Centerra Gold Reports Second Quarter Results
* Reuters is not responsible for the content in this press release.
TORONTO, ONTARIO, Jul 30 (MARKET WIRE) --
(This news release contains forward-looking information that is subject
to the risk factors and assumptions set out on page 13 and in our
Cautionary Note Regarding Forward-looking Information on page 17. All
figures are in United States dollars).
Centerra Gold Inc. (TSX: CG) today reported a second quarter loss before
unusual items of $30.3 million or $0.14 per common share based on
revenues of $104.3 million compared to earnings before unusual items of
$13.8 million or $0.06 per common share on revenues of $142.6 million in
the same quarter of last year.
After reflecting unusual items of $49.3 million (expense) in the second
quarter of 2009, the net loss was $79.6 million, or $0.36 per share,
compared to net earnings of $56.0 million, or $0.26 per share which
included unusual items of $42.2 million (gain) in the same period of
2008. The unusual items relate to the Agreement on New Terms for the
Kumtor Project among the Company, Cameco Corporation ("Cameco"), the
Government of the Kyrgyz Republic (the "Government"), Kumtor Operating
Company and Kumtor Gold Company (the "Agreement on New Terms"), which was
previously announced on April 24, 2009.
Consolidated gold production for the second quarter of 2009 totalled
110,457 ounces at a total cash cost of $667 per ounce produced compared
to 158,303 ounces at a total cash cost of $489 per ounce produced in the
corresponding quarter of 2008. Revenue-based taxes have been removed from
total cash costs for both periods to reflect the establishment of
Kumtor's new tax regime. Cash used in operations, net of working capital
changes was $17.3 million in the second quarter of 2009 compared to $10.6
million of cash provided in the second quarter of 2008. The second
quarter 2009 amount includes the $22.4 million cash settlement to the
Kyrgyz government as settlement due on the completion of the Agreement on
New Terms. (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.)
On June 11, 2009, the Company announced the closing of the transactions
contemplated by the Agreement on New Terms and the satisfaction of all of
the conditions to closing, including parliamentary approval, the
execution of binding project agreements, regulatory approvals and the
termination of all proceedings in the Kyrgyz courts and in international
arbitration with respect to the Kumtor Project.
The Company confirms that as part of the closing, it issued from treasury
18,232,615 common shares of Centerra to Kyrgyzaltyn JSC ("Kyrgyzaltyn"),
a company wholly-owned by the Government of the Kyrgyz Republic and a
related party, which brings Centerra's total issued and outstanding
shares to 234,857,228. As well, Cameco has agreed to transfer to the
Government between 14.1 and 25.3 million common shares of Centerra, which
are to be released to the Government upon satisfaction of certain
conditions. Until that time Cameco retains voting control over
approximately 52.7% of the issued and outstanding shares of Centerra.
Second Quarter Highlights
- Closed the Agreement on New Terms with respect to the Kumtor Project
- Operating licenses at Boroo mine were suspended on June 12, 2009. On
July 27, 2009 the suspension was lifted for mining and milling operations
- Labour dispute with the Boroo mine Trade Union was settled on June 16,
2009
- Drilling has extended the Kumtor SB Zone 270 metres along strike to the
southwest of previous exploration drilling. All holes intersected
significant widths and grades of mineralization. These holes will extend
the resource model
- Production guidance for 2009 for Kumtor remains unchanged
- Consolidated production guidance lowered to reflect changes to Boroo's
production outlook
Commentary
"The Company is pleased that the Agreement on New Terms closed in the
quarter, which allows Centerra to get back to exploring and developing
the Kumtor mine to its fullest potential. Unfortunately just as we were
resolving the labour issue at the Boroo mine the Minerals Resources
Authority of Mongolia (MRAM) suspended our main operating licenses at
Boroo. However, on July 27, the suspension at Boroo was lifted for mining
and milling. We expect mining and milling activities at Boroo to be fully
operational by August 1," said Steve Lang, President and CEO of Centerra
Gold.
Financial and Operating Summary
Revenues for the second quarter of 2009 were $104.3 million compared to
$142.6 million during the same period one year ago. Second quarter 2009
revenue reflects a 28% reduction in ounces sold partially offset by a 2%
increase in realized gold price ($905 per ounce in the second quarter of
2009 versus $889 per ounce in the second quarter of 2008) in the period.
The Company produced a total of 110,457 ounces of gold in the second
quarter of 2009, compared to 158,303 ounces of gold produced in the
second quarter of 2008. Gold production was 27% and 39% lower than the
comparative period at Kumtor and Boroo, respectively. At Kumtor lower
grades and recoveries resulted in lower gold production, while at Boroo
the labour disruption and license suspension impacted gold production.
Centerra's total cash cost per ounce produced reflecting the Agreement on
New Terms was $667 in the second quarter compared to $489 in the second
quarter of 2008. The year-over-year increase in unit cash costs was
primarily due the impact of lower gold production which increased unit
cash cost by $212 per ounce, see "Operations Update". (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 June 30,
2009, issued in conjunction with this news release.)
At Kumtor, revenue-based taxes are payable to the Kyrgyz Government under
the Agreement on New Terms at a rate of 13% of gross revenue, with an
additional contribution of 1% of gross revenue to the Issyk-Kul Oblast
Development Fund. This agreement received the approval of the Kyrgyz
Parliament on April 30, 2009, which is considered to be the date of
substantial enactment. The relevance of this date is that, from an
accounting perspective, the old tax regime is applied to the period prior
to April 30, even though the agreement specified that the new tax regime
will be applicable from January 1, 2008. The payments or refunds
calculated by the retroactive application of the Agreement on New Terms
are accounted for in unusual items on the financial statements. The tax
balances at April 30, 2009, generated under the old agreement have been
written off, either through unusual items (current taxes) or income tax
expense (future tax asset). Revenue-based taxes for the months of May and
June 2009 totalled $5.3 million.
The restated project agreements at Kumtor provide for an annual payment
of 4% of gross revenue against which all capital and exploration
expenditures in the Kyrgyz Republic are fully credited. Expenditures not
applied for credit in the year are carried forward for credit in future
years. As at June 30, 2009 the excess spent by the Company on capital and
exploration over the required 4% of gross revenue is $41.2 million. See
Other Corporate Developments - Kyrgyz Republic".
During the second quarter of 2009 a loss before unusual items was
recorded of $30.3 million or $0.14 per common share, compared to earnings
before unusual items of $13.8 million or $0.06 per common share for the
same period in 2008, reflecting reduced gold production and sales volumes.
The strengthening of the Mongolian tugrik compared to the U.S. dollar
resulted in an unrealized taxable loss in the quarter from the
revaluation of Boroo's local currency denominated financial statements.
As a result, the Company recorded an income tax recovery of $2.4 million
in the quarter, reducing a tax liability with respect to an earlier
weakening of the Mongolian tugrik during the first quarter. This
liability would only become payable upon realization of the gain.
Cash used in operations was $17.3 million for the second quarter of 2009
compared to cash provided of $10.6 million for the prior year second
quarter. The decrease reflects the settlement payments required by the
Agreement on New Terms of $22.4 million and the lower earnings, partially
offset by reduced working capital levels.
Capital expenditures spent and accrued in the second quarter of 2009
amounted to $17.7 million of which $11.1 million was spent on sustaining
capital projects. Centerra's cash position at the end of June 2009 was
$120.4 million, compared to cash and short-term investments of $167.4
million at December 31, 2008.
Exploration expenditures for the second quarter were $4.1 million dollars
compared to $5.1 million in the second quarter of 2008 reflecting lower
spending at Kumtor and an increase in spending on new joint venture
projects.
Other Corporate Developments
Kyrgyz Republic
On April 24, 2009, the Company announced that it had entered into the
Agreement on New Terms with the Government and Cameco that resolves all
of the existing disputes between the Company, Cameco and the Government
with respect to the Kumtor Project. On April 30, 2009, the Company
announced that the Kyrgyz Parliament had ratified the Agreement on New
Terms and enacted legislation authorizing its implementation including
the new tax regime.
The Agreement on New Terms provides for the Government's full commitment
to and support for the Company's continuing long-term development of the
Kumtor Project and the Government has agreed not to take any action that
deprives the Company of any of its rights in respect of the Kumtor
Project.
On June 11, 2009, the Company announced the closing of the transactions
contemplated by the Agreement on New Terms and that the parties had
executed restated project agreements to incorporate the provisions of the
Agreement on New Terms including providing for the settlement of all
outstanding claims between them including those currently the subject of
international arbitration as well as for the expansion of the Company's
existing concession area to include the area of its exploration and
development license. The Government will also support further and
additional exploration activity by the Company in the Kyrgyz Republic by
inviting it to consider opportunities to acquire additional exploration
and mining licenses. Taxes applicable to the Kumtor project have been
replaced with a simplified, new tax regime effective January 1, 2008.
Under the new tax regime, gross revenue will be taxed at a rate of 14%,
which includes a 1% monthly contribution to the Issyk-Kul Oblast
Development Fund. The new tax regime replaces income tax (10% of taxable
income), mineral resource tax (5% of revenue), emergency fund tax (1.5%
of revenue), road tax (0.8% of revenue), withholding taxes (10-30%
depending on the nature of the payment), the Issyk-Kul Social Fund tax
(2-4% of taxable income), all custom duties and certain other taxes.
The restated project agreements provide for an annual payment of 4% of
gross revenue against which all capital and exploration expenditures in
the Kyrgyz Republic are fully credited. Expenditures not applied for
credit in the year are carried forward for credit in future years.
The Company paid the Government, a related party, approximately $22.4
million comprised of: (i) an $11.0 million difference between the taxes
paid under the existing tax regime and the taxes that would have been
payable under the new tax regime for the period from January 1, 2008 to
December 31, 2008, (ii) $1.75 million in full satisfaction of all
liabilities or claims of any governmental authority against the Company
or any of its affiliates in respect of any matter arising before the
closing of the transactions contemplated by the Agreement on New Terms
and (iii) an advance on taxes of approximately $9.65 million related to
2009.
The Company has issued to the Government 18,232,615 common shares from
its treasury and Cameco has agreed to transfer to the Government up to
25,300,000 common shares of the Company, which are to be released to the
Government upon the satisfaction of certain conditions, including, among
other things, if Cameco's interest in the Company falls below 10,800,000
common shares. Until that time Cameco retains voting control over
approximately 52.7% of the issued and outstanding shares of Centerra. No
restrictions have been placed on the Company's ability to issue common
shares in the future. The Agreement on New Terms contemplates that the
Company's Board of Directors will be expanded to include an additional
independent director nominated by the Kyrgyz Government.
After closing of the transactions and upon the satisfaction of all
conditions to the transfer of shares by Cameco, the Kyrgyz Government
could own up to 33.0% of the Company, Cameco 37.8% and the balance,
29.2%, would be held by the remaining shareholders.
Mongolia
On May 26, 2009, unionized employees initiated an illegal work stoppage
at the Boroo Mine, which resulted in a temporary suspension of mining and
milling. The labour dispute with the Boroo Trade Union was settled on
June 16, 2009, but mining and milling remained suspended as a result of
the license suspensions discussed below. The key terms of the settlement
provide enhanced future redundancy benefits to permanent employees. The
Company believes the settlement will not have a material impact on future
cash costs.
As disclosed on June 12, 2009, the Company received a notice from the
Minerals Resources Authority of Mongolia suspending the Boroo Mine's main
operating licenses for a period up to three months. During June and July,
the Company worked with the relevant regulatory authorities in Mongolia
to understand the concerns raised by them. The Company announced on July
27, 2009 that the suspension had been lifted for the mining and milling
operations. The Company is continuing its discussions with the regulatory
authorities regarding their concerns. The mine stopped adding cyanide to
the heap leach pad at the end of April 2009 due to the expiry of the
temporary operating permit for the heap leach operation. The Company had
been awaiting the final operating permit for the heap leach facility when
Boroo's main operating licenses were suspended on June 12, 2009. The
Company continues to work with the Mongolian authorities to obtain the
final heap leach operating permit.
Centerra continued discussions with the government working group with
respect to an investment agreement for the Gatsuurt Project.
Operations Update
Kumtor
At the Kumtor mine, gold production was 81,467 ounces in the second
quarter of 2009 representing a 27% decrease from the same quarter in
2008. The decrease is the result of lower ore production, ore grades and
recovery. Mine ore production for the quarter was 39% lower than the
previous year primarily as a result of activities related to the
accelerated mining of ice and the removal of waste in the vicinity of the
central pit. The reduced ore production from the pit resulted in lower
grade stockpile material being fed to the mill. The mill head grade
averaged 2.60 g/t with a recovery of 66.0% in the second quarter of 2009,
compared to 3.41 g/t with a recovery of 76.3% in the same quarter of 2008.
Total cash cost per ounce, a non-GAAP measure of production efficiency,
increased to $723 in the second quarter of 2009 from $540 in the second
quarter of 2008. The significant increase in cash cost over the second
quarter of 2008 was due to the lower production. The impact of lower gold
production increased unit cash cost by $197 per ounce. Total operating
costs including mining, milling and administration decreased by $1.1
million over the second quarter of 2008, which represents a reduction of
$14 per ounce on unit cash costs.
Exploration expenditures totaled $2.3 million for the second quarter of
2009, a decrease from the $3.6 million reported in the second quarter
2008. Drilling productivity improved resulting in lower costs, in
addition to the reduced drilling program in 2009.
Capital expenditures in the second quarter of 2009 totalled $17.4 million
compared to $10.9 million in the prior year. This consisted of $11.0
million of sustaining capital, including expenditures on the heavy duty
equipment overhaul program ($5.1 million). Other sustaining capital
expenditures included the purchase of a bull gear for the ball mill ($2.1
million) and the continuing construction of the shear key and tailings
dam ($2.2 million). Growth capital investment totaled $6.4 million spent
mainly on the SB zone underground development including expenditures for
construction of the decline and construction of the overhead power line
($4.2 million).
There has been 568 meters of development completed on the SB Zone
development access drift. The planned turn of the development to align
the decline with the SB Zone structure in the hanging wall occurred in
the second quarter and underground exploration drilling has commenced.
Kumtor Production Update
At the Kumtor mine, 2009 gold production is estimated to be in the range
of 560,000 - 600,000 ounces. During the second quarter, mining of the
waste/ice dump material continued ahead of the planned schedule as a
result of the acceleration of portions of the southeast waste/ice dump.
While the production for the quarter is slightly below expectations due
to the later release of higher grade ores from the SB Zone, the higher
grade ore is expected to be in production for the balance of the year.
Kumtor gold production for the third and fourth quarters remains on plan
and full year gold production guidance remains unchanged.
During the second quarter of 2009 mining at Kumtor exposed the unfrozen
glacial till. The till layer responded positively to the on-going
depressurization and dewatering programs, which are fully operational and
extracting water from the pit area. The pit wall angles in most sectors
of the pit have improved and have been steepened as a result of the
depressurization and dewatering program. One sector in the South wall
requires further off-loading of waste and improved dewatering, however,
the Company believes this is manageable with the present mobile equipment
fleet. The planned replacement of the ball mill gear and relining of the
SAG mill has been rescheduled to first quarter 2010.
As a result of events described below, the production profile for
Kumtor's open pit operation has been revised compared to Centerra's
Technical Report dated March 28, 2008 (the "2008 Technical Report") and
accordingly the Company is providing a revised three-year production
estimate.
Three-Year Estimated Kumtor Gold Production
----------------------------------------------------------------------------
Revised Production Average Stripping
Year Estimate (ounces) Mill Grade Recovery Ratio
----------------------------------------------------------------------------
2009 560,000 - 600,000 3.86 g/t 75.8% 22.2:1
----------------------------------------------------------------------------
2010 553,000 3.91 g/t 79.3% 25.1:1
----------------------------------------------------------------------------
2011 553,000 3.71 g/t 78.4% 24.9:1
----------------------------------------------------------------------------
2012 640,000 4.19 g/t 80.9% 22.2:1
----------------------------------------------------------------------------
Adjustments have been made to the estimate in the 2008 Technical
Report to reflect the following: (1) the access to the Sarytor deposit
has been rescheduled for 2012; (2) the decrease in reserves resulting
from the changes made to the resource/reserve model primarily the
lowering the "top cut", or "capping" assays (see "Kumtor Mine - Kumtor
Reserve and Resource Estimates - Central Deposit Block Model" in the
Company's 2008 AIF); and (3) changes in mine sequencing to incorporate
new geotechnical information into the pit design (see " Kumtor Mine -
Mining Operations - Mining" in the Company's 2008 AIF).
The production profile for the period 2009 to 2012 in the 2008 Technical
Report was 2009 - 697,000 ounces, 2010 - 706,000 ounces, 2011 - 452,000
ounces and 2012 - 608,000 ounces. The reduction in the amount of gold
expected to be recovered in 2009 and 2010 compared to the estimate
provided in the 2008 Technical Report is expected to be recovered in
subsequent years. The foregoing production estimate and certain
statements of Centerra's plans and expectations for production at Kumtor,
including estimated grade and recovery are forward-looking information
and are based upon the following key assumptions and subject to the
following factors that could cause results to differ materially:
- the planned 2-week shutdown of the Kumtor mill in the first quarter of
2010 to change the ball mill ring gear and SAG mill liner is successfully
completed on time;
- the dewatering and depressurization programs at Kumtor continues to
function properly and the water management system works as planned;
- that high wall movements continue to be managed by the activities of
the mine;
- that Centerra receives all necessary permits and authorizations,
including environmental permits and authorizations from governmental
authorities of the Kyrgyz Republic, in a timely fashion and on acceptable
terms to maintain scheduled production; and
- The Kumtor mine's remaining mine life including the three-year
production estimate above does not take into account any underground
development or mining of the SB and Stockwork Zones, which lies below the
current pit design. A decision to commence underground mining of the SB
Zone or the Stockwork Zone resources will be considered as drilling
results become available in 2009 and 2010. See "Kumtor Reserve and
Resource Estimates - SB Zone Underground" in the Company's 2008 AIF.
The AIF and technical report have been filed on SEDAR and are available
at www.sedar.com.
Centerra has assumed there will be no material unexpected disruptions to
its planned production schedule, but Centerra's operations at Kumtor are
subject to risks and other factors that could cause actual results to
differ materially. For a further discussion of the factors that could
cause actual results to differ materially, please refer to "Risk Factors"
in Centerra's 2008 Annual Management's Discussion and Analysis and to
Centerra's 2008 Annual Information Form including the section titled
"Risk Factors", available on SEDAR at www.sedar.com. For information on
forward-looking information see "Cautionary Note Regarding
Forward-Looking Information".
Boroo
At the Boroo mine, gold production was 28,990 ounces in the second
quarter of 2009, 18,149 ounces lower than the second quarter of 2008.
Gold production was impacted by the mine not being able to process
approximately 16,000 planned ounces due to the labour interruption which
commenced on May 26, 2009 and the subsequent license suspension. Reduced
ore grades (2.48 g/t in the second quarter 2009 versus 2.92 g/t in the
second quarter 2008) and lower recovery (68.7% compared to 83.5%)
resulted in a reduction of mill poured ounces of 11,782 ounces which was
partially offset by 9,370 ounces recovered from heap leach production
(heap leach production commenced in June 2008).
The mine stopped adding cyanide to the heap leach pad at the end of April
2009 due to the expiry of the temporary operating permit for the heap
leach operation. The Company had been awaiting the final operating permit
for the heap leach facility when Boroo's main operating licenses were
suspended on June 12, 2009. The Company continues to work with the
Mongolian authorities to obtain the final heap leach operating permit.
Although the suspension of Boroo's main operating licenses has been
lifted on July 27, 2009, the Company is continuing its discussions with
the regulatory authorities regarding their concerns. Boroo expects to
resume full mining and milling operations by the end of July. See "Other
Corporate Developments - Mongolia". The recovery of gold at Boroo has
been negatively affected by the changing metallurgical nature of ore in
pit 3 which is becoming more refractory and more sulphidic ores are being
mined compared to the oxide ores mined in the prior year.
Total cash costs per ounce produced, a non-GAAP measure of production
efficiency, increased to $511 in the second quarter of 2009 from $370 in
the second quarter of 2008. The increase results primarily from the
impact of the strike and production shutdown. If the strike and
production costs since the shutdown are excluded, the second quarter of
2009 cash cost per ounce produced would have been $396.
During the second quarter of 2009, exploration expenditures in Mongolia
remained virtually unchanged year over year at $0.5 million. Capital
expenditures in the second quarter of 2009 were $0.1 million compared to
$10.7 million in the same quarter of 2008. The reduction is mainly due to
more significant expenditures in the second quarter of 2008 for
pre-stripping costs in pit 3 amounting to $4.6 million, and completing
the construction of the heap leach amounting to $2.4 million.
Exploration Update
Kyrgyz Republic
Kumtor Drilling
In the second quarter of 2009 the exploration drilling program continued
in the Kumtor Central Pit. The drilling program focused on continuing the
40 to 80 metre spaced holes to confirm the grade and extent of potential
high-grade underground mineable mineralization in the Stockwork Zone
below the current planned open pit. Drilling also continued testing the
southwest extension of the SB Zone within and outside of the current
planned open pit. In addition wide-spaced drill testing for strike and
down dip extensions to the main mineralized horizons in the Saddle Zone
of the Central Pit and the relatively untested area to the northeast of
the Central Pit high-wall continued.
Three additional holes were completed to test the down dip continuity and
depth extensions of high grade mineralization intersected in the
Stockwork Zone in the Central Pit area. Results continue to be very
encouraging. Some of the better intercepts are 5.6 g/t Au over 16.1
metres, including 7.9 g/t Au over 10.1 metres in hole D1323A and 6.8 g/t
Au over 14.3 metres, including 25.9 g/t Au over 2.8 metres in hole D1332.
These results, along with those from previous drilling, have outlined a
high-grade mineralized zone over a strike length of more than 400 metres
and down dip for up to 300 metres from the bottom of the planned KS9 pit
design. The results are confirming the excellent potential for a
high-grade underground deposit that is open both along strike and down
plunge to the northeast.
Nine drill holes were completed in the second quarter of 2009 to test the
southwest extension of the SB Zone within and beyond the current planned
open pit. All of the holes intersected significant widths and grades of
mineralization with some of the better intercepts being:
Hole D1325: 4.5 g/t Au over 15.4 metres,
-----------
Hole D1327: 6.7 g/t Au over 25.0 metres, including 11.4 g/t Au over 12.3
----------- metres,
Hole D1331: 16.1 g/t Au over 28.0 metres,
-----------
Hole D1333: 3.1 g/t Au over 47.0 metres, including 13.7 g/t Au over 3.0
----------- metres,
Hole D1336: 4.5 g/t Au over 34.8 metres, including 14.5 g/t Au over 3.2
----------- metres,
Hole D1337: 2.9 g/t Au over 21.3 metres,
-----------
Hole D1340: 6.4 g/t Au over 38.4 metres, including 10.1 g/t Au over 5.7
----------- metres and
22.8 g/t Au over 3.8 metres,
Hole D1343: 10.8 g/t Au over 42.4 metres, including 32.3 g/t Au over 9.3
----------- metres,
Hole D1344: 9.1 g/t Au over 42.9 metres, including 37.1 g/t Au over 5.3
----------- metres and
9.6 g/t Au over 3.3 metres and 7.7 g/t Au over 13.2 metres.
This drilling has extended the SB Zone a further 270 metres along
strike to the southwest of previous exploration drilling. The previous
drilling defines the limits of the current resource model used for
reserve estimation. These holes will extend the resource model and three
of the new intercepts lie within the current planned pit design and so
will add to current reserves.
These results are very encouraging, indicating the excellent potential
for both strike and down dip extensions of the SB Zone on the southwest
end of the Kumtor pit.
Two drill holes were completed in the second quarter in the Saddle Zone
area of the Central Pit, between the SB and Stockwork Zones. Both holes
intersected significant widths and grades of mineralization, including
4.8 g/t Au over 11.1 metres, including 7.9 g/t Au over 5.7 metres 3.2 g/t
Au over 18.6 metres, including 8.2 g/t Au over 3.6 metres in hole D1324
and 10.5 g/t Au over 3.0 metres in hole D1334.
These wide intersections of low-grade mineralization and narrower zones
of high-grade mineralization continue to be encouraging. The focus in the
third quarter of 2009 will be on 80-120 metre spaced step-out drilling to
test for high-grade mineralisation within the broad mineralised package.
Two drill holes were completed in the second quarter to test the area to
the northeast of the high-wall of the Central Pit. Hole D1301A
intersected significant mineralization 9.1 g/t Au over 11.0 metres,
including 10.8 g/t over 8.5 metres. This intersection is at the 3,600
metre elevation and is the second intersection of higher grade
mineralization in this area to the northeast of the pit highwall. Hole
D1165 drilled in 2007 returned an intercept of 8.6 g/t Au over 13.9
metres, including 12.7 g/t Au over 7.9 metres at approximately the same
elevation and 80 metres along strike to the northeast of the intersection
in hole D1301A. The focus in the third quarter will be on 80 to 120 metre
spaced step-out drilling to confirm the down dip and along strike extent
of the zone of mineralization.
Underground Decline
Exploration drilling to test the Kumtor structure in the footwall of the
underground decline commenced in June 2009. The first hole UG1342A
intersected 2.2 g/t Au over 9.0 metres. The focus in the third quarter
will be on 90-150 metre step out drilling to test for down dip and along
strike extensions of the mineralization.
Regional Exploration Regional exploration resumed in June following
signing of the Kumtor agreement and resolution of the exploration license
matters. Drilling was carried out in the Northeast, Southwest and Sarytor
areas.
Northeast Area
Drilling commenced in June on the Northeast prospect. The drill holes
were designed to follow up on the mineralization intersected in holes
completed in late 2007 and 2008 on the lower Northeast prospect which
indicated the potential for a near surface zone of mineralization similar
in grade to the Sarytor deposit. The drilling in the second quarter of
2008 returned interesting results. Some of the better intercepts from the
drilling in the second quarter of 2008 are 2.5 g/t Au over 11.8 metres,
2.2 g/t Au over 3.0 metres and 3.1 g/t Au over 5.2 metres at depths from
5 to 50 metres below surface in hole D1203A, 2.8 g/t over 9.3 metres and
2.8 g/t over 5.9 metres at a depth of 100 metres below surface in hole
DN1198 and 2.2 g/t over 8.1 metres, starting 10 metres below surface in
hole D1196.
All drill holes completed in the second quarter of 2009 have intersected
zones of alteration with no significant assay results. Drilling will
continue in the third quarter to test the strike and down dip extensions
of the mineralization intersected in 2007 - 2008.
Sarytor Area
One drill hole is in progress at Sarytor and is designed to test for
mineralization down dip of the Sarytor Pit design. The focus in the third
quarter will be on step out drilling to test further strike and down dip
extensions of the known mineralized zones.
Southwest Area
Drilling commenced at the Southwest Pit in late June, and one hole was
completed to test for mineralization on interpreted structures in the
footwall of the mineralization previously mined in the Southwest Pit. No
significant mineralization was intersected. Drilling will continue to
test similar interpreted footwall structures, as well as testing for
oxide mineralization west of the Southwest Pit.
Geophysical and Geochemical Programs
Preparations commenced in late June for geophysical surveys, including IP
and magnetics, and soil sampling surveys in the Petrov, Muzdusuu,
Northeast, and Bordoo areas with work expected to commence by early July.
True widths for the mineralized zones are typically from 40% to 95% of
the stated intercept.
A complete listing of the drill results and supporting maps for the
Kumtor pit have been filed on the System for Electronic Document Analysis
and Retrieval ('SEDAR') and are available at the company's web site at:
www.centerragold.com
Mongolia
Exploration work resumed in the second quarter on the Company's extensive
land package along the Yeroogol trend and in eastern Mongolia.
Geological mapping, sampling, IP surveys and trenching are underway on
the Khuder, Yalbag, Shiver and Khar Mod projects. Geological mapping and
IP surveys are in progress to complete target definition work on prospect
areas that are peripheral to the Gatsuurt Central and Main Zones
deposits. Drilling is planned to start later in the third quarter.
Outlook for 2009
Production
For the full year of 2009, Centerra expects consolidated gold production
of 680,000 to 730,000 ounces, which is lower than the prior guidance of
720,000 to 770,000 ounces. The reduction in gold production guidance is
due to lower than expected production at Boroo due to the operational
shutdown which resulted from the strike and subsequent suspension of the
main operating licenses.
Gold production for the full year 2009 at the Kumtor mine is forecast to
be 560,000 to 600,000 ounces, which is unchanged from prior guidance.
Production from the nearby Sarytor deposit has not been included this
year in Kumtor's current mine plan. The production from Sarytor has been
deferred until 2012.
Details of Kumtor's 2009 quarterly production profile were published in a
news release on June 12, 2009. Production in the first two quarters of
2009 was negatively affected by the mining activities related to
sustaining the cutback of the ice creep into the pit from the Davidov
glacier. However, overall, Kumtor's 2009 guidance on gold production is
not expected to be affected by the accelerated mining of ice and waste
material. The Company expects that due to an unplanned maintenance
shutdown of the SAG mill in the first quarter, the planned 2-week
shutdown of the Kumtor mill to replace the ball mill ring gear and the
SAG mill liner, originally scheduled for the third quarter of 2009 will
be delayed to 2010. The third quarter production is forecast to exceed
the production in the same quarter of last year by approximately 30,000
ounces due to the availability of high grade material for processing. The
Company expects the highest production in the fourth quarter of 2009,
when the high-grade ore in the SB Zone will be mined.
At Boroo, gold production is forecast to be 120,000 to 130,000 ounces,
which is lower than the prior guidance of 160,000 to 170,000 ounces. The
revised production guidance for Boroo reflects the impact of the labour
strike and license suspension and the expiration of the temporary heap
leach operating permit. The mining activities at Boroo were halted on May
26, 2009 due to the strike at the mine site followed by the suspension of
the mining licenses on June 12, 2009. On July 27, 2009, the suspension of
Boroo's main operating licenses was lifted for the mining and milling
operations. The Company is continuing its discussions with the regulatory
authorities regarding their concerns. The Company is working with the
Mongolian authorities to have the final operating permit for the heap
leach facility issued. Resumption of heap leach operations at Boroo would
add approximately 3,000 ounces per month to the Company's gold production
guidance.
Cash cost per ounce
The prior 2009 outlook for consolidated cash costs per ounce of $465 to
$505 has been revised to $410 to $450 per ounce to reflect the reduced
production at Boroo and the closing of all transactions under the
Agreement on New Terms. As disclosed previously the majority of taxes at
Kumtor have been replaced with a revenue-based tax which is excluded from
the total cash costs. Accordingly, the outlook for total cash costs per
ounce produced excludes the revenue-based tax.
Total cash cost for 2009 for Kumtor is expected to be in the range of
$390 to $430 per ounce produced. Other than adjusting the unit cost to
reflect the application of the Agreement on New Terms, the prior guidance
for total cash per ounce at Kumtor is unchanged. Centerra expects that
the higher cost profile at Kumtor in the first two quarters of 2009 will
be offset by higher production in the third and fourth quarters.
Total cash cost for 2009 for Boroo is expected to be in the range of $495
to $535 per ounce produced which is higher than the prior guidance of
$465 to $505 per ounce. The revised cash cost guidance for Boroo reflects
lower production due to the strike and subsequent suspension of the main
operating licenses. The cash cost at Boroo would be lower if heap leach
operations are resumed.
Total cash cost is a non-GAAP measure and is discussed under "Non-GAAP
Measures".
Centerra's production and unit costs are forecast as follows:
----------------------------------------------------------------------------
2009 Production Forecast 2009 Total Cash Cost(1)
(ounces of gold) ($ per ounce)
----------------------------------------------------------------------------
Kumtor 560,000 - 600,000 390 - 430
----------------------------------------------------------------------------
Boroo 120,000 - 130,000 495 - 535
----------------------------------------------------------------------------
Consolidated 680,000 - 730,000 410 - 450
----------------------------------------------------------------------------
(1) Total cash cost is a non-GAAP measure. See "Non-GAAP Measures below.
Major Assumptions and Sensitivities
The following material assumptions have been updated from the prior
disclosed guidance in light of current market conditions. In particular,
material assumptions or factors used to forecast production and costs
include the following:
- a gold price of $900 per ounce,
- exchange rates:
-- $1USD:$1.12CAD
-- $1USD:42 Kyrgyz Som
-- $1USD:1,425 Mongolian Tugrik
-- $1USD:0.71 Euro
- diesel price assumption:
-- $0.50/litre at Kumtor
-- $0.85/litre at Boroo
Diesel fuel is sourced from separate Russian suppliers for both sites and
only loosely correlates with world oil prices. The diesel fuel price
assumptions were made when the price of oil was about $64 per barrel.
Centerra's revenues, earnings and cash flows for 2009 are sensitive to
changes in certain variables and the Company has estimated their impact
on revenues, net earnings and cash from operations.
----------------------------------------------------------------------------
Impact on
Sensitivities ($ millions)
Change -------------------------------------------
Costs Revenues Cash flow Earnings before
income tax
----------------------------------------------------------------------------
Gold Price $25/oz 1.6 12.5 10.5 10.9
----------------------------------------------------------------------------
Diesel Fuel 10% $5/oz - 2.2 2.2
----------------------------------------------------------------------------
Kyrgyz som 1 som 0.6 - 0.6
0.6----------------------------------------------------------------------------
Mongolian tugrik 25 tugrik 0.1 - 0.1 0.1
----------------------------------------------------------------------------
Canadian dollar 10 cents 1.5 - 1.5 1.5
----------------------------------------------------------------------------
Other important assumptions that are implicit in the Company's
production, cost and capital guidance are as follows:
- grades and recoveries at Kumtor increase as expected through the third
and fourth quarters to achieve the forecast gold production,
- no further delays in or interruption of scheduled production from our
mines, including due to natural phenomena, labour or regulatory disputes
or other developmental and operational risks,
- the dewatering and depressurization programs at Kumtor continue to
produce the expected results and the water management system works as
planned,
- Boroo ore does not become more refractory in nature affecting mill
recoveries,
- no further labour disruption at the Boroo mine site,
- no further suspension of Boroo's operating licenses,
- prices for fuel oil, reagents and other consumables will remain
consistent with Company estimates, and
- all necessary permits, licences and approvals are received in a timely
manner.
Production and cost forecasts for 2009 are forward-looking information
and are based on key assumptions and subject to material risk factors
that could cause actual results to differ materially and which are
discussed under the heading "Cautionary Note Regarding Forward-Looking
Information".
Kumtor Mill Shutdown
In March 2008, an unplanned shutdown of the ball mill at Kumtor was
required to repair the ring gear which had failed. The repair was
completed in late March and the ball mill returned to full operation. The
successful repair of the ring gear is considered a temporary repair which
will require full replacement; this was originally planned for the third
quarter of 2009. This replacement has been postponed until early 2010 to
enable uninterrupted processing of higher-grade material in the third
quarter. The Company's expectation is that the temporary repair will last
until then.
Similarly, the maintenance and changeout of the Kumtor SAG mill liner
which was scheduled for the third quarter of 2009 has been postponed
until early 2010. However should the current liner and/or the ring gear
not last until the end of the year, an unplanned shutdown would be
required which would have an adverse affect on the production, costs and
earnings of the Company.
Further Creep of Waste and Ice Material at Kumtor
During the second quarter of 2009, continued movement of waste and ice
from the South East Ice Wall into the Kumtor open pit required the mining
of ice and waste which reduced the production of ore. Management is
working to neutralize and further stabilize this advanced creep, which by
the end of the quarter was being significantly mitigated. While work is
planned over the balance of the 2009 year to sustain the cutback of the
ice creep into the pit there is no guarantee that these efforts will
avert further negative impact on the Company's expected production, costs
and earnings.
Boroo License Suspension and Production Shutdown
As disclosed on June 12, 2009, the Company received a notice from the
Minerals Resources Authority of Mongolia suspending the Boroo Mine's main
operating licenses for a period up to three months. The Company disclosed
in its July 27, 2009 news release that the suspension had been lifted for
mining and milling operations.
The mine stopped adding cyanide to the heap leach pad at the end of April
2009 due to the expiry of Boroo's temporary heap leach permit. The
Company had been awaiting the authorization of the final heap leach
operating permit when the mine's main operating licenses were suspended.
See "Other Corporate Developments - Mongolia".
Exploration and Business Development
Exploration expenditures are expected to total $25 million and the
business development program is forecast at $4.1 million for 2009 to
support merger and acquisition initiatives of the Company for the year.
The 2009 exploration program will continue the aggressive exploration at
the Kumtor mine, target generation programs at the Boroo mine and around
the Gatsuurt project and on our extensive land holdings in Mongolia.
Target generation programs will continue in Asia, Russia and China.
Centerra will continue to fund and earn an interest in joint venture
properties and projects in Russia, Turkey and the United States. The
Company forecasts $25 million of spending on its program for the year.
The forecast includes $11 million for exploration at Kumtor.
Capital Expenditures
The capital requirement in 2009 is estimated to be $107.0 million,
including $45.1 million of sustaining capital and $61.9 million of growth
capital. This represents an increase of $7.0 million from prior guidance
primarily due to an increase in growth capital at Kumtor.
Growth capital includes:
----------------------------------------------------------------------------
Projects 2009 Growth Capital Expenditures Forecast
(millions of dollars)
----------------------------------------------------------------------------
Kumtor $47.3
----------------------------------------------------------------------------
Boroo $0.6
----------------------------------------------------------------------------
Gatsuurt $14.0
----------------------------------------------------------------------------
Consolidated $61.9
----------------------------------------------------------------------------
At Kumtor the growth capital expenditures are $32.1 million assigned
to the development of the two development drifts (Phase I and II to
access and drill the SB and Stockwork Zone resources), $11.3 million for
the initial funds for the Phase II mining fleet and long lead items, and
various other projects of $3.9 million. The Company increased the growth
capital guidance at Kumtor by $11.3 million which includes $14.4 million
for additional development costs for Phase II and reduced other growth
capital expenditures by $3.1 million either by cancelling or delaying
other projects.
The $14.0 million for Gatsuurt includes road construction and site
infrastructure development, which is unchanged from the prior estimates.
Additional capital expenditures for the next phase of processing
development, which includes $10.0 million to initiate the basic and
detail engineering and $15.1 million for procurement and construction
management will only be invested if the Company is successful in
obtaining an acceptable tax stabilization agreement for Gatsuurt with the
government authorities of Mongolia. The 55 kilometre road to the Gatsuurt
mine site has been designed and has been submitted for permitting to the
appropriate government agencies. The 14-month construction period began
in the second quarter of 2009.
Administration
Annual corporate and administration expenses without unusual items are
expected to amount to approximately $30 million in 2009 which is
unchanged from prior guidance.
Corporate Taxes
Kumtor
Effective April 30, 2009 (being the date the Kyrgyz Parliament ratified
the Agreement on New Terms) Kumtor became subject to a new tax regime
pursuant to which income taxes and other taxes were replaced by taxes
computed by reference to Kumtor's revenue. Under the new tax regime, a
tax of 13% of gross revenue is payable monthly plus, effective January 1,
2009, a payment equal to 1% of gross revenue is made monthly to the
Issyk-Kul Oblast Development Fund. The new tax regime replaces taxes
payable pursuant to the prior investment agreement, including income
taxes at 10% of taxable income, a mineral resource tax at 5% of revenue,
an emergency fund tax at 1.5% of revenue, a road tax at 0.8% of revenue,
withholding taxes imposed on payments to non-residents with rates ranging
from 10%-30% depending on the nature of the payment, an Issyk-Kul Social
Fund tax with a rate of 2%-4% of income, all customs duties, and certain
other taxes.
Boroo
The corporate income tax rate for Boroo Gold Company, for 2009 and
subsequent years, is 25% for taxable income over 3 billion tugrik
(approximately $2.1 million at the quarter end foreign exchange rate)
with a tax rate of 10% for taxable income up to that amount.
For further discussion of the factors that could cause actual results to
differ materially, please refer to "Risk Factors" in Centerra's 2008
Annual Management's Discussion and Analysis and to Centerra's 2008 Annual
Information Form including the section titled "Risk Factors", available
on SEDAR at www.sedar.com. For information on forward-looking information
see "Cautionary Note Regarding Forward-Looking Information".
Qualified Person
The new drilling results for Kumtor in this news release and on
Centerra's website and the other scientific and technical information in
this news release were prepared in accordance with the standards of the
Canadian Institute of Mining, Metallurgy and Petroleum and National
Instrument 43-101 - Standards of Disclosure for Mineral Projects ("NI
43-101") and were reviewed, verified and compiled by Centerra's
geological and mining staff under the supervision of Ian Atkinson,
Certified Professional Geologist, Centerra's Vice-President, Exploration,
who is the qualified person for the purpose of NI 43-101.
The Kumtor deposit is described in Centerra's most recently filed Annual
Information Form (the "AIF") and in a technical report dated March 28,
2008 prepared in accordance with NI 43-101. The AIF and technical report
have been filed on SEDAR at www.sedar.com. The technical report describes
the exploration history, geology and style of gold mineralization at the
Kumtor deposit. Sample preparation, analytical techniques, laboratories
used and quality assurance-quality control protocols used during the
drilling programs at the Kumtor site are described in the technical
report. Cautionary Note Regarding Forward-looking Information
Statements contained in this news release including those under the
headings "Three-Year Estimated Kumtor Gold Production" and "Outlook for
2009", and the documents incorporated by reference herein, contain
statements which are not current statements or historical facts and are
"forward-looking information" within the meaning of applicable Canadian
securities laws. All statements, other than statements of historical
fact, contained or incorporated by reference in this news release
constitute forward-looking information. Wherever possible, words such as
"plans", "expects" or "does not expect", "budget", "forecasts",
"projections", "anticipate" or "does not anticipate", "believe",
"intent", "potential", "strategy", "schedule", "estimates" and similar
expressions or statements that certain actions, events or results "may",
"could", "would", "might" or "will" be taken, occur or be achieved and
other similar expressions have been used to identify forward-looking
information. These forward-looking statements relate to, among other
things Centerra's expectations regarding, future growth, results of
operations (including, without limitation, future production and sales,
and operating and capital expenditures), performance (both operational
and financial), business and political environment and business prospects
(including the timing and development of new deposits and the success of
exploration activities) and opportunities.
Although the forward-looking information in this news release reflects
Centerra's current beliefs on the date of this news release based upon
information currently available to management and based upon what
management believes to be reasonable assumptions, Centerra cannot be
certain that actual results, performance, achievements, prospects and
opportunities, either expressed or implied, will be consistent with such
forward-looking information. By its very nature, forward-looking
information necessarily involves significant known and unknown risks,
assumptions, uncertainties and contingencies that may cause Centerra's
actual results, assumptions, performance, achievements, prospects and
opportunities in future periods to differ materially from those expressed
or implied by such forward-looking information. These risks and
uncertainties include, among other things, risks relating to the
resolution of issues at the Boroo mine relating to the suspension of the
Boroo licenses in June 2009 as described above under the heading "Other
Corporate Developments - Mongolia", the receipt of a final permit to
operate the heap leach operation at the Boroo mine, gold prices,
replacement of reserves, reduction in reserves related to geotechnical
risks, ground movements, political risk, nationalization risk, changes in
laws and regulations, civil unrest, labour unrest, legal compliance
costs, reserve and resource estimates, production estimates, exploration
and development activities, competition, operational risks,
environmental, heath and safety risks, costs associated with reclamation
and decommissioning, defects in title, seismic activity, cost and
availability of labour, material and supplies, increases in production
and capital costs, permitting and construction to raise the tailings dam
height and increase the capacity of the existing Kumtor tailing dam,
illegal mining, enforcement of legal rights, decommissioning and
reclamation cost estimates, future financing and personnel. There may be
other factors that cause results, assumptions, performance, achievements,
prospects or opportunities in future periods not to be as anticipated,
estimated or intended. See "Risk Factors" in the Company's most recently
filed Annual Information Form and Annual Management's Discussion and
Analysis available on SEDAR at www.sedar.com.
If Centerra's reserve or resource estimates for its gold properties are
inaccurate or are reduced in the future, this could have an adverse
impact on Centerra's future cash flows, earnings, results of operations
and financial condition.
Centerra estimates the future mine life of its operations. Centerra can
give no assurance that mine life estimates will be achieved. Failure to
achieve these estimates could have an adverse impact on Centerra's future
cash flows, earnings, results of operations and financial condition.
There can be no assurances that forward-looking information and
statements will prove to be accurate, as many factors and future events,
both known and unknown could cause actual results, performance or
achievements to vary or differ materially, from the results, performance
or achievements that are or may be expressed or implied by such
forward-looking statements contained in this news release. Accordingly,
all such factors should be considered carefully when making decisions
with respect to Centerra, and prospective investors should not place
undue reliance on forward-looking information. Forward-looking
information is as of July 29, 2009. Centerra assumes no obligation to
update or revise forward-looking information to reflect changes in
assumptions, changes in circumstances or any other events affecting such
forward-looking information, except as required by applicable law.
About Centerra
Centerra is a gold mining company focused on acquiring, exploring,
developing and operating gold properties primarily in Asia, the former
Soviet Union and other emerging markets worldwide. Centerra is a leading
North American-based gold producer and the largest Western-based gold
producer in Central Asia and the former Soviet Union. Centerra's shares
trade on the Toronto Stock Exchange (TSX) under the symbol CG. The
Company is based in Toronto, Canada.
Conference Call
Centerra invites you to join its 2009 second quarter conference call on
Thursday, July 30, 2009 at 10:00 am Eastern Time. The call is open to all
investors and the media. To join the call, please dial Toll-Free in North
America (800) 909-4804 or International callers dial (212) 231-2901.
Alternatively, an audio feed web cast will be available on
www.centerragold.com. A recording of the call will be available on
www.centerragold.com shortly after the call and via telephone until
midnight on Thursday, August 6, 2009 by calling (416) 626-4100 or (800)
558-5253 and using passcode 21425459.
Additional information on Centerra is available on the Company's web site
at www.centerragold.com and at SEDAR at www.sedar.com.
MDA and Financial Statements and Notes follow
Centerra Gold Inc.
Management's Discussion and Analysis ("MD&A")
For the period ended June 30, 2009
The following discussion has been prepared as of July 29, 2009, 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 six month periods ended June 30, 2009 in comparison with those
as at June 30, 2008. This discussion should be read in conjunction with
the unaudited interim consolidated financial statements and the notes of
the Company for the three and six month periods ended June 30, 2009. This
MD&A should also be read in conjunction with the Company's audited annual
consolidated financial statements for the three years ended December 31,
2008, the related MD&A included in the 2008 Annual Report, and the 2008
Annual Information Form. The financial statements of Centerra are
prepared in accordance with Canadian generally accepted accounting
principles ("GAAP") and, unless otherwise specified, all dollar amounts
are in United States dollars. The Company's 2008 Annual Report and Annual
Information Form are available at www.centerragold.com and on the System
for Electronic Document Analysis and Retrieval ("SEDAR") at
www.sedar.com.
TABLE OF CONTENTS
Consolidated Financial Results 2
Highlights 2
Three Month Period Ended June 30, 2009 compared with the Three
Month Period Ended June 30, 2008 2
Six-Month Period Ended June 30, 2009 Compared with the Six-Month
Period Ended June 30, 2008 7
Mine Operations 9
Other Financial Information - Related Party Transactions 18
Quarterly Results - Last Eight Quarters 19
Critical Accounting Estimates 22
Status of Centerra's Transition to International Financial
Reporting Standards ("IFRS") 24
Caution Regarding Forward-Looking Information 33
Consolidated Financial Results
Centerra's consolidated financial results for the three and six month
periods ended June 30, 2009 reflect 100% interests in the Kumtor and
Boroo mines, and the Gatsuurt project.
Highlights
----------------------------------------------------------------------------
Three Months Ended June 30 Six Months Ended June 30
----------------------------------------------------------------------------
Financial and
Operating Summary 2009 2008 % Change 2009 2008 % Change
----------------------------------------------------------------------------
Revenue - $
millions 104.3 142.6 (27%) 202.8 255.2 (21%)
----------------------------------------------------------------------------
Cost of sales - $
millions (1) 82.0 86.3 (5%) 151.2 139.9 8%
----------------------------------------------------------------------------Earn
ngs (loss)
before unusual
items - $ millions
(2) (30.3) 13.8 (320%) (50.5) 37.5 (235%)
----------------------------------------------------------------------------
Unusual items - $
millions (49.3) 42.2 (217%) (49.3) 37.7 (231%)
----------------------------------------------------------------------------
Net earnings (loss)
- $ millions (79.6) 56.0 (242%) (99.9) 75.2 (233%)
----------------------------------------------------------------------------
Earnings (loss) per
common share - $
basic and
diluted (0.36) 0.26 (238%) (0.46) 0.35 (231%)
----------------------------------------------------------------------------
Cash provided by
(used in)
operations - $
millions (17.3) 10.6 (263%) (6.4) 38.6 (117%)
----------------------------------------------------------------------------
Weighted average
common shares
outstanding
basic (thousands) 220,472 216,318 2% 217,354 216,318 0%
----------------------------------------------------------------------------
Weighted average
common shares
outstanding
diluted
(thousands) 220,472 217,456 1% 217,354 217,599 (0%)
----------------------------------------------------------------------------
Gold sold - ounces 115,308 160,373 (28%) 223,900 284,348 (21%)
----------------------------------------------------------------------------
Gold produced -
ounces 110,457 158,303 (30%) 213,661 278,698 (23%)
----------------------------------------------------------------------------
Cost of sales -
$/oz sold 710 529 34% 675 476 42%
----------------------------------------------------------------------------
Total cash cost -
$/oz produced(3)
(4) (5) 667 489 36% 740 518 43%
----------------------------------------------------------------------------
Total production
cost - $/oz
produced(3) 856 590 45% 950 595 60%
----------------------------------------------------------------------------
Average realized
gold price - $/oz 905 889 2% 906 898 1%
----------------------------------------------------------------------------
Average gold spot
price - $/oz 922 896 3% 915 911 0%
----------------------------------------------------------------------------
(1) Cost of sales for 2009 and its comparative years excludes regional
office administration.
(2) Net earnings before unusual items is a non-GAAP measure and is discussed
under "Non-GAAP Measures". (3) Total cash cost and total production cost
are non-GAAP measures and are discussed under "Non-GAAP Measures".
(4) 2009 includes the costs during the strike and shutdown at Boroo of $3.3
million: excluding these costs, the second quarter and six months cash
cost per ounce produced would be $637 and $725 respectively.
(5) As a result of Kumtor's Agreement on New Terms, total cash cost and
total production cost per ounce measures for both 2009 and 2008 excludes
operating and revenue-based taxes.
Three Month Period Ended June 30, 2009 compared with the Three Month
Period Ended June 30, 2008
Gold Production and Revenue
Revenue in the second quarter of 2009 decreased to $104.3 million from
$142.6 million in the same quarter last year reflecting the lower volumes
of gold produced and sold (decrease of 30% ounces produced and 27% ounces
sold year over year), partially offset by higher realized gold prices.
Gold production for the quarter was 110,457 ounces compared to 158,303
ounces reported in the second quarter of 2008. Gold production was lower
at both Kumtor and Boroo operations in the quarter year-over-year. At
Kumtor less ore was mined as compared to 2008 with lower grades and
recoveries and lower grade stockpile ore was processed at the mill. At
Boroo mining and milling were suspended since May 26, first due to a
labor disruption followed by the suspension of the main operating
licenses. See "Mine Operations - Kumtor" and "Mine Operations - Boroo".
Centerra realized an average gold price of $905 per ounce for the second
quarter of 2009, an increase from the $889 per ounce realized in the same
quarter in 2008. Since Centerra's gold production is not hedged and gold
is sold at the prevailing spot price, the average realized gold price in
the quarter reflects the continued strength of the spot gold price, which
averaged $922 per ounce for the second quarter of 2009 ($896 per ounce
for the same period in 2008).
Cost of Sales
Cost of sales in the second quarter of 2009 was $82.0 million, compared
to $86.3 million in the same quarter of 2008. The impact on cost of sales
of lower gold sales volume and decreased operating costs at both Kumtor
and Boroo was essentially offset by the fixed nature of many of the costs
at the sites (we continue to incur the costs even though we produced
fewer ounces). These costs accumulated in inventory, eventually flowing
through to cost of sales making the unit cost of ounces sold higher.
Cost of sales per ounce sold increased to $710 compared to $529 for the
same period in 2008. This reflects the impact of lower production
described above.
The Company's total cash cost per ounce produced was $667, up from $489
in the second quarter of 2008. This increase is primarily due to the
reduced production levels described above. Excluding the fixed costs of
$3.3 million incurred during the shutdown at Boroo, total cash cost per
ounce produced in the second quarter 2009 would be $637. See "Mine
Operations - Kumtor" and "Mine Operations - Boroo".
Mine Standby Costs
During the second quarter of 2009, Boroo's operations were temporarily
suspended due to a labour dispute, followed by the suspension of its main
operating licenses by the Mongolian authorities. Boroo continued to incur
fixed costs of approximately $3.3 million during the strike and
operational shutdown.
Depreciation, Depletion and Amortization
Consolidated depreciation, depletion and amortization for the second
quarter of 2009 increased to $25.7 million from $17.1 million in the same
quarter of 2008, mainly due to the depreciation of costs associated with
the new heavy duty equipment overhaul program on Kumtor's expanded fleet,
the amortization of pre-stripping costs and the depreciation of the heap
leach facility at Boroo (none of which were applicable in the comparative
period in 2008). On a per unit basis, depreciation, depletion and
amortization for the second quarter of 2009 was $223 per ounce sold
compared to $107 per ounce sold in the same quarter of 2008, primarily
reflecting the reduced sales volumes in 2009, the addition of capital
equipment at Kumtor, and the impact from the depreciation of
pre-stripping costs and the heap leach capitalized costs at Boroo.
Accretion and Reclamation Expense
Accretion and reclamation expense in the second quarter of 2009 was $0.7
million, an increase of $0.4 million as compared to the second quarter of
2008.
Exploration
Exploration costs in the second quarter of 2009 decreased to $4.1 million
from $5.1 million in the same quarter of 2008 reflecting increased
drilling productivity resulting in lower costs and decreased drilling
activity in the main pit at Kumtor during the period.
Capital Expenditures
Capital expenditures spent and accrued of $17.7 million in the second
quarter of 2009 included $11.1 million of sustaining capital and $6.6
million invested in growth capital primarily related to the SB Zone
underground development at Kumtor ($5.2 million).
Corporate Administration
Corporate administration costs for the second quarter of 2009 were $7.7
million compared to $7.5 million in the same quarter of 2008. The
increase is primarily due to the impact on share-based compensation of an
18% increase in the share price in the second quarter 2009 (the share
price decreased significantly in the second quarter of 2008).
Revenue-based Tax - Kumtor
Revenue-based taxes are payable to the Kyrgyz Government under the
Agreement on New Terms (see "Unusual Items") at a rate of 13% of gross
revenue, with an additional contribution of 1% of gross revenue to the
Issyk-Kul Oblast Development Fund. This agreement received the approval
of the Kyrgyz Parliament on April 30, 2009, which is considered to be the
date of substantial enactment. The relevance of this date is that, from
an accounting perspective, the old tax regime is applied to the period
prior to April 30, even though the agreement specified that the new tax
regime will be applicable from January 1, 2008. The payments or refunds
calculated by the retroactive application of the Agreement on New Terms
are accounted for in unusual items on the financial statements. The tax
balances at April 30, 2009, generated under the old agreement have been
written off, either through unusual items (current taxes) or income tax
expense (future tax asset). Revenue-based taxes for the months of May and
June 2009 totalled $5.3 million.
The restated project agreements provide for an annual payment of 4% of
gross revenue against which all capital and exploration expenditures in
the Kyrgyz Republic are fully credited. Expenditures not applied for
credit in the year are carried forward for credit in future years. As at
June 30, 2009, the excess spent by the Company on capital and exploration
over the required 4% of gross revenue is $41.2 million.
Income Tax Expense
The Company recorded an income tax expense of $0.1 million during the
three month period ended June 30, 2009 ($6.2 million three month period
ended June 30, 2008).
Kumtor
Effective April 30, 2009 Kumtor became subject to a new tax regime
pursuant to which income taxes and other taxes were replaced by taxes
computed by reference to Kumtor's revenue. An income tax expense of $0.05
million was recorded in the three month period ended June 30, 2009 ($0.3
million for the three month period ended June 30, 2008) on Kumtor's
earnings, which were subject to income tax from January 1, 2009 to April
30, 2009 at a rate of 12% on income, including 2% for a contribution to
the Issyk-Kul Social Fund. Boroo
The corporate income tax rate for Boroo for 2009 and subsequent years is
25% of taxable income in excess of 3 billion Tugriks (about $2.1 million
at the exchange rate at the balance sheet date), and 10% for income up to
that amount.
During the three month period ended June 30, 2009, Boroo recorded an
income tax expense of $0.05 million ($5.9 million for the three month
ended June 30, 2008).
The strengthening of the Mongolian tugrik, compared to the U.S. dollar,
resulted in an unrealized taxable loss being recognized in the quarter on
Boroo's local currency denominated financial statements, which are used
in the preparation of the Mongolian tax return. As a result, the Company
recorded an income tax recovery of $2.4 million in the quarter, reducing
the tax liability with respect to an earlier weakening of the Mongolian
tugrik during the first quarter. This liability would only become payable
upon realization of the cumulative gain.
Loss Before Unusual Items
Loss before unusual items for the second quarter of 2009 was $30.3
million, or $0.14 per share, compared to earnings of $13.8 million or
$0.06 per share for the same period in 2008, reflecting reduced gold
production and sales volumes.
Unusual Items
The total amount of unusual items expensed in the second quarter 2009 was
$49.3 million.
On April 24, 2009, the Company announced that an agreement (the
"Agreement on New Terms") had been reached between Centerra, Cameco
Corporation ("Cameco"), the Kyrgyz Republic (the "Government"),
Kyrgyzaltyn JSC ("Kyrgyzaltyn"), Kumtor Operating Company ("KOC") and
Kumtor Gold Company ("KGC") that provides for the Government's full
commitment to and support for Centerra's continuing long-term development
of the Kumtor project. As a result of the agreement which was approved by
the Kyrgyz Parliament on April 30, the parties executed restated project
agreements to incorporate the provisions of the Agreement on New Terms,
including the settlement of all outstanding claims as well as replacing
the tax regime applicable to the Kumtor project with a revenue-based tax
regime. Pursuant to the Agreement on New Terms, Centerra agreed to issue
18,232,615 common shares from its treasury to Kyrgyzaltyn, a company
wholly owned by the Government. Cameco agreed to transfer to the
Government between 14.1 million and 25.3 million common shares of
Centerra, which are to be released to the Government upon the
satisfaction of certain conditions.
On June 11, 2009, the transactions contemplated by the Agreement on New
Terms were completed. Pursuant to the agreement and as part of the
closing, the Company issued from treasury on June 11, 2009, 18,232,615
common shares of Centerra at the closing share price of $6.62 (Cdn.
$7.30) to Kyrgyzaltyn.
As a result, the Company recorded an addition to share capital of $120.7
million. The previously recorded liability, contingent common shares
issuable of $89.1 million, was drawn down and an additional expense of
$31.6 million was recorded in the second quarter of 2009.
Pursuant to this agreement, the Company also paid and expensed $1.75
million in full satisfaction of all liabilities or claims of any
governmental authority against Centerra or any of its affiliates in
respect of any matter arising before the closing of the transactions
contemplated by the Agreement on New Terms.
The Company and the Government have also agreed to replace the former tax
regime applicable to the Kumtor project with a simplified, tax regime
with effect from January 1, 2008. Under the new tax regime, gross revenue
will be taxed at a rate of 13%, plus, effective January 1, 2009, a
payment of 1% of gross revenue will be made to the Issyk-Kul Oblast
Development Fund. The new tax regime replaces income taxes (10% of
taxable income), a mineral resource tax (5% of revenue), an emergency
fund tax (1.5% of revenue), a road tax (0.8% of revenue), withholding
taxes (10%-30% depending on the nature of the payment), an Issyk-Kul
Social Fund tax (2%-4% of taxable income), all customs duties, and
certain other taxes.
During the second quarter 2009, the Company recorded an expense for the
tax settlement in the amount of $15.0 million including the 2008
settlement, 2009 differences between the new tax regime and the former
regime to the end of April 2009 and various adjustments to the Company's
tax accounts balances recorded to April 30, 2009. See "Other Corporate
Developments - Kyrgyz Republic".
Net Loss After Unusual Items
Net loss after unusual items for the second quarter of 2009 was $79.6
million, or $0.36 per share, compared to earnings of $56.0 million, or
$0.26 per share, for the same quarter of 2008, reflecting the unusual
items discussed above.
Liquidity and Capital Resources
Cash used in operations was $17.3 million for the second quarter of 2009
compared to $10.6 million of cash provided by operations for the same
quarter of 2008, primarily reflecting the tax settlement payments made by
Kumtor as required by the Agreement on New Terms of $22.4 million and
lower earnings, partially offset by reduced working capital levels.
Cash used in investing activities in the second quarter of 2009 was $18.7
million reflecting $11.1 million on sustaining capital projects and $6.6
million on growth projects. Expenditures on growth projects were mainly
for Kumtor's SB Zone underground development while sustaining capital was
$11.0 million at Kumtor. At Boroo, sustaining capital was $0.1 million.
As at June 30, 2009, the Company has entered into contracts to purchase
capital equipment and operational supplies totalling $28.7 million
(Kumtor $28.6 million, Boroo $0.1 million). These contracts are expected
to be settled over the next twelve months.
Cash and cash equivalents and short-term investments were $120.4 million
at the end of the second quarter of 2009, compared to cash and cash
equivalents and short-term investments of $167.4 million at December 31,
2008. The Company believes it has sufficient cash to carry out its
operational business plan for 2009. For information on forward-looking
information see "Caution Regarding Forward-Looking Information".
Six-Month Period Ended June 30, 2009 Compared with the Six-Month Period
Ended June 30, 2008
Revenue for the first six months of 2009 decreased by $52.4 million, or
21%, to $202.8 million compared to $255.2 million in the same period of
2008 due primarily to lower sales and production levels. Gold production
of 213,661 ounces in the first six months of 2009 was lower than the
278,698 ounces reported in the same period of 2008 mainly as a result of
the reduction in tonnes of ore mined at Kumtor and the production
stoppages (strike and license suspension) in the second quarter 2009 at
the Boroo mine. Lower grades and lower recoveries were experienced at
both operations. The average realized gold price for the first six months
of 2009 was $906 per ounce compared to $898 per ounce in the same period
of 2008 reflecting higher spot prices for gold. See "Mine Operations -
Kumtor" and "Mine Operations - Boroo".
Net loss before unusual items in the first six months of 2009 was $50.5
million, or $0.23 per share, compared to net earnings of $37.5 million,
or $0.17 per share, for the same period in 2008.
Net loss after unusual items in the first six months of 2009 was $99.9
million, or $0.46 per share, compared to net earnings of $75.2 million,
or $0.35 per share, in the same period of 2008. The decrease reflects
lower sales and production and the unusual items in the second quarter of
2009. See "Unusual Items".
The Company's total cash cost per ounce produced for the six months ended
June 2009 was $740, up from $518 in the same period in 2008. This
increase is primarily due to the reduced production levels in 2009.
Excluding the costs during the shutdown at Boroo, total cash cost per
ounce produced for the first six months of 2009 would be $725.
With the changes in the tax regime at Kumtor resulting from the Agreement
on New Terms, cash cost per ounce produced now excludes operating and
revenue-based taxes. As a result, the cash cost per ounce measure for the
first quarters ended March 31, 2009 and 2008 have been restated to $819
and $556 per ounce respectively (from $871 and $610 per ounce reported
previously).
Cash flow used by operations for the first six months of 2009 was $6.4
million compared to $38.6 million of cash provided by operations in the
same period of 2008 reflecting $22.4 million of tax settlement payments
made by Kumtor in June 2009 under the Agreement on New Terms and lower
net earnings. Cash used in investing activities totaled $24.6 million in
the six months of 2009 compared to $36.1 million spent on capital
projects in the prior year: the 2009 amount includes $42.4 million spent
on capital projects partially offset by a reduction in short-term
investments of $17.8 million. The increased spending on capital projects
relates mainly to the underground project at Kumtor.
Asset Retirement Obligations
The total future asset retirement obligations were estimated by
management based on the Company's ownership interest in all mines and
facilities, estimated costs to reclaim the mine sites and facilities and
the estimated timing of the costs to be incurred in future periods.
The Company has estimated the net present value of the total asset
retirement obligations to be $31.5 million as at June 30, 2009 (December
31, 2008 - $32.8 million). These payments are expected to commence over
the 2009 to 2016 period. The Company used weighted average
credit-adjusted rates of 6.99% at Kumtor and 8% at Boroo to calculate the
present value of the asset retirement obligations.
Share capital and share options
As of July 29, 2009, Centerra had 234,857,228 shares issued and
outstanding. In addition, at the same date, the Company had 2,271,176
share options outstanding under its share option and share appreciation
rights plan with exercise prices between Cdn$4.68 and Cdn$14.29 per
share, and with expiry dates between 2013 and 2017. Gold hedges
The Company had no gold hedges in place in the second quarter of 2009 and
no deferred charges were recognized.
Market Update
A significant factor in determining profitability and cash flow from the
Company's operations is the price of gold. The spot market gold price
based on the London PM fix was approximately $934 per ounce on June 30,
2009. For the second quarter of 2009, the gold price averaged $922 per
ounce compared to $896 per ounce for the same period in 2008.
The Company receives its revenues through the sale of gold in U.S.
dollars. The Company has operations in the Kyrgyz Republic and Mongolia,
and its corporate head office is in Toronto, Canada. During the six-month
period ending June 30, 2009, approximately $149 million of operating and
capital costs were incurred by Centerra in currencies other than U.S.
dollars. For the six-month period, the percentage of Centerra's non-U.S.
dollar costs, by currency was, on average, as follows: 54% in Kyrgyz
soms, 18% in Euro, 16% in Mongolian tugriks, 10% in Canadian dollars, and
2% in other currencies. On average, from the December 31, 2008 currency
rate, the Kyrgyz Som depreciated against the U.S. Dollar by approximately
6.5% and the Euro and the Tugrik depreciated by 4.8% and 13.9%,
respectively. The Canadian dollar appreciated by 1.0%. The estimated
impact of these movements over the six month period to June 30, 2009 has
been to reduce costs by approximately $9.5 million, after accounting for
Som, Tugrik and Canadian Dollars held at the beginning of the year.
Mine Operations
Centerra owns 100% of the Kumtor and Boroo mines and therefore all
operating and financial results are on a 100% basis.
----------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30 June 30
----------------------------------------------------------------------------
Kumtor Operating % %
Results 2009 2008 Change 2009 2008 Change
----------------------------------------------------------------------------
Gold sold - ounces 82,294 115,374 (29%) 144,490 182,490 (21%)
----------------------------------------------------------------------------
Revenue - $ millions 74.3 102.6 (28%) 131.6 164.1 (20%)
----------------------------------------------------------------------------
Average realized
gold price - $/oz 903 889 2% 911 899 1%
----------------------------------------------------------------------------
Cost of sales -
$ millions (1) 70.7 75.4 (6%) 119.3 112.2 6%
----------------------------------------------------------------------------
Cost of sales -
$/oz sold 859 645 33% 826 595 39%
----------------------------------------------------------------------------
Tonnes mined - 000s 29,968 29,605 1% 58,608 58,557 0%
----------------------------------------------------------------------------
Tonnes ore mined -
000s 664 1,082 (39%) 1,190 2,251 (47%)
----------------------------------------------------------------------------
Tonnes milled - 000s 1,454 1,410 3% 2,820 2,519 12%
----------------------------------------------------------------------------
Average mill head
grade - g/t (2) 2.60 3.41 (24%) 2.27 2.98 (24%)
----------------------------------------------------------------------------
Recovery - % 66.0 76.3 (13%) 68.0 75.8 (10%)
----------------------------------------------------------------------------
Gold produced -
ounces 81,467 111,164 (27%) 144,488 185,894 (22%)
----------------------------------------------------------------------------
Total cash cost -
$/oz (3)(4) 723 540 34% 859 596 44%
----------------------------------------------------------------------------
Total production
cost - $/oz (3)(4) 890 640 39% 1,059 663 60%
----------------------------------------------------------------------------
Capital
expenditures -
$ millions 17.4 10.9 59% 39.1 18.5 111%
----------------------------------------------------------------------------
Boroo Operating
Results
----------------------------------------------------------------------------
Gold sold - ounces 33,014 44,999 (27%) 79,410 101,858 (22%)
----------------------------------------------------------------------------
Revenue - $ millions 30.0 39.9 (25%) 71.2 91.1 (22%)
----------------------------------------------------------------------------
Average realized
gold price - $/oz 910 888 2% 897 895 0%
----------------------------------------------------------------------------
Cost of sales -
$ millions (1) 11.3 10.9 4% 31.9 27.7 15%
----------------------------------------------------------------------------
Cost of sales -
$/oz sold 339 232 46% 401 272 47%
----------------------------------------------------------------------------
Tonnes mined
excluding heap
leach - 000s 1,732 5,222 (67%) 4,295 9,687 (56%)
----------------------------------------------------------------------------
Tonnes mined heap
leach - 000s 511 516 (1%) 1,722 1,727 (0%)
----------------------------------------------------------------------------
Tonnes ore mined
direct mill feed -
000's 445 481 (7%) 1,066 1,207 (12%)
----------------------------------------------------------------------------
Tonnes ore milled -
000s 397 604 (34%) 1,018 1,212 (16%)
----------------------------------------------------------------------------
Average mill head
grade - g/t (2) 2.48 2.92 (15%) 2.40 2.83 (15%)
----------------------------------------------------------------------------
Recovery - % 68.7 83.5 (18%) 66.9 84.4 (21%)
----------------------------------------------------------------------------
Gold produced -
ounces 28,990 47,139 (39%) 69,173 92,805 (25%)
----------------------------------------------------------------------------
Total cash cost -
$/oz (3)(5) 511 370 38% 492 362 36%
----------------------------------------------------------------------------
Total production
cost - $/oz (3) 762 472 62% 723 459 58%
----------------------------------------------------------------------------
Capital
expenditures -
$ millions 0.1 10.7 (99%) 0.4 18.6 (98%)
----------------------------------------------------------------------------
(1) Cost of sales for 2009 and its comparative years 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) As a result of Kumtor's Agreement on New Terms, total cash cost and
total production cost per ounce measures for both 2009 and 2008 are
shown excluding operating and revenue-based taxes.
(5) 2009 includes the costs incurred during the strike and shutdown of $3.3
million. Excluding these costs the second quarter and six months cash
cost per ounce produced at Boroo would be $396 and $444 respectively.
Kumtor
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 1997 and has produced about 6.85
million ounces of gold. During the second quarter 2009, Kumtor
experienced zero lost-time accidents and three class I environmental
incidents.
Second Quarter 2009 Compared with Second Quarter 2008
Revenue and Gold Production
Revenue in the second quarter of 2009 decreased to $74.3 million from
$102.6 million in the second quarter of 2008 primarily as a result of
lower production and lower sales volumes (82,294 ounces sold in the
second quarter of 2009 compared to 115,374 ounces sold in the same period
of 2008). Kumtor produced 81,467 ounces of gold in the second quarter of
2009 compared to 111,164 ounces of gold in the second quarter of 2008.
The decrease primarily resulted from less tonnes of ore being mined as
compared to 2008 as efforts continued in the second quarter to remove ice
and waste material in the vicinity of the SB Zone at a faster rate than
planned. This resulted in lower grade stockpiled material from the
Southwest pit being fed to the mill instead of the planned higher grade
material from the SB Zone. Average mill head grade for the second quarter
2009 was 2.60 g/t, an improvement from the grades milled in the first
quarter 2009 which was 1.92 g/t. This compares to 3.41 g/t recorded in
the second quarter 2008. In addition to the lower grade of Southwest ore,
recoveries associated with this ore were lower at 66% due to its varying
degrees of telluride content and other refractory metallurgical
characteristics. This compares with a recovery of 76.3% in the same
quarter of 2008.
The realized gold price in the second quarter of 2009 was $903 per ounce
compared to $889 per ounce in the same period in 2008.
Cost of Sales
Cost of sales at Kumtor in the second quarter of 2009 was $70.7 million
compared to $75.4 million in the same quarter of 2008. This is primarily
due to lower ounces sold and lower operating costs.
Operating cash costs at Kumtor decreased $2.0 million in the second
quarter of 2009 compared to the same quarter of 2008. This variance can
be explained as follows: Mining costs for the quarter ending June 2009
were $32.5 million, $3.0 million or 9% lower than the quarter ended June
2008. This arose primarily due to lower expenditures on maintenance
materials and supplies due to the capitalization of major overhauls ($2.9
million), as well as reduced spending on fuels ($2.7 million), dewatering
materials ($0.2 million), geotechnical drilling ($0.2 million), and tires
($0.1 million). This was partially offset by increased spending on
explosives and blasting supplies ($1.4 million), lubricants ($0.7
million), higher labour costs ($0.4 million) and lower equipment
allocations ($0.3 million).
Milling costs for the quarter ended June 2009 were $13.3 million, $1.2
million or 10% higher than the quarter ended June 2008. This was
primarily due to increased costs of reagents and consumables ($1.3
million), as well as increased costs for electricity ($0.2 million). This
was partially offset by reduced spending on piping ($0.2 million).
Site Administration costs for the quarter ended June 2009 were $9.7
million, $0.2 million or 2% lower than the quarter ended June 2008,
primarily due to a favourable inventory adjustment from supplier credit
notes ($0.3 million), lower spending on food and supplies ($0.2 million),
lower fuel costs ($0.2 million), partially offset by various small
unfavourable variances in equipment allocations, travel costs, insurance
costs and rent costs.
The ultimate impact of these cost changes on the reported results for
cost of sales is dependant on the relative levels of capital and
operating activities and the buildup or drawdown of inventories during
the periods presented. On a unit cost basis, cost of sales per ounce sold
for the second quarter of 2009 increased to $859 compared to $645 for the
second quarter of 2008. This reflects the lower ore production from the
pit leading to higher per unit inventory costs and lower sales for the
period.
Total cash cost per ounce produced in the second quarter 2009 was $723
compared to $540 per ounce for the same period in 2008. The increase
results primarily from the lower production in 2009.
Kumtor Regional Administration
Bishkek Administration costs for the second quarter of 2009 were $3.5
million, a decrease of $0.3 million compared to the same period in 2008.
Depreciation and Amortization
Depreciation and amortization costs increased by $5.8 million over the
same period of 2008 due primarily to a depreciation adjustment resulting
from the componentization of the heavy duty mobile equipment in 2008 and
significant additions to capital in the second half of 2008 and at the
beginning of 2009. This was partially offset by a decrease in mined
ounces in the quarter leading to a reduction in units of production
depreciation for mining assets.
Exploration
Exploration costs for the second quarter of 2009 were $2.3 million, $1.3
million or 35% lower than the second quarter of 2008 mainly due to lower
spending on exploration consumables ($0.3 million), fuel ($0.3 million),
equipment rentals ($0.2 million) and labour costs ($0.4 million).
Drilling productivity improved resulting in lower costs, in addition to
the reduced drilling program in 2009 during the period.
Capital Expenditures
Capital Expenditures in the second quarter of 2009 totaled $17.4 million
compared to $10.9 million in the same quarter of 2008. This consisted of
$11.0 million of sustaining capital, predominately spent on the heavy
duty equipment overhaul program ($5.1 million), the purchase of a spare
ball / regrind bull gear ($2.1 million), spending on the continuing
construction of the shear key and tailings dam ($2.2 million) and the
purchase of two CAT 785 haul truck boxes ($0.4 million). Growth capital
investment totaled $6.4 million spent mainly on the SB zone underground
development including expenditures for construction of the decline ($4.2
million) and purchase of mining equipment for Phase II of the underground
project ($1.0 million). Other significant growth capital includes the
purchase of a new Liebherr 80 tonne crane ($1.2 million).
First Six Months of 2009 Compared with First Six Months of 2008
Revenue and Gold Production
Revenue for the first six months of 2009 decreased to $131.6 million from
$164.1 million in same period of 2008 primarily as a result of lower
production and lower sales volumes (144,490 ounces sold for the six
months of 2009 compared to 182,490 ounces sold in the same period of
2008). Kumtor produced 144,488 ounces of gold for the six months of 2009
compared to 185,894 ounces of gold in the same period of 2008. The
decrease results primarily from lower ore production, lower ore grades
and lower recovery. The ore grade averaged 2.27 g/t with a recovery of
68% for the six months period of 2009, compared to 2.98 g/t with a
recovery of 75.8% in the same period of 2008.
The higher average realized gold price per ounce for the six month period
in 2009 of $911 compared to $899 in 2008 was due to higher gold spot
prices.
Cost of Sales
Cost of sales at Kumtor in the first half of 2009 was $119.3 million
compared to $112.2 million in the same period of 2008. This is primarily
due to higher operating costs and lower ore production leading to higher
unit costs for ounces sold, partially offset by reduced sales volumes in
the year.
Operating cash costs at Kumtor increased $12.2 million for the first half
of 2009 compared to the same period of 2008. This variance can be
explained as follows:
Mining costs for year-to-date June 2009 were $72.2 million, $6.2 million
or 9% higher than the same period in 2008. This arose primarily due to
higher than 2008 year-to-date expenditures on explosives and blasting
supplies ($3.0 million), as well as dewatering supplies including piping
and pumps, ($2.7 million). Other unfavourable variances include higher
labour costs ($1.7 million) and higher lubrication costs ($1.5 million).
This was partially offset by favourable price and consumption variances
for diesel fuel in 2009 ($3.2 million) and lower maintenance expenses due
to increased capitalization of heavy duty equipment overhaul projects in
2009 ($2.2 million).
Milling costs year-to-date June 2009 were $25.8 million, $4.0 million or
18% higher than the same period in 2008. This was primarily due to higher
costs for reagents and consumables ($3.1 million), higher assay lab costs
($0.5 million), direct purchase of cyclones ($0.4 million), higher labour
costs ($0.3 million) and higher spending on maintenance materials and
supplies ($0.2 million). This was partially offset by lower spending on
piping ($0.3 million).
Site Administration costs year-to-date June 2009 were $19.3 million, $2.0
million or 11% higher than the same period in 2008, primarily due to
higher labour costs ($1.2 million), higher equipment rental costs ($0.6
million), insurance costs ($0.6 million), higher rent ($0.3 million), and
electricity costs ($0.2 million). Other unfavourable variances include
higher spending on business travel ($0.2 million), higher production
taxes ($0.2 million), and an increased allocation of both service
equipment and site services for the period ($0.1 million). This was
partially offset by favourable inventory adjustments from supplier
credits ($0.3 million), lower spending on food and supplies ($0.3
million), lower fuel costs ($0.2 million), and lower spending on expense
projects ($0.1 million).
The ultimate impact of these cost changes on the reported results for
cost of sales is dependant on the relative levels of capital and
operating activities and the buildup or drawdown of inventories during
the periods presented. On a unit cost basis, cost of sales per ounce sold
increased to $826 compared to $595 for the same period of 2008. This
reflects the lower gold production leading to higher unit costs. Other
unfavourable variances include the increased operating costs between the
two periods as explained above.
Total cash cost per ounce produced for the six months ended June 2009 was
$859 compared to $596 per ounce for the same period in 2008. The increase
results primarily from the lower production in 2009 and higher mining,
milling and administration costs as discussed previously. The exclusion
of operating and revenue-based taxes, as a result of the Agreement on New
Terms, has required a restatement of the first quarters of 2009 and 2008
cash cost per ounce produced to $1,035 and $680 per ounce respectively
(from $1,121 and $766 per ounce reported previously).
Kumtor Regional Administration
Bishkek Administration costs year-to-date June 2009 were $7.1 million,
$0.9 million or 14% higher than the same period in 2008. This was mainly
due to higher labour and rent costs as well as increased spending on
computer software. This was partially offset by lower spending on legal
and banking fees, and various small expense projects.
Depreciation and Amortization
Depreciation and amortization costs increased year-to-date by $13.1
million over the same period of 2008 due primarily to a depreciation
adjustment resulting from the componentization of the heavy duty mobile
equipment in 2008 and significant additions to capital in the second half
of 2008 and the beginning of 2009. This was partially offset by decrease
in mine ore ounces leading to a reduction in units of production
depreciation for mining assets.
Exploration
Exploration costs in the first half of 2009 were $5.6 million, $1.1
million or 16% lower than the same period in 2008 mainly due to reduced
spending on labour, rental equipment, and consumables and supplies.
Drilling productivity improved resulting in lower costs, in addition to
the reduced drilling program in 2009.
Capital Expenditures
Capital Expenditure in the first half of 2009 was $39.1 million compared
to $18.5 million in the same period 2008. This consisted of $27.6 million
of sustaining capital, predominately spent on the heavy duty equipment
overhaul program ($15.1 million), the purchase of a new 9350 Liebherr
shovel ($4.8 million), the purchase of equipment for the pit and till
dewatering projects ($1.4 million), continued spending on the tailings
dam project ($2.2 million), and the purchase of a spare ball / regrind
bull gear ($2.1 million). Growth capital investment totaled $11.5 million
spent mainly on the SB zone underground development including
expenditures for construction of the decline and supporting structures
for Phase I ($9.2 million), the purchase of equipment for Phase II ($1.0
million), as well as the purchase of a new Liebherr 80 tonne crane ($1.2
million). Boroo
Located in Mongolia, this open pit mine was the first hard rock gold mine
in Mongolia and to date it has produced approximately 1.3 million ounces.
During the second quarter of 2009, there were zero lost-time accidents,
two first aid injuries, and no reportable environmental spills.
Second Quarter 2009 Compared with Second Quarter 2008
Revenue and Gold Production
Revenue in the second quarter 2009 decreased to $30.0 million from $39.9
million in the second quarter 2008. The decrease is primarily due to
lower ounces sold in 2009, 33,014 compared to 44,999 ounces sold in the
second quarter 2008. The lower sold ounces were as a result of 39% lower
gold production in the second quarter 2009 compared to 2008 (28,990
ounces compared to 47,139 ounces in 2008) mainly due to the operational
shutdown caused by a labour strike followed by the suspension of Boroo's
mining license.
Gold production in the second quarter 2009 was 18,149 ounces lower than
for the same period in 2008. This is mainly due to approximately 16,000
planned ounces not being processed as a result of the operational
shutdown (the strike and the license suspension commencing from May 26th
and June 12th, 2009 respectively), lower mill recovery (69% vs. 84% in
2008) as processing up to 40% refractory ore in the mill feed decreased
production by 4,682 ounces, and lower head grade (2.48 g/t vs. 2.92 g/t
in 2008) which further decreased production by 7,100 ounces. This was
partially offset by the operation of the heap leach process which
produced 9,370 ounces in the second quarter 2009.
The mine stopped adding cyanide to the heap leach pad at the end of April
2009 due to the expiry of the temporary operating permit for the heap
leach operation. The Company had been awaiting the final operating permit
for the heap leach facility when Boroo's main operating licenses were
suspended on June 12, 2009. The Company continues to work with the
Mongolian authorities to obtain the final heap leach operating permit.
Although the suspension of Boroo's main operating licenses has been
lifted on July 27, 2009, the Company is continuing its discussions with
the regulatory authorities regarding their concerns. Boroo expects to
resume full mining and milling operations before the end of July. See
"Other Corporate Developments- Mongolia".
The realized gold price in the second quarter 2009 was $910 per ounce
compared to $888 per ounce in the same period in 2008.
Cost of Sales
Cost of sales in the second quarter of 2009 was $11.3 million compared to
$10.9 million in the comparative quarter 2008.
Operating cash costs decreased $2.3 million in the second quarter 2009
compared to the same period in 2008. This variance can be explained as
follows:
Mining costs for the second quarter were $3.8 million, $1.6 million or
30% lower than the comparative period in 2008. The decrease was mainly
due to the strike and license suspension which limited the mining
activity and lowered the variable mining costs ($1.3 million cost
reduction). In addition, there were cost savings in diesel, equipment
rental and blasting materials, and reduced overall cost for consumables.
This is mainly due to a decrease in production from 60,000 to 40,000
tonnes per day.
Milling costs for the second quarter 2009 were $4.1 million, $1.0 million
or 20% lower than the same quarter in 2008 primarily as a result of the
strike and license suspension.
Heap leaching activity accumulated $1.5 million of costs in the second
quarter 2009 for crushing and processing activities and for overheads. In
the second quarter 2008 most of the heap leach related costs were
capitalized due to the commissioning of the facility which was completed
at the end of June 2008.
Site administration costs for the second quarter 2009 remained unchanged
at $1.9 million compared to the same period in 2008.
Royalties and other operating costs decreased by $1.3 million in the
second quarter 2009 compared to the same period in 2008, reflecting the
reduced sales levels in 2009.
The ultimate impact of these cost changes on the reported results for
cost of sales is dependant on the relative levels of capital and
operating activities and the buildup or drawdown of inventories during
the periods presented. On a unit cost basis, cost of sales per ounce sold
for the second quarter of 2009 increased to $339 compared to $232 for the
second quarter of 2008. This increase compared to the 2008 result is
mainly due to an increase in the price and consumption of consumables, in
part to improve throughput and recoverability, and the inclusion of heap
leaching activity in 2009.
Total cash cost per ounce produced in the second quarter 2009 was $511
compared to $370 per ounce for the same period in 2008. The increase
results primarily from the impact of the shutdown on production. If you
exclude the fixed costs incurred during the shutdown period, the second
quarter 2009 total cash cost per ounce produced would be $396.
Mine Standby Costs
Boroo accumulated $3.3 million of standby costs during the first half of
2009 due to the temporary suspension of its operations as a result of a
labour dispute and following the suspension of its main operating license
by the Mongolian authorities.
Boroo Regional Administration
Regional administration costs at Boroo for the second quarter 2009 were
2.3 million, $0.2 million or 8% lower than the same quarter in 2008.
Depreciation and Amortization
Depreciation and amortization in the second quarter 2009 increased by
$2.8 million compared to the same period in 2008. This is mainly due to
the increased capitalization during 2008 of pit 3 pre-strip amounting to
$13.6 million as well as the addition of heap leach facilities that
commenced operation in June 2008 amounting to $20.9 million. These
additional capitalizations increased the depreciation expense by $1.8
million compared to the second quarter of 2008. The remaining variance is
mainly due the increase in reclamation assets in the first quarter 2009,
based on the updated closure cost estimates, which increased the
anticipated reclamation cost by $10.9 million. These additional costs are
being amortized over the remaining mine production.
Exploration
Exploration expenditures in Mongolia totaled $0.5 million in the second
quarter 2009 compared to $0.6 million in 2008.
Capital Expenditures
Capital expenditures in the second quarter of 2009 amounted to $0.1
million which was spent on sustaining capital, compared to $10.7 million
in 2008, which included $3.9 million of sustaining capital. The reduction
is mainly due to more significant expenditures in the second quarter of
2008 for pre-stripping costs in pit 3 amounting to $4.6 million and
completing the heap leach facility amounting to $2.4 million. No major
capital projects were undertaken during the second quarter of 2009.
First Six months of 2009 Compared with First Six Months of 2008
Revenue and Gold Production
In first half of 2009 revenue decreased to $71.2 million from $91.1
million in 2008 due to 22% lower sales volumes (79,410 ounces in 2009
compared to 101,858 ounces in 2008), marginally offset by a higher
average realized gold price in 2009 ($897 per ounce vs. $895 in 2008).
The lower ounces sold resulted from lower production of gold in 2009
compared to 2008 mainly due to the operational shutdown resulting from
the strike and followed by the suspension of Boroo's mining license. See
"Other Corporate Developments - Mongolia".
Gold production at Boroo was 69,173 ounces in 2009, a reduction of 23,632
ounces of gold produced as compared to the first half of 2008. This is
mainly due to the roughly 16,000 ounces not being produced resulting from
the operational shutdown (strike and license suspension), lower plant
recovery (67% vs. 84% in 2008) as up to 40% refractory ore in the mill
feed caused 13,743 ounces lower production, and lower head grade (2.40
g/t vs. 2.83 g/t in 2008) causing an additional shortfall of 14,220
ounces. These shortfalls were partially offset by the 18,663 ounces
produced by the heap leach in the first half of 2009.
Cost of Sales
Cost of sales at Boroo for the first half of 2009 was $31.9 million
compared to $27.7 million in 2008.
Operating cash costs at Boroo increased in 2009 to $30.2 million compared
to $28.8 million in the first half of 2008. The increase of $1.4 million
can be explained as follows:
Mining costs to June 2009 were $9.5 million, $1.7 million or 15% lower
than the comparative first six months of 2008. The reduction was mainly
due to the reduced mining activity resulting from the strike and license
suspension. Cost savings included diesel, equipment rental and blasting
material costs due to the reduction in the production rate from 60,000
tpd to 40,000 tpd. The unit cost of diesel decreased from $0.97/litre to
$0.69/litre in the first half of 2009 as compared to the same period in
2008.
Milling costs for the first six months of 2009 were $9.4 million compared
to $9.2 million for the same period in 2008. The 2% increase reflects
primarily the increase in the price and consumption of consumables, in
particular grinding balls.
Heap leaching costs for the first half of 2009 totaled $3.8 million for
crushing, processing and for overheads. Heap leaching activities
commenced at the end of June 2008.
Site administration costs to June 2009 were largely unchanged at $3.8
million compared to $3.5 million in the same period of 2008.
Royalties and other operating costs decreased by $1.2 million in the
first half of 2009 compared to the same period in 2008, reflecting the
reduced sales levels in 2009.
The ultimate impact of these cost changes on the reported results for
cost of sales is dependant on the relative levels of capital and
operating activities and the buildup or drawdown of inventories during
the periods presented. On a unit cost basis, cost of sales per ounce sold
for the first half of 2009 increased to $443 compared to $272 for the
same period in 2008. This includes the impact of the strike and shutdown
costs of $3.3 million expensed in the second quarter of 2009. Excluding
the costs associated with the strike and shutdown the cost of sales per
ounce sold for the first half of 2009 would be $313: the increase
compared to the 2008 result is mainly due to an increase in the price and
consumption of certain consumables, in part to improve throughput and
recoverability, and the inclusion of heap leaching activity in 2009.
Total cash cost per ounce produced in the first half of 2009 was $492
compared to $362 per ounce for the same period in 2008. If you exclude
the costs associated with the strike and the shutdown, the first half
2009 cash cost per ounce would be $444. This increase mainly reflects the
reduced production levels as a result of lower grades and recoveries in
2009 compared to the prior year (2.40 g/t vs. 2.83 g/t and 66.9 % vs.
84.4%) and due to higher prices for certain consumables in 2009.
Mine Standby Costs
Standby costs at the Boroo mine during the first six months of 2009
totalled $3.3 million as a result of the operation's suspension due to a
labour dispute and a temporary suspension of the main mining license by
the Mongolian authorities.
Boroo Regional Administration
Regional administration costs at Boroo for the first half of 2009
compared to the same period in 2008 was unchanged at $3.8 million.
Depreciation and Amortization
Depreciation and amortization costs in the first half of 2009 increased
by $6.8 million compared to the previous year. This was primarily due to
the increased capitalization in 2008 for the pit 3 pre-strip and for the
heap leach facility resulting in higher depreciation and amortization in
2009.
Exploration
Exploration expenditures in Mongolia totaled $0.8 million in the second
quarter 2009 compared to $0.9 million in 2008.
Capital Expenditures
Capital expenditures in the first half of 2009 were $0.4 million compared
to $18.6 million in 2008. This is mainly due to pre-stripping costs in
pit 3 amounting to $7.5 million, heap leach capital expenditures
amounting to $5.6 million, and tailings dam repair costs of $2.4 million,
all incurred in the first half of 2008.
Other Financial Information - Related Party Transactions
Cameco Corporation
Centerra is 48.5% owned by Cameco Corporation ("Cameco"), currently
Cameco retains 52.7% voting rights.
Kyrgyzaltyn and the Government of the Kyrgyz Republic
Effective June 11, 2009, revenues from the Kumtor mine are subject to a
management fee of $1.00 per ounce based on sales volumes (previously
$1.50 per ounce), payable to Kyrgyzaltyn, which holds approximately 22.2%
of the outstanding common shares of Centerra.
The table below summarizes the management fees and concession payments
paid and accrued by Kumtor Gold Company ("KGC"), a subsidiary of the
Company, to Kyrgyzaltyn or the Government of the Kyrgyz Republic, and the
amounts paid and accrued by Kyrgyzaltyn to KGC according to the terms of
the Gold and Silver Sales Agreement between Kumtor Operating Company
("KOC", a subsidiary of the Company), Kyrgyzaltyn and the Kyrgyz
Republic.
---------------------------------------------------------------------------
Three months ended Six months ended
($ thousands) June 30 June 30
---------------------------------------------------------------------------
2009 2008 2009 2008
---------------------------------------------------------------------------
Management fees paid by KGC to
Kyrgyzaltyn 115 173 209 274
---------------------------------------------------------------------------
Concession payments paid by KGC to
Kyrgyz Republic (365) 462 (116) 730
---------------------------------------------------------------------------
Total (250) 635 93 1,004
---------------------------------------------------------------------------
Gross gold and silver sales from KGC
to Kyrgyzaltyn 74,689 103,121 132,297 164,955
---------------------------------------------------------------------------
Deduct: refinery and financing charges (391) (530) (729) (855)
---------------------------------------------------------------------------
Net sales revenue received by KGC from
Kyrgyzaltyn 74,298 102,591 131,568 164,100
---------------------------------------------------------------------------
Gold produced by the Kumtor mine is purchased at the mine site by
Kyrgyzaltyn for processing at its refinery in the Kyrgyz Republic
pursuant to the Gold and Silver Sales Agreement (GSSA) entered into
between KOC, Kyrgyzaltyn and the Government of the Kyrgyz Republic.
Kyrgyzaltyn is permitted to pay for gold delivered up to 12 calendar days
after delivery at a price that is fixed based on the London PM fixed
price of gold on the London Bullion Market. The obligations of
Kyrgyzaltyn are partially secured by a pledge of a portion of the
Centerra shares owned by Kyrgyzaltyn, the value of which fluctuates with
the market price.
As at June 30, 2009, a receivable of $15.1 million was outstanding under
these arrangements (June 30, 2008 - $19.7 million).
Quarterly Results - Last Eight Quarters
Over the last eight quarters, Centerra's results reflect the positive
impact of rising gold prices, increased gold production at Kumtor in 2007
and 2008, offset by rising cash costs and reduced production at Kumtor
for the first half of 2009 due to the unplanned mining of ice and the
removal of waste in the vicinity of the central pit. Unusual items of
$49.3 million were recorded in the second quarter of 2009 as a result of
the ratification of the Agreement on New Terms. The results for the first
and second quarters of 2008 and the third and fourth quarters of 2007
reflect the impact from unusual items of $4.5 million, and $42.2 million
of gains in the respective 2008 quarters and $95.2 million and $36.4
million of charges in the respective 2007 quarters as the impact on the
ultimate shares to be issued to the Kyrgyz Government was adjusted for
the market price of Centerra shares.
---------------------------------------------------------------------------
$ millions, except 2009 2008 2007
per share data ---------------------------------------------------------
Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3
---------------------------------------------------------------------------
Revenue 104 98 241 139 143 113 89 98
---------------------------------------------------------------------------
Earnings (loss) before
unusual items (30) (20) 43 17 14 24 10 5
---------------------------------------------------------------------------
Net earnings (loss) (80) (20) 43 17 56 19 (27) (90)
---------------------------------------------------------------------------
Earnings (loss) per
share before unusual
items (basic and
diluted) (0.14) (0.09) 0.20 0.08 0.06 0.11 0.03 0.02
---------------------------------------------------------------------------
Earnings (loss) per
share (basic and
diluted) (0.36) (0.09) 0.20 0.08 0.26 0.09 (0.12) (0.42)
---------------------------------------------------------------------------
Other Corporate Developments
Kyrgyz Republic
On April 24, 2009, the Company announced that it had entered into the
Agreement on New Terms, which resolves all of the existing disputes
between the Company, Cameco and the Government with respect to the Kumtor
Project. On April 30, 2009, the Company announced that the Kyrgyz
Parliament had ratified the Agreement on New Terms and enacted
legislation authorizing its implementation including the new tax regime.
The Agreement on New Terms provides for the Government's full commitment
to and support for the Company's continuing long-term development of the
Kumtor Project and the Government has agreed not to take any action that
deprives the Company of any of its rights in respect of the Kumtor
Project.
On June 11, 2009, the Company announced the closing of the transactions
contemplated by the Agreement on New Terms and that the parties had
executed restated project agreements to incorporate the provisions of the
Agreement on New Terms including providing for the settlement of all
outstanding claims between them including those currently the subject of
international arbitration as well as for the expansion of the Company's
existing concession area to include the area of its exploration and
development license. The Government will also support further and
additional exploration activity by the Company in the Kyrgyz Republic by
inviting it to consider opportunities to acquire additional exploration
and mining licenses.
Taxes applicable to the Kumtor project have been replaced with a
simplified, new tax regime effective January 1, 2008. Under the new tax
regime, gross revenue will be taxed at a rate of 14%, which includes a 1%
monthly contribution to the Issyk-Kul Oblast Development Fund. The new
tax regime replaces income tax (10% of taxable income), mineral resource
tax (5% of revenue), emergency fund tax (1.5% of revenue), road tax (0.8%
of revenue), withholding taxes (10-30% depending on the nature of the
payment), the Issyk-Kul Social Fund tax (2-4% of taxable income), all
custom duties and certain other taxes.
The restated project agreements provide for an annual payment of 4% of
gross revenue against which all capital and exploration expenditures in
the Kyrgyz Republic are fully credited. Expenditures not applied for
credit in the year are carried forward for credit in future years.
The Company paid the Government, a related party, approximately $22.4
million comprised of: (i) an $11.0 million difference between the taxes
paid under the existing tax regime and the taxes that would have been
payable under the new tax regime for the period from January 1, 2008 to
December 31, 2008, (ii) $1.75 million in full satisfaction of all
liabilities or claims of any governmental authority against the Company
or any of its affiliates in respect of any matter arising before the
closing of the transactions contemplated by the Agreement on New Terms
and (iii) an advance on taxes of approximately $9.65 million related to
2009. The Company has issued to the Government 18,232,615 common shares
from its treasury and Cameco has agreed to transfer to the Government up
to 25,300,000 common shares of the Company, which are to be released to
the Government upon the satisfaction of certain conditions, including,
among other things, if Cameco's interest in the Company falls below
10,800,000 common shares. Until that time Cameco retains voting control
over approximately 52.7% of the issued and outstanding shares of
Centerra. No restrictions have been placed on the Company's ability to
issue common shares in the future. The Agreement on New Terms
contemplated that the Company's Board of Directors will be expanded to
include an additional independent director nominated by the Kyrgyz
Government.
After closing of the transactions and upon the satisfaction of all
conditions to the transfer of shares by Cameco, the Kyrgyz Government
could own up to 33.0% of the Company, Cameco 37.8% and the balance,
29.2%, would be held by the remaining shareholders.
Mongolia
On May 26, 2009, unionized employees initiated an illegal work stoppage
at the Boroo Mine, which resulted in a temporary suspension of mining and
milling. The labour dispute with the Boroo Trade Union was settled on
June 16, 2009, but mining and milling remains suspended as a result of
the license suspensions discussed below. The key terms of the settlement
provide enhanced future redundancy benefits to permanent employees. The
Company believes the settlement will not have a material impact on future
cash costs.
As disclosed on June 12, 2009, the Company received a notice from the
Minerals Resources Authority of Mongolia suspending the Boroo Mine's main
operating licenses for a period up to three months. During June and July
the Company worked with the relevant regulatory authorities in Mongolia
to address concerns raised by them. The Company announced on July 27,
2009 that the suspension had been lifted for the mining and milling
operations. The Company is continuing its discussions with the regulatory
authorities regarding their concerns. The mine stopped adding cyanide to
the heap leach pad at the end of April 2009 due to the expiry of the
temporary operating permit for the heap leach operation. The Company had
been awaiting the final operating permit for the heap leach facility when
Boroo's main operating licenses were suspended on June 12, 2009. The
Company continues to work with the Mongolian authorities to obtain the
final heap leach operating permit.
Centerra continued discussions with the government working group with
respect to an investment agreement for the Gatsuurt Project.
For information on forward-looking information see "Caution Regarding
Forward-Looking Information".
Critical Accounting Estimates
Centerra prepares its consolidated financial statements in accordance
with Canadian GAAP. In doing so, management is required to make various
estimates and judgments in determining the reported amounts of assets and
liabilities, revenues and expenses for each year presented and in the
disclosure of commitments and contingencies. Management bases its
estimates and judgments on its own experience, guidelines established by
the Canadian Institute of Mining, Metallurgy and Petroleum and various
other factors believed to be reasonable under the circumstances. In
reference to the Company's significant accounting policies as described
in note 3 to the December 31, 2008 Consolidated Financial Statements
management believes the following critical accounting policies reflect
its more significant estimates and judgments used in the preparation of
the consolidated financial statements.
Inventories of broken ore, heap leach ore, in-circuit gold and gold dore
are valued at the lower of average production cost and net realizable
value, while consumable supplies and spares are valued at the lower of
weighted-average cost and replacement cost. Determination of realizable
value or replacement costs requires estimates to be made for costs to
complete and sell inventory. Management periodically makes estimates
regarding whether an allowance is necessary for slow moving or obsolete
consumable supplies and spares inventories.
Depreciation and depletion of property, plant and equipment directly
involved in mining and milling operations is primarily calculated using
the "unit of production" method. This method allocates the cost of an
asset to each period based on current period production as a portion of
total lifetime production or a portion of estimated recoverable ore
reserves. Estimates of lifetime production and amounts of recoverable
reserves are subject to judgment and could change significantly over
time. If actual reserves prove to be significantly different than the
estimates, there would be a material impact on the amounts of
depreciation and depletion charged to earnings.
Mobile equipment and other administrative-type assets are depreciated
according to the straight-line method, based on an estimate of their
useful lives.
Significant decommissioning and reclamation activities are often not
undertaken until substantial completion of the useful lives of productive
assets. Regulatory requirements and alternatives with respect to these
activities are subject to change over time. A significant change to
either the estimated costs or recoverable reserves would result in a
material change in the amount charged to earnings.
If it is determined that carrying values of property, plant and equipment
cannot be recovered, then the asset is written down to fair value.
Similarly, Centerra tests goodwill at least annually for impairment to
ensure that the fair value remains greater than or equal to book value.
Any excess of book value over fair value is charged to income in the
period in which the impairment is determined. Recoverability and fair
value assessments are dependent upon assumptions and judgments regarding
future prices, costs of production, sustaining capital requirements and
economically recoverable ore reserves and resources. A material change in
assumptions may significantly impact the potential impairment of these
assets.
The Company uses the asset and liability method of accounting for future
income taxes. Under this method, current income taxes are recognized for
the estimated income taxes payable for the current year. Future income
tax assets and liabilities are recognized for temporary differences
between the tax and accounting bases of assets and liabilities,
calculated using the currently enacted or substantively enacted tax rates
anticipated to apply in the period that the temporary differences are
expected to reverse. Future income tax inflows and outflows are subject
to estimation in terms of both timing and amount of future taxable
earnings. Should these estimates change the carrying value of income tax
assets or liabilities may change.
Grants under our stock-based compensation plans are accounted for in
accordance with the fair-value-based method of accounting. For
stock-based compensation plans that will settle through the issuance of
equity such as stock options, the fair value of stock options is
estimated on the date of grant using the Black-Scholes option pricing
model, while for the cash-settled stock-based compensation, fair value is
determined based on the market value of the Company's common shares at
the reporting date. In addition, option valuation models require the
input of somewhat subjective assumptions including expected share price
volatility.
Changes in Accounting Policies
Centerra's unaudited interim consolidated financial statements for the
three and six months ended June 30, 2009 were prepared following
accounting policies consistent with Centerra's audited annual
consolidated financial statements and notes thereto for the year ended
December 31, 2008, except for the following changes in accounting
policies.
Effective January 1, 2009, the Company adopted the new recommendations of
Canadian Institute of Chartered Accountants ("CICA") Handbook section
3064, Goodwill and Intangible assets. This standard establishes revised
standards for recognition, measurement, presentation and disclosure of
goodwill and intangible assets. Concurrent with the introduction of this
standard, the CICA's Emerging Issues Committee ("EIC") withdrew EIC 27,
Revenues and Expenses during the pre-operating period. As a result of the
withdrawal of EIC 27, companies will no longer be able to defer certain
costs and revenues incurred prior to commercial production at new mine
operations. The adoption of this standard did not have an impact on the
Company's consolidated financial statements.
Effective January 1, 2009, the company adopted the new recommendations of
CICA issued EIC 173, Credit risk and the fair value of financial assets
and liabilities. This abstract requires companies to take the
counterparty credit risk into account when measuring the fair value of
financial assets and liabilities, including derivatives. The adoption of
this standard did not have an impact on the Company's consolidated
financial statements.
On March 27, 2009, the Emerging Issues Committee of the CICA approved
abstract EIC-174, Mining Exploration Costs, which provides guidance on
capitalization of exploration costs related to mining properties in
particular and on impairment of long-lived assets in general. The Company
has applied this new abstract for the three months ended March 31, 2009
and there was no significant impact on its financial statements as a
result of applying this abstract.
New Pronouncements
The CICA issued three new accounting standards in January 2009: Section
1582, Business Combinations, Section 1601, Consolidated Financial
Statements and Section 1602, Non-Controlling interests.
Section 1582 replaces section 1581 and establishes standards for the
accounting of a business combination. It provides the Canadian equivalent
to IFRS 3 - Business Combinations. The section applies prospectively to
business combinations for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or after
January 1, 2011. Sections 1601 and 1602 together replace section 1600,
Consolidated Financial Statements. Section 1601, establishes standards
for the preparation of consolidated financial statements. Section 1601
applies to interim and annual consolidated financial statements relating
to fiscal years beginning on or after January 1, 2011. Section 1602
establishes standards for accounting of a non-controlling interest in a
subsidiary in consolidated financial statements subsequent to a business
combination. It is equivalent to the corresponding provisions of IFRS lAS
27 - Consolidated and Separate Financial Statements and applies to
interim and annual consolidated financial statements relating to fiscal
years beginning on or after January 1, 2011.
The Company does not anticipate that the adoption of these standards will
impact its financial results.
Status of Centerra's Transition to International Financial Reporting
Standards ("IFRS")
As disclosed in the December 31, 2008 Annual Report Management's
Discussion and Analysis ("MD&A"), the Company's IFRS project has
completed its preliminary study phase and has now progressed to the
evaluation and development phases.
Evaluation and development work on the IFRS project continued during the
three months ended June 30, 2009. In May the Company provided formalized
training to the Board of Directors as a part of its overall executive
training program. This session followed the training provided to senior
management during the first quarter. As well in the first quarter the
Company performed an evaluation and assessment of the IFRS 1 transition
standard with the purpose of selecting the optional exemptions allowed to
the Company under IFRS 1. IFRS 1 requires that first-time adopters select
accounting policies that comply with each IFRS effective at the end of
its first IFRS reporting period (March 31, 2011 for the Company), and
apply those policies to all periods presented in its first IFRS financial
statements. IFRS 1 also provides relief on transition in certain areas by
providing optional exemptions to full retrospective application. In the
second quarter, results from this preliminary assessment regarding
optional exemptions to be elected were presented and discussed with the
Audit Committee. Tentative approval was obtained for these elected
optional exemptions.
During the second quarter, the Company completed a preliminary in-depth
review of its accounting policies and the impact from adopting IFRS, as
well as the associated impact of the IFRS transition on business
activities. As a result, IFRS-compliant accounting policies were
developed for the Company. These IFRS-complied accounting policies were
discussed with management and will be presented to the Audit Committee
for their review and approval during the third quarter of 2009.
Also planned for the third quarter is the assessment and evaluation of
internal control design and effectiveness for all accounting policy
changes identified. The Company's target is to complete the evaluation
and development phases by the end of the third quarter of 2009 and to
begin quantifying differences over the fourth quarter 2009 and first
quarter 2010. As these quantitative impacts are finalized, the company
intends to disclose such impacts in its future MD&A's.
The Company continues to monitor standards development as issued by the
International Accounting Standards Board and the Accounting Standards
Board (Canada) as well as regulatory developments as issued by the
Canadian Securities Administrators, which may affect the timing, nature
or disclosure of the Company's adoption of IFRS.
The project team is working through a detailed IFRS transition plan and
certain project activities and milestones could change. Centerra is
assessing the impact of the IFRS conversion on various functional
activities of the Company. IFRS disclosure in the MD&A will be updated
throughout the project.
Given the progress of the project and outcomes identified, the Company
could modify choices made between the time of communicating these key
milestones and the changeover date. Further, changes in regulation or
economic conditions at the date of the changeover or throughout the
project could result in changes to the transition plan being different
from those communicated.
Outlook for 2009
Production
For the full year of 2009, Centerra expects consolidated gold production
of 680,000 to 730,000 ounces, which is lower than the prior guidance of
720,000 to 770,000 ounces. The reduction in gold production guidance is
due to lower than expected production at Boroo due to the operational
shutdown which resulted from the strike and subsequent suspension of the
main operating licenses.
Gold production for the full year 2009 at the Kumtor mine is forecast to
be 560,000 to 600,000 ounces, which is unchanged from prior guidance.
Production from the nearby Sarytor deposit has not been included this
year in Kumtor's current mine plan. The production from Sarytor has been
deferred until 2012.
Details of Kumtor's 2009 quarterly production profile were published in a
news release on June 12, 2009. Production in the first two quarters of
2009 was negatively affected by the mining activities related to
sustaining the cutback of the ice creep into the pit from the Davidov
glacier. However, overall, Kumtor's 2009 guidance on gold production is
not expected to be affected by the accelerated mining of ice and waste
material. The Company expects that due to an unplanned maintenance
shutdown of the SAG mill in the first quarter, the planned 2-week
shutdown of the Kumtor mill to replace the ball mill ring gear and the
SAG mill liner, originally scheduled for the third quarter of 2009 will
be delayed to 2010. The third quarter production is forecast to exceed
the production in the same quarter of last year by approximately 30,000
ounces due to the availability of high grade material for processing. The
Company expects the highest production in the fourth quarter of 2009,
when the high-grade ore in the SB Zone will be mined.
At Boroo, gold production is forecast to be 120,000 to 130,000 ounces,
which is lower than the prior guidance of 160,000 to 170,000 ounces. The
revised production guidance for Boroo reflects the impact of the labour
strike and license suspension and the expiration of the temporary heap
leach operating permit. The mining activities at Boroo were halted on May
26, 2009 due to the strike at the mine site followed by the suspension of
the mining licenses on June 12, 2009. On July 27, 2009, the suspension of
Boroo's main operating licenses was lifted for the mining and milling
operations. The Company is continuing its discussions with the regulatory
authorities regarding their concerns. The Company is working with the
Mongolian authorities to have the final operating permit for the heap
leach facility issued. Resumption of heap leach operations at Boroo would
add approximately 3,000 ounces per month to the Company's gold production
guidance.
Cash cost per ounce
The prior 2009 outlook for consolidated cash costs per ounce of $465 to
$505 has been revised to $410 to $450 per ounce to reflect the reduced
production at Boroo and the closing of all transactions under the
Agreement on New Terms. As disclosed previously the majority of taxes at
Kumtor have been replaced with a revenue-based tax which is excluded from
the total cash costs. Accordingly, the outlook for total cash costs per
ounce produced excludes the revenue-based tax.
Total cash cost for 2009 for Kumtor is expected to be in the range of
$390 to $430 per ounce produced. Other than adjusting the unit cost to
reflect the application of the Agreement on New Terms, the prior guidance
for total cash per ounce at Kumtor is unchanged. Centerra expects that
the higher cost profile at Kumtor in the first two quarters of 2009 will
be offset by higher production in the third and fourth quarters.
Total cash cost for 2009 for Boroo is expected to be in the range of $495
to $535 per ounce produced which is higher than the prior guidance of
$465 to $505 per ounce. The revised cash cost guidance for Boroo reflects
lower production due to the strike and subsequent suspension of the main
operating licenses. The cash cost at Boroo would be lower if heap leach
operations are resumed.
Total cash cost is a non-GAAP measure and is discussed under "Non-GAAP
Measures".
Centerra's production and unit costs are forecast as follows:
----------------------------------------------------------------------------
2009 Production Forecast 2009 Total Cash Cost(1)
(ounces of gold) ($ per ounce)
----------------------------------------------------------------------------
Kumtor 560,000 - 600,000 390 - 430
----------------------------------------------------------------------------
Boroo 120,000 - 130,000 495 - 535
----------------------------------------------------------------------------
Consolidated 680,000 - 730,000 410 - 450
----------------------------------------------------------------------------
(1) Total cash cost is a non-GAAP measure. See "Non-GAAP Measures" below.
Major Assumptions and Sensitivities
The following material assumptions have been updated from the prior
disclosed guidance in light of current market conditions. In particular,
material assumptions or factors used to forecast production and costs
include the following:
- a gold price of $900 per ounce,
- exchange rates:
-- $1USD:$1.12CAD
-- $1USD:42 Kyrgyz Som
-- $1USD:1,425 Mongolian Tugrik
-- $1USD:0.71 Euro
- diesel price assumption:
-- $0.50/litre at Kumtor
-- $0.85/litre at Boroo
Diesel fuel is sourced from separate Russian suppliers for both sites and
only loosely correlates with world oil prices. The diesel fuel price
assumptions were made when the price of oil was about $64 per barrel.
Centerra's revenues, earnings and cash flows for 2009 are sensitive to
changes in certain variables and the Company has estimated their impact
on revenues, net earnings and cash from operations.
---------------------------------------------------------------------------
Impact on
($ millions)
Sensitivities Change ----------------------------------------
Earnings
Costs Revenues Cash flow before
income tax
Gold Price $25/oz 1.6 12.5 10.5 10.9
---------------------------------------------------------------------------
Diesel Fuel 10% $5/oz - 2.2 2.2
---------------------------------------------------------------------------
Kyrgyz som 1 som 0.6 - 0.6 0.6
---------------------------------------------------------------------------
Mongolian tugrik 25 tugrik 0.1 - 0.1 0.1
---------------------------------------------------------------------------
Canadian dollar 10 cents 1.5 - 1.5 1.5
---------------------------------------------------------------------------
Other important assumptions that are implicit in the Company's
production, cost and capital guidance are as follows:
- grades and recoveries at Kumtor increase as expected through the third
and fourth quarters to achieve the forecast gold production,
- no further delays in or interruption of scheduled production from our
mines, including due to natural phenomena, labour or regulatory disputes
or other developmental and operational risks,
- the dewatering and depressurization programs at Kumtor continue to
produce the expected results and the water management system works as
planned,
- Boroo ore does not become more refractory in nature affecting mill
recoveries,
- no further labour disruption at the Boroo mine site,
- no further suspension of Boroo's operating licenses,
- prices for fuel oil, reagents and other consumables will remain
consistent with Company estimates, and
- all necessary permits, licences and approvals are received in a timely
manner.
Production and cost forecasts for 2009 are forward-looking information
and are based on key assumptions and subject to material risk factors
that could cause actual results to differ materially and which are
discussed under the heading "Caution Regarding Forward-Looking
Information".
Kumtor Mill Shutdown
In March 2008, an unplanned shutdown of the ball mill at Kumtor was
required to repair the ring gear which had failed. The repair was
completed in late March and the ball mill returned to full operation. The
successful repair of the ring gear is considered a temporary repair which
will require full replacement; this was originally planned for the third
quarter of 2009. This replacement has been postponed until early 2010 to
enable uninterrupted processing of higher-grade material in the third
quarter. The Company's expectation is that the temporary repair will last
until then.
Similarly, the maintenance and change-out of the Kumtor SAG mill liner
which was scheduled for the third quarter of 2009 has been postponed
until early 2010. However should the current liner and/or the ring gear
not last until the end of the year, an unplanned shutdown would be
required which would have an adverse affect on the production, costs and
earnings of the Company.
Further Creep of Waste and Ice Material at Kumtor
During the second quarter of 2009, continued movement of waste and ice
from the South East Ice Wall into the Kumtor open pit required the mining
of ice and waste which reduced the production of ore. Management is
working to neutralize and further stabilize this advanced creep, which by
the end of the quarter was being significantly mitigated. While work is
planned over the balance of the 2009 year to sustain the cutback of the
ice creep into the pit there is no guarantee that these efforts will
avert further negative impact on the Company's expected production, costs
and earnings.
Boroo License Suspension and Production Shutdown
As disclosed on June 12, 2009, the Company received a notice from the
Minerals Resources Authority of Mongolia suspending the Boroo Mine's main
operating licenses for a period up to three months. The Company disclosed
in its July 27, 2009 news release that the suspension had been lifted for
mining and milling operations.
The mine stopped adding cyanide to the heap leach pad at the end of April
2009 due to the expiry of Boroo's temporary heap leach permit. The
Company had been awaiting the authorization of the final heap leach
operating permit when the mine's main operating licenses were suspended.
See "Other Corporate Developments - Mongolia".
Exploration and Business Development
Exploration expenditures are expected to total $25 million and the
business development program is forecast at $4.1 million for 2009 to
support merger and acquisition initiatives of the Company for the year.
The 2009 exploration program will continue the aggressive exploration at
the Kumtor mine, target generation programs at the Boroo mine and around
the Gatsuurt project and on our extensive land holdings in Mongolia.
Target generation programs will continue in Asia, Russia and China.
Centerra will continue to fund and earn an interest in joint venture
properties and projects in Russia, Turkey and the United States. The
Company forecasts $25 million of spending on its program for the year.
The forecast includes $11 million for exploration at Kumtor.
Capital Expenditures
The capital requirement in 2009 is estimated to be $107.0 million,
including $45.1 million of sustaining capital and $61.9 million of growth
capital. This represents a total increase of $7.0 million from prior
guidance primarily due to an increase in growth capital at Kumtor.
Growth capital includes:
---------------------------------------------------------------------------
Projects 2009 Growth Capital Expenditures Forecast
(millions of dollars)
---------------------------------------------------------------------------
Kumtor $47.3
---------------------------------------------------------------------------
Boroo $0.6
---------------------------------------------------------------------------
Gatsuurt $14.0
---------------------------------------------------------------------------
Consolidated Total $61.9
---------------------------------------------------------------------------
At Kumtor the largest expenditures are: $32.1 million assigned to the
development of the two development drifts (Phase I and II to access and
drill the SB and Stockwork Zone resources), $11.3 million for the initial
funds for the Phase II mining fleet and long lead items, and various
other projects of $3.9 million. The Company increased the growth capital
guidance at Kumtor by $11.3 million which includes $14.4 million for
additional development costs for Phase II and reduced other growth
capital expenditures by $3.1 million either by cancelling or delaying
other projects.
The $14.0 million for Gatsuurt includes road construction and site
infrastructure development, which is unchanged from the prior estimates.
Additional capital expenditures for the next phase of development, which
includes $10.0 million to initiate the basic and detail engineering and
$15.1 million for procurement and construction management will only be
invested if the Company is successful in obtaining an acceptable tax
stabilization agreement for Gatsuurt with the government authorities of
Mongolia. The 55 kilometre road to the Gatsuurt mine site has been
designed and submitted for permitting to the appropriate government
agencies. The 14-month construction period began in the second quarter of
2009.
Administration
Annual corporate and administration expenses without unusual items are
expected to amount to approximately $30 million in 2009 which is
unchanged from prior guidance.
Corporate Taxes
Kumtor
Effective April 30, 2009 (being the date the Kyrgyz Parliament ratified
the Agreement on New Terms) Kumtor became subject to a new tax regime
pursuant to which income taxes and other taxes were replaced by taxes
computed by reference to Kumtor's revenue. Under the new tax regime, a
tax of 13% of gross revenue is payable monthly plus, effective January 1,
2009, a payment equal to 1% of gross revenue is made monthly to the
Issyk-Kul Oblast Development Fund. The new tax regime replaces taxes
payable pursuant to the prior investment agreement, including income
taxes at 10% of taxable income, a mineral resource tax at 5% of revenue,
an emergency fund tax at 1.5% of revenue, a road tax at 0.8% of revenue,
withholding taxes imposed on payments to non-residents with rates ranging
from 10%-30% depending on the nature of the payment, an Issyk-Kul Social
Fund tax with a rate of 2-4%% of income, all customs duties, and certain
other taxes.
Boroo
The corporate income tax rate for Boroo Gold Company, for 2009 and
subsequent years, is 25% for taxable income over 3 billion tugrik
(approximately $2.1 million at the quarter end foreign exchange rate)
with a tax rate of 10% for taxable income up to that amount.
For further discussion of the factors that could cause actual results to
differ materially, please refer to "Risk Factors" in Centerra's 2008
Annual Management's Discussion and Analysis and to Centerra's 2008 Annual
Information Form including the section titled "Risk Factors", available
on SEDAR at www.sedar.com. For information on forward-looking information
see "Caution Regarding Forward-Looking Information". Non-GAAP Measures
This news release presents information about total cash cost of
production of an ounce of gold and total production cost per ounce for
the operating properties of Centerra. Except as otherwise noted, total
cash cost per ounce is calculated by dividing total cash costs by gold
ounces produced for the relevant period. Total production cost per ounce
includes total cash cost plus depreciation, depletion and amortization
divided by gold ounces produced for the relevant period. Total cash cost
and total production cost per ounce are non-GAAP measures.
Total cash costs include mine operating costs such as mining, processing,
administration, royalties and production taxes, but exclude amortization,
reclamation costs, financing costs, capital development and exploration.
Certain amounts of stock-based compensation have been excluded as well.
Total production costs includes total cash cost plus depreciation,
depletion and amortization. Total cash cost per ounce and total
production cost per ounce have been included because certain investors
use this information to assess performance and also to determine the
ability of Centerra to generate cash flow for use in investing and other
activities. The inclusion of total cash cost per ounce and total
production cost per ounce may enable investors to better understand
year-over-year changes in production costs, which in turn affect
profitability and cash flow.
Net earnings before unusual items is a non-GAAP measure. It has been
included because certain investors use this information to assess how the
Company would perform when items not considered to be usual in nature are
excluded. This may enable investors to better understand year-over-year
changes in income.
Centerra Gold Inc.
TOTAL CASH COST & TOTAL
PRODUCTION COST
RECONCILIATION (unaudited) Three months ended Six months ended
($ millions, unless June 30, June 30,
otherwise specified) 2009 2008 2009 2008
--------------- ----------------
Centerra:
---------
Cost of sales, as reported $ 82.0 $ 86.3 $ 151.2 $ 139.9
Adjust for: Refining fees &
by-product credits 0.1 (0.1) 0.3 (0.4)
Regional Office
administration 5.8 5.9 10.9 10.0
Mining Standby Costs 3.3 - 3.3 -
Operating taxes
excluded (1) (3.2) (10.1) (8.7) (16.5)
Non-operating costs (3.9) (0.5) (5.9) 0.1
Inventory movement (10.4) (4.1) 7.0 11.3
--------------- ----------------
Total cash cost - 100% $ 73.7 $ 77.4 $ 158.1 $ 144.4
Depreciation, Depletion,
Amortization and Accretion 25.9 17.2 47.8 27.9
Inventory movement - non-cash (5.0) (1.2) (2.9) 1.4
--------------- ----------------
Total production cost - 100% $ 94.6 $ 93.4 $ 203.0 $ 173.7
Ounces poured - 100% (000) 101.5 118.3 222.2 224.0
Total cash cost per ounce $ 667 $ 489 $ 740 $ 518
Total production cost per ounce $ 856 $ 590 $ 950 $ 595
Kumtor:
-------
Cost of sales, as reported $ 70.7 $ 75.4 $ 119.3 $ 112.2
Adjust for: Refining fees &
by-product credits 0.1 (0.4) 0.2 (0.7)
Regional Office
administration 3.5 3.8 7.1 6.2
Mining Standby Costs - - - -
Operating taxes
excluded (1) (3.2) (10.1) (8.7) -16.5
Non-operating costs (3.7) (0.6) (5.7) (0.2)
Inventory movement (8.5) (8.1) 11.9 9.9
--------------- ----------------
Total cash cost - 100% $ 58.9 $ 60.0 $ 124.1 $ 110.9
Depreciation, Depletion,
Amortization and Accretion $ 18.7 $ 13.3 $ 32.6 $ 19.9
Inventory movement - non-cash $ (5.1) $ (2.1) $ (3.7) $ 0.4
--------------- ----------------
Total production cost - 100% $ 72.5 $ 71.2 $ 153.0 $ 131.2
Ounces poured - 100% (000) 81.5 111.2 144.5 185.9
Total cash cost per ounce $ 723 $ 540 $ 859 $ 596
Total production cost per ounce $ 890 $ 640 $ 1,059 $ 663
Boroo:
------
Cost of sales, as reported $ 11.3 $ 10.9 $ 31.9 $ 27.7
Adjust for: Refining fees &
by-product credits - 0.3 0.1 0.3
Regional Office
administration 2.3 2.1 3.8 3.8
Mining Standby Costs 3.3 - 3.3 -
Operating taxes
excluded (1) - - - -
Non-operating costs (0.2) 0.1 (0.2) 0.3
Inventory movement (1.9) 4.0 (4.9) 1.4
--------------- ----------------
Total cash cost - 100% $ 14.8 $ 17.4 $ 34.0 $ 33.5
Depreciation, Depletion,
Amortization and Accretion 7.2 3.9 15.2 8.0
Inventory movement - non-cash 0.1 0.9 0.8 1.0
--------------- ----------------
Total production cost - 100% $ 22.1 $ 22.2 $ 50.0 $ 42.5
Ounces poured - 100% (000) 29.0 47.1 69.2 92.8
Total cash cost per ounce $ 511 $ 370 $ 492 $ 362
Total production cost per ounce $ 762 $ 472 $ 723 $ 459
(1) Kumtor's operating taxes under the previous regime are removed in both
years since these were replaced with a revenue-based tax combining
income and operating taxes from the previous regime
Qualified Person
The scientific and technical information in this document was prepared in
accordance with National Instrument 43-101 - Standards of Disclosure for
Mineral Projects ("NI 43-101") and was reviewed, verified and compiled by
Centerra's geological and mining staff under the supervision of Ian
Atkinson, Certified Professional Geologist, Centerra's Vice-President,
Exploration, who is the qualified person for the purpose of NI 43-101.
Caution Regarding Forward-Looking Information
This Management's Discussion and Analysis and the documents incorporated
by reference herein, contain statements which are not current statements
or historical facts and are "forward-looking information" within the
meaning of applicable Canadian securities laws. All statements, other
than statements of historical fact, contained or incorporated by
reference in this Management's Discussion and Analysis constitute
forward-looking information. Wherever possible, words such as "plans",
"expects" or "does not expect", "budget", "forecasts", "projections",
"anticipate" or "does not anticipate", "believe", "intent", "potential",
"strategy", "schedule", "estimates" and similar expressions or statements
that certain actions, events or results "may", "could", "would", "might"
or "will" be taken, occur or be achieved and other similar expressions
have been used to identify forward-looking information. These
forward-looking statements relate to, among other things Centerra's
expectations regarding, future growth, results of operations (including,
without limitation, future production and sales, and operating and
capital expenditures), performance (both operational and financial),
business and political environment and business prospects (including the
timing and development of new deposits and the success of exploration
activities) and opportunities.
Although the forward-looking information in this Management's Discussion
and Analysis reflects Centerra's current beliefs on the date of this
Management's Discussion and Analysis based upon information currently
available to management and based upon what management believes to be
reasonable assumptions, Centerra cannot be certain that actual results,
performance, achievements, prospects and opportunities, either expressed
or implied, will be consistent with such forward-looking information. By
its very nature, forward-looking information necessarily involves
significant known and unknown risks, assumptions, uncertainties and
contingencies that may cause Centerra's actual results, assumptions,
performance, achievements, prospects and opportunities in future periods
to differ materially from those expressed or implied by such
forward-looking information. These risks and uncertainties include, among
other things, the resolution of issues at the Boroo mine relating to the
suspension of the Boroo licenses in June 2009 as described above under
the heading "Other Corporate Developments - Mongolia", the receipt of a
final permit to operate the heap leach operation at the Boroo mine, gold
prices, replacement of reserves, reduction in reserves related to
geotechnical risks, ground movements, political risk, nationalization
risk, changes in laws and regulations, civil unrest, labour unrest, legal
compliance costs, reserve and resource estimates, production estimates,
exploration and development activities, competition, operational risks,
environmental, heath and safety risks, costs associated with reclamation
and decommissioning, defects in title, seismic activity, cost and
availability of labour, material and supplies, increases in production
and capital costs, permitting and construction to raise the tailings dam
height and increase the capacity of the existing Kumtor tailing dam,
illegal mining, enforcement of legal rights, decommissioning and
reclamation cost estimates, future financing and personnel. There may be
other factors that cause results, assumptions, performance, achievements,
prospects or opportunities in future periods not to be as anticipated,
estimated or intended. See "Risk Factors" in the Company's 2008 Annual
Information Form and Annual Management's Discussion and Analysis
available on SEDAR at www.sedar.com. There can be no assurances that
forward-looking information and statements will prove to be accurate, as
many factors and future events, both known and unknown could cause actual
results, performance or achievements to vary or differ materially, from
the results, performance or achievements that are or may be expressed or
implied by such forward-looking information and statements contained in
this Management's Discussion and Analysis. Accordingly, all such factors
should be considered carefully when making decisions with respect to
Centerra, and prospective investors should not place undue reliance on
forward-looking information. Forward-looking information is as of July
29, 2009. Centerra assumes no obligation to update or revise
forward-looking information to reflect changes in assumptions, changes in
circumstances or any other events affecting such forward-looking
information, except as required by applicable law.
Centerra Gold Inc.
Consolidated Financial Statements
For the Six Months and Quarter Ended June 30, 2009
(Unaudited)
(Expressed in United States Dollars)
Centerra Gold Inc.
Consolidated Balance Sheets
(Expressed In Thousands of United States Dollars)
June 30, December 31,
2009 2008
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(Unaudited)
Assets
Current assets
Cash and cash equivalents $ 120,449 $ 149,583
Short-term investments - 17,781
Amounts receivable 21,243 30,247
Income taxes recoverable 233 3,323
Inventories (note 3) 155,163 170,157
Prepaid expenses 7,580 18,012
-------------------------
304,668 389,103
Property, plant and equipment 388,320 394,933
Goodwill 129,705 129,705
Long-term receivables and other 6,980 5,917
Long-term inventories (note 3) 21,478 18,009
Future income tax asset 5,514 3,160
-------------------------
551,997 551,724
-------------------------
Total assets $ 856,665 $ 940,827
-------------------------
-------------------------
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable and accrued liabilities $ 24,532 $ 35,611
Taxes payable 2,461 14,493
Current portion of future income tax liability 6,849 -
Current portion of provision for reclamation
(note 5) 3,888 3,458
-------------------------
37,730 53,562
Provision for reclamation (note 5) 27,611 29,322
Future income tax liability - 1,121
-------------------------
27,611 30,443
Contingent common shares issuable (note 6) - 89,084
Shareholders' equity (note 7)
Share capital 646,081 523,107
Contributed surplus 33,388 32,904
Retained earnings 111,855 211,727
-------------------------
791,324 767,738
-------------------------
Total liabilities and shareholders' equity $ 856,665 $ 940,827
-------------------------
-------------------------
Commitments and contingencies (notes 6 and 9)
The accompanying notes form an integral part of these unaudited interim
consolidated financial statements.
Centerra Gold Inc.
Consolidated Statements of Earnings (Loss) and Comprehensive Income (Loss)
(Unaudited)
(Expressed In Thousands of United States Dollars)
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2009 2008 2009 2008
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Revenue from Gold Sales $ 104,345 $ 142,562 $ 202,774 $ 255,238
--------------------- ----------------------
Expenses
Cost of sales (1) 81,915 86,264 151,173 139,928
Mine standby costs (note 4) 3,343 - 3,343 -
Regional office administration 5,787 5,919 10,862 10,022
Depreciation, depletion and
amortization 25,707 17,084 47,494 27,500
Accretion and reclamation
expense (note 5) 713 336 1,288 753
Revenue based taxes (note 8(a)) 5,280 - 5,280 -
Exploration and business
development 4,333 5,185 10,026 10,119
Other (income) and expenses (276) 254 (112) 459
Corporate administration 7,698 7,463 12,700 13,948
--------------------- ----------------------
134,500 122,505 242,054 202,729
--------------------- ----------------------
Earnings (loss) before unusual
items and income taxes (30,155) 20,057 (39,280) 52,509
Unusual items-Kyrgyz settlement
(note 6) (49,333) 42,178 (49,333) 37,710
--------------------- ----------------------
Earnings (loss) before income
taxes (79,488) 62,235 (88,613) 90,219
Income tax expense (note 8 (b)) 98 6,242 11,259 14,954
--------------------- ----------------------
Net earnings (loss) and
comprehensive income (loss) $ (79,586) $ 55,993 $ (99,872) $ 75,265
--------------------- ----------------------
--------------------- ----------------------
Basic and diluted earnings
(loss) per common share
(note 7) $ (0.36) $ 0.26 $ (0.46) $ 0.35
--------------------- ----------------------
--------------------- ----------------------
(1) Excludes depreciation,
depletion and amortization
expenses of 25,468 16,864 46,974 27,046
The accompanying notes form an integral part of these unaudited interim
consolidated financial statements.
Centerra Gold Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(Expressed In Thousands of United States Dollars)
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2009 2008 2009 2008
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating activities
Net earnings (loss) $ (79,586) $ 55,993 $ (99,872) $ 75,265
Items not involving cash:
Depreciation, depletion and
amortization 25,707 17,084 47,494 27,500
Accretion and reclamation
expense 713 336 1,288 753
Loss on disposal of plant
and equipment 217 (343) 537 -
Stock based compensation
expense 456 (187) 815 -
Unusual items-Kyrgyz
settlement (note 6) 31,616 (42,178) 31,616 (37,710)
Future income tax expense
(recovery) (2,448) 454 3,373 3,418
Long-term inventory (1,086) 2,598 (3,469) 2,050
Other operating items 504 1,899 (1,157) 1,067
---------------------- -----------------------
(23,907) 35,656 (19,375) 72,343
Decrease (increase) in
working capital 6,633 (25,046) 12,940 (33,731)
---------------------- -----------------------
Cash provided by (used in)
operations (17,274) 10,610 (6,435) 38,612
---------------------- -----------------------
Investing activities
Additions to property, plant
and equipment (18,706) (18,726) (42,426) (36,111)
Short-term investments - - 17,781 -
Proceeds from disposition of
property,plant and equipment - - 2 -
---------------------- -----------------------
Cash used in investing (18,706) (18,726) (24,643) (36,111)
---------------------- -----------------------
Financing activities
Issuance of common shares
for cash 1,944 - 1,944 -
---------------------- -----------------------
Cash provided by financing 1,944 - 1,944 -
---------------------- -----------------------
(Decrease) Increase in cash
and cash equivalents during
the period (34,036) (8,116) (29,134) 2,501
Cash and cash equivalents at
beginning of the period 154,485 116,099 149,583 105,482
---------------------- -----------------------
Cash and cash equivalents at
end of the period $ 120,449 $ 107,983 $ 120,449 $ 107,983
---------------------- -----------------------
---------------------- -----------------------
Supplemental disclosure with
respect to cash flows
Cash and cash equivalents
consist of :
Cash $ 41,194 $ 57,189 $ 41,194 $ 57,189
Cash equivalents 79,255 50,794 79,255 50,794
---------------------- -----------------------
$ 120,449 $ 107,983 $ 120,449 $ 107,983
---------------------- -----------------------
---------------------- -----------------------
The accompanying notes form an integral part of these unaudited interim
consolidated financial statements.
Centerra Gold Inc.
Consolidated Statements of Shareholders' Equity
(Unaudited)
(Expressed In Thousands of United States Dollars)
----------------------------------------------------------------------------
Contingent
Number of Common Contrib-
Common Shares uted Retained
Shares Amount Issuable Surplus Earnings Total
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Balance at
December 31,
2007 216,318,188 $523,107 $ 126,794 $ 30,767 $ 60,350 $741,018
Contingent
common shares
issuable
revalued
(note 6) - - 4,468 - - 4,468
Stock-based
compensation
expense - - - 187 - 187
Inventory
adjustments,
on adoption
of -
accounting
standard, net
of tax (note
3) - - - - 16,612 16,612
Net earnings
for the
period - - - - 19,272 19,272
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Balance at
March 31,
2008 216,318,188 $523,107 $ 131,262 $ 30,954 $ 96,234 $781,557
Contingent
common shares
issuable
revalued
(note 6) - - (42,178) - - (42,178)
Contingent
common shares
issuable
reclassified
(note 6) - - (89,084) - - (89,084)
Stock-based
compensation
expense - - - 1,126 - 1,126
Net earnings
for the
period - - - - 55,994 55,994
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Balance at
June 30,
2008 216,318,188 $523,107 $ - $ 32,080 $ 152,228 $707,415
Stock-based
compensation
expense - - - 279 - 279
Net earnings
for the
period - - - - 16,886 16,886
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Balance at
September 30,
2008 216,318,188 $523,107 $ - $ 32,359 $ 169,114 $724,580
Stock-based
compensation
expense - - - 545 - 545
Net earnings
for the
period - - - - 42,613 42,613
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Balance at
December 31,
2008 216,318,188 $523,107 $ - $ 32,904 $ 211,727 $767,737
Stock-based
compensation
expense - - - 359 - 359
Net loss for
the period - - - - (20,286) (20,286)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Balance at
March 31,
2009 216,318,188 $523,107 $ - $ 33,263 $ 191,441 $747,810
Common shares
issued for
New Term
Agreement
(note 6) 18,232,615 120,700 - - - 120,700
Common shares
issued on
exercise of
stock options 306,425 2,274 - (330) - 1,944
Stock-based
compensation
expense - - - 455 - 455
Net loss for
the period - - - - (79,586) (79,586)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Balance at
June 30,
2009 234,857,228 $646,081 $ - $ 33,388 $ 111,855 $791,324
----------------------------------------------------------------------------
----------------------------------------------------------------------------
The accompanying notes form an integral part of these unaudited interim
consolidated financial statements.
Centerra Gold Inc.
Notes to the Consolidated Financial Statements
(Unaudited)
(Expressed in thousands of United States Dollars)
1. Basis of Presentation
These unaudited interim consolidated financial statements of Centerra
Gold Inc. ("Centerra" or the "Company") have been prepared by management
in accordance with accounting principles generally accepted in Canada
("Canadian GAAP") for interim financial statements. Certain information
and note disclosures normally included in the annual consolidated
financial statements prepared in accordance with Canadian GAAP have been
condensed or excluded. As a result, these unaudited interim consolidated
financial statements do not contain all disclosures required to be
included in the annual consolidated financial statements and should be
read in conjunction with the most recent audited annual consolidated
financial statements and notes thereto for the year ended December 31,
2008.
These financial statements have been prepared on the basis of accounting
principles applicable to a going concern which assumes that the Company
will be able to continue in operation for the foreseeable future and will
be able to realize its assets and discharge its liabilities in the normal
course of business. The operating cash flow and profitability of the
Company are affected by various factors, including the amount of gold
produced and sold, the market price of gold, operating costs, interest
rates, environmental costs and the level of exploration activity and
other discretionary costs and activities. The Company is also exposed to
fluctuations in currency exchange rates, interest rates, political risk
and varying levels of taxation. The Company seeks to manage the risks
associated with its business; however, many of the factors affecting
these risks are beyond the Company's control.
As at June 30, 2009 and December 31, 2008, Centerra held a 100% interest
in each of the following significant investments: the Kumtor mine, the
Boroo mine, and the Gatsuurt property.
2. Significant Accounting Policies:
These unaudited interim consolidated financial statements are prepared
following accounting policies consistent with the Company's audited
annual consolidated financial statements and notes thereto for the year
ended December 31, 2008, except for the following changes in accounting
policies:
Adoption of New Accounting Standards and Developments
a. Goodwill and Intangible assets
Effective January 1, 2009, the Company adopted the new recommendations of
CICA Handbook section 3064, Goodwill and Intangible assets. This standard
establishes revised standards for recognition, measurement, presentation
and disclosure of goodwill and intangible assets. Concurrent with the
introduction of this standard, the CICA withdrew EIC 27, Revenues and
Expenses during the pre-operating period. As a result of the withdrawal
of EIC 27, companies are no longer be able to defer certain costs and
revenues incurred prior to commercial production at new mine operations.
The adoption of this standard did not have an impact on the Company's
consolidated financial statements.
b. Credit Risk
Effective January 1, 2009, the Company adopted the new recommendations of
CICA issued EIC 173, Credit risk and the fair value of financial assets
and liabilities. This abstract requires companies to take counterparty
credit risk into account when measuring the fair value of financial
assets and liabilities, including derivatives. The adoption of this
standard did not have an impact on the Company's consolidated financial
statements. c. Mining Exploration Costs
On March 27, 2009, the Emerging Issues Committee of the CICA approved
abstract EIC-174,-Mining Exploration Costs, which provides guidance on
capitalization of exploration costs related to mining properties in
particular and on impairment of long-lived assets in general. Application
of this new abstract resulted in no significant impact on its financial
statements.
d. New Pronouncements
The CICA issued three new accounting standards in January 2009: Section
1582, Business Combinations, Section 1601, Consolidated Financial
Statements and Section 1602, Non-Controlling interests.
Section 1582 replaces section 1581 and establishes standards for the
accounting of a business combination. It provides the Canadian equivalent
to IFRS 3 - Business Combinations. The section applies prospectively to
business combinations for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or after
January 1, 2011.
Sections 1601 and 1602 together replace section 1600, Consolidated
Financial Statements. Section 1601 establishes standards for the
preparation of consolidated financial statements. Section 1601 applies to
interim and annual consolidated financial statements relating to fiscal
years beginning on or after January 1, 2011.
Section 1602 establishes standards for accounting of a non-controlling
interest in a subsidiary in consolidated financial statements subsequent
to a business combination. It is equivalent to the corresponding
provisions of IFRS IAS 27 - Consolidated and Separate Financial
Statements and applies to interim and annual consolidated financial
statements relating to fiscal years beginning on or after January 1, 2011.
The Company does not anticipate that the adoption of these standards will
impact its financial results.
3. Inventories
----------------------------------------------------------------------------
June 30, December 31,
(Thousands of US$) 2009 2008
----------------------------------------------------------------------------
Stockpiles (a) $ 45,756 $ 49,698
Gold in-circuit 10,633 6,394
Heap leach in circuit 4,575 5,913
Gold dore 15,132 15,239
----------------------------------------------------------------------------
76,096 77,244
Supplies 100,545 110,922
----------------------------------------------------------------------------
176,641 188,166
Less: Long-term inventory (heap leach) (21,478) (18,009)
----------------------------------------------------------------------------
Total inventories-current portion $ 155,163 $ 170,157
----------------------------------------------------------------------------
(a) Upon adoption of Canadian Institute of Chartered Accountants ("CICA")
Handbook Section 3031, Inventories at January 1, 2008, $10.4 million of
previously written off heap leach inventory and $10.0 million of mineralized
material now reclassified as low grade ore inventory following the lowering
of the cut-off grade ($16.6 million, net of tax in total) was recorded as
inventory with a corresponding recognition in retained earnings.
As at June 30, 2009, the Company recorded an expense of $5.3 million
(2008 - Nil) to write-down inventories to net realizable value. There
were no reversals of write-downs during the three months and six months
ended June 30, 2009. Write-downs and reversals are included in cost of
sales.
4. Mine Standby Costs
During the second quarter ended June 30, 2009, the Company's mining
operations at Boroo was temporarily suspended due to labour disputes
initiated by unionized workers, followed by the suspension of the main
operating licenses initiated by the Minerals Resources Authority of
Mongolia (note 9). The Company incurred and expensed the amount of $3.3
million for labour, maintenance and mine support costs directly as a
result of the labour disputes and suspension of the main operating
licenses at Boroo.
5. Asset Retirement Obligations
The total future asset retirement obligations were estimated by
management based on estimated costs to reclaim mine sites and facilities
and estimated timing of the costs to be incurred in future periods.
The Company has estimated the total undiscounted future decommissioning
and reclamation costs to be $43.1 million as at June 30, 2009 (December
31, 2008 - $46.4 million). These payments are expected to occur over the
2009 to 2016 period. The Company used weighted average credit adjusted
risk free rates of 6.99% at Kumtor and 8% at Boroo to calculate the
present value of the asset retirement obligations.
The following table reconciles the Company's discounted liability for
asset retirement obligations:
----------------------------------------------------------------------------
Three Months Ended Six Months Ended
(Thousands of US$) June 30/09 June 30/08 June 30/09 June 30/08
----------------------------------------------------------------------------
Balance, beginning of period $ 31,243 $ 21,856 $ 32,780 $ 20,868
Liabilities settled (457) (112) (595) (184)
Revisions in cost - 223 (1,974) 866
Accretion expense 713 336 1,288 753
----------------------------------------------------------------------------
Balance, end of period 31,499 22,303 31,499 22,303
Less: current portion (3,888) - (3,888)
----------------------------------------------------------------------------
$ 27,611 $ 22,303 $ 27,611 $ 22,303
----------------------------------------------------------------------------
During the first quarter ended March 31, 2009, the Company revised its
previous closure cost update performed in December 2008 at the Boroo mine
site. As a result a decrease to the present value of the closure cost
estimate of $2.0 million at Boroo was recorded during the six months
ended June 30, 2009 ($0.2 million and $0.8 million for the three months
and six months ended June 30, 2008).
6. Unusual Items - Kyrgyz Settlement
----------------------------------------------------------------------------
Three Months Ended Six Months Ended
(Thousands of US$) June 30/09 June 30/08 June 30/09 June 30/08
----------------------------------------------------------------------------
a) Contingent common shares
issuable $ 31,616 $ (42,178) $ 31,616 $ (37,710)
b) Legal claims settlement 1,750 - 1,750 -
c) Tax settlement 15,024 - 15,024 -
d) Legal and related costs 943 - 943 -
----------------------------------------------------------------------------
$ 49,333 $ (42,178) $ 49,333 $ (37,710)
----------------------------------------------------------------------------
a. Contingent Common Shares Issuable:
On April 24, 2009, the Company announced that an agreement (the
"Agreement on New Terms") had been reached between Centerra, Cameco
Corporation ("Cameco"), the Kyrgyz Republic (the "Government"),
Kyrgyzaltyn JSC ("Kyrgyzaltyn"), Kumtor Operating Company ("KOC") and
Kumtor Gold Company ("KGC") that provides for the Government's full
commitment to and support for Centerra's continuing long-term development
of the Kumtor project. As a result of the agreement which was approved by
the Kyrgyz Parliament on April 30, the parties executed restated project
agreements to incorporate the provisions of the Agreement on New Terms,
including the settlement of all outstanding claims as well as replacing
the tax regime applicable to the Kumtor project with a revenue-based tax
regime. Pursuant to the Agreement on New Terms, Centerra agreed to issue
18,232,615 common shares from its treasury to Kyrgyzaltyn, a company
wholly owned by the Government. Cameco agreed to transfer to the
Government between 14.1 million and 25.3 million common shares of
Centerra, which are to be released to the Government upon the
satisfaction of certain conditions.
On June 11, 2009, the transactions contemplated by the Agreement on New
Terms were completed. Pursuant to the agreement and as part of the
closing, the Company issued from treasury on June 11, 2009, 18,232,615
common shares of Centerra at the closing share price of $6.62 (Cdn.
$7.30) to Kyrgyzaltyn, a related party.
As a result, the Company recorded an addition to share capital of $120.7
million. The previously recorded liability, contingent common shares
issuable of $89.1 million was drawn down and an additional expense of
$31.6 million was recorded in the second quarter of 2009.
b. Legal Claims Settlement
Pursuant to this agreement, the Company also paid and expensed $1.75
million in full satisfaction of all liabilities or claims of any
governmental authority against Centerra or any of its affiliates in
respect of any matter arising before the closing of the transactions
contemplated by the Agreement on New Terms.
c. Tax Settlement
Pursuant to the Agreement on New Terms, as described in note 6 (a) above,
the Company and the Government have agreed to replace the former tax
regime applicable to the Kumtor project with a simplified, tax regime
with effect from January 1, 2008. Under the new tax regime, gross revenue
will be taxed at a rate of 13%, plus, effective January 1, 2009, a
payment of 1% of gross revenue will be made to the Issyk-Kul Oblast
Development Fund. The new tax regime replaces income taxes (10% of
taxable income), a mineral resource tax (5% of revenue), an emergency
fund tax (1.5% of revenue), a road tax (0.8% of revenue), withholding
taxes (10%-30% depending on the nature of the payment), an Issyk-Kul
Social Fund tax (2%-4% of income), all customs duties, and certain other
taxes. The settlement with the Government was enacted on April 30, 2009
with the ratification of the Kyrgyz parliament. As a result, presentation
in these statements of the old tax regime, income and other taxes,
continued until the end of April 30, 2009, with the revenue based taxes
as required under the new tax regime (see note 8 (a), Revenue-based
taxes) presented starting from May 1, 2009 onwards.
The net tax settlement expense pursuant to this agreement as at April 30,
2009 totalled $15.0 million. This net amount includes a paid settlement
for the 2008 year of $20.7 million, a credit of $6.4 million for taxes
paid to be applied in 2009 and a tax expense of $0.7 million representing
the difference between the requirements under the new tax regime as
compared to the old tax regime for the period of January to April 2009.
In addition, the Company is required to make an annual payment of 4% of
gross revenue reduced by an amount equal to the sum of all capital and
exploration expenditures made by the Company in the Kyrgyz Republic. Any
excess of the amount of capital and exploration expenditures made in the
year over the tax amount otherwise payable will be carried forward for
offset against amounts otherwise due in future years.
As at June 30, 2009 the excess spent by the Company on capital and
exploration over the required 4% of gross revenue is $41.2 million. This
excess amount will be carried forward and applied against future
commitments under this tax.
d. Legal and related expenses
The Company paid and accrued $0.9 million in legal and related expenses
related to the negotiation of the Agreement on New Terms with Kyrgyz
government described in note 6 (a).
7. Shareholders' Equity a. Share Capital
Centerra is authorised to issue an unlimited number of common shares,
class A non-voting shares and preference shares with no par value.
b. Earnings (Loss) Per Share
The basic net earnings (loss) per share is computed by dividing the net
earnings (loss) applicable to common shares by the weighted average
number of common shares outstanding during the year.
The diluted net earnings (loss) per share is computed by dividing the net
earnings (loss) applicable to common shares by the weighted average
number of common shares outstanding during the year, plus the effects of
dilutive common share equivalents such as stock options and contingent
common shares issuable (classified as equity). The diluted net earnings
(loss) per share is calculated using the treasury method, where the
exercise of options is assumed to be at the beginning of the period the
proceeds from the exercise of options, and the amount of compensation
expense measured but not yet recognized in income are assumed to be used
to purchase common shares of the Company at the average market price
during the period; and the incremental number of common shares (the
difference between the number of shares assumed issued and the number of
shares assumed purchased) is included in the denominator of the diluted
earnings per share computation.
Stock options to purchase common shares are not included in the
computation of diluted net earnings (loss) per share in years when net
losses are recorded given that they are anti-dilutive.
----------------------------------------------------------------------------
Three Months Ended
June 30/09 June 30/08
----------------------------------------------------------------------------
Basic weighted average number of common shares
outstanding (thousands) 220,472 216,318
Effect of stock options (thousands) - 1,138
----------------------------------------------------------------------------
Diluted weighted average number of common shares
outstanding (thousands) 220,472 217,456
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Six Months Ended
June 30/09 June 30/08
----------------------------------------------------------------------------
Basic weighted average number of common shares
outstanding (thousands) 217,354 216,318
Effect of stock options (thousands) - 1,281
----------------------------------------------------------------------------
Diluted weighted average number of common shares
outstanding (thousands) 217,354 217,599
----------------------------------------------------------------------------
For the three and six months ended June 30, 2009 all potentially
dilutive securities have been excluded from the dilutive calculation as
they would have all been anti dilutive.
c. Stock-Based Compensation
The impact of Stock-Based Compensation is summarized as follows:
----------------------------------------------------------------------------
(Millions of US$
except as indicated) Expense/(Income) Expense/(Income)
----------------------------------- Liability
Number Three months ended Six months ended
outstanding -----------------------------------------------------
June June June June June June Dec
30/09 30/09 30/08 30/09 30/08 30/09 31/08
----------------------------------------------------------------------------
(i) Centerra
stock
options 2,271,176 $ 0.5 $ (0.3) $ 0.8 $ 0.1 $ - $ -
(ii) Centerra
-PSU(1) 1,170,160 0.8 (2.6) 1.0 (1.8) 1.0 -
(iii) Centerra
annual
-PSU(2) 426,665 1.4 - 1.9 0.5 1.8 0.3
(iv) Deferred
share
units 331,292 0.4 (1.2) 0.4 (1.1) 1.5 1.1
(v) Cameco
stock
options 54,000 0.4 0.5 0.4 0.1 0.9 0.6
----------------------------------------------------------------------------
$ 3.5 $ (3.6) $ 4.5 $ (2.2) $ 5.2 $ 2.0
----------------------------------------------------------------------------
(1) Centerra performance share units.
(2) Centerra Annual performance share units
Movements in the number of options and units year-to-date are
summarized as follows:
----------------------------------------------------------------------------
Number Number Number
outstanding Issued Exercised Forfeited / outstanding Vested
Dec 31/08 Expired June 30/09 June 30/09
----------------------------------------------------------------------------
(i) Centerra
stock
options 1,848,165 816,802 (393,791) - 2,271,176 729,346
(ii) Centerra
-PSU 718,877 620,565 - (169,282) 1,170,160 -
(iii) Centerra
annual
- PSU 116,183 463,012 (107,978) (44,552) 426,665 211,579
(iv) Deferred
share
units 298,077 58,428 (25,213) - 331,292 331,292
(v) Cameco
stock
options 55,200 - (1,200) - 54,000 54,000
----------------------------------------------------------------------------
On February 17, 2009, Centerra granted 816,802 stock options at a
strike price of Cdn $4.81 per share. The fair value of the stock options
was determined using the Black-Scholes valuation model, assuming an
expected life of 5-years, 83.47% volatility and a risk-free rate of
return of 1.74%. The resulting value per option granted was Cdn $3.61.
The estimated fair value of the options is expensed over their three year
vesting period.
8. Taxes
a.) Revenue Based Taxes
Revenue based taxes are payable to the Kyrgyz government under the
Agreement on New Terms (note 6 (c)) which received the approval of the
Kyrgyz Parliament on April 30, 2009.
Under this agreement, taxes are imposed at a rate of 13% of gross
revenue. In addition, contribution of 1% of gross revenue will be made to
the Issyk-Kul Oblast Development Fund. This new Kyrgyz tax regime
eliminates income taxes and certain other operating taxes that were paid
by Kumtor under the previous tax regime (see note 6 (c)).
Separate presentation in the income statement of these new revenue-based
taxes is effective from May 1, 2009. The 13% revenue-based tax expensed
for the months of May and June 2009 totals $4.9 million, while the
Issyk-Kul tax of 1% of gross revenue for this same period totals $0.4
million.
b.) Corporate Income taxes
The Company recorded income tax expenses of $0.1 million and $11.3
million during the three months and six months ended June 30, 2009 ($6.2
million and $14.9 million three months and six months ended June 30,
2008).
Kumtor
As discussed in note 6 with respect to the Agreement on New terms,
effective April 30, 2009 Kumtor became subject to a new tax regime (note
8(a)) pursuant to which income taxes and other taxes, were replaced by
taxes computed by reference to Kumtor's revenue. Included in income tax
is a Nil provision and $2.9 million recovery for the three months and six
months ended June 30, 2009 ($0.3 million and $1.8 million for the three
months and six months period ended June 30, 2008) computed on Kumtor
earnings from January 1, 2009 to April 30, 2009 at an income tax rate of
12%, including 2% for the Issyk-Kul Social Fund.
Boroo
The corporate income tax rate for Boroo for 2009 and subsequent years is
25% of taxable income in excess of 3 billion Tugriks (about $2.1 million
at the exchange rate at the balance sheet date), and 10% for income up to
that amount. During the three month and six month periods ended June 30,
2009, Boroo recorded $0.1 million and $14.1 million ($5.9 million and
$15.0 million for the three months and six months ended June 30, 2008) as
income tax expense.
9. Commitments and Contingencies
Commitments
As at June 30, 2009, the Company had entered into contracts to purchase
capital equipment and operational supplies totalling $28.7 million
(Kumtor $28.6 million, Boroo $0.1 million): these are expected to be
settled over the next twelve months.
Contingencies
Mongolia
As disclosed on June 12, 2009, the Company received a notice from the
Minerals Resources Authority of Mongolia suspending the Boroo mine's main
operating licenses for a period up to three months. During June and July,
the Company worked with the relevant regulatory authorities in Mongolia
to understand the concerns raised by them. The Company announced on July
27, 2009 that the suspension had been lifted for the mining and milling
operations. The Company is continuing its discussions with the regulatory
authorities regarding their concerns. Boroo expects to resume full mining
and milling operations by the end of July.
The mine stopped adding cyanide to the heap leach pad at the end of April
2009 due to the expiry of the temporary operating permit for the heap
leach operation. The Company had been awaiting the final operating permit
for the heap leach facility when Boroo's main operating licenses were
suspended on June 12, 2009. The Company continues to work with the
Mongolian authorities to obtain the final heap leach operating permit.
10. Related Party Transactions
Kyrgyzaltyn and the Government of the Kyrgyz Republic
Revenues from the Kumtor gold mine are subject to a management fee of
$1.00 per ounce based on sales volumes, payable to Kyrgyzaltyn, a
shareholder of the Company and a state-owned entity of the Kyrgyz
Republic.
The table below summarizes 100% of the management fees and concession
payments paid and accrued by Kumtor Gold Company to Kyrgyzaltyn or the
Government of the Kyrgyz Republic and the amounts paid and accrued by
Kyrgyzaltyn to Kumtor according to the terms of a Gold and Silver Sales
Agreement between Kumtor Operating Company ("KOC"), Kyrgyzaltyn and the
Government of the Kyrgyz Republic.
----------------------------------------------------------------------------
Three Months Ended
(Thousands of US$) June 30/09 June 30/08
----------------------------------------------------------------------------
Management fees to Kyrgyzaltyn $ 116 $ 173
Concession payments to the Kyrgyz Republic (365) 462
----------------------------------------------------------------------------
$ (249) $ 635
----------------------------------------------------------------------------
Gross gold and silver sales to Kyrgyzaltyn $ 74,689 $ 103,121
Deduct: refinery and financing charges (391) (530)
----------------------------------------------------------------------------
Net sales revenue received from Kyrgyzaltyn $ 74,298 $ 102,591
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Six Months Ended
(Thousands of US$) June 30/09 June 30/08
----------------------------------------------------------------------------
Management fees to Kyrgyzaltyn $ 209 $ 274
Concession payments to the Kyrgyz Republic (116) 730
----------------------------------------------------------------------------
$ 93 $ 1,004
----------------------------------------------------------------------------
Gross gold and silver sales to Kyrgyzaltyn $ 132,297 $ 164,955
Deduct: refinery and financing charges (729) (855)
----------------------------------------------------------------------------
Net sales revenue received from Kyrgyzaltyn $ 131,568 $ 164,100
----------------------------------------------------------------------------
Gold produced by the Kumtor mine is purchased at the mine site by
Kyrgyzaltyn for processing at its refinery in the Kyrgyz Republic
pursuant to the Gold and Silver Sale Agreement entered into between KOC,
Kyrgyzaltyn and the Government of the Kyrgyz Republic. Under these
arrangements, Kyrgyzaltyn was required to prepay for all gold delivered
to it, based on the price of gold on the London Bullion Market on the
same day on which KOC provides notice that a consignment is available for
purchase.
Pursuant to the Agreement on New Terms (note 6), the Gold and Silver Sale
Agreement was amended with new terms. Effective June 11, 2009,
Kyrgyzaltyn is required to pay for gold delivered within 12 days from the
date of shipment. Default interest is accrued on any unpaid balance after
the permitted payment period of 12 days.
The obligations of Kyrgyzaltyn are partially secured by a pledge of
2,850,000 shares of Centerra owned by Kyrgyzaltyn. As at June 30, 2009,
$15.1 million was outstanding under these arrangements (December 31, 2008
- $24.1 million).
11. Fair Value of Financial Instruments
The Company has various financial instruments comprising of cash and cash
equivalents, short-term investments, receivables, a Reclamation trust
fund, accounts payable and accrued liabilities and short-term debt.
The carrying values of these financial instruments equal their book
values as at June 30, 2009 and December 31, 2008
12. Financial Risk Exposure and Risk Management
The Company is exposed in varying degrees to a variety of financial
instrument related risks by virtue of its activities. The overall
financial risk management program focuses on preservation of capital, and
protecting current and future Company assets and cash flows by reducing
exposure to risks posed by the uncertainties and volatilities of
financial markets.
These are discussed in detail in the notes to the December 31, 2008
Annual Financial Statements. The following updates this annual disclosure
and for events in the three months and six months ended June 30, 2009 as
relevant:
i) Counterparty Risk
Counterparty risk is the risk that a third party might fail to fulfill
its performance obligations under the terms of a financial instrument.
Counterparty risk can be assessed both in terms of credit risk and
liquidity risk. For cash and equivalents and accounts receivable, credit
risk represents the carrying amount on the balance sheets. Furthermore,
the Company takes measures that are intended to ensure its gold dore
customers, suppliers and banking services providers can fulfill their
contractual obligations. However, the current global economic situation
may have increased the risk of default by these parties.
Default by one or more of the Company's gold purchasers, bankers or
suppliers could materially impact the Company's liquidity, financial
condition and results of operations.
ii) Currency Risk
As required, the Company either makes purchases at the prevailing spot
price to fund corporate activities or enters into short-term forward
contracts to purchase Canadian dollars. During the three months and six
months ended June 30, 2009, $2.3 million and $5.7 million of such forward
contracts were executed ($1.5 million and $3.0 million - three months and
six months ended June 30, 2008). Contracts to purchase of $2.8 million
were outstanding at June 30, 2009 (Nil - December 31, 2008).
The exposure of the Company's financial assets and liabilities to
currency risk as at June 30, 2009 are as follows:
----------------------------------------------------------------------------
Kyrgyz Mongolian Canadian Australian European
(Thousands of US$) Som Tugrik Dollar Dollar Euro
----------------------------------------------------------------------------
Financial Assets
----------------
Cash and cash equivalents $ 535 $ 163 $ 2,875 $ - $ -
Amounts receivables 104 3,499 679 - 4
----------------------------------------------------------------------------
$ 639 $ 3,662 $ 3,554 $ - $ 4
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Financial Liabilities
---------------------
Accounts payable and
accrued liabilities $ 3,805 $ 183 $ 3,545 $ 102 $ 1,956
----------------------------------------------------------------------------
A strengthening of the US Dollar by 5% against the Canadian Dollar,
the Kyrgyz Som and the Mongolian Tugrik at June 30, 2009, with all other
variables held constant would have lead to additional before tax net
income of $0.09 million as a result of a change in value of the financial
assets and liabilities denominated in those currencies.
iii) Interest Rate Risk
Fluctuations in market interest rates during the three months and six
months ended June 30, 2009 have not had a significant impact on the
Company's results of operations due to the short term to maturity of the
investments held.
iv) Concentration of Credit Risk
Kyrgyzaltyn, a state-owned refinery in the Kyrgyz Republic, is Kumtor's
sole customer and is a shareholder of Centerra. To partially mitigate
exposure to potential credit risk related to Kumtor sales, the Company
has an agreement in place whereby Kyrgyzaltyn has pledged 2,850,000 of
Centerra shares as security against an individual gold shipment, in the
event of default on payment. Based on movements in Centerra's share
price, and the value of individual gold shipments, over the course of the
three months and six months ended June 30, 2009 the maximum exposure
during the three months and six months ended June 30, 2009, reflecting
the shortfall in the value of the security as compared to the value of a
given shipment, was approximately $5.1 million and $15.6 million.
The Company manages credit risk, in respect of short-term investments, by
maintaining bank accounts with highly-rated U.S. and Canadian banks and
investing only in highly-rated Canadian and U.S. Governments bills, term
deposits or banker's acceptances with highly-rated financial
institutions, and corporate issues that can be promptly liquidated.
At the balance sheet date, approximately 2.5% of the Company's liquid
assets were held with local Kyrgyz, Mongolian and certain non-rated
foreign banks and 19% with each of HSBC Bank and Citigroup. The remainder
of cash and cash equivalents, and short-term investments were held in
government securities, term deposits, banker's acceptances and
highly-rated corporate issues.
13. Comparative Information
Certain prior year balances have been reclassified to conform to the
current presentation.
14. Segmented Information
Centerra has three reportable segments. The Kyrgyz Republic segment
involves the operations of the Kumtor Gold Project and local exploration
and development activities, and the Mongolian segment involves the
operations of the Boroo Gold Project, development of the Gatsuurt Project
and local exploration activities. The North American segment involves the
head office located in Toronto, loans to each of the mine operations, as
well as exploration activities on North American projects.
Geographic Segmentation of Revenue
All production from the Kumtor Gold Project was sold to the Kyrgyzaltyn
refinery in the Kyrgyz Republic while production from the Boroo Gold
Project was sold to a refinery that is located in Ontario, Canada.
Three months ended June 30, 2009
----------------------------------------------------------------------------
($ millions) Kyrgyz North
Republic Mongolia America Total
----------------------------------------------------------------------------
Revenue $ 74.3 $ 30.0 $ - $ 104.3
Expenses
Cost of sales 70.7 11.3 - 82.0
Mine standby costs - 3.3 - 3.3
Regional office administration 3.5 2.3 - 5.8
Depreciation, depletion and
amortization 18.8 6.6 0.3 25.7
Accretion and reclamation expense 0.3 0.4 - 0.7
Revenue based taxes 5.3 - - 5.3
Exploration and business
development 2.3 0.5 1.5 4.3
Interest and other 0.3 (1.1) 0.5 (0.3)
Corporate administration 0.6 0.5 6.6 7.7
----------------------------------------------------------------------------
Earnings (loss) before unusual
items and income taxes (27.5) 6.2 (8.9) (30.2)
Unusual items-Kyrgyz settlement (49.3)
----------------------------------------------------------------------------
Earnings (loss) before income
taxes (79.5)
Income taxes 0.1
----------------------------------------------------------------------------
Net loss $ (79.6)
----------------------------------------------------------------------------
Capital expenditures for the quarter $ 17.4 $ 0.3 $ - $ 17.7
----------------------------------------------------------------------------
Assets (excluding Goodwill) $ 430.3 $ 273.2 $ 23.5 $ 727.0
----------------------------------------------------------------------------
Three months ended June 30, 2008
----------------------------------------------------------------------------
($ millions) Kyrgyz North
Republic Mongolia America Total
----------------------------------------------------------------------------
Revenue $ 102.6 $ 39.9 $ - $ 142.5
Expenses
Cost of sales 75.4 10.9 - 86.3
Regional office administration 3.8 2.1 - 5.9
Depreciation, depletion and
amortization 13.0 3.8 0.2 17.0
Accretion 0.3 0.1 - 0.4
Revenue based taxes - - - -
Exploration and business
development 3.7 0.6 0.9 5.2
Interest and other 2.7 (1.3) (1.2) 0.2
Corporate administration 0.7 0.5 6.3 7.5
----------------------------------------------------------------------------
Earnings (loss) before unusual
items and income taxes 2.9 23.3 (6.2) 20.0
Unusual items-Kyrgyz settlement 42.2
----------------------------------------------------------------------------
Earnings before income taxes 62.2
Income tax expense 6.2
----------------------------------------------------------------------------
Net earnings $ 56.0
----------------------------------------------------------------------------
Capital expenditures for the
quarter $ 10.9 $ 11.1 $ 0.1 $ 22.1
----------------------------------------------------------------------------
Assets (excluding Goodwill) $ 450.8 $ 261.9 $ 13.7 $ 727.4
----------------------------------------------------------------------------
Six months ended June 30, 2009
----------------------------------------------------------------------------
($ millions) Kyrgyz North
Republic Mongolia America Total
----------------------------------------------------------------------------
Revenue $ 131.6 $ 71.2 $ - $ 202.8
Expenses
Cost of sales 119.3 31.9 - 151.2
Mine standby costs - 3.3 - 3.3
Regional office administration 7.1 3.8 - 10.9
Depreciation, depletion and
amortization 32.5 14.5 0.5 47.5
Accretion and reclamation expense 0.6 0.7 - 1.3
Revenue based taxes 5.3 - - 5.3
Exploration and business
development 5.8 0.8 3.4 10.0
Interest and other (0.1) (1.0) 1.0 (0.1)
Corporate administration 1.2 0.9 10.6 12.7
----------------------------------------------------------------------------
Earnings (loss) before unusual
items and income taxes (40.1) 16.3 (15.5) (39.3)
Unusual items-Kyrgyz settlement (49.3)
----------------------------------------------------------------------------
Earnings (loss) before income taxes (88.6)
Income tax expense 11.3
----------------------------------------------------------------------------
Net loss $ (99.9)
----------------------------------------------------------------------------
Capital expenditures for the
period $ 39.1 $ 0.8 $ 0.1 $ 40.0
----------------------------------------------------------------------------
Assets (excluding Goodwill) $ 430.3 $ 273.2 $ 23.5 $ 727.0
----------------------------------------------------------------------------
Six months ended June 30, 2008
----------------------------------------------------------------------------
($ millions) Kyrgyz North
Republic Mongolia America Total
----------------------------------------------------------------------------
Revenue $ 164.1 $ 91.1 $ - $ 255.2
Expenses
Cost of sales 112.2 27.7 - 139.9
Regional office administration 6.2 3.8 - 10.0
Depreciation, depletion and
amortization 19.4 7.7 0.4 27.5
Accretion 0.5 0.3 - 0.8
Revenue based taxes - - - -
Exploration and business
development 7.0 1.0 2.1 10.1
Interest and other 4.8 (2.1) (2.2) 0.5
Corporate administration 1.3 1.1 11.5 13.9
----------------------------------------------------------------------------
Earnings (loss) before unusual
items and income taxes 12.7 51.6 (11.8) 52.5
Unusual items-Kyrgyz settlement 37.7
----------------------------------------------------------------------------Earn
ngs before income taxes 90.2
Income tax expense 15.0
----------------------------------------------------------------------------
Net earnings $ 75.2
----------------------------------------------------------------------------
Capital expenditures for the period $ 18.5 $ 19.1 $ 0.3 $ 37.9
----------------------------------------------------------------------------
Assets (excluding Goodwill) $ 450.8 $ 261.9 $ 13.7 $ 727.4
----------------------------------------------------------------------------
To view the maps/graphics discussed in this news release, please visit
the following link: http://file.marketwire.com/release/cgkumtor730.pdf
Contacts:
Centerra Gold Inc.
John W. Pearson
Vice President, Investor Relations
(416) 204-1241
john.pearson@centerragold.com
Copyright 2009, Market Wire, All rights reserved.
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