Centerra Gold Inc.

Greetings and welcome to the Centera Gold 2020 Second Quarter Results Conference Call and Webcast. During the presentation, all participants will be in a listen-only mode. Afterwards, we'll conduct a question-and-answer session, and at that time, if you have a question, you can press the 1 followed by the 4 on your telephone. If you're joining us by phone and you need to reach an operator, you can press star 0. And as a reminder, this conference has been recorded Friday, July 31, 2020. I'd now like to turn it to John Pearson, Vice President, Investor Relations. Please go ahead, sir.

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

Thanks, John, and good morning, everyone, and thanks for dialing into our Q2 earnings conference call. I hope and wish that everyone is safe and well during these extraordinary times with the COVID-19 pandemic. In terms of my remarks, I'm just referencing slide five of our accompanying earnings conference call presentation deck. Just looking at each of these bullet points, the first bullet point here, just with regards to the COVID-19 pandemic, obviously extraordinary times. I think we as a team, as a company, we've been very diligent in terms of the preventative measures and the protocols we've put in place. And I think it's been serving us well to the best of our knowledge. All three of our operations are currently virus free. And so you see that in terms of our operating results, our levels of productivity, et cetera. Generally speaking, we've been unaffected by the COVID-19 pandemic. In terms of safety, it continues to be a primary focus for us, as well as the COVID-19 pandemic. The well-being, the health, and the safety of our employees is our number one focus. In terms of safety, we had a number of milestones in the quarter, but really one of the key notable ones was Oxford, our new operation in Turkey. just recently achieved 3 million man-hours of lost-time incident-free operations, which is a fantastic milestone for the property and full credit, very commendable to our leadership team in Turkey. Likewise, you can see here in the third bullet point, one of the key milestones during the quarter was OXSUR, which is our new gold mining operation, our third operation. We actually declared and achieved commercial production during the quarter. This has been again a fantastic milestone. We poured first gold in January and to be so quickly declaring commercial production thereafter I think is very competitive. In terms of the operational results, I think it was a great quarter for the company. You can see here in the fourth bullet point we produced just under 220,000 ounces of gold and just over 19 million pounds of copper. That was an excellent level of gold production and copper production. And you can see that really resonates in the bullet points below, where if I reference the last bullet point, our oil and sustaining cost company-wide was very competitive, $804 per ounce. You can see in the parentheses there, each of our operations were each producing gold lower than an oil and sustaining cost of $700 per ounce. So at Comtor, $696 per ounce. At Mount Milligan, $679 per ounce. And at Oxfam, a very low cost at $537 per ounce. So albeit Oxford still in its sort of initial ramp up phase, but already is presenting as one of our lowest cost operations in our portfolio. So obviously in terms of prevailing gold price environment, this makes for a very high margin business. If I move to the next slide on slide six, just to address some of the financial highlights, you can see the first bullet point here, just given that low on sustaining costs, the high level of productivity and the high margins that I referenced earlier, You can see that's really flowing through in terms of the bottom line profitability, and I'll talk to free cash flow. But first bullet point here, our net earnings during Q2 was $80.7 million, which equates to $0.27 per share. But when you look at the free cash flow, if I move to the second bullet point and the third bullet point, the cash provided by operations was a very strong $268 million. But here in the third bullet point, I think this is really the key takeaway. The business is performing really well, just given the current gold price environment, the level of production, the low oil and sustaining costs. And you can see that's really resonating in terms of our free cash flow generation. So in Q2, on a company-wide basis, we generated $169 million of positive free cash flow. But really, I think one of the key takeaways, I mean, look at in parenthesis there, all of our operations are generating very meaningful results. positive free cash flow. So Comtor itself generated $157 million of positive free cash flow. Mount Milligan generated $34 million positive free cash flow. And what I was most pleased with is, you know, Oxford, we only just declared commercial production, but in its first sort of stub quarter of commercial production, it's already generating positive free cash flow, $5 million. And I think this, you know, this presents well in terms of where our business is going. As we move forward here, quarter over quarter, we're expecting, you know, meaningful progressive increases in production from Oxford and that's going to put us in really good stead to see growing free cash flows coming out of Turkey. The fourth bullet point here, just given the strong level of profitability, strong free cash flows, you can see one of the things that Darren, our Chief Financial Officer, he's been very focused on eliminating all the debt on our balance sheet and we've now finished the quarter with a debt-free balance sheet which I think presents really well and I think it's a very competitive balance sheet relative to our comparative peer group. So we finished the quarter with a net cash position of $212 million. And if you take into account our available credit lines, we now have a total liquidity of $712 million. So a very strong treasury position and obviously positions our business very well moving forward. The fifth bullet point here, we continue to maintain our guidance, which was originally issued at the beginning of this year. As I mentioned at the outset, we haven't seen any meaningful impact in terms of the COVID-19 pandemic. So we didn't withdraw our guidance. We've actually continued to maintain and reiterate that guidance moving forward. Last bullet point I'll reference here is our dividend. Shareholders may have noted that we've now increased our quarterly dividend by 25%. on a go-forward basis, are going to be looking to maintain that quarterly dividend at $0.05 per share. Last thing I'll reference on this slide is just the charts here at the bottom. I think it just speaks to some of the bullet points above. But you just look at where our business is going, and I think it's a scenario of our fundamentals are strengthening here quarter over quarter, just given the rising gold price environment. But we're also benefiting from the a lot of the devaluation that we've seen in the local currencies in terms of the jurisdictions where we operate, as well as a lower diesel fuel price environment. So the margins that we're seeing in our business now are potentially the highest margins that I personally have seen in the five years that I've been with the company. So just looking at the charts, moving from left to right, you can see Qumto, we had a fantastic Q1, but in Q2 here, it's been even better. more than anything because of the high gold price, but you can see it come towards the quarter-over-quarter increase in free cash flow, $157 million in Q2. Likewise, at Mount Milligan, you can see the growth quarter-over-quarter. But likewise, Oxford, again, this is our new operating mine in Turkey, and very pleased to see that already transitioning to positive free cash flow. And as I mentioned earlier, as we move forward over the course of this year, we are expecting a meaningful progressive quarter-over-quarter increase in gold production. So that's going to you know, bode well in terms of where Oxford profitability and free cashloads are going to be going here in Q3 and Q4. And then obviously, you know, it all resonates in the chart there on the bottom right in terms of the company-wide free cashload. Again, I think that was a very competitive sort of peer-leading level of free cashload with the company generating $169 million of positive free cashload. Just moving on to slide seven, you know, again, just focusing on the free cashload theme, You can see the chart here in the top left. It's just a typical waterfall chart just illustrating the level of free cash flow that was generated by the operating mines. So you can see all three mines together generated $294 million of free cash flow. And this is for the first six months of this year. It's on a year-to-date basis. And the red decrements, you can just see how we've been deploying that cash flow. So the first decrement there, obviously one of our key focuses has been eliminating cash any sort of debt facilities on that balance sheet. And as I mentioned earlier, we've now finished the quarter with a debt-free balance sheet. You can see we've also been redistributed $17 million in terms of dividend distributions. And then you can see the remaining decrement associated with our development projects, corporate G&A and exploration. I'll reference the chart in the bottom left. Again, I've spoken to these numbers, you know, the positive free cash flow, but whenever I'm presenting this chart, I like to talk to 2019 So when you look at Q2, Q3, Q4, you can see the level of positive free cash flow that we're generating on a company-wide basis was relatively modest. But you can see the significant step up that took place in Q1 of 2020. And so what I like to reference is, you know, in 2019, obviously the company were very focused on the construction of Oxsert. And so a lot of the positive free cash flow that we're generating from Coombe, Torre and Mount Milligan, we're using that free cash flow to finance the construction in Oxsert. But as we exited 2019, construction was essentially pretty close to being complete. So you can see the immediate step up in positive free cash flow in Q1 of 2020. That step up, you know, it's even more pronounced when you look at the Q2 result of $169 million of positive free cash flow, because obviously Oxfam were no longer in construction. It's now transitioned into operations with clear commercial production. And as you saw in our Q2 results, Oxfam was actually generating positive free cash flow. So again, I think this puts us in really good stead. It bodes really well for what we can expect in terms of Sintera's go-forward profile as OXA is going to be increasingly contributing meaningful positive free cash flow. And again, this puts us in really good stead as we move forward here. And last point I'd reference is I realized gold price during the quarter was just over $1,600 per ounce, obviously in a much stronger gold price environment as we speak. So if that does continue, Again, it just bodes really well for where our profitability and positive free cash flow is going. The chart on the bottom right just speaks to the debt-free balance sheet that I spoke to earlier. You can see year over year here we've been very progressively paying down our debt and we've now successfully achieved a debt-free balance sheet and finishing a quarter of the net cash balance of $212 million. With that, I'm now going to look to pass the call over to Dan Desjardins, who's our chief operating officer, and Dan will expand a bit more on some of the operational highlights. So, Dan, please.