Q4 2019 Centerra Gold Inc Earnings Call

Mar 26, 2020 PM UTC 查看原文
CG.TO - Centerra Gold Inc
Q4 2019 Centerra Gold Inc Earnings Call
Mar 26, 2020 / 02:00PM GMT 

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Corporate Participants
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   *  Daniel Richard Desjardins
      Centerra Gold Inc. - VP & COO
   *  Darren J. Millman
      Centerra Gold Inc. - VP & CFO
   *  John W. Pearson
      Centerra Gold Inc. - VP  of IR
   *  Scott Graeme Perry
      Centerra Gold Inc. - President, CEO & Director

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Conference Call Participants
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   *  Adam Philip Graf
      B. Riley FBR, Inc., Research Division - Senior Mining Analyst & MD
   *  Bryce Adams
      CIBC Capital Markets, Research Division - Analyst
   *  Daniel McConvey;Rossport Investments;Analyst
   *  Terence Ortslan;TSO & Associates;Analyst
   *  Trevor Turnbull
      Scotiabank Global Banking and Markets, Research Division - Analyst

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Presentation
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Operator   [1]
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 Greetings, and welcome to the Centerra Gold 2019 Fourth Quarter and Year-End Results Conference Call and Webcast. (Operator Instructions)

 This conference is being recorded Thursday, March 26, 2020. And now I'd like to turn the conference over to John Pearson, Vice President, Investor Relations. Please go ahead.

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 John W. Pearson,  Centerra Gold Inc. - VP  of IR   [2]
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 Thank you, operator. I'd like to welcome everyone to Centerra Gold's 2019 Fourth Quarter and 2019 Year-End Conference Call. Our summary slides are available on Centerra Gold's website, which will accompany each speaker's remarks. Today's call is open to all members of the investment community and media. And following the formal remarks, the operator will give the instructions for asking a question, and then we'll open the phone lines to those questions. Please note that all figures are in U.S. dollars unless otherwise noted.

 So today, all of us are dialing in remotely to this call. And joining me on the call is Scott Perry, President and Chief Executive Officer; Darren Millman, Chief Financial Officer; Dan Desjardins, Chief Operating Officer; and Yousef Rehman, our General Counsel.

 I would also like to caution everyone that certain statements made on this call today may be forward-looking statements, and as such, are subject to known and unknown risks, which may cause actual results to differ from those expressed or implied. Also, certain of the measures we will discuss today are non-GAAP measures and I refer you to our description of non-GAAP measures in our combined news release and MD&A. For a more detailed discussion of these material assumptions, risks and uncertainties, please refer to our news release and the MD&A issued this morning, along with our audited financial statements and notes and to our other filings, which can all be found on SEDAR and the company's website. And with that, I'll now turn the call over to Scott Perry. Thanks.

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 Scott Graeme Perry,  Centerra Gold Inc. - President, CEO & Director   [3]
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 Thanks, John, and good morning, everyone, and thanks for joining our call. I'm just going to start off by referencing Slide #5 of the accompanying earnings conference call presentation that John mentioned is available on our website. So here on Slide 5, just starting off with safety, as we usually do. Unfortunately, our performance in 2019 was overshadowed by two troubling safety incidents that we experienced at Kumtor in December 2019 and February of this year. This resulted in a loss of 3 of our employees. We, Centerra, sincerely apologize to the families, friends and colleagues in these tragic incidents, and we are fully committed to understanding and learning from the contributing circumstances so that we can take all necessary steps to prevent such tragic accidents from happening in the future. Myself and the senior leadership team, we remain absolutely steadfast in our resolve to ensure that everyone who works at operations can do so safely and will return home safely each and every day. There's nothing more important.

 Moving on to the second bullet point here. One of the key milestones during the year was closing the strategic agreement with the government of Kyrgyzstan. That was closed in the month of August of 2019, and we think that's going to result and really underpin a much improved business environment for Kumtor moving forward. On the back of this agreement closing, shareholders would note that we've been increasingly investing in exploration at Kumtor. We believe those exploration investments are paying dividends, and we believe we're seeing the success of that in terms of some of the recent resource increases that we've announced at Kumtor.

 Third bullet point here, just on Öksüt, which is transitioning into being our third operating asset. Very important for us strategically. Obviously, this is going to represent a third source of gold production in the company. It's going to add to our diversification moving forward, and we think it's going to favorably complement our existing operating asset base. You can see at the end of the year, we're at 89% completion. We've actually -- and then subsequently, we actually called out our first goal in January this year.

 In terms of the operating results, we had a very strong year at both operating assets in terms of Kumtor and Mount Milligan. You can see in the fourth bullet point here, we produced in excess of 780,000 ounces of gold company-wide, and more than 70 million pounds of copper. At a company-wide level, gold production is higher than our level of guidance. And so I think it really speaks to the strong operating momentum that we saw during the year.

 The next bullet point, just in terms of our all-in sustaining cost. Given that strong level of company-wide gold output and just the economies of scale that that provides in terms of such a high denominator, we saw our all-in sustaining cost finish the year at $708 per ounce, which again, was favorably lower than our company-wide guidance.

 The next bullet point here, just on Mount Milligan. Shareholders may recall that back when we announced our Q3 financial results, one of the things that we had reassessed was the carrying value of the Mount Milligan operation. What we were seeing there was our productivities were lower, our unitary costs were higher in our previous life-of-mine, 43-101 technical report in Mount Milligan. And then we used that to reevaluate what is the economic cut-off grade at Mount Milligan. And once we had that lower economic cut-off grade, what we saw was a contraction in terms of the size of the pit that shortened the mine life and that's what underpinned us revising the carrying value back in Q3 by some $230 million.

 That's a significant accounting charge. So when you look at the next bullet point, in terms of our bottom line, the net loss, obviously, that reflects the Mount Milligan carrying value adjustment. And when we look at our adjusted earnings, you can see company-wide, we came in at $181.5 million. As I mentioned, the carrying value adjustment is an accounting adjustment, it's a noncash flow item. And so when you look at the last 2 bullet points here, we see in terms of the company-wide free cash flow performance is very strong. Company-wide, it was positive $35 million, which includes $240 million from Kumtor, $27 million from Mount Milligan. I think a strong level of performance, given that for the entirety of the year, we were also funding construction at Öksüt, which is now our next operating gold mine in Turkey.

 Last bullet point here, just given the significant level of positive free cash flow that we have been generating in the business, we've been quite focused on increasing the strength of our balance sheet and paying down debt. You can see in totality here in 2019, we paid down $111 million worth of debt. Even subsequent to this, in January of this year, we've actually now retired and discharged the project construction finance facility that we had in Turkey on our Öksüt project. We've actually paid that down here in the new year. But in terms of the 2019 year-end balance sheet, we actually finished with a debt net of cash position of $35 million. So I think that makes very strong sort of liquidity profile moving forward.

 I'll just move on to the next slide here on Slide 6, and what we're looking to do at this slide is talk more to 2020, so the current year that we're in now. Obviously, first focus, #1 priority is safety. Myself and the senior executive leadership team have been strategizing, deliberating quite a lot on what we need to do to improve our business to ensure that we're all doubling down on our commitments to Work Safe - Home Safe and as best possible, ensuring that we have a culture and an operating environment of zero harm. A number of initiatives and measures have been identified, and we're getting going on each of those initiatives, and we'll be reporting back on that in due course.

 The next bullet point here, the second bullet point. Extraordinary times that we find ourselves in with regards to COVID-19. I just wanted to just spend a bit of time on this. First and foremost, the safety of our employees remains our top priority during this outbreak, and we, Centerra, are taking actions based on the best available information we have. During these extraordinary times, Centerra is prioritizing the health, safety and wellbeing of all of our employees, contractors, communities and other stakeholders.

 To date, Centerra has experienced no operating or production disruptions nor any supply chain interruptions or impact. However, one thing you will note in our MD&A and our news release is the company has voluntarily decided to undertake a significant reduction of manpower and operations at the Öksüt project in Turkey. This will commence on March 31 for an initial period of 2 weeks. This decision was taken in response to recent Turkish government sort of advisory initiatives aimed at reducing the spread of COVID-19. The reduction will result in a suspension of open pit mining activities, though limited crews will remain on-site to continue placing ore in the heap leach pad to continue operating the ADR plant and to perform other essential site services.

 At Öksüt, we have over 1 million tonnes of stockpiled ore and 150,000 tonnes of crushed ore material that is available for staffing. Öksüt has prepared detailed plans in case of further reduction or cessation of operations becomes necessary.

 Just with regard to Kumtor and Mount Milligan, these operations continue to run for the time being. And in the case of Kumtor, it's actually with the specific support of the Kyrgyz Republic Government. Each site has implemented a number of proactive measures to prevent the spread of COVID-19 and to ensure the safety of our employees, contractors, communities and other stakeholders.

 Likewise, both Kumtor and Mount Milligan also have detailed plans in case a reduction or cessation in operations becomes necessary. In addition to these precautionary measures, our operating mine sites have been actively assessing the resiliency of their supply chain. They've been increasing their mine site inventories of key materials, and developing contingency plans to allow the continued operations. We want to note that this situation is fluid, and it's been changing rapidly. The measures enacted reflect the company's best assessment at this time. They will remain flexible and will be revised as necessary or advisable or as is recommended by the public health and government authorities.

 With that said, just moving on to the third bullet point here. You can see in terms of our recently released guidance, great guidance for gold production, company-wide basis as high as 780,000 ounces of gold, as well as copper production of 85 million pounds from Mount Milligan. In terms of that 780,000 ounces, what we're looking to do this year is increasingly showcasing a higher level of diversity as Öksüt transitions from construction into operations.

 Fourth bullet point here, I mentioned the first gold pour, at Öksüt, that was announced on -- that took place on January 31. That was an important milestone. We're expecting to be declaring commercial production in Q2 of this year. I think what you're going to see in terms of the annual profile, you see a modest level of gold production from Öksüt in Q1. But as we ramp up operations, you'll see progressive increases quarter-over-quarter.

 As noted here, we've been -- mining has been underway for some time now, for more than 9 months. And we continue to see good reconciliations. It's actually been positive in terms of the underlying reconciliation of our ore tonnage and ore grade in the underlying reserve rock model. One of the announcements today was the Board has declared a dividend of CAD 0.04 per share. Again, that's based on the strong cash flow performance and the strength of our balance sheet in 2019.

 We've also today announced that we've released our new comprehensive 43-101 technical report for Mount Milligan. A lot of detail there that's available on SEDAR now. Dan, our COO, will touch on this in a little bit more detail. But I'd note the commodity price assumptions that we employed in that document relative to the current market conditions, they're somewhat conservative. Even so, we are seeing meaningful sort of cash flow and ongoing profitability from the mine moving forward.

 One of the -- the third bullet point here, one of the key highlights with our news flow is the significant increase in resources that we've had at Kumtor. You can see as illustrated here, our measured and indicated resources grew by 3.3 million ounces, which I think is attributable to the ongoing investment that we've been making in exploration at Kumtor in 2018, 2019. It's a significant increase, and in terms of our finding costs, we've been delineating these resource ounces at a cost as low as $6 per ounce.

 What we're now focused on is the second last bullet point here. We're going to be looking to finalize an updated 43-101 for Kumtor. And hopefully, we'll be looking at bringing in a material amount on this new resource into reserve category. And hopefully, that could underpin a further extension in Kumtor's open pit asset life moving forward. So I think that's an important catalyst and an important development that we'll be working on in the back half of this year.

 This is the last item of note, a lot of variability that we're seeing worldwide. Gold prices are strong. But in terms of our businesses, our assets in the jurisdictions that we operate in, we are benefiting from some favorable devaluations in terms of exchange rates, likewise, in terms of the world oil price regime, if you will, like what we're paying in terms of our diesel fuel prices is significantly lower than what we were planning when we commenced the year, so this is all making for a -- hopefully making for a favorable headwind -- sorry, tailwind.

 Just on Slide 7, this is going to be on the financials. The waterfall chart here on the top left, this is our 2019 results. So you can see Kumtor and Mount Milligan combined contributed $329 million positive free cash flow. The red columns of de-commenced just illustrate how we deployed that cash during the year. You can see in terms of the first 3 red columns, the repayment of debt was a key priority. The second one, the $63 million, that was the settlement expense associated with the closing of the strategic agreement, and then you can see that we funded $87 million worth of construction cost at Öksüt. When I look at this chart and I envision what this chart is going to look like in 2020, what I would like to note is the green column should be benefiting from the favorable gold price environment that we're seeing. And when it comes to debt repayments, settlement expenses and Öksüt spend, these items largely are noncontinuing when you think about our business moving forward.

 Lastly, the chart there on the bottom left is just our net debt sort of continuity profile and as you can see, just on the back of the significant cash flow and the dedicated debt repayments, we've been increasingly approaching a -- transitioning into a positive net cash position. We're still in a net debt position, as at the end of 2019, it was some $35 million, but trending favorably.

 Just on Slide 8. Just in terms of our environmental, social and governance profile, you can see we've listed a number of attributes here. I've already spoken in detail of safety, the second bullet point in terms of the license to operate, we haven't got any business interruption incidents for some 78 months. There was no environmental incident during the quarter. Increasingly, now we're rolling out different measures and initiatives focused on gender diversity in terms of our Leading from Within programs. Also this year, we're rolling out our -- looking to be a diverse and inclusive organization. And we've got our internally branded People First program that we're rolling out this year.

 And the last bullet point, which I'll use to transition on to Slide 9, we're a member of World Gold Council. The World Gold Council recently released their responsible gold mining principles. We're a signatory to these principles. And you see in the third bullet point, we actually volunteered to have Kumtor participate in a pilot walk-through of this program back in 2019. That was a very successful program in terms of there being no major gaps or noncompliances. And we're now working on this in earnest. And here in 2020, we'll be looking to roll this out to all of our other operating sites as well.

 With that, I'm now going to look to pass the call over to our Chief Operating Officer, Dan Desjardins. So with that, Dan, please?

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 Daniel Richard Desjardins,  Centerra Gold Inc. - VP & COO   [4]
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 Thank you, Scott. Good morning, everyone. Before I refer to the slides, I'd like to talk about safety. We continue to focus on our operational safety with Work Safe - Home Safe, Visible Felt Leadership, critical controls. And we had some successes in terms of substantially reducing our lost time incidents. But our safety performance was really hurt by the tragic events at Kumtor in December and then in mid-February. We are working hard to understand where we're failing on this area and -- so everyone can go home safe every day.

 In terms of safety milestones in 2019, even Kumtor last summer celebrated 1 year without a lost time incident. They approach 8 million man-hours. At Mount Milligan, they had a similar achievement in October. Turkey, we were under construction for the whole year, and they're now approaching 2.2 million man-hours without a lost time accident and approaching 1 year LTI free.

 Moving to Slide 7. At Kumtor, in Q4, we produced 148,000 ounces at $657 an ounce, and in the full year, we exceeded 600,000 ounces with 600,201 ounces at an all-in sustaining cost of $598, which bettered guidance.

 Notably, we moved forward a 2-week mill shutdown for maintenance from January 2020 (sic) [December 2019] -- into December of 2019 (sic) [January of 2020]. And we brought that -- the plant back up fully online at December 30. Due to the tragic waste dump failure on December 1, we did no mining in December and not much in January, but we did receive all our necessary permits for 2020 operations, and we did receive a restart order on January 22. For the year, Kumtor mined 13% less tonnes, but it still achieved an impressive dollar per tonne cost of $1.26.

 In the plant, the recovery was also very good at 83.5% with a feed grade of 3.69 grams per tonne, which was better than planned. Kumtor generated $104 million free cash flow in the fourth quarter and $240 million, which includes $63 million payment for -- to the Kyrgyz Republic settlement.

 At Mount Milligan, the full year gold production was 183,000 ounces at $828 an ounce. This exceeded the gold guidance, and we met our copper guidance of 71 million pounds produced. The mill throughput did average 45,000 tonnes per day calendar day, but we did do 51,000 tonnes per day per operating day. We did generate $27 million of free cash flow in 2019 at Milligan.

 We did much better with water in the second half of 2019. And in 2020 to date, we had a wetter fourth quarter as well as we did access additional underground aquifer water, which kept our inventory of water level quite level through the winter where we did not affect our ability to run the plant at full volumes. We have prepared to access our permitted surface water, so we'll be going after that starting April 1 when the spring melt starts in order to increase our water inventory. The plant maintenance of Milligan continues to improve, therefore, we're giving steady throughput, and we -- that is planned in 2020.

 At Öksüt, as Scott said, we are 89% completed at the end of the year, and we did do our first gold pour in January. If you go to the next slide, Slide 12, at Öksüt, we are ramping up to commercial production with our second gold pour yesterday, and we are planning one more in the month. We are still working through issues in our primary crusher system, but we have supplemented that with portable crushers. The ADR is running as designed, and we continue to increase the irrigation on the heap. Unfortunately, we've had a number of severe weather delays caused by higher than normal levels of snow, and a large number of mining days were lost with zero visibility due to fog. This has put us slightly behind our plans but we have the equipment in place to make up the shortfall once we have drier weather.

 At Mount Milligan, we are working closely with our partners and regulators, and we expect to have ample water for the full production for the year. Mount Milligan is focused on achieving consistent and improved production through maintenance and operational controls. We have also begun to identify some substantial cost savings by converting genset power into BC Hydro power. We've flattened our management structure, and we're saving on the fresh headwater pumping and other CI initiatives. With the 3 million increase in the open pit resources, we are now working on an updated Kumtor technical 43-101, and that should be completed in the second half of 2020. We continue to spend on brownfields exploration, a total of $32 million in 2020 is budgeted, specifically $20 million at Kumtor.

 If you go to Slide 13, these are photos of the Öksüt facility, pit, leach pad and ADR plants in the fourth quarter of 2019. Due to the COVID-19, we are planning a temporary shutdown, as Scott mentioned, for 2 weeks at Öksüt, but we will continue to have skeleton staff on-site to continue safe operations and stacking ore in the heap, irrigating and running the ADR plant as well as provide essential care and maintenance services.

 On the next slide, Slide 14, as announced, we have now completed the technical report and filed it today for Mount Milligan. The new plan now shows a 9-year mine life. The decrease in the reserves was driven by 2 main factors. First, we did identify escalating costs related to water sourcing, increased maintenance, increased labor component and lower processing throughput as compared to what was previously reported in the 2017 technical report. These factors have resulted in an estimated NSR cutoff increase to $9.55 a tonne from $8.12.

 The second is the resource model was updated, incorporating an additional 122 drill holes, and metallurgical recoveries were reestimated. This resulted in a revised ultimate open pit design and associated reserve decrease. Teams have been mobilized in Q3 2019 to target both cost reductions and improve recoveries. One example of potential future improvement is a small staged flotation reactor pilot plant that is planned to be commissioned in the second half of this year to validate some test work that we have taken to improve both copper and gold recoveries.

 It should be highlighted that Milligan's open pit optimization plan used a gold price of $12.50 per ounce and copper at $3 and exchange rate of $1.25 in the mineral reserve estimate. Our technical team at Mount Milligan will continue to look for opportunities to further optimize the mine plan with a focus on gold ore content and with the objective to lower the strip ratio, which increased since the previous technical report. The cash flow over the 9 years, as you can see, is a net free cash flow undiscounted basis of $398 million.

 On Slide 15, for several of you the -- on the call that have visited the Kumtor mine site with me in my previous role as President of Kumtor, you'll be familiar that Kumtor's specific objective back in 2018 was to extend the mine life. Thanks to the efforts of Kumtor's team, exploration geologists, the corporate technical team, we are one step closer to achieving this goal. Kumtor's measured and indicated resources increased by 3.3 million ounces to 6.3 million contained ounces. That's exclusive of our reserves. This is from the inclusion of drilling results from 2018 and 2019. What is notable is that this represents an average finding cost of, as what Scott said, $6 per ounce.

 I would also draw your attention to the measured gold resource grade, which is now an average of 4.1 grams. In 2019, Kumtor averaged our mill feed grade at 3.69, and we generated significant cash flow at an average gold price of $13.69. We are working on detailed mining plans now with a view of publishing an updated technical report on Kumtor in the second half of this year.

 Moving to Slide 16. A substantial amount of drilling was focused in the Hockey Stick area. This is on the east side of the pit, and it extends the Central Pit to the south, as can be seen in that shaded area.

 On Slide 17, we also updated the resource model for the whole Central Pit and Sarytor/Southwest. This further contributes to part of the resource increase.

 Now I'll turn over the call to Darren.

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 Darren J. Millman,  Centerra Gold Inc. - VP & CFO   [5]
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 Thanks, Dan, and good morning, everyone. For those following on our investor deck, I'm going to be speaking to initially Slide 19. Centerra recorded $312 million in revenue during the quarter. This consisted of $238 million in gold sales, $32 million in copper sales and $42 million from the molybdenum business unit. For the full year, Centerra recorded $1.4 billion in revenue. This consisted of $1 billion in gold sales, $141 million in copper sales and $213 million from the molybdenum business unit.

 In 2019, we sold in excess of 780,000 ounces of gold, a 10% increase year-on-year. We also sold 67.4 million pounds of copper, a 52% increase as the Mount Milligan team were able to increase mill availability, with 21% more tonnes processed during the year. This increase is attributable to preventative maintenance, together with the increased water levels. The mill head grade was also 25% higher year-on-year at 0.26% copper grade.

 As Scott mentioned earlier, the company exceeded 2019 gold production and met copper production for the year. And net loss of $93 million was recorded for the year. This included 3 components: the $231 million noncash impairment recorded in Q3 on the Mount Milligan asset, noting no further adjustments required with the delivery of the Mount Milligan technical report. It also included the additional $10 million charge associated with the Kyrgyz Republic settlement also recorded in Q3.

 The final significant adjustment was the $34 million noncash ARO adjustment at the Thompson Creek mine. The expenses associated with the movement in the underlying discount ore rate with reference to U.S. treasury bond rates. There is no change to the underlying activities required to mediate this property.

 Just moving on to Slide 20. Our adjusted net earnings after factoring in these 3 items resulted in a profit of $181 million, a 53% betterment year-on-year. This equates to an adjusted earnings per share of $0.62 for the year. From a cost perspective, Centerra ended the year with a final quarter recording an all-in sustaining cost of $799 per ounce. This equates to $708 all-in sustaining costs per ounce for the full year. It is important to highlight that both operations ended the year with a significant value on surface that will be realized in 2020.

 Kumtor finished the year with approximately 1 million contained gold ounces on surface in stockpiles, of which approximately 70% is planned to be processed in 2020. Mount Milligan ended the year with just under 2 shipments of copper-gold concentrate on hand, which contained 85,000 ounces of gold and 19.2 million pounds of copper. At an asset level, Kumtor recorded an all-in sustaining cost of $598 per ounce for the year, while Mount Milligan recorded all-in sustaining cost of $828 per ounce for the full year.

 Adjusted consolidated cash provided by operating cash by operations was $397 million, a 78% increase in comparison to the prior year. The adjustment relating to the settlement of the Kyrgyz payment. For the 2009 (sic) 2019 year, Centerra generated $35 million in free cash flow. It is important to highlight that as Centerra moves into 2020, where we're also adding Öksüt to our cash flow generation, complementing both the established free cash flow operations of Kumtor and Mount Milligan with $303 million and $27 million of free cash flow, respectively generated in 2019.

 This cash flow was achieved with an average gold price of $1,309 of gold at an average realized copper price of $2.09 per pound. As noted in the bottom left-hand table, Centerra finished the year with $35 million net debt position with $615 million in liquidity. The main component being the $500 million undrawn corporate facility at year-end.

 The Centerra Board, together with management, spent significant time and effort in evaluating whether to declare a dividend in light of the ever changing COVID-19 environment. The final conclusion was reached to declare a $0.04 dividend in consideration of several factors: The company's strong financial position; the support of employees, the government and local communities in the countries we operate; the current status of COVID-19 in communities we operate and source of our workforce, together with preventive measures taken by both the government and the company, we ran various financial scenarios ranging from 1 week up to 4 months impacting operations; and finally, our key cash-generating assets continue to operate. We'll obviously need to take careful consideration for future dividends in light of COVID-19.

 With that, I'll pass it back to Scott.

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 Scott Graeme Perry,  Centerra Gold Inc. - President, CEO & Director   [6]
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 Okay. Thanks, Darren. I'm just on Slide 22. Just again, just reflecting on our full year guidance for calendar year 2020, you can see the column on the far right. We're guiding for what should be another strong year, just given the prevailing macro environment. So in terms of company-wide gold outlook, we're guiding for as high as 820,000 ounces of gold. And in terms of our all-in sustaining costs, we're looking to produce that gold as low as $820 per ounce.

 With regard to the current gold price environment, this is an indicative all-in sustaining cost margin of more than $700 per ounce. This, together with some of the exchange rate devaluations we've seen, the lower diesel fuel pricing environment, should make for a good year in terms of strong profitability and ongoing strong financial performance. I think it's important to note though, due to the rapidly evolving risks relating to COVID-19, this guidance will not reflect the company's estimates of its performance if there are any further significant disruptions to any of our operations.

 Just moving to the next slide, on Slide 23. With our financials today, we also filed our year-end reserves and resources as well as the comprehensive 43-101 technical life-of-mine plans in Mount Milligan. Just referencing the table here at the top of this slide, you can see we're reporting a year-end inventory of some 11 million ounces of gold reserves across the company. And the table at the bottom, this is our copper reserve inventory, finishing the year at 1.6 billion pounds of copper.

 Just my final slide, on Slide 24. Again, just looking to use the world industry all-in sustaining costs as a backdrop. And there, we're just illustrating where each of our assets are located on the world cost curves. I think we, as a company, with our business plan, our strategy, what we're targeting for is to be showcasing or demonstrating that this is a portfolio that can -- hopefully, we can get this down into lower-cost quartile. I think that's what's always served Centerra very well, just the high margins in our business. And that way, in regards where we are in this prevailing gold price environment, we're always going to be best positioned for maximum profitability and maximum free cash flow.

 With that, operator, I'd now like to pass the call back to you just to see if we have any questions on the line.

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Questions and Answers
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Operator   [1]
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 (Operator Instructions) We have a question from Trevor Turnbull with Scotiabank.

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 Trevor Turnbull,  Scotiabank Global Banking and Markets, Research Division - Analyst   [2]
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 Yes. I was just wondering about the new mine plan that you're working on with respect to Kumtor and the resource increases you've had there. And as you work through that this year, I was just wondering, can you give us a little bit of color on what you're thinking with respect to the waste dumps? Is it likely you're going to end up reusing some of the existing dumps? Or are you looking at having to put in a new location for the new mine plant?

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 Scott Graeme Perry,  Centerra Gold Inc. - President, CEO & Director   [3]
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 Thanks, Trevor, it's Scott. Dan, are you happy to take that question?

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 Daniel Richard Desjardins,  Centerra Gold Inc. - VP & COO   [4]
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 Yes, I can take that, Scott. Thanks, Trevor. Currently, we have 3 waste dumps. We have the Central Valley, which we are presently doing the stripping for cut-back 20 and we're placing on the material in Central Valley. Further along, we have the Sarytor Valley, which is right below the Sarytor and Southwest Pit. Where we had the waste dump failure was the Lysii Valley. We are not dumping in there right now. We are currently working with the Kyrgyz engineering firm and as well as the Kyrgyz government on how to safely rebuild the waste dump in that valley.

 Our intention is to go back in that valley by -- in the second half of the year as that is the most appropriate place to place the cut-back 20 and cut-back 21 waste.

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 Trevor Turnbull,  Scotiabank Global Banking and Markets, Research Division - Analyst   [5]
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 Okay, great. And I guess just the other question with respect to those resource increases. You've mentioned that those were from 2018 and 2019 drilling. Does drilling -- and maybe this was in the press release, I just didn't get a chance to get through it that closely, but is drilling continuing this year? Are you still looking to -- is there still opportunity for further resource growth from programs this year and going forward at the main pits there?

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 Scott Graeme Perry,  Centerra Gold Inc. - President, CEO & Director   [6]
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 Dan, do you want to take that again?

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 Daniel Richard Desjardins,  Centerra Gold Inc. - VP & COO   [7]
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 Scott, I can -- yes, I can take that, Scott. Where we're now focusing our drilling is the area between the Hockey Stick Zone and our Southwest Pit. There -- that's where we were focusing, and that's -- in 2019, really in the Hockey Stick Zone, and it's a continuation of the trend towards the Sarytor and Southwest Pit.

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 Trevor Turnbull,  Scotiabank Global Banking and Markets, Research Division - Analyst   [8]
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 Okay. Yes, and I think maybe you did -- yes, go ahead.

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 Scott Graeme Perry,  Centerra Gold Inc. - President, CEO & Director   [9]
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 Sorry, Trevor, so the actual budget this year is approximately USD 20 million, so it's a significant budget, and that budget was underpinned on the success of the prior 2 years.

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Operator   [10]
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 We have a question from Daniel McConvey with Rossport Investments.

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 Daniel McConvey;Rossport Investments;Analyst,    [11]
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 A question on Mount Milligan. Just looking at the costs, and the disclosure you did just on what happened from 2018 to 2019, this -- it's a -- I realize it's a water issue, there's a throughput issue, everything else. But how much of a concern is that cost escalation to you? And do you think -- how much of that can be undone as you get throughput going this year? And that's my first question. I'll let you go ahead.

------------------------------
 Scott Graeme Perry,  Centerra Gold Inc. - President, CEO & Director   [12]
------------------------------
 Yes, thanks for the question, Dan. I would categorize it as a significant concern. It's something that myself and the leadership team are quite focused on right now. We've spoken about this previously in terms -- the shortfalls in mill productivity, the challenges we've had there, the lower productivity has resulted in higher unitary costs. Originally, we're having challenges in terms of mechanical availability so we added a lot of resources in that regard. And I think we've been successful in terms of establishing more of a consistent run rate in the mill facility there in terms of sort of averaging around 55,000 tonnes per day.

 So in terms of all the additional costs and the resourcing that we added, it's achieved its objective. But what we as a management team now need to work on is how do we get more leaner? How do we optimize our cost structure there? Pull back some of these costs that we've added into the business model as such that we can get down the result in unitary cost in terms of the all-in sustaining costs. So that's going to be a key objective for this year and moving forward. And I think we're also seeing some opportunity just in terms of the pit optimization itself, the mine plan, everything that went into that 43-101 study, it was comprehensive, but it was a short time line there in terms of what we could incorporate into that study. So I think with the passing of time here, as there's some action items for us in terms of where we see some further value enhancing opportunities, we'll be working on that throughout the course of this year.

------------------------------
 Daniel McConvey;Rossport Investments;Analyst,    [13]
------------------------------
 Okay, great. Second question is kind of related. You have 2 projects, Kemess and Hardrock, and you've taken action with Hardrock. And I just -- maybe this -- if you could elaborate on your position with both of those somewhat because I knew you were looking at studies due around now for each one. And I just wonder, given the escalation at Kemess, if there's cost escalations in Canada that we don't fully appreciate are taking place right now, despite the dollar?

------------------------------
 Darren J. Millman,  Centerra Gold Inc. - VP & CFO   [14]
------------------------------
 No. So right now, what we're seeing for the Canadian business, which is predominantly Western Canada, we're seeing a favorable macro environment in terms of the exchange rate devaluation, which I know you mentioned, but also world oil prices have gone through a significant devaluation. And we see that translating into lower diesel fuel prices in terms of what we're paying in our -- at our mine site locations, including Mount Milligan.

 In terms of our sort of organic growth pipeline, as you noted, we've got 2 Canadian-domiciled organic growth opportunities. Obviously, the Kemess project in British Columbia, and then we've got the Greenstone joint venture here in Ontario. Right now, when we've been discussing our opportunity as we move forward with the business, I think this year, in terms of having those discussions with the Board, and this is constant, we're always strategizing on this, but quite consistently, what we've been really focusing in on is let's just make sure we're maximizing the value of our existing operating assets.

 And with regards to Öksüt, our new project in Turkey, we've only just kind of finished construction of that asset. We're just, as we speak, really transitioning more and more into operations mode, and the big focus right now is to achieve commercial production in Q2 of this year. But even thereafter, I'd be comfortable saying that from the Board's perspective, they're still going to want to see at least 3 to 6 months of consistent sustained operations where we're operating at design, achieving our targets, et cetera. I think the Board wants to see us delivering those sort of catalysts, if you will, just in terms of demonstrating proof-of-concept on the asset. And I think it's only as and when we've achieved that, that the Board and management will start shifting into a different gear and start strategizing around, "Okay, what are we going to do next in terms of growing the company?"

 So coming back to your question in terms of that organic growth pipeline, which one represents the more stronger risk-reward sort of value proposition for Centerra in terms of Kemess versus Greenstone? Each asset has different attributes, so it's really going to depend on the underlying sort of business environment or macro environment. It will depend on the value proposition, is it compelling? I'm giving you a long answer here, Dan, but right now, it's not -- there's no decision that is imminent. I think right now, we're still quite focused on executing in Turkey on Öksüt.

------------------------------
 Daniel McConvey;Rossport Investments;Analyst,    [15]
------------------------------
 Okay. Appreciate the answer. Like the dividend, like the free cash flow, and investors are after that. It's just on the flip side of the coin is probably, if you believe, if cost escalation isn't going to be a huge concern right now. And of course, with the dearth of new produce going ahead and what's taking place in the macro level, like we've just seen -- if you believe these gold prices can stay anywhere near where they are, it's a great time to develop produce in Canada.

------------------------------
 Scott Graeme Perry,  Centerra Gold Inc. - President, CEO & Director   [16]
------------------------------
 Yes, thanks.

------------------------------
Operator   [17]
------------------------------
 We have a question from Adam Graf with B. Riley.

------------------------------
 Adam Philip Graf,  B. Riley FBR, Inc., Research Division - Senior Mining Analyst & MD   [18]
------------------------------
 Scott, I skimmed through the 268 page technical report and the releases you put out today, and maybe I missed it, but how does the current cut-off grade that you guys determined in Canadian dollars compare with the 2017 cut-off grade?

------------------------------
 Scott Graeme Perry,  Centerra Gold Inc. - President, CEO & Director   [19]
------------------------------
 Yes. So the --

------------------------------
 Adam Philip Graf,  B. Riley FBR, Inc., Research Division - Senior Mining Analyst & MD   [20]
------------------------------
 And I'm sorry, I also like that.

------------------------------
 Scott Graeme Perry,  Centerra Gold Inc. - President, CEO & Director   [21]
------------------------------
 Yes, yes, sorry. The NSR sort of cut-off grade, what we were using was CAD 9.55 or USD 7.64. I just -- I don't have it in front of me right now what we're using previously. I don't know if you have that Dan in front of you?

------------------------------
 Daniel Richard Desjardins,  Centerra Gold Inc. - VP & COO   [22]
------------------------------
 Yes, it was CAD 8.12.

------------------------------
 Adam Philip Graf,  B. Riley FBR, Inc., Research Division - Senior Mining Analyst & MD   [23]
------------------------------
 Canadian?

------------------------------
 Daniel Richard Desjardins,  Centerra Gold Inc. - VP & COO   [24]
------------------------------
 Canadian.

------------------------------
 Scott Graeme Perry,  Centerra Gold Inc. - President, CEO & Director   [25]
------------------------------
 CAD 8.12, yes.

------------------------------
 Adam Philip Graf,  B. Riley FBR, Inc., Research Division - Senior Mining Analyst & MD   [26]
------------------------------
 And then maybe it -- I'm assuming you guys floated a bunch of cones at different gold prices. Do you have a feel for -- obviously, there's a large component of marginal ore. Do you have a feel for what the Mount Milligan reserves and resources would do at $1,600 gold?

------------------------------
 Scott Graeme Perry,  Centerra Gold Inc. - President, CEO & Director   [27]
------------------------------
 I don't, Adam. We used the commodity price assumptions of $1,250 gold and $3 for copper. And in terms of what we published in that 43-101, we did not provide any sensitivities in terms of that to the pip.

------------------------------
 Adam Philip Graf,  B. Riley FBR, Inc., Research Division - Senior Mining Analyst & MD   [28]
------------------------------
 Yes, I noticed that.

------------------------------
 Scott Graeme Perry,  Centerra Gold Inc. - President, CEO & Director   [29]
------------------------------
 And that was mostly of the price.

------------------------------
 Adam Philip Graf,  B. Riley FBR, Inc., Research Division - Senior Mining Analyst & MD   [30]
------------------------------
 And then one last question. What was the diesel price assumption that you guys used?

------------------------------
 Scott Graeme Perry,  Centerra Gold Inc. - President, CEO & Director   [31]
------------------------------
 I don't have that in front of me. Dan or Darren, do you have that in front of you?

------------------------------
 Daniel Richard Desjardins,  Centerra Gold Inc. - VP & COO   [32]
------------------------------
 I don't, sorry.

------------------------------
 Adam Philip Graf,  B. Riley FBR, Inc., Research Division - Senior Mining Analyst & MD   [33]
------------------------------
 No problem. We will follow-up offline then?

------------------------------
 Daniel Richard Desjardins,  Centerra Gold Inc. - VP & COO   [34]
------------------------------
 Yes.

------------------------------
 Scott Graeme Perry,  Centerra Gold Inc. - President, CEO & Director   [35]
------------------------------
 Yes, yes. Sorry about that, Adam.

------------------------------
Operator   [36]
------------------------------
 We have a question from Terence Ortslan from TSO Mining Analyst.

------------------------------
 Terence Ortslan;TSO & Associates;Analyst,    [37]
------------------------------
 Just a question on the -- thank you for the model on the Mount Milligan, by the way, for the next many years. Can you just tell me in 2020, have you finished or completed your TC/RC discussions on the copper? And what are -- what they are?

------------------------------
 Scott Graeme Perry,  Centerra Gold Inc. - President, CEO & Director   [38]
------------------------------
 Darren, do you want to take that?

------------------------------
 Darren J. Millman,  Centerra Gold Inc. - VP & CFO   [39]
------------------------------
 Yes. We have -- we set those in basically November every year. I don't think we've given public disclosure on that so I'm not comfortable just given that it is confidential, but it is basically the market rate that are set every, virtually, November and March. So it is just basically the industry's -- the industry levels.

------------------------------
 Terence Ortslan;TSO & Associates;Analyst,    [40]
------------------------------
 A lot of the contracts are not completed in the industry, and you're making assumptions in the model. What are your assumptions in the model that you have in 2020 on TC/RC? You gave a million-dollar number of what's the TC/RC in the model for (inaudible) at $3 price of copper, but you got $23 million, I think, for the year?

------------------------------
 Scott Graeme Perry,  Centerra Gold Inc. - President, CEO & Director   [41]
------------------------------
 Yes. So what we'll do is, John Pearson, our Vice President of Investor Relations, he'll get back to you after this call with some of those more granular details.

------------------------------
 Terence Ortslan;TSO & Associates;Analyst,    [42]
------------------------------
 Okay. Second question is that with the -- on your treasury functions, with the financial stress in many locations that you operate and also international banking system, Turkey and Kyrgyzstan, how are you moving the cash around? Where is the cash? And are you controlling the flow? And where are you keeping the cash at the end of the day in terms of your treasury functions?

------------------------------
 Scott Graeme Perry,  Centerra Gold Inc. - President, CEO & Director   [43]
------------------------------
 Darren?

------------------------------
 Darren J. Millman,  Centerra Gold Inc. - VP & CFO   [44]
------------------------------
 Yes. Sure. All our cash or any excess cash is basically retained in North America. At Kumtor, for example, every shipment, so every 2 weeks at the moment, we are paid directly into a New York bank account. So it doesn't actually touch Kyrgyzstan. In Turkey, there -- when we -- when a sale occurs, we are paid in Turkish lira, we can convert that, that same-day or within 24 hours. And once again, any excess cash is distributed back to North America. So we're not seeing any constraints being put in place by the government. And as I said, our main asset in Kumtor, it doesn't even touch the local country bank accounts.

------------------------------
 Terence Ortslan;TSO & Associates;Analyst,    [45]
------------------------------
 Okay. All right. Looking forward from John to get the answer on TC/RC.

------------------------------
Operator   [46]
------------------------------
 (Operator Instructions) We have a question from Bryce Adams with CIBC.

------------------------------
 Bryce Adams,  CIBC Capital Markets, Research Division - Analyst   [47]
------------------------------
 Just one question from me actually. And it's on Mount Milligan and on the throughput rate, the 60,000 tonnes per day. I was just wondering if you could discuss what the optimizations or initiatives are that you expect that will enable you to hit that 60,000 tonne a day rate.

------------------------------
 Scott Graeme Perry,  Centerra Gold Inc. - President, CEO & Director   [48]
------------------------------
 Dan, do you want to take that?

------------------------------
 Daniel Richard Desjardins,  Centerra Gold Inc. - VP & COO   [49]
------------------------------
 I certainly can. The number one thing that we're working on is the plant mechanical availability. We regularly have days in the high 60,000s. And what we're working on is trying to make sure that we can consistently operate up in that area. So there's a number of initiatives on the maintenance side and debottlenecking both the primary, secondary crushing before the SAG. So that's certainly one main one that we're working on. It's difficult there for blending, so we can get a consistent type of feed because of the strip ratio being so low.

 But mostly, yes, mechanical availability and then seeing where we can find ways to debottleneck the upper end of the plant.

------------------------------
 Bryce Adams,  CIBC Capital Markets, Research Division - Analyst   [50]
------------------------------
 Got it. So is there a portion of the CapEx spend that's allocated towards that availability work?

------------------------------
 Scott Graeme Perry,  Centerra Gold Inc. - President, CEO & Director   [51]
------------------------------
 In terms of the life-of-mine capital, this is in the 43-101.

------------------------------
 Bryce Adams,  CIBC Capital Markets, Research Division - Analyst   [52]
------------------------------
 Yes. That's right. I was just wondering if -- what the costs associated with that with improving the availability have been factored out?

------------------------------
 Scott Graeme Perry,  Centerra Gold Inc. - President, CEO & Director   [53]
------------------------------
 We've incorporated in that any sustaining capital requirement within the process itself. There's a line item, processing plant sustaining capital.

------------------------------
 Bryce Adams,  CIBC Capital Markets, Research Division - Analyst   [54]
------------------------------
 I see that one. So that's directly related to availability?

------------------------------
 Scott Graeme Perry,  Centerra Gold Inc. - President, CEO & Director   [55]
------------------------------
 Not directly, but a portion of that would be.

------------------------------
Operator   [56]
------------------------------
 And there are no further questions at this time.

------------------------------
 John W. Pearson,  Centerra Gold Inc. - VP  of IR   [57]
------------------------------
 Okay. Thank you all for joining the call today. And with that, I think we will end the call.

------------------------------
Operator   [58]
------------------------------
 That does conclude the call for today. We thank you for your participation and ask that you please disconnect your line.




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