Centerra Gold Inc. (“Centerra” or the “Company”) (TSX: CG) (NYSE:
CGAU) is pleased to announce that the Company and its subsidiary,
Thompson Creek Metals Company Inc. (“TCM”), have entered into an
additional agreement with RGLD Gold AG, a subsidiary of Royal Gold,
Inc. (“Royal Gold”), relating to the Mount Milligan Mine (“Mount
Milligan”), which has resulted in a life of mine extension to 2035
and establishes favourable parameters for potential future mine
life extensions. All dollar figures are in United States dollars
unless otherwise stated.
President and CEO, Paul Tomory, commented, “We
are pleased to announce a mutually beneficial additional agreement
with Royal Gold, which has allowed us to immediately unlock
additional reserves beyond the current mine life. Extending Mount
Milligan’s mine life by two years is a key first step in our
strategy to realize the full potential of this cornerstone asset in
a top-tier mining jurisdiction. Our strategy to further increase
mine life at Mount Milligan has three prongs. First, we are
immediately initiating a Preliminary Economic Assessment to study
the incorporation of the significant drilled inventory to the west
of the existing pit, and to evaluate options for capital projects
in the mine and the mill that could lead to further mine life
extensions, and will soon be starting the associated work on
permitting and engagement with our First Nations partners and local
stakeholders. Second, we will continue to invest in exploration
drilling to unlock the large mineral endowment at Mount Milligan.
Finally, we are continuing to advance a site optimization program
at Mount Milligan, which began in the fourth quarter of 2023, with
a focus on enhanced safety performance and cash flow improvement.
We are encouraged by today’s announcement and the prospects for
continued optimization at Mount Milligan, which will benefit our
shareholders, our partner Royal Gold, and Mount Milligan’s First
Nations partners, employees and local stakeholders.”
Highlights of the
Transaction
- Mutually beneficial
additional agreement that unlocks incremental mineral reserves and
resources at Mount Milligan: Immediately extends the mine
life by two years to 2035, subject to normal course permitting, and
grows mineral resources to 510 million tonnes, inclusive of
reserves.
- Potential for future mine
life increases beyond 2035: The additional agreement
enables Centerra to study mine life extensions via the conversion
of existing mineral resources into mineral reserves, most of which
are classified in the measured and indicated categories, coupled
with the potential addition of new mineral resources. It also
establishes a strong platform for Centerra to continue to invest in
further drilling at Mount Milligan.
- Beneficial outcome for all
stakeholders at Mount Milligan: The additional agreement
supports Centerra’s strategy of extending Mount Milligan’s mine
life to, and potentially beyond, 2035 for the benefit of Centerra’s
shareholders, as well as Mount Milligan’s First Nations partners,
employees and local stakeholders.
- Centerra will receive
increased cash payments for Mount Milligan gold and copper
production sold to Royal Gold, starting in approximately
2030: When added to the streaming payments under the
Existing Stream Agreement (as defined below), the additional
agreement will effectively provide aggregate cash payments for gold
and copper sold under the Existing Stream Agreement as follows:
- For gold, up to: (i) the lower of
$850 per ounce and 50% of the gold spot price for the period
between approximately 2030 and approximately 2035(1,2); and (ii)
the lower of $1,050 per ounce and 66% of the gold spot price from
and after approximately 2036(1,3);
- For copper, up to, (i) 50% of the
copper spot price for the period between approximately 2030 and
approximately 2035(1,2); and (ii) 66% of the copper spot price from
and after approximately 2036(1,4).
- As part of the additional
agreement, Centerra and TCM have agreed to make certain payments
and deliveries to Royal Gold:
- Upfront cash payments of $24.5
million;
- A commitment to deliver an
aggregate of 50,000 ounces of gold;
- Commencing in approximately
2030(1,5), payments equal to 5% of Mount Milligan’s annual free
cash flow, which increase by an additional 5% of annual free cash
flow commencing in approximately 2036(1,6) (for a total of 10% per
year after such date).
(1) Approximate year estimates are based on
production forecasts.(2) The 2030 timeframe relates to the first to
occur of delivering, to Royal Gold, after January 1, 2024, 375,000
ounces of gold or 30,000 tonnes of copper.(3) The 2036 timeframe
relates specifically to the threshold of delivering to Royal Gold
665,000 ounces of gold after January 1, 2024.(4) The 2036 timeframe
relates specifically to the threshold of delivering to Royal Gold
60,000 tonnes of copper after January 1, 2024.(5) January 1st of
the year following the later of delivering to Royal Gold an
aggregate of 375,000 ounces of gold and an aggregate of 30,000
tonnes of copper, in each case from and after January 1, 2024, but
no later than January 1, 2036.(6) January 1st of the year
following the later of delivering to Royal Gold an aggregate of
665,000 ounces of gold and an aggregate of 60,000 tonnes of copper,
in each case from and after January 1, 2024, but not later than
January 1, 2036.
Mount Milligan Life of Mine
Extension
2023 Year-End Mineral Reserves and Mineral
Resources
As of December 31, 2023, Mount Milligan’s proven
and probable gold mineral reserves were an estimated 2.8 million
ounces of contained gold (250 million tonnes at 0.35 grams per
tonne (“g/t”) gold), and its measured and indicated gold resources
was 2.3 million ounces of contained gold (260 million tonnes at
0.27 g/t gold). As of December 31, 2023, the mine’s proven and
probable copper mineral reserves were an estimated 961 million
pounds of contained copper (250 million tonnes at 0.17% copper) and
its measured and indicated mineral resources were an estimated 851
million pounds (260 million tonnes at 0.15% copper).
Further Study, Preliminary Economic Assessment
(“PEA”), Exploration and Optimization
Centerra will be initiating a PEA to evaluate
the substantial mineral resources at Mount Milligan with a goal to
unlock additional value beyond its current 2035 mine life. The
scope of the PEA is expected to include significant drilling
completed to the west of the pit not currently included in the
existing resource, plus inclusion of existing resources, most of
which are classified in the measured and indicated categories. The
PEA will also evaluate several capital projects to support a
further expansion of Mount Milligan’s mine life, including options
for a new tailings storage facility (“TSF”) and potential process
plant upgrades. The Company will also be starting the associated
work on permitting and engagement with its First Nations partners
and local stakeholders. The PEA is expected to be completed in
first half of 2025.
The Company is also continuing its exploration
drilling program aimed at expanding the mineral resource base
significantly at Mount Milligan. In 2023, approximately 80% of the
exploration drilling at Mount Milligan was carried out in the pit
and three brownfield areas within the mining lease. In all these
areas, results received showed mineralization extending west from
the pit margin and below the ultimate pit boundary. Centerra is
encouraged by the significant mineral endowment at Mount Milligan,
setting the stage for potential future resource additions. At
Goldmark and South Boundary, there are possibilities for
near-surface additions. At North Slope, DWBX Extension and Saddle
West, the Company continues to test for depth extensions. Centerra
expects to invest approximately $5 to $7 million in exploration
spending at Mount Milligan in 2024. For additional details and
drill results from the 2023 Mount Milligan exploration program,
please refer to the announcement entitled “Centerra Gold Announces
2023 Year-End Mineral Reserves and Resources and Provides
Exploration Update”, which was issued in conjunction with this news
release on February 14, 2024.
Finally, in the fourth quarter of 2023, Centerra
embarked on a site-wide optimization program at Mount Milligan
focused holistically on assessments of operational health and
safety, productivity, and cost efficiency opportunities, in concert
with mine plan optimization. The comprehensive optimization program
will set up Mount Milligan for long-term success to 2035 and
beyond. The Company is encouraged by the preliminary cash flow
improvement estimates from the first phases of work on the
program.
Highlights of the Additional Royal Gold
Agreement
The additional agreement entered into with Royal
Gold (the “Additional Royal Gold Agreement”), which is effective
immediately, provides supplementary payments to Mount Milligan that
has enabled the reserve increase and corresponding extension of the
mine life described above. The existing Amended and Restated
Purchase and Sale Agreement with Royal Gold dated as of December
14, 2011, as amended (the “Existing Stream Agreement”), is not
affected by the Additional Royal Gold Agreement. The Additional
Royal Gold Agreement, taken together with the Existing Stream
Agreement, will have the effect of increasing payments for Mount
Milligan gold and copper production sold to Royal Gold under the
Existing Stream Agreement, among other things. The percentage of
gold and copper production streamed to Royal Gold remains unchanged
at 35% gold and 18.75% copper.
Gold Stream
Gold Delivery Threshold(after January 1,
2024) |
Approximate Year(1) |
Gold Payments Received from Royal
Gold |
Additional Royal Gold Agreement plus Existing Stream
Agreement |
Existing Stream Agreement |
Until either 375,000 ounces of gold or 30,000 tonnes of copper have
been delivered to Royal Gold (the “First Threshold”) |
2024 - 2029 |
$435/oz |
$435/oz |
After the First Threshold until 665,000 ounces of gold have been
delivered to Royal Gold (the “Second Gold Threshold”) |
2030 - 2035 |
Lower of $850/oz and 50% of spot gold price |
$435/oz |
After 665,000 ounces of gold have been delivered to Royal Gold |
2036+ |
Lower of $1,050/oz and 66% of spot gold price |
$435/oz |
(1) Approximate year estimates are based on
production forecasts.
Copper Stream
Copper Delivery Threshold(after January 1,
2024) |
Approximate Year(1) |
Copper Payments Receivedfrom Royal
Gold |
Additional Royal Gold Agreement plus Existing Stream
Agreement |
Existing Stream Agreement |
Until either 375,000 ounces of gold or 30,000 tonnes of copper have
been delivered to Royal Gold (the “First Threshold”) |
2024 - 2029 |
15% of spot copper price |
15% of spot copper price |
After the First Threshold until 60,000 tonnes of copper have been
delivered to Royal Gold (the “Second Copper Threshold”) |
2030 - 2035 |
50% of spot copper price |
15% of spot copper price |
After 60,000 tonnes of copper have been delivered to Royal
Gold |
2036+ |
66% of spot copper price |
15% of spot copper price |
(1) Approximate year estimates are based on
production forecasts.
Optional Pre-Threshold Payments
The Additional Royal Gold Agreement also
provides TCM an option to elect to receive additional payments
(“Optional Pre-Threshold Payments”) from Royal Gold prior to the
First Threshold (“Pre-Threshold Period”), in a low commodity price
environment. If both the gold spot price falls below $1,600 per
ounce and the copper spot price falls below $3.50 per pound, then
Centerra may elect to receive up to:
- For gold, the lesser of: (i) $415
per ounce, for an aggregate cash payment per ounce equal to $850
per ounce when including any cash payment under the Existing Stream
Agreement; and (ii) an amount per ounce equal to the difference of
66% of the gold spot price, less any cash payment under the
Existing Stream Agreement for such gold; and
- For copper, 35% of the copper spot
price, for an aggregate cash payment per metric tonne equal to 50%
of the copper spot price when including any cash payment under the
Existing Stream Agreement for such copper.
After the Pre-Threshold Period, any Optional
Pre-Threshold Payments previously received by TCM will be repayable
if the prices of gold and copper each increase above $1,600 per
ounce and $3.50 per pound, respectively, at the time of any gold or
copper delivery under the Existing Stream Agreement.
Centerra Payments
As part of the Additional Royal Gold Agreement,
Centerra and TCM have agreed to make certain payments and
deliveries to Royal Gold as outlined below.
- Upfront
consideration: Cash payment of $24.5 million;
- Deferred gold
consideration: Deliver an aggregate of 50,000 ounces of
gold. The first 33,333 ounces are expected to be delivered in
tranches of 11,111 ounces after an equivalent number of gold ounces
are received by Centerra in relation to the sale of Centerra’s 50%
interest in the Greenstone Gold Mines Partnership. Any remaining
ounces are to be delivered to Royal Gold in quarterly installments
equally over a 5-year period, with the first delivery to occur by
June 30, 2030(1); and
- Free Cash Flow
payments: Payments equal to 5% of Mount Milligan’s
cumulative free cash flow commencing approximately 2030(2), payable
annually. Commencing in approximately 2036(3) the annual payments
will double (for a total of 10% of free cash flow per year after
such date). No payments will be made for a calendar year in which
free cash flow is negative, and Centerra is allowed to recoup any
negative free cash flow (i.e., such that cumulative free cash flow
from the commencement of the payments in 2030 is positive) before
any such payments to Royal Gold resume. For the purposes of
calculating these payments, free cash flow is defined as gross
revenue received by TCM from the sale of minerals, less treatment
and refining costs, operating costs, exploration costs, interest
costs, taxes (excluding federal and provincial income taxes), lease
payments, capital costs, reclamation costs, net stream costs,
intercompany costs, and changes in working capital (all in respect
of Mount Milligan).
(1) First to occur of: the achievement of the
First Threshold, and Q2 2030.(2) January 1st of the year following
the later to occur of delivering to Royal Gold an aggregate of
375,000 of gold and an aggregate of 30,000 tonnes of copper, in
each case from and after January 1, 2024, but no later than January
1, 2036.(3) January 1st of the year following the later of the
Second Gold Threshold and the Second Copper Threshold, but not
later than January 1, 2036.
Conference Call to Discuss the Mount
Milligan Mine Life Extension and Additional Royal Gold
Agreement
Centerra will host a conference call and webcast
to discuss the Mount Milligan mine life extension and Additional
Royal Gold Agreement on Wednesday February 14, 2024 at 8:00 am
Eastern Time. Details for the conference call and webcast are
included below.
Webcast
- Participants can access the webcast
at the following
link:https://services.choruscall.ca/links/centerragold202402.html
- An archive of the webcast will be
available for until end of day May 14, 2024.
Conference Call
- Participants can register for the
conference call at the following registration link. Upon
registering, you will receive the dial-in details and a unique PIN
to access the call. This process will by-pass the live operator and
avoid the queue. Registration will remain open until the end of the
live conference call.
- Participants who prefer to dial-in
and speak with a live operator, can access the call by dialing
1-800-319-4610 or 604-638-5340. It is recommended that you call 10
minutes before the scheduled start time.
- After the call, an audio recording
will be made available via telephone for one month, until end of
day March 14, 2024. The recording can be accessed by dialing
412-317-0088 or 1-855-669-9658 and using the passcode 0700. In
addition, the webcast will be archived on Centerra’s website at:
www.centerragold.com/investor/events-presentations.
Advisors and Counsel
National Bank Financial acted as financial
advisor, and Stikeman Elliott LLP acted as legal advisor to
Centerra.
About Centerra Gold
Centerra Gold Inc. is a Canadian-based gold
mining company focused on operating, developing, exploring and
acquiring gold and copper properties in North America, Türkiye, and
other markets worldwide. Centerra operates two mines: the Mount
Milligan Mine in British Columbia, Canada, and the Öksüt Mine in
Türkiye. The Company also owns the Goldfield District Project in
Nevada, United States, the Kemess Project in British Columbia,
Canada, and owns and operates the Molybdenum Business Unit in the
United States and Canada. Centerra’s shares trade on the Toronto
Stock Exchange (“TSX”) under the symbol CG and on the New York
Stock Exchange (“NYSE”) under the symbol CGAU. The Company is based
in Toronto, Ontario, Canada.
For more information:
Lisa WilkinsonVice President, Investor Relations & Corporate
Communications(416) 204-3780lisa.wilkinson@centerragold.com
Lana PisarenkoSenior Manager, Investor Relations
lana.pisarenko@centerragold.com
Additional information on Centerra is available on the
Company’s website at www.centerragold.com and at
SEDAR+ at www.sedarplus.ca and EDGAR at www.sec.gov/edgar.
Qualified Persons
Jean-Francois St-Onge, Professional Engineer,
member of the Professional Engineer of Ontario (PEO) and Centerra’s
Senior Director, Technical Services, has reviewed and approved the
scientific and technical information in this news release related
to mining. Mr. St-Onge is a Qualified Person within the meaning of
NI 43-101.
Lars Weiershäuser, PhD, P.Geo, and Centerra’s
Director, Geology, has reviewed and approved the scientific and
technical information included in this news release related to
geology and mineral resources. Dr. Weiershäuser is a Qualified
Person within the meaning of NI 43-101.
All other scientific and technical information
presented in this document was reviewed and approved by Centerra’s
geological and mining staff under the supervision of W. Paul
Chawrun, Professional Engineer, member of the Professional
Engineers of Ontario (PEO) and Centerra’s Executive Vice President
and Chief Operating Officer. Mr. Chawrun is a Qualified Person
within the meaning of NI 43-101.
Caution Regarding Forward-Looking
Information:
Information contained in this document which is
not a statement of historical fact, and the documents incorporated
by reference herein, may be “forward-looking information” for the
purposes of Canadian securities laws and within the meaning of the
United States Private Securities Litigation Reform Act of 1995.
Such forward-looking information involves risks, uncertainties and
other factors that could cause actual results, performance,
prospects and opportunities to differ materially from those
expressed or implied by such forward-looking information. The words
"achieve", “assume”, “anticipate”, “approach”, “believe”, “budget”,
“contemplate”, “contingent”, “continue”, “could”, “deliver”,
“de-risk”, “develop”, “enhance”, “estimate”, “evaluate”, “expand”,
“expect”, “explore”, “focus”, “forecast”, “future”, “generate”,
“growth”, “in line”, “improve”, “intend”, “may”, “maximize”,
“modify”, “obtain”, “offset”, “on track”, “optimize”, “path”,
“plan”, "potential", “re-evaluate”, “realize”, “remaining”,
“restart”, “result”, “schedule”, “sees”, “seek”, “strategy”,
“subject to”, “target”, “test”, “understand”, “update”, “will”, and
similar expressions identify forward-looking information. These
forward-looking statements relate to, among other things: the
benefits expected to be realized from the Additional Royal Gold
Agreement, including expectations regarding future mine life
extensions and optimizations, benefits expected to be realized by
the Company’s shareholders and local stakeholders; the timing of
receiving the increased cash payments for Mount Milligan gold and
copper production sold to Royal Gold and the timing of the free
cash flow payments to Royal Gold under the Additional Royal Gold
Agreement; expectations regarding converting existing mineral
resources into reserves and investments in further drilling at
Mount Milligan; the completion of the PEA, including the timing,
scope and expected results of the PEA; the exploration drilling and
site-wide optimization programs at Mount Milligan and the benefits
expected to be realized from them.
Forward-looking information is necessarily based
upon a number of estimates and assumptions that, while considered
reasonable by Centerra, are inherently subject to significant
technical, political, business, economic and competitive
uncertainties and contingencies. Known and unknown factors could
cause actual results to differ materially from those projected in
the forward- looking information. Factors and assumptions that
could cause actual results or events to differ materially from
current expectations include, among other things: (A) strategic,
legal, planning and other risks, including: political risks
associated with the Company’s Mount Milligan operations; the impact
of changes in, or to the more aggressive enforcement of, laws,
regulations and government practices, including unjustified civil
or criminal action against the Company, its affiliates, or its
current or former employees; risks that community activism may
result in increased contributory demands or business interruptions;
the risks related to outstanding litigation affecting the Company;
risks relating to future disagreements or disputes with Royal Gold,
including in respect of the Existing Stream Agreement and/or the
Additional Royal Gold Agreement; potential defects of title in the
Mount Milligan properties that are not known as of the date hereof;
the inability of the Company and its subsidiaries to enforce their
legal rights in certain circumstances; Centerra not being able to
replace mineral reserves; Indigenous claims and consultative issues
relating to the Mount Milligan properties; (B) risks relating to
financial matters, including: sensitivity of the Mount Milligan
Mine to the volatility of gold, copper and other mineral prices;
the use of provisionally-priced sales contracts for production at
the Mount Milligan Mine; reliance on a few key customers for the
gold-copper concentrate at the Mount Milligan Mine; use of
commodity derivatives; the imprecision of the Company’s mineral
reserves and resources estimates and the assumptions they rely on,
including assumptions relating to the Additional Royal Gold
Agreement; the accuracy of the Company’s production and cost
estimates; the accounting treatment of the Additional Royal Gold
Agreement; changes to tax regimes; the Company’s ability to obtain
future financing; the impact of global financial conditions; the
impact of currency fluctuations; the effect of market conditions on
the Company’s short-term investments; the Company’s ability to make
payments, including any payments of principal and interest on the
Company’s debt facilities, which depends on the cash flow of its
subsidiaries; risks relating to the complexity of calculating free
cash flow in respect of the Mount Milligan Mine and the free cash
flow payments to be made to Royal Gold based thereon; and (C) risks
related to operational matters and geotechnical issues and the
Company’s continued ability to successfully manage such matters,
including: the stability of the pit walls at the Company’s
operations; the integrity of tailings storage facilities and the
management thereof, including as to stability, compliance with
laws, regulations, licenses and permits, controlling seepages and
storage of water, where applicable; the risk of having sufficient
water to continue operations at the Mount Milligan Mine and achieve
expected mill throughput; changes to, or delays in the Company’s
supply chain and transportation routes, including cessation or
disruption in rail and shipping networks, whether caused by
decisions of third-party providers or force majeure events
(including, but not limited to: labour action, flooding, wildfires,
earthquakes, COVID-19, or other global events such as wars); the
success of the Company’s future exploration and development
activities, including the financial and political risks inherent in
carrying out exploration activities; inherent risks associated with
the use of sodium cyanide in the mining operations; the adequacy of
the Company’s insurance to mitigate operational and corporate
risks; mechanical breakdowns; the occurrence of any labour unrest
or disturbance and the ability of the Company to successfully
renegotiate collective agreement when required; the risk that
Centerra’s workforce and operations may be exposed to widespread
epidemic or pandemic; seismic activity, including earthquakes;
wildfires; long lead-times required for equipment and supplies
given the remote location of some of the Company’s operating
properties and disruptions caused by global events; reliance on a
limited number of suppliers for certain consumables, equipment and
components; the ability of the Company to address physical and
transition risks from climate change and sufficiently manage
stakeholder expectations on climate-related issues; the Company’s
ability to accurately predict decommissioning and reclamation costs
and the assumptions they rely upon; the Company’s ability to
attract and retain qualified personnel; competition for mineral
acquisition opportunities; risks associated with the conduct of
joint ventures/partnerships; and, the Company’s ability to manage
its projects effectively and to mitigate the potential lack of
availability of contractors, budget and timing overruns, and
project resources. For additional risk factors, please see section
titled “Risks Factors” in the Company’s most recently filed Annual
Information Form (“AIF”) available on SEDAR at www.sedar.com and
EDGAR at www.sec.gov/edgar.
There can be no assurances that forward-looking
information and statements will prove to be accurate, as many
factors and future events, both known and unknown could cause
actual results, performance or achievements to vary or differ
materially from the results, performance or achievements that are
or may be expressed or implied by such forward-looking statements
contained herein or incorporated by reference. Accordingly, all
such factors should be considered carefully when making decisions
with respect to Centerra, and prospective investors should not
place undue reliance on forward-looking information.
Forward-looking information is as of February 14, 2024. Centerra
assumes no obligation to update or revise forward-looking
information to reflect changes in assumptions, changes in
circumstances or any other events affecting such forward-looking
information, except as required by applicable law.
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