Thursday October 31, 2013 1:53 PM
(Kitco News) - Centerra Gold Inc. (
) released improved year-on-year third-quarter financial and
operational results but the focus remains on the company's latest
issues with its Kumtor operation in Kyrgyzstan.
The company posted an improved net loss of $1.8 million, or 1
cent per share, compared to a 2012 third-quarter net loss of $33.7
million, or 14 cents per share. Gold production jumped 166% to
113,840 ounces compared to 42,723 ounces year-over-year.
During the quarter, Kumtor produced 90,289 ounces of gold, while
the company's Boroo production came in at 23,551 ounces of gold
during the same period.
"Kumtor, we always said from the start of that the second and
third quarters were the lower production quarters," said Ian
Atkinson, president and chief executive officer of Centerra, in a
telephone interview with Kitco News. "So as we continue to strip
down into the high grade portion of the zone, we needed access to
that on schedule so that we can now meet our production for Kumtor
for the year."
The mine is expected to produce between 550,000 and 600,000
ounces of gold in 2013, half of that in the fourth quarter alone,
Centerra also upped their expected 2013 production guidance to
between 635,000 to 685,000 ounces of gold, based on Boroo's
continuing strong performance, compared to the previous guidance of
615,000 and 675,000, which had also been raised in the second
However, the current news dominating Centerra is focused on the
Kyrgyz parliament recently nixing a memorandum of understanding
(MOU) between the Kyrgyz government and the company.
"It's a shame Centerra gets overshadowed with the political
issues around Kumtor," said Atkinson.
The MOU between Centerra and the Kyrgyz government is a
potential "restructuring transaction under which Kyrgyzaltyn JSC
would exchange its 32.7% equity interest in Centerra and $100
million payable to Centerra by way of adjustments to future joint
venture distributions otherwise due to Kyrgyzaltyn for a 50%
interest in a joint venture company that would own the Kumtor
Project," the company said in a release.
"As analysts have said, it is slightly dilutive to Centerra as a
whole, but we think that it is a very fair agreement that meets a
large number of the needs for the Kyrgyz government that were
outlined in the state commission reports," Atkinson said. "We think
we'll get shareholder support for it and that's the key for us, the
shareholders - and I think we would have support on the basis of
the current MOU, but any radical change from that, I think would be
a challenge to that fairness test."
The Kyrgyz parliament rejected the MOU last week; instead, the
government wants to improve the Kyrgyz Republic's position,
increasing its interest in the joint venture project to no less
Centerra has been operating Kumtor for 16 years and has had a
presence in the country for 20 years. Kumtor is responsible for 12%
for the country's GDP, is the country's largest employer and the
country's largest single tax payer.
Atkinson said that the company will continue trying to get the
government to explain the positive parts of the MOU to the Kyrgyz
Rounding out the financial and operational highlights was
revenue for the third quarter, increased by 125% to $155 million
from $68.8 million year-on-year. Cost of sales was $111.7 million
in the third quarter of 2013, compared to $53.9 million in last
year's comparative quarter, the company said.
Operating cash costs per ounce produced in the third quarter
came in at $699, a drop from $1,093 per ounce year-on-year.
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By Alex Létourneau of Kitco News firstname.lastname@example.org