Centerra reports 396% increase in 3Q11 net earnings
Centerra Gold reported a 400% increase in earnings per share, as well as a nearly fourfold increase in net earnings during the third quarter of this year. The Toronto-based gold miner also upped guidance for 2011 consolidated gold production to a range of 640,000 to 660,000 ounces from the original guidance of 600,000 to 650,000 ounces. Meanwhile, Centerra CEO Steve Lang also announced the company contributed $10 million during the quarter for the construction and repair of 27 schools throughout the Kyrgyz Republic.“In addition, we have reached a settlement with the Kyrgyz Social Fund to voluntarily pay $14.1 million covering the 2010 year and the first nine months of 2011,” said Lang. “Going forward, Kumtor has agreed to make contributions to the Social Fund in respect of the high-altitude premium, a portion of which will be paid by the employer and a portion of which will be paid by the employees.
Gold production for 3Q11 was 154,936 ounces, a 61% increase over the 96,308 ounces reported in 3Q10. The increase in gold production reflects 105% higher gold output at the Kumtor Mine, attributed to higher throughput, lower waste movement, and the processing of higher grade material.
However, gold production at Boroo in Mongolia declined because of the processing of lower-grade stockpiled ore with lower recoveries as the heap leach operation remained idle.
For the first nine months of this year, Centerra reported 490,818 ounces of gold production, a 14% increase over the 429,818 gold ounces mined during the same period of 2010. Production at Kumtor increased to 444,460 ounces from 339,369 ounces due to higher grades, recover and throughput. Mining operations at Boroo ceased at the end of November 2010 while the heap leach process remains idle awaiting final operating permit approval. Boroo recovered lower production at 46,358 ounces during the first nine months of this year, compared with 89,706 ounces for the same period of 2010 due to the processing of lower grade ores from stockpiled pit and heap leach material.
The Kumtor Mine is expected to produce 580,000 to 600,000 ounces in 2011, revised from the prior guidance of 550,000 to 600,000 ounces.
At Boroo, 2011 gold production is forecast to be 60,000 ounces in 2011, which is higher than the previous guidance of 50,000 ounces as higher grade heap leach ore processed through the mill continues to show better grades than expected. The forecast assumes no production from the Gatsuurt project, also in Mongolia, due to uncertainties with permitting final approvals and regulatory commissioning. Gatsuurt is ready to begin production on receipts of these approvals and regulatory commissioning.
However, the company is revising its total cash cost per ounce outlook from the prior guidance of $430 to $460 per ounce to $460-$480/oz “to reflect rising cost pressures at the Kumtor Mine.”
“The local labor costs have been affected by the introduction of social fund contributions on the high altitude premium,” Centerra observed. While the Social Fund is not included in the total cash cost per ounce for the first nine months of this year, the Social Fund will now be expensed as operating costs. The anticipated additional cost for Kumtor is $2.6 million or $17 per ounce for the fourth quarter.
Net earnings for 3Q11 were $83.8 million or 35-cents per ounce, up 396% from the net earnings of $16.9 million or 7-cents per ounce reported for 3Q10. The increase reflects “higher realized gold prices and higher ounces sold and produced at Kumtor, partially offset by lower volumes at Boroo.”
For the first nine months of this year Centerra reported net income of $291.5 million or $1.23 per share, up 70% from the $171.5 million or 73-cents per ounce reported during the same period of 2010.
The company has increased the 2011 3exploration budget from $34 million to $40 million with planned expenditures in the Kyrgyz Republic of $14 million, which is higher than the prior guidance of $13 million due to increased drilling activity.
The capital expenditures for 2011 are estimated to be $193 million, including $157 million of growth capital, which is lower than the prior 2011 guidance of $203 million.