Results of the Fourth Quarter and Full Year 2010

published: 15 March 2011

Centerra Gold Inc. (TSX: CG) and Kumtor Operating Company have summed up results of the full year 2010. In 2010, Kumtor produced 567,802 ounces¹, or 17.66 tonnes, of gold and paid more than 5.407 billion soms in taxes and compulsory payments. Thanks to successful exploration activities, Kumtor’s open pit mine life has extended to 2021.

Gold Production and Sales

At the Kumtor mine, gold production was 228,433 ounces, or 7,105 kilogrammes, in the fourth quarter of 2010 and 567,802 ounces, or 17,660.6 kilogrammes in the full year 2010. Lower gold production (by 8%) during the fourth quarter compared to the same period of 2009 is mainly a result of the labour dispute and related ten day work stoppage in October 2010.

The mill head grade in the fourth quarter of 2010 increased averaging 7.06 g/t with a recovery of 84.1%, as the high-grade SB Zone ore was mined in the quarter.

For the full year 2010, the mill feed grade averaged 4.02 g/t with a recovery of 79.5%.

Gold sales at Kumtor were 209,929 ounces, or 6.5 tonnes, in the fourth quarter of 2010 while gold sold in 2010 totalled 568,390 ounces, or 17,678.9 kilogrammes.

The average realized gold price was $1,376² per ounce for the fourth quarter of 2010 and $1,239 per ounce for the full year 2010. 

The Kumtor mine produces unrefined Doré bars, which are purchased at the mine site by Kyrgyzaltyn JSC for further 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.

Revenue at Kumtor was $288.9 million in the fourth quarter of 2010 and $704.3 million for the full year 2010.

Production costs, including depreciation and amortization, totalled $79.9 million in the fourth quarter of 2010 and $292.5 million in the full year 2010. Lower operating costs were partially offset by higher costs for diesel fuel as a result of the introduction of the fuel export duty imposed by the Russian Government, higher national labour and power costs, higher maintenance costs due to the expanded mine fleet and higher camp catering costs.

Capital Expenditures

During the fourth quarter of 2010, capital expenditures were $53.3 million with growth capital investment totaling $44.8 million spent mainly on purchase of Liebherr shovels and CAT 789 haul trucks, pre-strip capitalization and the underground development. $8.5 million of sustaining capital was spent mainly on the shear key, buttress and tailings dam construction.

The SB Zone underground decline (Decline #1) has now advanced a total of 1,080 metres while the Stockwork Zone underground decline (Decline #2) has advanced a total of 744 metres. Exploration and delineation drilling of the Stockwork Zone resource commenced in the fourth quarter of 2010 as planned and will continue into 2011.

For the full year 2010, capital expenditures totaled $186.5 million.

Exploration

Exploration expenditures at Kumtor mine site totaled $3.7 million for the fourth quarter of 2010 and $11.5 million for the full year 2010.

Robert Wunder, President of Kumtor Operating Company, commented: “We are extremely pleased with our results for the year 2010, despite the many problems we faced. We met or exceeded all of our planned production targets, and achieved excellent safety results. We were able to increase Kumtor’s reserves by 28% and our new life-of-mine plan has extended the open pit operation by two years to 2021. Centerra’s Board of Director’s has approved significant new capital investment for additional mining equipment and beneficial projects, and preparations for underground operations are expected to produce tangible effects in the next few years. Engineering work in the mine during the past two years has provided a mining production profile for 2011 that ensures approximately equal monthly gold production during the year, thus providing regular contributions to the national budget of the Kyrgyz Republic”.

Reserves and Resources

Due to successful exploration, proven and probable reserves increased by 1.5 million contained ounces of gold in 2010. Kumtor’s proven and probable mineral reserves total 6.3 million ounces of contained gold as of December 31, 2010. Based on these estimates, the additional reserves will extend the Kumtor open pit mine-life to 2021. 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 development activities.

Measured and indicated resources at Kumtor increased by 1.9 million ounces.

                                                                                                                                          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

Payments to the Kyrgyz National Budget and Mandatory Contributions

During the twelve months of 2010, contributions to the national budget in taxes, deductions to the Social Fund and other mandatory payments have totaled more than $114.8 million. According to the official National Bank exchange rate as of December 31, 2010, this amounts to more than 5.4 billion soms. (For taxes and other mandatory payments see Table 3).

Inaugural Annual Dividend

According to previous disclosures, as part of Centerra’s long-term strategy to maximize shareholder value, the Company’s inaugural annual dividend was paid on September 8, 2010 to shareholders of record at the close of business on August 18, 2010.

Based on Kyrgyzaltyn’s interest (33%), it has received net dividends of $4.246 million after withholding taxes.

Payments within the Kyrgyz Republic

In 2010, payments effected within the Kyrgyz Republic (including taxes, contract payments to local suppliers, infrastructure payments, charities, etc.) totaled $218.7 million. During the period between 1994 and 2010, Kumtor Gold Project’s payments within the Kyrgyz Republic have totaled $1,389,700,000 (see Table 3).

Kumtor’s impact on the Kyrgyz economy

According to the Kyrgyz National Statistics Committee, Kumtor’s sales accounts for 10.5% of the 2010 GDP and more than 39.2% in the Kyrgyz national export.

2011 Outlook

The Kumtor mine is expected to produce 550,000 to 600,000 ounces (or 17.1 to 18.7 tonnes) in 2011. The production profile at Kumtor differs significantly from recent years in that it is expected to have consistent quarterly production throughout the year, which will facilitate regular contributions to the Kyrgyz national budget throughout the year.

At Kumtor, during 2011 total capital expenditures are forecast to be $206 million, including $170 million of growth capital investment and $36 million of sustaining capital.

Growth capital investment will be mainly spent on the purchase of seven CAT 789 haul trucks ($21 million), purchase of remaining equipment for the North Wall expansion project ($28 million), pre-strip costs related to the development of the open pit ($63 million) and a waste dump expansion project ($3 million). Also, $52 million is included in growth capital investment for the underground growth capital.

The largest sustaining capital spending will be on the major overhaul maintenance of the heavy duty mine equipment ($19 million), expenditures for the shear key, buttress and tailings dam construction works ($5 million) and for equipment replacement and other items ($12 million).

Exploration expenditures at Kumtor are forecast to be $13 million in 2011.

* * *

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, 2010, has produced 7.8 million ounces, or 242.6 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 15, 2011, Kyrgyzstan’s interests are estimated at more than $1,224 mln.

Currently, Centerra has two producing gold mines:

100% interest in the Kumtor mine in the Kyrgyz Republic
100% interest in the Boroo mine in Mongolia

A development property:
100% interest in the Gatsuurt property in Mongolia near Boroo

It also has interests in promising exploration properties:

Nevada:
– Tonopah Divide property, Nevada, Centerra has earned a 60% interest on this property under its exploration and option agreement with Tonogold Resources Inc.
– Oasis property, Nevada, Centerra has the right to earn up to a 75% interest through its joint venture with Redstar Gold Corp.

Turkey:
– Akarca, Samli and Elmali projects, Turkey, Centerra has the right to earn up to 70% interest through its option/joint venture with Eurasian Minerals Inc.
– Oksut project, Turkey, Centerra has the right to earn up to a 70% interest through its option/joint venture with Stratex International Plc

Russia:
– Kara Beldyr project in the Tyva Republic in Russia, Centerra has earned its 50% interest in the property and has exercised its option to earn an additional 20% interest through its option/joint venture with Central Asia Gold AB

Mongolia:
– Sumber Joint Venture, Mongolia, Centerra has the right to earn up to a 75% interest through its joint venture with Altairgold LLC.

Additional information on Centerra and the full text of the news release on the 2010 results are available on SEDAR at www.sedar.com and the Company’s website at www.centerragold.com.