(Kitco News) - The still-new chief executive of Centerra Gold Inc. (TSX: CG) is enthusiastic about taking over a company that he says is on track to double its production to 1 million ounces of gold in half a decade.
The Canadian company generated cash flow of $158.4 million in 2015 from its Kumtor mine in the Kyrgyz Republic, which is considered the largest foreign-owned mine in the former Soviet Union. Meanwhile, the company is working to advance projects in Turkey, Mongolia and Canada. While doing so, Centerra had a cash balance sheet of $542 million as of the end of 2014.
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Scott Perry
Chief Executive Officer |
Scott Perry, who succeeded Ian Atkinson as chief executive officer in November, outlined the status of those projects during an interview with Kitco News Thursday. He spoke the day after Centerra released its fourth-quarter and full-year 2015 earnings report, as well as announcing a quarterly dividend of 4 Canadian cents per share payable on March 24 to shareholders of record on March 10.
“We’ve got three key assets that we are moving forward,” Perry said. “As these assets come to fruition over the next five years, it’s going to double the company’s profile by which we should be producing 1 million ounces a year.”
Output in 2015 was 536,920 ounces, although this was down from 620,821 in 2015 due to lower grades at Kumtor and as mining at Boroo in Mongolia winds down.
The new projects are in several parts of the world, allowing Centerra to gain more diversification geographically.
“Probably the most important for the short-term future is kst,” Perry said. He described this as a conventional open-pit operation in Turkey.
“It’s inexpensive in terms of capital,” Perry said, estimating the cost of construction around $221 million.
The first gold pour is expected in the third quarter of 2017, and Perry called this a “high rate-of-return project of around 43%.” Expectations are for annual output to average around 110,000 ounces per year at an all-in sustaining cost of less than $500 per ounce. The estimated mine life is eight years, although Perry added that company officials are “cautiously optimistic” that exploration efforts will expand the lifespan.
Officials are looking forward to advancing the Gatsuurt project in Mongolia, since they can utilize an already-existing mine, Perry explained. Reserves have been depleted 55 miles away at Boroo, but the infrastructure remains in place. Thus, the Boroo mill can be utilized whenever the open-pit Gatsuurt deposit comes on line. Gatsuurt passed one hurdle last month when the Mongolian Parliament passed a resolution setting the state ownership interest.
“The key thing we’ve been waiting on is to negotiate our investment and development agreements with the government,” Perry explained. “Those negotiations are taking place as we speak. Once the agreements are finalized, which should take place this year, thereafter it’s a very quick 12 to 18 months for us to bring Gatsuurt into production.”
The company is in the process of finalizing an updated technical report for the project. In the meantime, Perry said, officials have been expecting annual output of some 150,000 ounces per year with an AISC below $1,000.
Meanwhile, Perry characterized the Greenstone gold property in Ontario as “one of the largest undeveloped open-pit gold mines in Canada.” Centerra is a 50-50 joint-venture partner on this project with Premier Gold Mines Ltd. The resource estimate is more than 4 million ounces, Perry noted.
A final feasibility study – which will include production, capital costs and more – is expected somewhere around the middle of 2016, Perry said.
“This is obviously in a top-tier jurisdiction,” added the CEO.
By Allen Sykora of Kitco News; asykora@kitco.com