Centerra flaunts a strong quarter

Centerra Gold (cg-t) posted solid third-quarter results, with profits soaring nearly 400%.

The Toronto-based miner with gold mines in the Kyrgyz Republic and Mongolia boasted net earnings of US$83.3 million, or 35¢ a share, compared to the US$16.9 million, or 7¢ a share, in the same period last year.

These earnings include the company’s US$10-million donation to fix and erect 27 schools throughout the Kyrgyz Republic as part of its “evolving corporate responsibility efforts” and a US$8.3-million increase in the Kyrgyz Social Fund settlement.

As part of the agreement, Centerra will pay US$14.1 million for 2010 and the first nine months of 2011 for the high-altitude premium it did not previously pay.

Going forward, that premium would be paid 65% by the company and 35% by its employees.

Along with rising profits, the company saw higher levels of revenue, production and sales.

Revenue came at US$278.4 million, a 132% increase from the comparable period last year. Centerra generated 154, 936 oz. from its Kumtor mine in Kyrgyz and the Boroo mine in Mongolia at a total cash cost of US$556 per oz. This represents a 61% boost in production and a 30% drop in cash costs over the same period in 2010.

To top that off, it sold 163,283 oz. gold at an average realized gold price of US$1,705 per oz.

Given the good results on the production front, the company’s president and CEO Stephen Lang said Centerra increased its 2011 production guidance to 640,000 to 660,000 oz.

Kumtor is expected to churn out 580,000 to 600,000 oz., while Boroo is forecasted to contribute 60,000 oz.

The miner has also tightened up its previous total cash cost guidance to US$480 to US$500 per oz. from US$460 to US$495 per oz. citing “rising cost pressures at the Kumtor mine.”

These pressures include higher costs of labour, reagents and power partially resulting from the weaker greenback, amid rising costs for diesel, fuel and blasting materials.

Despite the increased costs, Kumtor more than doubled its output to 141,217 oz. during the quarter thanks to higher gold grades and recoveries, offsetting the dwindling production at Boroo.

The Mongolian mine produced 13,719 oz. gold during the period down from the 27,551 oz. in the third quarter of 2010. This decrease resulted from the processing of low-grade stockpiled ore as the mine stopped operating at the end of November 2010.  The company plans to start heap-leaching following the receipt of a final operating permit from the Mongolian government.

If the company doesn’t get the permit, it’ll write off the investment, which totalled US$15.9 million at the end of the quarter. It could then run all the material through the Boroo mill for another 4 years.

Outlining the goals left for the year, the company’s CEO said in an interview “the Kumtor mine is moving along fairly well for us from a production standpoint. We were very keen on getting up to 500,000-tonne-a-day and it has been very consistent during the last few months. We want to certainly maintain where we are there.”

Lang added miners will continue underground development at Kumtor. He estimates the company has about five quarters of development left before reaching ore. Initial underground production is targeted for 2013.

In Mongolia, the big task by year end is to complete an initial resource statement at its 100%-owned ATO polymetallic project, reckons Lang, explaining in January the company plans to submit the estimate to the Mongolian authorities as part of a package to receive a mining license.  

Situated 35 km from Boroo is the company’s Gastuurt gold property. Once it receives permits to start mining, Lang predicts the output from Gastuurt and from the underground ore at Kumtor could add about 50% to Centerra’s current production rate. This would bring annual output to under a million oz. in the next three years or so.

On the quarterly news, Centerra moved up a dime to close at $21.03 a share.