Centerra Gold Inc. (TSX:CG) today announced that its 2010 consolidated gold production totalled 678,941 ounces, which includes 249,866 ounces of gold produced in the fourth quarter of 2010.
2010 Quarterly Gold Production
Steve Lang, President and CEO of Centerra stated, "As expected we had another strong fourth quarter, despite a 10-day shutdown at Kumtor, enabling the Company to achieve its 2010 production guidance. For our 2011 gold production guidance we have not included any production from the heap leach facility at Boroo and our Gatsuurt development project. Continued delays in receiving the final permits and approvals including the regulatory commissioning of the Gatsuurt project, pending the resolution of the Water and Forest Law in Mongolia, makes it difficult to predict the timing of the start of 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."
2011 Outlook
Centerra's gold production and unit costs for 2011 are forecast as follows:
Centerra's 2011 consolidated gold production is forecast to be in the 600,000 to 650,000 ounce range. The Kumtor mine is expected to produce between 550,000 to 600,000 ounces in 2011. The production profile at Kumtor differs significantly from recent years in that it will have consistent quarterly production throughout the year.
At the Boroo mine, gold production is forecast to be approximately 50,000 ounces and assumes no mining activities at Boroo in 2011. The 2011 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 the remaining direct mill feed stockpiled ore at Boroo until the end of May 2011 with an average grade of approximately 1.44 g/t. For the balance of the year, the Boroo mill is expected to process stockpiled material with grades between 0.76 – 0.81 g/t.
Receipt of the final heap leach operating permit would add approximately 4,000 ounces of gold a month. At Gatsuurt, the project is ready to begin production of the oxide ore on receipt of the final approvals and regulatory commissioning.
2011 Exploration Expenditures
Exploration expenditures of $34 million are planned for 2011, an increase from $30 million in 2010. The 2011 program will continue the aggressive exploration work at the Kumtor mine together with an increase in the exploration in the Kumtor district with target definition and drilling programs on the properties acquired in 2010 and planned expenditures of about $13 million. In Mongolia $5 million is allocated for target definition and drill programs on the Gatsuurt project and on our land holdings along the Yeroogol trend and in eastern Mongolia.
In 2011, drilling programs will continue on the Kara Beldyr project in Russia to determine the resource potential of the property. Drilling programs will also continue in Turkey and Nevada. In addition, generative programs will continue in Russia, China, Turkey and the U.S. to increase the pipeline of projects that the Company is developing to meet the longer term growth targets of Centerra.
2011 Capital Expenditures
The capital expenditures for 2011 are estimated to be $213 million, including $38 million of sustaining capital and $175 million of growth capital.
Kumtor
At Kumtor, during 2011 total capital expenditures are forecast to be $206 million including $36 million of sustaining capital. The largest sustaining capital spending will be on the major overhaul maintenance of the heavy duty mine equipment ($19 million), expenditures for the shear key, buttress and tailings dam construction works ($5 million) and for equipment replacement and other items ($12 million).
Growth capital investment at Kumtor for 2011 is forecast at $170 million primarily for the purchase of seven CAT 789 haul trucks ($21 million), purchase of remaining equipment for the North Wall expansion project ($28 million), pre-strip costs related to the development of the open pit ($63 million) and a waste dump expansion project ($3 million). Also, $52 million is included in growth capital investment for the underground growth capital, to continue to develop the SB Zone and Stockwork Zone, as well as, for delineation drilling and capital purchases in 2011.
Boroo & Gatsuurt (Mongolia)
At Boroo, 2011 sustaining capital expenditures are expected to be $1 million and growth capital is forecast at $5 million primarily for the tailings dam construction to expand the capacity of the Boroo tailings facility to allow treatment of waste from processing of the oxide and sulphide ore from the Gatsuurt project.
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 Administration
Corporate and administration expenses for 2011 are forecast at $44 million.
Major Assumptions
The following material assumptions have been used to forecast production, costs and future capital expenditures;
- a gold price of $1,300 per ounce,
- exchange rates:
- $1USD:$1.03 CAD
- $1USD:48.50 Kyrgyz Som
- $1USD:1,250 Mongolian Tugrik
- $1USD:0.74 Euro
- diesel fuel price assumption:
- $0.78/litre at Kumtor
- $0.94/litre at Boroo
The assumed diesel price of $0.78/litre at Kumtor includes a customs export duty imposed by the Russian authorities on the diesel fuel exported to the Kyrgyz Republic. Russia imposed a customs duty of approximately $194 per tonne on gasoline and diesel fuel exports to the Kyrgyz Republic that went into effect on April 1, 2010. The customs export duty for 2011 is assumed to be at approximately $0.18/litre or $212.77 per tonne of diesel fuel; however, there has been public statements made by Kyrgyz authorities that it could be revoked retroactive to January 1, 2011. Should the Russian authorities revoke the customs export duty, Kumtor's cash costs are expected to decrease by approximately $17 million.
Diesel fuel is sourced from separate Russian suppliers for both sites and only loosely correlates with world oil prices. The diesel fuel price assumptions were made when the price of oil was approximately $84 per barrel.
Other important assumptions include the following:
- no recurrence of political and civil unrest in the Kyrgyz Republic and it does 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 is successful, see "Kumtor Mine - Remedial Plan to Manage the High Movement Area" in the Company's December 7, 2009 news release,
- 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,
- certain issues at Boroo raised by the General Department of Specialized Inspection ("SSIA") concerning state alluvial reserves, the production and sale of gold from the Boroo heap leach facility and other matters will be resolved through negotiation without material adverse impact on the Company, see "Other Corporate Developments, Mongolia, Mongolian Regulatory Matters" in the Company's MDA for the period ended September 30, 2010,
- 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 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 "Recent Developments" and "Risk Factors" in the Company's most recently filed annual information form, available on SEDAR at www.sedar.com.
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 a technical report dated December 16, 2009 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 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.