Strategic Plan Including Thompson Creek Prefeasibility Study Highlights Announced
TORONTO - Centerra Gold Inc. President and CEO, Paul Tomory, said, “We are excited to roll-out our strategic plan that focuses on maximizing the value for each asset in our portfolio. The plan identifies the opportunities at each asset that will drive future value and growth for the Company. Specifically, at Mount Milligan, we expect strong operational performance in the next few years, and we will work to optimize operations and maximize the value of the large deposit. At Öksüt, our life of mine plan demonstrates particularly strong production and cost performance over the next two years with a steady gold production profile continuing throughout the life of mine. Our prefeasibility study on the Thompson Creek molybdenum mine supports a disciplined path to restarting operations and realizing significant vertical integration synergies with the Langeloth Metallurgical Facility. And finally, at the Goldfield Project, we have decided to re-evaluate the project scope of work to achieve a lower capital flowsheet and to maximize the returns on the project. Our exploration focus will now be on oxide and transition material, with the timing of an initial resource estimate contingent on exploration success and metallurgical testwork.”
In conjunction with execution of the strategic plan, we have also developed a capital allocation strategy which focuses on returning capital to shareholders through dividends and share buybacks, investing in internal projects and exploration within our current portfolio and evaluating external opportunities for growth. We believe that Centerra’s exposure to gold and base metals is a differentiating factor, however, our strategic plan has us remaining a gold-focused company. Today’s announcement provides a clear path to delivering safe and sustainable operations and creating value for our shareholders and local stakeholders in the future.”
Mount Milligan’s production in the first half of 2023 was impacted by mine sequencing and lower than planned gold grades as a result of mining in an ore-waste transition zone, which caused lower metal recoveries and throughput challenges in the processing plant in the first quarter. The Company has completed mining in the ore-waste transition zone in Phase 9 and is currently mining the higher-grade copper and gold zones from Phase 7 and Phase 9 in the second half of 2023.
Centerra views Mount Milligan’s substantial resource base as a strategic asset and is advancing work on productivity and cost efficiencies in concert with mine plan optimization to offset some of the recent inflationary pressures that have impacted the industry. In parallel, Centerra is working to explore ways to maximize the value of the very large mineral endowment.
As previously disclosed, Öksüt resumed full operations in June. The mine started ramping up its crushing, stacking, and processing activities and produced 20,503 ounces during the month. Öksüt continues to process gold-in-carbon inventory, and in July Centerra issued 2023 gold production guidance of 180,000 to 190,000 ounces.
The Company expects elevated production at Öksüt through mid-2024, as the inventory and stockpiles are processed through the adsorption, desorption, and recovery (ADR) plant, at which point, the production levels are expected to return to steady state. The life of mine (LOM) plan has been updated to reflect the restart of operations and other optimizations. The updated Öksüt LOM will generate positive free cash flow, and the mine remains a strategic asset in Centerra’s portfolio.
The Molybdenum Business Unit (MBU) is a fully integrated business in North America with a long operating history. The MBU consists of the Thompson Creek Mine in Idaho, the Endako Mine in northern British Columbia, a joint venture in which Centerra owns a 75% interest and the remaining 25% is held by Sojitz Moly Resources, Inc., and the Langeloth Metallurgical Facility near Pittsburgh, Pennsylvania. The two mines have been in care and maintenance since late 2014 and mid-2015, respectively, with significant infrastructure in place that is in excellent condition, while Langeloth has continued to operate at reduced capacity processing third party concentrates and selling finished molybdenum products.
The Company has completed a prefeasibility study (PFS) on the restart of mining at Thompson Creek, with the objective of realizing value for the MBU. A restart of Thompson Creek, vertically integrated with operations at Langeloth, would result in a combined $373 million after-tax net present value (5%) (“NPV5%”) and 16% after-tax internal rate of return (IRR), based on a flat molybdenum price of $20 per pound.
Langeloth is among the largest molybdenum conversion plants in North America and is a unique and strategic asset given its proximity to the North American steel market. Significant synergies and margin improvements that will enhance future cash flow generation and profitability from the MBU will result from: (1) increased capacity utilization at Langeloth from the current level of 30-35% to leverage fixed costs; (2) ability to blend the high-quality Thompson Creek concentrate with lower quality third-party concentrates; and (3) ability to produce an increased volume of higher margin final molybdenum products. Overall, the restart and integration of Thompson Creek with Langeloth presents an opportunity to establish a fully integrated business that can leverage existing infrastructure and create long-term value through profitable operations and significant optionality.
In line with the Company’s disciplined approach to capital allocation, Centerra expects to phase the operations restart at Thompson Creek. The PFS, requiring between $350 and $400 million of pre-production capital expenditures, includes an optimized mine design, which leads to a longer mine life and provides for greater exposure to molybdenum price cycles. As previously disclosed with the Company’s outlook on February 23, 2023, capital spending at Thompson Creek in 2023 is expected to be $9 to $10 million associated with advancement of project studies including project de-risking activities such as geotechnical drilling, additional engineering costs and site early works.
The Company has commenced a feasibility study (“FS”) for Thompson Creek, which is expected to be completed by mid-2024. Upon completion of the FS, the Company expects to authorize a limited notice to proceed, requiring $100 to $125 million of capital for pre-stripping within current authorizations and to purchase long lead items. While the current authorizations support early works and certain activities defined in the limited notice to proceed stage, the Company has initiated discussions with the appropriate authorities to obtain a modified permit for the full scope of the optimized mine plan.
Endako is expected to remain in care and maintenance as the Company focuses on the Thompson Creek restart. Endako is an important molybdenum asset with a large defined resource in a top-tier jurisdiction, with valuable modern plant infrastructure, providing longer-term optionality. Should Endako be restarted in the future, it could support many years of continuous mining from Centerra’s MBU.
While Centerra remains primarily a gold mining business, the Company sees value from its exposure to base metals. As part of the value maximizing plan for the MBU, the Company will evaluate all strategic options for the assets.
After a review of the Goldfield Project, the Company has made the decision to re-evaluate the project scope of work to achieve a lower capital flowsheet and to maximize returns on the project. As a result, it will now focus exploration activities only on oxide and transition material, principally in the Gemfield and nearby deposit areas. Due to this strategic pivot, Centerra will take additional time to perform exploration activities in Goldfield’s large, underexplored land position before releasing an initial resource estimate. The timing for Goldfield’s initial resource estimate will be contingent on exploration success and metallurgical testwork. Centerra will provide an update on exploration progress at Goldfield with the Company’s third quarter 2023 results. The Company continues to believe that Goldfield presents an attractive opportunity in a top mining jurisdiction.
Kemess is a past producing mine located in the Toodoggone district within British Columbia’s prolific Golden Horseshoe, a highly prospective area with multiple gold and copper discoveries. Kemess benefits from infrastructure already on-site, including a process plant, water treatment plant, air strip, and an open pit available for waste storage. In addition, Kemess has several permits in place and an impact benefit agreement with its First Nation partner. Centerra’s strategic approach at Kemess is to leverage the existing infrastructure to unlock regional potential and continue to evaluate the underground prospect of Kemess which could be a future source of gold and copper production.