Operating Results of the 1st Quarter of 2014

published: 22 May 2014

Centerra Gold Inc. (Centerra) and Kumtor Gold Company have summed up their operating results in the 1st quarter of 2014. In the first three months of 2014, KOC produced 102,933 ounces¹ or 3,202 kg of gold and contributed more than 2.23 billion soms in taxes and mandatory payments.

Gold Production and Sales

At the Kumtor mine, gold production in the first quarter of 2014 was 102,933 ounces, or 3,202 kg of gold compared to 89,618 ounces, or 2,787 kg in the comparative quarter of 2013 as Kumtor processed higher-grade ore from cut-back 15 that was mined and stockpiled during the fourth quarter of 2013.

During the first quarter of 2014, Kumtor’s mill head grade averaged 2.65 g/t with a recovery of 76.2%, compared with 2.69 g/t and a recovery of 74.1% for the same quarter in 2013.

Gold sales in the first quarter of 2014 were 101,915 ounces, or 3.17 tonnes. Total revenues from gold sales in the first quarter of 2014 were $131.7 million2.

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 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.

Production costs and capital expenditures

All-in costs per ounce sold4, which excludes revenue-based tax and income tax, for the first quarter of 2014 decreased 19% to $1,077 compared to $1,329 in the comparative period of 2013. The decrease in all-in costs4 is due to an 11% increase in gold sold for the first quarter of 2014 and a $14.2 million, or $155 per ounce reduction in growth capital4 expenditures (excluding capitalized stripping).

Capital expenditures spent and accrued in the first quarter of 2014 were $98.4 million which includes:
– $8.3 million of sustaining capital4;
– $1.9 million invested in growth capital4 mainly for relocating infrastructure; and
– $88.1 million for capitalized stripping.

All-in sustaining costs per ounce sold4, which excludes revenue-based tax, were $1,058 in the first quarter of 2014 compared to $1,111 in the comparative quarter of 2013. The decrease results from lower sustaining capital4 expenditures, higher production and sales partially offset by increased capitalized stripping in the current period.

Payments to the Kyrgyz National Budget and Mandatory Contributions

During the first three months of 2014, contributions to the national budget in taxes, deductions to the Social Fund and other mandatory payments have totaled 2.23 billion soms.

Outlook for 2014

According to estimates, Kumtor mine will produce between 550,000 and 600,000 ounces or 17.1-18.7 tonnes 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.

Quarterly Dividend

Centerra’s Board of Directors has authorized a dividend of Cdn$0.04 per common share. The dividend of Cdn$0.04 per common share is payable on June 5, 2014, to shareholders of record on May 22, 2014.

Commentary

Michael Fischer, President of Kumtor Gold Company, commented, “Operationally we are on track to achieve our gold production guidance for 2014 with over 50% of the gold production occurring in the fourth quarter.”

***

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 March 31, 2014, has produced approximately 9.4 million ounces or 292 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, Canada.

The Kyrgyz Republic, via Kyrgyzaltyn JSC, is Centerra’s largest shareholder owning 77,401,766 shares (about 33%). As of May 22, 2014, Kyrgyzstan’s interests were estimated at $338 million.

Currently, Centerra has two producing gold mines in the Kyrgyz Republic and Mongolia. The Company also owns the Gatsuurt development project in Mongolia, the Öksüt Gold Project, Turkey, and has interests in the promising exploration properties in Mongolia, Turkey, Russia, Cyprus, and Western Canada.

Additional information on Centerra and the full text of the news release on the results of the first quarter of 2014 are available on SEDAR at www.sedar.com and the corporate websites at www.centerragold.com and www.kumtor.kg.