2016 Fourth Quarter and 2016 Year-end Results

2016 Fourth Quarter and 2016 Year-end Results

published: 24 March 2017

Basic Operating and Financial Results

At the Kumtor mine gold production in 2016 was 550,960 ounces or 17,136.78 kg. Gold sales in 2016 were 546,342 ounces* or 16,993.15 kg with a revenue totaling $686.4 million**.

The table below displays Kumtor’s basic operating and financial results:

Three Months Ended December 31

Year Ended December 31

2016

2015

Change

2016

2015

Change
Revenue  from gold sales to Kyrgyzaltyn – $ millions 231.3 144.5 60% 686.4 604.5 14%
Operating costs (on a sales basis)**** 44.6 46.9 (5%) 171.8 151.1 14%
Cost of sales – total 103.1 112.1 (8%) 350.4 367.9 (5%)
Cost of sales – $/oz sold*** 537 852 (37%) 641 707 (9%)
Tonnes mined – 000s 35,542 45,418 (22%) 144,399 169,527 (15%)
Tonnes ore mined – 000s 223 3,941 (94%) 8,911 6,583 35%
Tonnes milled – 000s 1,581 1,504 5% 6,303 5,729 10%
Average mill head grade – g/t 4.71 3.42 38% 3.44 3.57 (4)%
Recovery – % 83.5% 79.9% 5% 79.2% 78.8% 1%
Gold produced – ounces* 200,762 130,610 54% 550,960 520,694 6%
Gold produced — kg 6,244.40 4,062.43 54% 17,136.78 16,195.41 6%
Gold sold – ounces* 191,842 131,549 46% 546,342 520,517 5%
Gold sold –  kg 5,966.96 4,091.63 46% 16,993.15 16,189.90 5%
Average realized gold price – $/oz*** 1,206 1,098 10% 1,256 1,161 8%
Capital expenditures (sustaining)*** 11.5 11.8 (3%) 61.0 50.5 21%
Capital expenditures (growth)*** 1.4 2.5 (44%) 14.8 14.2 4%
Capital expenditures (stripping)*** 58.3 12.1 382% 136.7 210.6 (35%)
Adjusted operating costs – $/oz sold*** 253 392 (36%) 342 326 5%
All-in sustaining costs – $/oz sold*** 538 553 (3%) 640 731 (12%)
All-in costs – $/oz sold*** 545 572 (5%) 667 758 (12%)
All-in costs (including taxes) – $/oz sold*** 715 725 (1%) 843 921 (9%)

* – One Troy ounce equals to 31.10348 grammes.
** – Unless specified otherwise, all dollar figures in this news release are in US dollars.
*** – Results may not add due to rounding
**** – Adjusted operating costs, all-in sustaining costs, all-in costs and all-in costs – including taxes (in $ millions and per ounce sold), as well as average realized gold price per ounce sold, cost of sales per ounce sold and capital expenditures (sustaining and growth) are non-GAAP measures and discussed under “Non-GAAP Measures”.

Kumtor’s Contributions in Taxes and Mandatory Payments for the Twelve Months of 2016

 

 As of Dec 31, 2016

USD thousands***
Gross Proceeds Tax 80,083.32
Issyk-Kul Development Fund 6,160.26
Pollution tax 310.00
Employee Income tax 4,104.37
Social Insurance Fund 17,906.10
Customs 383.44
Tax on nonresident companies 665.04
Other taxes and mandatory payments 1,043.11
Total 110,783.49
US$ official exchange rate to the Kyrgyz Soms as of Dec 31, 2016 69.2301
Equivalent of payments effected in thousand Kyrgyz Soms 7,633,766.55

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 2016 (including taxes, refining, domestic suppliers, infrastructure, charities, etc.) have exceeded $238.450 million. In all, contributions made within the Kyrgyz Republic between 1994 and 2016 have exceeded $3.2 billion.

USD millions***

2016

1994 – 2015
Taxes, customs & other mandatory payments 86.949 984.575
Social Insurance Fund 17.906 167.796
Issyk-Kul Development Fund 6.160 56.205
Licenses & permits 0.458 3.514
Pollution tax and payments to the Environment Protection Agency 0.310 4.989
Payments to Kyrgyzaltyn 0.472 12.819
Refinery 3.825 50.901
Revenue from the sale of Centerra shares – 86.000
Dividends 7.097 93.315
Purchases in the Kyrgyz Republic:
– supplies & services		 37.052 727.259
– foods 4.049 65.223
Kyrgyz-infrastructure-related payments:
– electricity		 12.962 166.601
– roads outside the mine site 1.596 42.745
– Tamga-Kumtor power-transmission line – 41.612
KGC employees’ net wage 59.244 629.199
Sanatoria treatment – 0.744
Education, scholarships & training 0.664 5.817
Sponsorships & sustainable development projects 0.706 28.123
Government contributions – 31.000
Payments to communities – 4.400
Total 238.450 3,202.84

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 2016 was 8%;
  • Kumtor’s share in the aggregate industrial output was 4%.

Outlook for 2017                  

Kumtor’s gold production forecast is expected to be in the range of 455,000 ounces to 505,000 ounces with 30% of the gold production expected to be in the fourth quarter.

At Kumtor, 2017 total capital expenditures, excluding capitalized stripping, are forecast to be $96 million**. Spending on sustaining capital*** of $68 million relates primarily to major overhauls and replacements of the heavy duty mine equipment ($58 million), major overhauls and replacements of mill equipment ($3 million) and other items ($7 million). Growth capital*** investment at Kumtor for 2017 is forecast at $28 million and includes the relocation of certain infrastructure at Kumtor related to the life-of-mine expansion plan amounting to $9 million, tailings dam construction ($11 million), purchase of new mining equipment ($4 million), dewatering projects ($2 million) and other items ($2 million). The cash component of capitalized stripping costs related to the development of the open pit is expected to be $172 million of the $234 million total capitalized stripping in 2017.

CEO Commentary

Scott Perry, Chief Executive Officer of Centerra stated, “Regrettably 2016 got off to an unfortunate start when a mill employee at Kumtor was fatally injured. With this tragic event the Company is rolling out a new Company-wide safety leadership program called Work Safe – Home Safe. On the operational front, as we disclosed earlier, Kumtor had another strong year and we exceeded the mid-point (540,000 ounces) of Centerra’s favourably revised gold production guidance for 2016. I am pleased to report that Centerra also significantly beat its unit cost guidance for the year as the all-in sustaining costs were $682 per ounce sold. Our lower costs reflect Kumtor favourably exceeding its cost guidance with all-in sustaining costs of $640 per ounce sold for the year. Kumtor successfully implemented various continuous improvement initiatives throughout the year resulting in higher throughput in the mill and lower unit costs. Kumtor once again generated a significant amount of cash, after all capital expenditures and taxes – it generated $237 million in 2016. The Company continues its discussions with the Government of the Kyrgyz Republic to resolve all outstanding issues affecting the Kumtor Project in a manner that is fair to all of its stakeholders.”

●●●

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, 2016, has produced approximately 10.937 million ounces or 340.181 tonnes of gold.

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 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 23, 2017, Kyrgyzstan’s interests were estimated at $422 million.

Additional information on Centerra and the full text of the news release on the fourth quarter 2016 year-end results are available on SEDAR at www.sedar.com and the corporate websites at www.centerragold.com and www.kumtor.kg.