Centerra Gold Inc. Common Shares

Greetings and welcome to the Sentara Gold 2021 Third Quarter Results Conference Call and Webcast. 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 on Friday, November 5, 2021. I would now like to turn the conference over to Mr. John Pearson, Vice President, Investor Relations. Please go ahead.

Thank you, Operator. Welcome to Sentara Gold's third quarter 2021 results conference call. Summary slides are available on Sentara Gold's website to accompany each speaker's 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 questions. Please note that all figures are in U.S. dollars unless otherwise noted. Joining me on the call today is Scott Perry, our President and Chief Executive Officer, Dan Desjardins, Chief Operating Officer, and Darren Millman, our Chief Financial Officer. I would also 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 the measures we will discuss today are non-GAAP measures. Please refer to the description of non-GAAP measures in our news release in MD&A issued this morning. And for a more detailed discussion of the material assumptions, risks, and uncertainties, please refer to the news release, MD&A, along with our unaudited financial statements and notes, and all of our other filings, which can be found on CDAR, EDGAR, and on the company's website. And now I'll turn the call over to Scott.

Thanks a lot, John, and a very good day to everyone. Thank you very much for joining us for our Q3 earnings conference call. I'm just referencing the accompanying slide presentation that's available on our website. I'm just going to start off on slide number five. So on slide five, a number of key bullet points here just in terms of some of the key corporate highlights. The first bullet point, just starting with safety as always, you can see during the Q3 period, we had a number of safety highlights. One of the key ones I want to reference is that OXSURT, our producing operating gold mine in Turkey, we recently celebrated two million hours, consecutive hours of lost time incident-free operations Moving on to the second bullet point, just with regards to the global COVID-19 pandemic, during the quarter, we're seeing very, very good uptake in terms of the vaccination rollout, whereby the majority of our workforce is now double vaccinated. Third bullet point, just with regards to the Comtor matter, as you would have noted in our disclosure, we continue pursuing legal actions to preserve the value of our assets and protect the interests of our shareholders. This obviously includes the binding international arbitration, as well as the court action in Toronto and New York. Moving into the operation results, the fourth bullet point here. We had another good quarter in Q3. We've seen good continuity there, just in terms of our operating momentum and our productivity, and that resulted in gold output of just under 77,000 ounces. That was a relatively strong level of production. So when you look at the sixth bullet point, you can see in terms of the corresponding All in sustaining costs, it was a low competitive $781 per ounce on a company-wide basis. In parenthesis, in terms of the individual contributions at the operations, Mount Milligan was operating at $727 per ounce during the quarter, and Oxfam was operating at $603 per ounce during the quarter. So again, both operations demonstrating relatively low unitary costs. As I mentioned earlier, you know, there's a good level of production in the third quarter. I'm just referencing the second last bullet point here. And we think that puts us in very good stead with regards to our outlook or our full year guidance. We think we're well positioned in terms of achieving our goal production targets, both at Mount Milligan and Oxford. Last bullet point, just given that strong production that we're seeing, particularly at Oxford, as you would have noted in Q3, it was a strong quarter. We're also seeing very strong corresponding oil and sustaining cost performance. And as a result of that, we've actually lowered our full-year guidance for Hoxha, whereby we've decreased the estimated range to $680 to $730 per ounce. Likewise, that has a favorable impact just on the company-wide oil and sustaining cost range, whereby we've now lowered that to a new range of $700 to $750 per ounce. Just moving on to slide six, first bullet point here, just in terms of the headline earnings result, it was an adjusted net earnings of $0.12 per share. Darren, our CFO, he will expand on this further during his remarks. But in terms of free cash flow, the third bullet point, given the strong production, given the relatively strong oil and sustaining cost performance, and just in light of the relatively strong gold price and copper price environment, we are seeing pretty good margins, both from a profitability perspective as well as a free cash flow perspective. But during the quarter, Q3, company-wide, we generated free cash flow of $41 million. And again, in parentheses, you can see the individual contributions from the operating mines. So Mount Milligan generated $25.9 million of positive free cash flow, and Oxford had a significant increase in free cash flow generation, coming in at $48.9 million for the quarter. The strong profitability, the strong free cash flow, just referencing the fourth bullet point here, we finished the quarter with a debt-free balance sheet and total cash reserves of just under $912 million U.S. The second last bullet point, taking into account our revolving line of credit facility, which is entirely undrawn, we have a total treasury liquidity profile in excess of $1.3 billion U.S. Just lastly here in terms of the last bullet point, again, just recognizing the solid operating performance and the strong financial position, the board has again declared a quarterly dividend of Canadian $0.07 per share. You can see the chart down the bottom. I just want to highlight the chart in the middle, which is OXA. Obviously, this is our newest operating gold mine operating in Turkey. You can see the quarter-over-quarter free cash flow and As you can see in Q3, it was a significant increase in pre-cash flow performance. And that's consistent with what we've been guiding to. We've always expected the backup this year to be a back-end weighted production year. And what's really driving that is the grade dissemination profile and just where we are in terms of our mine plan and the sequencing of operations. So we are now into that high-grade sequence. We expect that to continue. here in q4 and likewise that will continue into next year as well and beyond but particularly next year whereby you know we are expecting a very meaningful significant increase in gold production levels relative to what we are guiding for this year so suffice to say Oxford is in is in a very good position and we are seeing that in terms of its profitability and its free cash flow generation just moving on to the next slide on slide seven Just in terms of Sinterra's environmental social governance profile and just in terms of some of the key quarterly updates here, I won't reference all of these bullet points, but in terms of the first bullet point, obviously from a safety perspective, that's absolutely paramount. We continue to be relentlessly focused on achieving a zero-harm environment. As I mentioned earlier, we had a number of safety highlights during the quarter, which is fantastic. And I'm sure Dan will expand on some of this during his remarks. I do want to mention the sixth bullet point here. Sentera is a member of the World Gold Council, and the members of the World Gold Council, we're currently rolling out the responsible gold mining principles. I think all of us in the industry are very well advanced on this, but particularly at Sentera, that is the case. We're looking to be achieving full compliance with these 52 key principles by the end of 2022, and I think our operations are well positioned for us to achieve that. And then just lastly, I want to give recognition to Mount Milligan. You can see here during the quarter they received a mine reclamation award from the British Columbia regulators. And again, just recognizing their proactive approach to reclamation. So that was a good achievement during the quarter. With that, I'm going to look to pass the presentation over to Dan Desjardins, our Chief Operating Officer. And Dan can provide some more detail on the operating highlights. So Dan, over to you, please.

Thanks, Scott. Good morning, everybody. Please move to slide nine. Sentara continues to prioritize the health, safety and well-being of its employees, contractors, communities and other stakeholders as COVID-19 is still with us. We have put great emphasis on vaccinations this quarter and all of our sites have higher vaccination rates than the regions that they were. We continue to modify our COVID protocols at all of our locations to help prevent infection and reduce the potential transmission of COVID-19. All of the great efforts of our people have allowed us to reduce the potential transmission and continue our operations in a normal mode. Just as other businesses, though, we are seeing stresses in our supply chain, but our supply chain management experts have been staying ahead of it and there has not been a material negative effect on any of our operations. For employees and other workers, safety in Q3, we continue to focus on improving the safety performance of Sentara company wide with good results. Our TRIFR for Q3 was 1.21, which is in line with our target of 1.26, but we still did have eight reportable injuries in the quarter, which was a 7% improvement over the previous year's quarter. As part of our WorkSafe HomeSafe program, which is a focus on employee behavior at work and at home, We have rolled out our training virtually with great success, and we continue to roll out our critical control management approach. An excellent milestone, as Scott spoke to, was at our Auksoot mine where we did achieve 2 million man hours without a lost time injury. And Ndako had an impressive eight years without an LTI. And one year at our Thompson Creek mine and Langloff metallurgical facility. On the production front, we had another strong quarter with our two operations producing, as Scott indicated, near 77,000 ounces of gold and 17.9 million pounds of copper at an all-aid and sustaining cost of $630 per ounce sold. Now Milligan produced 39,658 ounces at 774 after the copper credits. and oxwood produced 37,255 at $481. Of note, Mountain Milligan mine had in excess of 6 million cubic meters of water in our tailings inventory at September 30th. And we have had a steady level of water now for the last eight weeks as we benefit from having access to well understood underground aquifer water, as well as the permitted draw that we had from surface water earlier in the summer. We do still have access and permits to the end of 2023. We continue to work with our First Nations partners and regulators to permit the long-term surface water solution for our life of mine as part of our long-term water strategy. We feel confident on that. Both Mount Milligan and Oxwood mines are running well, and we are well on track to achieve our 2021 production targets as we approach the end of the year. And as Scott also indicated, we are lowering our cost guidance for aux suites to an all-in sustainment cost of $680 to $730 per ounce sold. Please move to slide 10, and we can talk specifically about aux suites for 2021. Safety, again, is our highest operating priority, and we continue to roll out our safety programs to consistently improve our safety performance. We did have the milestone of 2 million man-hours without an LTI, but unfortunately last week, therefore in the fourth quarter, one of our contract drillers did injure his hand, which got squeezed on the drill rig. We are reviewing that in detail, this incident, to further improve our guarding and employee adherence to our safety policies and procedures. Oxhoud continues to mine in both of our pits. with the majority of the ore coming from Keltepe. We are moving into the higher grade zones, as you can see from the table below, and plan to have access to these levels over the next two years. We have expanded the near mine exploration drilling program to 30,000 meters in order to work towards further expansion of the reserve and resources. Our final point, as mentioned earlier, we are seeing good Good results so far in 2021. Therefore, we have lowered our cost guidance for auxin to the all in sustaining cost of 680 to 730 for the year. Turning to slide 11 and looking at our key focus for the remainder of 2021. Our Q3 results reflect what we will continue on and focus for the rest of the year. We are putting great emphasis on improving our safety performance throughout the company. Exploration has been a big focus and we continue to try to drive to zero harm in this area. Oxhoud has been a great addition to our operation in mines and continues to deliver better than planned financial and operating results. We are much more confident in our access to the required water from Mount Milligan and we continue to manage this area closely to ensure that we have water to run at full capacity. Our major continuous improvement project of the installation of the staged flotation reactors is on target and to be operational by the end of the year at Mount Milligan. Auxhoot mining is continuing as planned in higher grades in both fits and we are putting a strong effort to understand our near mine resources with additional exploration meters planned. Moving to slide 12 on guidance. We have detailed out, as you can see, our cost guidance for 2021. Overall, as we approach the end of the year, we are guiding a total of the 270,000 to 300,000 ounces of gold and 70 to 80 million pounds of payable copper at a very competitive all-in sustaining cost of $700 to $800 per ounce. With the strong copper credits at Mount Milligan, it has an excellent all-in sustaining cost of $530 to $580 per ounce on 100,000 to 200,000 ounces of gold production. For AuxSuite, we are guiding 90,000 to 110,000 ounces of gold and all in sustaining costs of $680,000 to $730,000, which was lowered by $50 from the last quarter guidance. Capital expenditures on a consultant basis are still looking to come in between the $95 million and $115 million for the year, so that is well under control. Now over to Darren, our CFO, to review our third quarter financial results.

Thanks, Dan, and good morning all. For those following on the slide deck, I'm on slide 14. Sentara recorded $220 million in revenue during the quarter, consisting of the Mount Milligan mine, the Oxud mine, and Amalipton and business unit. Revenue materially consisted of $118 million in gold sales, 53 million in copper sales, and 52 million from our Molybdenum business unit. During the quarter, the company's operational average gold price realized was $1,542 per ounce of gold and 255 cents per pound of copper. This incorporates the existing streaming arrangements over the Mount Milligan mine. In the quarter, our continued operation sold 75,721 ounces of gold, 38,517 ounces from the Mount Milligan mine, and 37,204 gold ounces attributed to the Oxud mine. We also sold 18.5 million pounds of copper in the quarter from Mount Milligan. The adjusted net earnings during the quarter from continued operations was 35.7 million, The net earnings from a consolidated operation was $27.6 million. This included the adjusting item of $8.1 million attributable to legal and other costs relating to the seizure of the Kuntur mine. Earnings attributable from an operational perspective were $19.4 million contributed from the Matt Milligan mine, $37.4 million contributed from the Oksud mine, and $6.9 million from the Melisandum business unit. The adjusted earnings from continued operations was $0.12 per share for the quarter. Now moving to slide 15. Sentara's continued operations in the quarter recorded production costs of $630 per ounce and an all-in sustaining cost of $781 per ounce. At an asset level, Matt Milligan recorded an all-in sustaining cost of $727 per ounce, and Oxy recorded all-in sustaining costs of $603 per ounce for the quarter. The key cash flow metrics of note for the quarter were $62.4 million in cash provided by operating activities from continued operations, free cash flow from continued operations of $41 million, with our ending cash balance for the quarter has now grown to $912 million. As you'll note at the bottom right-hand chart, Sentera's continued operations year-to-date has produced 217 ounces of gold, so tracking well to achieve 2021 production guidance. The bottom left-hand chart notes our free cash flow year-to-date of approximately $140 million from our continued operations, with up to $175 million guided for 2021 at a gold price of $1,750 per ounce. However, I would draw your attention to two things. Firstly, 2021 capital expenditure guidance in the MD&A remains unchanged. For Mount Milligan, we are guiding to capital expenditure of $70 to $80 million with year-to-date expenditure of $48 million. For Oxsut, we are guiding to total capital expenditure of $15 to $25 million with year-to-date of $15 million. Therefore, we're guiding to elevated capital expenditure in the final quarter of 2021. Secondly, there has been congestion at the Port of Vancouver as reported by other users of the port. We are targeting four shipments in Q4 from our Mount Milligan operations. This might have an impact on timing of cash receipts. I'm now moving to slide 16. As noted by Dan on slide 10, we have now entered the high-grade phase of the ox suit mine, which will continue into 2022. The result of processing the high-grade material is evidenced in the bottom left-hand chart with a targeted 40% increase in consolidated production comparing guidance midpoint from 2021 to 2022. As noted by Scott and Dan earlier, we have also reduced our 2021 ore and sustaining cost axe ox suit to the new range of $680 to $730 per ounce and a consolidated basis reducing the new range to $700 to $750 per ounce from a rolling forward and sustaining cost perspective. Our midpoint all-in cost for 2021 is now $875 per ounce and reducing to a low $575 per ounce in 2022 as per our guidance. If gold and copper prices remain at current levels, significant margins will be achieved as we move into 2022. Now, finally, given the cash flow generation of our continued operations and a closing cash position of $912 billion, Sentera Board has declared a quarterly dividend of $0.07 per share for the quarter. With that, I'll pass back to Scott.

Thanks, Darren. So just to sort of close out our prepared remarks here on slide 18, Just referencing some of the bullet points here in the top left of this slide. So as Dan and Darren have already spoken to, we're continuing to guide up to 310,000 ounces of gold production for this year. We're seeing good operating momentum. As we've spoken to, we have favorably reduced our all-in sustaining cost guidance for the full year, so expecting to produce this gold at a cost as low as $700 per ounce in terms of the all-in sustaining cost metric. Second bullet point, we continue to see a good gold and copper price environment. And again, just given our strong operating performance, we continue to guide for free cash flow up to $175 million U.S. Just in terms of the last bullet point there in the top left, the strong operating momentum, profitability, free cash flow generation, as Darren just spoke to, we finished the quarter with a debt-free balance sheet with total cash reserves of approximately $912 million U.S. So again, in conjunction with our available revolving on a credit facility, we have very strong liquidity, and I think that allows us to advocate that Sentera is operating a fully funded business model here moving forward. As I spoke to earlier, the middle chart there down the bottom, I think we're seeing very strong contributions from Oxford right now, and we do expect that to continue now that we're into the higher grade sequence. And as Darren spoke to, as we look forward to next year, Oxford is going to underpin some meaningful organic growth in terms of our gold production levels from Sentera. Just lastly, a key announcement I want to make, and we referenced that in our disclosure today, particularly in terms of my CEO quote, but I just want to reiterate that we here at Sentera, we would like to recognize that after more than 15 years of Sentera, John Pierce and our vice president investor relations who is on the call John will be retiring at the end of this year You know, obviously we all want to congratulate John on his upcoming retirement and thank him for his continuous commitment and Dedicated surface. So John, you know on behalf of myself the company in the board We would like to you know, wish you a very happy retirement and we'd also note that upon John's retirement All investor relation responsibilities are going to be assumed by Toby Caron, who is our treasurer and director for investor relations moving forward. With that, I'd like to pass the proceedings back to the operator, and we can move into the Q&A segment, please.

Thank you. If you would like to register a question, please press the 14 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. One moment please for the first question. Our first question comes from Trevor Turnbull with Scotiabank. Please proceed.

Yes, thank you. And I'd like to add my congratulations to John as well on his upcoming retirement. And thank him really for many years of discussions and great tours over the years. And congratulations to Toby as well. My first question, I guess, is about the higher grades at aux suit. Dan mentioned they're going to carry well into 2022. I just wondered if the grades that we saw placed in Q3 were kind of typical of what we can expect for this higher grade material. or if that 1.6 grams was really particularly high relative to what we should be thinking about.

Dan, I'll let you take that, please.

Yeah, it's a very good point. I think it's fairly close on target. Obviously, through the year, we'll be placing, as we pull the high grade out of the bottom of mostly Caltepe Pit, but also Gunantepi Pit, But we are looking probably slightly less than that, closer to maybe 1.2 through the year average, but certainly it'll be blended and we'll try to maintain our steady rate.

Trevor, just from my perspective, just to help with your modeling, we would expect OXA to be at the upper end of our goal production guidance in terms of where we're going to finish this year and perhaps you could kind of just back calculate what the grade is, just given where we're expecting to finish the year on guidance.

Sure. The 1.2 grams that Dan just referenced, that's for this year or for 2022? No, you were speaking to 2022.

Okay, right. Got it.

And then I just, to follow up on that, I was wondering if the Guna Tepe approval is still expected kind of mid 2022, or is that date up in the air a bit?

I can speak to that, Scott. Yeah, that's fine. We have commitments from, you know, from the government and, you know, the legal authorities to be tightly reviewing that by the end of this year, early next year. then we go through the normal permitting process. So we're still feeling fairly confident that by mid-year we will have the new footprint. We are fully permitted in Gunantepi and we do have plans that if that permit was continued to be delayed, we would continue on with our original design and the access. So right now we are mining in Gunantepi, but within the old permitted footprint.

Right, okay. And then just changing gears, I wanted to ask about the comment in the MD&A about the resignation of the appointed international arbitrator. And I wondered if that worries you in terms of finding a new arbitrator to take on the role. And I ask that because... it sounded like the arbitrator wanted some protections against future prosecution from the Kyrgyz, which he wasn't able to secure. And I'm just wondering if any arbitrator wouldn't want that same sort of protection. And so I guess the question is, are you worried about the timeline for arbitration and finding someone to replace that person? And what other avenues can you really pursue for a timely resolution on the whole Kumtor story?

Well, the first part of the question, Trevor, we're in that process right now in terms of appointing a new arbitrator. Obviously, our lawyers are looking at this pretty carefully, but unfortunately, I'm not really in a position to comment any further on that aspect. In terms of expediting a resolution of the Comptor matter, the second part of your question, I think, as we've always said, we obviously would prefer to engage in a constructive dialogue with the Kyrgyz authorities to resolve this dispute. There has been some engagement, but really, absent any indication from the Kyrgyz authorities that they are willing to reach a reasonable resolution through such dialogue, we will, of course, continue to pursue our legal avenues with full force, which is what's currently underway.

Okay, I understand. Thanks, Scott.

Our next question comes from Anira Soni with CIBC World Markets. Please proceed.

Good morning, and I also wanted to congratulate John Pearsman on a well-deserved retirement and all that he's contributed to the animals community over the past 15 years. My question is with regard to auxute. I was clear and now I'm confused. So in Q2, I'm looking at the outlook that you guys had put out for 2022 and 2023. I believe in the MDNA, and I'm sure you don't have it handy, but in the MDNA, you basically say that grades would be approximately 2.2 gram per ton material during 2022 and 2023. And so I'm just kind of trying to reconcile that to that 1.2 that was just quoted. And my question was with regards to that original question was with regards to the grades and throughput and specifically the throughput. It says also that you're partially offset by lower or ton stacked. So I was just trying to get an idea of lower relative to the average for the year or lower relative to the pretty good stacking rate that you saw in Q3 and probably in Q4.

Anita, thank you for the comments regarding John, and I should have thanked Trevor as well earlier. We obviously appreciate that. I'm sure John appreciates that recognition. Dan, the first part of Anita's question, when you quoted 1.2, Dan, I think you and I may have misspoken. I think we were trying to reference Trevor's previous question on what could be the great profile for Q4 of this year. Dan, would you agree?

Yeah, no, fair enough. And, um, yeah, we did, I think we both got a little taken off, but, but, um, we have only one other, you know, I can speak to that. Scott is we, as part of our adjusting plan, we, uh, we are, we do, we have added to our life of mine in the last couple of months, uh, some run of mine or which we, um, which we did not include in our plan before. that that will bring down the grade and increase the tons but i i unfortunately i don't have that those numbers right in front of me so i i think i'll have to leave that to toby to or john to follow back follow up later in a separate communication maybe run of mine is there a clothing to cut off is that is that a fair assumption that that is a fair assumption and uh but it is uh economic so we uh yeah we've included that that'll lower the grade substantially yeah

Okay, so maybe the throughput levels remain the same, but the grade will be a little bit lower than what you guided to in Q2.

We're still targeting in Q3, Anita.

Sorry, I mean, in Q2, you had guided to a specific number. When you refreshed your outlook for 2022 to 2023, that's what I'm talking about.

Right, it was much lower, tons of ore, but higher grade. That's correct. We keep adjusting our plan. based on additional tons and including some much lower grade.

Okay. And then, secondly, along the same vein, as we, you know, given, you know, outside the relative to the prior guidance, which would have been a very slight dip in Mount Milligan for next year, is there anything we should think about that might have been, you know, updated within that plan for 2022?

We haven't come forward with with the numbers from our updated life of mine, we are still we just finalized our drilling program and we're working on our resource and reserve block models to bring to a new a new pit design, so I think it'd be premature to to speak to that but.

This time okay last question would be on Q4 at mountain Milligan. So a slightly lower grade this quarter. You did have that planned shutdown. As a result of that, we should expect higher grades going into Q4, more normalized to what we've had as an average for this year.

Again, our shutdown is as planned here in later November, so we are doing that. And we're still feeling, as Scott indicated, we'll be coming into Q4. at the higher end of guidance. We are looking at normal grades. We're feeding both from stockpile and from run-of-the-mine.

Oh, I'm sorry. I thought in the MD&A that the shutdown had already occurred. I'll take a look at that again. Okay. All right.

Thank you.

That's it for my question.

Okay.

Operator, is there any additional questions in here?

Our next question comes from Dalton Barreto with Canaccord. Please proceed.

Thanks. Good morning, Scott and team. I'll jump on the John Pearson congratulations bandwagon as well. I'm also confused with regards to the gold profile at OXU here. I just want to be very clear. First of all, I'm talking about 2022 now. Okay, and your previous guidance suggests an average weight of 2.2 grams per ton and production guidance of 210 to 240,000 ounces. Is that still valid?

Yes, there's been no change. I'm sorry you got confused, Dalton. I think Dan and I got confused when Trevor was asking the question, the way Trevor framed the question, and I think it got us confused, got everyone confused, but when it comes to 2022, there is no change.

Okay, so 22 and 23, there's no change.

Correct.

In the overall ounce guidance, correct. In the overall ounce guidance, but based on what Dan said earlier, the tonnage and grade profile has changed because of these run of mine times?

There will be some changes in that, but we won't necessarily be filing a new 43-1. It's not material at this point, but that's correct. The ounce guidance that we have indicated is not changing. Got it.

Okay. Okay. And then just maybe switching gears to the whole Coomptor situation again, I got to ask, you know, just given everything that's happened and what these guys are doing to the mine, do you actually want the mine back or would you prefer this be resolved, you know, from a monetary perspective?

You know, Dalton, obviously we're, you know, steadfast right now in terms of our focus on protecting our rights and protecting the value, as well as from a shareholder's perspective, doing everything we can from that perspective. But I think if one was to say, in the context of your question, that some of these steps that the Kyrgyz have taken, it may be difficult for one to envision how you would return back to that position of owner and operator of the project. You know, we've had a number of shareholders who would certainly advocate that, you know, moving on from the situation in some form of clean exit would be the appropriate measure for Sentera to take. So, obviously, we're taking all that into our calculus, you know, in terms of what's going to, you know, ultimately be the best sort of long-term value proposition for Sentera shareholders. So, there certainly is sentiment that, you know, parallels with the context of your question there.

Okay, great. And then, you know, you exit at Q3 with more than $900 million in cash in your balance sheet here. And as you're thinking about capital allocation going forward, I know, Scott, in the past, you've said buybacks are not an option. Just, you know, you wouldn't want to increase the concentration of the Kirby's position. Is that still your position, given the restrictions you put on their shares?

I think it is, Dalton. And again, when it comes to capital return initiatives, that's obviously a board decision. But in terms of us management strategizing, deliberating with the board, we recognize that there's various capital return initiatives available to us. Obviously, we've been focused on dividend distributions, and we have been growing that. But in terms of some form of meaningful share buyback, I think it's very difficult for us to envision doing that until the Kogi situation has been resolved. As you pointed out yourself, just concentrating their ownership position would just be off strategy. Now, I know you referenced the current restrictions that are in place in terms of their ability to, you know, invoke transfer or sell their shares, et cetera. Those restrictions, you know, continue to be in place. But, you know, you can't project what the future may look like, you know, vis-a-vis what would be a very significant decision in terms of, you know, a share buyback at a meaningful quantum level. So, yeah, in terms of how this is stage-gated, you know, conceptually, I think we need to resolve the Qumto situation first.

Okay, that makes sense. And then, you know, as I look at your consolidated production outlook, there is a reasonably substantial drop coming in somewhere in that 24, 25 timeframe. How important is M&A to you right now?

I'm sorry, Dalton, you broke up. How important is that?

Well, is M&A becoming... a much more important priority for you and the board?

Well, so that's still quite a ways out we would put forward, you know, in terms of production declining. And really that's at Oxford where, you know, indicatively, you know, based on the prior sort of 43-1-1 profile, you would be seeing production starting to decline three years out. But, you know, what Dan and his team and our exploration division, you know, we're very focused on our exploration program at Oxford. We've got a pretty significant sort of exploration budget underway, and we are seeing, you know, it's early stage, but we are seeing some interesting results. We are doing some additional internal work on what we think the life of mine profile is going to be moving forward. As you can appreciate, like most companies, we're in our sort of budget cycle right now, as well as our long-range planning cycle. And I think we are seeing some conceptual opportunities at Ops that are that may assist us in addressing that production decline. I know I recognize your question is more focused on M&A, but look, I wouldn't say that we're spending an inordinate amount of time on that topic right now, Dalton. I think, as I've said before, it's a pretty strong gold price environment, and I think valuations are reasonable, so the ability for one to identify you know, a transaction that's going to create meaningful shareholder value, I think it's still pretty difficult right now, just given where we're at in the cycle. So I would put forward that, like you've seen for the last two to three years, we continue to be pretty internally focused. And, you know, again, just coming back to any sort of production decline three years out, we're going to try and do everything we can in terms of optimizing our existing assets, as well as success for the expiration drill bit to try and, you know, as best possible, find every bit of organic growth internally that we can.

Okay, great. And there's maybe one last one if I can squeeze it in. You know, Molly's north of 19 bucks a pound now. Is there a market for your Molly business? Like, I mean, are you looking to offload it? Are there potential buyers? Does anyone approach you?

Yeah, I mean, you know, we have seen a significant appreciation in the Molly Price, as you referenced, and, you know, coinciding with that, we have seen interest, you know, unsolicited interest from third parties. And, you know, as and when, you know, people, as and when, you know, there is interest, we, of course, we engage and hear out, you know, what are their proposals or, you know, what could be the inherent sort of value proposition here and There are a couple of parties that we have been having discussions with. Again, it's still early stage. But we'll see what comes of that. Using analogy, we'll pull on that string and see where it takes us. But suffice to say that if any of those led to, again, a value proposition that we think is going to surface value and create value for our shareholders, then we would certainly proceed accordingly. I think the current millennium price is strong, and maybe this will present that window of opportunity. Only time will tell.

Great, thanks. That's all from me, guys. Thanks, Don.

Our next question comes from Fahad Tariq with Credit Suisse. Please proceed.

Hi, good morning. Thanks for taking my question. One of the things that struck me was that your company seems very immune, not even immune, but just completely safe from the inflationary pressure that we're seeing your peers facing. So I'm just curious, can you talk a little bit through just like the lower cost guidance and how you're able to achieve that in a pretty high inflation environment? Thanks.

So, Dan, do you want to speak to that first? And then once you're done, Dan, maybe pass it over to Darren just to talk about hedging as well. But, Dan, over to you, please. Sure.

Yeah, no, very good. We are seeing some small amount of inflation pressure, especially on steel, but our usage of steel at Mount Milligan, for example, is not like you would see in an underground mine, and we had longer-term contracts and fairly large inventories. So we're still looking very good there. At Oxsuit... It's a very small operation. We have an ADR plant, long-term contracts with our major supplies. As well, we benefited somewhat from the exchange rate improvements in Turkey. Although we did have wage pressures, we were able to offset that. Again, our biggest cost in Turkey is our contracted mining cost, and that's a long-term contract as well. So, yes, we're looking at better guidance and with the good productivity, we're solid on those numbers.

And Darren is going to... So sorry, over to Darren. I was going to say, Darren might want to comment as well.

Go ahead, Darren. Yeah, I'd draw your attention to page 28 of the MD&A, and basically what you'll see there is we have for many years been implementing FX for more Canadian dollar and fuel hedges, and the fruits of that labor have paid off. Year-to-date, from an FX perspective, we've realized $14 million in gains on the FX hedges, recognized $19 million in gains from a A fuel perspective, as we head into 2022, the FX hedges, you know, we're getting a range for 2022 between $130 to $137, obviously a lot better than the current rates in $18, and we've got some forwards at $129. So that's been approximately 50% coverage. And similar for the fuel hedges, we've actually got a coverage of approximately 70%. so you know i think those that sort of three-year rolling um uh programs have kept this in good stead in particular um the fx that uh you know that's kind of kept us in in good stead okay sorry i just want to catch the number you said 70 percent cover for fuel next year is that right yeah yeah so there's a table on this that on page 28 of the mdna and that is approximately 70% coverage on our fuel hedges for next year. And then into 23, we've actually got 40% coverage. And 2022, it's all laid out there.

Okay, great. Yeah, it looks like it's worked out well. I'm not aware of any other gold producer keeping costs flat, let alone lowering their cost profile. Okay, great. That's it for me. Thanks.

Our last question comes from Anita Soni with CIBC World Markets. Please proceed.

Yeah, sorry for the follow-up. I just checked the MDMA, and it does say that there was a shutdown in the third quarter at Mount Milligan. Is there another one planned in November? Is that what you were saying?

Dan, do you want to take that, please? I believe that that one did get pushed. It was... It was going to be in late September, and we were able to push it into November.

Okay, so it didn't actually happen. So it hasn't happened. So then can I ask why this throughput in grade was a little lower at Mount Mulligan this quarter than your run rate?

Yes, we did have a couple of more minor maintenance issues, and we've been working with changing our liners and our big sag mills. So we took the sag mill down a number of times for 12-hour shuts to remove cracked liners, et cetera, but it was fairly much normal maintenance.

Okay. So then next quarter there might be a little bit lower throughput with the shutdown. How long is the shutdown?

The plan is five days.

Okay. So probably, okay. And then in terms of the grade, is there, could we expect a bump up in grade versus what you had this quarter or was that? You know, something that we should expect going forward, like this 0.38 versus the kind of 0.45 you've been running so far.

Yeah, again, I don't have that in front of me, but, you know, the guidance, you can back-calculate that.

Okay. All right. Thank you.

Operator, was there any further questions? Okay.

I don't have further questions at this time.

Okay. Thanks, Operator.

John, did you want to close out the call? Sure, Scott. Thanks. I want to thank everyone for their kind words and remarks. It's been a pleasure working with you all over these many, many years. And I just wanted to thank you all. So with that, we will end. end the call here, and if you have further questions, reach out to me, Toby, or the team, and we'll get back to you. Thank you.

That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line. Have a great day, everyone.