Canadian gold and copper mining company Centerra Gold has reported a sharp drop in net earnings for 2018, as the impact of reduced capacity at the water-stressed Mount Milligan mine, in British Columbia, and a slight drop in output from Kumtor, in Kyrgyzstan, weighed on its financial results.
Centerra posted net earnings of $107.5-million, or $0.37 a share, on revenue of $1.1-billion, in 2018, compared with $209.5-million, or $0.72 a share, on revenue of $1.2-billion in 2017.
The lower revenue is the result of 10% fewer gold ounces sold, 26% less copper pounds sold and lower average prices for both metals, the miner reported on Friday.
Besides the lower volumes at Mount Milligan, the fourth quarter results were also negatively affected by a charge for reclamation expense of $41.8-million, mainly for additional water treatment costs at the idled Thompson Creek mine.
Centerra’s operating costs increased to $564.5-million in 2018, compared with $487.1-million in 2017, which includes an increase in operating costs of $61.5-million in the molybdenum business, mainly as a result of increased volumes and prices.
All-in sustaining costs on a by-product basis per ounce of gold sold, which excludes revenue-based tax and income tax, increased to $754/oz in from $687/oz in the comparative period, mainly owing to lower copper credits from lower Mount Milligan sales, higher mining costs at Kumtor and lower gold ounces sold, partially offset by lower capitalised stripping costs at Kumtor, lower sustaining capital and lower administration costs.
Operationally, the company delivered within its production guidance with gold output amounting to 729 556 oz. Kumtor’s production fell by 5% to 534 563 oz and Mount Milligan’s gold output decreased by 12% to 222 567 oz.
Mount Milligan produced 47.1-million pounds of copper during the year, which was at the upper end of the revised guidance, despite the mill being temporarily shutdown until early February and operating at a reduced rate in the fourth quarter, owing to a shortage of water resources in the milling process.
Cash generated from operations totalled $217.5-million for the year. Mount Milligan generated $63.1-million and Kumtor generated $345-million. In 2018, Kumtor generated $128-million of free cash flow and Mount Milligan generated $2.5-million, which enabled the company to pay down its debt in the fourth quarter by about $139-million.
For 2019, Centerra is estimating consolidated gold production to be in the range of 690 000 oz to 740 000 oz and 65-million to 75-million pounds of payable copper production from Mount Milligan.
The guidance assumes reduced mill throughput in the first quarter of 2019 at Mount Milligan to properly manage its water balance until the spring melt runoff.
Gold production at Kumtor is expected to be evenly weighted for the first three quarters of the year with the fourth quarter representing about 28% of the full year’s production forecast.
Centerra’s projected consolidated all-in sustaining cost per ounce sold net of copper by-product for 2019 is expected to be in the range of $723/oz to $775/oz.
Meanwhile, construction of the mining company’s next gold mine – Öksüt in Turkey – was 38% complete at the end of December. During the year, Centerra spent $43.9-million on development activities at the mine and will spend $123-million in the comping year. The first gold pour at Öksüt is lated for the first quarter of 2020.
The British Columbia-based Kemess underground project, which Centerra gained through the acquisition of AuRico in January last year, no decision has been made yet on the development and construction of the proposed Kemess underground project (KUG).
In 2019, total spending at KUG is estimated at $40-million, including $14-million for care-and-maintenance and $26-million on capitalised pre-construction activities. The company has substantially all permits and approvals in place for the project.