Centerra Gold Reports Fourth Quarter and Full-Year 2022 Results
All figures are in United States dollars. All production figures reflect payable metal quantities and are on a 100%-basis, unless otherwise stated. For references denoted with NG, refer to the “Non-GAAP and Other Financial Measures” disclosure at the end of this news release for a description of these measures.
TORONTO, Feb. 23, 2023 (GLOBE NEWSWIRE) -- Centerra Gold Inc. (“Centerra” or the “Company”) (TSX: CG and NYSE: CGAU) today reported its fourth quarter and full-year 2022 results.
Significant financial and operating results of the fourth quarter and year ended December 31, 2022 included:
· *Net loss *for the quarter of $130.1 million or $0.59 per common share (basic), including a non-cash impairment loss on the Kemess Project of $138.2 million (net of tax). The Kemess Project impairment loss was recorded as the Company is now classifying the project as non-core with no exploration or development-related expenditures incurred in 2022 or committed for future years. An adjusted loss^NG of $13.7 million or $0.06 per common share (basic). Net loss for the year of $77.2 million or $0.29 per common share (basic) and an adjusted net loss^NG of $9.4 million or $0.04 per common share (basic).
· *Cash used in operating activities and free cash flow deficit*^*NG* for the quarter of $9.8 million and $25.3 million, respectively was primarily due to a temporary suspension of leaching activities at the Öksüt Mine. Cash used in operating activities at the Öksüt Mine was $11.9 million for the quarter with continued mining and stacking of ore. Mount Milligan Mine generated cash provided by mine operating activities and free cash flow^NG of $26.5 million and $15.6 million for the quarter, respectively. Cash used in operating activities and free cash flow deficit^NG for the year were $2.0 million and $82.9 million, respectively.
· *In January 2023, the Öksüt Mine received notice of approval of its operating license extension application for a period of 10 years *as well as approval of an enlarged grazing land permit to allow expansion of the open pits. The regulatory review of Öksüt Mine’s amended Environmental Impact Assessment (“EIA”), which was submitted in mid-January 2023 for regulatory review, remains on track.
· *The Company’s mercury abatement retrofit to the Öksüt Mine’s ADR plant is complete. *Upon restart of the ADR plant, and after receiving regulatory approvals, the Company will be in a position to process the gold-in-carbon inventory on hand of approximately 100,000 recoverable ounces. The ADR plant has capacity to produce gold at a rate of approximately 35,000 ounces per month.
· *The Company continues to evaluate strategic options for the Molybdenum Business Unit*, including a potential restart of the Thompson Creek Mine with improving global molybdenum prices*. *The Company plans to issue a Prefeasibility Study (“PFS”) on a restart of the Thompson Creek Mine in the third quarter of 2023.
· *Goldfield Project drilling activities continued *in the fourth quarter of 2022. The Company plans to issue an initial resource estimate by mid-year 2023 followed by an updated resource estimate accompanied by a Feasibility Study.
· *The Company completed full rollout of Responsible Gold Mining Principles *in the fourth quarter of 2022.
· *Strong balance sheet *with a cash position at the year-end of $531.9 million.
· *Returns to shareholders of $22.6 million *for the quarter and $58.9 million for the year, through dividends and the buyback of shares under a Normal Course Issuer Bid (“NCIB”).
· *Gold production *for the quarter of 53,222 ounces, solely from the Mount Milligan Mine.
· *Copper production *for the quarter of 16.9 million pounds.
· *Gold production costs *for the quarter of $790 per ounce.
· *Copper production costs *for the quarter of $2.00 per pound.
· *All-in sustaining costs on a by-product basis*^*NG* for the quarter of $987 per ounce.
· *All-in costs on a by-product basis*^*NG* for the quarter of $1,572 per ounce due to higher exploration and project development costs incurred primarily at the Company’s Goldfield Project.
· *Quarterly Dividend *declared of CAD$0.07 per common share.
The Company’s 2022 full-year results on a continuing basis, and previously disclosed full-year 2022 guidance are summarized below:
*2022 *
*Guidance* *2022 *
*Full-Year
results* *2022 *
*Guidance* *2022 *
*Full-Year *
*results* *Mount*
* Milligan* *Mount*
* Milligan* *Consolidated* *Consolidated*
*Production*
Total gold production (Koz) 190 - 210 *189* 245 - 265 *244*
Total copper production (Mlb) 70 - 80 *74* 70 - 80 *74*
*Costs*
Gold production costs ($/oz) 775 - 825 *767* 675 - 725 *681*
All-in sustaining costs on a by-product basis^NG ($/oz) 775 - 825 *630* 1,000 - 1,050 *860*
All-in costs on a by-product basis^NG ($/oz) 825 - 875 *704* 1,225 - 1,275 *1,201*
All-in sustaining costs on a co-product basis^NG ($/oz) 1,000 - 1,050 *956* 1,175 - 1,225 *1,112*
Copper production costs ($/lb) 1.55 - 1.70 *1.70* 1.55 - 1.70 *1.70*
All-in sustaining costs on a co-product basis^NG ($/lb) 2.25 - 2.40 *2.12* 2.25 - 2.40 *2.12*
*
CEO Discussion*
Paul Wright, Interim President and Chief Executive Officer of Centerra stated, “In 2022, the Company continued to demonstrate that safety remains Centerra’s top priority, with a number of our sites achieving milestones without a lost time injury. We put a strategy in place to improve safety performance at the Mount Milligan Mine during the year and subsequent to the year-end, the Mount Milligan Mine’s team achieved one million hours worked without a lost time injury.”
“Despite all other challenges in 2022, I want to highlight Mount Milligan Mine’s record annual mill throughput in 2022 of 21.3 million tonnes. The Company continues to optimize the life of mine plan for Mount Milligan and anticipates increases in both gold and copper production for 2024 and 2025 when compared to the annual figures included in the most recent Technical Report for the mine. To streamline our corporate structure, we recently implemented changes that will lead to the closure of our regional Prince George office and reduced workforce levels at the corporate office in Toronto.”
“I’m also pleased to say that steady progress is being made at the Öksüt Mine toward a restart of operations. The retrofit of the ADR plant at the Öksüt Mine, was completed early in 2023, and we continue to work with the Turkish officials on the restart of gold room operations at the ADR plant as well as an updated EIA for the mine. We have received a 10-year operating license extension for the Öksüt Mine as well as the approval of an enlarged grazing land permit. The people of Türkiye continue to deal with the devastating impact of the earthquakes and aftershocks that occurred in the southeastern portion of the country in early February. An emergency response team from the Öksüt Mine assisted the Turkish state emergency preparedness authorities and regional disaster response organizations during the search and rescue stage. The Company continues to provide equipment and material support to the ongoing recovery activities where possible. Centerra offers its condolences to the people of Türkiye and all those that have lost loved ones in this natural disaster.”
*Update on Öksüt Mine Operations*
In March 2022, Centerra announced it had temporarily suspended gold doré bar production at the Öksüt Mine due to mercury detected in the gold room at the ADR plant. From the date of suspension of gold room operations through to August 2022, the Company continued to process ore into gold-in-carbon and had approximately 100,000 recoverable ounces of stored gold-in-carbon as of December 31, 2022, having incurred substantially all associated production costs (excluding royalty charges). In addition, the Öksüt Mine had approximately 200,000 recoverable ounces of gold in ore stockpiles and on the heap leach pad as at December 31, 2022. The Company has completed construction of a mercury abatement system to allow processing of mercury-bearing ores with capital costs below the original $5 million budget and it continues to work with relevant authorities to obtain the required approvals to restart gold room operations at the ADR plant. Once operations resume, the ADR plant is expected to have sufficient production capacity to process up to approximately 35,000 ounces of gold per month.
Permitting
Following inspection by the Ministry of Environment, Urbanization and Climate Change (the “Ministry of Environment”) and several further discussions, the Company determined that an updated EIA should be prepared and submitted to clarify various production and other capacity limits and to align the EIA production levels with current operating plans. The Öksüt Mine suspended leaching of ore on the heap leach pad and ceased using activated carbon on site effective late August 2022 though mining, crushing and stacking activities continued in line with existing EIA limits for the remainder of 2022.
The Öksüt Mine has built substantial inventories of gold-in-carbon, ore stacked on the heap leach pad and ore stockpiles and has therefore paused crushing and stacking activities. The Öksüt Mine is currently focusing mining activities on the Phase 5 pit wall pushback to expand the Keltepe pit.
The Öksüt Mine’s application to update its EIA was submitted to regulators at the end of August 2022 and the new updated EIA was submitted in January 2023. The Company is working with Turkish officials and other stakeholders on the regulatory review and approval of its EIA and other permits that may be required to allow for a timely full restart of all operations.
In January 2023, the Öksüt Mine received notice of approval of its operating license extension application for a period of 10 years as well as approval of an enlarged grazing land permit to allow expansion of the Keltepe and Güneytepe pits as planned.
*Exploration Update*
Exploration activities in the fourth quarter of 2022 included drilling, surface sampling, geological mapping and geophysical surveying at the Company’s various projects and earn-in properties, targeting gold and copper mineralization in Canada, Türkiye, and the United States of America. Exploration expenditures in the fourth quarter of 2022 were $16.2 million. The activities were primarily focused on expanded drilling programs at the Mount Milligan Mine in British Columbia, the Öksüt Mine in Türkiye, the Goldfield Project in Nevada, and greenfield projects in the USA and Türkiye.
At the Mount Milligan Mine, 27 diamond drill holes, totalling 10,516 metres, were completed in the fourth quarter of 2022, including brownfield exploration drilling (8,003 metres in 17 drill holes) and resource expansion drilling (2,513 metres in ten drill holes). The 2022 drill programs at the Mount Milligan Mine targeted porphyry-style gold-copper mineralization below and adjacent to the current ultimate open-pit boundary, as well as continued to test targets with potential for shallower porphyry-style gold-copper mineralization and high gold-low copper style mineralization peripheral to the current pits.
The planned 2023 exploration drilling programs at the Mount Milligan Mine are expected to commence late in the first quarter of 2023, targeting porphyry-style gold-copper mineralization on the northern and southwestern margins of the current ultimate open pit, and peripheral greenfield targets within the Mount Milligan claim block.
At the Öksüt Mine, 43 diamond drill holes and 18 reverse circulation (“RC”) drill holes, totalling 15,840 metres, were completed in the fourth quarter of 2022. Exploration drilling activities were mainly undertaken at the Keltepe, Güneytepe, Keltepe North, Keltepe Northwest, and Keltepe North-Northwest deposits with the aim of expanding known oxide gold mineralization resources. Drilling also continued testing peripheral targets, such as the Yelibelen, Büyüktepe, and Boztepe prospects.
The planned 2023 exploration drilling programs at the Öksüt Mine are expected to commence early in the second quarter of 2023, targeting oxide gold mineralisation proximal to the known deposits and the potential for porphyry-style gold- copper mineralization at depth within the property.
At the Goldfield Project, 21 diamond drill holes and 134 RC drill holes, totaling 35,259 metres of drilling, were completed in the fourth quarter of 2022. Completed holes include 26,590 metres in 117 exploration, infill, and resource expansion holes, 3,995 metres in 18 condemnation drill holes, 2,920 metres in ten metallurgical holes, 1,512 metres in eight geotechnical holes, and two water monitoring wells for 241 metres.
The planned 2023 exploration drilling programs at the Goldfield Project commenced early in the first quarter of 2023, principally targeting extensions to gold mineralization proximal to the known deposits.
*Conference Call*
Centerra invites you to join its 2022 fourth quarter conference call on Friday, February 24, 2023 at 9:00 AM Eastern Time. The call is open to all investors and the media. To join the call, please dial toll-free in North America 1 (877) 210-1510. International participants may access the call at +1 (416) 620-9188. Results summary presentation slides are available on Centerra’s website at www.centerragold.com. Alternatively, an audio feed webcast will be broadcast live by Notified and can be accessed live at Centerra’s website at www.centerragold.com. A recording of the call will be available after the call and via telephone until midnight Eastern Standard Time on March 10, 2023 by calling +1 (416) 626-4100 or (800) 558-5253 and using passcode 22026083.
*Non-GAAP and Other Financial Measures*
This document contains “specified financial measures” within the meaning of NI 52-112, specifically the non-GAAP financial measures and non-GAAP ratios described below. Management believes that the use of these measures assists analysts, investors and other stakeholders of the Company in understanding the costs associated with producing gold and copper, understanding the economics of gold and copper mining, assessing operating performance, the Company’s ability to generate free cash flow from current operations and on an overall Company basis, and for planning and forecasting of future periods. However, the measures have limitations as analytical tools as they may be influenced by the point in the life cycle of a specific mine and the level of additional exploration or other expenditures a company has to make to fully develop its properties. The specified financial measures used in this document do not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other issuers, even as compared to other issuers who may be applying the World Gold Council (“WGC”) guidelines. Accordingly, these specified financial measures should not be considered in isolation, or as a substitute for, analysis of the Company’s recognized measures presented in accordance with IFRS.
*Definitions:*
The following is a description of the non-GAAP financial measures and non-GAAP ratios used in this news release:
· All-in sustaining costs on a by-product basis per ounce is a non-GAAP ratio calculated as all-in sustaining costs on a by-product basis divided by ounces of gold sold. All-in sustaining costs on a by-product basis is a non-GAAP financial measure calculated as the aggregate of production costs as recorded in the consolidated statements of loss, refining and transport costs, the cash component of capitalized stripping and sustaining capital expenditures, lease payments related to sustaining assets, corporate general and administrative expenses, accretion expenses, asset retirement depletion expenses, copper and silver revenue and the associated impact of hedges of by-product sales revenue (added in the current period and applied retrospectively to the previous period). When calculating all-in sustaining costs on a by-product basis, all revenue received from the sale of copper from the Mount Milligan Mine, as reduced by the effect of the copper stream, is treated as a reduction of costs incurred. A reconciliation of all-in sustaining costs on a by-product basis to the nearest IFRS measure is set out below. Management uses these measures to monitor the cost management effectiveness of each of its operating mines.
· All-in sustaining costs on a co-product basis per ounce of gold or per pound of copper, is a non-GAAP ratio calculated as all-in sustaining costs on a co-product basis divided by ounces of gold or pounds of copper sold, as applicable. All-in sustaining costs on a co-product basis is a non-GAAP financial measure based on an allocation of production costs between copper and gold based on the conversion of copper production to equivalent ounces of gold. The Company uses a conversion ratio for calculating gold equivalent ounces for its copper sales calculated by multiplying the copper pounds sold by estimated average realized copper price and dividing the resulting figure by estimated average realized gold price. For the fourth quarter and year ended December 31, 2022, 394 pounds and 450 pounds, respectively, of copper were equivalent to one ounce of gold. A reconciliation of all-in sustaining costs on a co-product basis to the nearest IFRS measure is set out below. Management uses these measures to monitor the cost management effectiveness of each of its operating mines.
· Sustaining capital expenditures and Non-sustaining capital expenditures are non-GAAP financial measures. Sustaining capital expenditures are defined as those expenditures required to sustain current operations and exclude all expenditures incurred at new operations or major projects at existing operations where these projects will materially benefit the operation. Non-sustaining capital expenditures are primarily costs incurred at ‘new operations’ and costs related to ‘major projects at existing operations’ where these projects will materially benefit the operation. A material benefit to an existing operation is considered to be at least a 10% increase in annual or life of mine production, net present value, or reserves compared to the remaining life of mine of the operation. A reconciliation of sustaining capital expenditures and non-sustaining capital expenditures to the nearest IFRS measures is set out below. Management uses the distinction of the sustaining and non-sustaining capital expenditures as an input into the calculation of all-in sustaining costs per ounce and all-in costs per ounce.
· All-in costs on a by-product basis per ounce is a non-GAAP ratio calculated as all-in costs on a by-product basis divided by ounces sold. All-in costs on a by-product basis is a non-GAAP financial measure which includes all-in sustaining costs on a by-product basis, exploration and study costs, non-sustaining capital expenditures, care and maintenance and predevelopment costs. A reconciliation of all-in costs on a by-product basis to the nearest IFRS measures is set out below. Management uses these measures to monitor the cost management effectiveness of each of its operating mines.
· Adjusted net (loss) earnings is a non-GAAP financial measure calculated by adjusting net (loss) earnings as recorded in the consolidated statements of loss and comprehensive loss for items not associated with ongoing operations. The Company believes that this generally accepted industry measure allows the evaluation of the results of continuing income-generating capabilities and is useful in making comparisons between periods. This measure adjusts for the impact of items not associated with ongoing operations. A reconciliation of adjusted net (loss) earnings to the nearest IFRS measures is set out below. Management uses this measure to monitor and plan for the operating performance of the Company in conjunction with other data prepared in accordance with IFRS.
· Free cash flow (deficit) from operations is a non-GAAP financial measure calculated as cash provided by operating activities from continuing operations less property, plant and equipment additions. A reconciliation of free cash flow from continuing operations to the nearest IFRS measures is set out below. Management uses this measure to monitor the amount of cash available to reinvest in the Company and allocate for shareholder returns.
· Free cash flow (deficit) from mine operations is a non-GAAP financial measure calculated as cash provided by mine operations less property, plant and equipment additions. A reconciliation of free cash flow from mine operations to the nearest IFRS measures is set out below. Management uses this measure to monitor the degree of self-funding of each of its operating mines and facilities.
**Certain unit costs, including all-in sustaining costs on a by-product basis (including and excluding revenue-based taxes) per ounce, are non-GAAP ratios which include as a component certain non-GAAP financial measures including all-in sustaining costs on a by-product basis which can be reconciled as follows:**
*Three months ended December 31,* *Consolidated*^*(2)* *Mount Milligan* *Öksüt* *Kumtor*
*(Unaudited - $millions, unless otherwise specified)* *2022* 2021 *2022* 2021 *2022* 2021 *2022* *2021*
Production costs attributable to gold *39.0* 49.7 *39.0* 39.3 *—* 10.4 *—* —
Production costs attributable to copper *30.8* 30.7 *30.8* 30.7 *—* — *—* —
Total production costs excluding molybdenum segment, as reported *69.8* 80.4 *69.8* 70.0 *—* 10.4 *—* —
Adjust for:
Third party smelting, refining and transport costs *3.5* 2.3 *3.5* 2.2 *—* 0.1 *—* —
By-product and co-product credits *(54.3* *)* (63.8 ) *(54.3* *)* (63.8 ) *—* — *—* —
Adjusted production costs *19.0* 18.9 *19.0* 8.4 *—* 10.5 *—* —
Corporate general administrative and other costs *12.1* 7.3 *0.4* (0.1 ) *—* — *—* —
Reclamation and remediation - accretion (operating sites) *1.7* 1.5 *0.5* 0.5 *1.2* 1.0 *—* —
Sustaining capital expenditures *14.5* 24.3 *9.9* 20.2 *4.6* 4.1 *—* —
Sustaining leases *1.5* 1.4 *1.3* 1.3 *0.2* 0.1 *—* —
All-in sustaining costs on a by-product basis *48.8* 53.4 *31.1* 30.3 *6.0* 15.7 *—* —
Exploration and evaluation costs *23.0* 6.4 *2.0* 1.1 *1.4* — *—* —
Non-sustaining capital expenditures^(1) *0.1* 2.4 *0.1* 2.2 *—* 0.2 *—* —
Care and maintenance and other costs *5.8* 4.0 *—* — *1.3* — *—* —
All-in costs on a by-product basis *77.7* 66.2 *33.2* 33.6 *8.7* 15.9 *—* —
Ounces sold (000s) *49.4* 90.3 *49.4* 58.6 *—* 31.7 *—* —
Pounds sold (millions) *15.4* 17.2 *15.4* 17.2 *—* — *—* —
Gold production costs ($/oz) *790* 550 *790* 670 *n/a * 328 *—* —
All-in sustaining costs on a by-product basis ($/oz) *987* 591 *629* 518 *n/a* 495 *—* —
All-in costs on a by-product basis ($/oz) *1,572* 732 *672* 573 *n/a* 501 *—* —
Gold - All-in sustaining costs on a co-product basis ($/oz) *1,308* 829 *950* 883 *n/a* 495 *—* —
Copper production costs ($/pound) *2.00* 1.79 *2.00* 1.79 *n/a* n/a *n/a* n/a
Copper - All-in sustaining costs on a co-product basis ($/pound) *2.40* 2.34 *2.40* 2.34 *n/a* n/a *n/a* n/a
^(1) Non-sustaining capital expenditures are distinct projects designed to have a significant increase in the net present value of the mine. In the current quarter, non-sustaining capital expenditures include costs related to the installation of the staged flotation reactors at the Mount Milligan Mine.
*Certain unit costs, including all-in sustaining costs on a by-product basis (including and excluding revenue-based taxes) per ounce, are non-GAAP ratios which include as a component certain non-GAAP financial measures including all-in sustaining costs on a by-product basis which can be reconciled as follows:*
*Years ended December 31,* *Consolidated*^*(2)* *Mount Milligan* *Öksüt* *Kumtor*^*(3)*
*(Unaudited - $millions, unless otherwise specified)* *2022* 2021 *2022* 2021 *2022* 2021 *2022* *2021*
Production costs attributable to gold *164.9* 189.9 *143.8* 138.8 *21.1* 51.1 *—* 72.6
Production costs attributable to copper *125.1* 118.0 *125.1* 118.0 *—* — *—* —
Total production costs excluding molybdenum segment, as reported *290.0* 307.9 *268.9* 256.8 *21.1* 51.1 *—* 72.6
Adjust for:
Third party smelting, refining and transport costs *12.1* 11.1 *11.9* 10.1 *0.2* 1.0 *—* 1.2
By-product and co-product credits *(223.8* *)* (238.0 ) *(223.8* *)* (238.0 ) *—* — *—* —
Community costs related to current operations *—* — *—* — *—* — *—* 2.6
Adjusted production costs *78.3* 81.0 *57.0* 28.9 *21.3* 52.1 *—* 76.4
Corporate general administrative and other costs *47.8* 27.7 *1.1* 1.0 *—* — *—* —
Reclamation and remediation - accretion (operating sites) *7.2* 4.9 *1.8* 1.8 *5.4* 3.1 *—* 0.3
Sustaining capital expenditures *69.1* 85.5 *53.1* 66.7 *16.0* 18.8 *—* 60.6
Sustaining lease payments *5.8* 5.4 *5.1* 4.8 *0.6* 0.6 *—* —
All-in sustaining costs on a by-product basis *208.2* 204.5 *118.1* 103.2 *43.3* 74.6 *—* 137.3
Revenue-based taxes *—* — *—* — *—* — *—* 37.0
Exploration and study costs *65.7* 23.6 *12.2* 5.6 *3.8* 2.1 *—* 8.8
Non-sustaining capital expenditures^(1) *2.1* 5.3 *1.6* 4.1 *—* 0.8 *—* 25.9
Care and maintenance and other costs *14.8* 14.1 *—* — *1.7* — *—* —
All-in costs on a by-product basis *290.8* 247.4 *131.9* 112.9 *48.8* 77.5 *—* 209.0
Ounces sold (000s) *242.2* 314.8 *187.5* 203.1 *54.7* 111.7 *—* 147.8
Pounds sold (millions) *73.4* 78.0 *73.4* 78.0 *—* — *—* —
Gold production costs ($/oz) *681* 604 *767* 683 *386* 457 *—* 491
All-in sustaining costs on a by-product basis ($/oz) *860* 649 *630* 508 *791* 668 *—* 929
All-in costs on a by-product basis ($/oz) *1,201* 785 *704* 556 *891* 694 *—* 1,414
Gold - All-in sustaining costs on a co-product basis ($/oz) *1,112* 891 *956* 883 *791* 668 *—* 929
Copper production costs ($/pound) *1.70* 1.51 *1.70* 1.51 *n/a* n/a *n/a* n/a
Copper - All-in sustaining costs on a co-product basis ($/pound) *2.12* 1.94 *2.12* 1.94 *n/a* n/a *n/a* n/a
^(1) Non-sustaining capital expenditures are distinct projects designed to have a significant increase in the net present value of the mine. In the current year, non-sustaining capital expenditures include costs related to the installation of the staged flotation reactors at the Mount Milligan Mine.
^(2) Presented on a continuing operations basis, excluding the results from the Kumtor Mine.
^(3) Results from the period ended December 31, 2021 from the Kumtor Mine are prior to the seizure of the mine on May 15, 2021.
*Adjusted net (loss) earnings is a non-GAAP financial measure and can be reconciled as follows:*
*Three months ended December 31,* *Years ended December 31,*
*($millions, except as noted)* *2022* 2021 *2022* 2021
*Net (loss) earnings* *$* *(130.1* *)* $ 274.9 *$* *(77.2* *)* $ (381.8 )
Adjust for items not associated with ongoing operations:
Loss of control of the Kumtor Mine *—* — *—* 926.4
Kumtor Mine legal costs and other related costs *—* 11.3 *15.0* 27.5
Gain from the discontinuance of Kumtor Mine hedge instruments *—* — *—* (15.3 )
Impairment loss (reversal), net of tax *138.2* (117.3 ) *138.2* (117.3 )
Gain on the sale of Greenstone property *—* (25.0 ) *—* (97.3 )
Reclamation (recovery) expense at sites on care and maintenance *(3.4* *)* 24.2 *(94.2* *)* 24.1
Gain on derecognition of the employee health plan benefit provision at the Langeloth Facility *(4.4* *)* — *(4.4* *)* —
Income and mining tax adjustments(1) *(14.0* *)* (132.7 ) *13.2* (132.7 )
*Adjusted net (loss) earnings* *$* *(13.7* *)* $ 35.4 *$* *(9.4* *)* $ 233.6
*Net (loss) earnings per share - basic* *$*
*(0.59*
*)*
$
0.93 *$*
*(0.29*
*)*
$
(1.29
)
*Net (loss) earnings per share - diluted* *$* *(0.59* *)* $ 0.92 *$* *(0.31* *)* $ (1.29 )
*Adjusted net (loss) earnings per share - basic* *$* *(0.06* *)* $ 0.12 *$* *(0.04* *)* $ 0.79
*Adjusted net (loss) earnings per share - diluted* *$* *(0.06* *)* $ 0.12 *$* *(0.04* *)* $ 0.77
^(1) Income tax adjustments reflect the impact of foreign currency translation on deferred income taxes and an election made under local legislation to account for inflation and increase the tax value of Öksüt Mine’s assets
*Free cash flow (deficit) from continuing operations and adjusted free cash flow (deficit) from continuing operations are non-GAAP financial measures and can be reconciled as follows:*
*Three months ended December 31,* *Consolidated* *Mount Milligan* *Öksüt* *Molybdenum* *Other* *2022* *2021* *2022* *2021* *2022* *2021* *2022* *2021* *2022* *2021*
*Cash (used in) provided by operating activities from continuing operations*^*(1)* *$* *(9.8* *)* $ 61.8 *$* *26.5* $ 63.5 *$* *(11.9* *)* $ 39.5 *$* *8.6* $ (15.8 ) *$* *(33.0* *)* $ (25.4 )
Deduct:
Property, plant & equipment additions^(1) *(15.5* *)* (23.1 ) *(10.9* *)* (17.3 ) *(4.6* *)* (4.2 ) *—* (1.4 ) *—* (0.2 )
*Free cash flow (deficit) from continuing operations* *$* *(25.3* *)* $ 38.7 *$* *15.6* $ 46.2 *$* *(16.5* *)* $ 35.3 *$* *8.6* $ (17.2 ) *$* *(33.0* *)* $ (25.6 )
^(1) As presented in the Company’s consolidated statements of cash flows.
*Years ended December 31,* *Consolidated* *Mount Milligan* *Öksüt* *Molybdenum* *Other* *2022* *2021* *2022* *2021* *2022* *2021* *2022* *2021* *2022* *2021*
*Cash provided by (used in) operating activities from continuing operations*^*(1)* *$* *(2.0* *)* $ 270.9 *$* *161.6* $ 268.9 *$* *(17.5* *)* $ 131.7 *$* *(9.3* *)* $ (37.3 ) *$* *(136.8* *)* $ (92.4 )
Deduct:
Property, plant & equipment additions at continuing operations^(1) *(80.9* *)* (92.5 ) *(61.2* *)* (67.4 ) *(16.0* *)* (20.1 ) *(1.1* *)* (2.5 ) *(2.6* *)* (2.5 )
*Free cash flow (deficit) from continuing operations* *$* *(82.9* *)* $ 178.4 *$* *100.4* $ 201.5 *$* *(33.5* *)* $ 111.6 *$* *(10.4* *)* $ (39.8 ) *$* *(139.4* *)* $ (94.9 )
^(1) As presented in the Company’s consolidated statements of cash flows.
*Sustaining capital expenditures and non-sustaining capital expenditures are non-GAAP measures and can be reconciled as follows:*
*Three months ended December 31,* *Consolidated* *Mount Milligan* *Öksüt* *Molybdenum* *Other* *2022* *2021* *2022* *2021* *2022* *2021* *2022* *2021* *2022* *2021*
*Additions to PP&E*^*(1)* *$* *27.9* $ 46.9 *$* *14.6* $ 28.9 *$* *5.1* $ 9.3 *$* *0.8* $ 1.4 *$* *7.4* $ 7.3
Adjust for:
Costs capitalized to the ARO assets *(11.7* *)* (17.9 ) *(4.4* *)* (5.3 ) *—* (5.2 ) *—* — *(7.3* *)* (7.4 )
Costs capitalized to the ROU assets *(0.2* *)* (1.3 ) *—* (1.5 ) *(0.2* *)* 0.2 *—* — *—* —
Other^(2) *(0.6* *)* 0.4 *(0.2* *)* 0.3 *(0.3* *)* — *—* — *(0.1* *)* 0.1
*Capital expenditures* *$* *15.4* $ 28.1 *$* *10.0* $ 22.4 *$* *4.6* $ 4.3 *$* *0.8* $ 1.4 *$* *—* $ —
Sustaining capital expenditures *15.3* 25.7 *9.9* 20.2 *4.6* 4.1 *0.8* 1.4 *—* —
Non-sustaining capital expenditures *0.1* 2.4 *0.1* 2.2 *—* 0.2 — — *—* —
^(1)* *As presented in the Company’s consolidated financial statements.
^(2) Includes reclassification of insurance and capital spares from supplies inventory to PP&E.
*Years ended December 31,* *Consolidated* *Mount Milligan* *Öksüt* *Molybdenum* *Other* *2022* *2021* *2022* *2021* *2022* *2021* *2022* *2021* *2022* *2021*
*Additions to PP&E*^*(1)* *$* *275.1* $ 118.9 *$* *49.2* $ 83.7 *$* *14.2* $ 24.9 *$* *1.8* $ 2.5 *$* *209.9* $ 7.8
Adjust for:
Costs capitalized to the ARO assets *6.4* (17.8 ) *5.5* (5.3 ) *1.9* (5.20 ) *—* — *(1.0* *)* (7.3 )
Costs capitalized to the ROU assets *(0.4* *)* (6.9 ) *—* (6.8 ) *(0.4* *)* (0.1 ) *—* — *—* —
Costs relating to the acquisition of Goldfield Project *(208.2* *)* — — — *—* — *—* — *(208.2* *)* —
Other^(2) *0.3* (0.9 ) *—* (0.8 ) *0.3* — *0.1* — *(0.1* *)* (0.1 )
*Capital expenditures* *$* *73.2* $ 93.3 *$* *54.7* $ 70.8 *$* *16.0* $ 19.6 *$* *1.9* $ 2.5 *$* *0.6* $ 0.4
Sustaining capital expenditures *71.1* 88.0 *53.1* 66.7 *16.0* 18.8 *1.9* 2.5 *0.1* —
Non-sustaining capital expenditures *2.1* 5.3 *1.6* 4.1 *—* 0.8 — — *0.5* 0.4
^(1) * *As presented in the Company’s consolidated financial statements.
^(2) Includes reclassification of insurance and capital spares from supplies inventory to PP&E.
*About Centerra*
Centerra Gold Inc. is a Canadian-based mining company focused on operating, developing, exploring and acquiring gold and copper properties in North America, Türkiye, and other markets worldwide. Centerra operates two mines: the Mount Milligan Mine in British Columbia, Canada, and the Öksüt Mine in Türkiye. The Company also owns the Goldfield Project in Nevada, United States, the Kemess Underground Project in British Columbia, Canada, and owns and operates the Molybdenum Business Unit in the United States and Canada. Centerra's shares trade on the Toronto Stock Exchange (“TSX”) under the symbol CG and on the New York Stock Exchange (“NYSE”) under the symbol CGAU. The Company is based in Toronto, Ontario, Canada.
*For more information:*
Toby Caron Shae Frosst
(416) 204-1694 (416) 204-2159
toby.caron@centerragold.com shae.frosst@centerragold.com
*Additional information on Centerra is available on the Company’s website at *www.centerragold.com and at SEDAR at www.sedar.com and EDGAR at www.sec.gov/edgar.
*Management’s Discussion and Analysis*
*For the Years Ended December 31, 2022 and 2021*
This Management’s Discussion and Analysis (“MD&A”) has been prepared as of February 23, 2023 and is intended to provide a review of the financial position and results of operations of Centerra Gold Inc. (“Centerra” or the “Company”) for the three and twelve months ended December 31, 2022 in comparison with the corresponding periods ended December 31, 2021. This discussion should be read in conjunction with the Company’s audited financial statements and the notes thereto for the year ended December 31, 2022 prepared in accordance with International Financial Reporting Standards (“IFRS”). The Company’s audited financial statements and the notes thereto for the year ended December 31, 2022, are available at www.centerragold.com and on the System for Electronic Document Analysis and Retrieval (“SEDAR”) at www.sedar.com and EDGAR at www.sec.gov/ edgar. In addition, this discussion contains forward-looking information regarding Centerra’s business and operations. Such forward-looking statements involve risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. See “Caution Regarding Forward-Looking Information” below. All dollar amounts are expressed in United States dollars (“USD”), except as otherwise indicated. All references in this document denoted with ^NG indicate a “specified financial measure” within the meaning of National Instrument 52-112 Non-GAAP and Other Financial Measures Disclosure of the Canadian Securities Administrators. None of these measures is a standardized financial measure under IFRS and these measures might not be comparable to similar financial measures disclosed by other issuers. See section “Non-GAAP and Other Financial Measures” below for a discussion of the specified financial measures used in this document and a reconciliation to the most directly comparable IFRS measure.
*Caution Regarding Forward-Looking Information*
Information contained in this document which is not a statement of historical fact, and the documents incorporated by reference herein, may be “forward-looking information” for the purposes of Canadian securities laws and within the meaning of the United States Private Securities Litigation Reform Act of 1995. 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. The words “believe”, “expect”, “anticipate”, “contemplate”, “plan”, “intends”, “continue”, “budget”, “estimate”, “may”, “will”, “schedule”, “understand” and similar expressions identify forward-looking information. These forward-looking statements relate to, among other things: statements regarding 2023 Outlook and 2023 Guidance, including production, costs, capital expenditures, depreciation, depletion and amortization expenses and taxes; the effects of inflation on the Company’s costs; the weakening of the Canadian dollar and Turkish lira relative to the U.S. dollar; expectations regarding copper credits and copper prices in 2023; the expected trend of the Company’s performance toward achieving guidance; expected cash outflows at the Oksut Mine for 2023; completion of mercury abatement, containment and safety work in the gold room of the ADR plant at the Öksüt Mine, including construction progress; the expected restart of gold room operations, related regulatory approvals and the expected timing thereof; the capacity of the Öksüt Mine’s ADR plant to process inventories of loaded gold in carbon ; preparation and timing of further submissions relating to the EIA amendment for the Öksüt Mine and further discussions and regulatory review thereof; progress on ordinary course permitting, including the formal issuance of such permits at the Öksüt Mine and the ability to mine the Keltepe and Guneytepe pits; expectations for continued mining, crushing and stacking operations at the Öksüt Mine in 2023; highlights of a new life of mine plan for the Mount Milligan Mine, including reserves and resources, costs, inflationary pressures and expectations regarding the release of further guidance; expectations for optimization of Mount Milligan Mine’s staged flotation reactors; strategic options for the Molybdenum BU, including a potential restart of the Thompson Creek Mine, net cash required to maintain the business and expectations for molybdenum prices; expectations for ongoing activities at the Goldfield project, including drilling, resource estimation and a feasibility study; expectations for market purchases under a normal course issuer bid; possible impact to operations relating to COVID-19; leadership transition of the Chief Executive Officer position; and expectations regarding contingent payments to be received from the sale of Greenstone Partnership.
Forward-looking information is necessarily based upon a number of estimates and assumptions that, while considered reasonable by Centerra, are inherently subject to significant technical, 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. Factors and assumptions that could cause actual results or events to differ materially from current expectations include, among other things: (A) strategic, legal, planning and other risks, including: political risks associated with the Company’s operations in Türkiye, the USA and Canada, including potential uncertainty created by upcoming presidential elections in Türkiye and their potential to disrupt or delay Turkish bureaucratic processes and decision making; resource nationalism including the management of external stakeholder expectations; the impact of changes in, or to the more aggressive enforcement of, laws, regulations and government practices, including unjustified civil or criminal action against the Company, its affiliates, or its current or former employees; risks that community activism may result in increased contributory demands or business interruptions; the risks related to outstanding litigation affecting the Company; risks of actions taken by the Kyrgyz Republic, or any of its instrumentalities, in connection with the Company’s prior ownership of the Kumtor Mine or the Global Arrangement Agreement; including unjustified civil or criminal action against the Company, its affiliates, or its current or former employees; the impact of constitutional changes or political events or elections in Türkiye; risks that Turkish regulators pursue aggressive enforcement of the Öksüt Mine’s current EIA and permits or that the Company experiences delay or disruption in its applications for new or amended EIA or other permits, including the formal issuance thereof; the impact of any sanctions imposed by Canada, the United States or other jurisdictions against various Russian and Turkish individuals and entities; potential defects of title in the Company’s properties that are not known as of the date hereof; the inability of the Company and its subsidiaries to enforce their legal rights in certain circumstances; risks related to anti-corruption legislation; Centerra not being able to replace mineral reserves; Indigenous claims and consultative issues relating to the Company’s properties which are in proximity to Indigenous communities; and potential risks related to kidnapping or acts of terrorism; (B) risks relating to financial matters, including: sensitivity of the Company’s business to the volatility of gold, copper and other mineral prices; the use of provisionally-priced sales contracts for production at the Mount Milligan Mine; reliance on a few key customers for the gold- copper concentrate at the Mount Milligan Mine; use of commodity derivatives; the imprecision of the Company’s mineral reserves and resources estimates and the assumptions they rely on; the accuracy of the Company’s production and cost estimates; the impact of restrictive covenants in the Company’s credit facilities which may, among other things, restrict the Company from pursuing certain business activities or making distributions from its subsidiaries; changes to tax regimes; the Company’s ability to obtain future financing; the impact of global financial conditions; the impact of currency fluctuations; the effect of market conditions on the Company’s short-term investments; the Company’s ability to make payments, including any payments of principal and interest on the Company’s debt facilities, which depends on the cash flow of its subsidiaries; and (C) risks related to operational matters and geotechnical issues and the Company’s continued ability to successfully manage such matters, including the stability of the pit walls at the Company’s operations; the integrity of tailings storage facilities and the management thereof, including as to stability, compliance with laws, regulations, licenses and permits, controlling seepages and storage of water where applicable; the risk of having sufficient water to continue operations at the Mount Milligan Mine and achieve expected mill throughput; changes to, or delays in the Company’s supply chain and transportation routes, including cessation or disruption in rail and shipping networks whether caused by decisions of third-party providers or force majeure events (including, but not limited to, flooding, wildfires, earthquakes, COVID-19, or other global events such as wars); the success of the Company’s future exploration and development activities, including the financial and political risks inherent in carrying out exploration activities; inherent risks associated with the use of sodium cyanide in the mining operations; the adequacy of the Company’s insurance to mitigate operational and corporate risks; mechanical breakdowns; the occurrence of any labour unrest or disturbance and the ability of the Company to successfully renegotiate collective agreements when required; the risk that Centerra’s workforce and operations may be exposed to widespread epidemic including, but not limited to, the COVID-19 pandemic; seismic activity including earthquakes; wildfires; long lead-times required for equipment and supplies given the remote location of some of the Company’s operating properties and disruptions caused by global events; reliance on a limited number of suppliers for certain consumables, equipment and components; the ability of the Company to address physical and transition risks from climate change and sufficiently manage stakeholder expectations on climate-related issues; the Company’s ability to accurately predict decommissioning and reclamation costs and the assumptions they rely upon; the Company’s ability to attract and retain qualified personnel; competition for mineral acquisition opportunities; risks associated with the conduct of joint ventures/partnerships; and, the Company’s ability to manage its projects effectively and to mitigate the potential lack of availability of contractors, budget and timing overruns and project resources. For additional risk factors, please see section titled “Risks Factors” in the Company’s most recently filed Annual Information Form (“AIF”) available on SEDAR at www.sedar.com and EDGAR at www.sec.gov/edgar.
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 herein or incorporated by reference. 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 February 23, 2023. 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.
*TABLE OF CONTENTS*
*Overview* *1*
*Overview of Consolidated Financial and Operational Highlights* *2*
*Overview of Consolidated Results* *3*
*Outlook* *6*
*Recent Events and Developments* *11*
*Risks That Can Affect Centerra's Business* *14*
*Market Conditions* *17*
*Liquidity and Capital Resources* *19*
*Financial Performance* *20*
*Financial Instruments* *24*
*Balance Sheet Review* *25*
*Contractual Obligations* *26*
*2023 Liquidity and Capital Resources Analysis* *27*
*Operating Mines and Facilities* *27*
*Discontinued Operations* *39*
*Annual Results – Previous Three Years* *40*
*Quarterly Results – Previous Eight Quarters* *40*
*Related Party Transactions* *41*
*Accounting Estimates, Policies and Changes* *41*
*Disclosure Controls and Procedures and Internal Control Over Financial Reporting* *42*
*Non-GAAP and Other Financial Measures* *42*
*Mineral Reserves and Mineral Resources* *49*
*Qualified Person & QA/QC – Production, Mineral Reserves and Mineral Resources* *51*
* *
*Overview*
*Centerra’s Business*
Centerra is a Canada-based mining company focused on operating, developing, exploring and acquiring gold and copper properties in North America, Türkiye, and other markets worldwide. Centerra’s principal continuing operations are the Mount Milligan gold-copper mine located in British Columbia, Canada (the “Mount Milligan Mine”), and the Öksüt gold mine located in Türkiye (the “Öksüt Mine”). The Company also owns the Goldfield District Project (the “Goldfield Project”) in Nevada, United States, the Kemess Underground Project (the “Kemess Project”) in British Columbia, Canada as well as exploration properties in Canada, the United States of America and Türkiye and has options to acquire exploration joint venture properties in Canada, Türkiye, and the United States. The Company owns and operates a Molybdenum Business Unit (the “Molybdenum BU”), which includes the Langeloth metallurgical processing facility, operating in Pennsylvania, USA (the “Langeloth Facility”), and two primary molybdenum mines on care and maintenance: the Thompson Creek Mine in Idaho, USA, and the Endako Mine (75% ownership) in British Columbia, Canada.
Prior to May 15, 2021, the Company also consolidated the results of the Kumtor mine, located in the Kyrgyz Republic, (the “Kumtor Mine”), through its wholly-owned subsidiary, Kumtor Gold Company CJSC (“KGC”). The seizure of the Kumtor Mine and the actions of the Kyrgyz Republic and Kyrgyzaltyn JSC (“Kyrgyzaltyn”) resulted in the following: (i) the carrying value of the net assets of the mine were derecognized from the Company’s balance sheet, (ii) no value was ascribed to the Company’s interest in KGC, (iii) the Company recognized a loss on the change of control in the second quarter of 2021, and (iv) results of the Kumtor Mine’s operations are now presented as a discontinued operation in the Company’s financial statements. The Company entered into a global arrangement agreement (“Arrangement Agreement”) dated April 4, 2022 with, among others, Kyrgyzaltyn and the Kyrgyz Republic to effect a separation of the parties, including through the disposition of Centerra’s ownership of the Kumtor Mine and its investment in the Kyrgyz Republic, the purchase for cancellation by Centerra of Kyrgyzaltyn’s Centerra common shares, the termination of Kyrgyzaltyn’s involvement in the Company, and the resolution of disputes (the “Transaction”). The Transaction closed on July 29, 2022.
As of December 31, 2022, Centerra’s significant subsidiaries were as follows:
*Entity* *Property - Location* *Current Status* *Ownership*
Thompson Creek Metals Company Inc. Mount Milligan Mine - Canada Operation 100% Endako Mine - Canada Care and maintenance 75%
Öksüt Madencilik A.S. Öksüt Mine - Türkiye Operation 100%
Langeloth Metallurgical Company LLC Langeloth - USA Operation 100%
Gemfield Resources LLC Goldfield Project - USA Advanced exploration 100%
AuRico Metals Inc. Kemess Project - Canada Care and maintenance 100%
Thompson Creek Mining Co. Thompson Creek Mine - USA Care and maintenance 100%
The Company’s common shares are listed on the Toronto Stock Exchange and the New York Stock Exchange and trade under the symbols “CG” and “CGAU”, respectively.
As of February 23, 2023, there are 218,494,646 common shares issued and outstanding, options to acquire 3,686,129 common shares outstanding under the Company’s stock option plan, and 983,933 restricted share units outstanding under the Company’s restricted share unit plan (exercisable on a 1:1 basis for common shares).
*Overview of Consolidated Financial and Operating Highlights*
*($millions, except *as* *noted)
** *Three months* *ended December 31,
* *Years ended December 31, *
*Financial Highlights (continuing operations basis, except as noted)*
*2022*
2021 %
Change
*2022*
2021 %
Change
Revenue *208.3* 251.1 (17 )% *850.2* 900.1 (6 )%
Production costs *158.1* 132.0 20 % *574.6* 487.7 18 %
Depreciation, depletion, and amortization ("DDA") *17.2* 31.0 (45 )% *97.1* 120.5 (19 )%
Earnings from mine operations *33.0* 88.1 (63 )% *178.5* 292.0 (39 )%
Net (loss) earnings from continuing operations *(130.1* *)* 274.9 (147 )% *(77.2* *)* 446.9 (117 )%
Adjusted net (loss) earnings from continuing operations^(^1) *(13.7* *)* 35.4 (139 )% *(9.4* *)* 149.2 (106 )%
Net loss from discontinued operations^(^2) *—* — — % *—* (828.7 ) (100 )%
Net (loss) earnings^(^2) *(130.1* *)* 274.9 (147 )% *(77.2* *)* (381.8 ) 80 %
Adjusted net (loss) earnings^(^1)(2) *(13.7* *)* 35.4 (139 )% *(9.4* *)* 233.6 (104 )%
Cash (used in) provided by operating activities from continuing operations *(9.8* *)* 61.8 (116 )% *(2.0* *)* 270.9 (101 )%
Free cash flow (deficit) from continuing operations^(^1) *(25.3* *)* 38.7 (165 )% *(82.9* *)* 178.4 (146 )%
Adjusted free cash flow (deficit) from continuing operations^(^1) *(25.3* *)* 44.0 (158 )% *(62.0* *)* 192.6 (132 )%
Cash provided by operating activities from discontinued operations *—* — — % *—* 143.9 (100 )%
Net cash flow from discontinued operations^(^2)(3) *—* — — % *—* 47.8 (100 )%
Additions to property, plant and equipment (“PP&E”) *27.9* 46.9 (41 )% *275.1* 118.9 131 %
Capital expenditures - total^(^1) *15.4* 28.1 (45 )% *73.2* 93.3 (22 )%
Sustaining capital expenditures^(^1) *15.3* 25.7 (40 )% *71.1* 88.0 (19 )%
Non-sustaining capital expenditures^(^1) *0.1* 2.4 (96 )% *2.1* 5.3 (60 )%
Net (loss) earnings from continuing operations per common share - basic^(^4) *(0.59* *)* 0.93 (163 )% *(0.29* *)* 1.51 (119 )%
Net (loss) earnings per common share - $/share basic^(^2)(4) *(0.59* *)* 0.93 (163 )% *(0.29* *)* (1.29 ) (77 )%
Adjusted net (loss) earnings from continuing operations per common share - basic^(^1)(4) *(0.06* *)* 0.12 (150 )% *(0.04* *)* 0.50 (108 )%
Adjusted net (loss) earnings per common share - $/share basic^(^1)(2)(4) *(0.06* *)* 0.12 (150 )% *(0.04* *)* 0.79 (105 )%
*Operating highlights (continuing operations basis)*
Gold produced (oz) *53,222* 91,197 (42 )% *243,867* 308,141 (21 )%
Gold sold (oz) *49,443* 90,312 (45 )% *242,193* 314,757 (23 )%
Average market gold price ($/oz) *1,728* 1,795 (4 )% *1,800* 1,799 — %
Average realized gold price ($/oz )^(5) *1,352* 1,504 (10 )% *1,446* 1,485 (3 )%
Copper produced (000s lbs) *16,909* 16,993 — % *73,864* 73,275 1 %
Copper sold (000s lbs) *15,374* 17,184 (11 )% *73,392* 78,017 (6 )%
Average market copper price ($/lb) *3.63* 4.40 (18 )% *3.99* 4.23 (6 )%
Average realized copper price ($/lb)^(^5) *3.43* 3.59 (4 )% *2.95* 2.92 1 %
Molybdenum sold (000s lbs) *4,040* 2,361 71 % *13,448* 11,461 17 %
Average market molybdenum price ($/lb) *21.49* 18.89 14 % *18.73* 15.98 17 %
*Unit costs (continuing operations basis)*
Gold production costs ($/oz) *790* 550 44 % *681* 604 13 %
All-in sustaining costs on a by-product basis ($/oz)^(^1) *987* 591 67 % *860* 649 33 %
All-in costs on a by-product basis ($/oz)^(^1) *1,572* 732 115 % *1,201* 785 53 %
Gold - All-in sustaining costs on a co-product basis ($/oz)^(^1) *1,308* 829 58 % *1,112* 891 25 %
Copper production costs ($/lb) *2.00* 1.79 12 % *1.70* 1.51 13 %
Copper - All-in sustaining costs on a co-product basis – ($/lb)^(^1) *2.40* 2.34 3 % *2.12* 1.94 9 %
^(1) Non-GAAP financial measure. All per unit costs metrics are expressed on a metal sold basis. See discussion under “Non-GAAP and Other Financial Measures”.
^(2) Inclusive of the results from the Kumtor Mine prior to the loss of control on May 15, 2021.
^(3) Calculated as the sum of cash flow provided by operating activities from discontinued operations, cash flow used in investing activities from discontinued operations and cash flow used in financing activities from discontinued operations.
^(4) As at December 31, 2022, the Company had 218,428,681 common shares issued and outstanding.
^(5) This supplementary financial measure within the meaning of National Instrument 52-112 - Non-GAAP and Other Financial Measures Disclosure (“NI 51-112”) is calculated as a ratio of revenue from the consolidated financial statements and units of metal sold and includes the impact from the Mount Milligan Streaming Arrangement, copper hedges and mark-to-market adjustments on metal sold not yet finally settled.
*Overview of Consolidated Results*
Although during 2021, the Company remained the legal owner of KGC, due to the seizure of the Kumtor Mine and the related actions by the Kyrgyz Republic and Kyrgyzaltyn, the Company derecognized the assets and liabilities of the Kumtor Mine in the statements of financial position and presented its financial and operating results prior to the loss of control as discontinued operations for the year ended December 31, 2021. As a result, the Company’s consolidated results from continuing operations discussed in this MD&A exclude the Kumtor Mine’s operations, unless otherwise noted.
*Fourth Quarter 2022 compared to Fourth Quarter 2021*
Net loss of $130.1 million was recognized in the fourth quarter 2022, compared to net earnings of $274.9 million in the fourth quarter 2021. Decrease in net earnings was primarily due to:
· lower earnings from mine operations of $33.0 million in the fourth quarter of 2022 compared to earnings from mine operations of $88.1 million in the fourth quarter of 2021 primarily due to no ounces of gold sold at the Öksüt Mine, lower gold ounces and copper pounds sold and lower average realized copper prices at the Mount Milligan Mine and higher production costs at the Molybdenum BU. Higher production costs at the Molybdenum BU were primarily due to higher average molybdenum prices paid for third-party molybdenum concentrate, an increase in pounds of molybdenum roasted, and the effect of higher production costs from the mix of products produced and sold in the period. A decrease in earnings from mine operations was partially offset by lower production costs and DDA at the Öksüt Mine due to the suspension of gold room operations at the ADR plant and lower DDA at the Mount Milligan Mine primarily attributable to the increase in proven and probable reserves;
· a non-cash impairment loss of $138.2 million (net of tax) recognized in the fourth quarter of 2022 related to the Kemess Project compared to an impairment reversal $117.3 million (net of tax) recognized in the fourth quarter of 2021 related to the Mount Milligan Mine;
· higher exploration and development costs primarily relating to various drilling activities and technical studies undertaken at the Goldfield Project and at the Mount Milligan Mine; and
· lower income tax recovery primarily resulting from the draw-down of the deferred tax assets recognized in the fourth quarter of 2021 at the Mount Milligan Mine, partially offset by the impact of the suspension of operations and an inflationary adjustment recorded to the tax basis of property, plant and equipment at the Öksüt Mine.
The decrease in net earnings was partially offset by a reclamation recovery of $3.4 million in the fourth quarter of 2022 compared to reclamation expense of $24.3 million in the fourth quarter of 2021, resulting from an increase in the risk-free interest rates applied to discount the estimated future reclamation cash flows, partially offset by an increase in underlying future reclamation cash flows impacted by various factors, including higher short-term inflation and an increase in the scope of reclamation activities at the Endako Mine and Thompson Creek Mine. In addition, there was a decrease in other non-operating expenses due to a decrease in legal costs and related expenses incurred in connection with the seizure of the Kumtor Mine, a non-cash gain on derecognition of the employee health plan benefit provision at the Langeloth Facility upon termination of the plan and higher interest income earned on the Company’s cash balance from rising interest rates.
Adjusted net loss^NG of $13.7 million was recognized in the fourth quarter of 2022, compared to adjusted net earnings^NG of $35.4 million in the fourth quarter of 2021. The decrease in adjusted net earnings^NG was primarily due to lower earnings from mine operations and higher exploration and development costs and income tax expense, partially offset by lower non-operating expenses as outlined above.
The adjusting items to net loss in the fourth quarter of 2022 were:
· $138.2 million, net of tax, related to the non-cash impairment loss of the Kemess Project;
· $14.0 million of deferred income tax recovery resulting from an inflationary adjustment recorded to the tax basis of property, plant and equipment at the Öksüt Mine;
· $4.4 million non-cash gain on derecognition of the employee health plan benefit provision at the Langeloth Facility upon termination of the plan; and
· $3.4 million reclamation provision revaluation recovery at sites on care and maintenance in the Molybdenum BU primarily attributable to an increase in the risk-free interest rates applied to discount the estimated future reclamation cash flows.
The adjusting items to net earnings in the fourth quarter of 2021 were:
· $11.3 million of legal and other costs related to the seizure of the Kumtor Mine;
· $24.2 million reclamation provision revaluation expense at sites on care and maintenance in the Molybdenum BU, resulting primarily from the change in estimated future reclamation cash flows and a decrease in the discount rate applied to these cash flows;
· $132.7 million of income tax adjustments related primarily to the recognition of a deferred tax asset related to the Mount Milligan Mine;
· $117.3 million, net of tax, related to the impairment reversal of the Mount Milligan Mine; and
· $25.0 million gain on the sale of