Centerra Gold Inc. Common Shares

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Thank you, operator. Welcome to Sentara Gold's fourth quarter and full year 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 line to questions. Please note that all figures are in U.S. dollars unless otherwise noted. Joining me on the call today are Scott Perry, President and Chief Executive Officer, Darren Millman, Chief Financial Officer, Dan Desjardins, Chief Operating Officer, Dennis Kwong, Vice President Business Development and Exploration, and Malcolm Stallman, Vice President Exploration. 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 measures we will discuss today are non-GAAP measures. Please refer to the description of non-GAAP measures in our news release and MD&A issued 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 audited financial statements and notes, and all of our other filings, which can be found on CDAR, EDGAR, and the company's website at SinterraGold.com. And now, I'll turn the call over to Scott.

Thanks, Toby, and a very good day to everyone. Thanks for joining us for our year-end earnings result conference call. As Toby mentioned, I'm just referencing the summary slides that are available on our website. So just starting off on slide number five, I just want to speak to some of the key bullet points here in the top left. 2021, it was another strong year in terms of the company-wide gold production profile. I can see for the full year we finished with some 308,000 ounces of gold output, which is at the very upper end of our guidance range. So a good level of performance from both of the respective operations. In terms of the third bullet point, just given that strong level of metal production, in terms of our corresponding oil and sustaining cost per ounce, I think it was a low competitive $649 per ounce. And again, I'll just highlight that that was favorably lower than our full-year guidance range. You can see in parentheses there just each of the all-in-sustaining cost results at both Mt. Milligan and Oxford. So I think underpinning a portfolio that is certainly a lower cost quartile. The strong metal price environment that we're seeing in gold and copper, as well as our low unitary costs, just in the fourth bullet point here, we had an excellent year. In terms of free cash flow generation, we generated some $178 million of positive free cash flow. And again, that was above the upper end of guidance, so a favorable result. With today's release, we've also reported our year-end reserve and resource update. And I think a couple of the key highlights here is we have replenished our production depletion at our offset operational gold mine. And then also in terms of our Mount Milligan operation, We have reported, in terms of our gold resources, we've reported an increase of some 1.4 million ounces. And in terms of our copper resource inventory, we've reported an increase of some 450 million pounds of copper. As we communicated previously, we are embarking on a new technical study at Mount Milligan, and we expect to be releasing that in the second quarter of this year. And one of the key objectives is to be upgrading a lot of this new resource into reserve category, which should underpin an extension in Mt. Milligan's indicative reserve life. And then just lastly, the last bullet point, as we announced on Tuesday morning, was the exciting acquisition of the Goldfield District Project in Nevada. And I will speak to this towards the end of this presentation. But again, an important development for Sentara that I think is going to underpin our organic growth profile here in the medium term. Just referencing the chart down the bottom, the chart in the bottom left is Mount Milligan. You can see the full year result there. Again, some $202 million in positive free cash flow, which is an excellent result. And then OXSERP, which is the middle chart, again the column on the far right, OXSERP in 2021 generated some $112 million of positive free cash flow. That also marked an important milestone at OXSERP. If you take the free cash flow that we generated in 2021, as well as the free cash flow that was generated in 2020, we have essentially paid back the entire upfront investment of some $200 million. So this has been a great experience for us and a real success. And again, just want to recognize the leadership team in terms of the results they've achieved there. Just moving on to slide six of the presentation, just in terms of some of the key corporate highlights. Starting off with safety first, it was a good year in terms of safety. OXIRT, during the year, achieved two million hours of lost-time incident-free operations. You can also then see that INDARCO achieved eight years, and now Thompson Creek Mine and Langlois Facility, they each achieved one year of continuous operations without a lost-time injury. Again, important milestones and indicative that we're on the right path in terms of our pursuit. our objective for zero-harm operations. So again, just want to commend the leadership teams across the organization. Just in terms of third bullet point, as we announced at the beginning of the year, we have been engaged in negotiations with the political leadership in Kyrgyzstan regarding the dispute of the Kumto mine and the illegal seizure of that operation. You know, generally speaking, the key aspect in terms of what we've been negotiating here in terms of resolving this is Sentera will be looking to relinquish its legal ownership of the operation to Kyrgyzstan. And in exchange, Kyrgyzstan will be looking to relinquish their 26% shareholding in Sentera. As and when that's relinquished, we'd then be looking to turn around and cancel those shares. In terms of the current progress, right now with our respective legal advisors, where we're working on negotiating what I would call the global settlement agreement. And as and when that negotiation is finalized, we'll be in a position to sign that and press release that accordingly. So it continues to progress, and hopefully we'll have more news on that forthcoming shortly. Just on the sixth bullet point, I just want to, again, just recognize Mount Milligan. Mount Milligan had a record year in 2021 in terms of mill throughput. It was the highest level of throughput that we've seen. in the history of the operation. And then you can see in terms of the free cash flow result, from $202 million, that was also a record year in terms of being the highest level of free cash flow that's been generated by the operation. Just on the eighth bullet point here, third last bullet point, again, I spoke to this earlier, but very low cost in terms of our oil and sustaining costs across the portfolio, very competitive, $649 per ounce. And then, as I mentioned earlier, you can see in parentheses, The portfolio is certainly one that's showcasing a first quartile cost structure. Second last bullet point, we are anticipating that a lot of this strong production momentum is going to carry into this year. We're guiding for up to 425,000 ounces of gold in terms of the midpoint of our guidance, and that makes for pretty compelling organic growth. Essentially, we're expecting up to a 40% increase in gold production this year over last year. And then in terms of the last bullet point here, that growing level of gold production as well as the sort of current metal price environment, we are expecting a corresponding increase in the level of free cash flow generation this year regarding for up to $250 million of positive free cash flow. So that's going to present well just in terms of the growth in our balance sheet and the underlying profitability within the business. Just moving on to slide seven, just in terms of our environmental social governance profile and just some of the key updates here. As I spoke to earlier, safety continues to be absolutely paramount and I touched on some of the good milestones that we achieved in 2021 that will continue to be an enduring focus here moving forward over the course of this year. Third and fourth bullet points, we continue to advance our various strategies and initiatives when it comes to climate change as well as diversity, equity, inclusion, and making good progress in that regard. And then just the sixth bullet point there, Sentera is a member of the World Gold Council, and we have signed up to the World Gold Council's Responsible Gold Mining Principles, and we're currently rolling these out and implementing these principles at each of our operating and project assets and making very good progress there and in very good stead to have achieved full compliance in the coming 12 months. With that, I'm now going to turn the call over to Dan Desjardins, who's our Chief Operating Officer, and Dan can expand a little bit more on the operating highlights. So, Dan, over to you, please.

Thanks, Scott. Good morning, everyone. Please move to slide nine, and I'll start with the 2021 operating highlights. I'd like to start our 2021 operating highlights, the focus on safety. In Q4, our total reportable injury frequency rate, our TRIFR, was 1.89 due to a number of incidents at Mount Milligan and one more severe incident at Oxwood where a contractor injured his finger. Overall, our TRIFR was 1.02, which is well above our target and has given rise for a need for even further focus on our visible felt leadership in the field. Two positive milestones as Scott spoke to in the year were that offshoot mine did achieve 2 million work hours without a lost time incident. And then DACO, having eight years, although on care and maintenance, still has a number of activities in sight and had eight years in Thompson Creek and Langlois facilities, both went the year without a lost time injury. Sentara continues to prioritize the health and safety and well-being of its employees, contractors, communities, and other stakeholders as COVID is still with us. Just as other businesses, we are seeing stresses in our supply chain and on a couple of our small capital projects, but our people have been staying ahead and there has not been any material negative effect on our operations. On the production front, we had another strong quarter at our two operating sites producing 91,197 ounces of gold and 17 million pounds of copper at an all-in sustaining cost on a byproduct credit from continuing operations of $591 per ounce sold. On a full year, gold ounce production came in at, as Scott indicated, 308,141 ounces, which is right at the top end of guidance, with our copper production coming in at 73.3 million pounds in the middle of our guidance. Our gold production costs were very competitive, $604 per ounce at the bottom end of guidance which was $600 to $650 per ounce. This was due to the increase in the ounce production and strong cost controls. For 2021, our all-in sustaining costs on a byproduct basis from continuing operations came in at the $649, with Mount Milligan a very low $508 per ounce with the strong copper credits, and Auxude at $668 per ounce. Please go to slide 10 and we'll specifically look at Mount Milligan. Over the past few years, we had a strong focus on our process water management. A very positive step forward occurred on January the 6th, 2022, when we obtained the amendment to our environmental assessment certificate to allow for options on our long-term water requirements. We continue to work closely with our partners on our permitting requirements, and environmental management plans as well as licenses for occupation of the land required for pumping infrastructure we will continue to construct the new stage flotation reactor the sfr but commissioning was set back due to the end of march partly due to the supply disruptions but also we had safety concerns during assembly that created the need to change our contractors Although this did set us back, we felt that we must act on all safety issues as this is our most important value. We completed the first step of the Mount Milligan Technical Study, which was taking our 2021 drill results and produced the optimal resource pit. The next stage will be convert the resources to reserves and produce a new Life of Mine 43-101 Technical Study, which is on track for completion in the second quarter. As part of our new life of mine, we did complete nearly 40,000 meters of drilling in 68 holes. The assays were delayed, but we have now included all those in the resource update. The Mount Milligan team had a number of excellent production achievements under the leadership of our new general manager, Carol Fortin. Of note in the past year was the achievement of the highest throughput for the site since the operation began in 2014. In the table at the bottom, you can see that the recovery of both copper and gold are somewhat variable quarter to quarter. This is due to ore type, but both copper and gold recoveries were slightly better than planned due to a new grinding process control system. We are anticipating continued improvements in our recoveries with the commissioning of the SFR in late Q1 and later a new flotation control system. Turning to slide 11, we will discuss Auxud's highlights. Auxud Mine had a very successful year and is on plan with mining in the fourth quarter. It's El Tepe phase two and higher grade zone four, as well as in Gunantepi. The higher grade output from the mine will continue through 2022. The exploration and infill drilling of 31,000 meters delivered enough additional reserves to cover the depletion for the year, and this was with the success of planning, and we are going to do 40,000 meters in 2022. Oxut is now running very much steady state. Therefore, the focus is on productivity and efficiency, and thus we are putting out guidance that is a very competitive all-in sustaining cost for Oxut on a byproduct basis for 2022 of $425 to $475 per ounce of gold. In total, we placed 195,990 ounces on the heap, of which 16,200 was unirrigated. We poured 111,703 ounces, which was slightly above our 2021 guidance. Moving to slide 12, we can discuss a Mount Milligan reserve and resource update. Mount Milligan was able to complete its drilling program and updated his resources with all the asset results. The new life of mine is planned to be released in Q2. Therefore, this update, we have just depleted the reserves. The reserve therefore did decrease from 2.1 million ounces of gold to 1.8 million ounces and for copper from 837 million pounds to 736 million pounds. We did have a substantial increase though in Mount Milligan's resources. which has now increased in terms of gold from 1.39 million ounces to 2.7 million ounces of gold, and copper increased from 521 million pounds to 974 million pounds. We are taking all efforts to finalize the new 43-101 and the Q2, and that will take into account this large increase in resources. On slide 13, for Oxford Reserves and Resources, At OXU, we did have an infill drilling as we did do near mine exploration as well. The site was able to replace its throughput of 196,000 ounces with the additional 203,000 ounces, therefore an increase in total reserve of 1.13 to 1.14 million ounces. OXU resources also increased slightly from 230,000 ounces to 283,000 ounces with an average grade drop though of 0.66 grams per ton to 0.50. This is due to the cutoff grade reduction of 0.20 grams per ton to 1.6 grams per ton. Moving to slide 2022, in terms of guidance outlook, for 2022, our consolidated gold production range is between 400 and 450,000 ounces, non-milligan being 190,000 ounces to 210 and oxygen from 210,000 ounces to 240,000 ounces. For copper, Milligan is targeting to produce between 70 and 80 million pounds. For our consolidated gold production cost guidance for 2022, that will be between 500 and $550 per ounce with an all-in sustaining cost on a byproduct basis. We are guiding a very competitive 600 to $650 per ounce. Milligan's all-in sustaining guidance within that is $575 to $625, and AuxSuit, with the higher production, is looking at guiding $425 to $475 per ounce. Moving to slide 15, or 2022, we are guiding a total capital expenditure of $95 to $105 million, of which sustaining capital is the majority coming in at $90 to $100 million. The non-sustaining capital of only $5 million is a carry forward from 2021 to complete the stage flotation reactor at Mount Milligan. Of note, we are looking to spend between $35 and $45 million in exploration, including exploration at Mount Milligan of $12 million and Oxfam of $5 million. Additionally, in regards to the newly acquired Goldfield District project, the company expects to incur 15 to 20 million in relation to the exploration activities at the project in 2022. Overall, Sentera is guiding a strong free cash flow of 200 to 250 million at a gold price of $1,700 per ounce and a copper price of $4 per pound. With that, I'll pass it over to Darren, our CFO, to review our fourth quarter and 2021 financial results.

Thanks, Dan. Good morning, all. For those following on the slide deck, I'm on slide 17. Sentera recorded $251 million in revenue during the quarter, consisting of the Mount Milligan mine, the Oxford mine, and our Molybdenum business unit. Revenue consisted of $136 million in gold sales and $62 million in copper sales and $52 million from our Molybdenum business units. In the quarter, a continued operation sold 90,312 ounces of gold, 58,642 ounces from a Milligan mine, and 31,670 gold ounces of tripled to Oxford mine. We also sold 17.2 million pounds of copper in the quarter. For the 2021 year, our continuing operation sold 314,757 ounces of gold, a 21% increase year on year. This representing the upper end of our 2021 guidance. We also sold 78 million pounds of copper, a 3% decrease at the Manmilligan mine. This is attributable to the 16% decrease in copper grades processed during the quarter, during the year. This was positively offset by the 4% additional tons processed and the higher level of inventory held at the start of 2021. During the quarter, the company's operations average gold price realized was $1,504 per ounce and $3.59 per pound of copper. This incorporates the existing streamer range over the Mount Milligan mine. Cash provided by operating activities from continued operations was 61.8 million for the quarter and 271 million for the year. Free cash flow from operations for the quarter was 38.7 million and 178.4 million for the year. At an operational level, the Mount Milligan mine generated 46 million free cash flow for the quarter and 201 million for the year. The Oxit mine in the quarter generated $35 million in free cash flow and $112 million for the year. The Oxit mine is now in the higher grade gold sequencing. This highlighted by the 2022 guidance with up to 240,000 ounces of gold to be produced. The adjusted net earnings per share was $0.12 for the quarter and $0.79 for the full year. I've been now speaking to slide 18. The net earnings from continued operations was $274.9 million in the quarter, with $35.4 million in adjusted net earnings. The earnings in the quarter attributable to operations were $50.9 million contributed from the Mount Milligan mine, $38.7 million contributed from the Oxut mine, and a $1.2 million loss from the Merlindina Business Unit. During the year and for the quarter, there were several adjustments adjusting items of significance that are noted on this slide. I'll be only speaking to the quarterly adjusting items. Firstly, the Mount Milligan mine impairment reversal net of tax recorded of 117.3 million. An initial impairment was recorded in Q3 2019. Since then, the Mount Milligan mine has improved with sustainable performance with a reduction in both mining and milling costs from a unit basis. This, together with the increase in underlying resources and the long-term copper and gold price increases, Sentera has made the decision with confidence to reverse the impairment. We look forward to sharing the new Mount Milligan technical report in queue this year, together with the three-year consolidated guidance update. Secondly, the gain on sale of the green stove property. An additional 25 million gain was recorded in the quarter, The trigger event being the construction decision made by Orion Resources and its JV partners. This amount is due and payable to Sentera no later than December 2023. Sentera has not recorded the additional consideration that is attached to the production milestones of the Greenstone project. Thirdly, the income and mining tax adjustments of $132.7 million was recorded. This is in connection to the Mount Milligan mine now recording a deferred tax asset given the confidence management now has on income generation from the Mount Milligan mine and the company using a three-year forward look realisation approach. The other adjusting items representing a combination of reclamation provision expense driven by the accounting standards and the need to apply current underlying discount rates together with the legal and other costs associated with the Comptor file. I'll now move to slide 19. From a cost perspective, Sentera's continued operations in the quarter recorded production costs of $550 per ounce of gold and for the year, $604 per ounce sold. All in sustaining costs on a by-product basis of $591 per ounce was recorded in the quarter and $649 per ounce for the year. At an asset level for the full year, Mt Milligan recorded all in sustaining costs on a by-product basis of $500 per ounce. outperforming the 2020 21 guidance range of 530 to 580 per ounce oxford recorded all in sustaining cost of 668 dollars per ounce for the year also outperforming the 2020 guidance range of 730 to 780 dollars per ounce the company exited 2021 with a cash balance of 947 million dollars the board declaring a quarterly dividend of seven cents per share I would like to draw your attention to the bottom left-hand chart. I would note in 2021, the free cash flow was 178 million. We see this growing to 220 million in 2022 using a $1,700 gold price and a $4 copper price at that midpoint. Obviously conservative in this current price environment. Based on our sensitivity analysis disclosed in January 18 press release, a $100 increment in gold price movement will generate an additional $35 million cash for Sentera. Finally, the bottom right-hand chart noting the 2022 column, our fully loaded or all-in cost is $725 per ounce of gold. Therefore, for each ounce of gold produced, a very healthy margin. With that, I'll pass it back to Scott.

Thanks, Darren. Just referencing slide 21, just to recap, as we announced this past Tuesday, an important development here at Sentera is the acquisition of the Goldfield District project. I think this is going to be important to the organization moving forward, just being one of our key sources of organic growth here over the medium term. In terms of the transaction and the rationale, you can see as per the slide, we're acquiring this project for some $175 million US in cash. with a further milestone payment of $31.5 million in cash for Sentera shares at our election. The $175 million in cash obviously means that our share count will not be growing. And so in terms of the value proposition here, we expect this to be an accretive transaction, especially when you think about how we're increasing our shareholders' gold exposure, be it resources, future reserves, or future incremental production. A lot of strategic rationale in terms of pursuing this project, and you can see that illustrated on the slide here. Firstly, we think this adds a high-quality development project to our pipeline. It's a conventional open-pit heat leach project, very similar to our operational Oxford gold mine. We expect this to be a meaningful source of future low-cost production. And in terms of future construction, we would certainly note that this project should have low capital intensity, similar to our experience with our operational Oxford gold mining operation in Turkey. You can see it's going to improve our geographic profile. The project is located in Nevada, which is deemed a Tier 1 mining jurisdiction. And importantly for Sentera, this is going to favorably sort of reposition our portfolio just in terms of our geopolitical risk profile. And I would like to think that's going to support a robust valuation moving forward just in terms of our valuation multiples. In terms of the work done to date by the vendor, I would say it's been very high quality. And one of the things we've certainly noted is there's a lot of strong support in terms of the communities, in terms of the county, and in terms of the regulators and the agencies. So we do expect to be establishing a strong license to operate here. One of the important aspects here in terms of the industrial logic is it allows us to leverage our existing operating expertise. So as we've commented previously, we see this being very similar to our Oxford gold mine in Turkey, and that's going to allow us to leverage a lot of our exploration, development, and operating expertise, and again, hopefully replicate that success that we had with Oxford and replicate that here with the Goldfield District project. Second last row here, just in terms of the exploration potential, we think it is significant. It is a large land package and in terms of the overall endowment here in the history, it has produced some 4 million ounces of gold. We think it is still under explored. We have a number of drill ready targets that we'll be pursuing. And our objective here is to be expanding the known deposit and extending the mine life. And that'll certainly be a key focus here in 2022. And just lastly, we know this project well. We have been evaluating this since 2020. The level of due diligence that we have undertaken here, it has been quite extensive. And that obviously underpins our confidence in the overall sort of opportunity here. In terms of this year, I think some of the key milestones, sorry, in the Over the next 18 months, some of the key milestones we'll be pursuing with the Gulfwood District Project is in the first half of 2023, we'll be publishing a Synterra authored resource for the property, and thereafter we'll be publishing a feasibility study and moving this project forward so that it's in a position for a potential construction decision. So overall, I think it's an attractive value proposition. We're very excited about this, and particularly so because this will represent our next source of organic growth for Synterra in the medium term. Just moving on to slide 22, just my final slide. Really what I've just highlighted on this slide, just in the bottom right-hand corner, as Darren spoke to, it was a very good year in terms of free cash flow generation. You can see the column on the far right. We generated some $178 million of positive free cash flow. And we're really looking forward to this year. Obviously, our gold production, we've got good organic growth. Our gold production is growing by 30% to 40%. And given the current metal price environment, that should certainly make for another strong year in terms of free cash flow. Again, in terms of the upper end of our guidance, we're guiding for up to $250 million of positive free cash flow. And that level of profitability and cash flow generation, that's going to certainly underpin our peer-leading balance sheet. And likewise, our investment in Goldfield District Project. So again, I think we're well positioned and in great stead for another year of strong performance at Sentera. With that, I'm going to conclude our prepared remarks. And Dina, if I can pass it back over to you just to facilitate the Q&A session, please.

Of course. If you'd like to register a question, please press the one followed by the four 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 one followed by the three. Once again, to register for a question over the phone lines, please press the one followed by the four. And it's just going to be a moment for the first question. Our first question is coming from the line of Fahad Tariq with Credit Suisse. Please go ahead.

Hi, good morning. Thanks for taking my question. Can you touch a little bit on how you're thinking about capital allocation? I mean, I think you touched on this right at the end of your presentation. You know, the balance sheet has $900 million of cash. The recent acquisition costs around $200 million with another $200 million of CapEx. There's still quite a bit of capacity to maybe raise the dividend, do buybacks, maybe even further acquisitions. Just any thoughts on how you're thinking about the balance sheet and how to potentially leverage some of that cash? Thanks.

Yeah, thanks, Ahmed. You know, we certainly recognize that the balance sheet's in a very strong position. And in terms of that cash balance, you could advocate that it's surplus to our sort of medium-term requirements moving forward. And that's something that myself and the board, you know, we're cognizant of. We have been having a number of discussions around sort of potential shareholder-friendly capital return initiatives. In the past, we've always been primarily focused on our dividend distributions. And if you look back over the last sort of two-year period, we increased our dividend to $0.04 per share per quarter, then to $0.05 per share per quarter, and then most recently we've increased it to $0.07 per share per quarter. There will continue to be discussions and deliberations on that with the board. We certainly have the opportunity to look at increasing our dividend distributions even more so. But we also, you know, we debate and we deliberate on, you know, potential share count reduction initiatives, you know, all the way, you know, considering things in terms of a normal cost issue a bit, or do we do something more substantial in terms of a substantial issue a bit. So we'll continue to evaluate these things, but, you know, the one thing that dictates the timeline around all of this is we're waiting until we've resolved this situation with the government of Kyrgyzstan. As I mentioned at the outset of the call, progress is pretty good there in terms of the negotiations around finalizing the Global Settlement Agreement. But it's not until we've fully resolved that situation that we'll be able to actually embark on any sort of meaningful capital return initiative. The reason being, the government of Kyrgyzstan, through their agency, Kyrgyzstan, they are a 26% shareholder in Sentera. So we want to wait until we've resolved that shareholding. And thereafter, I think that'll put us in a good position to really embark on those evaluations and discussions around what we could be doing incrementally in terms of capital return initiatives.

Okay. Okay. And then just switching gears to Goldfield, can you just give us a rough idea of timeline? Like what are some milestones maybe in 2022?

Yeah, so look, over the next 18 months, we're in what we call the definition phase around the project. And so if I look at this year, for example, we're going to be extensively focusing on infill drilling, as well as our exploration investments. All of that work will be going into and supporting a property resource update that we're looking to publish in the first half of 2023. In parallel, the technical team, we're commencing work on detailed engineering, water studies, as well as other technical aspects, metallurgical test work, et cetera. And a lot of that work will then support a new feasibility study for the project. And that feasibility study itself will then support a new technical report for the property. And the reason we're doing all of that is we want to make sure that we're positioning the project for a construction decision over the next 18 months. Assuming we do get that construction decision and a positive approval from the board in terms of sanctioning the construction of the project, we're then looking at a two-year construction timeline. So again, really the key sort of catalyst here for HUD is a resource update in the first half of 2023, and then shortly thereafter we'll be publishing the feasibility study for the property.

Okay, great. Thank you very much, Todd.

Our next question is coming from the line of Dalton Barreto with Ken Accord. Please go ahead.

Thanks operator. Good morning, everybody. Scott, congratulations on the Goldfields acquisition. It looks good from my perspective. I just want to follow up on that previous line of questioning there. There's some parameters out in the public domain that were put out there by the vendor. And I'm just wondering, How much can we rely on those parameters in terms of resource size and grade, in terms of kind of mine life and annual production, just those sorts of metrics? Thank you.

Yeah, you know, look, Dalton, when we did our... you know, all of our due diligence and what have you, and all the evaluations we've been doing over the last, you know, 18 months, nearly two years, you know, obviously we relied on, you know, the work that the vendor's technical team has done, and they've done a lot of good work, but what we're seeing is a larger opportunity, especially in terms of the indicative or the conceptual resource, and that's something we're going to be, you know, quite focused on. You know, a lot of our investment this year, as I mentioned earlier, It's focused on our exploration programs that we're already drafting, if you will, or preparing, but also a lot of infill drilling as well. Ultimately, what we think we're going to be preparing here is hopefully a larger resource for the property and thereafter a more optimized feasibility study. I understand your question. I want to put forward that you shouldn't rely on any previous technical studies because we're looking to optimize a lot of those studies. And again, if we do have success with the drill bit, that's obviously going to result in a different sort of profile as well. So hopefully that answers your question, Dalton.

Okay, that makes sense. That also segues into my next question. So I understand that this project is fully permitted, which is a huge win in the U.S. As you go about optimizing, as you put it, How much would you put that permit at risk or is everything you're going to do within the constraints of that permit?

No, I would say, you know, more likely than not, we're going to have to update some of those permits, which is, you know, there's mechanisms for that. And I would put forward that should be a relatively routine process. You can imagine in terms of our valuations and our diligence and what have you, we have had interactions with people the local county, the regulators, the agencies, et cetera, we do see good support for this project and for the conceptual development here. So I would not see that as an issue of high concern. We think there's very good support for this. And likewise, in terms of the permits that are already in place, I think we're just going to be looking at amendments. But we just have to wait and see how things go over the next 18 months. We've you know, the overall results and the conceptual design and, you know, what we are going to be seeing here, you know, in terms of Sinterra being the operator.

Okay, great. And then just maybe switching gears with one last question. You mentioned the surplus cash, if you will, over the medium term, and you mentioned shareholder returns. Is M&A completely off the table now?

You know, from my perspective, I think, you know, we consider ourselves pretty fortunate to have acquired this goldfield district project. And so when I think about our focus here over the medium term, I think we're just going to be very focused on, you know, execution. Obviously, at Oxford and Mount Milligan, we've got a pretty compelling year here in terms of, you know, organic growth and our gold production profile and, you know, the result in profitability and free cash flow. But then, you know, the team, we're going to be very focused on, you know, moving forward what we believe is going to be our next source of organic growth in terms of goldfield district projects. I would see a lot of our focus being on that front. What I find most challenging personally when I try and think about inorganic growth is just the current gold price environment. It's a pretty strong gold price. Valuations reflect that accordingly and so it's really difficult when you think about inorganic growth opportunities. It's difficult, you know, in terms of identifying ones that can, you know, meaningfully create shareholder value. I think we were fortunate with this one. We see a pretty compelling value proposition here on the Goldfield District project, but they're few and far between. And having said all of that, I think as and when we do, you know, resolve the situation with Kyrgyzstan and, you know, clean up the share capital structure and compress our share count, I think Synterra is going to be a very clean organization, and potentially we have a peer-leading balance sheet. We've got a very low cost profile. We've got organic growth in front of us. So if opportunities are presented to Synterra, we would obviously consider those in line with our fiduciary obligations, and if there's something compelling there, then we would engage accordingly. I'm giving you a long answer, Dalton, but I think just in terms of the status quo, I think a lot of our focus is going to be on the Goldfield District project here over the short to medium term.

Thanks. That's helpful, Scott. I'll jump back in queue.

Our next question is coming from the line of Mike Jelonen with Bank of America. Please go ahead.

Good morning, Scott, Dan, and Darren. A lot of my questions on Gemfield are answered, so I'll skip to the Mount Milligan study coming out, I guess. Scott, thanks for the breakdown of the reserves and the resources. Very impressive M&I resource increase. And I'm just wondering, basically in 2021, Mount Milligan mined process 0.46 grams per ton, gold, as you know. The grade of the deposit, 0.38, and the grade of the M&I is 0.31. So it seems to me that the grade, we come up with a new plan, reserves go up, grade will come down. To maintain production, if I'm right with those assumptions, is Centera looking at expanding Mount Milligan's processing capacity to keep production steady? Thanks.

Thanks for the question, Mike. We, right now, we are not envisioning expanding the capacity of the mill facility. In terms of the sort of go-forward, you know, goal production profile and copper production profile, we see it being, you know, relatively uniform year over year, and you'll see that as and when we finalize the new 43-101, and we can publish that. Look, having said all of that, though, Dan, is there anything that you'd want to sort of put forward just in terms of responding to Mike?

Mike, it's an excellent question. Mike, I guess two things. One is, yeah, the 43-101 that we'll put out will be within our permitted, which is 60,000 tons per day. So we won't be envisioning it in that. But we are doing some scoping studies right now to see if there is an opportunity to either de-bottleneck and have a slight increase in our throughput or can we bolt on a gold plant or, or even, uh, you know, substantially increases the throughput. So we're, we're in the middle of that right now for the next, uh, say six months, uh, um, just to, to take a look, because as you indicated, as, as we increase the reserve, uh, resources, um, you know, is that opportunity there? Um, but right now with the high, um, the excellent productivity that Carol and her team are, are getting both in the operational activity and also cost control, uh, we, uh, we can see ourselves making a good return even as the grade has lowered a little bit.

Okay. Well, thanks for that and good luck. Scott, I'll be happy to buy you a beer in the lobby bar next Monday night. Thanks. Take care. Thank you.

Next question. Coming from the line of Mike Parkin with National Bank. Please go ahead.

Hey, guys. Most of My questions have been asked, but going back to gold fields, I recognize that, you know, the old study, you don't want us to kind of rely on, but is the strip ratio of that project proposed, given that you're kind of starting off, you know, the same area, is it kind of fair to assume that a strip ratio in and around that kind of level could be maintained with your early thoughts on what you're thinking? Thanks, Mike. It's hard for me to really respond to that because, again, we're going to be optimizing a lot of those studies and investing quite a bit in infill drilling and exploration drilling that's focused on potentially expanding each of the three deposits and more. And so then, you know, we have to sit down with all that information we're getting with the drill bit and, you know, really look at, you know, optimizing these studies and really look at how we're, you know, sequencing and phasing the development. So I don't really want to talk to, you know, strip ratios or in situ reserve grades or productivities or what have you. I think what I would be comfortable saying is that we think this is going to be quite similar to Oxford. That's the kind of look and feel. that we kind of have based on all our evaluations and all our modeling today. But I just don't want to get ahead of the resource update and the feasibility study that we will be offering and publishing. Right. I can appreciate that. One last question on it, though, is in terms of what is secured in terms of permits for water access, is that a limiting factor, and is that something that one of the amendments that you're looking at John Potter, To make would be looking to address it sounds like you know potentially the scale of this project could be bigger than envisioned by the previous owner. John Potter, And that would just kind of suggest that you need additional waters access. No, we looked at that pretty extensively. That was a key focus, you know, along with other facets. And I think, as I mentioned on Tuesday, we even invested in additional hydrology drilling. We did a three-day water testing of the identified aquifer. You know, that aquifer is permitted already. And also, you know, the project or the vendor, they already have water supply agreements in place with the county and the state And, you know, coming out of that three-day water test that we invested in, we were able to, you know, validate or substantiate that it does supply sufficient water in terms of what the project would require, you know, in terms of our kind of envisioned production profile scenarios. And, yeah, so we were quite satisfied in that regard. And if I haven't mentioned already, the project already does have water right permits. And, yeah, we deem them sufficient. Okay, super. Thanks, guys. That's it for me.

Next question is coming from the line of Anita Soni with CIBC World Markets. Please go ahead.

Hi. So thanks for taking my question. So firstly, on Coomptor, I just wanted to understand in terms of the negotiations, you know, outside of the cancellation of shares that you're talking about and, you know, relinquishing Coomptor to the Kyrgyz government, is there any else Anything else that we should be thinking about? I know there were significant tax obligations, and I think there were some environmental allegations. Would those all go away as well, or would there be something outstanding that we would also need to be thinking about?

Yeah, Anita, so I think we put out a press release on January 3rd where we just updated the market on what are the key sort of commercial aspects that have been negotiated, and that all remains the same. There's no change to that. What we've been doing since that initial round of negotiations is we've now passed it over to our respective legal advisors, and they're now documenting and papering up the whole deal and putting together what we call a global settlement agreement. A lot of the work right now, a lot of the negotiations is around the mechanics in terms of how would each party negotiate. terminate and counsel any legal claims or what have you that have been brought forward as part of this whole dispute. That will result in a number of conditions precedent to closing that would need to be satisfied. On the Kyrgyz side, as you referenced, any civil claims, any criminal claims, any environmental claims, all of those would have to be terminated permanently. And then likewise on the Sinterra side, in terms of the legal actions that we've launched, for example, the international arbitration, the Chapter 11 proceedings, we would have to terminate those proceedings as well prior to closing. So that's really what we're working on now is just agreeing on all the mechanics, et cetera. And it's a sensitivity for both sides perhaps, but definitely for ourselves because I think as I've commented before, we absolutely want this to be a clean exit. That's what we're very focused on right now. As and when we're satisfied in that regard, that's when we'll be in a position to sign the deal and announce it accordingly.

Okay. Then the second question was just another follow-up on Mount Milligan. There's been a few moving parts. We had a resequencing of the plan, and I think that resulted in slightly lower production this year. And then I'm just trying to understand, you know, why really on the life of mine plan that you're putting out in the technical report that you're putting out, you know, why was that necessitated and what are you hoping to achieve on that? And as Mike referenced with the lower reserve grade or the lower resource grade, you know, if you said that the grades are going to remain similar, when would they come down to the resource grade or the reserve grade? Because presumably that would have to eventually happen.

Yeah, Dan, do you want to respond to that, please?

I can certainly take a shot at it. Certainly, as we sequenced this pasture, as we did our drilling, we realized that there's a good chance we're going to be expanding the pit in a number of different directions and at depth. So we did change our locations. There are a couple of places in the mine that are higher in copper and lower in gold and vice versa. a couple places where it's quite a bit higher in gold and lower in copper. So that really changed the sequencing over these next couple years in anticipation of what we probably see is new haul roads, new pit designs and access to these areas. In terms of the grade that will be in the reserves, we don't have those numbers yet. in terms of what we'll convert from resource to reserve. But we are seeing that with the higher productivity, the higher recoveries and the lower costs, that we're certainly able to have good financial results with that added productivity, which will be incorporated into the new life of mine.

Okay, thanks. And just one last question on that, though. The op costs are coming down, so that's helping you get a lower cutoff rate. I'm understanding that. But when you think about things like the sustaining capital associated with that, is that included when you're thinking about the reserves when you do your sort of break-even analysis? I know lots of companies have different policies on that. I just want to understand what yours is.

No, absolutely, yes. Okay.

All right. Thank you.

Our next question is coming from the line of Trevor Turnbull with Scotiabank. Please go ahead.

Hi. Maybe just sticking with Dan to follow up a little bit more on Mount Milligan. I was just curious if you could make any comment. You did talk about how the pit's likely going to be expanding in several directions and at depth, and obviously we're hoping for good reserve conversion given the size of the resource increase. But can you talk about how the general strip ratio may change relative to what we've seen? I mean, it's certainly possible to expand the pit and kind of maintain the same type of strip ratio, but I wondered if there was reason to think that might change. And then the follow-up to that, I guess, is how do we feel about tailings capacity? Is that something that's easy to expand, or do you have to look for new areas? And then finally, the long-term water plan, is that Maybe just remind me where you're at on the long-term water plan, please.

Okay, thank you. Well, let's start with the strip ratio. Again, we don't have the final reserve pit yet, but the strip ratio of Mount Milligan is very low. So there will not be a material change in that that I would not envision happening. In terms of tailings, as probably most people know, we did reduce the life of the mine two years ago. And with this additional resource and with the new pit, I don't believe we'd be looking at any at this time. We're not going to be expanding beyond what we had originally permitted before. So there won't be a tailings requirement there. But at some point in time, if we were to continue to expand the reserving resources, there is space near mine that you could have either a second tailings or there would be a limit of how high you could raise it up. In terms of long-term water, we're in a very excellent position right now. We're still in the area of 4.5 million cubic meters of water through the winter. We hardly dropped at all. because we have additional aquifer water that we've been pulling in. So we're very comfortable, and we continue to do exploration drilling for additional aquifer water, which seems to be very successful so far. On the long-term water potential of taking to the surface, we did get our – we indicated in the presentation our environmental – the environmental permits in January, and we continue to work on submitting all of the information required with our partners in order to be able to move that forward if it's required. Great, great knowledge is indicated. We're at a very stable situation with the subsurface aquifer water, and so we feel we're in a very strong position and if we do require, which we have been taking water, although a limited amount, this last summer. We took 3 million cubic meters of water from a local creek, but we were permitted for six, and we stopped because we had enough. So, again, we're just working our way through that process, but so far it's been very positive, and our First Nation partners and the regulators have been working with us very closely.

Okay. I appreciate that. That's all I had. Thanks, guys.

And our last question in queue is a follow-up question coming from the line of Delton Barreto with Canaccord. Please go ahead.

Actually, operator, all of my questions have been answered. Thank you.

No further questions at this time.

Okay. Thanks, operator. And again, thank you, everyone, for joining our call. And we wish everyone a good day and look forward to engaging and speaking in due course here moving forward. Thanks, everyone.

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