Centerra Gold Reports Third Quarter Earnings of $0.08 Per Share

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TORONTO, ONTARIO–(Marketwire – Oct. 31, 2008) –

(This news release contains forward-looking information that is subject to the risk factors and assumptions set out on page 9 and in our Cautionary Note Regarding Forward-looking Information on page 12. All figures are in United States dollars.)

Centerra Gold Inc. (TSX:CG) today reported third quarter net earnings of $16.9 million or $0.08 per common share based on revenues of $139.4 million compared to net earnings before unusual items of $4.8 million or $0.02 per common share on revenues of $98.0 million in the same quarter of last year. In the third quarter of 2007 after reflecting unusual items, the Company recorded a loss of $90.4 million or $0.42 per common shares.
Centerra’s consolidated gold production for the third quarter of 2008 totaled 186,145 ounces at a total cash cost of $498 per ounce compared to 136,461 ounces at a total cash cost of $440 per ounce in the corresponding quarter of 2007. Cash provided by operations, net of working capital changes and other operating items was $24.4 million compared to $29.3 million in the third quarter of 2007. (Total cash cost is a non-GAAP measure and is discussed under “Non-GAAP Measures” in the Management’s Discussion and Analysis issued in conjunction with this news release).

As disclosed in the Company’s news release of September 25, 2008, Centerra agreed to suspend the international arbitration proceedings initiated by the Company, which had been previously postponed to September 29, 2008. The Company continues to hold discussions with Cameco Corporation and the Government working group responsible for Kumtor and the parties have agreed that this suspension will allow for these discussions to continue and for the parties to concentrate on resolving outstanding issues relating to the project. See “Other Corporate Developments – Kyrgyz Republic”.

Third Quarter Events

– Suspended international arbitration proceedings, as negotiations continue.

– Gold production and operations continue uninterrupted at Kumtor and the heap leach facility at Boroo has commenced gold production.

– Higher grade material being accessed in the SB Zone at Kumtor.

– Exploration joint ventures signed in Russia (Tyva Republic) and Turkey.

– Surface mapping and sampling continued on the Tonopah Divide project in Nevada.

Commentary

Stephen Lang, President and CEO of Centerra Gold commented, “The operations during the quarter provided strong cash flow, contributing $63 million year-to-date. I can report that our discussions are continuing with the Kyrgyz Government and the suspension of the international arbitration indicates that those discussions are continuing. The higher grade portion of the SB Zone at Kumtor was reached in September, but head grades at the early stage of the high-grade development were lower than expected. While we are starting to see much better grades at Kumtor, as we get deeper into the SB Zone, we have revised our guidance to reflect the lower than anticipated gold production for the third quarter. There will be a significant increase in gold production in the fourth quarter at Kumtor as we mine the higher-grades in the SB Zone.”

Financial and Operating Summary

Revenues for the third quarter of 2008 were $139.4 million compared to $98.0 million during the same period one year ago. Third quarter 2008 revenue reflects a 26% increase in realized gold price ($860 per ounce in the third quarter of 2008 versus $680 per ounce in the third quarter of 2007).

The Company produced a total of 186,145 ounces in the third quarter of 2008, up from 158,303 ounces of gold in the second quarter of 2008 and the 136,461 ounces of gold produced in the third quarter of 2007.

Centerra’s total cash cost per ounce of gold was $498 in the third quarter compared to $440 in the third quarter of 2007. The year-over-year increase in unit cash costs was primarily due to a $61 per ounce increase in operating costs resulting from reduced deferred stripping in 2008, an $18 per ounce increase in consumable costs, partially offset by the impact of higher grades and recoveries at Kumtor. (Total cash cost is a non-GAAP measure and is discussed under “Non-GAAP Measures” in the Management’s Discussion and Analysis for the three months ended September 30, 2008, issued in conjunction with this news release.)

Cash provided by operations was $24.4 million for the third quarter of 2008 compared to $29.3 million for the prior year third quarter. The decrease reflects the higher working capital levels partially offset by increased gold sales and higher average gold price received.

Capital expenditures in the third quarter of 2008 amounted to $29.3 million of which $14.5 million was spent on sustaining capital projects and $14.8 million invested in growth capital, the major components are related to the SB Zone underground development at Kumtor ($3.1 million), completion of the heap leach facility at Boroo ($2.5 million) and Pit 3 pre-stripping at Boroo ($5.0 million).

During the third quarter of 2008, the Company paid down a $10 million revolving credit facility taken out in 2007. The facility remains available for future use. After repaying the $10 million revolving credit facility, Centerra’s cash position at the end of September 2008 was $91.8 million, compared to $105.5 million at December 31, 2007.

Exploration expenditures for the third quarter were $5.6 million dollars compared to $3.9 million in the third quarter of 2007 reflecting higher spending at Kumtor in 2008.

…Boroo

At the Boroo mine in the third quarter of 2008, gold production was 52,332 ounces (including heap leach production), 6,625 ounces lower than the third quarter of 2007 due to reduced ore grades, 2.58 g/t versus 3.61 g/t 2007 and lower recovery 70.5% compared to 81.9%. During the third quarter 2008, the heap leach facility commenced gold production resulting in 12,810 ounces produced from the heap leach. The Company is currently in discussions with the Mongolian government agencies to extend the temporary permit and to get the final permits and approvals for the heap leach facility.

Total cash costs per ounce, a non-GAAP measure of production efficiency, increased to $338 in the third quarter of 2008 from $280 in the third quarter of 2007. The cash cost increased from the same quarter in 2007, primarily as the result of higher mill costs ($36 per ounce), and a reduction in ounces produced ($35 per ounce). Partially offsetting these costs was a reduction in administration costs ($12 per ounce).

Major mine consumables costs increased primarily due to higher prices and higher consumption of mine consumables related to a 6% increase in material movement. Increased rental costs are a result of the requirement to increase stacking at the heap leach pad and substitute trucks for those out for rebuild. Royalties paid in respect of the Boroo operation increased as a result of amendments in the third quarter of 2007 to the Stability Agreement with the Mongolian Government which increased the royalty rate from 2.5% to 5% effective August 3, 2007.

During the third quarter of 2008, capital expenditures of $10.6 million included $3.0 million sustaining capital and $7.6 million invested in growth capital primarily related to completing the construction of the heap leach facility ($2.5 million) and $5.0 million in capitalized pre-stripping of pit 3…

Centerra’s production and unit costs are forecast as follows:

---------------------------------------------------------------------------
Production (100%)              First Nine                  2008        2007
Ounces of gold                  Months of              Forecast      Actual
                              2008 Actual
---------------------------------------------------------------------------
Kumtor                            319,707     550,000 - 580,000     300,862
---------------------------------------------------------------------------
Boroo                             145,136     190,000 - 210,000     254,548
---------------------------------------------------------------------------
Total                             464,843     740,000 - 790,000     555,410
---------------------------------------------------------------------------

---------------------------------------------------------------------------
Total Cash Cost (1)            First Nine                  2008        2007
$ per ounce                     Months of              Forecast      Actual
                              2008 Actual
---------------------------------------------------------------------------
Kumtor                                633             480 - 520(2)      610
---------------------------------------------------------------------------
Boroo                                 353             380 - 420         244
---------------------------------------------------------------------------
Consolidated                          546             460 - 495(2)      442
---------------------------------------------------------------------------
(1) Total cash cost is a non-GAAP measure. See "Non-GAAP Measures below.

(2) Unit costs reflect revenue-based taxes and royalties for the full year,
    as described above.

In particular, material assumptions or factors used to forecast production
and costs include the following:

- a gold price of $800 per ounce,
- exchange rates:
 - $1USD:$1.10CAD
 - $1USD:36 Kyrgyz Som
 - $1USD:1,150 Mongolian Tugrik
 - $1USD:0.65 Euro

Centerra’s revenues, earnings and cash flows for the fourth quarter of 2008 are sensitive to changes in certain variables and the Company has estimated their impact on revenues, net earnings and cash from operations.

-------------------------------------------------------------------------
                                                   Impact on
Sensitivities           Change                   ($ millions)
                                 ----------------------------------------
                                  Costs   Revenues   Cash flow   Earnings
-------------------------------------------------------------------------
Gold Price              $25/oz      1.4        8.4         7.0        7.0
-------------------------------------------------------------------------
Diesel Fuel                 10%   $6/oz          -         1.7        1.5
-------------------------------------------------------------------------
Kyrgyz som               1 som      1.0          -         1.0        0.9
-------------------------------------------------------------------------
Mongolian tugrik     25 tugrik      0.3          -         0.3        0.2
-------------------------------------------------------------------------
Canadian dollar       10 cents      1.6          -         1.6        1.6

-------------------------------------------------------------------------

Boroo

Located in Mongolia, this open pit mine was the first hard rock gold mine in Mongolia and to date has produced over 1.2 million ounces of gold. During the third quarter of 2008, there was one lost-time accident, two first aid injuries, and no reportable environmental spills at the Boroo mine.

----------------------------------------------------------------------------
          Three Months Ended September 30   Nine Months Ended September 30
----------------------------------------------------------------------------

Boroo

 Operating                               %                                %
 Results       2008   2007  Change Change      2008    2007  Change Change
----------------------------------------------------------------------------
Gold sold -
 ounces      51,019 61,808 (10,789)   (17%) 152,877 198,278 (45,401)   (23%)
----------------------------------------------------------------------------
Revenue - $
 millions      43.7   42.2     1.5      4%    134.9   131.5     3.4      3%
----------------------------------------------------------------------------
Average
 realized
 gold
 price-$/oz     857    684     173     25%      882     663     219     33%
----------------------------------------------------------------------------
Cost of
 sales - $
 millions (1)  14.6   12.8     1.8     14%     42.3    31.4    10.9     35%
----------------------------------------------------------------------------
Cost of
 sales - $/oz
 sold           286    207      79     38%      277     158     119     75%
----------------------------------------------------------------------------
Tonnes mined
 - 000s       4,132  4,291    (159)    (4)%  13,819  12,678   1,141      9%
----------------------------------------------------------------------------
Tonnes mined
 heap leach -
 000s           864    951     (87)    (9%)   2,592   2,819    (227)    (8%)
----------------------------------------------------------------------------
Tonnes ore
 mined direct
 mill           584    552      32      6%    1,791   1,638     153      9%
----------------------------------------------------------------------------
Feed - 000s
 Tonnes ore
 milled -
 000s           665    631      34      5%    1,876   1,899     (23)    (1%)
----------------------------------------------------------------------------
Average mill
 head grade -
 g/t (2)       2.58   3.61   (1.03)   (29%)    2.74    3.76   (1.02)   (27%)
----------------------------------------------------------------------------
Recovery - %
 (4)           70.5   81.9   (11.4)   (14%)    79.8    85.3    (5.5)    (6%)
----------------------------------------------------------------------------
Gold
 produced -
 ounces      52,332 58,957  (6,625)   (11%) 145,136 195,940 (50,804)   (26%)
----------------------------------------------------------------------------
Total cash
 cost (3) -
 $/oz           338    280      58     21%      353     211     142     67%
----------------------------------------------------------------------------
Total
 production
 cost (3)-
 $/oz           440    372      68     18%      452     284     168     59%
----------------------------------------------------------------------------
Capital
 expenditures
 - $millions   10.6   10.7    (0.1)    (1%)    29.2    27.9     1.3      5%
----------------------------------------------------------------------------

(1) Cost of sales for 2008 and comparative periods exclude regional office
    administration.
(2) g/t means grams of gold per tonne.
(3) Total cash cost and total production cost are non-GAAP measures and are
    discussed under "Non-GAAP Measures". 
(4) (Excludes heap leach recovery.)


Third Quarter 2008 vs. Third Quarter 2007

Revenue and Gold Production

Although ounces sold decreased in the third quarter of 2008 to 51,019 from 61,808 in the same period of 2007, revenue in the third quarter of 2008 increased to $43.7 million from $42.2 million in the third quarter of 2007, due to the higher realized gold price. The realized gold price in the third quarter of 2008 was $857 per ounce compared to $684 per ounce in the same period in 2007 due to the higher gold spot prices.

Gold production at Boroo was 52,332 ounces in the third quarter of 2008 which was 6,625 ounces less than the third quarter of 2007 primarily resulting from lower grade ores and lower recovery. During the third quarter of 2008, the mill ore grade averaged 2.58 g/t with a recovery of 70.5% compared to mill ore grade of 3.61 g/t and recovery of 81.9% in the same quarter of 2007. The reduction of head grade reduced overall ounces poured by 17,359. This was partially offset by the start-up of heap leach operations in the third quarter resulting in 12,810 ounces produced. The Company is in discussions with Mongolian government agencies to extend the temporary heap leach permit and to get the final permits and approvals for the heap leach facility.

Cost of Sales

Cost of sales at Boroo for the third quarter of 2008 was $14.6 million compared to $12.8 million in the third quarter of 2007.

Cost of sales at Boroo increased by $1.8 million primarily due to increases in operating costs during the period partially offset by a reduction of ounces sold during the period.

The increase in operating costs was mainly due to the start up of the heap leach operations as well as price increases across commodities and rental costs. During the third quarter, the start-up of the heap leach facility increased overall operating costs by $1.7 million.

Higher diesel costs accounted for $2.1 million in increases ($4.1 million vs. $2.0 million for the same quarter last year). This was mainly due to an increase in diesel prices of 81% and a 10% increase in volumes resulting from increased heap leach activity. The price of explosive increased 99% ($1.4 million vs. $0.9 million for the same quarter last year) and mine rental costs were $1.3 million vs. $0.3 million for the same quarter last year. Major mine consumables costs increased primarily due to higher prices and higher consumption of mine consumables resulting from a 6% increase in material movement. Increased rental costs are a result of the requirement to increase stacking at the heap leach pad and substitute trucks for those out for rebuild.

Reagent costs increased to $1.6 million from $0.5 million for the same quarter last year. Mill consumables costs included a 35% price increase in cyanide as well as 24% price increase in grinding balls. Total heap leach reagent and other consumable costs increased the overall production costs for the quarter by $0.4 million.

These cost increases were partially offset by various cost decreases including; maintenance costs ($1.4 million vs. $2.1 million for the same period of last year), and contractors and consultants cost decrease ($0.8 million vs. $1.4 million for the same period of the last year).

Other cost increases included higher royalties of $0.1 million for the same quarter last year due to higher average realized sales prices as well as an increase in royalty rate. Royalties paid in respect of the Boroo operation increased as a result of amendments in the third quarter of 2007 to the stability agreement with the Mongolian Government which increased the royalty rate from 2.5% to 5% effective August 3, 2007. The ultimate impact of these cost changes on the reported results is dependent on the relative levels of capital and operating activities and the buildup or drawdown of inventories during the periods presented.

Depreciation, depletion and amortization increased by $0.9 million quarter-over-quarter for 2008 due to the addition of the heap leach facilities which commenced production in the third quarter of 2008.

Cost of sales per ounce sold increased to $286 from $207 for the third quarter of 2008. This reflects an increase in the operating costs as described above.
Total cash costs per ounce increased to $338 in the third quarter of 2008 from $280 in the third quarter of 2007 as a result of higher mill costs ($36 per ounce), and a reduction in ounces produced ($35 per ounce), partially offset by lower administration costs ($12 per ounce).

Exploration

Exploration expenditures in Mongolia totaled $0.8 million in the third quarter of 2008 compared with $0.5 million in 2007. The expenditures relate primarily to a more focused exploration program near the Boroo mine area and other areas with known mineralization.

Capital Expenditures

Capital expenditures in the third quarter of 2008 of $10.6 million included $3.0 million of sustaining capital and $7.6 million invested in growth capital primarily related to completing the construction of the heap leach facility ($2.5 million) and $5.0 million in capitalized pre-stripping of Pit 3.

First Nine Months of 2008 vs. First Nine Months of 2007

Revenue and Gold Production

Year to date revenue in 2008 increased to $134.9 million from $131.5 million during 2007 due to higher realized gold prices; $882 per ounce in 2008 vs. $663 per ounce in the same period of 2007 partially offset by lower sales volumes, 152,877 ounces in the nine months of 2008 compared to 198,278 ounces in the same period of 2007.

Gold production at Boroo was 145,136 ounces in 2008 which was 50,804 fewer ounces of gold than reported in 2007 primarily resulting from lower ore grades and recoveries. During the first nine months of 2008, the mill ore grade averaged 2.74 g/t with a recovery of 79.8% compared to 3.76 g/t and a recovery of 85.3% in the same period in 2007. Overall the reduction of head grade reduced overall ounces poured by 53,161. This was partially offset by the start-up of heap leach operations in the quarter which poured 12,810 ounces.

Cost of Sales

Cost of sales at Boroo for 2008 was $42.3 million compared to $31.4 million in 2007. The increase was primarily due to an increase in operating costs as well as the start-up of the heap leach facilities.

Cost of sales at Boroo increased $10.9 million. The reduction of ounces sold during the period of 45,401 resulted in a reduction of $13.0 million in cost of sales which partially offset production cost increases of $25.8 million.

The increase in operating costs of $9.6 million is mainly due to price increases across all consumables as well as increased rental costs, royalties and depreciation expense.

Increases in consumables costs of $9.5 million from the same period last year relates to diesel ($9.7 million vs. $5.3 million for the same period last year), explosives ($3.7 million vs. $1.9 million for the same period last year), reagent costs ($3.5 million vs. $1.2 million), and other consumables costs ($5.7 million vs. $4.6 million). Major mine consumables costs increased due to higher prices as well as higher consumption resulting from increased material movement. Increased mine rental costs of $3.3 million are a result of the requirement to increase mine production, increase stacking at the heap leach pad as well as replace equipment that was out of country for rebuild. Additionally the collective bargaining agreement, which was signed in February 2008, increased the national employees' salaries by 65% in 2008, resulted in salary costs increases of $2.2 million vs. the same period last year.

These operating cost increases were partially offset by cost decreases of $6.1 million from the same period last year including contractors and consultants' costs by $1.4 million and other operating expenses decrease by $1.7 million. In addition, the increased operating costs were offset by $4.1 million due to the capitalization of pre-stripping compared with the same period last year.

Higher royalties of $2.7 million for the same period last year are due to higher average realized sales prices as well as an increase in royalty rate. Royalties paid in respect of the Boroo operation increased as a result of amendments in the third quarter of 2007 to the Stability Agreement with the Mongolian Government which increased the royalty rate from 2.5% to 5% effective August 3, 2007. The overall rate change resulted in a cost of $3.3 million. In addition the higher overall realized gold price resulted in an increase in royalties of $0.6 million. This was partially offset by reduced ounces sold which resulted in a $1.2 million reduction in royalties.

The cost of sales per ounce sold increased to $277 compared to $158 for the same period in 2007. This reflects an increase in the operating costs, as described above.

Total cash costs per ounce increased to $353 in 2008 from $211 in 2007 primarily as the result of higher mining costs ($37 per ounce), higher milling costs ($22 per ounce), increased royalties ($16 per ounce) and a reduction in ounces produced ($74 per ounce) partially offset by a reduction in administration costs ($7 per ounce).

Exploration

Exploration expenditures in Mongolia totaled $1.8 million in 2008 compared with $1.1 million in 2007. The expenditures relate primarily to exploration programs near the Boroo mine area and other areas with known mineralization.

Capital Expenditures

Capital expenditures in 2008 of $29.2 million included $8.7 million sustaining capital and $20.5 million invested in growth capital primarily related to completing the construction of the heap leach facility ($8.1 million) and $12.5 million in capitalized pre-stripping of Pit 3.

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