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Centerra Gold lifts Q1 profit on higher output, sales

Centerra Gold's Kumtor mine, in the Kyrgyz Republic.

Centerra Gold's Kumtor mine, in the Kyrgyz Republic.

Photo by Centerra Gold

1st May 2015

By: Henry Lazenby

Creamer Media Deputy Editor: North America

  

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TORONTO (miningweekly.com) – Canadian gold producer Centerra Gold has experienced a significant jump in first-quarter earnings on the back of a 53% jump in ounces sold.

The Toronto-based company after market close on Thursday reported net earnings of $40.7-million, or $0.17 a share, for the three months ended March 31, compared with net earnings of $2.1-million, or $0.01 a share, in the comparative quarter of 2014, reflecting improved sales that were partially offset by lower realised gold prices, currency movements and higher share-based compensation charges.

Revenue for the period rose 44% to $212.6-million, the result of selling 175 232 oz of gold compared with 114 493 oz in the first quarter of 2014. The average realised gold price was 6% lower year-on-year at $1 213/oz.

Despite the significant improvement in sales, costs increased by only 4% to $113.9-million, reflecting the lower costs in both the stockpiled ore and in the ore mined and processed at the company’s flagship Kumtor mine, in the Central Asian State of Kyrgyzstan.

The cost of sales in the period benefited from Cutback 16, containing more ounces and lower operating costs for diesel, labour and other consumables, as well as reduced waste stripping, compared with Cutback 15 ore that was processed in the first quarter last year.

Gold output for the quarter rose 46% to 170 683 oz, mainly owing to higher-grade feed being processed through the Kumtor mill.

In Mongolia, output from Centerra’s shuttered Boroo mine was lower in the quarter, as a result of the mill shutdown in the fourth quarter and lower production from the heap leach operation as it transitioned to 100% secondary leaching.

Centerra’s all-in costs an ounce sold for the first quarter were $799/oz, compared with $1 158/oz in the comparative quarter of 2014, and included all cash costs related to gold production, excluding revenue-based tax and income tax.

Centerra forecast full-year gold output to be between 480 000 oz and 535 000 oz, at all-in sustaining costs of between $898/oz and $1 003/oz.

KUMTOR NEGOTIATIONS
Kyrgyzstan's Parliament voted on Thursday to approve former Economy Minister Temir Sariyev as Prime Minister after his predecessor Joomart Otorbayev resigned after failing to settle a deal with Centerra on the future of the Kumtor mine.

Centerra, which operated Kumtor, had been in talks with Kyrgyzstan for more than a year on a deal that would involve the government swapping its 32.7% stake in Centerra for half of a joint venture (JV) that would control the gold deposit, the largest in the region.

However, negotiations hit renewed uncertainty earlier last month after Otorbayev said instead of forming the long-discussed JV to run Kumtor, the government now wanted to increase its representation on Centerra's board.

Otorbayev said at the time that the JV was no longer in Kyrgyzstan's national interest owing to Centerra's new, lower Kumtor reserve estimate. In February, the company estimated proven and probable reserves at 6.1-million ounces of contained gold as of end-2014, compared with 8.5-million a year earlier.

“The company continues to work toward a resolution of all outstanding matters affecting the Kumtor project. Any proposed resolution would need to be fair to all shareholders of Centerra and to receive all necessary legal and regulatory approvals under the Kyrgyz Republic and Canadian laws,” Centerra president and CEO Ian Atkinson told analysts during a telephone call on Friday.

However, Centerra noted that 53.5-million Centerra shares held by State gold company Kyrgyzaltyn (out of 77.4-million shares owned by Kyrgyzaltyn) were currently subject to Ontario court orders that placed restrictions on Kyrgyzaltyn’s ability to sell or transfer, and their ability to exercise its rights as a registered shareholder of Centerra, which complicated negotiations.

DEVELOPMENT PROJECTS
Meanwhile, Centerra’s Gatsuurt project had been designated as a ‘mineral deposit of strategic importance’ by the Mongolian Parliament, which would allow the Gatsuurt project to move forward in compliance with the Water and Forest Law.

Atkinson said the company was working with the Mongolian government to determine either the level of State ownership or a special royalty in lieu of ownership and expected the new proposal to be considered by Parliament in the current Parliamentary session.

Centerra also in the quarter announced a partnership with Premier Gold to develop the Trans-Canada Property in north-western Ontario.

“These two projects together with our Öksüt project [in Turkey] represent a significant step forward for Centerra in creating a development pipeline and reducing the risk associated with over reliance on a single project,” Atkinson noted.

Centerra had also held an option to earn a 70% interest from Medgold Resources in the four-concession Lagares gold property, located 30 km east of the City of Porto, in northern Portugal.

Edited by Tracy Hancock
Creamer Media Contributing Editor

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