Centerra Gold Records $108 Million Net Earnings and Generates $217 Million Cash from Operations and Exceeds 2018 Consolidated Gold Production and Cost

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Algemeen advies 23/02/2019 07:15
This news release contains forward-looking information that is subject to the risk factors and assumptions set out under “Caution Regarding Forward-looking Information”. It should be read in conjunction with the Company’s audited financial statements and the notes thereto for the year ended December 31, 2018. The consolidated financial statements of Centerra Gold Inc. are prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. All figures are in United States dollars and all production figures are on a 100% basis unless otherwise stated.
All references in this document denoted with NG, indicate a non-GAAP term which is discussed under “Non-GAAP Measures” and reconciled to the most directly comparable GAAP measure.

Toronto, Canada, February 22, 2019: Centerra Gold Inc. (“Centerra”) (TSX: CG) today reported fourth quarter 2018 net earnings of $49.0 million or $0.17 per common share (basic) on revenues of $391.5 million, including a charge of $41.8 million ($0.14 per share) in reclamation expenses mainly at the Thompson Creek Mine which is currently on care and maintenance. During the same period in 2017, the Company reported net earnings of $130.0 million or $0.45 per common share (basic) on revenues of $358.2 million, including a tax benefit of $21.3 million as a result of a change in tax legislation enacted in the U.S. Adjusted earningsNG in the fourth quarter of 2018 were $49.0 million or $0.17 per common share (basic) compared to $108.7 million or $0.37 per common share (basic), which excludes the tax benefit, in the same period of 2017.
For the full year 2018, the Company recorded net earnings of $107.5 million or $0.37 per share (basic) on revenues of $1.1 billion compared to $209.5 million or $0.72 per share (basic) on revenues of $1.2 billion in 2017. The decrease in earnings in 2018 reflect the impact from Mount Milligan operating at reduced capacity for a portion of the year due to a shortage of water resources, slightly lower gold production at Kumtor and a charge of $40.4 million in reclamation expenses as compared to the prior year. In 2018, the Company recorded a gain of $28.0 million on the sale of the gold royalty portfolio, $9.4 million gain on receipt of proceeds from the sale of the ATO property, partially offset by an asset impairment of $8.4 million related to the sale of the Mongolian business unit and $4.4 million of costs incurred as part of the acquisition of AuRico Metals Inc. in January 2018. Excluding these items, adjusted earningsNG in 2018 were $77.8 million or $0.27 per share (basic). The 2017 net earnings include charges for a settlement reached with the Kyrgyz Republic Government of $60 million, an impairment charge relating to the Company’s Mongolian assets of $41.3 million ($39.7 million net of tax), a tax benefit of $21.3 million due to new tax legislation enacted in the United States, and a gain of $9.8 million ($6.9 million net of tax) on the sale of the ATO property in Mongolia. Excluding these items, adjusted earningsNG in 2017 were $281 million or $0.96 per share (basic).

2018 Fourth Quarter and Full Year Highlights
• Exceeded Company-wide 2018 gold production guidance producing 729,556 ounces; Kumtor produced 534,563 ounces exceeding the upper end of its favourably revised guidance, whileMount Milligan produced 194,993 ounces achieving the upper end of its revised gold production guidance.
• Mount Milligan produced 47.1 million pounds of copper during 2018, which was at the upper end of the revised guidance despite the mill being temporarily shutdown until early February and operating at a reduced capacity as it ramped up, and operating at a reduced rate in the fourth quarter due to a shortage of water resources in the milling process.
• Cash generated from operations totalled $217.5 million for the year (including $291.0 million from Kumtor and $37.4 million from Mount Milligan). In the fourth quarter 2018 cash generated from operations was $151.6 million (including $149.6 million from Kumtor and $39.3 million from Mount Milligan).
• Outperformed the low-end of Company-wide 2018 guidance for all-in sustaining costs on a by-product basis per ounce soldNG at $754, excluding revenue-based tax in the Kyrgyz Republic and income tax ($576 per ounce sold in the fourth quarter 2018).
• Proven and probable gold mineral reserves total an estimated 14.2 million ounces of contained gold (706.3 Mt at 0.6 g/t gold) at year-end, reflecting 2018 mining depletion and the impact of the sale of the Company’s Mongolian business unit.
• Proven and probable copper mineral reserves total an estimated 2,465 million pounds of contained copper (555 Mt at 0.202% copper) at year-end, reflecting 2018 mining depletion and the impact of geological model changes.
• Closed the AuRicoMetals Inc. acquisition on January 8, 2018 and added the Kemess Project to the Company’s pipeline of projects.
• Started construction of the Öksüt Project in Turkey late-March, after receiving the pastureland permit, investment incentive certificate and Board approval. Construction was 38% complete at the end of 2018.
• On February 1, 2018, entered into a $500 million, four-year senior secured revolving credit facility with a lending syndicate of eight financial institutions as lenders, replacing prior facilities. See “Liquidity – Credit Facilities”.
• Sold the Company’s gold royalty portfolio on June 27, 2018 for $155 million, recognizing a gain of $28.0 million.
• Sold a silver stream on the Kemess Project on June 27, 2018 for $45 million with first of four stream payments to be received when a construction decision is made by the Board.
• Completed the sale of the Company’s Mongolian business unit on October 11, 2018 for net proceeds of $35 million.
• Received the final permit to allow construction of the Kemess Project on July 6, 2018, although a construction decision has not yet been made by the Board.
• Repaid net $105 million in 2018 on the Company’s credit facilities.
• Cash, cash equivalents, restricted cash and short-term investments at December 31, 2018 were $179.2 million.
Subsequent to December 31, 2018
• Extended long-stop date in connection with the Strategic Agreement with the Government of the Kyrgyz Republic to May 31, 2019.

Commentary
Scott Perry, President and Chief Executive Officer of Centerra stated, “As a result of the strong fourth quarter operating performance at both operations, the Company exceeded its overall 2018 production and cost guidance producing 729,556 ounces of gold at an all-in sustaining costNG on a by-product basis of $754 per ounce sold, beating the low-end of our all-in-sustaining cost guidance for the year. Kumtor had another strong year exceeding its revised production guidance and beating its all-in-sustaining cost guidance, delivering 534,563 ounces of gold production at an all-in-sustaining cost on a by-product basis of $694 per ounce sold. In 2018, Mount Milligan achieved the upper end of both its gold and copper production guidance, producing 194,993 ounces of gold and 47.1million pounds of copper and beat its all-in-sustaining cost guidance at all-in-sustaining cost on a by-product basis of $764 per ounce sold.
“Financially, the Company generated $336.6 million of cash from operations before changes in working capitalNG for the year, with both operations generating a meaningful amount of cash from operations before changes in working capitalNG, Mount Milligan generated $63.1 million and Kumtor generated $345.0 million. In 2018, Kumtor generated $128 million of free cash flowNG and Mount Milligan generated $2.5 million which enabled the Company to aggressively pay down its debt in the fourth quarter by approximately $139 million ($105 million over the 2018 year) ending the year with net debt of $46.0 million (excluding restricted cash).”
“For 2019, we are estimating consolidated gold production to be in the range of 690,000 to 740,000 ounces and 65 million to 75 million pounds of payable copper production from Mount Milligan. The guidance assumes reduced mill throughput in the first quarter of 2019 atMountMilligan to properly manage its water balance until the spring melt runoff. Gold production at Kumtor is expected to be evenly weighted for the first three quarters of the year with the fourth quarter representing approximately 28% of the full year’s production forecast. Centerra’s projected consolidated all-in sustaining cost per ounce soldNG net of copper by-product for 2019 is expected to be in the range of $723 to $775 per ounce.”
“Our projected capital expenditures for 2019, excluding capitalized stripping, is estimated to be $275 million which includes $91 million of sustaining capitalNG and $184 million of growth capitalNG spending. Growth capital spending includes $123 million at the Öksüt Project in Turkey as we complete the construction of our next gold mine with an expected first gold pour to be in the first quarter of 2020, $26 million at the Kemess Underground Project and $21 million at the Greenstone Gold Property on pre-construction activities.” See “2019 Outlook” for further details.

This Management Discussion and Analysis (“MD&A”) has been prepared as of February 22, 2019, and is intended to provide a review of the financial position and results of operations of Centerra Gold Inc. (“Centerra” or the “Company”) for the three and twelve months ended December 31, 2018 in comparison with the corresponding periods ended December 31, 2017. This discussion should be read in conjunction with the Company’s audited financial statements and the notes thereto for the year ended December 31, 2018 prepared in accordance with International Financial Reporting Standards (“IFRS”). In addition, this discussion contains forward-looking information regarding Centerra’s business and operations. Such forward-looking statements involve risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by such forward looking statements. See “Risk Factors” and “Caution Regarding Forward-Looking Information” in this discussion. All dollar amounts are expressed in United States dollars (“USD”), except as otherwise indicated. Additional information about Centerra, including the Company’s most recently filed Annual Information Form, is available at www.centerragold.com and on the System for Electronic Document Analysis and Retrieval (“SEDAR”) at www.sedar.com.
Overview
Centerra is a Canadian-based gold mining company focused on operating, developing, exploring and acquiring gold properties worldwide and is one of the largest Western-based gold producers in Central Asia. Centerra’s principal operations are the Kumtor Gold Mine located in the Kyrgyz Republic and the Mount Milligan Gold-Copper Mine located in British Columbia, Canada. The Company is currently constructing its next gold mine, the Öksüt Project in Turkey and has two promising development properties in Canada as well as exploration joint ventures or properties in Canada, Finland, Mexico, Sweden, Turkey and the United States.
Centerra’s common shares are listed for trading on the Toronto Stock Exchange under the symbol CG. As of February 22, 2019, there are 292,123,716 common shares issued and outstanding and options to acquire 4,981,701 common shares outstanding under its stock option plan.
As of December 31, 2018, Centerra’s significant subsidiaries are as follows:

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AND
Centerra Gold 2018 Year-End Statement of Mineral Reserves and Resources and Fourth Quarter Exploration Update
This news release contains forward-looking information that is subject to risk factors and assumptions set out in the Cautionary Note Regarding Forward-looking Information on page 13. All figures are in United States dollars unless otherwise stated.
Toronto, Canada, February 22, 2019: Centerra Gold Inc. (“Centerra”) (TSX: CG) today issued its 2018 year-end estimates for mineral reserves and mineral resources. 2018 year-end mineral reserves have been estimated based on a gold price of $1,250 per ounce and a copper price of $3.00 per pound.
Highlights:
• Measured and indicated gold mineral resources increased by 2.1 million ounces of contained gold, excluding the impact of the sale of the Company’s Mongolian business unit (933,000 contained ounces), to 11.3 million ounces of contained gold (758.8 million tonnes (Mt) at 0.5 g/t gold), exclusive of gold mineral reserves.
• Proven and probable gold mineral reserves total 14.2 million ounces of contained gold (706.3 Mt at 0.6 g/t gold) a decrease of 782,000 ounces of contained gold, excluding the impact of the sale of the Company’s Mongolian business unit (1.3 million contained ounces).
• Measured and indicated copper mineral resources increased by 296 million contained pounds to 5,836 million pounds of contained copper (1,090 Mt at 0.243% copper), exclusive of copper mineral reserves.
• Proven and probable copper mineral reserves total an estimated 2,465 million pounds of contained copper (555 Mt at 0.202% copper).
Year-end Gold Mineral Reserves and Mineral Resources
Mineral Reserves
At December 31, 2018, proven and probable gold mineral reserves total an estimated 14.2 million contained ounces (706.3 Mt at 0.6 g/t gold), compared to 16.3 million contained ounces (746.8 Mt at 0.7 g/t gold) the prior year. During 2018, proven and probable gold mineral reserves decreased by 2.1 million contained ounces, after processing of 977,000 contained ounces and a net deletion of 1.1 million contained ounces. The decrease in gold mineral reserve contained ounces is primarily due to the Company’s sale of the Mongolian business unit (Gatsuurt Project) that represented 1.3 million contained ounces of mineral reserves. Excluding the impact of the sale of the Company’s Mongolian business unit gold mineral reserves decreased by 782,000 contained ounces in 2018. The 2018 year-end gold mineral reserves have been estimated using a gold price of $1,250 per ounce.
At the Kumtor Mine, in the Kyrgyz Republic, at the end of December 2018, proven and probable gold mineral reserves total an estimated 4.0 million ounces of contained gold (51.6 Mt at 2.4 g/t gold), compared to 4.5 million contained ounces (57.1 Mt at 2.4 g/t gold) as at December 31, 2017. During 2018, proven and probable gold mineral reserves decreased by 471,000 contained ounces, after accounting for processing of 668,000 contained ounces in 2018, of which 11,000 contained ounces came from processing gold-bearing carbon fines, and further offset by a 24,000 ounce positive reconciliation from the Central Pit stockpiles and a 162,000 ounce positive reconciliation to the resource model in the Central Pit.
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In Canada, at the Mount Milligan Mine, proven and probable gold mineral reserves total an estimated 4.7 million ounces of contained gold (447.6 Mt at 0.3 g/t gold) as at December 31, 2018, compared to 5.1 million contained ounces gold (467.9 Mt at 0.3 g/t gold) at the end of December 2017. For 2018, proven and probable gold mineral reserves decreased by 401,000 contained ounces of gold, after processing 309,000 contained ounces of gold and the impact of various model adjustments made in 2018.
At the Kemess Property, in Canada, the proven and probable gold mineral reserves at the Kemess Underground Project are unchanged at an estimated 1.9 million contained ounces (107.4 Mt at 0.5 g/t gold) at the end of December 2018.
At the Company’s 50% owned Greenstone Gold Property, in Canada, the proven and probable gold mineral reserves at the Hardrock Project are unchanged at an estimated 2.3 million contained ounces (Centerra’s share) (70.8 Mt at 1.0 g/t gold) at the end of December 2018.
In Turkey, at the Öksüt Project, proven and probable gold mineral reserves total an estimated 1.3 million ounces of gold (28.8 Mt at 1.4 g/t gold) at the end of December 2018, up from the estimated 1.2 million ounces of gold (28.2 Mt at 1.3 g/t gold) as at December 31, 2017. The proven and probable gold mineral reserves increased by 91,000 contained ounces, because of 16 new drill holes that were included in the resource model for 2018. The drill holes were primarily completed to further delineate in-pit mineralization within the Keltepe open pit.
Due to the Company’s recent divestiture in 2018 of its Mongolian assets, an estimated 1.3 million ounces of contained gold have been removed from the proven and probable gold mineral reserves attributable to the sale of the Gatsuurt Project (15.4 Mt at 2.7 g/t gold).
Mineral Resources
Measured and indicated gold mineral resources, exclusive of gold mineral reserves, increased by 2.1 million ounces of contained gold, excluding the impact of the sale of the Company’s Mongolian business unit (993,000 contained ounces), to 11.3 million ounces of contained gold (758.8 Mt at 0.5 g/t gold), compared to the December 31, 2017. The increase is a result of exploration success at Kumtor and Mount Milligan and changes in the metal price assumptions at the Kemess Project.
At Kumtor, measured and indicated gold mineral resources increased by 330,000 contained ounces to 3.0 million contained ounces of gold (32.2 Mt at 2.9 g/t gold) due to the inclusion of exploration results from the 2018 drilling campaign and from the generation of a new open pit shell that constrained the resource.
At the Mount Milligan Mine 860,000 contained ounces of gold were added to measured and indicated gold mineral resources in 2018 as a result of the successful drilling program and now measured and indicated gold mineral resources total 2.7 million ounces of contained gold (342.2 Mt at 0.2 g/t gold).
At the Kemess Underground and Kemess East projects a re-estimation of the measured and indicated gold resources was completed to unify our resources on the same metal price basis, using metal prices assumptions of $1,450/oz gold and $3.50/lb copper (previously $1,275/oz gold and $3.20/lb copper). After the change to metal prices and exchange rate changes (previously US$1:C$1.32, now US$1:C$1.25) Kemess Underground and Kemess East measured and indicated gold ounces increased by 277,000 and 625,000 contained ounces respectively.
Inferred gold mineral resource estimate totals 6.2 million contained ounces of gold (151.3 Mt at 1.3 g/t gold), a decrease of 629,000 contained ounces from December 31, 2017. The decrease is primarily a result of the reduction of 511,000 of contained ounces of gold as a result of the divestiture of the Mongolian assets in 2018. In addition, at Kemess East inferred mineral resources decreased by 357,000 contained ounces of gold from additional drilling that converted a portion of the inferred ounces to the indicated category. At Kumtor inferred
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mineral resources increased by 8,000 contained ounces because of exploration drilling and the generation of a new constraining economic pit shell. At Öksüt additional in-fill drilling in the Keltepe open pit converted 58,000 contained ounces to the measured and indicated categories. These decreases were offset by the addition of 252,000 contained ounces at the Kemess Underground project due to the change in resource metal prices assumptions.
Year-end Copper Mineral Reserves and Mineral Resources
Mineral Reserves
Proven and probable copper mineral reserves total an estimated 2,465 million pounds of contained copper (555 Mt at 0.202% copper). The copper mineral reserves have been estimated based on a copper price of $3.00 per pound for the Mount Milligan Mine and the Kemess Underground Project.
At the Mount Milligan Mine, proven and probable copper mineral reserves total an estimated 1,836 million pounds of contained copper (448 Mt at 0.186% copper) at the end of December 2018, compared to 1,938million contained pounds of copper (468 Mt 0.188% copper) as of December 31, 2017. Proven and probable copper mineral reserves decreased by 103 million contained pounds of copper, after processing 61 million contained pounds of copper in 2018. During 2018, mineral reserves decreased primarily due to mining depletion, but was also affected by geological model changes, modifications to the copper recovery curve and an increase in concentrate transportation costs.
At the Kemess Property, proven and probable copper mineral reserves are unchanged at the Kemess Underground Project and are estimated to be 630million pounds of contained copper (107 Mt at 0.266% copper) at the end of December 2018.
Mineral Resources
Measured and indicated copper mineral resources, exclusive of mineral reserves, total an estimated 5,836 million pounds of contained copper (1,090 Mt at 0.243% copper). The copper mineral resources are located at the Mount Milligan Mine, the Berg Property, the Kemess Underground, and Kemess East properties that are all located in Canada.
At Mount Milligan, measured and indicated mineral resources increased by 365 million pounds of contained copper to an estimated 1,028 million pounds of contained copper (342 Mt at 0.136% copper) at the end of December 2018 as a result of successful exploration drilling activities in 2018 and have been estimated based on a copper price of $3.50 per pound.
Measured and indicated resources that are exclusive of reserves increased by an estimated 588 million contained copper pounds at the Kemess Project. This increase in copper pounds is attributable to an increase of 132 million pounds of contained copper at Kemess Underground that was due to a change to the metal price assumptions (changed to standardize them across our sites) and an increase of 456 million pounds of contained copper at Kemess East because of the standardization of corporate metal prices and the addition of 9 exploration drill hole results that converted inferred material to the indicated category. The Kemess Underground measured and indicated resources are 174 Mt at 0.182% copper or an estimated 697 million pounds of contained copper and Kemess East measured and indicated resources of 178 Mt at 0.360% copper or an estimated 1,410 million pounds of contained copper.
Centerra’s inferred copper mineral resource estimate totals 607 million pounds of contained copper (132 Mt at 0.209% copper). This includes atMount Milligan an estimated 115 million pounds of contained copper (41 Mt at 0.127% copper) that represents a year-over-year increase of 4 million pounds of contained copper that is attributable to additional in-pit drilling completed in 2018. At Kemess Underground this includes 210 million pounds of contained copper (48 Mt at 0.20% copper) and at Kemess East 203 million pounds of contained copper (29 Mt at 0.31%).

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