Centerra Gold Inc. (TSX:CG) -
This news release contains forward-looking information that is subject to the
risk factors and assumptions set out on page 19 and in our Cautionary Note
Regarding Forward-looking Information on page 27. The financial figures in this
news release are presented under International Financial Reporting Standards
("IFRS") see "Conversion to IFRS" on page 21. All figures are in United States
dollars.
To view the Management's Discussion and Analysis and the Financial Statements
and Notes for the three and six month periods ended June 30, 2011, please visit
the following link: http://file.marketwire.com/release/CCG728FS.pdf.
Centerra Gold Inc. (TSX:CG) today reported net earnings of $71.1 million or
$0.30 per common share on revenues of $243.8 million compared to a net earnings
of $30.7 million or $0.13 per common share based on revenues of $152.2 million
in the same quarter last year.
Consolidated gold production for the second quarter of 2011 totaled 155,166
ounces at a total cash cost of $513 per ounce produced compared to 121,728
ounces at a total cash cost of $616 per ounce produced in the corresponding
quarter of 2010. Cash provided by operations, net of working capital changes,
was $118.5 million compared to $76.5 million in the second quarter of 2010.
(Total cash cost is a non-GAAP measure and is discussed under "Non-GAAP
Measures" in this news release.)
Second Quarter Highlights
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-- Special and annual dividend payment of $99.3 million
-- Consolidated gold production of 155,166 ounces
-- Cash provided by operations of $118.5 million or $0.50 per share
-- Maintaining consolidated gold production and cost guidance for 2011
-- Exploration discovery in Eastern Mongolia, the ATO property, additional
35 drill holes completed in June and five holes were deepened.
Commentary
Steve Lang, President and CEO of Centerra Gold stated, "We are maintaining our
gold production and cost guidance for the year after another solid quarter of
operating performance at our mines. During the quarter, Centerra's Board
declared a special dividend and increased our annual dividend based on our
strong cash flow and the continuing high gold price. The Company's cash balances
are growing even after significant capital investment."
"On July 11, we announced a significant discovery in Eastern Mongolia at our
Altan Tsagaan Ovoo (ATO) property. We are very excited about this new discovery
in what we view as a new emerging mineral district. The 35 additional drill
holes completed in June continue to demonstrate high-grade mineralization from
surface and that there is good continuity in the mineralization and also the
drilling continues to expand Pipe #4. As indicated in our earlier news release
our Board has approved a $6 million increase in the Company's 2011 exploration
budget from $34 million to $40 million, with $4 million of this additional
funding allocated for further work on the ATO property," he concluded.
Financial and Operating Summary
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Three Months Ended June 30 Six Months Ended June 30
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Financial and
Operating Summary 2011 2010 % Change 2011 2010 % Change
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Revenue - $ millions 243.8 152.2 60% 494.0 407.7 21%
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Cost of sales - $
millions (1) 105.9 79.8 33% 167.7 158.1 6%
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Net earnings - $
millions 71.1 30.7 131% 207.7 154.6 34%
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Earnings per common
share - $ basic and
diluted 0.30 0.13 131% 0.88 0.66 33%
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Cash provided by
operations - $
millions 118.5 76.5 55% 261.0 158.8 64%
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Capital expenditures
- $ millions 48.6 54.7 (11%) 120.8 83.8 44%
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Weighted average
common shares
outstanding - basic
(thousands) 236,021 234,992 0% 235,951 234,926 0%
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Weighted average
common shares
outstanding -
diluted (thousands) 236,353 235,567 0% 236,281 235,512 0%
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Average gold spot
price - $/oz 1,506 1,197 26% 1,445 1,152 25%
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Average realized
gold price - $/oz 1,527 1,200 27% 1,452 1,143 27%
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Gold sold - ounces 159,642 126,797 26% 340,271 356,636 (5%)
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Cost of sales - $/oz
sold (1) 663 629 5% 493 443 11%
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Gold produced -
ounces 155,166 121,728 27% 335,882 332,767 1%
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Total cash cost -
$/oz produced(2)
(3) 513 616 (17%) 436 441 (1%)
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Total production
cost - $/oz
produced(2) (3) 625 757 (17%) 541 557 (3%)
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(1) As a result of the IFRS conversion, cost of sales for 2011 and its
comparative year now includes depreciation, depletion and amortization
related to operations.
(2) Total cash cost and total production cost are non-GAAP measures and are
discussed under "Non-GAAP Measures".
(3) As a result of Kumtor's Restated Investment Agreement signed in 2009,
total cash cost and total production cost per ounce measures for both
years exclude production-based and revenue-based taxes.
Revenues for the second quarter of 2011 were $243.8 million compared to $152.2
million during the same period one year ago. Second quarter 2011 revenue
reflects a 26% increase in ounces sold (159,642 ounces versus 126,797 ounces)
and a 27% increase in realized gold price ($1,527 per ounce in the second
quarter of 2011 versus $1,200 per ounce in the second quarter of 2010) in the
period.
Gold production for the second quarter of 2011 was 155,166 ounces compared to
121,728 ounces reported in the second quarter of 2010. The increase in gold
production reflects 54% higher gold production at the Kumtor mine. At Kumtor,
the increase in production was the result of higher throughput and the
processing of higher grade material with the associated higher recoveries. Gold
production at Boroo was lower in the second quarter 2011 due to processing
low-grade stockpiled ore with lower recoveries as mining operations ceased at
the end of November 2010. The heap leach operation at Boroo remained idle during
the quarter.
Centerra's total cash cost per ounce of gold produced was $513 in the second
quarter of 2011 compared to $616 in the second quarter of 2010. The
year-over-year decrease in unit cash costs was primarily due to 54% higher gold
production at Kumtor, partially offset with increased operating costs at Kumtor
and reduced operating levels at Boroo (see "Operations Update"). (Total cash
cost is a non-GAAP measure and is discussed under "Non-GAAP Measures" in this
news release.)
Cash provided by operations was $118.5 million for the second quarter of 2011
compared to $76.5 million for the prior year second quarter. The increase
reflects increased earnings as a result of higher gold sales volumes and higher
average realized gold prices.
Capital expenditures spent and accrued in the second quarter of 2011 amounted to
$48.6 million of which $8.4 million was spent on sustaining capital projects.
Growth capital totaled $40.2 million, mainly invested at Kumtor relating to
capitalization of pre-stripping activities ($15.1 million), the purchase of haul
trucks, shovels and drills ($11.1 million) and the underground development
($10.2 million). Capital expenditures in the comparative quarter of 2010 totaled
$54.7 million, consisting of $12.9 million of sustaining capital and $41.8
million of growth capital.
Exploration expenditures for the second quarter of 2011 were $11.3 million
dollars compared to $6.9 million in the second quarter of 2010 mainly reflecting
increased drilling activity in Mongolia at the Altan Tsagaan Ovoo (ATO) property
and at the Company's other exploration joint venture projects.
Net earnings for the second quarter of 2011 was $71.1 million, or $0.30 per
share, compared to $30.7 million or $0.13 per share for the same period in 2010,
reflecting higher realized gold prices and higher ounces sold and produced at
Kumtor, partially offset by lower volumes at Boroo.
Centerra's cash and cash equivalents and short-term investments at the end of
June 2011 increased to $464.7 million, compared to cash and short-term
investments of $413.0 million at December 31, 2010. As of June 30, 2011, the
Company had an undrawn revolving credit facility available of $150.0 million.
Operations Update
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Three Months Ended June 30 Six Months Ended June 30
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Kumtor Operating
Results 2011 2010 % Change 2011 2010 % Change
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Gold sold - ounces 144,687 91,204 59% 310,832 291,971 6%
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Revenue - $ millions 221.2 109.8 101% 451.1 333.1 35%
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Average realized
gold price - $/oz 1,529 1,204 27% 1,451 1,141 27%
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Cost of sales - $
millions (1) 92.9 59.9 55% 141.2 123.8 14%
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Cost of sales - $/oz
sold (1) 642 657 (2%) 454 424 7%
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Tonnes mined - 000s 38,271 28,654 34% 74,779 56,191 33%
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Tonnes ore mined -
000s 1,448 791 83% 2,036 2,179 (7%)
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Average mining grade
- g/t (2) 2.68 2.68 0% 3.97 4.09 (3%)
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Tonnes milled - 000s 1,545 1,434 8% 2,936 2,900 1%
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Average mill head
grade - g/t (2) 3.27 2.74 19% 3.68 3.83 (4%)
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Recovery - % 82.6 77.5 7% 82.6 77.0 7%
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Gold produced -
ounces 139,077 90,050 54% 303,244 270,612 12%
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Total cash cost -
$/oz produced (3)
(4) 507 639 (21%) 418 416 0%
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Total production
cost - $/oz
produced (3) (4) 615 763 (19%) 517 515 0%
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Capital expenditures
- $ millions 46.0 39.5 17% 117.9 62.9 87%
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Boroo Operating
Results
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Gold sold - ounces 14,955 35,593 (58%) 29,439 64,665 (54%)
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Revenue - $ millions 22.6 42.4 (47%) 42.9 74.6 (43%)
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Average realized
gold price - $/oz 1,513 1,191 27% 1,457 1,153 26%
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Cost of sales - $
millions (1) 13.0 19.9 (35%) 26.5 34.3 (23%)
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Cost of sales - $/oz
sold (1) 869 558 56% 900 530 70%
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Total Tonnes mined -
000s - 2,969 (100%) - 6,062 (100%)
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Average mining grade
(non heap leach
material) - g/t (2) - 1.66 (100%) - 1.75 (100%)
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Tonnes mined heap
leach - 000s - 577 (100%) - 1,355 (100%)
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Tonnes ore mined
direct mill feed
-000's - 736 (100%) - 1,873 (100%)
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Tonnes ore milled -
000s 510 615 (17%) 1,106 1,238 (11%)
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Average mill head
grade - g/t (2) 1.35 2.05 (34%) 1.35 1.98 (32%)
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Recovery - % 70.3 74.9 (6%) 65.5 73.9 (11%)
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Gold produced -
ounces 16,089 31,678 (49%) 32,639 62,155 (47%)
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Total cash cost -
$/oz produced (3) 568 549 3% 607 550 10%
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Total production
cost - $/oz
produced (3) 707 738 (4%) 756 739 2%
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Capital expenditures
- $ millions
(Boroo) 2.4 3.2 (24%) 2.5 3.4 (28%)
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Capital expenditures
- $ millions
(Gatsuurt) 0.1 11.9 (99%) 0.2 17.3 (99%)
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(1) As a result of the IFRS conversion, cost of sales for 2011 and its
comparative year now includes depreciation, depletion and amortization
related to operations.
(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 Restated Investment Agreement signed in 2009,
total cash cost and total production cost per ounce measures for both
years are shown excluding operating and revenue-based taxes.
Kumtor
At the Kumtor mine in the Kyrgyz Republic, gold production was 139,077 ounces in
the second quarter of 2011 representing a 54% increase from the same quarter in
2010. The increase in gold production is the result of higher grades (3.27 g/t
versus 2.74 g/t) and higher recoveries (82.6% versus 77.5%) in the second
quarter of 2011. During the quarter, ore from cut-back 12B was uncovered in May
2011 and as a result, Kumtor began amortizing the pre-stripping costs previously
capitalized. Ore tonnage processed increased 7.7% to 1.5 million tonnes in the
quarter compared to the same period in 2010. The majority of the mill feed
processed for the second quarter of 2011 included ore sourced from cutback 12A
which resulted in a higher head grade and recovery for the quarter.
Total cash cost per ounce, a non-GAAP measure of production efficiency, was $507
in the second quarter of 2011 down from $639 in the second quarter of 2010. The
quarter-over-quarter decrease in unit cash costs reflects 54% higher gold
production partially offset by 22% higher cash operating costs. The total cash
costs were $70.5 million in the second quarter of 2011 compared to $57.6 million
in the same period of 2010. The cost increase reflects the higher mining rate
achieved during the second quarter of 2011 where 34% more tonnes of waste and
ore were moved with Kumtor's expanded mining fleet. This also reflects higher
operating costs due to an increase of $8.3 million in national labour costs as a
result of the new collective agreement with the unionized national workforce
signed in October 2010 and higher consumable costs, in particular, a $10.1
million increase in diesel costs, partially offset by higher by-product revenue
from silver sales of $1.6 million. (Total cash cost per ounce produced is a
non-GAAP measure and is discussed under "Non-GAAP Measures".)
Exploration expenditures totaled $2.8 million for the second quarter of 2011,
comparable to the same quarter in 2010. Exploration activity in the quarter
focused on regional surface work and drilling within the Central Pit.
Capital expenditures in the second quarter of 2011 were $46.0 million, which
includes $8.0 million of sustaining capital, compared to $39.5 million in the
same quarter of 2010. Sustaining capital was predominantly spent on the major
overhaul program for heavy duty equipment ($5.1 million), tailings dam lift
($1.5 million) and pit dewatering system ($0.6 million). Growth capital
investment during the quarter totalled $38.0 million which was mainly spent on
pre-stripping capitalization ($15.1 million), purchases of the new CAT 789 haul
trucks ($11.0 million), underground development phase I and II ($9.7 million),
underground delineation drilling ($0.5 million), purchase of container handler
for Balychy Marshalling Yard ($0.5 million), waste rock dump buttress ($0.3
million) and numerous other projects ($0.9 million).
The underground development at Kumtor continued in the second quarter of 2011
with a total advance of 490 metres. Year-to-date total development advance is
891 metres. Decline #1 (SB Zone decline) advanced 193 metres in the second
quarter and is now approximately 1.5 kilometres in length. Decline #2 advanced
153 metres in the second quarter towards the SB Zone and totals 807 metres in
length. The Stockwork Drive advanced 144 metres in the second quarter to a total
length of 429 metres.
In the Stockwork Drive, delineation drilling commenced in the second quarter and
exploration drilling continues to test for extensions to the Stockwork Zone.
Exploration drilling will be continued in the third quarter from Decline #1 to
test the Kumtor structure beneath the Davidoff Glacier and from Decline #2 to
test the Saddle Zone. Delineation drilling of the SB Zone is planned for the
first quarter of 2012.
Boroo/Gatsuurt
At the Boroo mine in Mongolia, gold production was 16,089 ounces in the second
quarter of 2011 compared to 31,678 ounces in the second quarter of 2010. The
lower gold production is the result of processing low-grade and low recovery ore
stockpiled from the open pit and heap leach operation as mining operations
ceased at the end of November 2010. The heap leach operation remained idle
during the second quarter 2011 awaiting issuance of the final operating permit
from the Mongolian government. The milling ore grade averaged 1.35 g/t with a
recovery of 70.3% in the second quarter of 2011, compared to 2.05 g/t with a
recovery of 74.9% in the same quarter of 2010.
During May and June 2011, the Boroo SAG mill motor and related motor control
centre had an unscheduled shut down for 35 days due to an electrical failure.
Production continued without any material impact as a result of a by-pass of the
SAG mill which was configured using the ball mill and a stockpile of fine
material remaining from the heap leach development. The SAG mill was restarted
in early June following the receipt and replacement of the damaged components.
Total cash cost per ounce produced, a non-GAAP measure of production efficiency,
was $568 in the second quarter of 2011 compared to $549 in the second quarter of
2010 due to the lower gold production which was partially offset by lower
operating costs. Operating costs decreased in the quarter by $8.1 million
primarily due to a $5.3 million reduction in mining costs as mining operations
ceased at the end of November 2010.
During the second quarter of 2011, exploration expenditures in Mongolia
increased to $4.1 million from $1.5 million in the same period of 2010,
reflecting significant drilling on the ATO property in northeast Mongolia.
Capital expenditures spent and accrued at Boroo in the second quarter of 2011
were $2.4 million compared to $3.2 million the same quarter of 2010. This
consisted of $0.3 million of sustaining capital and $2.1 million of growth
capital investment spent on raising the tailings dam.
Exploration Update
To view the graphics, maps/drill sections and complete drill results discussed
in this news release, please visit the following link:
http://file.marketwire.com/release/CCG728a.pdf or visit the Company's web site
at: www.centerragold.com.
In the second quarter of 2011, the Company entered into three new exploration
joint venture agreements covering projects located in the Amur region of Russia,
Central Anatolia region of Turkey and Heilongjiang region of China.
KYRGYZ REPUBLIC
During the second quarter of 2011, exploration drilling programs continued in
the Kumtor Central Pit, regional exploration drilling continued on the Kumtor
concession area at the Northeast, Petrov, Bordoo and Akbel areas and surface
exploration commenced on the Karasay and Koendy projects.
Kumtor Pit
In the second quarter of 2011, fourteen drill holes were completed and a further
three holes are in progress at the end of the quarter to test the extent and
grade of mineralization within and below the KS11 open pit design.
Eleven holes were completed to test the northeast extension of the SB Zone
towards the Saddle Zone, with a number of the holes returning significant
results. Some of the better intercepts are discussed below.
Holes D1533 and D1538 were drilled on section 34 and both holes returned
significant results. Hole D1533 intersected 8.9 g/t Au over 31.2 metres
including 19.7 g/t Au over 11.0 metres within the KS-11 pit design and 3.8 g/t
Au over 11.1 metres immediately below the KS-11 pit design bottom. Hole D1538
intersected 8.1 g/t Au over 23.3 metres including 25.7 g/t Au over 3.0 metres
within the KS-11 pit design.
Holes D1544 and D1546 were drilled on section 42 and intersected mineralization
20 to 150 metres below the KS11 pit design, with 4.9 g/t Au over 47.3 metres,
3.8 g/t Au over 17.6 metres and 7.1 g/t Au over 11.5 metres in hole D1544, and
3.9 g/t Au over 26.8 metres and 7.8 g/t Au over 5.7 metres in hole D1546.
Holes D1548 and D1549 were drilled on section 46 with hole D1548 intersecting
2.1 g/t Au over 21.9 metres within the KS-11 pit design and 9.8 g/t Au over 2.3
metres immediately below the pit design bottom. Hole D1549 intersected 6.8 g/t
Au over 13.3 metres approximately 50 metres below the KS11 design pit bottom.
Holes D1541, D1552 and D1554 on sections 58, 50 and 46, respectively, were
drilled as wide-spaced holes to test the down dip extension of the SB Zone. Hole
D1541 intersected 2.4 g/t Au over 24.9 metres. Hole D1552 intersected 3.4 g/t Au
over 42.1 metres including 12.2 g/t Au over 5.0 metres. Hole D1554 intersected
4.5 g/t Au over 72.3 metres including 9.8 g/t Au over 4.1 metres and 15.8 g/t Au
over 6.0 metres, confirming the continuation of high-grade mineralization for
300 metres down dip of the KS11 design pit bottom.
Further drilling to delineate the depth extent of the SB Zone will continue in
the third quarter whenever suitable drill locations become available.
Decline Exploration
One underground exploration hole was completed during the quarter and one hole
is in progress. Drill hole UD1547 was completed on section -72 in Decline #1 to
test for extensions of the mineralized structure immediately below the Davidoff
glacier. Drilling intersected alteration and low grade mineralization over 116
metres including 1.6 g/t Au over 8.0 metres and 3.2 g/t Au over 4.6 metres.
Exploration drilling from Decline 1 to test below Davidoff glacier and in
Decline 2 to test the Saddle Zone will be continued in the third quarter
whenever drill access becomes available.
Stockwork Resource Delineation Drilling
The resource delineation program was started in the second quarter. A number of
holes were stopped before reaching their target depth as a result of difficult
drilling conditions. One hole was completed and two holes are in progress. Hole
UD1545 intersected 3.3 g/t Au over 2.7 metres, on the southwestern edge of the
Stockwork Zone. Drilling will continue in the third quarter, with the addition
of a second diamond drill.
True widths for the mineralized zones are typically from 70% to 95% of the
stated intercept.
Regional Exploration
Regional exploration drilling continued in the second quarter with up to three
drills completing two holes in the Northeast area, three holes in the Petrov
area and two holes in the Bordoo area.
Northeast Area
Two drill holes were completed during the second quarter designed as 40 metre to
80 metre spaced infill holes to confirm the extent of the mineralization within
100 to 200 metres of surface over the known 800 metre strike extent of
mineralization at the Northeast Prospect. Drilling intersected 1.3 g/t Au over
7.0 metres in hole DN1532, and 1.7 g/t Au over 26.6 metres in DN 1537.
An additional two holes will be drilled in the third quarter to test for
increased grades and widths of mineralization at depth at the northeastern end
of the mineralized structure.
Petrov Area
Two holes were completed in the second quarter at the Petrov prospect area,
which covers the northeastern-most strike extension of the Kumtor structure
within the mining concession area. Hole DRP1528 intersected the Kumtor Fault but
did not intersect any significant alteration or return any gold values. Hole
DRP1536, designed to test a strong geophysical anomaly in the footwall
stratigraphy west of the Kumtor Fault, intersected minor disseminated pyrite in
weakly altered Carboniferous sandstones with no significant assays.
Prospecting and target definition work will continue in the third quarter of 2011.
Bordoo Area
Two drill holes were completed during the second quarter to test geophysical and
geochemical targets in the footwall stratigraphy on the western side of the
Kumtor Fault. No significant alteration or mineralization was intersected.
Karasay and Koendy Projects
Continuation of the stream sediment sampling program as well as follow-up
mapping, soil sampling, geophysics and trenching on the targets identified in
2010, commenced in the second quarter on both exploration licenses. Drilling is
scheduled to be carried out in the third quarter of 2011.
A complete listing of the drill results and supporting maps for the Kumtor pit
and Northeast area have been filed on the System for Electronic Document
Analysis and Retrieval ('SEDAR') at www.sedar.com and are available at the
Company's web site at: www.centerragold.com.
MONGOLIA
Field activities in Mongolia were focused on the ATO project with drilling,
trenching, mapping, geochemical and geophysical surveys were carried out on the
ATO prospect and in the district. Results have been very encouraging and the
program has been expanded to include additional drilling, metallurgical test
work and baseline environmental, social hydrological and engineering studies.
As previously disclosed in the July 11, 2011 news release, the precious and
base-metal mineralization identified at the ATO prospect is in three vertically
plunging, breccia pipes (Pipes #1, #2 and #4) that cut Early Jurassic sediments
(conglomerates, gravels, sandstone and clay) and Permian volcaniclastic rock.
The Pipes have been displaced by later faulting and cross cut by younger diorite
porphyry dykes. Gold, Ag, Pb, Zn and Cu are main metals making up the
mineralization.
Drilling on Pipe #1 has been completed on a 30 by 30 metre grid with 47 drill
holes totaling 8,511 metres which were completed in 2010 and 44 holes and 7,575
metres drilled in 2011 for a total of 91 holes and 16,086 metres of drilling.
Pipe #1 has an oval shape surface projection of approximately 200 by 300 metres
oriented NE - SW. It has been drilled to a depth of 200-250 metres below surface
(elevation 850 metres) where the pipe has a similar length and slightly less
width. Pipe #1 has primarily Pb mineralization in the upper portion and Pb+Zn
mineralization at depth. The gold distribution is consistent from surface down
to the 850 metre elevation.
Drilling has been completed at Pipe #2 on a 30 by 60 metres grid and includes 12
holes totaling 2,183 metres drilled in 2010 and 21 holes totaling 2,869 metres
drilled in 2011 for a total of 34 holes and 5,052 metres of drilling. Pipe #2 is
also ovoid in shape but is smaller than Pipe #1 and is approximately 120 by 270
metres on surface. It is also oriented NE - SW and somewhat narrower at depth
with base metal mineralization forming a high grade +5% zone at depth.
Pipe #4 was first identified in 2011 when trenching to test a geophysical target
located SE of Pipe #1 returned weak base and precious metal values. Pipe #4 is
being drilled on a 30 by 60 metre grid with a total of 40 holes and 7,421 metres
of drilling completed to the end of the second quarter. Pipe #4 has similar
geometry of 150 to 250 metres on surface oriented NE - SW. Work-to-date
indicates that Pipe # 4 has a strong lateral (from NW to SE) zonation with the
base metal content decreasing in this direction from +1% to the ppm level and Ag
increasing with values up to several hundreds of grams per tonne.
In general, gold can be traced down to depths of 200 to 250 metres below surface
to the 850 metre elevation, with base metals being traced deeper than Au. Silver
is characterized by high grades in SE parts of Pipes #1 and 2. Base-precious
mineralization occupies entire volume of the pipes #1, 2 and 4. Oxidation is
commonly defined and coincident with the sediments and volcanics stratigraphic
boundary. The pipes are located from 50 to 100 metres distance between each
other.
Results for the first 124 holes drilled for which all assays results had been
received by the end of May 2011 were filed on SEDAR and published on the
Company's web site to accompany the news release of 11th July 2011.
Assay results have now been received for six holes completed in May that had
assays pending at the end of May. In addition as of 20th July 2011 results have
been received for 30 of the 35 holes drilled and three of the five holes
deepened in June. The assay results for the six holes from May and 33 holes from
June and the supporting maps and sections have been filed on SEDAR and published
on the Company's web site.
Following are some of the more significant intersections from the drilling
completed in late May and June:
Centerra Gold Inc. - ATO 2011 Drilling Results
Results from June 1st, 2011 to July 20th, 2011
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Core
Drill From Length Au Ag
Location Section Hole (m) To (m) (m) (g/t) (g/t) Pb % Zn %
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PIPE 1 3 SE ATO-125 0.00 68.00 68.00 2.03 9.95 0.27 0.75
---------------------------------------------------
includes 10.30 29.00 18.70 2.01 10.97 0.29 0.53
---------------------------------------------------
includes 34.50 58.30 23.80 3.40 13.03 0.32 0.98
---------------------------------------------------
70.60 75.80 5.20 0.15 2.17 0.05 0.31
---------------------------------------------------
87.20 105.00 17.80 0.15 3.63 0.18 0.61
---------------------------------------------------
120.60 130.20 9.60 0.90 3.82 0.45 0.97
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4SE ATO-127 0.00 132.75 132.75 2.66 17.64 0.90 1.26
---------------------------------------------------
includes 54.40 91.30 36.90 4.55 28.31 1.43 1.96
---------------------------------------------------
includes 99.75 121.55 21.80 4.80 10.45 1.60 1.74
-------------------------------------------------------------------
5 SE ATO-131 0.00 141.60 141.60 1.50 5.98 0.97 1.36
---------------------------------------------------
includes 22.40 32.40 10.00 1.40 4.55 1.03 0.99
---------------------------------------------------
includes 33.40 49.40 16.00 1.75 5.33 0.76 0.90
---------------------------------------------------
includes 50.40 63.40 13.00 2.16 9.15 1.48 2.61
---------------------------------------------------
153.60 178.55 24.95 1.78 9.80 1.50 2.87
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7 SE ATO-152 0.00 7.90 7.90 1.00 12.86 0.64 0.12
---------------------------------------------------
23.25 31.35 8.10 0.15 4.97 0.02 0.12
---------------------------------------------------
140.95 199.30 58.35 1.58 11.36 1.87 4.13
---------------------------------------------------
207.10 214.90 7.80 0.12 1.57 0.01 0.04
---------------------------------------------------
232.10 244.10 12.00 0.11 0.86 0.05 0.45
---------------------------------------------------
256.20 281.20 25.00 0.30 6.34 0.72 3.42
-------------------------------------------------------------------
9 SE ATO-138 0.00 47.90 47.90 1.20 11.51 0.94 0.13
---------------------------------------------------
includes 2.70 17.80 15.10 2.94 24.39 2.12 0.09
-----------------------------------------------------------
ATO-139 1.50 208.40 206.90 1.29 6.27 0.72 0.71
---------------------------------------------------
includes 1.50 48.70 47.20 4.45 18.85 1.87 0.22
---------------------------------------------------
215.45 221.45 6.00 0.59 13.28 1.34 2.34
---------------------------------------------------
226.45 231.65 5.20 0.14 0.71 0.06 0.09
----------------------------------------------------------------------------
----------------------------------------------------------------------------
PIPE 4 9 SE ATO-134 5.50 74.50 69.00 1.79 6.50 0.13 0.15
---------------------------------------------------
includes 9.00 41.95 32.95 3.47 5.62 0.22 0.24
-----------------------------------------------------------
ATO-143
(i) 58.90 85.60 26.70 1.59 8.22 0.15 0.18
---------------------------------------------------
94.00 97.60 3.60 0.15 1.63 0.01 0.03
-----------------------------------------------------------
ATO-150 41.50 62.50 21.00 2.80 6.44 0.66 0.81
---------------------------------------------------
67.00 117.05 50.05 0.28 10.64 0.09 0.15
---------------------------------------------------
126.05 132.05 6.00 0.13 4.20 0.01 0.02
-------------------------------------------------------------------
13 SE ATO-135 13.00 30.20 17.20 0.41 100.00 0.10 0.34
---------------------------------------------------
37.40 113.00 75.60 1.96 5.88 0.16 0.25
---------------------------------------------------
includes 52.50 67.00 14.50 4.98 4.62 0.24 0.35
-------------------------------------------------------------------
15 SE ATO-130 88.80 147.40 58.60 2.76 6.19 0.90 1.36
---------------------------------------------------
157.70 180.00 22.30 1.68 4.28 0.44 0.62
---------------------------------------------------
185.00 191.15 6.15 0.15 4.21 0.14 0.31
-----------------------------------------------------------
ATO-140
(i) 44.60 73.70 29.10 1.39 23.31 0.08 0.12
-------------------------------------------------------------------
17 SE ATO-154 86.00 131.00 45.00 2.18 4.21 0.74 1.34
---------------------------------------------------
135.00 155.00 20.00 0.18 3.14 0.39 0.73
----------------------------------------------------------------------------
Notes: (i) Partial mineralized interval, only intercept within section
corridor +/- 15m, along section line.
Mineralized intervals are greater than 0.10 g/t Au.
Higher grade sub-intervals are greater than 1.00 g/t Au.
Individual assays are top cut to 30 g/t Au prior to composite
calculation.
True widths for mineralized zones are about 20% to 50% of stated down
hole interval.
This information should be read together with our news release of
July 11, 2011.
Ian Atkinson, a Certified Professional Geologist, is Centerra's
qualified person for the purpose of National Instrument 43-101.
Tables are current for all holes drilled up to June 30, 2011 with
assays received as of July 20, 2011.
Drilling will continue in the third quarter of 2011 with two machines. Initially
drilling will focus on completion of delineation of the mineralization in Pipe
#2 and Pipe #4 and preliminary geotechnical drilling. Subsequently drilling will
move to testing other exploration targets indentified in the area surrounding
the ATO discovery.
RUSSIA
Kara Beldyr JV
A further nine diamond drill holes were completed in the second quarter of 2011
on the Gord Zone. The drilling has confirmed the main geological features
previously identified including the major fault and the alteration zones in both
the foot and hanging walls and in addition cross faulting has been identified
that displaces the mineralized zone on some sections by 40 to 50 metres. Visible
gold was detected in both the hanging and footwall mineralization in 50% of the
holes, which is significantly more than in the initial drilling.
Some of the more significant intersections from the drilling completed in the
second quarter of 2011 are; KB-061: 3.1 g/t Au over 3.0 metres; KB-064: 1.8 g/t
Au over 10.2 metres; KB-066: 1.3 g/t Au over 12.4 metres; KB-068: 13.1 Au g/t
over 4.0 metres; KB-069: 1.9 Au g/t over 8.9 metres; KB-072: 2.5 g/t Au over 5.4
metres; KB-073: 2.7 g/t Au over 8.0 metres; KB-074: 2.6 g/t Au over 15.3 metres;
and KB-075: 10.6 g/t Au over 2.0 metres.
Drilling of the Gord Zone on a 50 by 50 metre grid is now complete and further
drilling of the Ezen and Camp Zones is underway.
To view the graphics, maps/drill sections and complete drill results discussed
in this news release, please visit the following link:
http://file.marketwire.com/release/CCG728a.pdf or visit the Company's web site
at: www.centerragold.com.
Other Corporate Developments
The following is a summary of current matters affecting the Company and its
subsidiaries in the Kyrgyz Republic, Mongolia and Canada. Except for the Kyrgyz
Republic Social Fund matter and further developments on the claim by Sistem
(both as discussed below), no significant changes have occurred on these matters
since the Company's most recent interim disclosure documents published on April
29, 2011.
Kyrgyz Republic
The Company's Kyrgyz Republic operating subsidiary Kumtor Operating Company
("KOC") pays Kyrgyz Republic Social Fund ("Social Fund") contributions in
respect of the base wages of its national employees. In late 2010, the Social
Fund notified KOC of its position that it should pay contributions to the Social
Fund not only in respect of base wages but also in respect of the premium
compensation that it is required to pay employees for work at high-altitude. The
position of the Social Fund is inconsistent with its past practices and with
prior audits of KOC. Following the most recent audit of KOC for 2010 operating
year and completed at the end of June 2011, the Social Fund issued an act
(assessment) for approximately $6.7 million for the 2010 period. This amount
includes a portion assessed on the employer and an amount assessed on Kumtor's
employees. KOC has formally responded to the claim and will continue to
vigorously dispute the Social Fund's position and the quantum of the claim. The
Company has accrued in its second quarter 2011 accounts $5.8 million in respect
of this claim, representing the mid-point from a host of possible outcomes
covering the 2010 assessed year and an estimate for the first six months of
2011.
Mongolia
In Mongolia, the Company continued to work with the Minerals Resource Authority
of Mongolia ("MRAM") and the Mongolian General Department of Specialized
Inspection ("SSIA") with respect to several outstanding issues arising from the
inspections at the Boroo mine carried out by the SSIA in mid-2009. During the
quarter, the Company also worked with the SSIA in relation to the very
significant claim for compensation that the Company received from the SSIA in
October 2009 regarding state alluvial reserves covered by the Boroo mine
licenses. While Centerra cannot give assurances, it believes that settlement of
the outstanding matters and the alluvial claim (which the Company disputes) will
be concluded through negotiations and will not result in a material impact.
In March 2010, the Company received a letter from MRAM stating that certain of
its mining and exploration licenses, including the Gatsuurt mining licenses,
could be revoked under the water basin and forestry law which was enacted by the
Mongolian Parliament in July 2009 (the "Water and Forest Law"). Under the Water
and Forest Law, mineral prospecting, exploration and mining in water basins and
forestry areas in Mongolia would be prohibited, and the affected licenses would
be revoked. The legislation provides a specific exemption for "mineral deposits
of strategic importance", which would exempt the Boroo mining licenses from the
application of the legislation. Centerra's Gatsuurt licenses and its other
exploration license holdings in Mongolia however, are currently not exempt.
Under the Minerals Law of Mongolia, Parliament on its own initiative or, on the
recommendation of the Government, may designate a mineral deposit as strategic.
Such designation could result in Mongolia receiving up to a 34% interest in the
deposit. The March 2010 letter requested that the Company provide a preliminary
estimate of expenses incurred in relation to each license that could be revoked
and the compensation that the Company would expect to receive if such licenses
were to be revoked. The Company submitted a detailed estimate to MRAM in March
2010.
In April 2010, the Company received a letter from the Ministry of Mineral
Resources and Energy ("MMRE") indicating that the Gatsuurt licenses were within
the area designated, on a preliminary basis, as land where mineral mining is
prohibited under the Water and Forest Law, and that the MMRE would communicate
with the Company further on negotiations with respect to an investment agreement
for the Gatsuurt project once the MMRE received additional clarity on the impact
of the Water and Forest Law on the Gatsuurt project.
In November 2010, Mongolia's cabinet announced its intention to initiate the
revocation of 1,782 mineral licenses under the Water and Forest Law on a staged
basis, beginning with the revocation of 254 alluvial gold mining licenses. The
Company has four licenses (subsequently clarified to be only three licenses) on
the list of alluvial gold mining licenses that may be revoked. None of these
licenses are material to the Company. In particular, Centerra's principal
Gatsuurt hardrock mining licenses are not on the list of alluvial licenses to be
revoked. In accordance with the Water and Forest Law, the Company submitted in
February 2011 a formal request for compensation for the three licenses slated to
be revoked. The Company has not yet received any further update from the
Mongolian regulatory authorities on this matter.
In late 2010, the Mongolian Government announced that it was considering taking
the following actions as the next stages of its implementation of the Water and
Forest Law:
-- preparing and submitting to the cabinet a proposal to designate as
"strategic" those deposits, development of which would contribute to
regional social and economic development and, at the same time, require
significant amounts of compensation;
-- revoking all licenses for non-gold mining operations which utilize
surface water;
-- revoking all 460 gold exploration licenses and providing compensation ;
-- revoking all 931 non-gold exploration licenses and providing
compensation;
-- revoking and providing compensation to all remaining affected mining
licenses.
Of the Company's 55 mineral licenses, 36 licenses (including the Gatsuurt hard
rock licenses) are included in the 1,782 licenses referred to in the cabinet
announcement as subject to staged revocation.
The Company understands that Mongolia's cabinet expects that the Water and
Forest Law will take until approximately November 2012 to fully implement.
According to statements by officials, the Government estimates that the total
compensation due to mining companies for the revocation of their licenses will
amount to approximately US$4 billion, which is about equal to Mongolia's annual
gross domestic product for 2009.
The Water and Forest Law has attracted opposition from Mongolia's alluvial
miners, the Mongolian National Mining Association and other groups. A group of
parliamentarians has proposed amendments to the Water and Forest Law to reduce
its impact on environmentally-sound mining operations. The Company understands
that if the amendments are approved in its submitted form, the Gatsuurt project
would be able to proceed. The proposed amendments were discussed in the second
quarter of 2011 by a Mongolian parliamentary committee which then referred it to
Parliament for further discussion. The Company understands that such discussion
is expected to occur in the third or fourth quarter of 2011.
While the Company has continued to receive permits and approvals in connection
with the road construction to Gatsuurt and for construction of surface
facilities at the project, in November 2010, the Company received a letter from
the MMRE indicating that operations at the Gatsuurt project cannot be commenced
while the implementation of the Water and Forest Law is being resolved.
Accordingly, it is anticipated that further approvals and regulatory
commissioning of Gatsuurt will be delayed as a result of the Water and Forest
Law.
Centerra is reasonably confident that the economic and development benefits
resulting from its exploration and development activities will ultimately result
in the Water and Forest Law having a limited impact on the Company's Mongolian
activities. There can be no assurance, however, that this will be the case.
Unless the Water and Forest Law is repealed or amended such that the law no
longer applies to the project or Gatsuurt is designated as a "mineral deposit of
strategic importance" that is exempt from the Water and Forest Law, mineral
reserves at Gatsuurt may have to be reclassified as mineral resources or
eliminated entirely and the Company may be required to write-off the associated
investment in Gatsuurt and Boroo. As at June 30, 2011, the Company has net
assets recorded amounting to approximately $36 million related to the investment
in Gatsuurt and approximately $19 million remaining capitalized for the Boroo
mill facility, which is expected to be utilized for the processing of ore from
Gatsuurt. A revocation of the Company's mineral licenses, including the Gatsuurt
mineral license, or the reclassification of mineral reserves or the write-off of
assets could have an adverse impact on Centerra's future cash flows, earnings,
results of operations and financial condition. See "Risk Factors" in the
Company's most recently filed Annual Information Form ("AIF").
New Graduated Royalty Fee
In November 2010, the Mongolian Parliament enacted a graduated royalty tax that
applies to all mining projects as of January 1, 2011, including the Gatsuurt
project when commissioned, the Ulaan Bulag and ATO prospects. This graduated
royalty replaces the previous flat 5% royalty fee on gold. Pursuant to the
graduated royalty fee, the royalty rate is tied to the price of gold such that
there is a 1% increase in the royalty fee for every $100 increase in the price
of gold per ounce above a certain price. In the case of gold, there is a basic
5% royalty fee that applies while gold is less than $900 per ounce. At $900 per
ounce the royalty fee increases to 6%, at $1,000 per ounce the royalty is 7%, at
$1,100 per ounce the royalty is 8%, and at $1,200 per ounce the royalty is 9%.
The highest royalty fee rate is reached at 10% at $1,300 per ounce and above.
For example an ounce of gold sold at $1,000 per ounce would be subject to a
royalty of 7% or $70.
The graduated royalty became effective as of January 1, 2011 for all mining
projects in Mongolia. On January 19, 2011, the Standing Committee of the State
Great Hural of Mongolia issued a resolution to the Government which, among other
things, resolved to direct the Government to enter into negotiations to have the
graduated royalty structure apply to business entities that have already entered
into a stability and/or an investment agreement. This would include the
Company's Boroo mine which is currently operating pursuant to a stability
agreement entered with the Mongolian government. To date, the Company has not
received any further word regarding this resolution and whether the Government
will act on it. In any event, the Company is of the opinion that the Boroo
stability agreement provides, among other things, legislative stabilization for
its Boroo operations and accordingly the graduated royalty fee is not applicable
to Boroo's remaining operations. However, the Company cannot provide any
guarantees that Boroo will not be made subject to the graduated royalty fee. If
the graduated royalty fee does apply, it may have an adverse impact on
Centerra's future cash flows, earnings, results of operations or financial
condition. Regardless of whether the graduated royalty fee applies to the Boroo
operation, it will apply to gold produced from the Gatsuurt mine, when
developed. See "Risk Factors" in the Company's most recently filed AIF.
Corporate
On June 23, 2011 the Company held its Annual Special Meeting of Shareholders. At
the Shareholders Meeting all resolutions proposed by management in the
Management Information Circular were voted in favour of. The number of directors
elected at the Meeting was twelve. See "Nominees - Biographies" in the Company's
most recently filed Management Information Circular.
In March 2011, Centerra was served by a Turkish company, Sistem Muhenkislik
Insaat Sanayi Ticaret SA ("Sistem"), with a notice of enforcement to seize any
shares and dividends in Centerra held in the name of the Kyrgyz Republic,
followed by a notice of garnishment in April 2011 for any debts owed by Centerra
to the Kyrgyz Republic (the "Republic"). These notices were served by Sistem
through the Sheriff in Toronto as part of the enforcement proceedings brought by
Sistem in the Ontario Superior Court to collect US$11 million with additional
interest, owed to Sistem by the Republic in accordance with a judgment of the
Ontario Superior Court enforcing an international arbitration award against the
Republic. In these Ontario proceedings, Sistem alleges that the shares in
Centerra owned by Kyrgyzaltyn JSC, and any dividends paid in respect of those
shares, are in fact legally and beneficially owned by the Republic and are
therefore subject to execution to pay the judgment. Based on legal advice
received, Centerra disputes those allegations and maintains that Kyrgyzaltyn JSC
alone is the legal and beneficial owner of the shares and any dividends in
respect of those shares, based on the applicable legal principles and the
binding agreements with Kyrgyzaltyn JSC. As a result, Centerra paid its May 18,
2011 dividend in the total amount of approximately Cdn$31 million to Kyrgyzaltyn
JSC. Sistem is continuing with its claim regarding the Centerra shares owned by
Kyrgyzaltyn JSC. If this claim is successful in the Ontario court proceedings,
Sistem may have a right to execute its judgment against those shares and may
assert a claim against Centerra in respect of the payment of the May 18, 2011
dividend after service of the notice of garnishment. However, Centerra believes
it has a strong defense to that claim based on the facts and the law.
Kyrgyzaltyn JSC is aware of these Ontario proceedings and, when necessary, may
elect to protect its own interest in respect of the shares.
Outlook for 2011
Centerra's 2011 consolidated gold production is forecast to be 600,000 to
650,000 ounces. Total cash cost in 2011 is expected to be $460 to $495 per ounce
produced. Both production and cash cost guidance are unchanged from the prior
guidance disclosed in the Company's news release of April 29, 2011. While the
Company is holding its prior guidance for unit costs, we anticipate that rising
cost pressure for fuel and labour may result in the cash costs approaching the
higher-end of guidance. Total cash cost is a non-GAAP measure and is discussed
under "Non-GAAP Measures".
The Kumtor mine is expected to produce 550,000 to 600,000 ounces in 2011.
Kumtor's total cash cost for 2011 is expected to be $430 to $460 per ounce
produced. Both production and cash cost guidance are unchanged from the prior
guidance. The Kumtor mill is expected to have a scheduled replacement of the SAG
mill discharge trunnion liners at the beginning of the third quarter which is
expected to require the shutdown of the mill for approximately three days.
At the Boroo mine, gold production is forecast to be 50,000 ounces and assumes
no mining or heap leach activities in 2011. Boroo's total cash cost is expected
to be $865 per ounce produced in 2011. Both production and cash cost guidance
are unchanged from the prior guidance. The 2011 forecast also assumes no
production from the Gatsuurt project due to uncertainties with permitting final
approvals and regulatory commissioning. During the first half of 2011, the Boroo
mill processed the remaining direct mill feed stockpiled ore with an average
grade of 1.35 g/t. For the balance of the year, the Boroo mill is expected to
process mostly stockpiled material with grades between 0.76 - 0.87 g/t Au. At
the current reserve gold price assumption of $1,000 per ounce, the Boroo
operation could potentially continue to feed the mill until the end of 2012
utilizing existing low-grade stockpiles.
Receipt of the final heap leach operating permit would add approximately 3,500
to 4,000 ounces of gold a month. At Gatsuurt, the project is ready to begin
production of the oxide ore on receipt of the final approvals and regulatory
commissioning. See also "Other Corporate Developments - Mongolia" and other
material assumptions set out below.
Centerra's Production and Unit Cost -2011 Forecast as follows:
--------------------------------------------------------------
Production Total Cash Cost(1)
Ounces of gold $ per ounce
--------------------------------------------------------------
Kumtor 550,000 - 600,000 430 - 460
--------------------------------------------------------------
Boroo 50,000 865
--------------------------------------------------------------
Total Consolidated 600,000 - 650,000 460 - 495
--------------------------------------------------------------
(1) Total cash cost is a non-GAAP measure. See "Non-GAAP Measures".
2011 Exploration Expenditures
As previously disclosed in the news release of July 11, 2011, the Company has
expanded the exploration budget for the current year from $34 million to $40
million, $4 million of this additional funding has been allocated for a further
work on the ATO property in the northeast Mongolia, which is 100% owned by the
Company. The additional funding for the ATO property brings the total planned
exploration expenditures in Mongolia to $9 million allocated for target
definition and drill programs on the Company's land holdings along the Yeroogol
trend and in eastern Mongolia.
The 2011 program will also continue the aggressive exploration work at the
Kumtor mine together with an increase in the exploration in the Kumtor district
with target definition and drilling programs on the properties acquired in 2010.
Planned exploration expenditures in the Kyrgyz Republic are approximately $13
million, which is unchanged from the prior guidance.
In 2011, drilling programs will continue on the Kara Beldyr project in Russia to
determine the resource potential of the property. The Kara Beldyr project is a
joint venture in which Centerra currently holds an indirect 50% interest.
Drilling programs will also continue in Turkey and Nevada. Generative programs
will continue in Kyrgyzstan, Mongolia, Russia, China, Turkey and the U.S. to
increase the pipeline of projects that the Company is developing to meet the
longer term growth targets of Centerra.
2011 Capital Expenditures
The capital expenditures for 2011 are estimated to be $213 million, including
$38 million of sustaining capital and $175 million of growth capital, which is
unchanged from the prior guidance.
Capital expenditures include:
----------------------------------------------------------------------
2011 Growth Capital 2011 Sustaining Capital
Projects ($ millions) ($ millions)
----------------------------------------------------------------------
Kumtor mine 169 36
----------------------------------------------------------------------
Mongolia 6 1
----------------------------------------------------------------------
Corporate - 1
----------------------------------------------------------------------
Consolidated Total 175 38
----------------------------------------------------------------------
Kumtor
At Kumtor, during 2011 total capital expenditures are forecast to be $205
million which includes $36 million of sustaining capital. The largest sustaining
capital spending will be on the major overhaul maintenance of the heavy duty
mine equipment ($19 million), expenditures for the shear key, buttress and
tailings dam construction works ($5 million) and for equipment replacement and
other items ($12 million).
Growth capital investment at Kumtor for 2011 is forecast to be $169 million
primarily for the purchase of seven CAT 789 haul trucks ($21 million), purchase
of remaining equipment for the North Wall expansion project ($28 million),
pre-strip costs related to the development of the open pit ($62 million) and a
waste dump expansion project ($3 million). Also, $52 million is included in
growth capital investment for the underground, of which $43 million has been
allocated to advance the two underground declines to continue to develop the SB
Zone and Stockwork Zone, as well as, $3 million for delineation drilling and $6
million for capital purchases and other costs.
Boroo & Gatsuurt (Mongolia)
At Boroo, 2011 sustaining capital expenditures are expected to be $1 million and
growth capital is forecast at $5 million primarily for the tailings dam
construction to expand the capacity of the Boroo tailings facility to allow
treatment of waste.
At Gatsuurt, $1 million is forecast for the environment studies, care
maintenance of the site and security of the facilities. No other capital for the
development of the deeper sulphide ores at Gatsuurt has been forecast and will
only be invested following successful regulatory commissioning of the Gatsuurt
project. The engineering and construction of a bio-oxidation facility to be
located at the Boroo mill, which is needed to treat Gatsuurt sulphide ores, will
be restarted only after the approval to begin mining at Gatsuurt has been
received from the Government of Mongolia.
Corporate Administration
Corporate and administration expenses for 2011 are forecast at $45 million,
which is unchanged from the prior guidance.
Taxes
Pursuant to the Restated Investment Agreement, Kumtor's operations are not
subject to corporate income taxes. The agreement replaced the prior tax regime
applicable to the Kumtor project with a simplified regime effective January 1,
2008. This simplified regime, which assesses tax at 13% on gross revenue (plus
1% for the Issyk-Kul Oblast Development Fund effective January 2009), was
approved and enacted by the Parliament of the Kyrgyz Republic on April 30, 2009.
The corporate income tax rate for Centerra's Mongolian subsidiary, Boroo Gold
Company is 25% for taxable income over 3 billion Mongolian tugriks
(approximately $2.4 million at the 2010 year-end foreign exchange rate) with a
tax rate of 10% for taxable income up to that amount.
Production, cost and capital forecasts for 2011 are forward-looking information
and are based on key assumptions and subject to material risk factors that could
cause actual results to differ materially and which are discussed herein under
the headings "Material Assumptions" and "Caution Regarding Forward-Looking
Information" and under the heading "Risk Factors" in the Company's most recently
filed AIF.
Sensitivities
Centerra's revenues, earnings and cash flows for the second half of 2011 are
sensitive to changes in certain variables and the Company has estimated their
impact on revenues, net earnings and cash from operations.
----------------------------------------------------------------------------
Impact on
($ millions)
-----------------------------------------------
Earnings before
Change Costs Revenues Cash flow income tax
----------------------------------------------------------------------------
Gold Price $50/oz 2.4 15.6 13.2 13.5
----------------------------------------------------------------------------
Diesel Fuel (1) 10% 3.8 - 3.8 3.8
----------------------------------------------------------------------------
Kyrgyz som 1 som 0.9 - 0.9 0.9
----------------------------------------------------------------------------
Mongolian tugrik 25 tugrik 0.2 - 0.2 0.2
----------------------------------------------------------------------------
Canadian dollar 10 cents 2.2 - 2.2 2.2
----------------------------------------------------------------------------
(1) a 10% change in diesel fuel price equals $13/oz produced
Material Assumptions and Risks
Material assumptions or factors used to forecast production and costs for the
second half of 2011 include the following:
-- a gold price of $1,400 per ounce,
-- exchange rates:
-- $1USD:$0.97 CAD
-- $1USD:45.15 Kyrgyz som
-- $1USD:1,194 Mongolian tugriks
-- $1USD:0.72 Euro
-- diesel fuel price assumption:
-- $0.77/litre at Kumtor
-- $1.16/litre at Boroo
The assumed average diesel price of $0.77/litre at Kumtor does not include a
customs export duty imposed by the Russian authorities on the diesel fuel
exported to the Kyrgyz Republic in 2010. Russia imposed a customs duty of
approximately $194 per tonne on gasoline and diesel fuel exports to the Kyrgyz
Republic that went into effect on April 1, 2010. The customs export duty
amounted to approximately $0.18/litre or $212.77 per tonne of diesel fuel. While
there were public statements that the export duty had been revoked retroactive
to January 1, 2011, Kumtor had to pay the customs export duty on some of its
purchases of diesel fuel from Russia during the first quarter of 2011. However,
towards the end of the first quarter and throughout the second quarter, the cost
of purchases of diesel fuel did not include the export duty. Based on that,
Kumtor's forecast for cash costs has been adjusted to exclude the export duty.
Nevertheless, any potential savings from the removal of the customs duty are
expected to be fully offset by the increased cost of the diesel fuel as a result
of the increase in the price of oil. Should the Russian authorities re-introduce
the customs export duty (discussed above) on the diesel fuel exported to the
Kyrgyz Republic, the cash costs at Kumtor would be expected to increase by
approximately $9 million on forecasted diesel purchases until the end of 2011.
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 approximately $95 per barrel.
Other important assumptions include the following:
-- any recurrence of political and civil unrest in the Kyrgyz Republic will
not impact operations, including movement of people, supplies and gold
shipments to and from the Kumtor mine,
-- grades and recoveries at Kumtor will remain consistent with the life-of-
mine plan to achieve the forecast gold production,
-- the dewatering program at Kumtor continues to produce the expected
results and the water management system works as planned,
-- the remedial plan to deal with the Kumtor waste and ice movement
continues to be successful (see "Kumtor Mine - Geotechnical Issues
Affecting the Kumtor Open Pit" in the Company's AIF for the year ended
December 31, 2010),
-- no unplanned delays in or interruption of scheduled production from our
mines, including due to civil unrest, natural phenomena, labour,
regulatory or political disputes, equipment breakdown or other
developmental and operational risks,
-- certain issues at Boroo raised by the General Department of Specialized
Inspection ("SSIA") concerning state alluvial reserves, the production
and sale of gold from the Boroo heap leach facility and other matters
will be resolved through negotiation without material adverse impact on
the Company, see "Other Corporate Developments - Mongolia",
-- no further suspension of Boroo's operating licenses, and
-- all necessary permits, licences and approvals are received in a timely
manner.
Production and cost forecasts and capital estimates are forward-looking
information and are based on key assumptions and subject to material risk
factors. If any event arising from these risks occurs, the Company's business,
prospects, financial condition, results of operations or cash flows could be
adversely affected. Additional risks and uncertainties not currently known to
the Company, or that are currently deemed immaterial, may also materially and
adversely affect the Company's business operations, prospects, financial
condition, and results of operations or cash flows. See the sections entitled
and "Risk Factors" in the Company's most recently filed AIF, available on SEDAR
at www.sedar.com and see also the discussion below under the heading "Cautionary
Note Regarding Forward-looking Information".
Conversion to IFRS
As prescribed by the CICA Accounting Standards Board, the Company adopted the
requirements of the International Financial Reporting Standards ("IFRS") in its
statements of account as of January 1, 2011, including the restatement of its
opening balance sheet of January 1, 2010 and its second quarter 2010
comparatives. The restatement of the Company's comparative balances from those
previously reported under Canadian GAAP standards to those converted IFRS
standards is fully explained and reconciled in note 17 of the Company's June 30,
2011 condensed consolidated interim financial statements as filed on SEDAR.
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 of gold for the operating
properties of Centerra. Except as otherwise noted, total cash cost per ounce
produced is calculated by dividing total cash costs by gold ounces produced for
the relevant period. Total production cost per ounce produced includes total
cash cost plus depreciation, depletion and amortization divided by gold ounces
produced for the relevant period. Cost of sales per ounce sold is calculated by
dividing cost of sales by gold ounces sold for the relevant period. Total cash
cost and total production cost per ounce produced, as well as cost of sales per
ounce sold, are non-GAAP measures.
Total cash costs include mine operating costs such as mining, processing,
administration, royalties and production taxes (except at Kumtor where
revenue-based taxes and production taxes are excluded), 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 produced, total production
cost per ounce produced and cost of sales per ounce sold 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 produced and total
production cost per ounce produced may enable investors to better understand
year-over-year changes in production costs, which in turn affect profitability
and cash flow.
TOTAL CASH COST & TOTAL PRODUCTION COST Three months Six months
RECONCILIATION (unaudited) ended June 30, ended June 30,
($ millions, unless otherwise specified) 2011 2010 2011 2010
----------------- -----------------
Centerra:
----------------------------------------
Cost of sales, as reported $ 105.9 $ 79.8 $ 167.7 $ 158.1
Less: Non-cash component 25.3 17.0 40.1 38.2
----------------- -----------------
Cost of sales - Cash component $ 80.6 $ 62.8 $ 127.6 $ 119.9
Adjust for:
Refining fees & by-product credits (1.3) 0.1 (2.2) 0.1
Regional Office administration 6.2 5.0 11.0 9.9
Mine standby costs 0.2 - 0.2
Non-operating costs (5.8) - (5.8) 0.2
Inventory movement (0.3) 7.0 15.7 16.5
----------------- -----------------
Total cash cost - 100% $ 79.7 $ 74.9 $ 146.5 $ 146.6
Depreciation, Depletion, Amortization
and Accretion 25.5 17.2 40.4 39.0
Inventory movement - non-cash (8.3) - (5.5) (0.4)
----------------- -----------------
Total production cost - 100% $ 96.8 $ 92.1 $ 181.4 $ 185.2
Ounces poured - 100% (000) 155.2 121.8 335.9 332.8
Total cash cost per ounce $ 513 $ 616 $ 436 $ 441
Total production cost per ounce $ 625 $ 757 $ 541 $ 557
Kumtor:
----------------------------------------
Cost of sales, as reported $ 92.9 $ 59.9 $ 141.2 $ 123.8
Less: Non-cash component 22.4 11.4 34.1 28.3
----------------- -----------------
Cost of sales - Cash component $ 70.5 $ 48.5 $ 107.1 $ 95.5
Adjust for:
Refining fees & by-product credits (1.3) (2.2)
Regional Office administration 4.7 3.3 8.0 6.6
Mine standby costs - - - -
Non-operating costs (5.8) 0.1 (5.8) 0.4
Inventory movement 2.3 5.6 19.5 10.0
----------------- -----------------
Total cash cost - 100% $ 70.5 $ 57.5 $ 126.7 $ 112.5
Depreciation, Depletion, Amortization
and Accretion $ 22.6 $ 11.6 $ 34.4 $ 28.7
Inventory movement - non-cash $ (7.6) $ (0.4) $ (4.3) $ (1.9)
----------------- -----------------
Total production cost - 100% $ 85.5 $ 68.7 $ 156.8 $ 139.3
Ounces poured - 100% (000) 139.1 90.1 303.2 270.6
Total cash cost per ounce $ 507 $ 639 $ 418 $ 416
Total production cost per ounce $ 615 $ 763 $ 517 $ 515
Boroo:
----------------------------------------
Cost of sales (cash), as reported $ 13.0 $ 19.9 $ 26.5 $ 34.3
Less: Non-cash component 2.9 5.5 6.0 9.9
----------------- -----------------
Cost of sales - Cash component $ 10.1 $ 14.3 $ 20.5 $ 24.4
Adjust for:
Refining fees & by-product credits (0.0) 0.1 (0.0) 0.1
Regional Office administration 1.5 1.7 3.0 3.3
Mine standby costs 0.2 - 0.2 -
Non-operating costs - (0.1) - (0.2)
Inventory movement (2.6) 1.4 (3.8) 6.5
----------------- -----------------
Total cash cost - 100% $ 9.1 $ 17.4 $ 19.8 $ 34.1
Depreciation, Depletion, Amortization
and Accretion $ 2.9 5.6 6.0 10.3
Inventory movement - non-cash $ (0.7) 0.4 $ (1.2) 1.5
----------------- -----------------
Total production cost - 100% $ 11.3 $ 23.4 $ 24.6 $ 45.9
Ounces poured - 100% (000) 16.1 31.7 32.6 62.2
Total cash cost per ounce $ 568 $ 549 $ 607 $ 550
Total production cost per ounce $ 707 $ 738 $ 756 $ 739
Centerra Gold Inc.
Condensed Consolidated Statement of Financial
Position
(Unaudited) June 30 December 31
2011 2010
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(Expressed in Thousands of United States Dollars)
Assets
Current assets
Cash and cash equivalents $ 256,375 $ 330,737
Short-term investments 208,332 82,278
Restricted cash 198 795
Amounts receivable 55,900 100,562
Inventories 217,664 181,633
Prepaid expenses 11,855 22,221
------------- -------------
750,324 718,226
Property, plant and equipment 587,855 519,019
Goodwill 129,705 129,705
Long-term receivables and other 22,652 17,299
Long-term inventories 11,926 12,877
Deferred income tax asset 58 3,367
------------- -------------
752,196 682,267
------------- -------------
------------- -------------
Total assets $ 1,502,520 $ 1,400,493
------------- -------------
------------- -------------
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable and accrued liabilities $ 61,376 $ 70,909
Taxes payable 17,597 27,354
Current portion of provision 16,620 9,553
------------- -------------
95,593 107,816
Provision 33,229 30,880
Deferred income tax liability 1,334 -
------------- -------------
34,563 30,880
Shareholders' equity
Share capital 657,239 655,178
Contributed surplus 33,915 33,827
Retained earnings 681,210 572,792
------------- -------------
1,372,364 1,261,797
------------- -------------
Total liabilities and shareholders' equity $ 1,502,520 $ 1,400,493
------------- -------------
------------- -------------
Centerra Gold Inc.
Condensed Consolidated Statements of Earnings and Comprehensive Income
(Unaudited) Three months ended Six months ended
June 30 June 30 June 30 June 30
2011 2010 2011 2010
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(Expressed in Thousands of United States Dollars, except per share amounts)
Revenue from Gold
Sales $ 243,808 $ 152,172 $ 493,987 $ 407,658
Cost of sales 105,912 79,765 167,706 158,131
Mine standby costs 164 - 164 -
Regional office
administration 6,231 4,973 11,044 9,917
----------------------------------------------------------------------------
Earnings from mine
operations 131,501 67,434 315,073 239,610
Revenue based taxes 30,966 15,369 63,154 46,635
Exploration and
business development 12,406 7,135 19,963 12,656
Corporate
administration 12,467 6,071 20,235 17,209
----------------------------------------------------------------------------
Earnings from
operations 75,662 38,859 211,721 163,110
Other (income) and
expenses (1,272) 1,690 (2,320) 2,126
Finance costs 1,220 308 1,610 634
----------------------------------------------------------------------------
Earnings before income
taxes 75,714 36,861 212,431 160,350
Income tax expense
(recovery) 4,597 6,127 4,691 5,754
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net earnings and
comprehensive income $ 71,117 $ 30,734 $ 207,740 $ 154,596
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Basic and diluted
earnings per common
share $ 0.30 $ 0.13 $ 0.88 $ 0.66
-------------------------- ---------------------------
-------------------------- ---------------------------
Centerra Gold Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited) Three months ended Six months ended
June 30 June 30 June 30 June 30
2011 2010 2011 2010
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(Expressed in Thousands of United States Dollars)
Operating activities
Net earnings $ 71,117 $ 30,734 $ 207,740 $ 154,596
Items not requiring
(providing) cash:
Depreciation, depletion
and amortization 25,423 17,072 40,379 38,449
Finance costs 1,220 308 1,610 634
Loss on disposal of plant
and equipment - 847 109 990
Stock - based compensation
expense 477 268 801 629
Change in long-term
inventory 768 (898) 951 (2,447)
Long-term other assets (4,794) 14 (5,353) (992)
Change in provisions 5,784 - 5,784 -
Income tax expense 4,597 6,127 4,691 5,754
Other operating items 280 (855) 251 (529)
-------------------------------------------------
104,872 53,617 256,963 197,084
Change in operating
working capital 11,623 31,612 3,186 (24,601)
Income tax recovery (paid) 1,984 (8,774) 892 (13,656)
------------------------ ------------------------
Cash provided by operations 118,479 76,455 261,041 158,827
------------------------ ------------------------
Investing activities
Net movement in restricted
cash (597) - (597) -
Additions to property,
plant and equipment (48,457) (57,171) (110,142) (78,207)
Purchase of short-term
investments (57,088) 22,627 (126,054) (14,696)
Advance for long-term
assets - (5,152) - (5,152)
Proceeds from disposition
of fixed assets - 2 - 44
------------------------ ------------------------
Cash used in investing (106,142) (39,694) (236,793) (98,011)
------------------------ ------------------------
Financing activities
Dividends paid (99,322) - (99,322) -
Transaction costs related
to borrowing (509) - (636) (17)
Proceeds from common
shares issued for cash 1,177 1,477 1,348 1,477
------------------------ ------------------------
Cash (used in) provided by
financing (98,654) 1,477 (98,610) 1,460
------------------------ ------------------------
(Decrease) Increase in cash
during the period (86,317) 38,238 (74,362) 62,276
Cash and cash equivalents
at beginning of the period 342,692 200,942 330,737 176,904
Cash and cash equivalents
at end of the Period $ 256,375 $ 239,180 $ 256,375 $ 239,180
------------------------ ------------------------
Cash and cash equivalents
consist of:
Cash $ 45,710 $ 95,314 $ 45,710 $ 95,314
Cash equivalents 210,665 143,866 210,665 143,866
------------------------ ------------------------
$ 256,375 $ 239,180 $ 256,375 $ 239,180
------------------------ ------------------------
Centerra Gold
Inc.
Condensed Consolidated Statements of Changes in Shareholders' Equity
(Unaudited)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(Expressed in Thousands of United States Dollars, except share information)
Number of
Common Contributed Retained
Shares Amount Surplus Earnings Total
----------------------------------------------------------------------------
Balance at
January 1, 2010 234,857,228 $ 646,081 $ 35,376 $ 264,121 $ 945,578
----------------------------------------------------------------------------
Stock-based
compensation
expense - - 629 - 629
Shares issued on
exercised of
stock options 288,741 2,056 (579) - 1,477
Net earnings for
the period - - - 154,596 154,596
----------------------------------------------------------------------------
Balance at June
30, 2010 235,145,969 $ 648,137 $ 35,426 $ 418,717 $ 1,102,280
----------------------------------------------------------------------------
Balance at
January 1, 2011 235,869,397 $ 655,178 $ 33,827 $ 572,792 $ 1,261,797
----------------------------------------------------------------------------
Stock-based
compensation
expense - - 801 - 801
Shares issued on
exercised of
stock options 234,347 2,061 (713) - 1,348
Dividend paid - - - (99,322) (99,322)
Net earnings for
the period - - - 207,740 207,740
----------------------------------------------------------------------------
Balance at June
30, 2011 236,103,744 $ 657,239 $ 33,915 $ 681,210 $ 1,372,364
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Qualified Person
The new drilling results 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 Senior Vice-President, Global
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 a technical report dated March 22, 2011
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
This news release and the documents referred to herein contain statements which
are not statements of current or historical facts and are "forward-looking
information" within the meaning of applicable Canadian securities laws. Such
forward-looking information involves risks, uncertainties and other factors that
could cause actual results, performance, prospects and opportunities to differ
materially from those expressed or implied by such forward-looking information.
Wherever possible, words such as "believe", "expect", "anticipate",
"contemplate", "target", "plan", "intends", "continue", "budget", "forecast",
"projections", "estimate", "may", "will", "schedule", "potential", "strategy"
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 processing the remaining refractory in-situ
ore at Boroo through a bio-oxidation facility, the impact of the Water and
Forest Law on the Company's Mongolian operations and the potential need to write
off the Company's investments in Gatsuurt and Boroo or reclassify mineral
reserves if the Water and Forest Law is not repealed or amended, the timing of
the discussion of the Water and Forest Law amendment in the Mongolian
Parliament, the application of the Graduated Royalty Fee on the Company's Boroo
operations, 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
(including the ATO (Altan Tsagaan Ovoo) deposit) and the success of exploration
activities), outcome of litigation involving Centerra, the timing for the
preparation of an initial resource statement for the Company's ATO property, the
timing for mill maintenance and repair work at Boroo, the expected impact on the
Company's financial statements as a result of adopting IFRS standards, the
timing of the scheduled SAG mill discharge liners at Kumtor and its impact on
production and opportunities and the discussion under the heading "Outlook for
2011", including the forecasted gold production and cash costs, exploration
expenditures and exploration plans.
Although the forward-looking information in this news release reflects
Centerra's current beliefs as of the date of this news release based on
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.
Forward-looking information is necessarily based upon a number of estimates and
assumptions that, while considered reasonable by Centerra, are inherently
subject to significant political, business, economic and competitive
uncertainties and contingencies. Known and unknown factors could cause actual
results to differ materially from those projected in the forward-looking
information.
Material assumptions used to forecast production and costs include those
described under the heading "Outlook for 2011". Other factors that could cause
actual results or events to differ materially from current expectations include,
among other things: the sensitivity of the Company's business to the volatility
of gold prices; the political risks associated with the Company's operations in
the Kyrgyz Republic and Mongolia; the impact of changes in, or more oppressive
enforcement of, laws, regulations and government practices in the jurisdictions
in which the Company operates; the effect of the November 2010 amendments to the
2006 Mongolian Minerals Law on the royalty payments payable in connection with
the Company's Mongolian operations; the effect of the Water and Forest Law on
the Company's operations in Mongolia; the impact of continued scrutiny from
Mongolian regulatory authorities; in the Kyrgyz Republic the impact of changes
to, or the increased enforcement of, environmental laws and regulations relating
to the Company's operations; the Company's ability to replace its reserves;
ground movements at the Kumtor Mine; waste and ice movement at the Kumtor Mine;
litigation; the accuracy of the Company's reserves and resources estimate; the
accuracy of the Company's production and cost estimates;
the success of the Company's future exploration and development activities;
competition for mineral acquisition opportunities; the adequacy of the Company's
insurance; environmental, health and safety risks; defects in title in
connection with the Company's properties; the impact of restrictive covenants in
the Company's revolving credit facility; the Company's ability to successfully
negotiate an investment agreement for the Gatsuurt development property to
complete the development of the mine and the Company's ability to obtain all
necessary permits and commissions needed to commence mining activity at the
Gatsuurt development property; seismic activity in the vicinity of the Company's
operations in the Kyrgyz Republic and Mongolia; long lead times required for
equipment and supplies given the remote location of the Company's properties;
illegal mining on the Company's Mongolian properties; the Company's ability to
enforce its legal rights; the Company's ability to accurately predict
decommissioning and reclamation costs; the Company's ability to obtain future
financing; the impact of current global financial conditions; the impact of
currency fluctuations; the effect of recent market conditions on the Company's
short-term investments; the Company's ability to attract and retain qualified
personnel; the Company's ability to make payments including payments of
principal and interest on the Company's debt facilities; risks associated with
the conduct of joint ventures; risks associated with the Company's largest
shareholder, the Kyrgyz government; and possible director conflicts of interest.
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 AIF available on SEDAR at www.sedar.com.
Furthermore, market price fluctuations in gold, as well as increased capital or
production costs or reduced recovery rates may render ore reserves containing
lower grades of mineralization uneconomic and may ultimately result in a
restatement of reserves. The extent to which resources may ultimately be
reclassified as proven or probable reserves is dependent upon the demonstration
of their profitable recovery. Economic and technological factors which may
change over time always influence the evaluation of reserves or resources.
Centerra has not adjusted mineral resource figures in consideration of these
risks and, therefore, Centerra can give no assurances that any mineral resource
estimate will ultimately be reclassified as proven and probable reserves.
Centerra's mineral reserve and mineral resource figures are estimates and
Centerra can provide no assurances that the indicated levels of gold will be
produced or that Centerra will receive the gold price assumed in determining its
mineral reserves. Such estimates are expressions of judgment based on knowledge,
mining experience, analysis of drilling results and industry practices. Valid
estimates made at a given time may significantly change when new information
becomes available. While Centerra believes that these mineral reserve and
mineral resource estimates are well established and the best estimates of
Centerra's management, by their nature mineral reserve and mineral resource
estimates are imprecise and depend, to a certain extent, upon analysis of
drilling results and statistical inferences which may ultimately prove
unreliable. If Centerra's reserve or reserve estimates for its properties are
inaccurate or are reduced in the future, this could have an adverse impact on
Centerra's future cash flows, earnings, results or 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 28, 2011. 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 operating, developing, exploring
and acquiring gold properties primarily in Asia, the former Soviet Union and
other emerging markets worldwide. Centerra is a leading North American-based
gold producer and is the largest Western-based gold producer in Central Asia.
Centerra's shares trade on the Toronto Stock Exchange (TSX) under the symbol CG.
The Company is headquartered in Toronto, Canada.
Conference Call
Centerra invites you to join its 2011 second quarter conference call on Friday,
July 29, 2011 at 10:30am Eastern Time. The call is open to all investors and the
media. To join the call, please dial toll-free in North America (800) 682-8921
or International participants dial +1 (303) 223-2680. 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 Friday August 5, 2011 by calling (416) 626-4100 or
(800) 558-5253 and using passcode 21528563.
Additional information on Centerra is available on the Company's web site at
www.centerragold.com and at SEDAR at www.sedar.com.
To view the Management's Discussion and Analysis and the Financial Statements
and Notes for the three and six month periods ended June 30, 2011, please visit
the following link: http://file.marketwire.com/release/CCG728FS.pdf.
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