Basic Operating Results of Kumtor Operating Company in 2012

Basic Operating Results of Kumtor Operating Company in 2012

published: 27 March 2013

Gold Production and Sales in 2012

At the Kumtor mine, gold production was 315,238 ounces* or 9.8 tonnes for the full 2012 year. Gold sales at Kumtor were 314,987 ounces or 9.8 tonnes. Revenue from gold sales was $533.6 million.**

Total capital expenditure amounted to $399.9 million, most of the funds were spent on the expansion of the open pit mining equipment fleet and its’ repair / re-build, in addition capital expenditure also included the un-loading of the ice areas of the open pit and continued waste rock stripping for ore production later in the 2013 budget year. Exploration expenditures totaled 11.8 million dollars.

Three Months Ended December 31 Year Ended December 31
2012 2011 Change 2012 2011 Change
Gold produced – ounces 189,438 138,696 37% 315,238 583,156 (46%)
Gold produced – kg 5,892.2 4,313.9 37% 9,805.0 18,138.2 (46%)
Gold sold – ounces 185,936 141,897 31% 314,987 599,494 (47%)
Gold sold – kg 5,783.3 4,413.5 31% 9,797.2 18,646.4 (47%)
Average realized gold price – $/oz 1,709 1,689 1% 1,694 1,570 8%
Revenue from gold sales to Kyrgyzaltyn* –           $ millions 317.8 239.7 33% 533.6 941.1 (43%)
All-in cash cost, including discretionary spending (pre-tax) – $millions ** 151.2 110.6 37% 614.5 475.0 29%
Total production cost(with depletion and amortization ) – $millions 193.5 112.1 42% 370.5 392.2 (6%)
Capital expenditures – $millions 83.9 28.5 195% 399.9 180.7 121%
Exploration expenditures – $millions 2.9 2.9 (7) 11.8 13.6 (11%)
Tonnes mined – 000s 38,185 37,124 3% 147,610 150,605 (2%)
Tonnes ore mined – 000s 4,463 1,095 308% 4,955 6,020 (18%)
Tonnes milled – 000s 1,547 1,450 7% 4,756 5,815 (18%)
Average mill head grade – g/t 5.13 3.80 35% 2.79 3.79 (26%)
Recovery – % 77.7 77.6 0% 75.6 80.8 (6%)

* The final product of the Kumtor mine, the Doré bars,3 is purchased by Kyrgyzaltyn JSC for processing at its refinery in Kara-Balta 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.
** All-in cash cost (pre-tax) includes the following costs: operating cash costs (mainly mining, processing, production taxes (excluding revenue-based taxes) and administrative expenses), sustaining and growth capital (including capitalized stripping), exploration expenses and community investments.
The Company has decided to move toward reporting an “all-in cash cost” methodology for gold production. The Company believes an all-in cash cost measure more fully reflects the actual cost of producing gold. All-in cash cost (pre-tax) is non-GAAP measure.

Reserves and Resources

On November 7th, 2012, the Company reported an increase in the deposit reserves and extended the mine life by five years. According to the KS-13 resource model, it is expected that the open pit mining life is extended till 2023, with milling of ore extended to 2026. Reserves and resources of the deposit at the end of 2012 are given in the table below.

Reserves and resources at Kumtor as of December 31, 2012 Thousands of tonnes Grade(g/t) Contained gold
Thousands of oz Tonnes
Gold reserves:
             – proven 3,149 1.9 196 6.10
             – probable 88,371 3.3 9,270 288.33
Total Reserves 91,520 3.2 9,466 294.43
 
Resources:
             – measured (open pit) 21,975 2.3 1,631 50.73
             – indicated (open pit) 12,113 2.3 898      27.93
             – indicated (Stockwork Underground) 351 10.7 121         3.8
Total Measured and Indicated Resources 34,439 2.4 2,650 79.04
 
Inferred Resources
            – Central Pit 9,339 2.4 712 22.15
            – Underground Stockwork Zone 2,002 11.0 705 21.93
            – Underground SB Zone 3,413 11.2 1,229 38.23
Total Inferred Resources 14,754 5.6 2,646 82.31

 

Contributions to the Kyrgyz national budget and other mandatory payments

During the twelve months of 2012, payments to the Kyrgyz national budget, including taxes, contributions to the Social Fund and other mandatory payments by the Company, exceeded $128 million, which, according to the KR National Bank’s exchange rate as of December 31, 2012, is equivalent to approximately 6.07 billion soms.

As of December 31, 2012 USD thousands
Revenue-based tax* 96,594.74
Issyk-KulDevelopment Fund 4,638.17
Pollution tax 310.00
Employee Income tax 4,828.52
Social Insurance Fund 19,886.43
Customs 1,093.53
Tax on nonresident companies 566.96
Other taxes and mandatory payments 109.77
Total 128,028.13
US$ official exchange rate to the Kyrgyz Soms as of December 31, 2012 47.4012
Equivalent of payments effected in million Kyrgyz Soms 6,068,686.83

Note: Under the Agreement on New Terms of April 24, 2009, the revenue-based tax and contributions to the Issyk-Kul Development Fund are estimated based on actual cash revenues from sales during the specified period.
* Includes an advance of $30 million of revenue-based taxes otherwise due in 2013

Other Payments

In April 2012, according to a Memorandum signed between the Company and the Ministry of Youth, Labor and Employment of the Kyrgyz Republic, Kumtor contributed US $21 million in sponsorship for the alleviation of poverty and unemployment throughout Kyrgyzstan through a Micro Credit Agency.

Late in May 2012, in response to the Government’s request, Kumtor Management decided to pay part of its revenue-based tax in advance. The contribution was US $30 million.

Payments effected within the Kyrgyz Republic

In 2012, payments within the Kyrgyz Republic (including taxes, refining charges, payments to local suppliers of goods and services, infrastructure payments, charities, etc.) exceeded $298 million.

During the period between 1994 and 2012, Kumtor Gold Project’s payments within the Kyrgyz Republic have exceeded $2.15 billion.

USD millions 2012 1994 – 2012
Taxes, customs & other mandatory payments 103.194 627.453
Social Insurance Fund 19.886 92.362
Issyk-Kul Development Fund 4.638 27.674
Licenses & permits 0.259 2.279
Pollution tax and payments to the Environment Protection Agency 0.310 3.749
Payments to Kyrgyzaltyn – 11.421
Refinery 1.884 36.081
Revenue from the sale of Centerra shares – 86.000
Dividends 5.836 50.249
Purchases in theKyrgyzRepublic:
            – supplies & services		 54.178 537.014
            – foods 5.278 46.471
Kyrgyz-infrastructure-related payments:
            – electricity		 10.941 119.340
            – roads outside the mine site 1.530 35.333
            – Tamga-Kumtor power-transmission line – 41.612
KOC employees’ net wage 66.575 378.652
Sanatoria treatment 0.136 0.744
Education, scholarships & training 0.074 3.839
Sponsorships & sustainable development projects 2.921 14.992
Government contributions 21.000 31.000
Payments to communities – 4.400
Total 298,641 2 150,664

 

The Company’s impact on the macroeconomic characteristic
of the Kyrgyz Republic

According to the KR National Statistics Commitee’s preliminary reports:

● Kumtor’s share in GDP in 2012 was – 5.5%;
● Kumtor’s share in the total industrial output was – 18.9%;

Outlook for 2013

● In 2013 the Kumtor mine is expected to produce between 550,000 and 600,000 ounces (17.1- 18.7 tonnes).
● In 2013, approximately 50% of Kumtor’s gold production is expected to occur in the fourth quarter.
● Planned exploration expenditures on the Kumtor concession are expected to be about $13.5 million.
● At Kumtor, 2013 total capital expenditures, excluding capitalized stripping, are forecast to be $95 million including $63 million of sustaining capital.
● Growth capital investment at Kumtor for 2013 is forecast at $31 million, which includes the relocation of certain infrastructure at Kumtor related to the KS-13 life-of-mine expansion.
● Capitalized stripping cash costs related to the development of the open pit are expected to be $212 million in 2013.

Commentary

Michael Fischer, President of Kumtor Operating Company, said, “2012 was a challenging year, beginning with the ice and waste movement at Kumtor and the revised mining plan. However, we managed to stabilize the situation by the end of the year. By the start the fourth quarter in 2013 we expect to be mining in the high grade area of the SB Zone, which has had a number of years of production history. Development of this area will enable stable operations in the coming years from the Kumtor Open Pit.”

● ● ●

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, 2012, has produced approximately 8.7 million ounces or 271 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.

Kyrgyzaltyn JSC, a Kyrgyz state-owned entity, is Centerra’s largest shareholder owning 77,401,766 shares (about 33%). As of March 1, 2013, Kyrgyzaltyn’s interests are estimated at $507 million.

Currently, Centerra has two producing gold mines located in the Kyrgyz Republic and Mongolia. Also, the Company owns the Öksüt Gold Project in Turkey and has interests in promising exploration properties located in Mongolia, Turkey, China and the Russian Federation.

Additional information on Centerra and the full text of the news release on the 2012 results are available on SEDAR at www.sedar.com and the corporate websites at www.centerragold.com and www.kumtor.kg .
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* – One Troy ounce equals to 31.10348 grammes
** – Unless specified otherwise, all dollar figures in this news release are in US dollars.
*** – The Doré bar, Kumtor’s final product, contains up to 85% of gold as well as silver, iron, zinc, copper and nickel admixtures.