This news release contains forward-looking information that is subject to the risk factors and assumptions set out on page 5 and in our Cautionary Note Regarding Forward-looking Information on page 6. All figures are in United States dollars.
Toronto, Canada, January 17, 2012: Centerra Gold Inc. (TSX: CG) announced today that its 2011 consolidated gold production totalled 642,380 ounces, which includes 583,156 ounces of gold from the Kumtor mine and 59,224 ounces of gold from the Boroo mine.
During the fourth quarter of 2011, consolidated gold
production was 151,562 ounces, including
138,696 ounces of gold produced by the Kumtor mine, located
in the Kyrgyz Republic and 12,866 ounces of gold produced by
the Boroo mine, located in Mongolia.
Centerra's 2012 gold production and unit costs are forecast
as follows:
2012 Production Forecast (ounces of gold) | 2012 Total Cash Cost(1) ($ per ounce produced) | |
Kumtor | 575,000 - 625,000 | 430 - 465 |
Boroo | approx. 60,000 | 810 |
Consolidated | 635,000 - 685,000 | 465 - 500 |
(1) Total cash cost is a non-GAAP measure and includes mine operating costs such as mining, processing, regional office administration, royalties and production taxes (except at Kumtor where revenue-based taxes are excluded), but exclude amortization, reclamation costs, financing costs, capital development, community investments and exploration.
Steve Lang, President and CEO of Centerra stated, "As expected we achieved our 2011 gold production forecast as both operations had strong fourth quarter operating performance allowing us to build our balance sheet, which we will use to grow the Company. Significant capital investment is planned at Kumtor for 2012 in order to renew our mining fleet to enable us to maintain production levels and manage the pit walls in the Central Pit. Our 2012 gold production guidance does not include any production from the heap leach facility at Boroo or the adjacent Gatsuurt project. The continued delays in receiving the final permits and approvals including the regulatory commissioning of the Gatsuurt project, pending the discussion of the Water and Forest Law amendment in the Mongolia Parliament, makes it difficult to predict the timing of the start of
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production. We continue to expand our exploration and
business development efforts as we look for additional
operating platforms in an effort to increase our future gold
production and help us achieve our goal of producing 1.5
million ounces of gold annually."
"I am also very pleased to announce that Mr. Patrick James
has resumed his role as Chair of the Board of Directors of
Centerra. In early December 2011, Pat took a short leave of
absence for family medical reasons, but has now since
rejoined the board," he concluded.
Centerra's 2012 consolidated gold production is forecast to
be in the 635,000 to 685,000 ounce range. The Kumtor mine is
expected to produce between 575,000 to 625,000 ounces in
2012. Kumtor's 2012 planned mining sequence results in a
production profile with the majority of the gold production
occurring in the fourth quarter. The high-grade material from
the SB Zone is only available for mining at the end of the
third quarter when it is exposed by Cut Back 14A. On a
quarterly basis, Kumtor's 2012 gold production is forecast to
have 12% of gold production being recovered in the first
quarter, 20% in the second quarter, 25% in the third quarter
and 43% in the fourth quarter. Gold production in the first
quarter of 2012 will also be impacted by four days of
scheduled mill maintenance of the Ball and SAG mills.
Kumtor's collective bargaining agreement expires at the end
of 2012. A work stoppage at any time during the year could
have a significant impact on Kumtor achieving its forecasted
production. Additionally, achieving the 2012 production is
dependent on the delivery of new mining equipment on schedule
and successfully maintaining the mining rates of the waste
and ice in the southeast portion of the pit to gain access to
the higher grade ore.
At the Boroo mine, gold production is forecast to be
approximately 60,000 ounces and assumes mining of Pit 6 at
Boroo starting in January 2012. The 2012 forecast also
assumes no production from the heap leach facility or the
Gatsuurt project due to uncertainties with permitting. The
Boroo mill is expected to process mostly higher grade heap
leach ore stockpiles for the first eight months of
2012, followed by processing the higher grade ore from Pit 6
from September 2012 to January 2013. During September to
December 2012, the Boroo mill is expected to process a
mixture of higher grade Pit 6 ore with an average grade of
approximately 2.1 g/t and stockpiled heap leach material with
grades between 0.67 - 0.76 g/t.
Receipt of the final heap leach operating permit would add
approximately 2,000 ounces of gold a month. At Gatsuurt, the
project is ready to begin mining the oxide ore on receipt of
the final approvals and regulatory commissioning.
Exploration expenditures of $45 million are planned for 2012, a 13% increase from $40 million planned expenditures in 2011. The 2012 program will continue the aggressive exploration work at the Kumtor mine together with an increase in the exploration in the Kumtor district, planned expenditures are expected to be about $15 million. In Mongolia, $8 million is allocated for exploration programs and work will continue along the Onon trend in eastern Mongolia and to follow up on the positive results on the Altan Tsagaan Ovoo ("ATO") project.
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In 2012, drilling programs will continue on the Kara Beldyr and Dvoinoy projects in Russia and expenditures for the two projects are expected to be approximately $6 million. Drilling programs will also continue in Turkey on the Company's joint venture projects with expenditures expected to be approximately $6 million. Drilling of the Laogouxi project in China is expected to commence as soon as the joint venture is approved by the applicable Chinese regulatory authorities. In addition, generative programs will continue in Central Asia, Russia, China, and Turkey to increase the pipeline of projects that the Company is developing to meet the longer term growth targets of Centerra.
2012 Capital Expenditures
The capital expenditures for 2012 are estimated to be $389
million, including $49 million of sustaining capital and $340
million of growth capital.
Capital expenditures include:
Projects | 2012 Growth Capital (millions of dollars) | 2012 Sustaining Capital (millions of dollars) |
Kumtor mine | $328 | $45 |
Mongolia | $12 | $3 |
Corporate | - | $1 |
Consolidated Total | $340 | $49 |
Kumtor
At Kumtor, 2012 total capital expenditures are forecast to be
$373 million including $45 million of sustaining capital. The
largest sustaining capital spending will be the major
overhaul maintenance of the heavy duty mine equipment ($21
million), expenditures for dewatering and infrastructure ($8
million), effluent treatment plant relocation ($5 million),
tailings dam construction works ($4 million) and for
equipment replacement and other items ($7 million).
Growth capital investment at Kumtor for 2012 is forecast at
$328 million, which includes pre-strip costs related to the
development of the open pit ($128 million), purchase of new
mining equipment including 25 CAT 789 haul trucks, 4 drills
and 4 Hitachi 3600 shovels ($126 million), and other items
($11 million). Growth capital for 2012 has increased compared
to the most recent Kumtor technical report as purchases of
mine expansion equipment planned for 2013 ($61 million) have
been brought forward to 2012. This was done to ensure that
all of the new CAT 789 haul trucks were of the same model "C"
series, given that CAT is discontinuing the C series in late
2012. Additionally, the added capacity will help to ensure
the required mine production rate is maintained. Also, $63
million is included in 2012 growth capital investment for the
underground project to continue to develop the SB and
Stockwork Zones, as well as for delineation drilling and
capital purchases in 2012.
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Mongolia (Boroo & Gatsuurt)
At Boroo, 2012 sustaining capital expenditures are expected
to be about $3 million primarily for component change-outs
and mill maintenance. Growth capital is forecast at $12
million, which includes capitalized pre-stripping costs of
Pit 6 at Boroo ($11 million).
No 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
oxide project. The engineering and construction of the
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 and administration expenses for 2012 are forecast
at $41 million.
Total community investments for 2012 are forecast at $26
million, in accordance with Centerra's Community Investment
policy. This investment includes $5 million for donations and
sustainable development projects in the various communities
Centerra operates in and $21 million for strategic community
investment projects. Note that these costs are not included
in cash cost per ounce.
Centerra has a history of investing in various community
sustainable development and strategic investment projects in
the countries and communities where it operates. For example
in 2010, Boroo invested $6.4 million towards the construction
of a new maternity hospital in Ulaanbaatar and in
2011 Kumtor contributed $10 million for the construction and
repair of 27 schools throughout the Kyrgyz Republic. The
Company intends to include community investment as part of
its regular guidance.
In January 2012, Centerra's wholly owned subsidiary, Boroo Gold LLC, which owns the Boroo project, resolved the previously disclosed very significant claim for compensation that it received from the Mongolian General Department of Specialized Inspection ("SSIA") in October 2009 following the June 2009 inspection at the Boroo project. The claim related to certain mineral reserves, including state alluvial reserves, covered by the Boroo project licenses, that are recorded in the Mongolian state reserves registry, but for which there are no or incomplete records or reports of mining activity. Pursuant to the resolution, Boroo Gold LLC will pay approximately $2.5 million. While this claim has been resolved, other regulatory issues remain outstanding in Mongolia, including the issuance of a final heap leach permit.
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Major Assumptions
The following material assumptions have been used to forecast
production, costs and future capital expenditures;
• a gold price of $1,700 per ounce,
• exchange rates:
o $1USD:$1.01 CAD
o $1USD:46.00 Kyrgyz Som
o $1USD:1,235 Mongolian Tugrik
o $1USD:0.74 Euro
• diesel fuel price assumption:
o $0.71/litre at Kumtor
o $1.13/litre at Boroo
The assumed diesel price of $0.71/litre at Kumtor assumes
that no Russian export duty will be paid on the fuel exports
from Russia to the Kyrgyz Republic.
Diesel fuel is sourced from separate Russian suppliers for
both sites and only loosely correlates with world oil prices.
Political and supply pressures and policies may cause the
average price of fuel from Russia to be higher. The diesel
fuel price assumptions were made when the price of oil was
approximately $99 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 annual information form 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,
• domestic inflation rates remain stable,
• 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
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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 "Risk Factors" in the Company's most recently filed annual information form, available on SEDAR at www.sedar.comand see also the discussion below under the heading "Cautionary Note Regarding Forward-looking Information".
Qualified Person
The production information and 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 technical report has 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.
The Boroo deposit is described in Centerra's most recently
filed AIF and a technical report dated December 17, 2009
prepared in accordance with NI 43-101, which is available on
SEDAR at www.sedar.com. The technical report describes the
exploration history, geology and style of gold mineralization
at the Boroo deposit. Sample preparation, analytical
techniques, laboratories used and quality assurance-quality
control protocols used during the drilling programs at the
Boroo site are the same as, or similar to, those described in
the technical report.
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, the discussion under the heading
"2012
Outlook", including the forecasted gold production and cash
costs, exploration expenditures and exploration plans,
capital expenditures, community investments and corporate
administration, Centerra's expectations regarding the impact
of the Water and Forest Law on the Company's Mongolian
operations, business and political environment and business
prospects including the timing and development of new
deposits (including the ATO deposit) and the success of
exploration activities.
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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 "Major
Assumptions". 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, including further
investigations by the SSIA and other 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, Kyrgyzaltyn JSC; 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
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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 January 17, 2012. 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 CenterraCenterra Gold Inc. 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, Ontario, Canada.
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Additional information on Centerra is available on the Company's website at www.centerragold.comand at SEDAR at www.sedar.com.
For more information:
John W. Pearson
Vice President, Investor Relations (416) 204-1241 john.pearson@centerragold.com
- end -
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