PROFIT & LOSS

Centerra slashes guidance after 'messy quarter'

Canada-based miner Centerra Gold has slashed guidance and outlined a near-US$1 billion non-cash loss, given the loss of control of its flagship Kumtor gold mine in the Kyrgyz Republic.

 Centerra Gold achieved record throughput in the June quarter at its Mount Milligan mine in Canada

Centerra Gold achieved record throughput in the June quarter at its Mount Milligan mine in Canada

President and CEO Scott Perry said the company had "derecognised" the assets and liabilities of Kumtor and recorded a loss on the change of control of $926.4 million in its second quarter results.

Kyrgyz seized control of the circa 500,000 ounce per annum Kumtor in May, citing what Centerra dubbed "groundless" corruption, tax and environmental claims, prompting the miner to seek international arbitration and take legal action in the US and Canada.

Centerra yesterday cut 2021 gold guidance to 270,000-310,000oz and reduced all-in sustaining costs on a by-product basis to $750-800/oz.

This compares with the original forecast of 740,000-820,000oz of gold and AISC of $850-$900/oz. Copper guidance was maintained at 70-80 million pounds.

Centerra said it was on track to achieve 2021 guidance at Oksut in Turkey and Mount Milligan in Canada, where it did not expect an impact from forest fires in the province.

It reported earnings from continuing operations of $33 million.

The net loss of $851.7 million compared with net earnings of $80.7 million a year earlier.

Perry said Centerra continued to be "financially and operationally strong".

It finished the quarter debt-free, with $882.9 million in cash and declared a C7c quarterly dividend.

"A generally messy quarter, with Kumtor being re-classified as a discontinued operation following its nationalisation by the Kyrgyz government and accounting for copper hedges rendering Mount Milligan's metrics not directly comparable to our estimates," Canaccord Genuity analyst Dalton Baretto said.

"Our view remains that the most probable outcome is the cancellation of [state-owned] Kyrgyzaltyn shares in exchange for the loss of Kumtor."

He said there was "some urgency" for the company to add one or more producing assets via M&A, given its cash position and Canaccord's forecast drop in consolidated gold production from Centerra's existing asset base from about 400,000oz in 2022 to circa 250,000oz in 2024.

Canaccord maintained a speculative buy rating but lowered its price target from $12 to $11.50.

Centerra shares (TSX: CG) are trading near a one-year low, closing down almost 2% yesterday to $9.04 to value it at $2.68 billion (US$2.1 billion).

A growing series of reports, each focused on a key discussion point for the farming sector, brought to you by the Kondinin team.

A growing series of reports, each focused on a key discussion point for the farming sector, brought to you by the Kondinin team.

editions

Mining Journal Intelligence Investor Sentiment Report 2024

Survey revealing the plans, priorities, and preferences of 120+ mining investors and their expectations for the sector in 2024.

editions

Mining Journal Intelligence Mining Equities Report 2023

Access an exclusive, inside look on the quarterly mining IPOs and secondary raisings data and mining equities performance tables with an annual Stock Exchange Comparisons supplement.

editions

Mining Journal Intelligence World Risk Report 2023 (feat. MineHutte ratings)

A detailed analysis of mining investment risks across 121 jurisdictions globally, built on 11 ‘hard risk’ metrics and an industrywide survey.

editions

Mining Journal Intelligence Global Leadership Report 2023: Social licence

Gain insights into social licence trends and best practices from interviews with 20+ top mining company executives and an industrywide survey.