TORONTO, ONTARIO--(Marketwired - Feb.
19, 2014) -
This news release contains forward-looking information that is subject to the risk factors and assumptions set out on page 32 and in our Cautionary Note Regarding Forward-looking Information on page 39.
It should be read in conjunction with the Companys audited financial statements and notes thereto for the year ended December 31, 2013 and the associated Managements Discussion and Analysis.
The consolidated financial statements of Centerra are prepared in accordance with International Accounting Standard 34, as issued by the International Accounting Standards Board and the Companys accounting policies as described in note 3 of its annual consolidated financial statements for the year ended December 31, 2013.
All figures are in United States dollars.
To view the 2013 Managements Discussion and Analysis and the Audited Financial Statements and Notes for the year-ended December 31, 2013, please visit the following link:
http://media3.marketwire.com/docs/CG2013-YEMDA.pdf.
Centerra Gold Inc.
(TSX:CG) today reported net earnings of $106.6 million or $0.45 per common share (basic) in the fourth quarter of 2013.
This compares to a net loss of $70.7 million or $0.30 per common share (basic) for the same period in 2012 after a charge of $180.7 million in the fourth quarter of 2012 for the de-recognition of the underground assets at the Kumtor mine.
2013 Fourth Quarter Highlights
-- Full year gold production and costs were better than guidance.
-- Produced 362,234 ounces of gold in the fourth quarter, including 348,130
ounces at Kumtor and 14,104 ounces at Boroo.
-- Increased revenues to $468.9 million compared to $368.5 million in the
same quarter of 2012.
-- All-in sustaining costs per ounce sold(1) were $433 in fourth quarter
and $818 for the full year.
-- All-in costs per ounce sold(1) were $474 in the fourth quarter and $920
for the full year.
-- Increased indicated resources at the Oksut project in Turkey by 60% to
1.1 million contained ounces of gold.
-- Proven and probable gold reserves total 10.2 million ounces of contained
gold.
-- Cash provided by operations was $359.5 million compared to $209.1
million in the fourth quarter of 2012.
-- Entered into a non-binding Heads of Agreement with the Kyrgyz Republic
in connection with the potential restructuring of the Kumtor project,
replaces MOU signed in September 2013.
For the full year, the Company recorded net earnings of $157.7 million or $0.67 per share (basic), compared to a net loss of $143.7 million or $0.61 per share (basic) in 2012.
The increase in earnings in 2013 reflects significantly more ounces produced and sold (ounces sold increased 78% over 2012), a $4.8 million write-down of the exploration inventory at Kumtor following the closure of the exploration program and the adoption, in the first quarter of 2013, of a new accounting policy (IFRIC 20).
Adoption of IFRIC 20 resulted in retroactively capitalizing approximately $40 million of previously expensed stripping costs in 2012 thereby reducing the loss in 2012.
The Companys 2012 results have been restated as described in note 5 to the Companys 2013 annual financial statements.
The additional capitalized stripping costs in 2012 was fully amortized in 2013, resulting in the Companys actual depreciation, depletion and amortization (DD&A) exceeding the prior DD&A guidance of February 20, 2013.
Production increases in 2013 were reported at both of the Companys operations, but these increases were partially offset by 20% lower realized gold prices in 2013.
The 2012 results reflected a charge for the de-recognition of the underground assets at Kumtor of $180.7 million and the negative impact on production of the acceleration of ice and waste in the high movement area above the SB Zone which delayed the release of ore and required a re-design of the production plan in early 2012.
Consolidated gold production in 2013 totaled 690,720 ounces compared to 387,076 ounces in the prior year.
Production increases in 2013 were reported at both operations; Kumtor recorded a 90% increase in ounces poured, while Boroo poured 26% more ounces in 2013.
During the year, Kumtor processed higher grades and achieved higher recoveries and Boroo benefited from a full year of heap leach production (which resumed operation in October 2012).
In 2012 the lower gold production was primarily due to the revised mine plan at Kumtor, which resulted from the accelerated ice and waste movements in the pit wall above the SB Zone.
Commentary
Ian Atkinson, President and CEO of Centerra stated, "Both operations exceeded their production guidance in 2013, mainly as a result of a strong fourth quarter at Kumtor and better than expected annual production from the heap leach operation at Boroo.
Centerras performance in 2013 was well within its third quarter operating cash costs guidance, and performed better than its prior all-in cash costs(1) per ounce produced guidance partly due to Boroo, which exceeded expectations, and to Kumtors strong production in the fourth quarter of 2013, which enabled it to exceed its guidance.
From a financial standpoint, in the fourth quarter of 2013, the Company had strong net earnings of $106.2 million or $0.45 per share.
Cash provided by operations was approximately $360 million during the fourth quarter and our cash and short-term investments grew to over $425 million net of our debt at year-end."
"On February 5, 2014, we published our updated reserves and resources in which we reported that we successfully converted the majority of the inferred resources to indicated resources at the Oksut project in Turkey through our in-fill drilling during the year and we continued to expand the resource, which now totals 1.1 million contained ounces of gold in the indicated category with an average grade of 1.2 g/t.
The Company expects to complete a preliminary economic assessment in the first quarter of 2014 and if such assessment is positive, we expect to commence a feasibility study later in the year."
"In 2014, we are expecting consolidated gold production to be in the 595,000 to 645,000 ounce range and our expected consolidated all-in sustaining costs per ounce sold(1) for 2014 to be within a range of $875 to $950 and our expected consolidated all-in costs to be $989 to $1,074 per ounce sold(1)."
On December 24, 2014, Centerra entered into a non-binding Heads of Agreement (the "HOA") with the Government of the Kyrgyz Republic and Kyrgyzaltyn JSC ("Kyrgyzaltyn") in connection with a potential restructuring transaction under which Kyrgyzaltyn would exchange its 32.7% equity interest in Centerra for a 50% interest in a joint venture company that would own the Kumtor Project.
On February 6, 2014, after their review of the HOA, the Kyrgyz Parliament adopted a resolution which appears to support the concept of the restructuring described in the HOA but also contains a number of recommendations that are materially inconsistent with the terms of the HOA.
Among other things, the resolution calls for further audits of the Kumtor operation and for the Government and the General Prosecutors Office to continue pursuing claims for environmental and economic damages, which the Company disputes.
The Company has not yet received an official copy of the Parliamentary resolution.
The Company expects to continue its discussions with the Government regarding a potential restructuring transaction to resolve all outstanding concerns relating to the Kumtor Project.
However, the Company continues to maintain that any agreement to resolve matters must be fair to all of Centerras shareholders.
Any definitive agreement for a potential restructuring remains subject to required approvals in the Kyrgyz Republic, including Government and Parliament of the Kyrgyz Republic, as well as Centerra Special Committee and Board approval, and compliance with all applicable legal and regulatory requirements and approvals, including a formal independent valuation and shareholder approval.
See "Other Corporate Developments - Kyrgyz Republic" for further details on these developments.
As at December 31, 2013, the Company had $76 million outstanding debt under its $150 million revolving credit facility with the European Bank for Reconstruction and Development ("EBRD") leaving a balance of $74 million undrawn at December 31, 2013.
Repayment of the $76 million outstanding was subsequently extended to August 11, 2014 or, at the Companys discretion, repayment of the loan may be further extended until February 2015.
Cash, cash equivalents and short-term investments at the end of 2013 increased to $501.5 million from $382.1 million at December 31, 2012.
Changes in Presentation of Non-GAAP Financial Performance Measures
In 2013, the Company adopted non-GAAP performance measures, "all-in cash costs(1)", which were based on production.
In June 2013, the World Gold Council (WGC) published guidelines for reporting all-in sustaining costs(1) and all-in costs(1) performance measures.
Centerra reviewed the recommended measures and assessed their impact from adoption on its reporting.
The WGC measures are similar to Centerras former presentation of all-in cash costs(1) except that they include accretion expense, allocate social development costs and exploration spending to the operating sites and are based on sales of gold rather than production.
The following discussion presents a detailed calculation for both measures and reconciles the transition from the old measures to the new measures that have now been adopted.
The new measures have limitations as an analytical tool as they may be distorted in periods where significant capital investments are being made to expand for future growth or where significant cash mining costs are being expended on stripping to benefit future periods.
These new measures should therefore not be considered in isolation, or as a substitute for, analysis of our results as reported under GAAP.
Unit Cash Costs(1) - Old Measure
The following table calculates Centerras actual all-in cash costs using the Companys calculation methodology as presented in the first three quarters of 2013 and also compares the annual result with the Companys most recent cost guidance for 2013 presented in its third quarter 2013 public disclosures.
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2013 Year - Actual
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$ millions, except as noted Consolidated(7) Kumtor Boroo
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All-in Cash Costs:
Mining (2) 58.5 58.5 -
Milling 94.0 70.8 23.1
Leaching 10.6 - 10.6
Site support 68.1 60.0 8.1
Regional administration 23.7 18.1 5.8
Royalties 9.4 - 9.4
Management fees and other (0.3) 0.6 (0.9)
Refining fees 3.8 3.5 0.3
By-product credits (4.3) (3.8) (0.5)
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Operating cash costs(1) $ 263.5 $ 207.7 $ 55.9
Capitalized stripping and ice
unload - cash 201.3 201.3 -
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Operating cash costs and
capitalized stripping 464.8 409.0 55.9
Sustaining capital (cash)(1)
(3) 57.7 49.7 7.4
Growth capital (cash) -
including Gatsuurt(1) (4) 39.9 39.2 -
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Operating cash costs including
capital 562.4 497.8 63.4
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Corporate and other cash costs 68.1 - -
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All-in Cash Costs - pre-tax(1) $ 630.5 $ 497.8 $ 63.4
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Revenue-based tax and income
tax 126.3 113.5 12.8
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All-in Cash Costs - including
taxes(1) $ 756.8 $ 611.4 $ 76.1
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Ounces poured 690,720 600,402 90,318
Operating cash costs - $/oz
produced(1) (5) $ 382 $ 346 $ 619
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All-in Cash Costs (pre-tax) -
$/oz produced(1) (6) $ 913 $ 829 $ 702
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All-in Cash Costs (including
taxes) - $/oz produced(1) $ 1,096 $ 1,018 $ 843
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2013 Full Year Cost Guidance
(reported October 2013):
Ounces poured 635,000 - 550,000 - approx
685,000 600,000 85,000
Operating cash costs - $/oz
produced(1) $ 375 - $400 $ 330 - $360 approx $680
All-in Cash Costs (pre-tax)
- $/oz produced(1) $ 930 - $1,000 $ 820 - $895 approx $775
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(1) Non-GAAP measure see discussion under "Non-GAAP Measures".
(2) Excludes capitalized stripping and abnormal mining costs.
(3) Sustaining capital(1) is a capital expenditure necessary to maintain
existing levels of production.
The sustaining capital(1) expenditures
maintain the existing mine fleet, mill and other facilities so that
they function at levels consistent from year to year.
(4) Growth capital(1) is capital expended to expand the business or
operations by increasing productive capacity beyond current levels of
performance.
(5) Operating cash costs(1) include mine operating costs such as mining,
processing, administration, royalties and operating taxes (except at
Kumtor where revenue-based taxes are excluded), but exclude
depreciation, depletion and amortization (DD&A), reclamation costs,
financing costs, capital expenditures and exploration.
Certain amounts
of stock-based compensation have been excluded as well.
Operating cash
costs per ounce produced is calculated by dividing operating cash costs
by the ounces produced.
(6) All-in cash costs per ounce produced(1) includes operating cash
costs(1), capitalized stripping, sustaining and growth capital(1),
corporate general and administrative expenses, global exploration
expenses and social development costs.
The measure is presented
including and excluding revenue-based taxes at Kumtor and income taxes
at Boroo.
(7) Consolidated numbers may not add across the columns as corporate
entities are not presented in this table, given these are not
significant.
The following table reconciles the prior reported measure of consolidated all-in cash costs(1) to the new all-in sustaining costs(1) and all-in costs(1) measures for the Companys 2013 actual results.
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$ millions, except as noted 2013 Year - Consolidated Actual (2)
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Old Measures New WGC Measures
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All-in
All-in Cash Sustaining All-in
Costs(1) Costs(1) Costs(1)
---------------------------------------
Operating cash costs and capitalized
stripping 464.8 464.8 464.8
Sustaining capital (cash) (1) 57.7 57.7 57.7
Growth capital (cash)(1) 39.9 39.9
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Operating cash costs including
capital 562.3
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Corporate and General Administration 30.3 30.3 30.3
Exploration and business development 29.6 29.6
Community investments (social
development costs) 6.4 6.4 6.4
Other expenses 1.9 1.9
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All-in Cash Costs - pre-tax(1) $ 630.5
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Changes in Inventories 10.0 10.0
Reclamation expense 0.9 0.9
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All-in Sustaining Costs(1) $ 570.1
--------------------------
All-in Costs(1) $ 641.4
Revenue-based tax and Income tax 126.3 126.3
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All-in Cash Costs - including
taxes(1) $ 756.8
------------- -------------
All-in Costs (including taxes)(1) $ 767.7
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Ounces poured 690,720
Ounces sold 696,818 696,818
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Operating cash cost - $/oz produced
(1) $ 382
All-in Cash Costs (pre-tax) - $/oz
produced (1) $ 913
All-in Cash Costs (including taxes) -
$/oz produced(1) $ 1,096
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All-in Sustaining Costs - $/oz
sold(1) $ 818
All-in Costs - $/oz sold(1) $ 920
All-in Costs (including taxes) - $/oz
sold(1) $ 1,102
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The impact of this change in presentation of the Companys all-in cost performance measures was not a significant change from its previously reported measure for the reported periods.
As presented in the above table, the consolidated all-in cash costs (pre-tax) per ounce produced(1) (old measure) for 2013 was $913, as compared to the consolidated all-in costs per ounce sold(1) (new measure) of $920.
At Kumtor, all-in cash costs (pre-tax) per ounce produced(1) (old measure) for 2013 was $829, as compared to the all-in costs per ounce sold(1) (new measure) of $853, while at Boroo, all-in cash costs (pre-tax) per ounce produced(1) (old measure) for 2013 was $701, as compared to the all-in costs per ounce sold(1) (new measure) of $765.
For a detailed breakdown of the all-in unit costs(1) by operation please refer to the Companys year-end MD&A.
The Company believes that this change in presentation brings the Companys performance measure reporting more in-line with the rest of the gold industry and may provide investors with better comparability in assessing performance against other gold producers.
It may also help investors to assess the ability of Centerra to generate cash flow for use in investing and other activities.
"All-in cash costs(1)", "all-in sustaining costs(1)", "all-in costs(1)" and "all-in costs (including taxes)(1)" are intended to provide additional information only and do not have standardized definitions under IFRS and should not be considered as a substitute for measures of performance prepared in accordance with IFRS (see discussion under "Non-GAAP Measures").
The all-in costs measure is presented including and excluding revenue-based taxes at Kumtor and income taxes at Boroo.
An investor may choose instead to treat revenue-based taxes as a royalty and include this amount as part of the all-in sustaining costs measure.
These measures are not representative of all of the Companys cash expenditures as they do not include interest costs or dividend payments.
Any references to all-in costs(1) or all-in sustaining costs(1) (whether on a unit basis or not) in the remainder of this news release are under the definitions as developed by the World Gold Council (see discussion under "Non-GAAP Measures").
Financial and Operating Summary
Consolidated Highlights
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Three Months Ended Year Ended
December 31 December 31
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Financial and % %
Operating Summary 2013 2012(5) Change 2013 2012(5) Change
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Revenue - $ millions 468.9 368.5 27% 944.4 660.7 43%
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Cost of sales - $
millions (1) 271.8 167.9 62% 559.2 383.3 46%
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Abnormal mining costs
- $ millions - 8.9 100% - 24.8 100%
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Regional office
administration - $
millions 6.2 5.6 11% 23.7 21.0 13%
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Revenue-based taxes -
$ millions 62.9 44.5 41% 113.5 74.7 52%
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Other operating
expenses - $ millions 1.9 4.8 (60%) 8.3 34.3 (76%)
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Loss on de-recognition
of UG - $ millions - 180.7 100% - 180.7 100%
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Exploration - $
millions 8.8 11.5 (24%) 29.6 37.9 (22%)
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Corporate
administration - $
millions 8.1 8.8 (8%) 30.6 27.0 13%
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Earnings (loss) before
income taxes - $
millions 107.6 (65.5) 264% 170.8 (132.0) 229%
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Income tax expense - $
millions 1.0 5.2 (81%) 13.1 11.7 12%
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Net earnings (loss) -
$ millions 106.6 (70.7) 251% 157.7 (143.7) 210%
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Earnings (loss) per
common share - $
basic 0.45 (0.30) 250% 0.67 (0.61) 210%
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Earnings(loss) per
common share - $
diluted 0.44 (0.30) 247% 0.64 (0.61) 205%
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Cash provided by
operations - $
millions 359.5 209.1 72% 483.9 173.4 179%
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Capital expenditures -
$ millions 86.7 86.4 0% 376.6 464.0 (19%)
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Weighted average
common shares
outstanding - basic
(thousands) (2) 236,388 236,339 0% 236,382 236,369 0%
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Weighted average
common shares
outstanding - diluted
(thousands) (2) 236,646 236,339 0% 236,663 236,369 0%
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Average gold spot
price(4) - $/oz 1,276 1,721 (26%) 1,411 1,669 (15%)
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Average realized gold
price(3) - $/oz 1,271 1,711 (26%) 1,355 1,692 (20%)
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Gold produced - ounces 362,234 219,316 65% 690,720 387,076 78%
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Gold sold - ounces 368,954 215,361 71% 696,818 390,533 78%
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Cost of sales (3) -
$/oz sold 737 780 (6%) 803 982 (18%)
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Adjusted operating
costs(3)- $/oz sold 247 366 (33%) 402 747 (46%)
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All-in sustaining
costs(3)- $/oz sold 433 664 (35%) 818 1,449 (44%)
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All-in costs(3) - $/oz
sold 474 850 (44%) 920 1,991 (54%)
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All-in costs including
taxes (3)- $/oz sold 644 1,087 (41%) 1,102 2,212 (50%)
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(1) Cost of sales excludes regional office administration.
(2) As of December 31, 2013, the Company had 236,390,219 common shares
issued and outstanding.
(3) Adjusted operating costs per ounce sold, all-in sustaining costs per
ounce sold, all-in costs per ounce sold, all-in costs (including taxes)
per ounce sold, as well as average realized price per ounce sold and
cost of sales per ounce sold, are non-GAAP measures and are discussed
under "Non-GAAP Measures".
(4) Average for the period as reported by the London Bullion Market
Association (US dollar Gold P.M.
Fix Rate).
(5) The 2012 comparative period was restated as a result of the adoption of
IFRIC 20.
Fourth Quarter of 2013 compared to Fourth Quarter of 2012
-- Gold production for the fourth quarter of 2013 was 362,234 ounces
compared to 219,316 ounces in the same quarter of 2012.
The increased
gold production in the fourth quarter of 2013 reflects 84% higher
production at Kumtor as compared to the same quarter in 2012.
In the
fourth quarter of 2013, Kumtor produced 58% of its annual gold
production as a result of the higher grades mined and milled.
-- All-in sustaining costs per ounce sold(1) were $433 in the fourth
quarter of 2013 compared to $664 in the comparative quarter of 2012.
The
decrease in the 2013 period results mainly from significantly higher
production at Kumtor, partially offset by higher operating costs.
-- All-in costs per ounce sold(1) were $474 in the fourth quarter of 2013
compared to $850 in the same quarter of 2012.
The decrease reflects the
increased ounces sold from higher production and lower capital
requirements at Kumtor in the 2013 quarter, partially offset by
increased costs associated with the larger truck fleet.
-- Revenues in the fourth quarter of 2013 increased by $100.4 million to
$468.9 million from $368.5 million in the same period last year mainly
as a result of 71% higher ounces sold, partially offset by 26% lower
realized gold price.
The average realized gold price(1) in the fourth
quarter of 2013 was $1,271 per ounce, a 26% decrease from $1,711 per
ounce realized in the same quarter of 2012.
-- Cost of sales for the fourth quarter of 2013 was $271.8 million compared
to $167.9 million in the same quarter of 2012.
The increase reflects
significantly more ounces sold at Kumtor, higher depreciation of
capitalized stripping at Kumtor, higher operating costs due to increased
consumption of reagents, cyanide and power from increased throughput and
head grades at Kumtors mill and volume increases due to the increased
use of consumables for the expanded fleet at Kumtor.
DD&A included in costs of sales for the fourth quarter of 2013 of $188.7
million increased by $92.8 million compared to the same period last
year, due in part to the processing and sale of more ounces in the
fourth quarter of 2013 at Kumtor, partially offset by fewer ounces at
Boroo.
The fourth quarter of 2013 at Kumtor reflects the higher
depletion of the capitalized stripping associated with cut-back 15,
compared to cutback 14B that was mined in the comparative period.
During
the fourth quarter of 2013, Kumtor depleted the majority of the 142
million tonnes associated with cut-back 15, compared to 61 million
tonnes from cut-back 14B in the comparative period.
The increased DD&A
charge was partially offset by mining and stockpiling greater ounces
from cut-back 15 that will defer recognition of DD&A until the ounces
are produced in 2014.
-- There were no abnormal mining costs in the fourth quarter of 2013
compared to $8.9 million in the comparative period of 2012.
Abnormal
mining costs represent the cost of removing the ice and waste from the
high movement unload zone necessitated by the unexpected ice movement.
-- Other operating expenses for the fourth quarter of 2013 totaled $1.9
million compared to $4.8 million in the same quarter of 2012.
Costs in
the fourth quarter of 2012 included $2.9 million for the closure of the
underground development project at Kumtor.
Approximately $1.9 million
was spent in the fourth quarter in 2013 and 2012 for ongoing sustainable
development projects in both the Kyrgyz Republic and Mongolia.
-- A charge of $180.7 million was recorded in the fourth quarter of 2012 to
reflect the de-recognition of the underground assets at Kumtor.
This
results from the decision in early November 2012 to expand the open pit
at Kumtor and as a result consume a major portion of the underground
infrastructure.
-- Exploration expenditures for the fourth quarter of 2013 were $8.8
million compared to $11.6 million in the same quarter of 2012 mainly
reflecting a cessation of drilling activities at Kumtor and on-going
drilling programs at the Oksut project in Turkey and the ATO Project in
Mongolia.
All exploration drilling at Kumtor ceased in the third quarter
of the year and there are no future plans for exploration work within
the mining concession area or on a regional scope.
As a result, the
Company recognized a $4.8 million write-down of the exploration
inventory in the fourth quarter.
-- Cash provided by operations was $359.5 million in the fourth quarter of
2013 compared to $209.1 million in the same period of 2012.
The increase
over 2012 reflects increased earnings from higher production and ounces
sold and a reduction in working capital levels, partially offset by
lower realized gold prices and higher operating costs.
-- Capital expenditures spent and accrued in the fourth quarter of 2013
were $86.7 million, which included sustaining capital(1) of $10 million,
growth capital(1) of $5.9 million and $70.8 million of capitalized
stripping costs.
Capital expenditures in the same quarter of 2012 were
$86.4 million, which included $11.6 million for sustaining capital(1)
and $24.5 million for growth capital(1) and capitalized stripping of
$50.3 million.
Full Year 2013 compared to Full Year 2012
-- Gold production for 2013 totaled 690,720 ounces compared to 387,076
ounces in the prior year.
Kumtor recorded a 90% increase in ounces
poured year-over-year, while Boroo poured 26% more ounces in 2013 due to
the heap leach operating for the full year.
The lower ounces poured in
2012 were mainly due to the revised mine plan at Kumtor, necessitated by
the accelerated ice and waste movements in the SB Zone.
-- All-in sustaining costs per ounce sold(1) for 2013 was $818.
This
compares to all-in sustaining costs(1) of $1,449 per ounce sold in 2012.
The decrease is mainly due to higher production and sales at both sites
(significantly higher at Kumtor), lower spending on social development
costs and lower mine stand-by costs.
-- All-in costs per ounce sold(1) for 2013 was $920, and includes all cash
costs related to gold production, except for revenue-based taxes in the
Kyrgyz Republic.
This compares to all-in costs(1) of $1,991 per ounce
sold in 2012.
The decrease is mainly due to higher production at both
sites (significantly higher at Kumtor), lower spending on growth
capital(1), partially offset by higher operating costs and higher
spending on capitalized stripping and ice and waste unload costs.
Capital expenditures excluding capitalized stripping costs decreased by
$111.9 million from $209.5 million ($536 per ounce) in 2012 to $97.6
million ($140 per ounce) in 2013 as the Kumtor mine completed the major
portion of its mining fleet expansion during 2012.
-- Revenues for 2013 were $944.4 million, an increase of $283.6 million
compared to the same period of 2012 due to a 78% increase in ounces sold
partially offset by a 20% decrease in the average realized gold
price(1).
Gold sold was 696,818 ounces in 2013 compared to the 390,533
ounces reported in 2012.
The increase reflects higher gold production at
both Kumtor and Boroo.
The average realized gold price(1) for 2013 was
$1,355 per ounce compared to $1,692 per ounce in the same period of 2012
reflecting lower spot prices for gold throughout the year.
-- Cost of sales was $559.2 million in 2013 compared to $383.3 million in
2012, reflecting the significantly higher ounces sold in 2013.
The
volumes in 2012 were significantly reduced as a result of the revised
mine plan at Kumtor which led to the suspension of milling activities
for part of the year.
Cost of sales in 2013 included an increase in DD&A
of $167 million, mainly due to higher ounces sold.
Cost of sales in 2012
also included a charge of $7.2 million representing a metal
reconciliation variance between the gold content estimated in the
stockpiles and the gold actually recovered through processing at Kumtor.
DD&A associated with sales increased to $309 million in 2013 from $142.1
million in 2012 as a result of higher volumes and increased depreciation
for the expanded mobile fleet at Kumtor.
In addition, the Company
incurred higher amortization of capitalized stripping costs at Kumtor of
about $40 million resulting from the adoption of IFRIC 20.
The adoption
of IFRIC 20 resulted in operating costs that were previously expensed in
2012 in the amount of about $40 million being capitalized as stripping
costs in 2012.
The 2012 results have therefore been restated as
described in Note 5 to the 2013 Audited Financial Statements.
These
newly capitalized costs were then amortized during 2013 as the ore in
the related cutback was mined, increasing 2013 DD&A expense by
approximately $40 million.
-- The Company recorded $24.8 million of abnormal mining costs at Kumtor in
2012 (nil for 2013) representing the cost of removing the ice and waste
from the high movement unload zone.
The costs associated with this
unloading activity resulted in a significant amount of mining costs
which did not relate to the production of inventory in the period and
were expensed immediately as abnormal mining costs.
-- Other operating expenses for 2013 totaled $8.3 million compared to $34.3
million in 2012.
The 2013 amount includes spending on social development
programs (corporate social responsibility ("CSR") programs) of $6.3
million ($26.2 million in 2012) and $1.5 million spent on closure costs
for the underground project at Kumtor ($7.8 million in 2012).
CSR
spending in 2013 was $6.2 million in the Kyrgyz Republic and $0.1
million in Mongolia.
In 2012, $24 million was spent on CSR projects in
the Kyrgyz Republic, including $21 million as a contribution to a
national micro-credit financing program, and $2.2 million in Mongolia,
including an additional contribution by Boroo to the Ulaanbaatar
maternity hospital of $1.1 million.
A decision was made in 2012 to close
the underground project at Kumtor which resulted in closure costs being
incurred in 2012 and 2013.
-- Exploration expenditures in 2013 were $29.6 million compared to $37.9
million in 2012.
Exploration expenditures in 2013 decreased from 2012
mainly due to the suspension of all exploration programs in the Kyrgyz
Republic in the second half of 2013.
-- The Company recorded a charge of $180.7 million in the fourth quarter of
2012 to reflect the de-recognition of the underground assets at Kumtor
following the decision to expand the open pit, as announced on November
7, 2012.
The larger open pit is expected to partially consume the
declines rendering them unusable for future mining activities.
-- Cash provided from operations for 2013 totaled $483.9 million compared
to $173.4 million in 2012, primarily as a result of significantly higher
earnings at both operations in 2013, especially at Kumtor, partially
offset by an increase in working capital levels.
-- Capital expenditures spent and accrued in 2013 were $376.6 million as
compared to $464.0 million in the prior year.
Sustaining capital(1) in
2013 was $58.2 million (including $49.7 million at Kumtor and $7.9
million at Boroo), compared to $44.0 million in 2012 (including $40.8
million at Kumtor and $2.6 million at Boroo).
Growth capital(1),
excluding capitalized stripping, was $39.9 million in 2013, compared to
$168.4 million the prior year, primarily reflecting $39.2 million of
spending at Kumtor mainly on the infrastructure relocation project
($19.1 million), fleet expansion ($17.7 million) and spending at
Gatsuurt of $0.7 million for maintenance of the site.
Capitalized
stripping in 2013 totaled $278.6 million ($201.3 million cash), as
compared to $251.7 million ($196.7 million cash) in the prior year,
spent on stripping activities in cut-backs and in the unload areas at
Kumtor.
Operations Update - Summary of Key Operating Results
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Three Months Ended Year Ended
December 31 December 31
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% %
Kumtor Operating Results 2013 2012(4) Change 2013 2012(4) Change
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Revenue - $ millions 448.9 317.8 41% 810.9 533.6 52%
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Cost of sales - $
millions (1) 255.1 140.0 82% 473.0 306.9 54%
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Cost of sales - $/oz
sold (3) 722 753 (4%) 786 974 (19%)
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Tonnes mined - 000s 46,866 38,185 23% 176,693 147,610 20%
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Tonnes ore mined - 000s 4,194 4,463 (6%) 7,289 4,955 47%
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Tonnes milled - 000s 1,460 1,547 (6%) 5,596 4,756 18%
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Average mill head grade
- g/t 8.88 5.13 73% 4.26 2.79 53%
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Recovery - % 84.1 77.7 8% 79.3 75.6 5%
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Gold produced - ounces 348,130 189,438 84% 600,402 315,238 90%
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Gold sold - ounces 353,252 185,936 90% 601,887 314,987 91%
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Average realized gold
price(3) - $/oz sold 1,271 1,709 (26%) 1,347 1,694 (20%)
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Adjusted operating costs
(3) - $/oz sold 217 322 (33%) 357 727 (51%)
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All-in sustaining costs
(3)- $/oz sold 388 618 (37%) 775 1,483 (48%)
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All-in costs (3)- $/oz
sold 407 783 (48%) 853 2,064 (59%)
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All-in costs including
taxes (3)- $/oz sold 585 1,023 (43%) 1,042 2,301 (55%)
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Capital expenditures
(sustaining) - $
millions 9.6 10.5 (9%) 49.7 40.8 22%
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Capital expenditures
(growth) (2) - $
millions 5.8 24.0 (76%) 39.2 167.7 (77%)
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Boroo Operating Results
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Revenue - $ millions 20.0 50.6 (61%) 133.4 127.2 5%
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Cost of sales - $
millions (1) 16.7 27.9 (40%) 86.2 76.4 13%
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Cost of sales - $/oz
sold (3) 1,064 948 12% 908 1,011 (10%)
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Tonnes mined - 000s - - - 6,195 (100%)
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Tonnes mined heap leach
- 000s - - - 143 (100%)
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Tonnes stacked heap
leach - 000s 271 456 (41%) 2,644 456 480%
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Tonnes leached - 000s 560 904 (38%) 4,248 904 370%
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Tonnes milled - 000s 593 581 2% 2,394 2,382 1%
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Average mill head grade
- g/t 0.80 2.07 (61%) 1.12 1.32 (15%)
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Recovery - % 58.3 58.3 0% 57.6 64.0 (10%)
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Gold produced - ounces 14,104 29,878 (53%) 90,318 71,838 26%
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Gold sold - ounces 15,702 29,425 (47%) 94,931 75,546 26%
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Average realized gold
price(3) - $/oz sold 1,272 1,720 (26%) 1,406 1,684 (17%)
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Adjusted operating costs
(3) - $/oz sold 901 641 41% 683 832 (18%)
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All-in sustaining costs
(3)- $/oz sold 931 655 42% 765 946 (19%)
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All-in costs (3)- $/oz
sold 931 672 39% 765 952 (20%)
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All-in costs including
taxes (3) - $/oz sold 934 892 5% 899 1,108 (19%)
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Capital expenditures
(Boroo) (2) - $
millions 0.4 0.7 (43%) 7.9 2.9 172%
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Capital expenditures
(Gatsuurt) - $ millions 0.1 0.1 0% 0.7 0.4 75%
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(1) Cost of sales excludes regional office administration.
(2) Excludes capitalized stripping.
(3) Adjusted operating costs per ounce sold, all-in sustaining costs per
ounce sold, all-in costs per ounce sold, all-in costs (including taxes)
per ounce sold, as well as average realized gold price per ounce sold
and cost of sales per ounce sold, are non-GAAP measures and are
discussed under "Non-GAAP Measures".
(4) The 2012 comparative period was restated as a result of the adoption of
IFRIC 20.
Kumtor
At the Kumtor mine, gold production was 348,130 ounces in the fourth quarter of 2013, which represents 58% of the mines annual production, compared to 189,438 ounce in the same quarter in 2012.
The increase in production for the fourth quarter of 2013 was due to processing high-grade SB Zone ore available from cutback 15.
During the fourth quarter of 2013, Kumtor fully mined the remaining 4.2 million tonnes of ore in cut-back 15 at an average grade of 4.46 g/t.
Mill head grades for the fourth quarter of 2013 were 8.88 g/t with a recovery of 84.1%, versus 5.13 g/t and a recovery of 77.7% for the same quarter in 2012.
Cost of sales per ounce sold(1) for the fourth quarter of 2013, which includes the impact of DD&A, decreased to $722 per ounc