Centerra Gold Inc. Common Shares

Welcome to the Centuria Gold 2021 Second Quarter Results Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question and answer session. At that time, if you have a question, please press the 1 followed by the 4 on your telephone. If at any time during the conference you need to reach an operator, please press star 0. As a reminder, this conference is being recorded Tuesday, August 10, 2021. Now let's turn the conference over to Mr. John Pearson, Vice President, Investor Relations. Please go ahead, sir.

Thank you, Maria. Welcome to Sentara Gold's second quarter 2021 results conference call. Summary slides are available on Sentara Gold's website to accompany each of the speakers' remarks. Today's call is open to all members of the investment community and media in listen-only mode. Following the formal remarks, the operator will give the instructions for asking a question, and then we will open the phone lines to those questions. Please note that all figures are in U.S. dollars unless otherwise noted. Joining me on the call today is Scott Perry, President and Chief Executive Officer, Dan Desjardins, Chief Operating Officer, and Darren Millman, Chief Financial Officer. I would like to caution everyone that certain statements made today may be forward-looking statements and as such are subject to known and unknown risks which may cause our actual results to differ from those expressed or implied. Also, certain of these measures we will discuss today are non-GAAP measures, so please refer to our description of non-GAAP measures in our news release in MD&A issued earlier this morning. For a more detailed discussion of the material assumptions, risks, and uncertainties, please refer to our news release and MD&A, along with the unaudited financial statements and notes, and all of our other filings, which can be found on CDAR and EDGAR and on the company's website at centeragold.com. Now, I'll turn the call over to Scott.

Thanks, John, and good day, everyone. Thank you for joining us for our earnings conference call. I'm just referencing our accompanying slide presentation deck, and I'm just starting off on slide number five. I just want to start with some of the recent developments in the Kogi's Republic with regards to our Kumtor mine, and just some prepared remarks that I just want to iterate here. So look, it's been nearly three months since the Kyrgyz Republic took control of the Kumtor mine, and I would like to give an update on where things stand with regards to the company. We here at Sentera are very saddened for what our employees and friends who worked at Kumtor are going through. Our thoughts and best wishes go out to all those that were so closely affected by what the Kyrgyz government has done. It's important to note A key takeaway from the call today and our results is it's important to note that Sentera remains financially strong with solid performance and a healthy outlook at our other operations and businesses. These comprise the Mount Milligan Gold and Copper Mine, the Oxford Gold Mine, and our Molybdenum business unit. As illustrated in our Q2 results, our cash position at the end of June was up by almost $60 million US quarter on quarter and currently represents some $883 million. This represents total liquidity of almost $1.3 billion U.S. We remain on track to achieve our 2021 production and cost guidance at both the Mount Milligan and Oxford mines. Regarding the situation at Kumtor, it remains largely unchanged since we updated you after the Kyrgyz government seized the mine in mid-May, using unsubstantiated environmental, tax, and safety claims to appoint a so-called external manager to run the operation. Sadly, the government's unjustified actions have put thousands of well-paying jobs for Kyrgyz nationals and the businesses of hundreds of Kyrgyz suppliers at risk. The government's behavior has also threatened the future of foreign investment in the country. As you know, global investors want certainty. They want to know that a government will respect signed agreements and not change the rules without warning. So that is the state of play. As we've said all along, we prefer to engage in a constructive dialogue with the Kyrgyz authorities to resolve this dispute, as we have done in the past. But so long as the Kyrgyz authorities refuse to engage, we will continue to pursue legal steps to preserve the value of our assets and to protect the interests of our shareholders and our various other stakeholders. That includes binding international arbitration proceedings that we have initiated, as well as the court actions in Toronto and New York. As we said, while we continue to believe that the Kumtor mine is a valuable asset, with or without it, our company is financially strong, with significant cash on hand, no meaningful debt, and a robust outlook at our continuing operations in Canada and Turkey. Using that as a segue, if I can now transition to the next slide on slide six, I just want to provide some of the key highlights from our recent reported Q2 results. So the first bullet point here, First and foremost, in terms of safety, we continue to see our company-wide WorkSafe, HomeSafe leadership program paying dividends to the organization. During the quarter, a key highlight at our Oxford mine was where they achieved one million hours of consecutive lost-time, incident-free operations. All our sites are maintaining proactive COVID-19 measures, and in terms of our vaccination rollout, we're seeing very good progress, whereby we have now provided second vaccine second vaccines to 64% and 55% of our site employees at Mount Milligan and Oxford respectively second bullet point here one of the key notable achievements during the quarter that we're very proud of with regards to our Mount Milligan team is the ongoing improvements that they're demonstrating in the mill productivity during the quarter we saw excellent mechanical availability and Mount Milligan actually achieved record throughput to the quarter, exceeding 60,000 tons per calendar day. This is an excellent result. Third bullet point here, Darren, our Chief Financial Officer, will talk about this in more detail, but obviously following the seizure of the Kumtor mine, you're seeing the appropriate accounting classifications in our financial results whereby we have deconsolidated Kumtor and classified this as a discontinued operation during the quarter. This resulted in a change of control loss of some $926 million US. In terms of our continuing operations, in terms of the fourth bullet point here, we saw, again, a very good quarter of production. We're seeing very good productivity and very good unitary costs at our operations. Our company-wide gold output from our continuing operations was just under 70,000 ounces of gold and some 20 million pounds of copper output. In terms of the corresponding oil and sustaining costs in the sixth bullet point here, you can see company-wide we had a very low competitive oil and sustaining cost of some $676 per ounce. On the second last bullet point here, in terms of our guidance for this year, we're continuing to reiterate our guidance for Mount Newly and OXA, and I think if you look at the performance for the first half of this year, both operations are in excellent stead to achieve their guided outlook. Also, the very last bullet point, as you can see, we continue to be a financially strong company, a very profitable company. We're generating meaningful free cash flow. You can see our guidance here for this year. We're guiding for free cash flow up to $175 million from our continuing operations. Just moving on to the next slide, on slide seven, just some other key highlights here. The fourth bullet point, as I mentioned, we saw good production, good levels of gold output. Our corresponding all and sustaining cost was very low, so we saw good margins. And you can see here in the fourth bullet point, our continuing operations generated just under $31 million of positive free cash flow. In terms of our treasury position, the second last bullet point, we continue to have a peer-leading balance sheet. It's debt-free, and we finished the quarter with just under $883 million in cash. The last bullet point, you know, again, the board recognizing, you know, Recognizing the strong operating performance and financial performance during the quarter, we've increased our quarterly dividend to Canadian $0.07 per share. Just moving on to the next slide on slide eight, just again in terms of the company's cash flow profile and treasury profile, you can see the chart here in the top right. It's just an illustration of our balance sheet over the last five to six years. And you can see increasingly we've been building out our balance sheet just given the strong free cash flow levels that we've been generating from the operation. So as I mentioned earlier, it's a debt-free balance sheet, and we've got some $883 million in cash. Referencing the chart down the bottom, particularly the middle chart, this is Oxert, our newest operation in Turkey. We've had a great experience with Oxert in Turkey. We built this mine on time, on budget. Last year was a very successful year whereby the mine generated some $105 million in positive free cash flow. And as of today, we've essentially recouped more than half of our investment already. Here at Oxford, we're now transitioning into a higher grade profile. In the back half this year, you will see growing levels of gold output. And that will continue into 2022 and 2023 where we're expecting meaningful increases in gold output. So suffice to say, given that growing level of gold output, we're also expecting a meaningful increase in terms of profitability and free cash flow at Oxfam. Just moving on to slide nine, just in terms of our environmental social governance profile, a number of bullet points here. First bullet point, as I mentioned at the outset, safety is obviously absolutely paramount, and we continue to pursue a zero-harm environment. And we're seeing a number of milestones demonstrating that we're on track in that regard. The third bullet point, we had no environmental incidents during the quarter, which is as it should be. And the second last bullet point here, we're continuing the journey in terms of advancing our diversity, equity, and inclusion initiatives, including our current state assessment that was completed recently. Then the last bullet point, Sunterra is a member of the World Gold Council, and the approximately 18 months ago, rolled out their responsible gold mining principles. We are a signatory to these principles, and we are currently implementing these in our operations, and we are in good stead in terms of being able to attest to our full compliance to these principles in the coming 18 months. With that, I now want to pass the call over to Dan Desjardins, our chief operating officer. Dan, please.

Thanks, Scott. Good morning, everyone. Please move to slide 11. Sentara continues to prioritize the health, safety and well-being of our employees, contractors, communities and other stakeholders as COVID-19 is still with us. We've put a great emphasis on vaccinations in the past quarter and all of our sites have higher vaccination rates than the regions that they work. We continue to modify our COVID-19 protocols at all our locations to help prevent infection and reduce the potential spread of COVID-19. All of these great efforts of our people have allowed for continuous operation. For 2021, we have a number of operating highlights. In Q2, we continued to focus on improving our safety performance of the Sentara company-wide with good results. Our TRIFR for Q2 was 0.18, much better than our target of 0.41, but we still had two reportable injuries in the quarter. We have an excellent program we call WorkSafe HomeSafe, which focuses on employee behavior at work and at home. And we rolled out training virtually with great success. And an excellent milestone is our aux-suit mine. We achieved 1 million people hours, lost time injury-free, with the number now exceeding 1.5 million work hours. On the production front, we had another strong quarter at our two operating sites. producing 69,854 ounces of gold and 19.8 million pounds of copper at an all-in sustaining cost of $676 per ounce. Mount Milligan specifically produced 54,675 ounces at $486 per ounce with a copper credit of 19.8 million pounds. Oxhut produced 15,179 ounces at 947. Again, overall, we have a very competitive all in sustaining costs for the quarter of 676. Of note, the Mount Milligan mine had an excess of 8 million cubic meters of water in the tailings pond inventory at June 30th. We actually stopped pumping water from surface earlier than planned because we had the maximum water inventory that we require. We now have access to well-understood underground water, as well as additional permits for surface water to the end of 2023. We continue to work with our First Nation partners, the regulators, to permit for long-term solution of water and for our life of mine as part of our long-term water strategy. Both Mount Milligan and Oxsuit mines were running well, and we are well on track to achieve our 2021 production and cost guidance. Please move over to slide 12 and we'll view operational key focus. Again, safety is our highest priority and we continue to roll out our safety programs to constantly improve our safety performance. We've embraced our WorkSafe HomeSafe program for three years now and we are focused also on visible felt leadership and developing and rolling out our critical controls. Q2 again had no lost time incidents, which is a great step forward. Those who follow the company can see that we have removed Kumtor from our 2021 and three-year outlook production and cost guidance. Now Milligan continues to hit its stride and is achieving a record quarterly throughput of 5.6 million tons. Through excellent mechanical availability, we have a new process control system on our sag, and we had great focus by the team on the ore blending for optimal throughput. The BC wildfires had minimal effect on Mount Milligan operations. Late in the quarter there was fire damage on the rail route used by CN to transport our concentrate from the port from site to the Port of Vancouver. CN has subsequently repaired the damage and we are currently not experiencing any transportation issues, but we will continue to monitor closely. There are currently no visible forest fires in the vicinity of the mine. We don't expect an impact on 2021 production, but we may have a slight lag in our Q3 shipments to catch up on the rail disruptions. We are on track for the installation of a new stage flotation reactor to be operated by the end of the year, and all studies are showing that this will have improvements in our copper and gold recoveries. Oxut, our newest operations, continues as planned with a major ore coming from the Kel Tepe pit. Please move to slide 13. We have detailed out our production cost guidance for 2021. Overall, our mid-range of guidance is near 300,000 ounces at a very competitive all-in sustaining cost of $750 to $800 per ounce. With a strong copper credit, Mount Milligan has an excellent all-in sustaining cost guidance of 530 to 580 per ounce on 180 to 200,000 ounces of gold. For Oxut, we are guiding 90 to 100,000 ounces at a null and sustaining cost of 730 to 780 per ounce. Again, our capital expenditures on consolidated basis are looking to come in between 95 and 115 million for the year. Going to the next slide, 14, you can see we are looking to substantially increase our gold production at Oxut for the next two years, moving to higher grade ore. Mount Milligan remains relatively steady at similar production levels over the three years. Now Darren will take us through our financial results.

Thanks, Dan, and morning all. For those following on the slide deck, I'm on slide 16. Sentara recorded $202 million in revenue during the quarter. This relates to our continuing operations as defined in our financial statements. This primarily includes the Mount Milligan mine, deoxid mine, and a molybdenum business unit. Revenue materially consists of 94 million in gold sales, 50 million in copper sales, and 46 million from a molybdenum business unit. During the quarter, the company's continuing operations, average gold price realized was $1,419 per ounce of gold and $2.92 per pound of copper. This incorporates the existing streaming arrangements over the Mount Milligan mine. In the quarter, our continued operations, we sold 66,642 ounces of gold, 51,000 ounces from the Matt Milligan mine, which is a 47% increase compared to the prior year quarter, and 15,000 gold ounces attributable to Oxid mine. And as you recall, the Oxid mine only declared commercial production in May 31, 2020. Prior to the actions taken by the Kyrgyz Republic government, the Kumto mine produced and sold approximately 49,000 ounces of gold. We also sold 19.5 million pounds of copper in the quarter. The net earnings during the quarter from a continued operations was 33 million. This included the adjusting item of 10.8 million non-cash expense attributable to the reclamation liability increase due to unfavorable discount rate movement. The adjusted earnings from continued operation perspective was $49.9 million for the quarter or $0.17 per share. Earnings attributable from an operations perspective were $42.4 million contributed from the Mount Milligan mine, $16.1 million contributed from the Oxford mine, and a $14.8 million loss attributable to Molybdenum business units. This was primarily attributable to the reclamation expense of 10.8 million mentioned earlier. The net loss, including both continued and discontinued operations, was 851 million. As noted in our disclosures, we classified the Kumto operations as discontinued operations on May 15, resulting from the actions by the Kyrgyz Republic government and continued actions thereafter. The three items to highlight within this continued operations were 44.8 million net earnings from Coomptor mine recorded up until May 15, a $926 million charge recorded on the loss of control of the Coomptor mine, and a 15.3 million gain was recorded on the closeout of fuel hedges in connections with the Coomptor mine. For clarity, as at 30 June, no value is recorded in the balance sheet associated with the Comptomai. I'll now move to slide 17. Sentera's continued operations in the quarter recorded production cost of $593 per ounce and an all-in sustaining cost of $676 per ounce. At an asset level, Mount Milligan recorded all-in sustaining cost of $486 per ounce and OXIC recorded all in sustaining costs of $947 per ounce per quarter. As noted in the bottom right-hand chart, Sentera's continued operations year-to-date has produced 140,000 ounces of gold, so tracking well to retrieve 2021 production guidance. The bottom left-hand chart notes our free cash flow year-to-date of approximately $100 million from our continued operations. with up to $175 million guided for 2021 at a goal price of $1,750. On a go-forward basis, as Dan noted, there is potential for slight delay in Mount Milligan sales. This could result in a lower level of free cash flow in Q3 compared to Q4. Now move to slide 18. The company ended the quarter debt-free with $883 million in cash as referenced in the bottom right-hand chart. As disclosed in the MDA and summarized in the bottom left-hand chart, we have better three-year gold production guidance excluding the Kumto mine. You will note we're guiding to a 40% increase in gold output for our continued operations and a similar reduction in our cost profile. The graph noting annual guidance midpoints. As a result of that, free cash flow will significantly increase as we move into 2022. Finally, Given the cash generation of our continued operations, a closing cash position of $883 million and total liquidity of just under $1.3 billion, the Sentera Board declared a quarterly dividend of $0.07 for the quarter, which represents a 40% increase from the prior quarter. With that, I'll pass it back to Scott.

Thanks, Darren. And just to round out and wrap up the call, I'll just speak to slide 22. So again, just in terms of some of the key bullet points here in the left, first bullet point, as we heard Dan and Darren speak to, we are reiterating our gold production guidance for Mount Milligan and Oxford. You can see it's illustrated here. This year we're guiding for up to 310,000 ounces. And in terms of the corresponding oil and sustaining costs, we're expecting to produce this gold as low as $750 per ounce. So given the prevailing metal price environment and that competitive oil and sustaining cost profile, I think that's going to make for robust margins, and I think you're seeing that there in terms of the free cash flow guidance, where we're guiding up to $175 million for this year. Fourth bullet point, again, it was another strong operating quarter. We're seeing good operating momentum at our continuing operations. So again, producing some 70,000 ounces of gold at a very low competitive or sustaining cost of $676 per ounce. And then just lastly, the final bullet point, as Darren just spoke to, I think we really are continuing to maintain and grow a peer-leading balance sheet. It's debt-free, finish the quarter with cash of $883 million. And just given where we see our business going in terms of the free cash flow guidance for this year, in terms of the growing level of gold output coming from Turkey next year, I think this balance sheet will continue to grow moving forward. So, look, as I mentioned at the very outset of the call and as we've disclosed in our MD&A, there are a number of legal proceedings that we have commenced in connection with Qumto, both against the Kyrgyz government and Kyrgyz Zoltan. As we move into the question and answer portion of the call, I just want to caveat that, unfortunately, we will be limited in our ability to provide details related to those ongoing proceedings. So with that caveat, operator, Maria, if I can now pass it over to you to coordinate the Q&A portion, please.

Thank you. If you would like to register a question, please press the 1 followed by the 4 on your telephone. You will hear a three-tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration, please press the 1 followed by the 3. Our first question comes from the line of Trevor Turnbull from Scotiabank. Your line is open.

Thank you. Thank you, Scott. Maybe start with operations. Just a quick question on Mount Milligan. I know that Darren was talking about the long-term water plan and solutions up there. Can you talk a little bit about what that might look like or what the capex might be involved with that? I did notice that until that's finalized, you haven't provided any capex guidance, but I wondered if you could just give order of magnitude description of it.

Yeah, thanks, Trevor. And, Dan, are you happy to respond to that question just in terms of some of our current evaluations that are underway?

Absolutely. Good morning, Trevor. Right now, we are in a very, very strong position. You know, the tailings and palmments full. We're drawing in probably more than half of our required water from underground, and basically those are permanent facilities now. We have a little bit of connecting up green power in terms of hydroelectric permanent solutions to some of our pumps, but that's going very well. We are drawing right now from two very local rivers within four kilometers of the mine site. Those were temporary installations that we've been setting up each year using a contractor. And so that has been able to satisfy our water needs fully. So we're looking at two solutions right now. One is further distance away. We're still engineering the capital cost, but that'll be in the neighborhood of, say, 30 to... 40 million and we also are still strongly looking at very near mine solutions that would be certainly less than 10 million in terms of capital but right right now we're sitting in a very good position and we have permits to the end of 2023 for the the way we're set up right now okay thanks dan um i also had a quick question on oxu just uh

Was there any, or maybe I missed it, but was there any update on permitting for the Gunitepe pit?

Yeah, absolutely. We continue to work with the government. There is still a court case between two of the government agencies on who has control of the land. And that should be coming to fruition here in September when they go back into session. We've adjusted our plans, but certainly in the near term, there is no effect. And we also have re-engineered our access to the Gunantipi pit. In case we don't get permit for the larger footprint, we would be still able to access as our original feasibility plans indicated.

Okay, thank you. And then maybe I had a quick question on the dividends. You mentioned that you've raised the dividend and that the dividends are essentially waived for the Kyrgyz-Altan shares. It said that they're waived to the extent that they can be attributed to KGC or KUMTOR. And I guess I had a question about the language. Does that mean that there is a portion of the dividend that Kyrgyz-Altan is eligible for that, say, is not attributable to KUMTOR? Yes.

Yeah, Trevor, it's Scott. No, it's our determination. I mean, as you know, dividends are paid out of retained earnings, and it's our determination that the entirety of our retained earnings position has been attributable to Comtor. So in terms of the dividend distribution during the quarter, again, the determination was that it's entirely attributable to Comtor. So as you know, there's a series of restrictions in place in terms of the Kogies Olden shareholding, in terms of their ability to receive dividends, in terms of their ability to transfer shares in terms of their ability to vote on those shares. So they will have no entitlement to the recently declared dividend.

Okay, that helps clear it up. And I guess my last point or comment is just on your summary slide that you closed with, you make a very compelling case on the continuing operations in terms of their cost structures and their cash flow generation. but it doesn't really get to any per share metrics, which is, is kind of where, um, I, I struggle. And I just wondered how you would kind of frame the investment thesis, um, with respect to kind of per share metrics and per share valuation, you know, should we be thinking about your capital structure as, as intact going forward with the Kyrgyz, Alton shares, or should we be thinking that at some point there will be a reduced share count that essentially removes those shares from the calculus?

Yeah, I mean, if you look at our free cash flow guidance for this year, up to $175 million in cash, that's approximately $0.65 per share in terms of free cash flow, which moving forward we expect that to grow significantly. just given the rising gold output that we're expecting from Turkey as we move into that high-grade sequence. So next year, 2022, 2023, I think you're going to see some very meaningful increases in terms of the free cash flow generated from our continuing operations, assuming the current sort of prevailing metal price environment. Obviously, in terms of our broader share count, You know, there are some opportunities here. You know, obviously, we're open to, you know, engaging in negotiations with the political leadership in Kyrgyzstan in terms of, you know, looking to resolve the situation through constructive dialogue. And look, we're certainly open to all possibilities, which could include, you know, the Kyrgyzstan shareholding and what that could potentially mean for a reduction in our share count. But the other thing I want to mention is our balance sheet. I think I've been describing it as a peer-leading balance sheet relative to our comparative peer group. We think it's going to continue to grow and maybe there's opportunities there as well in terms of strategizing with the board around capital return initiatives, et cetera. But it's all kind of preliminary right now, Trevor, but I think as a management team and speaking on behalf of the board, we do recognize that we have some opportunities here which we'll continue to evaluate Obviously, during the quarter, you saw us take one small step or a measure, a token, in terms of increasing the dividend by some 40%. But I think we certainly have the financial capacity to continue to evaluate other potential capital return initiatives. So, sorry, Trevor, that was a long answer.

Yeah. No, that's good. I guess maybe one last question just with respect. You mentioned potentially you remain open to speaking to the government in ways that you may be able to talk to them about the shares. Are there also legal remedies? And if so, are they something that you kind of need the other legal processes to kind of play out before you would You would consider those, in other words, the international arbitration, the case you have in Canada and so forth. Do those need to kind of conclude before you think about next steps legally?

It's difficult for me to kind of respond to that, Trevor. As I mentioned, it's hard for us to comment on the legal proceedings, but right now our primary focus is on the international arbitration as well as the Chapter 11 proceedings. down in New York. They are the legal measures we're taking right now that we think best position us in terms of protecting the rights of our shareholders and the overall value on behalf of our stakeholders.

Yeah, and there's also the case in Canada against the temporary manager. What is the outcome you're looking for there in that particular case?

It's all part of our sort of legal measures, you know, looking to substantiate that what's taking place here is invalid, it's without merit, and it's in direct contravention in terms of our project agreements and our investment agreements.

Okay, fair enough. All right, thank you, Scott. That's all I had. Thanks.

The next question comes from the line of Michael Ciprico from RBC Capital Markets. Please go ahead.

Thank you, guys, for taking my question. Scott, you just touched on it a little bit, but I was hoping you could talk a little bit more about that balance sheet and capital allocation. And I suppose that would be a key question, notwithstanding, As you said, it is still preliminary, but what really drives your thinking on those fronts if we're looking at dividends, cash return, and M&A as well, I suppose? Are you seeing opportunities out there? Is it too early to think about that? Can you give a little bit more color around how you're thinking about the balance sheet?

Yeah. You know, we recognize that we have a significant sort of debt-free balance sheet, and we think that's going to continue to grow just given where the business is positioned and just, you know, the underlying profitability that you're seeing right now. You know, we regularly sort of, you know, strategize and deliberate on this with the board. And, you know, I think over the last sort of 18 months, you have seen us take a number of steps, you know, with regards to our dividend distributions. We very quickly reinstituted our dividend program. We then increased the dividend to $0.04 per share. Then last year, we increased it to $0.05 per share. And then you saw most recently we've now declared a dividend of $0.07 per share. So on that front, we have been taking some steps. Obviously, there's potentially other capital return opportunities here. As I was mentioning earlier, we could be evaluating and thinking about our share count. But one of the challenges we have, Michael, is I don't think we can do anything until we have resolved the situation with Comtor and the Kogi Zoltan shareholding. And so what I mean by that, say you're asking me about a share buyback scenario. Under that scenario, if Kogi Zoltan was not participating, we would be effectively increasing or concentrating their ownership position. within the organization, and that brings with it a number of other considerations as part of the overall calculus. So I think until we have that resolved, it kind of restricts our ability to, you know, to evaluate in earnest any kind of, you know, shared buyback scenario.

And on the M&A front, I mean, you still, obviously, you've sold some assets, you've got some other assets in the portfolio, and Again, looking at that cash balance, and I agree, it's a huge asset. Is it too early to think about longer term strategy? Is it still sort of dependent in the timeline on what happens in Kyrgyzstan?

You know, I myself, personally, I like to kind of be a little bit more contrarian in terms of when we do get acquisitive in terms of inorganic growth. So, for example, you know, during the time I've been with Sentero, when we were quite active in terms of, you know, acquiring the, you know, Mount Milligan or Comest, it was, you know, it was in the low phase of the gold price cycle. You know, gold was trading around $12.50. I think that's a better time. in terms of maximizing the likelihood of a value creating sort of transaction. So given where we are on the gold price cycle right now, I find it a little bit more difficult to envision doing things that are going to be representing compelling sort of value of creative opportunities. At the same time, I'm not ruling it out. Obviously, I think in terms of our go-forward position here, be it our balance sheet, our profitability, our cost profile, I think we're in a fantastic position, and it's something that we can look to capitalize on. But I think just speaking more broadly in terms of where the industry is positioned, I think the industry is doing really well. The industry is quite profitable at these gold prices, and I think everyone's balance sheets have largely been repaired. So I think it's going to be difficult in terms of actionability, in terms of opportunities presenting themselves, and That's fine from my perspective. You know, I'm willing to be patient, and I think we've got a great business here moving forward. But, you know, we recognize that that balance sheet provides us with a lot of optionality, and I think that's a competitive position for us to be in.

Okay, great. Thanks. And maybe just one last one from me, a higher level on the dispute with Kyrgyzstan. You know, obviously the situation is very different than it's been in the past, and this is maybe just my perception or opinion, but it does seem that based on local media reports that the government's comments are maybe more heated, the rhetoric is more heated, more specific commentary about past agreements, denunciation, that sort of thing. Absent direct contact with the government, can you comment at all on what you're seeing in terms of their public statements, maybe relative to those past disputes?

Well, you know, I'm seeing what you're seeing, and it's a lot of hyperbole, it's a lot of rhetoric, and, you know, all of it is unsubstantiated. This has been the typical sort of Kyrgyz playbook, so I think you've got to take it with the appropriate, you know, pinch of salt, if you will, or put it in that context. You know, we don't react to it, as you've seen. What we're focused on is, you know, obviously trying to engage with the Kyrgyz leadership, and that's how we've always resolved these disputes, is through constructive dialogue. If you look at history, eventually both sides eventually come to the table. But in the absence of having any meaningful engagement, it forces us to take the legal measures that you've seen us pursuing in terms of international arbitration and the Chapter 11 proceedings. I think we just have to continue to watch and see how this unfolds, Mike.

Okay, great. Thanks very much for the time.

The next question comes from the line of Anita Soni from CIBC World Markets. Your line is open.

Thanks for taking my call. So I'm not really going to ask anything about Coombe Tor because I think that's probably been asked to death at this point. But can you – I want to focus a little bit on operations and some of the other moving parts. The molybdenum business is now a net – you said it's a net $35 million cash draw this year. Is that going to continue going forward in your view when you look at 2022, 2023? Have you – think that that's – an ongoing situation or should that only be a one-time kind of 2021 forecast?

Yeah, thanks, Anita. Darren, do you want to respond to that? And in your response, Darren, just make sure you point out that it's, you know, build up an inventory that will be monetized in due course. But over to you, Darren.

Hi, Nita. Yeah, it's basically driven by, as you know, the molybdenum prices has dramatically increased. I think it's up to around $18 a pound. When we put out guidance for 2021, the start of the year, I think we'll be using around $12 a pound. So it's predominantly driven by a working capital increase, call it 80 to 90% of that. We don't, unless the molybdenum prices continue to spike up again into 2022, 2023, then you'll see potentially an additional buildup of all the need for additional cash into the business. But it's primarily just driven by the molybdenum price increase, nothing more. So if it's currently flat, obviously we'd like to recoup some of that $30 million approximate income cash inflow into the business um but that's kind of the real driver behind it okay and then secondly there um mount milligan's depreciation uh increased can you just um walk me through why it increased for this year um i try to reflect um when we issued the mount milligan um uh like new life of mine i think back in 2020 um you know obviously reduced the mine life so you know that was the driver of the um you know shorter mine life which needs to need to increase our depreciation you know period on period so i'll have to look dive in a little bit deeper but the top of my head that would be the driver and obviously we've had a higher throughput, higher production coming in during the quarter. So, obviously, that'll be attached to that piece. But once again, we could dive in a bit further and get back to you as well, if you like.

Yeah, that would be helpful. I think what you're describing would drive, would not be doing the movement that you're talking about. It's going up again. this quarter or for this year. So anyway, I just wanted to get around to understand, you know, what the main drivers there were. And then on corporate administration, I think there was an increase there. Is that a, you know, 15 million bucks? Is that more along the lines of all the, you know, legal things that you're dealing with? And perhaps on a long run rate, we should be more along the lines of the original number of 35 to 40 million or even less now that you're not necessarily worrying about the contour mine?

Yes. Okay.

And then lastly, just on operations for OXFUT, the Kelatefi pit, I guess the phase three, four, and five are largely, the stripping there is largely complete. Is that, should we expect higher grades more along the line of reserve grades going to the back half of the year, or will that be more next year?

Dan, do you want to speak to that, please? Yes, yes, certainly. And you are correct. We are now starting to already experience higher grades, and We plan to carry that forward to really over the next two and a half years. Okay.

And I guess one last question on Mount Milligan. It seems like you're running a little higher than the top end of your guidance range, particularly on gold. Is there something that we should be thinking about in the second half of the year in terms of throughput ramifications or grade ramifications that would bring it more to the midpoint or within the guidance range or We do continue to expect some outperformance.

Dan, do you want to speak to this? I certainly can. We are having excellent throughput, and that is continuing into the third quarter, which is great. We are focused as well on both gold and copper, but we have gone through some fairly high-grade gold sections of our pit, so we're still confident on guidance We're also seeing excellent recovery in both copper and gold. And, you know, hopefully that will continue as we've got additional process controls in our plant. So we're still feeling very strong on our guidance there.

Okay. Thank you. That's it for my questions.

Our last question comes from the line of Mike Jelanin from Bank of America. Your line is open.

Okay. Mark Benthien, ECA- MCB4 Member, Morning Scott yeah just to follow it on a comment about. Mark Benthien, ECA- MCB4 Member, Better grades about mail again earlier this year, I can't remember who said it Scott, but it was it was pending new life of mine studies at both mountain Milligan oxen in October November I didn't say anything this time about those is that still the plan. Mark Benthien, ECA- MCB4 Member, For those to be released or completed.

Yeah, hi, Mike. So, yeah, Dan and his engineering technical services team, they're doing a number of evaluations in terms of what we're seeing in terms of conceptual sort of life and mine opportunities at Mount Milligan as well as Oxford. That work is well underway. But in terms of committing to a timeline, you know, we haven't made that commitment in terms of our public disclosure. It's potentially an opportunity for us in terms of our typical year-end reserves and resources. And it will really come down to, you know, whether or not, you know, what is the materiality in terms of what we're seeing. If it's something material, then obviously we'd have to disclose it. If it's not material, then, you know, it may be something that we don't disclose. So that's something that we continue to evaluate, and we'll just have to see how that unfolds here over the course of this year.

Okay. Well, thanks. And one last question, Scott. I guess if you put Coontour to the side, obviously you've got a great balance sheet, great free cash flow, but The gold world is awash with three, four-and-a-thousand-ounce gold producers. And if I could go to the Denver Gold Forum, I'd be tripling all over them in the atrium or the bar, just wondering how does – well, the returns obviously is one way, but how does Sinterra distinguish itself among all these companies now?

Well, look, you know, speaking, talking to my own book, you know, obviously I would put forward that what differentiates Sentera, what distinguishes Sentera, you know, obviously the peer-leading cash position, but I think also we've got a, you know, pretty much a peer-leading cost profile. You know, if you look at our guidance for this year, you look at the results in Q2, I mean, sub $700 per ounce, that really is a lower cost quarter. I think that distinguishes us, but then also we've got some natural, organic growth taking place here as we move forward over the next two and a half years. And that's particularly in Turkey, where, you know, as Dan mentioned earlier, we are getting into a high-grade sequence. We're expecting our gold production levels at Oxfam to more than double 2022, 2023 relative to this year. And so that's obviously going to make for growing free cash flow and growing profitability. I think as we spoke to, you know, we've been doing some things in terms of capital return initiatives or shareholder-friendly initiatives. There's been some meaningful increases in our dividend distributions, their opportunity to do more. That's something we have to continue to evaluate with the board. But I think some of those attributes I just put forward, Mike, I really do think that distinguishes Sentera in a favorable manner. And then obviously underpinning all of this would be the valuation. And does that represent an interesting investment proposition? I think that's how I'd respond, Mike.

Okay. Okay. Well, thank you for that, and good luck.

Thanks, Matt.

There are no further questions on the lines.

With that, I'd like to thank everyone for joining us on our call today, and we'll wrap up the call right now. Well, thank you, everyone. Goodbye.

That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.