee,
• Kumtor’s share in KR GDP in 2013 was 7,7%;
• Kumtor’s share in the aggregate industrial output was 24,0%;
• Gold’s share in the national exports in 2013 was 36,5%.

2014 Outlook

The Kumtor mine estimates it will produce between 550,000 and 600,000 ounces or 17.1 to 18.7 tonnes of gold in 2014 and similar to 2013, over 50% of this gold production is expected during the fourth quarter when mining will reach the high-grade section of the SB Zone.

The projected capital expenditures for 2014, excluding capitalized stripping, are estimated to be $85 million of which $42 million will be spending on sustaining capital, including the major overhaul maintenance of the mine equipment, purchase of ball mill girth gear, tailings dam construction raise and other items. Growth capital investment at Kumtor is forecast at $43 million and includes the relocation of certain infrastructure at Kumtor related to the KS-13 life-of-mine expansion plan, dewatering projects and purchase of new mining equipment.

Capitalized stripping costs (cash) are expected to be $191 million in 2014.

●●●

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 in operation since May 1997 and, as of December 31, 2013, has produced approximately 8.9 million ounces or 279 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 gold mining company focused on operating, developing, exploring and acquiring gold properties primarily in Asia, the former Soviet Union and other 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, Ontario, Canada.

Additional information on Centerra and the full text of the news release on the 4th quarter and basic operating results of 2013 are available on SEDAR at www.sedar.com and www.centerragold.com. Information on KOC is available at www.kumtor.kg