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Centerra Gold makes progress in diversifying asset base, reports strong Q2 performance

30th July 2015

By: Henry Lazenby

Creamer Media Deputy Editor: North America

  

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TORONTO (miningweekly.com) – Canadian miner Centerra Gold has completed a positive feasibility study on its fully owned Öksüt project, in south-central Turkey, with first gold production slated for early in the second quarter of 2017.

The feasibility study's base-case scenario estimated that the project would have an after-tax net present value of $242-million and a 42.5% internal rate of return.

“Development of the Öksüt project is another step in Centerra’s strategy of diversifying its portfolio of profitable assets. The feasibility study shows a very attractive rate of return of almost 43% and that the project is profitable at significantly lower gold prices. In fact, using an 8% discount rate, the project breaks even with a gold price of $767/oz,” president and CEO Ian Atkinson told analysts on a conference call on Wednesday morning.

He noted that the company had a strong balance sheet, with cash available for construction as well as several financing opportunities with lending institutions.

“We are ready to move forward with the development of the Öksüt project and are targeting mid-2016 to start mining, pending the receipt of the final approval of the Turkish environmental-impact assessment and receipt of all required permits and other regulatory approvals,” he advised.

The life-of-mine (LoM) plan entailed producing 895 000 oz of gold over eight years, producing an average of 155 000 oz/y in the first four years.

All-in costs, including taxes, were estimated at $777/oz and all-in sustaining costs (AISC) came in at $490/oz.

Centerra said preproduction expenditures and construction capital would be $221-million, including a $25-million contingency. Payback on construction capital and preproduction expenditures was expected to be 2.5 years after production started, with LoM sustaining capital being $10-million, excluding $30-million of capitalised stripping. 


The feasibility study and LoM plan assumed a gold price of $1 250/oz.

For the study, the company had updated the Öksüt project’s reserve estimate, reporting probable reserves of about 1.2-million ounces of gold contained in 26.1-million tonnes at an average grade of 1.4 g/t of gold, using a cutoff grade of 0.3 g/t. 


Atkinson noted that there was still further upside on the property, which the company would continue to follow-up on through further exploration and drilling.

Öksüt was located about 295 km south-east of the Turkish capital of Ankara and was comprised of the Keltepe deposit and the smaller Güneytepe deposit. The area had excellent infrastructure that included nearby airports, electrical power lines, roads and sources of water.

Q2 RESULTS
Centerra had also, after markets closed on Tuesday, announced improved earnings for the second quarter ended June 30, despite lower gold prices offsetting more ounces sold and lower costs.

The TSX-listed company reported net earnings of $21.9-million, or $0.09 a common share, compared with a net loss of $31.7-million, or $0.13 a share, for the same period in 2014.

The company lifted gold output 36% year-over-year to 125 088 oz in the period, which included 122 111 oz from the cornerstone Kumtor mine, in Kyrgyzstan, and 2 977 oz at Boroo, in Mongolia.


AISC an ounce sold fell 39% to $937, excluding revenue-based tax in the Kyrgyz Republic and income tax. Cash provided by operations in the second quarter was $114.6-million, up 61% compared with the same period a year earlier.

Centerra’s revenue climbed 23% to $146.8-million, boosted by a 32% increase in ounces sold at 123 079 oz. The average realised gold price fell 7% over the comparable period last year to $1 192/oz.

The company reported that immediately following the quarter-end, it received extensions to the end of the year of its permits for emissions into the atmosphere and waste disposal into the tailings management facility. 


Atkinson said the company continued to work toward a resolution of all outstanding matters affecting the Kumtor project. Centerra had been in talks with Kyrgyzstan for about two years 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.

“As we have stated previously, any proposed resolution would need to be fair to all shareholders of Centerra,” Atkinson affirmed.

Meanwhile, Centerra was strategically diversifying its geographic asset base and continued further drilling at the Trans-Canada property in the quarter, which was renamed the Greenstone Gold property. The company had in the first quarter announced a partnership with Premier Gold to develop the project, including the Hardrock project located in the Geraldton-Beardmore Greenstone belt, in north-western Ontario.

The partners were now in the process of updating the Hardrock resource estimate. The partnership had also received the notice of approval of the terms of reference for the environmental assessment for the Hardrock project from the Ontario Ministry of the Environment and Climate.

Further, Atkinson noted that despite the Mongolian government declaring the company’s Gatsuurt project a mineral deposit of strategic importance earlier this year, Parliament had so far declined to approve the level of State ownership in the project.

“The Bill regarding the level of State ownership in the project was returned by Parliament to the government for further consideration. It is our understanding that the government intends to submit a revised proposal to Parliament later this year,” Atkinson concluded.

Centerra’s TSX-listed stock on Wednesday gained nearly 7% to C$6.17 apiece.

Edited by Tracy Hancock
Creamer Media Contributing Editor

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