2017 Fourth Quarter and 2017 Year-end Results

2017 Fourth Quarter and 2017 Year-end Results

published: 16 March 2018

Basic Operating and Financial Results

At the Kumtor mine gold production in 2017 was 562,749 ounces*  or 17,503.46 kg.Gold sales in 2017 were 550,134 ounces * or 17,111.09 kg with a revenue totaling $685.2 million**. Contribution in to the national budget in taxes and mandatory payments in 2017 is more than 8.7 billion soms. The table below displays Kumtor”s basic operating and financial results:

($ millions*** , except as noted) Three Months ended December 31 Year ended December 31
2017 2016 % Change 2017 2016 % Change
Revenue from gold sales to Kyrgyzaltyn – $ millions** 228.1 231.3 (1%) 685.2 683.4 0%
Cost of sales – total 84.7 103.0 (18%) 291.7 347.4 (16%)
Cost of sales – $/oz sold**** 468 537 (13%) 530 636 (17%)
Tonnes mined – 000s 50,770 35,543 43% 181,878 144,399 26%
Tonnes ore mined – 000s 2,607 223 1068% 5,084 8,911 (43%)
Average mining grade – g/t 2.30 8.62 (73%) 2.12 3.45 (39%)
Tonnes milled – 000s 1,668 1,581 6% 6,246 6,303 (1%)
Average mill head grade – g/t 3.76 4.71 (20%) 3.58 3.44 4%
Mill Recovery – % 80.4% 83.5% (4%) 79.1% 79.2% (0%)
Mining costs – total ($/t mined material) 1.08 1.24 (13%) 1.10 1.27 (13%)
Milling costs ($/t milled material) 9.16 9.37 (2%) 10.69 9.87 8%
Gold produced – ounces 158,165 200,762 (21%) 562,749 550,960 2%
Gold produced – kg 4,919.49 6,244.40 (21%) 17,503.46 17,136.78 2%
Gold sold – ounces 180,703 191,842 (6%) 550,134 546,342 1%
Gold sold – kg 5,620.50 5,966.96 (6%) 17,111.09 16,993.15 1%
Average realized gold price – $/oz**** 1,262 1,206 5% 1,245 1,251 (0%)
Capital expenditures (sustaining)**** – cash 16.5 11.5 44% 60.6 61.0 (1%)
Capital expenditures (growth)**** – cash 7.1 1.4 399% 18.1 14.8 23%
Capital expenditures (stripping)**** – cash 24.4 42.9 (43%) 149.4 100.5 49%
Capital Expenditures (stripping) – non-cash 7.5 15.4 (52%) 50.9 36.2 40%
Capital expenditures (total) 55.5 71.2 (22%) 279.0 212.5 31%
Operating costs (on a sales basis)***** 44.9 43.1 4% 146.0 167.4 (13%)
All-in sustaining costs (including taxes) 95.1 103.1 (8%) 383.9 349.2 10%
Adjusted operating costs – $/oz sold**** 297 253 18% 313 342 (8%)
Operating Costs (on a sales basis)***** – $/oz sold 249 224 11% 265 306 (13%)
Gold – All-in sustaining costs on a by-product basis – $/oz sold**** 526 538 (2%) 698 640 9%
Gold – All-in Sustaining costs on a by-product basis including taxes – $/oz sold**** 704 707 (0%) 874 815 7%

*–One Troy ounce equals to31.10348 grams.

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

*** –Numbers may not add up due to rounding.

**** –Adjusted operating costs per ounce sold, operating costs (on a sales basis) ($ and per ounce sold), all-in sustaining costs (including taxes), gold all-in sustaining costs on a by-product basis per ounce sold (including and excluding taxes), as well as average realized gold price per ounce sold and capital expenditures (sustaining and growth) are non-GAAP measures and are discussed under “Non-GAAP Measures” in Centerra’s news release dated February 23, 2018.

*****-Operating costs (on a sales basis) is comprised of mine operating costs such as mining, processing, site support administration and production taxes (except at Kumtor where revenue-based taxes are excluded), but excludes reclamation costs and depreciation, depletion and amortization.

Kumtor’s Contributions in Taxes and Mandatory Payments for the Twelve Months of 2017

As of December 31, 2017. USD
Q1 2017 Q2 2017 Q3 2017 Q4 2017 Total
Gross Proceeds Tax 23,168,141 27,041,241 22,671,153 20,668,944 93,549,480
Issyk-Kul Development Fund 1,389,468 2,472,792 1,743,935 822,612 6,428,807
Pollution tax 310,000 – – – 310,000
Employee Income tax 1,245,567 1,173,336 987,757 1,186,260 4,592,921
Social Insurance Fund 5,673,426 4,984,932 4,811,394 4,579,019 20,048,771
Customs 148,828 139,379 95,362 93,163 476,732
Tax on nonresident companies 168,592 152,640 84,533 156,892 562,657
Other taxes and mandatory payments 114,487 236,483 62,131 142,441 555,542
Total 32,218,509 36,200,803 30,456,265 27,649,332 126,524,909
US$ official exchange rate to the Kyrgyz Soms as of end of Quarter 68.6069 69.1367 68.6585 68.8395 –
Equivalent of payments effected in thousand Kyrgyz Soms 2,210,412,018 2,502,804,052 2,091,081,501 1,903,366,178 8,707,663,748

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 2017 (including taxes, refining, domestic suppliers, infrastructure, charities, etc.) have exceeded US $269.731 million. In all, contributions made within the Kyrgyz Republic between 1994 and 2017 have exceeded US $3,472billion.

USD millions 2017 1994 – 2017
Taxes, customs & other mandatory payments 99.314 1,083.889
Social Insurance Fund 20.049 187.845
Issyk-Kul Development Fund 6.429 62.634
Licenses & permits 0.423 3.809
Pollution tax and payments to the Environment Protection Agency 0.310 5.299
Payments to Kyrgyzaltyn 0.521 13.340
Refinery 4.364 55.265
Revenue from the sale of Centerra shares – 86.000
Dividends – 93.315
Purchases in the Kyrgyz Republic:

– supplies & services

 44.468 771.727
– foods 4.317 69.540
Kyrgyz-infrastructure-related payments:

– electricity

 12.869 179.470
– roads outside the mine site 1.742 44.487
– Tamga-Kumtor power-transmission line – 41.612
KGC employees” net wage 66.428 695.627
Sanatoria treatment – 0.744
Education, scholarships & training 0.581 6.398
Sponsorships & sustainable development projects 0.916 29.039
Government contributions – 31.000
Cancer Care Support Fund 7.000 7.000
Payments to communities – 4.400
Total 269.731 3,472.44

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 2017 was  9.7%;

  • Kumtor”s share in the aggregate industrial output was  21.1%.

Outlook for 2018 Kumtor’s 2018 gold production forecast is expected to be in the range of 450,000 to 500,000 ounces with about 45% of the gold production expected in the fourth quarter. In 2018, Kumtor’s all-in sustaining cost on a by-product basis 3 is expected to be in the range of $733 to $815 per ounce sold. At Kumtor, 2018 total capital expenditures, excluding capitalized stripping, are forecast to be $63 million. Spending on sustaining capital 3 of $49 million relates primarily to major overhauls and replacements of the heavy duty mine equipment ($42 million). Growth capital 3 investment at Kumtor for 2018 is forecast at $14 million primarily related to tailings dam construction ($9 million). The cash component of capitalized stripping costs related to the development of the open pit is expected to be $122 million of the $168 million total capitalized stripping estimated in 2018.

CEO Commentary

Scott Perry, President and Chief Executive Officer of Centerra Gold stated, “I am pleased to report that Centerra met its overall gold production guidance producing 785,316 ounces at an all-in sustaining cost on a by-product basis of $688 per ounce sold 3 , beating the low-end of our all-in-sustaining cost 3 guidance for the year. Kumtor had another strong year exceeding its revised production guidance and beating its all-in-sustaining cost guidance, delivering 562,749 ounces of gold production at all-in-sustaining cost on a by-product basis of $698 per ounce sold 3 in 2017.

***

The Kumtor open pit mine , located in the Kyrgyz Republic, is one of the largest gold mines in Central Asia operated by a Western-based gold producer. It has been operating since May 1997 and has produced over 11.5million ounces or 357 tonnes of gold to December 31, 2017.

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

Centerra Gold Inc. is a Canadian-based gold mining company focused on operating, developing, exploring and acquiring gold properties in North America, Asia and other markets worldwide. Centerra operates two flagship assets, the Kumtor Mine in the Kyrgyz Republic and the Mount Milligan Mine in British Columbia, Canada 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.

The Kyrgyz Republic, via Kyrgyzaltyn JSC, is Centerra”s largest shareholder owning 77,401,766 common shares. As of March 14, 2018, Kyrgyzstan”s interests were estimated at $425 million .

Additional information on Centerra and the full text of the news release on the fourth quarter 2017 year-end results are available on SEDAR at www.sedar.com and the corporate websites at www.centerragold.com and www.kumtor.kg .