Q3 2022 Centerra Gold Inc Earnings Call
Okay.
Okay.
Greetings and welcome to the third quarter 2022 results conference call.
During the presentation, all participants will be in a listen only mode.
Afterwards, we will conduct a question and answer session.
At that time, if you have a question. Please press the one followed by the four on your telephone.
If at any time during the conference you need to reach an operator, Please press star zero.
As a reminder, this conference is being recorded Monday November 7th 2022.
I would now like to turn the conference over to Toby Carone, Treasurer and director of Investor Relations. Please go ahead.
Thank you operator, welcome to <unk> Gold's third quarter 2022 results Conference call. Please note that presentation slides are available on <unk> website to accompany each speaker's remarks todays call is open to all members of the investment community and media in listen only mode.
Following the formal remarks, the operator will give the instructions for asking a question and then we will open the line to questions. Please note that all figures are in U S dollars unless otherwise noted.
Joining me on the call today are Paul <unk> interim President and Chief Executive Officer, Paul Sharon.
<unk> operating officer, and Darren Millman, Chief Financial Officer I.
I would like to caution everyone that certain statements made today are forward looking statements and as such are subject to known and unknown risks, which may cause our actual results to differ from those expressed or implied.
Also certain of the measures we will discuss today are non-GAAP measures. Please refer to the description of non-GAAP measures in our news release and MD&A issued this morning.
For a more detailed discussion on the material assumptions risks and uncertainties. Please refer to our news release and MD&A, along with the unaudited financial statements and notes and all of our other filings, which can be found on SEDAR Edgar and on the company's website at <unk> Dot Com and now I'll turn the call over to Paul.
Thank you Tobey.
Good morning, and welcome to our third quarter Conference call.
Prior to commencing with a presentation I wish to make a few brief comments regarding my time to date in this interim role.
My priority over the last 60 days has been to get out to our business units to better understand the people the physical assets the challenges and opportunities.
I'm pleased to report that the company now is highly competent dedicated professionals running our operations.
Optimistic for the future of the company.
We will continue to engage our shareholders as it relates to their opinions and concerns and work to ensure that there is clarity in terms of our strategy for the company going forward.
Finally, the <unk>.
Search for a permanent CEO is underway with an executive search firm retained and now active on the file.
Moving on to the presentation.
I will then three slides briefly cover.
Our short term strategy.
On the corporate ESG highlights so turning to slide four on the deck.
It's also the list predictably is returning to normal operations through the completion of the modification of the agent.
And obtaining all regulatory approvals for the restart.
This was closely followed by continual optimization of operations at the Mount Milligan mine and extensive mine site exploration.
The recently completed Hello, and plan provides a stable platform for further enhancement led by Paul Shaun.
The Goldfields project in Nevada purchased earlier in 2022 is being advanced to the initial resource estimate incorporating ongoing drilling scheduled for mid 2023 with a feasibility study to follow.
Finally in light of improving molybdenum prices, we are updating our view on the molybdenum business unit, including the possibility of a restart of the Companys, 100% owned Thompson Creek mine.
Turning to slide five.
Okay.
In August .
This year, we suspended leaching operations, whilst continuing with mining crushing and stacking activities at our Oxford mine.
Prior to the cessation of the temporary cessation of reaching in the quarter. We had added approximately 40000 ounces to the gold and carbon inventory.
Applications for the environmental impact assessment EIA was made at the end of August 2002.
Progress in advancing the EIA remains in accordance with plan.
With the public meeting conducted and completed November one.
We expect to completed submission.
By year end.
Mercury Abatement addition to the ADR plant remains on schedule for completion by year end and anticipated final costs of approximately $5 million.
The resumption of active leaching and reactivation of a modified ADR plants.
One is planned to follow shortly thereafter.
But thereafter, the approval of the expansion.
In early October .
So terra announced details from new life of mine plan for the Mount Milligan mine, which call will highlight data in the presentation.
The pool practical report will be released today.
Early October we also announced a non course issuer bid and CIB program.
Purchased for cancellation up to $15 6 million shares at 7% for some terrorists total issued and outstanding common shares.
We plan to commence utilizing the NCI be to purchase shares before year end.
And have established an automatic purchase program for periods.
Which management is under blackout.
I am pleased to report that the Goldfield project Advancement continued in the third quarter.
The resource expansion and infill drill program is targeting over 65000 meters of diamond drilling and reverse circulation drilling.
Okay.
Previously mentioned our plan is to issue an initial resource estimate for the project in mid 2023 with the feasibility study around year end.
In addition.
To my appointment, we also appointed <unk> as the company's new Chief operating officer in the third quarter and the officially started with us in September .
At the Q2 meeting the board granted a quarterly dividend of.
Seven Canadian per share. This is the 12th straight quarterly dividend.
Turning to slide six.
There's a number of ESG updates on the slide I won't go through them all.
But I will note that we published our 2021 ESG report in the third quarter.
Additionally, in the third quarter. The company continued to demonstrate the safety remains <unk> top.
Top priority, achieving 1 million hours milestone.
Lost time injury at the Oxford mine.
I will now pass the baton over to Paul showroom.
The walk through <unk> operational highlights for the third quarter.
Over to you Paul.
Thank you Paul.
On slide eight we have the operating highlights of Mount Milligan for the quarter now.
<unk> continues to be a low cost mine as you can see with our quarterly gold production cost at $729 per ounce and all in sustaining cost on a byproduct basis at $615 per ounce.
The total gold produced for the quarter was a little over 54000 ounces and copper was 19 million pounds.
The operating plan remains on track for year end projections with the quarterly total material movement at $11 9 million tonnes and ore mined at approximately $5 3 million tonnes.
At the plant quarterly ore throughput was $5 5 million tons and that included a major shutdown in September .
Both the mine and the plant and are on track for record annual production.
The copper head grade was <unk>, 2% and the recovery was 82, 4% with the gold grade at 0.47 grams per tonne and recovery at 66, 2%.
Copper grades are lower primarily because we are starting to feed a higher proportion of the high grade gold low grade copper ore or HDL C. Youll see in the technical report, which will continue for the remainder of the year and into the future.
Installation of the staged flotation reactors were completed earlier this year. This quarter, we have demonstrated the benefits with elevated copper and gold recoveries in tandem with increased throughput and the periodic blending of low grade copper ore.
On slide nine we provide the operating results for oxy.
As the company has previously reported the ADR plant and gold room operations have been suspended since March of this year.
Mining activities have continued through the quarter, including our recovery crushing and stacking.
Approximately 1 million tons of warm stacked at a grade of 196 grams per tonne.
For over 63000 ounces contained ounces placed onto the heap Leach pad.
Waste movement was reduced during the third quarter the extent of further mining activities for the remainder of the year are currently being evaluated while the plant remains suspended.
For the period that the plant was partially operating in the quarter. The total gold stored in carbon inventory increased by approximately 40% to 45000 ounces, bringing the total bowls and carbon inventory to over 100000 ounces.
Progress in advancing the EIA remains in accordance with plan, including the public consultation meeting recently held.
The update due to the ADR plant will include the Mercury Abatement addition, and is progressing on schedule with mechanical completion expected in December and cost to be about $5 million.
As expected.
Moving on to slide 10.
Our year end production guidance remains on track.
Copper production is expected to be between 70, and 80 million pounds with gold production expected to be on the lower side within the range of $2 45 to 265000 ounces.
Gold production from Mt. Milligan is expected to be on the low end of the guidance range from 190 to 210000 ounces, primarily due to localized adjustments to the oxide transition zone on the current bench in the higher grade gold areas, which were observed in October .
Please see slide 11 for the highlights of the Mount Milligan updated life of mine plan and reserves.
In early October we released that the proven and probable reserves at Mt. Milligan were increased by 1.1 dollars 1 million contained ounces of gold.
And by 260 million pounds of contained copper.
This provides for an increase in mine life by over four years to 2033.
The current life of mine payable gold production is one 9 million ounces.
This produces a net cash flow of approximately $640 million at $500 gold and $3 25, copper with significantly higher cash flow at the current spot prices.
The total capital cost is $494 million with the majority for the continued construction of the tailings and waste storage facility.
And the replacement of mine mobile fleet as it ages.
Recent inflationary cost pressures seen over the duration of 2022 will be taken into consideration when we issued the 2023 cost guidance.
Exploration potential exists both near the existing pit limits and nearby on the mine lease we have drilled approximately 50000 meters since the resource cutoff date and plan to continue drilling for the remainder of the year and into 2023.
And now over to Darin, who will go through the quarterly financial results. Thanks, Paul and good morning all.
For those following on the slide deck I'll be speaking initially to slide 13.
<unk> recorded $175 79 million in net revenue during the quarter consisting of the Mount Milligan Mod.
Molybdenum business unit no revenue was recorded at the oxide mine.
At the moment look at bond gross gold and copper sales was $68 million and 49, respectively.
In the quarter Magniloquent sold 56245.
245 ounces of gold and $19 6 million pounds of copper.
As previously reported the idea of plant is currently suspended.
The oxide mine has no record gold sales oil production in the quarter. However, stored golden carbon inventory has continued to grow in the quarter coffee holding in excess of 100000 recoverable ounces at September 30.
The cost associated with the Oxford stored gold and copper inventories approximately $440 per ounce, which has been capitalized as current asset for the inventory.
The reported cost will only flow through the earnings statement of the processing at the idea of flat.
At the molybdenum business unit, approximately three 3 million pounds of molybdenum was solid generating 61 million in revenue.
During the quarter. The Milligan mine operations average gold price was $204 per gold ounce and $2 49 per pack.
Out of copper.
This incorporates the existing streams over the volume.
Cash used in operating activities by operations were $17 million for the quarter at 35 free cash flow deficit in the quarter.
As noted in the MD&A and Matt Milligan mine recognized $33 million in positive operating cash flow at 20, <unk> and free cash flow.
As noted by Paul another strong operational performance of the VAT Milligan mine. This was partially offset by higher product higher production costs, including diesel fuel grinding media launches and equipment rebuilds and some of these items were offset by the weakening Canadian dollar.
Given those sales occurring at the <unk> mine in the quarter with operations continuing $23 million was used from our treasury, we expect a similar level of outflow in Q4.
The net loss from continued operations was $33 9 million in the quarter with $15 now I mean, an adjusted net loss per quarter.
Do anything in the quarter were attributable to $28. Two main contributor for the Mount Milligan mine $1 3 million loss from the oxide mine, primarily exploration cost at $1 4 million loss from the lithium business unit for.
For the quarter there were three adjustments.
Firstly, the income tax expense of $20 4 million, resulting from the impact of the weakening of the Canadian dollar on the underlying tax basis at both the Mount Milligan mine.
<unk>.
Reclamation cost recovery at sites of care minus 17 of $7 7 million at Contura related cost or other cost of $5 3 million.
Now moving to slide 14.
Largely covered off on most of the points I just wanted to call out a few here. The company has exited Q3 with a cash balance of $591 million and just under 1 billion in liquidity.
The liquidity does not affect the anglogold and carbon with a current market value of approximately 165 million.
Given the Ibs production capacity upon restart we expect these to be monetized within a three to four month period.
The molybdenum business unit continues to implement its new streamline business plant at its <unk> facility, reducing inventories held at <unk> working capital to generate cash flow from operations of $7 2 million during the quarter.
With improved molybdenum prices. The company continues to evaluate strategic options for the business unit, including a potential restart of the Thompson Creek.
Finally, given our strong financial position the board declared a quarterly dividend of <unk> <unk> per share.
With that I'll pass it back to Paul Rod.
Alright, Thank you Darren.
As we wrap up here I would like to reiterate a few points. Our guidance is on track with strong cash flows at the Mount Milligan mine in the third quarter, we continued to make steady progress towards the auction reopening.
Our deal was finally closed in the quarter.
We have initiated a normal course issuer bid and lastly, we have issued a new Mount Milligan Technical report with an updated life of mine that highlighted the mine life extension and increase reserves, but with that operator, please open up for questions.
Thank you.
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Our first question comes from the line of Trevor Turnbull with Scotiabank. Please proceed with your question.
Yes, Thank you guys.
I'm wondering just with respect to the dividend that you just paid out this quarter.
We should expect that to continue while we're waiting for oxy to resume production in sales given that you've got significant cash reserves.
Yes, Trevor I'll sort of answer that.
Presently I think that would be not an unrealistic.
Assumption.
Obviously, the board review management's recommendation on them on a quarterly basis as it relates to two two to dividend payment.
And Thats the qualification I will provide an in any situation.
Sure Okay.
And then the only other question I had was you mentioned, having visited all of the operations and I know that.
Hello, Paul Sheldon has also had a chance to see everything.
In addition to your comment about being pleased with the teams that you have in place already is there any other first impressions that either of you could share about operations for our opportunities for say change going forward.
Forward.
Over to yourself.
Oh.
Yes. Thanks, Thanks, Trevor I think just in general these are great assets.
<unk> would be to the company in the first place we have an excellent balance sheet will put these.
Put the optimization test to all of these up these.
These assets and as well the malt business unit has strong potential as well we'll be looking at a lot of those details and I think <unk> is poised for excellent growth going forward I think it's one of the best stories out there once once we get some of these current issues behind us.
Yes sure.
Alright.
They are not a little bit of color as it relates to Turkey, I mean, obviously, we've had some issues in Turkey.
And some of those we certainly have to accept responsibility for and I would I would say that the quality of the operating team now in Turkey is probably superior to what the corporation started with.
Leave it without an sir is up to the attached.
To extract the maximum value from provided investment.
Okay. It sounds good that's all I had thank you.
Yes.
Thank you. Our next question comes from the line of Anita Soni with CIBC World markets. Please proceed with your question.
Morning, Paul and Paul and Paul rates, good to hear your voice again.
Right right.
It is.
I just wanted to follow up on I'm.
On the permitting for the enlarged grazing land permit and then and the extension of the Oxy overall.
Overall operating licence it says it.
<unk> expire in January I mean, if we are looking forward into next year reasonably.
During that we are in November now should we expect that.
The mining would resume in January or will it take more time for these permits.
Okay.
Look permits.
Asking how long is a piece of string I mean, we have our application for a permit.
We understand that they are progressing through the system as we would expect.
We can't project accurately when we're going to receive those too.
<unk>.
We do not have a heightened level of concern about about the outcome.
And certainly.
The the Pastureland from it would allow us to to accelerate waste removal in parts of the area.
And we would advance with those prior to the initial leaching operations, which are dependent upon the completion and approval of the new EIA.
Okay, and then I just wanted to follow up.
And the last disclosure there was some disclosure in Q2.
Boat.
I think there were a number of individuals in the Mercury room that had tested for higher levels of Mercury can we get a follow up on that I didn't see anything in the Sun.
MD&A.
Well there is nothing further to comment on that regard Anita.
In the world.
Alright, Thank you very much.
Thank you our.
Our next question comes from the line of Dalton Barreto with Canaccord. Please proceed with your question.
Thanks.
Morning, guys I wanted to ask about strategy and how youre potential near CEO fits into this I mean, when I look at the pipeline.
Match, which is a high copper component.
Just talk about the policy all of that seems can state layoffs strategy to me and I'm just wondering.
In a way where do you Paul Reitz see this company going forward and what kind of attributes and background are you looking for in a new CEO and will you be prepared to pull the trigger on any strategic mandates ahead of having someone in the chair. Thank you.
Yeah, I mean, there's a number of different questions not all of which I think probably the appropriate person to answer I mean, I am an interim CEO .
The process to identify and secure the new CEO is.
Four 4% to six month period of time my focus is really on on stabilizing the operation.
And ensuring that we have the appropriate platform thats on strategy in terms of allowing the new CEO to grow a very successful business.
Hope to see that.
Is the opportunity.
As it relates to any any type of possible transactions.
Can't say that that's a high priority at this stage.
Okay.
But nor would I completely preclude it because you've.
You never can determine when a possibility may turn up that makes a lot of sense, but I think thats highly unlikely given that as I said.
An interim CEO .
Okay. Thank you for that color, Paul and then maybe switching to the operation of that particular part of I think around <unk>.
So.
Presumably.
The EIA review is going to take a little bit of time into the new year.
The operating permit expires in January .
Even if you get it.
Racing permits ahead of time can you actually start doing anything if youre operating permits expire and does your operating permit.
And contingent on the EIA.
Ladies and gentlemen.
No the operating operating permit.
The renewal of the upgrade equivalents as a separate item.
And we would anticipate that to you.
Obtained.
In advance of what drove the existing operating permits expiring.
And with that have happened in the pasture land, we would continue with our normal mining operations.
Limited to the mining prior to the.
The granting of the EIA.
<unk> ability to restart.
Great. That's all for me thank you.
Thank you.
Our next question comes from the line of Brian Macarthur with Raymond James. Please proceed with your question.
Good morning, and thank you for taking my question I'd, just like to follow up a little bit more on the moly strategy in a couple of questions. Following up on adult would you go.
Go ahead and proceed with it a new CEO on that strategy, if you decided to reopen the.
Thompson Creek mine and I guess my second question is what needs to be done there and my third question is I think stoped at one time had a partnership and had claim on the or whatever can you just go through with a little more color about.
Why it would be doing that as opposed to you know historically, you sort of talked about selling that operation.
For those operations.
Yes look I can deal with the front part of that those questions I'm darn proud to you can deal with the last element because I'm not quite familiar with.
Jeff.
Look I mean, we're in the.
In the phase of really pulling together the information.
And generating additional information identifying what additional work needs to be done as it relates to technical studies to put ourselves in a position where we can critically assess.
The options that are available to us with the mall business.
<unk> in the context of what we've seen is strengthening moly prices.
It is not.
This is not imminent decision making process.
Certainly it would not be it would be unlikely that we will be making any significant decisions on the malt business prior to a new CEO , who would obviously take ownership of those decisions.
It.
A decision most likely made by right at my successor.
Thank you.
Behooves us at this point to have a more fulsome understanding of what are the options for the for the business.
Whether or not ultimately the.
The company decides to push push forward.
A ways off.
And just to clarify of Brightcove as the Thompson Creek mine is 100% occupied set terror, which is b provide under review.
The Endako mines.
Is the 75% <unk>, 25% <unk> and that is it.
Being progressed.
The same extent as the Thompson Creek mine.
Great. Thank you very much.
Thank you.
Our next question comes from the line of Lawson Winder with Bank of America Securities. Please proceed with your question.
Hello, Good morning, and thank you for the update.
I first wanted to ask about the sustaining capex guidance, which was.
Reiterated for 2022.
Implication being a pretty substantial step up in the fourth quarter would be helpful. If you could just walk through some of the items that are driving that spend thank you.
Alright.
Yeah, sorry, it's Darren here I think.
If you look at the guidance you actually know.
We do know it's going to be at the lower end. So there is nothing significant individually on that but we do expect to be more on the lower end. If you look at our disclosure and the outlook comparative between year to died.
And going for you.
No specific guidance, but there is nothing.
Real substance in there.
Okay, even the low end is higher but I guess, what youre, saying its just a mix of things.
Sorry, one one.
Yes.
Okay, what does that mean there is nothing.
No individual it also flagged as know we did the big shutdown in Q3 four for Mount Milligan. So we're not expecting any large shutdowns during that quarter. So.
Yes.
Really just business as usual, but sort of cohort catch up from the 2022 guidance.
Okay.
I also wanted to ask about the Mount Milligan costs. So we're expecting an update on $23 2025.
Operating costs when you released your guidance in January .
Could you give us an idea.
Where cost per ton was in Q.
Q3.
Perfect.
Both on the mining side and on the milling side, and then sort of where youre seeing inflationary pressures and where there might be offsets for example, like with the Canadian dollar.
Thanks.
Okay I'll take that.
Yes, so I'll just go through the numbers. So the mining was 202 per tonne tonne mine plant $5 52, a ton and admin was $2 37 a ton.
And then in terms of comparing that to the low end.
<unk> was done earlier in the year and as with everybody in the industry. We have seen some some cost increases on fuel.
Consumables supplier parts tires in the range of five I'd say about 5% to 20%. So so we will take that into consideration when we issue our three year cost guidance early in the new year.
Okay. That's very helpful. Thank you.
Thank you.
And there are no further questions at this time I will now turn the call back to you. Please continue with your presentation or closing remarks.
With that I'd like to thank everyone for joining us on the call today.
No further comments, thank you very much.
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