Centerra Gold (US:CGAU)2022-11-06 16:00Financial Performance - Revenue for the three months ended September 30, 2022, was $179.0 million, a decrease of 19% compared to $220.5 million in the same period of 2021 [34]. - Net loss from continuing operations was $33.9 million in Q3 2022, compared to net earnings of $27.6 million in Q3 2021, representing a 223% decline [37]. - Adjusted net loss for Q3 2022 was $15.9 million, down 145% from adjusted net earnings of $35.7 million in Q3 2021 [39]. - Cash used in operating activities was $17.0 million in Q3 2022, a significant decrease from cash provided of $62.4 million in Q3 2021 [42]. - Free cash flow deficit for Q3 2022 was $35.5 million, compared to free cash flow of $41.0 million in Q3 2021, marking a 187% decline [43]. - Gold produced in Q3 2022 was 54,134 ounces, a 30% decrease from 76,913 ounces in Q3 2021 [34]. - Average realized gold price in Q3 2022 was $1,204 per ounce, down 22% from $1,542 per ounce in Q3 2021 [34]. - Copper produced in Q3 2022 was 19,045 thousand pounds, a 7% increase from 17,861 thousand pounds in Q3 2021 [34]. - Molybdenum sold in Q3 2022 was 3,291 thousand pounds, a 26% increase from 2,615 thousand pounds in Q3 2021 [34]. - Net earnings for the nine months ended September 30, 2022, were $52.9 million, a significant improvement from a net loss of $656.6 million in the same period of 2021 [43]. - Net earnings from continuing operations decreased to $52.9 million in 2022 from $172.1 million in 2021, primarily due to lower earnings from mine operations [44]. - Adjusted net earnings from continuing operations fell to $4.3 million in 2022 compared to $113.9 million in 2021, driven by lower mine earnings and increased corporate costs [47]. - Cash provided by operating activities from continuing operations dropped to $7.8 million in 2022 from $209.1 million in 2021, attributed to decreased gold ounces sold and unfavorable working capital changes [49]. - Free cash flow deficit from continuing operations was $57.6 million in 2022, a significant decline from a free cash flow of $139.7 million in 2021 [50]. Production and Operations - The Company operates the Mount Milligan Mine in Canada and the Öksüt Mine in Türkiye, with both mines currently in operation [28]. - Centerra anticipates continued mining operations at the Öksüt Mine in the fourth quarter of 2022, with expectations for cash outflows related to the mine [23]. - The Company is preparing for the restart of gold room operations at the Öksüt Mine, pending regulatory approvals and construction progress [23]. - Centerra's future outlook includes expectations for production, costs, and capital expenditures, with a focus on managing inflationary pressures [24]. - The Mount Milligan Mine's gold production guidance for 2022 is 190,000 to 210,000 ounces, while the Öksüt Mine is expected to contribute no further gold production in 2022 due to operational suspensions [51][57]. - Total gold production for 2022 is projected to be between 245,000 and 265,000 ounces, reflecting only 54,691 ounces produced at the Öksüt Mine in Q1 2022 [57]. - The company expects total cash outflows related to the Öksüt Mine in Q4 2022 to be similar to those incurred in Q3 2022 [51]. - The Öksüt Mine is expected to process up to approximately 35,000 ounces of gold per month once operations resume, with 100,000 recoverable ounces of gold-in-carbon stored as of September 30, 2022 [86]. - Gold production for 2022 was 54,691 ounces, down 32% from 80,035 ounces in 2021, primarily due to the suspension of gold room operations [205]. Costs and Expenditures - Consolidated gold production costs for the nine months ended September 30, 2022, were $653 per ounce sold, with full year costs expected to range from $675 to $725 per ounce sold [60]. - Gold production costs at the Mount Milligan Mine were $759 per ounce sold for the nine months ended September 30, 2022, with full year guidance unchanged at $775 to $825 per ounce sold [61]. - The Öksüt Mine's gold production costs are expected to remain at $386 per ounce sold for the full year, consistent with the nine months ended September 30, 2022 [64]. - Consolidated all-in costs on a by-product basis are expected to be in the range of $1,225 to $1,275 per ounce sold for the full year of 2022, compared to $1,105 per ounce sold in the nine months ended September 30, 2022 [66]. - Sustaining capital expenditures in 2022 are expected to be in the range of $90 to $100 million, with the Mount Milligan Mine's sustaining capital expenditures estimated at $65 to $70 million [69]. - The company incurred $12.8 million in care and maintenance expenses related to the Molybdenum Business Unit in the nine months ended September 30, 2022, with full year care and maintenance expenses estimated between $20 and $25 million [70]. - Consolidated DDA expense for 2022 is expected to be in the range of $110 to $130 million, compared to $79.9 million in the nine months ended September 30, 2022 [71]. - The company anticipates a 10% increase in production costs across all categories compared to 2021, driven by rising labor, energy, and consumable costs [99]. Strategic Initiatives and Acquisitions - The company is engaged in advanced exploration at the Goldfield Project in the USA and the Kemess Project in Canada, highlighting its growth strategy in exploration [32]. - Centerra completed the acquisition of the Goldfield Project for $176.7 million in cash, enhancing its exposure to North America and providing a foothold for further opportunities [92]. - The company is constructing a mercury retort system at the Öksüt Mine to safely manage mercury levels, with total capital costs expected to be $5 million [83]. - The company has submitted an updated environmental impact assessment for the Öksüt Mine, with the full submission expected before the end of 2022 [86]. - Centerra has initiated a normal course issuer bid to purchase up to 15,610,813 common shares, representing 10% of the public float, from October 13, 2022, to October 12, 2023 [94]. Leadership and Governance - Centerra's leadership transition includes the appointment of Paul Chawrun as COO and Paul Wright as interim CEO following the resignation of Scott Perry [100][101]. Market and Economic Factors - Centerra's financial performance is subject to risks including volatility in gold and copper prices, which could impact revenue and operational costs [25]. - Centerra's revenues, earnings, and cash flows for Q4 2022 are sensitive to changes in key inputs, with gold price fluctuations impacting revenues by $4.5 - $5.2 million per $50/oz change [79]. - The average realized gold price for the Mount Milligan Mine is projected to be $1,220 per ounce in Q4 2022, with copper at $2.65 per pound [54]. - Centerra's copper hedging program covers approximately 56% of its exposure for Q4 2022, with an expected average blended copper price of $3.40 per pound [79]. Taxation and Financial Position - Income tax related to the Öksüt Mine for the nine months ended September 30, 2022, was $21.7 million, estimated to be between $20 to $30 million for the full year [72]. - Income tax expense increased to $57.9 million in 2022 from $17.6 million in 2021, primarily due to full taxation of Öksüt Mine's income and foreign exchange impacts [143]. - The company's total liquidity position as of September 30, 2022, was $972.8 million, consisting of a cash balance of $580.8 million and $392 million available under a corporate credit facility [109]. Asset and Liability Management - Total assets decreased by 8% to $2,449.8 million as of September 30, 2022, from $2,676.6 million at the end of 2021 [149]. - Cash decreased to $580.8 million as of September 30, 2022, from $947.2 million at December 31, 2021, due to various cash outflows including the acquisition of the Goldfield Project [150]. - The carrying value of property, plant, and equipment increased to $1.42 billion as of September 30, 2022, from $1.27 billion at December 31, 2021, mainly due to the acquisition of the Goldfield Project [151]. - Accounts payable and accrued liabilities decreased to $135.6 million as of September 30, 2022, from $186.8 million at December 31, 2021, due to lower amounts owed under the Mount Milligan Streaming Arrangement [153]. - Share capital decreased to $893.8 million as of September 30, 2022, from $984.1 million at December 31, 2021, primarily due to the repurchase of shares from Kyrgyzaltyn [159]. - The long-term provision for reclamation decreased to $220.9 million as of September 30, 2022, from $331.3 million at December 31, 2021, due to increased risk-free interest rates [158].