Centerra Gold Inc. Common Shares

Thank you for standing by. This is the conference operator. Welcome to the Centera Gold fourth quarter 2023 conference call. As a reminder, all participants are in listen only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star, then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star, then 0. I would now like to turn the conference over to Lisa Wilkinson, Vice President, Investor Relations, and Corporate Communications at Centera Gold. Please go ahead.

Thank you, operator, and good morning, everyone. Welcome to Centera Gold fourth quarter 2023 results conference call. Joining me on the call today are Paul Tomori, President and Chief Executive Officer, Paul Charen, Chief Operating Officer, and Darren Millman, Chief Financial Officer. Our release yesterday details our fourth quarter 2023 results. It should be read in conjunction with our MD&A and financial statements, both of which can be found on CDAR, EDGAR, and our website. All figures are in US dollars unless otherwise noted. Presentation slides accompanying this webcast are available on Centera's website. Following the prepared remarks, we will open the call for questions. Before we begin, I would like to caution everyone that certain statements made today may be forward looking and are subject to risks which may cause our actual results to differ from those expressed or implied. Please refer to the cautionary statements included in the presentation as well as the risk factors set out in our annual information form. Certain measures we will discuss are non-GAAP measures. Please refer to the description of non-GAAP measures in our news release and MD&A issued yesterday. I will now turn the call over to Paul Tamori.

Thanks, Lisa, and good morning, everyone. To start, I'd like to express my sympathy and support to everyone impacted as a result of a recent slip of the heat bleach fatted mine in Turkey. We have sent a mine rescue team to assist in the recovery efforts, and our thoughts and prayers are with the affected individuals. Moving on to Centera's performance, we delivered a strong finish to 2023, achieving both production and cost guidance for the year. Fourth quarter was our second consecutive quarter of significant free cash flow, and we ended the year with over $600 million in cash and cash equivalents. I'd also like to highlight annual record performance at Mount Milligan and both the mine and the plant. Our recently announced additional agreement with Royal Gold allows us to look at the Mount Milligan Copper Gold Pour Free deposit much more broadly and to assess its potential to be a multi-decade operation. This is a key first step in our strategy to realize the full potential of this cornerstone asset in a top tier mining jurisdiction. Looking ahead at Mount Milligan, we've initiated a preliminary economic assessment to evaluate the potential of a mine life extension beyond 2035. The PA is expected to be complete in the first half of 2025. We will also continue to invest in exploration drilling to unlock the large mineral endowment at Mount Milligan, setting the stage for potential future resource additions. And finally, we'll continue to advance site-wide optimization program, assessing all aspects of the operation to maximize the potential of the ore body and to set Mount Milligan up for long-term success to 2035 and beyond. In addition to our strategic approach on Mount Milligan, we're also focused on several key areas in 2024. We expect to complete the feasibility study for the Thompson Creek restart in the middle of 2024, as well as an initial resource assessment of the Goldfield project by the end of 2024. In the year ahead, we expect to continue to deliver on our strategic plan to maximize the value of the assets in our portfolio. Finally, I'd like to touch on a recent ESG achievement. In 2020, Uxsut joined the International Signed Management Institute as a signatory. Over a span of three years, the site underwent a certification program to align with the Institute's principles and standards practice. In early January, Uxsut successfully attained certification for the Institute, confirming complete adherence to the International Signed Management Code. This was a collaborative effort with team members from ESG Occupational Health and Safety, process maintenance and construction departments working together to achieve this significant milestone. And with that, I'll pass the call over to Paul Charan to walk us through our operational performance for the quarter.

Thank you, Paul. On slide five, we show operating highlights at Mount Milligan for the quarter. The Mount Milligan mine produced over 40,000 ounces of gold and almost 20 million pounds of copper in the fourth quarter, achieving 2023 production guidance ranges for both gold and copper. For 2023, Mount Milligan achieved annual records for total tons mined and plant throughput at over 50 million tons mined and 21.7 million tons processed, respectively. Looking ahead, in 2024, we expect Mount Milligan to produce 180,000 to 200,000 ounces of payable gold, which is 23% higher than last year, mainly due to mine sequencing and higher gold grade. 2024 payable copper production is expected to be between 55 to 65 million pounds. Both gold and copper production are expected to be evenly weighted throughout the year, but sales in the second half of 2024 are expected to contribute approximately 55% of the annual sales. In the fourth quarter, gold production costs were $946 per ounce and all in sustaining costs on a by-product basis were $946 per ounce. Full year 2023 gold production costs at Mount Milligan were 1,088 per ounce, which was in line with the guidance range. Full year all in sustaining costs were $1,156 per ounce beating the guidance range. Looking ahead, Mount Milligan's 2024 all in sustaining costs are expected to be $1,075 to $1,175 per ounce. In the fourth quarter, we embarked on a site-wide optimization program at Mount Milligan focused on an integrated holistic assessment of occupation and health and safety, mine and plant operations. We are encouraged by the preliminary cashflow improvement estimates from the first phase of work on this program. And we expect to start realizing the benefits of the program later this year. As a result, the potential cost savings are not included in the Mount Milligan's 2024 cost guidance ranges. On slide six, as Paul mentioned earlier, we are assessing Mount Milligan's potential to be a multi-decade operation. We now have 250 million tons of reserves at Mount Milligan extending our mine life out to 2035. In addition, we have substantially increased our resource to 260 million tons, most of which is classified as measured or indicated. And lastly, we have additional drilled inventory, which has not been incorporated into the resources where we intend to continue drilling with the objective of further increases to the resources. We intend to incorporate these additional resources into an optimized mine plan in support of a preliminary economic assessment. On slide seven, to provide more detail, we are targeting deposits to the west and southwest of the main pit within the current mining lease. At Goldmark and South Boundary, there are possibilities for near surface additions. At North Slope, DWVX and Saddlewest, we continue to test for depth extension. And finally, I commend the Mount Milligan site team for embracing the site optimization program. The team has been fully engaged and is dedicated to enhancing the culture for continuous improvement through this important initiative. To date, we started to see evidence of this continually improved safety performance in the fourth quarter and year to date. On slide eight are the operating highlights at Irk Suit. Irk Suit closed out the year with a second consecutive quarter of strong performance. Fourth quarter production was over 88,000 ounces and full year production was almost 196,000 ounces, achieving the midpoint of the guidance range. Production guidance for 2024 at Irk Suit is estimated to be 190 to 210,000 ounces of gold, which is aligned with our previously disclosed Life of Mine plan published last September. As we are still going through the buildup of inventory, approximately 60% of the annual production is expected to be weighted to the first half of this year. Gold production costs and all in sustaining costs on a byproduct basis in the fourth quarter 2023 were $474 per ounce and $671 per ounce respectively. Full year 2023 gold production costs and all in sustaining costs were $457 per ounce and $675 per ounce respectively, in line with the guidance ranges. Looking ahead, 2024 gold production cost guidance is expected to be $650 to $750 per ounce and all in sustaining cost guidance is expected to be $900 to $1,000 per ounce. Costs in 2024 at Irk Suit are expected to be higher than previously disclosed in the Life of Mine plan due to a new multi-year contract with the existing mining and hauling service provider, as well as higher weighted average cost per ounce in the remaining inventory. To wrap up, I'd like to commend the Irk Suit team for outperforming their 2023 safety targets and achieving one year without a lost time injury in early December. This milestone demonstrates our priority to the safety of our workforce and our commitment to the journey towards achieving zero harm. I'll now pass on to Darren to walk through our financial highlights for the quarter.

Thanks, Paul. Slide nine details our fourth quarter financial results. In the quarter, we incurred a net loss of 28.8 million or a loss of 13 cents per share. There were several adjusting items in the quarter, including 50 million of reclamation provision, reevaluation expense, and 34.1 million of non-cash impairment loss relating to the resource change at the Kamez project and the sale of the Berg project, among other things. As a result of the one time items adjusting net earnings in the fourth quarter with 61.2 million or 28 cents per share. In the fourth quarter, sales were 130,281 ounces of gold and 16.6 million pounds of copper. The average realized price was $1,846 per ounce of gold and $3 per pound of copper, which incorporates the existing stream arrangements at the Matt Milligan mine. At the molybdenum business unit in the fourth quarter, approximately 2.1 million pounds of molybdenum was sold at an average molybdenum price of $20.35 per pound, generating 47 million in revenue. In the fourth quarter, 2023, additions to property, plant, and equipment and total capital expenditure were 68 million and 36 million respectively. Consolidated oil and sustaining costs on a by-product basis for the quarter were $831 per ounce, which achieved our 2023 guidance target. Slide 10 shows our financial highlights for the quarter. The fourth quarter was our second consecutive quarter of significant free cash flow. Cash generated by operating activities was 146 million in the quarter and free cash flow was 111 million. For the full year 2023, cash provided for operating activities was 246 million and free cash flow was 160 million. At the Matt Milligan mine, cash provided by the mine operations and free cash flow were 29 million and 14 million respectively in the fourth quarter. For the full year, cash provided by operating activities was 114 million and free cash flow was 73 million. At Oxsuit in the fourth quarter, the mine generated 144 million in cash from operations and 128 million in free cash flow. For the full year, cash provided by operating activity was 275 million and free cash flow was 238 million. At the Langloft Metallurgic Facility, approximately six million of investment in working capital from the first quarter was released during the fourth quarter. However, the Malibu Business Unit as a whole had a free cash flow deficit of nine million in the fourth quarter. In the fourth quarter, we received a 25 million dollar payment from Orion Mine Finance Group in relation to the December 2021 sale of our interest in the Greenstone project. In the fourth quarter, our cash balance grew by 121 million to 613 million. This provides us with total liquidity over one billion and positions the company well to execute on our strategic plan and deliver shareholder value. Given our strong financial position, the board declared a quarterly dividend of seven cents per share. Flight 11 shows our 2024 outlook. In 2024, we expect to produce between 370,000 ounces and 410,000 ounces of gold, which is 11% higher than last year. And copper production is expected to be between 55 and 65 million pounds of copper. 2024 consolidated gold production costs and oil and sustaining costs are expected to be 800 to 900 dollars per ounce and 1,075 and 1,175 per ounce respectively. 2024 sustaining capital expenditure are expected to be 100 to 125 million and non-sustaining capital guidance is paid to 15 million. We continue to invest in exploration. In 2024, we expect to spend 35 to 45 million. Approximately 48% of exploration spending is related to brownfield targets and 52% is related to greenfield and general exploration programs. In 2024, OXSOUTS current income tax paid is expected to be between 85 and 95 million. Given the timing of the statutory payments made in Turkey, the annual royalty payment and income tax payments relating to Q4 2023 and Q1 2024 will be made in the second quarter of 2024. As a result, our cash flow in the second quarter of 2024 will be impacted by these cash payments. We're expecting a solid 2024 with a high gold production compared to last year and we expect to continue to generate strong cash flow from our operations. I'll pass it back to Paul for some closing remarks.

Thanks very much, Darren. Before we wrap up the call and on behalf of the Board of Directors, I'd like to take this opportunity to thank Darren for his hard work and dedication for the past 11 years at Sinterra. And personally, it's been a pleasure for me to have worked with Darren over the past 10 months as I myself have done my own onboarding here. He's built a strong financial position for the company with over a billion of liquidity, no debt and has set us up for a successful CFO transition. Ryan Snyder will be taking over from Darren as CFO in April. Ryan's been with us for almost two years as VP of Finance and is very well positioned for this new opportunity. We wish Darren and his family all the best as they relocate back home to Australia. With that, I'll conclude and open the call to questions.

We will now begin the question and answer session. To join the question queue, you may press star, then one on your telephone keypad. You will hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then two. The first question comes from Brian McCurther with Raymond James. Please go ahead.

Good morning. I just wanted to follow up on the Q2 payment for OXU. Is that just the $40 million you show in taxes payable for the taxes? And then there'll be the royalty payment on top of that? So I should be looking at a... And then the 85 to 90 that you're forecasting for this year, I assume that gets paid then in the second quarter of next year. Is that correct?

Yeah, Darren, go ahead on that. Yeah, so the numbers referenced earlier, so that references the 2024... Sorry, the 2023 income tax payable and also the Q1 2024 royalty. That number references... That total number referenced earlier is combined of both those two,

Brian. Right, but you have a taxes payable in your current liabilities of $40.9 million. That is the OXU payment, right? So I should be thinking $40 million for that plus whatever the royalty is on top of it. Thank you. And my second question is... And I don't know if you can give guidance on this. Obviously, congratulations on the very good CRE cash flow. We're still working through inventory at OXU, but we know all the ADR stuff, which was very cheap on a cash basis is gone. Is there a lot of what I would call historical... I mean, you used to give a number, there's a fair number of ounces that still had to come out with very low cash costs as opposed to what you label as ongoing costs out of the mine. Is there still a bunch of cash to be liberated for mass in the first half of the year?

Yeah, Brian. So I guess fundamentally, we're working through the inventory and there was some built up at the end of 2023. So I guess the best way to explain it is our own sustaining costs that we've guided to will have that baked in for the remainder of the year. And the bulk of that inventory is completed in Q1 and Q2 because it gets integrated with what we're stacking now.

Right. Okay. That's clear. I just wanted to check that. So there is still some of that, what I call older pre-mine stuff still comes through in the first half of the year, but it's all weighted into your average cost of inventory, which will come out. Is that correct?

That's right. We've baked that into the all-in sustaining for all of 2024. And in reality, it'll probably be slightly less on the front end and slightly higher on the back end as a result.

And that's why we've guided to the higher proportion of production coming from the first half of the year because we're still benefiting from those inventory ounces.

Great. Thanks very much. Very clear.

Once again, if you have a question, please press star, then one. The next question comes from Lawson Wender with

Bank of America Securities. Please go ahead.

Thank you very much, operator. And good morning, everyone. Thank you for the presentation. I wanted to ask about Mount Milligan exploration upside. And just looking at that chart you guys have showing the Goldmark deposit and then the other deposit underneath it, do you have a sense of what the stock is going to be? Strip ratio might look like on that. I mean, it looks like it would be relatively low given where Goldmark is. Then you have that deposit right beneath it. Thanks.

Yeah, I don't have a number on strip ratio because some of that hasn't really been that well defined in between on that exact section view that you're referring to. But what we'll be doing is we'll be drilling that through, secondly, over on that north slope and then just some of the other section views of the southwest. We have quite a bit of ways to go to extend the mineralization with what we've already drilled. And then we'll be optimizing the mine plan so that we'll be taking care of the strip ratio, low strip ratio on the front end and then, of course, at depth in the past. So that'll be all part of the optimization of the PEA. But no, I don't have an exact strip ratio because we haven't defined all the mineralization in those areas.

Okay, fair enough. Yeah, I just thought maybe you'd have some sense of it by now, but that's completely fair. The other thing I wanted to ask about is, for ages, there's been discussion about potentially improving the recoveries of gold at Mount Milligan. And I assume with the updated agreement with Royal Gold, there's probably additional motivation to do so. What are kind of the items you're focusing on and what's the timeline to providing some clarity to the market and what you can potentially do there?

Yeah, Lawson, I'll give a response here and Paul will give a little bit more detail. But you're quite correct. With the transaction announced with Royal Gold, what that gives us is the confidence to look at long-term investments in the asset, which includes process plant improvements. So as part of the PEA, we will be looking at longer-term modifications to the plant that could improve recovery. Now, that doesn't mean that there aren't near-term continuous improvement type things we can do on recovery, but longer-term, there may be capital improvements that could be made in the mill. But Paul, why don't you talk about both those, the shorter-term and the longer-term ideas?

Yeah, so in the longer-term, we'll be looking at adjustments to the flow sheet with some capital, and that'll be a key part of the PEA. And we've already initiated the metallurgical test work for that. I won't get into specifics, but it may involve a different process that would need a separate stage of permitting. And then on the short-term, it's really just about looking at the incremental gains all the way through, balancing throughput versus the reagent consumption versus the grind size, to incrementally gain on the gold and the copper recovery, understanding the ore body, getting a geoment balance. And it's really just the hard yards lifting, heavy lifting of getting the incremental gains all the way through. The other key element here is we have improved on the throughput on the front end, on the secondary crush. And then, of course, there's a balance between throughput and overall recovery. And so we're working through all that optimization, and there's a myriad of initiatives to go through each of those incremental gains.

Okay, great. Thank you both very much.

Once again, if you have a question, please press star and 1. Since there are no more questions, this

concludes the question and answer session and today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.