Q4 2023 Centerra Gold Inc Earnings Call

Thank you for standing by this is the conference operator, welcome to the Sentara Gold's fourth quarter 2023 conference call.

As a reminder, all participants are in listen only mode and the conference is being recorded.

After the presentation, there will be an opportunity to ask questions.

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I'd now like to turn the conference over to Lisa Thompson, Vice President Investor Relations and corporate Communications Center uncle.

Please go ahead.

Thank you operator, and good morning, everyone welcome to Houston, Terra Gold's fourth quarter 2023 results conference call joining.

Joining me on the call today are Paul Tamari, President and Chief Executive Officer called Sharon Chief Operating Officer, and Darren Millman, Chief Financial Officer of.

Ah released yesterday detailing our fourth quarter 2023 results it should be read in conjunction with our MD&A and financial statements both of which can be found on SEDAR Edgar and our website.

All figures are in U S dollars unless otherwise noted presentation slides accompanying this webcast are available on <unk> website.

So in the prepared remarks, we will open the call for questions.

Before we begin I would like to caution everyone that certain statements made today may be forward looking and are subject to risks, which may cause our actual results to differ from those expressed or implied.

Please refer to the cautionary statements included in the presentation as well as the risk factors set out in our annual information form.

Certain measures, we will discuss our non-GAAP measures. Please refer to the description of non-GAAP measures in our news release and M DNA issued yesterday.

I will now turn the call over to Paul Tomorrow.

Thanks, Lisa and good morning, everyone.

Started I'd like to express my sympathy and support to everyone impacted as a result of a recent slip of the heap Leach pad at the mine in Turkey.

We have sent a mine rescue team to assist in the recovery efforts and our thoughts and prayers are with the affected individuals.

Moving onto Sincerest performance, we delivered a strong finish to 2023.

Beating both production and cost guidance for the year.

Fourth quarter was our second consecutive quarter of significant free cash flow, we ended the year with over $600 million in cash cash equivalents.

I'd also like to highlight annual record performance at Mount Milligan, and both the mine and plant.

Our recently announced additional agreement with Royal Gold allows us to look at the Mount Milligan copper gold porphyry deposits much more broadly.

And to assess its potential to be a multi decade operation.

This is a key first step in our strategy to realize the full potential of this cornerstone asset go talk to your mining jurisdiction.

Looking ahead at Mt. Milligan, we've initiated a preliminary economic assessment to evaluate the potential mine life extension beyond 2035.

P. A is expected to be completed in the first half of 2025.

We will also continue to invest in exploration drilling to unlock the large mineral endowment at Mount Milligan setting the stage for potential future resource additions.

And finally, we're continuing to advance a site wide optimization program assessing all aspects of the operation to maximize the potential of the ore body.

Milligan up for long term success to 2035 and beyond.

In addition to our strategic approach at Mount Milligan.

We're also focused on several key areas in 'twenty 'twenty four we.

We expect to complete the feasibility study for the Thompson Creek restart in the middle of 'twenty 'twenty four as well as an initial resource estimate of the Goldfield project by the end of 'twenty 'twenty four.

In the year ahead, we expect to continue to deliver on our strategic plan to maximize the value of the assets in our portfolio.

Finally, I'd like to touch on our recent ESG achievements.

In 2020 Oaks, who joined the International Cyanide Management Institute is a signatory.

Over a span of three years site underwent a certification program to align with the Institute's principles and standards of practice.

Early January execute successfully attained certification for the Institute.

<unk> completed hearings the international Cyanide management code.

This was a collaborative effort with team members from U S. G occupational health and safety process maintenance and construction departments working together to achieve this significant milestone.

And with that I'll pass the call over to Paul to walk us through our operational performance for the quarter.

Thank you Paul.

On slide five we show operating highlights at Mount Milligan for the quarter.

The Mount Milligan mine produced over 40000 ounces of gold and almost 20 million pounds of copper in the fourth quarter, achieving 20 twenty-three production guidance ranges for both gold and copper for 2023, Mount Milligan achieved annual records for total tonnes mined and plant throughput and over 50 million tons mined at 21 seven.

Tonnes processed respectively.

Looking ahead in 'twenty 'twenty four we expect Mt. Milligan to produce 180000 to 200000 ounces of payable gold, which is 23% higher than last year, mainly due to mine sequencing and higher gold grades.

'twenty 'twenty four payable copper production is expected to be between 55 to 65 million pounds.

Both gold and copper production are expected to be evenly weighted throughout the year, but sales in the second half of 'twenty 'twenty four are expected to contribute approximately 55% of the annual sales.

In the fourth quarter gold production costs were $946 per ounce and all in sustaining cost on a byproduct basis were $946 per ounce.

Full year 2023 gold production costs at Mount Milligan were 1088 per ounce, which was in line with the guidance range.

Full year all in sustaining costs.

$1156 per ounce, beating the guidance range.

The head Mount Milligan 2024, all in sustaining costs are expected to be 1075 to $1175 per ounce.

In the fourth quarter, we embarked on a site wide optimization program at Mount Milligan focused on an integrated holistic assessment of occupational health and safety mine and plant operations.

We are encouraged by the preliminary cash flow improvement estimates from our first phase of work on this program.

And we expect to start realizing the benefits of the program later this year.

As a result, the potential cost savings are not included in the Mount Milligan is 'twenty 'twenty four cost guidance ranges.

On slide six as Paul mentioned earlier, we are assessing Mount Milligan has potential to be a multi decade operation.

We now have 250 million tonnes of reserves at Mount Milligan, extending our mine life out to 2035.

In addition, we have substantially increased our resource to 260 million tons, most of which is classified as measured or indicated.

Lastly, we have additional drilled inventory, which has not been incorporated into the resources, where we intend to continue drilling with the objective of further increases to the resources.

We intend to incorporate these additional resources into an optimized mine plan.

In support of a preliminary economic assessment.

On slide seven to provide more detail, we are targeting deposits to the west and southwest of the main pit.

Within the current mining lease.

At Goldmark and so boundary there are possibilities for near surface editions at north slope DWP acts and saddle West we continue to test for depth extension.

And finally, I commend the Mount Milligan site team for embracing the site optimization program.

The team has been fully engaged and is dedicated to enhancing the culture for continuous improvement through this important initiative.

To date, we started to see evidence of that continually improve safety performance in the fourth quarter and year to date.

On slide eight are the operating highlights Edward shoot.

Earth's suit closed out the year with a second consecutive quarter of strong performance.

Fourth quarter production was over 88000 ounces in full year production was almost 196000 ounces achieving the midpoint of the guidance range.

Production guidance for 'twenty 'twenty four Eric suite is estimated to be 190 to 210000 ounces of gold.

Which is aligned with our previously disclosed life of mine plan published last September.

As we are still going through the buildup of inventory approximately 60% of the annual production is expected to be weighted to the first half of this year.

Gold production costs and all in sustaining cost on a byproduct basis in the fourth quarter, 2023, or $474 per ounce and $671 per ounce respectively.

Full year 'twenty twenty-three gold production cost and all in sustaining costs were $457 per ounce and $675 per ounce respectively.

In line with the guidance ranges.

Looking ahead 2020 for gold production cost guidance is expected to be 650 to $750 per ounce and all in sustaining cost guidance is expected to be 900 to $1000 per ounce.

Costs in 'twenty 'twenty four at Erg suite are expected to be higher than previously disclosed and the life of mine plan due to a new multi year contract with the existing mining and hauling service provider as well as higher weighted average cost per ounce in the remaining inventory.

To wrap up I'd like to commend New York suite team outperforming their 2023 safety targets and achieving one year without a lost time injury in early December.

This milestone demonstrates our priority to the safety of our workforce and our commitment to the journey towards achieving zero harm.

I'll now pass on to Dare to walk through our financial highlights for the quarter.

Thanks, Paul.

Slide nine details our fourth quarter financial results.

In the quarter, we incurred a net loss of 28.8 million or.

Or a loss of <unk> 13 cents per share.

There were several adjusting items in the quarter, including 50 beat of reclamation provision reevaluation expense and $34 1 million of noncash impairment loss relating to the resource changed at the project and the sale of the Burke project among other things.

As a result of the one time items adjusted net earnings in the fourth quarter with $61 2 million or 28 cents per share.

In the fourth quarter sales were 130281 ounces of gold and $16 6 billion pounds of copper.

The average realized price was $1846 per ounce of gold at $3, a pound of copper, which incorporates the existing streaming arrangements at the Mount Milligan mine.

At the molybdenum business unit in the fourth quarter, approximately $2 1 billion pounds of molybdenum was sold at an average of molybdenum price of $20 35 per pound generating $47 million in revenue.

In the fourth quarter 2023 additions to property plant and equipment.

Total capital expenditure was 68 million, a 36 million respectively.

Consolidated all in sustaining cost on a byproduct basis for the quarter were $831 per ounce, which achieved a 2023 guidance target.

Slide 10 shows our financial highlights for the quarter.

The fourth quarter was our second consecutive quarter of significant free cash flow.

Cash generated by operating activities was 146 million in the quarter and free cash flow was $111 million.

For the full year 2023 cash provided by operating activities was 246 million and free cash flow was 160 million.

At the Mount Milligan mine cash provided by the mine operations and free cash flow were 29 million 14 million respectively in the fourth quarter.

For the full year cash provided by operating activities was 114 million and free.

Free cash flow was 73 million.

At Oxford in the fourth quarter. The mine generated 144 million in cash from operations at 128 million in free cash flow.

For the full year cash provided by operating activities was $275 million at free cash flow was 238 million.

At the language, but allergic facility approximately 6 million of investment in working capital from the first quarter was released during the fourth quarter.

However, the molybdenum business unit as a whole had a free cash flow deficit of no I mean, the fourth quarter.

In the fourth quarter, we received a $25 million payment from Orion mine Finance group in relation to the December 2021, silo by interest and the Green spent project.

In the fourth quarter, our cash balance grew by 121 million to 613 million.

This provides us with total liquidity of one being and positions the company well to execute on our strategic plan and deliver shareholder value.

Given our strong financial position the board declared a quarterly dividend of seven cents per share.

Slide 11 shows the 'twenty 'twenty four outlook in.

In 2024, we expect to produce between 370000 ounces and 410000 ounces of gold, which is 11% higher than last year and copper production is expected to be between 50 565 billion pounds of copper.

'twenty 'twenty four consolidated gold production cost and all in sustaining costs are expected to be 800 to $900 per ounce and 1075, and 1100 75 per ounce respectively.

2020 for sustaining capital expenditure are expected to be 100 to 125 million and non sustaining capital guidance is tightened to 15 minutes.

We continue to invest in exploration in.

In 2024, we expect to spend 35 to 45 million.

Approximately 48% of exploration spending is related to brownfield targets and 52% is related to Greenfield and general exploration programs.

In 2020 for oxo. Its current income tax paid is expected to be between 85 and 95 million.

Giving the timing of the statute repayments mining took here the annual royalty payment and income tax payments relating to Q4 2023 in Q1 'twenty 'twenty four will be made in the second quarter of 2024.

As a result, our cash flow in the second quarter of 2024 will be impacted by these cash payments.

We are expecting a solid 2024 with a higher gold production compared to last year, and we expect to continue to generate strong cash flow from our operations.

I'll pass it back to Paul for some closing remarks, thanks very much Darren.

Before I wrap up the call and on behalf of the board of directors I'd like to take this opportunity to thank Darren for his hard work and dedication over the past 11 years or so Tara.

Personally it's been a pleasure for me to have worked with them over the past 10 months.

I myself have done my own Onboarding here.

He has built a strong financial position for the company with over 1 billion of liquidity no debt and have set us up for successful CFO transition.

Brian Snyder will be taking over from Darren as CFO in April.

Brian has been with us for almost two years as VP of finance and is very well positioned for this new opportunity.

We wish Darin and his family all the best as they relocate back home to Australia.

And with that I'll conclude and open the call to questions.

We will now begin the question and answer session and joined the question queue. You May Press Star then one on your telephone keypad.

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Our first question comes from Brian Macarthur with Raymond James. Please go ahead.

Hi, Good morning, I, just wanted to follow up on the U two payment for oxy.

That just the 40 million you so in taxes payable for the taxes and then there'll be the royalty payment on top of that so I should be looking at it.

I don't know if you can give me a number for that quarter and then the 85 to 90 that you're forecasting for this year I assume that gets paid down in the second quarter of next year is that correct.

Yeah Darrin go ahead on that.

Yeah. So the did the eye.

That was referenced earlier, so that references the 'twenty 'twenty four they.

We started the 2023 income tax payable and also the Q1 2020 full royalty so that number referenced that total number I referenced earlier. These combined a buck those to you Brian.

Right, but the taxes you havent taxes payable in your current liabilities of 49.

9 million Yeah is that that is the oxy attainment right what it could be $40 million for that plus the royalty is on top correct.

Alright, thank you.

And my second question is and I don't know if you can give guidance on this and obviously congratulations on the very good free cash flow.

Still working through inventory at ox suit, we know all the ADR stuff with very cheap on a cash basis has gone is there a lot of what I would call historical I mean, you used to give a number there's a fair number of ounces that they'll have to come out with very low cash cost as opposed to.

What would you label as ongoing cost out of the mine is there still a bunch of cash to be liberated from that in the first half of the year.

Yeah, Brian So I guess fundamentally where we're working through the inventory and there was some built up.

At the end of 2023.

So I guess the best way to explain it is our all in sustaining costs that we've guided to that we'll have that baked in for the remainder of the year and the bulk of that inventory is completed in Q1 and Q2, because it gets integrated with what we're stacking now.

Yeah.

Right. Okay. That's clear I, just wanted to check that but there. So there is still some of that or what I call older pre mine stuff still coming through in the first half of the year, but it's all weighted into your average cost of inventory, which will come out as I can get that correct. That's right. So we've baked that into the all in sustaining for all of 2024 and in reality it'll probably be slightly.

And the front end and slightly higher on the back end as a result.

And that's why we've guided to the higher proportion of production coming from the first half of the year, because we're still benefiting from those inventory ounces.

Great. Thanks, very much very clear.

Once again, if you have a question. Please press Star then one.

The next question comes from Lawson Winder.

Bank of America Securities. Please go ahead.

Thank you very much operator, and good morning, everyone and thank you for the presentation.

Wanted to ask about Mount Milligan.

Exploration upside and just looking at that chart you guys have shown.

Showing the goldmark deposit and then the other deposit underneath it.

A sense of what the strip ratio might look like on that I mean, it looks like it would be relatively low given where goldmark is and then you have that.

Deposit right beneath it.

Yeah, I don't have a number on on strip ratio because some of that hasn't really been that well defined in between on that exact section views that you're referring to.

But what we will be doing is we'll be drilling that through secondly over on that north slope and then just some of the other second views of the southwest.

We have quite a bit a ways to go to extend the mineralization with what we've already drilled and then we will be optimizing the mine plan. So that will be taken care of the strip ratio low strip ratio on the front end and then of course at depth in the past so that'll be all part of the optimization of the P E. But no I don't have an exact strip ratio because we haven't defined on the mineral.

Asian in those areas.

Okay fair enough.

I just thought maybe you'd have some sensitive by now but that's completely fair.

The thing I wanted to ask you about is.

For ages, there's been discussion about potentially improving the recoveries of gold at Mount Milligan.

And I assume with the updated agreement with Royal Gold, there's probably additional motivation to do so.

What are kind of the items you are focusing on and what's the timeline to providing some clarity to the market and what you could potentially do there.

And I'll give a response here and Paul will give a little bit more detail, but you are quite correct with our with the transaction amounts with Royal gold what that gives us is the confidence to look at long term investments.

In the asset which includes process plant improvements so as part of P. A we will be looking at longer term modifications to the plant that could improve recovery now that doesn't mean that there aren't near term continuous improvement type things, we can do on recovery, but longer term there may be capital improvements that can be made in the mail, but Paul why don't you talk.

About both those are shorter term and the longer term ideas yeah. So in the longer term, we'll be looking at adjustments to the flow sheet with some capital and that'll be a key part of the P. E and we've already initiated the metallurgical test work for that I won't get into specifics, but you know it may involve a different process that would need a separate stage of permitting.

And then on the short term, it's really just about looking incrementally all the way through balancing throughput versus the reagent consumption versus the grind size.

To incrementally gain on the gold and copper recovery understanding the ore body getting a genome that balance and its really just just the hard the hard yards lifting heavy lifting of getting the incremental gains all the way through.

The other key element here is we having improved on the throughput on the front end on the secondary crush and then of course, there's a balance between throughput and overall recovery and so we're working through all that optimization and theres a myriad of initiatives to to go through each of those incremental gains.

Okay, great. Thank you both very much.

Once again, if you have a question. Please press Star then one.

There are no more questions. This concludes our question and answer session and today's conference call call. You may disconnect. Your lines. Thank you for participating and have a pleasant day.

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