Centerra Gold Reports Fourth Quarter Earnings per Share of $0.09.TORONTO Toronto (tərŏn`tō), city (1998 est pop. 2,400,000), provincial capital, S Ont., Canada, on Lake Ontario. Toronto is the largest city in Canada and since the 1970s has been one of the fastest-changing cities in North America, experiencing -- Successful Exploration Program Results in 2.7 Million Ounces of New Reserves (All figures are in United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. dollars) Centerra Gold Centerra Gold Inc. (TSX: CG) is the gold mining company headquartered in Toronto, Canada. The company was formed and went public in 2004 when Saskatoon, SK-based Cameco Corp. Inc. (TSX TSX Toronto Stock Exchange (TSE before April, 2002) TSX Transfer from Stack Pointer to Index TSX True Space Extension :CG) today reported net earnings of $6.4 million ($0.09 per common share) in the fourth quarter of 2005, based on revenues of $75 million. Cash provided by operations, net of working capital changes and other operating items was $4.8 million. Earnings and cashflow were negatively affected during the quarter by a deferral deferral - Waiting for quiet on the Ethernet. of a gold shipment as well as the build up of accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying from a gold shipment at Boroo for which payment was received in January January: see month. 2006. Also during the fourth quarter of 2005, gold production was 166,704 ounces and cash costs were $300 per ounce ounce, in zoology ounce, in zoology: see leopard. ounce, unit of measurement ounce: see English units of measurement. . In the fourth quarter of 2004, Centerra reported net earnings of $14.9 million ($0.21 per common share), cash from operations of $25 million and revenues of $87.7 million. In the same period, gold production was 205,274 ounces at an average cash cost of $237 per ounce. For the 12 months ended December December: see month. 31, 2005, Centerra generated net earnings of $42.4 million (or $0.59 per common share) compared to $50.6 million (or $0.91 per common share) in 2004. Cash provided by operations was $83.4 million in 2005 compared to $88.5 million in 2004. Revenues were $338.6 million compared to $247.1 in 2004. Centerra's share of gold production reached a record 787,275 ounces in 2005 compared to 640,779 ounces in 2004. Cash costs increased to $241 per ounce from $187 per ounce in 2004. 2005 Highlights - Centerra's reserves totaled 6.2 million ounces of contained gold at the end of 2005, on a 100% project basis (Centerra's share is 6.1 million ounces), an increase of 2.7 million ounces from the end of 2004, before mining of 917,000 ounces of contained gold in 2005. - Measured and indicated resources at the end of 2005 totaled 6.3 million ounces of contained gold on a 100% project basis (Centerra's share is 5.8 million ounces), an increase of 2.5 million ounces over 2004. - These reserves additions result in almost three years of additional mine life at Kumtor and one year at Boroo. - The Gatsuurt feasibility study The analysis of a problem to determine if it can be solved effectively. The operational (will it work?), economical (costs and benefits) and technical (can it be built?) aspects are part of the study. Results of the study determine whether the solution should be implemented. was completed with the potential to significantly extend the life of the Boroo assets. - An updated life-of-mine plan has Centerra's gold production exceeding one million ounces in 2009. - In 2005, Centerra spent $25.5 million on exploration. - Strong cash flow provided by operations in 2005 resulted in cash on hand of $202 million; Centerra continues to be hedge and debt-free. - At Kumtor, capital was committed for the purchase of larger, more productive haulage trucks and mine shovels. Commentary "2005 was a very good year for Centerra thanks to strong fundamentals in the gold market, solid financial and operating performance and excellent results from our exploration initiatives" said Len Homeniuk, President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. . "In fact, based on updated estimates, Centerra's annual gold production is expected to exceed one million ounces in 2009. This is a good time to be in the gold business and we are very excited about our prospects for sustainable growth." Financial Summary Centerra Gold became a public company on June June: see month. 30, 2004. The prior year production and financial figures shown throughout reflect Centerra's ownership interest in Kumtor and Boroo are as follows: a 33% interest in Kumtor until June 22, 2004 and 100% thereafter and a 100% interest in Boroo since commercial production commenced on March 31, 2004. This increase in ownership since 2004 was a significant factor in the higher production and revenue recognized in 2005. Centerra's share of production at the Kumtor and Boroo mines was 166,704 ounces poured for the fourth quarter of 2005 and a record 787,275 ounces for the full year of 2005. This compares with 205,274 and 640,779 ounces for the fourth quarter of 2004 and full year of 2004 respectively. Lower production in the fourth quarter of 2005 was primarily the result of lower average ore grade Ore grade is a measure that describes the concentration of a valuable natural material (such as metals or minerals) in its surrounding ore. Ore grade is used to assess the economic feasibility of a mining operation: the cost of extracting a natural material from its ore is directly at Kumtor. Revenues for the fourth quarter of 2005 declined 14.5% to $75.0 million from $87.7 million during the same period one year ago. For the full year 2005, revenues increased 37% to $338.6 million from $247.1 million in 2004. The year-over-year decline in fourth quarter revenue was due to the grade related reduction in ounces produced at the Kumtor mine, partially offset by a higher average realized gold price ($476 per ounce in the fourth quarter of 2005 versus $430 per ounce in the fourth quarter of 2004). For the full year of 2005, the average realized gold price improved by 9% to $433 per ounce from $397 per ounce for the full year of 2004. Centerra's total cash cost per ounce of gold in 2005 was $300 for the fourth quarter and $241 for the year. Comparative cash costs in 2004 were $237 for the fourth quarter and $187 for the year. The year-over-year increases in unit cash costs were due to lower ore grade and production at Kumtor and higher costs of labour, taxes and consumables at both mines. (Total cash cost is a non-GAAP measure and is discussed under "Non-GAAP Measure - Total Cash Cost" below.) Net earnings totaled $6.4 million or $0.09 per share in the fourth quarter of 2005 and $42.4 ($0.59 per share) for the 12 months of 2005. The comparative results for 2004 were $14.9 million or $0.21 per share for the fourth quarter and $50.6 million or $0.91 per share for the entire year. In 2005, the Company generated $83.4 million in cash from operations of which $4.8 million was generated in the fourth quarter. This compares with 2004 results of $88.5 million in cash from operations for the year and $25 million in the fourth quarter. Cash generated from operations was lower during the fourth quarter of 2005 due primarily to a build up in working capital inventory related to the deferral of a gold shipment as a result of maintenance at the Kyrgyzaltyn refinery, as well as a build up of accounts receivable due to a late shipment at Boroo, which was paid in January 2006. Sustaining capital expenditures in 2005 amounted to $15 million. Centerra's cash position stood at $202 million at the end of 2005. The Company has no debt or gold hedge positions. Reserves and Resources Update In a separate news release dated January 23, 2006, Centerra issued an updated estimate of the resources and reserves at its operating mines and advanced projects. Also included was an update on its drilling activities at the Kumtor pit. Complete listings of these results and relevant maps are available on the Company's website at: cnrp.ccnmatthews.com/client/centerra/release.jsp?actionFor=576967&rele aseSeq=0&year=2006 (Due to the length of the URL URL in full Uniform Resource Locator Address of a resource on the Internet. The resource can be any type of file stored on a server, such as a Web page, a text file, a graphics file, or an application program. it may be necessary to copy and paste To copy files from one location to another or to copy text and images from one document to another. All modern operating systems and applications have a copy and paste capability that is typically selected from an Edit menu. See cut and paste and Win Copy between windows. it into your web browser The program that serves as your front end to the Web on the Internet. In order to view a site, you type its address (URL) into the browser's Location field; for example, www.computerlanguage.com, and the home page of that site is downloaded to you. ) www.centerragold.com/properties/exploration_update_January_2006 At the Kumtor mine 2.3 million ounces of reserves have been added, before the mining of 614,000 ounces of contained gold in 2005, with almost all of this addition being the result of drilling at the SB Zone at the south end of the currently operating pit. Reserve grade has also increased by 18% from 3.3 g/t to 3.8 g/t gold due to the higher grade mineralization Mineralization The process by which the body uses minerals to build bone structure. Mentioned in: Rickets mineralization, n the bioprecipitation of an inorganic substance. being delineated de·lin·e·ate tr.v. de·lin·e·at·ed, de·lin·e·at·ing, de·lin·e·ates 1. To draw or trace the outline of; sketch out. 2. To represent pictorially; depict. 3. in the SB Zone. At the Boroo mine 349,000 ounces of reserves have been added, which replaces reserves mined in 2005. Additionally, 2.5 million ounces of measured and indicated resources have been added to Centerra's resource base. As of December 31, 2005, on a 100% project basis, Centerra's proven and probable PROBABLE. That which has the appearance of truth; that which appears to be founded in reason. reserves totaled 6.2 million ounces of contained gold (Centerra's share is 6.1 million ounces), which includes an increase of 2.7 million ounces offset by 917,000 ounces mined in 2005. As of December 31, 2005, on a 100% project basis, Centerra's measured and indicated resources totaled 6.3 million ounces of contained gold (Centerra's share is 5.8 million ounces), which includes an increase of 2.5 million ounces over the December 31, 2004 figures. The Gatsuurt resource base has been significantly expanded by recent drilling programs on the main zone. A feasibility study "A Feasibility Study" is an episode of the original The Outer Limits television show. It first aired on 13 April, 1964, during the first season. It was remade in 1997 as part of the revived The Outer Limits series with a minor title change. was completed in 2005. The preferred option, supported by the study, is to modify the existing Boroo facility by adding a bio-oxidation (BIOX) circuit and processing the refractory refractory Material that is not deformed or damaged by high temperatures, used to make crucibles, incinerators, insulation, and furnaces, particularly metallurgical furnaces. material from Gatsuurt at the modified mod·i·fy v. mod·i·fied, mod·i·fy·ing, mod·i·fies v.tr. 1. To change in form or character; alter. 2. facility following depletion depletion n. when a natural resource (particularly oil) is being used up. The annual amount of depletion may, ironically, provide a tax deduction for the company exploiting the resource because if the resource they are exploiting runs out, they will no longer be able of the Boroo reserves. This has the potential to significantly extend the life of the Boroo facility. Further analysis to optimize optimize - optimisation the project is continuing. Outlook - Five Year Forecast Based on Revised Life-of-Mine Plan Centerra has substantially increased reserves at the Kumtor and Boroo mines since its initial public offering (IPO (Initial Public Offering) The first time a company offers shares of stock to the public. While not a computer term per se, many founders, employees and insiders of computer companies have found this acronym more exciting than any tech term they ever heard. ) in June 2004. In the one and one-half years since the IPO, reserves at Kumtor have increased by 3.1 million ounces, Boroo by 600,000 ounces and the Gatsuurt project has been progressed significantly. These significant exploration results gives rise to updated life-of-mine production data for Kumtor and Boroo, the next five years of which are summarized below. The full life-of-mine data can be found on Centerra's website at: http://www.centerragold.com/media/pdf/properties/kumtor/life_of_mine_k umtor.pdf Centerra's gold production in 2009 is now forecast to exceed the one million ounce per year threshold The point at which a signal (voltage, current, etc.) is perceived as valid. .
Q1 Five Year Annual Forecast
2006 2006 2007 2008 2009 2010
---------------------------------------------
Kumtor
Oz Poured 000's 101 461 533 673 843 764
Total Cash cost (1) $ 384 $ 347
Boroo
Oz Poured 000's (2) 64 268 256 219 195 93
Total Cash cost (1) $ 221 $ 203
Consolidated 162 716 776 882 1,028 852
Consolidated Total
Cash Cost (1) $ 321 $ 294
(1) Per ounce Total Cash Cost is a Non-GAAP measure and is discussed
under "Non-GAAP Measure - Total Cash Cost".
(2) Centerra's share of Boroo's production is 95%.
Centerra has committed to capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. of $103 million for 2006. This includes $87 million of growth capital related to the addition of larger, more productive haulage trucks and shovels as well as other support and auxiliary equipment Noun 1. auxiliary equipment - electronic equipment not in direct communication (or under the control of) the central processing unit off-line equipment and infrastructure in support of the increase of mine life at Kumtor. The delivery of the new fleet will be largely completed by year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. 2006. On a life-of-mine basis this capital spending represents $18 per reserve ounce, when amortized over the remaining life of the mine. The remaining $16 million of capital spending is for maintenance capital at both mine sites. The foregoing life-of-mine information is forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. information that involves risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. by such forward-looking information. See below under "About Centerra" for a further discussion of the factors that could cause actual results to differ materially. The life-of-mine information is based on the 2005 year-end reserves estimates, which were estimated using a gold price of US$400, and the implementation of the Company's expenditure plan to replace its mining fleet and related equipment and infrastructure. About Centerra Centerra is a growth-oriented gold company focused on acquiring, exploring, developing and operating gold properties primarily in Central Asia, the former Soviet Union and other emerging markets. Centerra's shares trade on the Toronto Stock Exchange Toronto Stock Exchange (TSE) Canada's largest stock exchange, trading approximately 1,200 company stocks and 33 options. (TSX) under the symbol CG. The Company is based in Toronto, Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of . Statements contained in this news release, including those under the headings "Outlook -- Revised Five Year Forecast Based on Life-of-Mine Plan", which are not historical facts are forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. that involve 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 statements. Factors that could cause actual results or events to differ materially from current expectations include, among other things: volatility Volatility 1. A statistical measure of the tendency of a market or security to rise or fall sharply within a period of time. 2. A variable in option pricing formulas that denotes the extent to which the return of the underlying asset will fluctuate between now and the and sensitivity to market prices for gold; replacement of reserves; procurement The fancy word for "purchasing." The procurement department within an organization manages all the major purchases. of required capital equipment and operating parts and supplies; equipment failure; unexpected geological ge·ol·o·gy n. pl. ge·ol·o·gies 1. The scientific study of the origin, history, and structure of the earth. 2. The structure of a specific region of the earth's crust. 3. A book on geology. or hydrological hy·drol·o·gy n. The scientific study of the properties, distribution, and effects of water on the earth's surface, in the soil and underlying rocks, and in the atmosphere. conditions; political risks arising from operating in certain developing countries; imprecision im·pre·cise adj. Not precise. im  pre·cise ly adv. in
reserve estimates; success of future exploration and development
initiatives; competition; operating performance of the facilities;
environmental and safety risks including increased regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. burdens; seismic activity, weather and other natural phenomena; failure to obtain necessary permits and approvals from government authorities; changes in government regulations and policies including tax and trade laws and policies; ability to maintain and further improve positive labour relations labour relations (US), labor relations npl → relations fpl dans l'entreprise labour relations labour npl → Beziehungen pl ; and other development and operating risks Operating risk The inherent or fundamental risk of a firm, without regard to financial risk. The risk that is created by operating leverage. Also called business risk. . Reserve and resource figures included are estimates and no assurances can be given that the indicated levels of gold will be produced or that Centerra will receive the gold price assumed in determining its reserves. Such estimates are expressions of judgment based on knowledge, mining experience, analysis of drilling results and industry practices. Valid estimates made at a given time may significantly change when new information becomes available. While Centerra believes that the reserve and resource estimates included are well established and the best estimates of Centerra's management, by their nature reserve and resource estimates are imprecise im·pre·cise adj. Not precise. im pre·cisely adv. and
depend, to a certain extent, upon statistical inferences Inferential statistics or statistical induction comprises the use of statistics to make inferences concerning some unknown aspect of a population. It is distinguished from descriptive statistics. which may
ultimately prove unreliable. Furthermore, market price fluctuations in
gold, as well as increased capital or production costs or reduced
recovery rates may render (1) To make visible; to draw. The term comes from the graphics world where a rendering is an artist's drawing of what a new structure would look like. In computer-aided design (CAD), a rendering is a particular view of a 3D model that has been converted into a realistic image. ore ore, metal-bearing mineral mass that can be profitably mined. Nearly all rock deposits contain some metallic minerals, but in many cases the concentration of metal is too low to justify mining the ore. reserves containing lower grades of
mineralization uneconomic and may ultimately result in a restatement RestatementA revision in a company's earlier financial statements. Notes: The need for restating financial figures can result from fraud, misrepresentation, or a simple clerical error. of reserves. The extent to which resources may ultimately be reclassified as proven or probable reserves is dependent upon the demonstration of their profitable recovery. The evaluation of reserves or resources is always influenced by economic and technological factors, which may change over time. Resources figures included herein have not been adjusted in consideration of these risks and, therefore, no assurances can be given that any resource estimate will ultimately be reclassified as proven or probable reserves. If Centerra's reserve or resource estimates for its gold properties are inaccurate or are reduced in the future, this could have an adverse impact on Centerra's future cash flows, earnings, results of operations and financial condition. Centerra estimates the future mine life of its operations. No assurance can be given that mine life estimates will be achieved. Failure to achieve these estimates could have an adverse impact on Centerra's future cash flows, earnings, results of operations and financial condition. Mineral resources Noun 1. mineral resources - natural resources in the form of minerals natural resource, natural resources - resources (actual and potential) supplied by nature are not mineral reserves, and do not have demonstrated economic viability, but do have reasonable prospects for economic extraction extraction /ex·trac·tion/ (eks-trak´shun) 1. the process or act of pulling or drawing out. 2. the preparation of an extract. . Measured and indicated resources are sufficiently well defined to allow geological and grade continuity to be reasonably assumed and permit the application of technical and economic parameters in assessing the economic viability of the resource. Inferred resources are estimated on limited information not sufficient to verify (1) To prove the correctness of data. (2) In data entry operations, to compare the keystrokes of a second operator with the data entered by the first operator to ensure that the data were typed in accurately. See validate. geological and grade continuity or to allow technical and economic parameters to be applied. Inferred resources are too speculative Speculative Securities that involve a high level of risk. speculative Of or relating to an asset or a group of assets with uncertain returns. The greater the degree of uncertainty the more speculative the asset. geologically ge·ol·o·gy n. pl. ge·ol·o·gies 1. The scientific study of the origin, history, and structure of the earth. 2. The structure of a specific region of the earth's crust. 3. A book on geology. to have economic considerations applied to them to enable them to be categorized cat·e·go·rize tr.v. cat·e·go·rized, cat·e·go·riz·ing, cat·e·go·riz·es To put into a category or categories; classify. cat as mineral reserves as there is no certainty CERTAINTY, UNCERTAINTY, contracts. In matters of obligation, a thing is certain, when its essence, quality, and quantity, are described, distinctly set forth, Dig. 12, 1, 6. It is uncertain, when the description is not that of one individual object, but designates only the kind. Louis. that mineral resources can be upgraded to mineral reserves through continued exploration. Centerra Gold reports its reserves and resources separately. Although Centerra believes that the assumptions inherent in the forward-looking statements are reasonable, undue reliance should not be placed on these statements, which only apply as of the date of this report. Centerra disclaims any intention or obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. Qualified Person Robert S Robert, Henry Martyn 1837-1923. American army engineer and parliamentary authority. He designed the defenses for Washington, D.C., during the Civil War and later wrote Robert's Rules of Order (1876). Noun 1. . Chapman CHAPMAN. One whose business is to buy and sell goods or other things. 2 Bl. Com. 476. , P. Geo., Centerra's Director, Mergers & Acquisitions, who is a Qualified Person for the purpose of National Instrument 43-101 is the person responsible for the preparation of the technical information in this news release and related exploration results on Centerra's website. Conference Call Centerra invites you to join its third-quarter conference call on Tuesday Tuesday: see week. January 31, 2006 at 2:00 pm Eastern time. The call is open to all investors and the media. To join the call, please dial (416) 620-9644 or (1-877) 871-4106 (Canada and U.S.). Alternatively, an audio feed will be available on www.centerragold.com. A recorded version of the call will be available on www.centerragold.com shortly after the call and via telephone until midnight on Tuesday, February February: see month. 7, 2006 by calling (416) 626-4100 or (1-800) 558-5253 and using pass code 21281533. Additional information on Centerra is available on the Company's web site at: www.centerragold.com and at SEDAR SEDAR System for Electronic Document Analysis and Retrieval SEDAR Southeast Data, Assessment, and Review at www.sedar.com. Management's Discussion and Analysis Management's discussion and analysis (MD&A) A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial The following discussion of the financial condition and results of operations of Centerra Gold Inc. (Centerra or the Company) for the three and twelve months ended December 31, 2005 should be read in conjunction conjunction, in astronomy conjunction, in astronomy, alignment of two celestial bodies as seen from the earth. Conjunction of the moon and the planets is often determined by reference to the sun. with the unaudited consolidated financial statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge and the notes of the Company for the period ended December 31, 2005, as well as the audited consolidated financial statements for the company for the year ended December 31, 2004 and management's discussion and analysis of the audited statements, both of which are included in the 2004 Annual Report. The financial statements of Centerra are prepared in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ) and, unless otherwise specified spec·i·fy tr.v. spec·i·fied, spec·i·fy·ing, spec·i·fies 1. To state explicitly or in detail: specified the amount needed. 2. To include in a specification. 3. , all figures are in United States dollars. The company's 2004 Annual Report and the Annual Information Form are available at www.centerragold.com and on SEDAR at www.sedar.com. Caution Regarding Forward-Looking Statements Statements contained herein, including those under the heading "Outlook", which are not historical facts are forward-looking statements that involve 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 statements. Factors that could cause actual results or events to differ materially from current expectations include, among other things: volatility and sensitivity to market prices for gold; replacement of reserves; procurement of required capital equipment and operating parts and supplies, equipment failure; unexpected geological or hydrological conditions; political risks arising from operating in certain developing countries; imprecision in reserve estimates; success of future exploration and development initiatives; competition; operating performance of the facilities; environmental and safety risks including increased regulatory burdens; seismic activity, weather and other natural phenomena; failure to obtain necessary permits and approvals from government authorities; changes in government regulations and policies; including tax and trade laws and policies; ability to maintain and further improve positive labour relations; and other development and operating risks. Reserve and resource figures included are estimates and no assurances can be given that the indicated levels of gold will be produced or that Centerra will receive the gold price assumed in determining its reserves. Such estimates are expressions of judgment based on knowledge, mining experience, analysis of drilling results and industry practices. Valid estimates made at a given time may significantly change when new information becomes available. While Centerra believes that the reserve and resource estimates included are well established and the best estimates of Centerra's management, by their nature reserve and resource estimates are imprecise and depend, to a certain extent, upon statistical inferences which may ultimately prove unreliable. Furthermore, market price fluctuations in gold, as well as increased capital or production costs or reduced recovery rates may render ore reserves containing lower grades of mineralization uneconomic and may ultimately result in a restatement of reserves. The extent to which resources may ultimately be reclassified as proven or probable reserves is dependent upon the demonstration of their profitable recovery. The evaluation of reserves or resources is always influenced by economic and technological factors, which may change over time. Resources figures included herein have not been adjusted in consideration of these risks and, therefore, no assurances can be given that any resource estimate will ultimately be reclassified as proven or probable reserves. If Centerra's reserve or resource estimates for its gold properties are inaccurate or are reduced in the future, this could have an adverse impact on Centerra's future cash flows, earnings, results of operations and financial condition. Centerra estimates the future mine life of its operations. No assurance can be given that mine life estimates will be achieved. Failure to achieve these estimates could have an adverse impact on Centerra's future cash flows, earnings, results of operations and financial condition. Although Centerra believes that the assumptions inherent in the forward-looking statements are reasonable, undue reliance should not be placed on these statements, which only apply as of the date of this report. Centerra disclaims any intention or obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. Mineral resources are not mineral reserves, and do not have demonstrated economic viability, but do have reasonable prospects for economic extraction. Measured and indicated resources are sufficiently well defined to allow geological and grade continuity to be reasonably assumed and permit the application of technical and economic parameters in assessing the economic viability of the resource. Inferred resources are estimated on limited information not sufficient to verify geological and grade continuity or to allow technical and economic parameters to be applied. Inferred resources are too speculative geologically to have economic considerations applied to them to enable them to be categorized as mineral reserves as there is no certainty that mineral resources can be upgraded to mineral reserves through continued exploration. Consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: Financial Results For accounting purposes, Centerra's consolidated financial results for the three and twelve months ended December 31, 2005 reflect fully consolidated interests in the Kumtor and Boroo mines, a 62% interest in REN ren or jen In Confucianism, the most basic of all virtues, variously translated as “humaneness” or “benevolence.” It originally denoted the kindness of rulers to subjects. and a 100% interest in Gatsuurt.
Highlights - Centerra
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Three months ended Twelve months ended
December 31 December 31
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Financial Highlights 2005 2004 2005 2004
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Revenue - $ millions 75.0 87.7 338.6 247.1
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Gross profit - $ millions (1) 19.9 25.3 92.5 83.4
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Net earnings - $ millions 6.4 14.9 42.4 50.6
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Cash provided from operations
- $ millions 4.8 25.0 83.4 88.5
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Sales volume - ounces (2) 157,665 204,089 781,274 618,843
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Ounces poured (2) 166,704 205,274 787,275 640,779
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Average realized price
- $/oz (3) 476 430 433 397
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Gold spot market price - $/oz
- average for period 485 434 445 409
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Total cash cost - $/oz (4) 300 237 241 187
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Earnings per common share
- $ - basic and diluted 0.09 0.21 0.59 0.91
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Weighted average shares
outstanding - basic
- (thousands) 72,080 72,080 72,080 55,604
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(1) Gross profit is defined as total revenues less cost of sales and
depreciation, depletion and reclamation.
(2) Comprising one-third of Kumtor to June 22, 2004 and 100%
thereafter, and 100% of Boroo from March 1, 2004.
(3) Net of the effect of gold hedges, closed in 2004.
(4) Total cash cost is a non-GAAP measure and is discussed under
"Non-GAAP Measure - Total Cash Cost".
Fourth Quarter Results Gold Production and Revenue Fourth quarter revenue in 2005 was $75.0 million compared to $87.7 million in the same quarter last year. Production decreased to 166,704 ounces in the fourth quarter of 2005 from 205,274 ounces reported in the fourth quarter of 2004 mainly as a result of lower ore grade at Kumtor. Centerra realized an average gold price of $476 per ounce for the fourth quarter of 2005 (including the amortization of $1.1 million of deferred charges), a significant increase over the $430 per ounce realized in the same quarter in 2004. This increase was due to higher spot gold prices that averaged $485 per ounce in the fourth quarter of 2005, compared to $434 per ounce in the prior year quarter. Centerra's gold production is unhedged. The impact of prior closures of hedge position's is discussed below under "Gold Hedging hedging, in commerce, method by which traders use two counterbalancing investment strategies so as to minimize any losses caused by price fluctuations. It is generally used by traders on the commodities market. ". Cost of Sales Cost of sales in the quarter remained virtually unchanged year over year at $43 million, reflecting higher mine production and mill throughput The speed with which a computer processes data. It is a combination of internal processing speed, peripheral speeds (I/O) and the efficiency of the operating system and other system software all working together. 1. at Boroo and the higher cost of labour, taxes, and consumables. On a unit basis, the total cash cost per ounce was $300, up from $237 in 2004, mostly due to lower gold production at Kumtor related to the lower ore grade in 2005. Depreciation, Depletion and Reclamation Reclamation A claim for the right to return or the right to demand the return of a security that has been previously accepted as a result of bad delivery or other irregularities in the delivery and settlement process. Depreciation, depletion and reclamation decreased to $12.3 million in the fourth quarter of 2005 from $20.4 million in the prior year quarter mainly due to the lower production at Kumtor. On a per unit basis, depreciation and amortization for the fourth quarter of 2005 was $78 per ounce sold compared to $100 per ounce sold in the fourth quarter of 2004, reflecting the addition of the reserves announced in January 2005. Exploration & Business Development Exploration and business development costs of $8.5 million in the fourth quarter of 2005 increased from $7.4 million in the fourth quarter of 2004 and reflect the continuation continuation - continuation passing style of an enhanced drilling program in support of the Company's growth objective to increase reserves at and around its existing mines as well as investment in growth initiatives including the Gatsuurt feasibility study. Interest and Other Interest and other expenses resulted in a net recovery of $1.1 million in the fourth quarter of 2005 reflecting interest earned of $1.7 million on the Company's cash and short term investments, partially offset by a foreign exchange loss of $0.6 million. The comparable amount in the fourth quarter of 2004 was a net recovery of $2.8 million representing a foreign exchange gain on Centerra's Canadian dollar Noun 1. Canadian dollar - the basic unit of money in Canada; "the Canadian dollar has the image of loon on one side of the coin" loonie dollar - the basic monetary unit in many countries; equal to 100 cents cash balance combined with interest earned on cash and short term investments. The Company has no outstanding interest-bearing Adj. 1. interest-bearing - of financial obligations on which interest is paid debt. Administration Administration costs for the fourth quarter of 2005 were $6.0 million compared to $5.9 million in the same period last year. Income Tax The tax recovery of $0.7 million in the fourth quarter of 2005 ($0.8 million recovery in fourth quarter 2004), includes the recognition of a $1.6 million reversal reversal n. the decision of a court of appeal ruling that the judgment of a lower court was incorrect and is reversed. The result is that the lower court which tried the case is instructed to dismiss the original action, retry the case, or is ordered to change its of a valuation allowance on Boroo's capital assets capital assets n. equipment, property, and funds owned by a business. (See: capital, capital account) , related to the new life of mine plan Net Earnings Net earnings for the fourth quarter of 2005 were $6.4 million or $0.09 per share compared to $14.9 million or $0.21 per share for the same period in 2004. This decrease reflects lower production levels at Kumtor and an increase in administration and operating costs operating costs npl → gastos mpl operacionales , including labour, taxes and consumables. Liquidity and Capital Resources Cash provided from operations was $4.8 million for the fourth quarter of 2005 compared to $25.0 million for the prior year fourth quarter. The decrease was mainly due to the lower production levels and an increase in working capital resulting from the timing of shipments and payments. Cash used in investing activities in the fourth quarter of 2005 was $14.7 million for capital spending, compared to a total $4.3 million in the same quarter of 2004. In the fourth quarter of 2005, $4.5 million was spent on maintenance projects while $10.1 million was spent on growth projects. Cash on hand was $202 million at the end of the fourth quarter of 2005, of which $48 million was held in Canadian dollars for anticipated Canadian dollar expenditures. Centerra has sufficient cash to carry out its business plan in 2006. Year-End Results Revenue increased for the twelve months ended December 31, 2005 reflecting increased ownership at Kumtor and Boroo, a full year of production at Boroo, and higher spot gold prices. Net earnings were down year over year, primarily due to the lower grade and production at Kumtor, during the second half of the year and the higher cost of labour, taxes, and consumables. Revenue for the twelve months of 2005 was $338.6 million compared to $247.1 million in the same period in 2004. Average realized prices were $433 per ounce in 2005 compared to $397 in 2004. Net earnings for the twelve months ended 2005, decreased to $42.4 million ($0.59 per share) compared to $50.6 million ($0.91 per share) in 2004 reflecting lower grades and production, and higher costs which were partially offset by higher realized gold prices in 2005. Cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses for the twelve months of 2005 was $83.4 million compared to $88.5 million in the previous year. This change is primarily the result of increased working capital levels. Share Capital As of December 31, 2005, Centerra had 72,079,605 common shares outstanding and 200,183 share options outstanding under its stock option plans. Gold Hedges The deferred charges, net of deferred revenue, related to the closing of the gold hedges in 2004, will be recognized in future periods. During the fourth quarter of 2005, $1.1 million of these deferred charges were recorded in the income statement. --------------------------------------------------------------------- $ millions Total --------------------------------------------------------------------- Balance as at December 31, 2004 8.2 --------------------------------------------------------------------- Amortized in 2005 (5.4) --------------------------------------------------------------------- Balance as at December 31, 2005 2.8 --------------------------------------------------------------------- At December 31, 2005, deferred charges on the balance sheet totaled $2.8 million and are expected to be amortized as follows: Recognition of Deferred Charges (Net of Deferred Revenue) --------------------------------------------------------------------- $ millions Q1 Q2 Q3 Q4 Total --------------------------------------------------------------------- 2006 1.9 (0.6) 0.4 0.6 2.3 --------------------------------------------------------------------- 2007 0.5 -- -- -- 0.5 --------------------------------------------------------------------- Total 2.8 --------------------------------------------------------------------- Market Update During the fourth quarter of 2005, the spot market gold price reached a high of $537 per ounce and closed the period at $513 per ounce. For the three months ended December 31, 2005, the spot market gold price averaged $485. Mine Operations Operating and financial results of the Kumtor and Boroo mines are shown on a 100% basis. With the completion of the Kumtor restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). and the acquisition of the AGR AGR advanced gas-cooled reactor minority interest in the second quarter of 2004, Centerra owns 100% of Kumtor and 95% of Boroo. Kumtor - 100% Basis The Kumtor open pit mine, located in the Kyrgyz Kyr·gyz or Kir·ghiz or Kir·giz n. pl. Kyrgyz or Kyr·gyz·es or Kirghiz or Kir·ghiz·es or Kirgiz or Kir·giz·es 1. Republic, is the largest gold mine in Central Asia operated by a Western-based producer. It has been operating since 1997 and has produced more than five and one-half million ounces. During the fourth quarter of 2005, Kumtor experienced no lost-time accidents. Through 2005, Kumtor experienced one lost time accident involving a company employee, and contractors experienced three lost time accidents. Kumtor had no reportable environmental spills during 2005.
---------------------------------------------------------------------
Three months ended Twelve months ended
December 31 December 31
---------------------------------------------------------------------
Kumtor Operating Results 2005 2004 2005 2004
---------------------------------------------------------------------
Sales volume - ounces 87,333 136,646 498,086 632,788
---------------------------------------------------------------------
Revenue - $ millions (3) 40.7 57.2 213.8 240.9
---------------------------------------------------------------------
Average realized price
- $/oz (3) 466 419 429 381
---------------------------------------------------------------------
Tonnes mined - 000s 20,862 21,618 81,038 84,855
---------------------------------------------------------------------
Tonnes ore mined - 000s 1,890 1,329 6,135 3,303
---------------------------------------------------------------------
Tonnes milled - 000s 1,425 1,383 5,649 5,654
---------------------------------------------------------------------
Average mill head grade
- g/t (1) 2.77 4.0 3.38 4.4
---------------------------------------------------------------------
Recovery - % 77.6% 80.2% 81.2% 82.1%
---------------------------------------------------------------------
Ounces recovered 98,368 141,882 497,497 657,523
---------------------------------------------------------------------
Ounces poured 98,973 138,702 501,487 657,329
---------------------------------------------------------------------
Total cash costs
- $/oz (2) 352 264 274 200
---------------------------------------------------------------------
Capital expenditures
- $ millions 10.9 2.7 21.5 4.7
---------------------------------------------------------------------
(1) g/t means grams per tonne.
(2) Total cash cost is a non-GAAP measure and is discussed under
"Non-GAAP measure - Total cash cost".
(3) Net of the effect of gold hedges, eliminated in 2004.
Revenue Fourth quarter revenue in 2005 decreased to $40.7 million from $57.2 million in the fourth quarter of 2004 due to lower grades and production. This was partially offset by an increase in the average realized gold price to $466 per ounce in the fourth quarter of 2005 from $419 per ounce in the same period last year. Production was 98,973 poured ounces in the fourth quarter of 2005, 28% less than the same quarter in 2004, due to lower ore grades (an average of 2.77 g/t in the fourth quarter of 2005 compared to 4.0 g/t in the fourth quarter of 2004). Revenue for the twelve months ended December 31, 2005 declined from the same period in 2004, reflecting reduced production, as a result of lower grades, partially offset by higher realized prices. The higher average realized price for the three and twelve month periods was due to higher gold spot prices and the elimination of gold hedges in 2004. Cost of Sales The cost of sales for the fourth quarter of 2005 and twelve months ended December 31, 2005 was $28.5 million and $134.6 million, respectively, compared to $32.2 million and $122.5 million for the fourth quarter of 2005 and twelve months ended December 31, 2004. Total cash costs per ounce increased to $352 in the fourth quarter of 2005 from $264 in the fourth quarter of 2004. Total unit cash costs for the twelve months ended December 31, 2005 increased to $274 compared to $200 for the twelve months ended December 31, 2004. These increases are primarily a result of a lower average grade fed to the mill and the higher cost of labour, taxes and consumables. Exploration & Business Development Exploration and business development expenditures totaled $4.0 million for the fourth quarter of 2005 and $14.6 million for the year ended December 31, 2005. The expenditures relate primarily to ongoing drilling in the immediate vicinity of the open pit, and the Sarytor Zones. See also the Company's news release of January 23, 2006. Boroo - 100% Basis The Boroo open pit gold mine in Mongolia Mongolia, country, Asia Mongolia (mŏn-gō`lēə, mŏng–), officially State of Mongolia, republic (2005 est. pop. 2,791,000), 604,247 sq mi (1,565,000 sq km), N central Asia; traditionally known as Outer Mongolia. began commercial production on March 1, 2004. The mine had no lost-time injuries in the fourth quarter and experienced two lost-time accidents during the year. Boroo had no reportable environmental spills during 2005.
---------------------------------------------------------------------
Three months ended Twelve months ended
December 31 December 31
---------------------------------------------------------------------
Boroo Operating Results 2005 2004 2005 2004
---------------------------------------------------------------------
Sales volume - ounces (1) 70,332 67,443 283,188 217,679
---------------------------------------------------------------------
Revenue - $ millions (3) 34.3 30.5 124.8 87.9
---------------------------------------------------------------------
Average realized price
- $/oz (3) 488 452 441 404
---------------------------------------------------------------------
Tonnes mined - 000s 4,705 3,688 18,582 13,656
---------------------------------------------------------------------
Tonnes ore mined - 000s 1,108 473 2,865 1,837
---------------------------------------------------------------------
Tonnes milled - 000s 589 504 2,231 1,849
---------------------------------------------------------------------
Average mill head grade (g/t) 3.85 4.50 4.23 4.50
---------------------------------------------------------------------
Recovery - % 90.8% 94.0% 91.5% 93.7%
---------------------------------------------------------------------
Ounces recovered (1) 66,295 68,268 277,522 251,740
---------------------------------------------------------------------
Ounces poured (1) 67,731 66,572 285,788 217,998
---------------------------------------------------------------------
Total cash cost - $/oz (2) 223 181 183 149
---------------------------------------------------------------------
Capital expenditures
- $ millions 3.1 1.6 11.4 7.1
---------------------------------------------------------------------
(1) Does not include pre-commissioning production or sales volumes
for January and February 2004 of 27,703 ounces.
(2) Total cash cost is a non-GAAP measure and is discussed under
"Non-GAAP measure - Total cash cost".
(3) Net of the effect of gold hedges, eliminated in 2004.
Revenue Fourth quarter revenue increased to $34.3 million in 2005 from $30.5 million in the same period a year ago as a result of a higher realized gold price and higher production. Production was 67,731 poured ounces in the fourth quarter of 2005, up 2% from the fourth quarter of 2004 mostly due to higher throughput resulting from productivity improvements. These improvements offset lower ore grades (3.85 g/t in the fourth quarter of 2005 compared to 4.50 g/t in the fourth quarter of 2004). Revenue for the twelve months ended December 31, 2005 was $124.8 million compared to $87.9 million in the same period of 2004, reflecting a higher realized price per ounce and increased production during the first full year of commercial operations. Higher average realized prices for the fourth quarter of 2005 and the full year were due to higher gold prices realized and the elimination of gold hedges in 2004. Cost of Sales The cost of sales for the fourth quarter of 2005 and twelve months ended December 31, 2005 was $14.4 million and $51.6 million, respectively, compared to $9.8 million and $28.7 million in the fourth quarter and twelve months of 2005, reflecting the higher sales and production levels. Total cash costs per ounce increased to $223 in the fourth quarter of 2005 compared to $181 in the same period in 2004. For the year ended December 31, 2005, total cash costs per ounce increased to $183 from $149 in the year ended December 31, 2004. The increase resulted from the scheduled rebuild of the mining fleet, and the higher cost of labour, taxes, and consumables. Exploration & Business Development Exploration and business development expenditures in Mongolia totaled $2.7 million in the fourth quarter of 2005. For the year ended December 31, 2005, $8.6 million was spent in Mongolia, of which $2.2 million was spent in the immediate mine area, $5.3 million was spent at Gatsuurt and $0.6 million was spent on Mongolian Mon·go·li·an or mon·go·li·an adj. Relating to Down syndrome. No longer in technical use. Now considered offensive. licenses. In a separate news release dated January 23, 2006, Centerra issued an updated estimate of the resources and reserves at its operating mines and advanced projects. The Gatsuurt resource base has been significantly expanded by recent drilling programs on the main zone. A feasibility study was completed in 2005. The preferred option, supported by the study, is to modify the existing Boroo facility by adding a bio-oxidation (BIOX) circuit and processing the refractory material from Gatsuurt at the modified facility following depletion of the Boroo reserves. This has the potential to significantly extend the life of the Boroo facility. Further analysis to optimize the project is continuing. Other Financial Information - Related Party Transactions Cameco Cameco Corp. TSX: CCO NYSE: CCJ is the world's largest publicly traded uranium company, based in Saskatoon, Saskatchewan. It was formed in 1988 by the merger and privatization of two crown corporations: the federal owned Eldorado Mining and Refining Limited (known better Corporation Centerra and its subsidiaries maintain inter-company advances to and from Cameco Corporation ("Cameco") and several of its subsidiaries to fund operations. These advances, which are non-interest bearing and payable on demand, will be repaid in the ordinary course of business. Effective April 1, 2004, Centerra entered into an administrative services agreement with Cameco whereby Cameco agreed to provide services and expertise to Centerra in return for reimbursement Reimbursement Payment made to someone for out-of-pocket expenses has incurred. of all of its direct and indirect costs Indirect costs are costs that are not directly accountable to a particular function or product; these are fixed costs. Indirect costs include taxes, administration, personnel and security costs. See also
relating to relate prep → bezüglich +gen, mit Bezug auf +acc these services. As a result of the above items, the balance owing to owing to prep. Because of; on account of: I couldn't attend, owing to illness. owing to prep → debido a, por causa de Cameco at December 31, 2005 was $1.0million with $0.2 million of services provided by Cameco during the fourth quarter of 2005 ($0.8 million of services for the twelve months ended December 31, 2005). Kyrgyzaltyn and the Government of the Kyrgyz Republic The table below summarizes 100% of the management fees, royalties Not to be confused with Royal family. Royalties (sometimes, running royalties) are usage-based payments made by one party (the "licensee") to another (the "licensor") for ongoing use of an asset, most typically an intellectual property (IP) right. and concession CONCESSION. A grant. This word is frequently used in this sense when applied to grants made by the French and Spanish governments in Louisiana. payments paid by the Kumtor Gold Company ("KGC KGC Knights of the Golden Circle KGC Kids get Care KGC Kingscote, South Australia, Australia (Airport Code) KGC Known Good Cable ") to Kyrgyzaltyn JSC JSC Johnson Space Center (NASA) JSC Joint Stock Company JSC Java Studio Creator JSC Joint Steering Committee JSC Joint Standing Committee JSC Journal of Symbolic Computation JSC Joint Scientific Committee ("Kyrgyzaltyn") or the Government of the Kyrgyz Republic and the amounts paid by Kyrgyzaltyn to KGC according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. the terms of the Gold and Silver Sales Agreement between Kumtor Operating Company operating company A business that engages in transactions with outsiders. , Kyrgyzaltyn and the Government of the Kyrgyz Republic. For periods prior to the restructuring, the Centerra financial statements reflect one-third of the charges.
---------------------------------------------------------------------
$ thousands Three months ended Twelve months ended
December 31 December 31
---------------------------------------------------------------------
Related Parties in the
Kyrgyz Republic 2005 2004 2005 2004
---------------------------------------------------------------------
Management fees to
Kyrgyzaltyn 131 205 747 949
---------------------------------------------------------------------
Concession payments
to Kyrgyz Republic 349 546 1,992 2,531
---------------------------------------------------------------------
Total 480 751 2,739 3,480
---------------------------------------------------------------------
Gross gold and silver
sales to Kyrgyzaltyn 42,427 58,931 220,242 257,739
---------------------------------------------------------------------
Deduct: refinery and
financing charges (550) (729) (2,603) (2,766)
---------------------------------------------------------------------
Net sales revenue received
from Kyrgyzaltyn 41,877 58,202 217,639 254,973
---------------------------------------------------------------------
Effective as of December 22, 2005, Kyrgyzaltyn and KGC have agreed to temporarily permit Kyrgyzaltyn to pay within twelve days after date of shipment of gold from the Kumtor mine. No later than March 1, 2006, Kyrgyzaltyn will resume the prior practice of pre-paying for gold. Kyrgyzaltyn shall pay interest on unpaid amounts equal to LIBOR LIBOR See: London Interbank Offered Rate LIBOR See London interbank offered rate (LIBOR). plus 0.25%. Kyrgyzaltyn has agreed to sell, after February 1, 2006 but before March 1, 2006, a sufficient number of Centerra shares to yield $11 million of proceeds. These proceeds, which will continue to be held by Kyrgyzaltyn, will fund a gold payment facility, to be used by Kyrgyzaltyn to resume the prior practice of pre-paying for gold. The obligations of Kyrgyzaltyn to KGC are secured by a pledge A Bailment or delivery of Personal Property to a creditor as security for a debt or for the performance of an act. Sometimes called bailment, pledges are a form of security to assure that a person will repay a debt or perform an act under contract. of a portion of the Centerra shares owned by Kyrgyzaltyn. Other In addition, the Company paid approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $109,000 Cdn in the fourth quarter of 2005 (approximately $429,000 Cdn for the twelve months ended December 31, 2005) to Ms. Marina Marina “a piece of virtue.” [Br. Lit.: Pericles] See : Virtuousness Stephens Ste·phens , Alexander Hamilton 1812-1883. American politician who was vice president of the Confederacy (1861-1865) under Jefferson Davis. , a lawyer and the spouse spouse A legal marriage partner as defined by state law of President and Chief Executive Officer, Mr. Homeniuk. Ms. Stephens provides legal and business advisory services advisory services advisory services provided to the public, in their capacity as owners and managers of animals, are an important part of veterinary science. They may be provided by government bureaux, by commercial companies who deal in pharmaceuticals or animals or animal related to international operations Internal Operations (I.O., IO or I/O) is a fictional American Intelligence Agency in Wildstorm comics. It was originally called International Operations. I.O. first appeared in WildC.A.T.S. volume 1 #1 (August, 1992) and was created by Brandon Choi and Jim Lee. . As at December 31, 2005, a relocation RELOCATION, Scotch law, contracts. To let again to renew a lease, is called a relocation. 2. When a tenant holds over after the expiration of his lease, with the consent of his landlord, this will amount to a relocation. loan in the amount of $250,000 Cdn was outstanding with Centerra's President and Chief Executive Officer, Mr. Homeniuk. The loan principal is payable in June 2010, while interest is charged as a taxable benefit to Mr. Homeniuk. Quarterly Results - Last Eight Quarters Over the last eight quarters, Centerra's results reflect the positive impact of rising gold prices, the increased ownership in both Kumtor and Boroo in June 2004, partially offset by rising cash costs and reduced production due to lower grades at Kumtor in the last half of 2005.
---------------------------------------------------------------------
2005 2004
$ millions, except --------------------------------------------------
per share data Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
---------------------------------------------------------------------
Revenue 75 77 95 92 88 86 47 26
---------------------------------------------------------------------
Net earnings 6 9 15 12 15 29 (1) 8
---------------------------------------------------------------------
Net Earnings per
share (basic
& diluted) 0.09 0.12 0.21 0.17 0.21 0.40 (0.02) 0.20
---------------------------------------------------------------------
Other Corporate Developments Kyrgyz Republic In 2005 the Kyrgyz Republic went through a major change in its political life. The former President of the Kyrgyz Republic, Mr. Askar Akayev Askar Akayevich Akayev (Аскар Акаевич Акаев) (born 10 November 1944 in Kyzyl-Bairak, Kirghiz SSR) served as the President of Kyrgyzstan from 1990 until he was overthrown in , was ousted from office following an earlier parliamentary election. The newly elected e·lect v. e·lect·ed, e·lect·ing, e·lects v.tr. 1. To select by vote for an office or for membership. 2. To pick out; select: elect an art course. parliament designated Mr. Kurmanbeck Bakiyev as the new president of the Kyrgyz Republic. Subsequently, Mr. Kurmanbeck Bakiyev won a presidential election and was confirmed as the President of the Kyrgyz Republic for a five year term. Mr. Felix Kulov Felix Sharshenbayevich Kulov (Russian: Феликс Шаршенбаевич Кулов has been appointed ap·point tr.v. ap·point·ed, ap·point·ing, ap·points 1. To select or designate to fill an office or a position: appointed her the chief operating officer of the company. 2. the Prime Minister of the Kyrgyz Republic. Throughout 2005, Centerra Gold Inc. and its Kyrgyz subsidiaries worked closely with the new authorities in the Kyrgyz Republic to resolve a number of outstanding issues regarding the Kumtor project, including tax and customs disputes, road blocks and various investigations into the previous Government's activities. To date, most of the outstanding issues have been resolved. The Company continues its cooperative cooperative Organization owned by and operated for the benefit of those using its services. Cooperatives have been successful in such fields as the processing and marketing of farm products and the purchasing of other kinds of equipment and raw materials, and in the efforts to resolve the outstanding issues with the newly appointed Government, local authorities of the Issyk-Kul Is·syk-Kul or Y·syk-Köl A lake of northeast Kyrgyzstan in the Tian Shan near the northwest Chinese border. region, where the Kumtor mine is located, and other authorities. The political situation in the Kyrgyz Republic appears to have stabilized sta·bi·lize v. sta·bi·lized, sta·bi·liz·ing, sta·bi·liz·es v.tr. 1. To make stable or steadfast. 2. somewhat during the last quarter of 2005 and the Company reports normal course of business in the country. Mongolia Mongolia is currently engaged in the process of reforming its Government, following dissolution Act or process of dissolving; termination; winding up. In this sense it is frequently used in the phrase dissolution of a partnership. The dissolution of a contract is its Rescission by the parties themselves or by a court that nullifies its binding force and reinstates each of the previously established coalition cabinet, formed by the two most prominent Mongolian parties. The new cabinet is expected to be dominated dom·i·nate v. dom·i·nat·ed, dom·i·nat·ing, dom·i·nates v.tr. 1. To control, govern, or rule by superior authority or power: by members from the current majority party (Mongolian People's Revolutionary Party The Mongolian People's Revolutionary Party (Mongolian: Монгол Ардын Хувьсгалт Нам, ). It is expected that the new Government will resume normal work in the near future. Prior to its dissolution, the previous cabinet was expected to review and implement certain changes to the Mongolian mining code that had the potential to negatively affect the investment climate for the mining industry in Mongolia (although with no direct impact on existing projects, such as Centerra's Boroo project). To date, the new cabinet's position regarding the changes to the Mongolian mining code proposed by the previous cabinet is unclear. Outlook Production and Unit Cost - 2005 by Quarter and 2006 Forecast Centerra is forecasting production in the first quarter of 2006 to total 165,000 ounces. Production at Kumtor during the first quarter of 2006 is projected to be 101,000 ounces, relatively unchanged from the fourth quarter of 2005 while cash costs are expected to increase approximately 8% to $384 per ounce in the first quarter of 2006. Production at Boroo is projected at 64,000 ounces during the first quarter of 2006, approximately 6% lower than the fourth quarter of 2005 as a result of reduced tonnes milled while cash costs are forecast to remain flat at $221 per ounce in the first quarter of 2006. For the 2006 year, Centerra is forecasting production of 729,000 ounces, approximately 8% lower than in 2005. Cash costs are forecast to increase to $294 per ounce in 2006 from $241 per ounce in 2005. The mill head grade at Kumtor is expected to average 3.34 g/t in 2006 compared to 3.38 g/t in 2005 and production from the mine is expected to total 461,000 ounces at an average cash cost of $347 per ounce. Kumtor's life-of-mine plan is focused on accessing the highest available ore grades; this will require mining through lower grades in 2006. At Boroo, production is expected to decline to a total of 268,000 ounces in 2006 due primarily to a lower mill head grade which is expected to average 3.88 g/t in 2006 compared to 4.23 g/t in 2005. Total cash cost is forecasted to be $203 per ounce in 2006. In 2006, a $25 per ounce change in the gold spot price is anticipated to effect revenues, net earnings and cash from operations by approximately $18.2 million, $14.8 million and $16.9 million respectively.
Centerra's production and unit costs are forecast as follows:
---------------------------------------------------------------------
Ounces except
where noted 2005 2006
---------------------------------------------------------------------
Ounces except Q1 Q2 Q3 Q4 YTD Q1 Year
where noted Actual Actual Actual Actual Actual Forecast Forecast
---------------------------------------------------------------------
Kumtor
production
(100%
Centerra
share) 141,558 137,794 123,162 98,973 501,487 101,000 461,000
---------------------------------------------------------------------
---------------------------------------------------------------------
Boroo's
production
(1) 68,297 71,659 67,197 64,344 271,497 60,800 255,000
---------------------------------------------------------------------
Centerra's
share of
total
production 209,855 209,453 190,359 163,317 772,984 161,800 716,000
---------------------------------------------------------------------
(1) Centerra's share of Boroo's production is 95%
---------------------------------------------------------------------
Total cash cost (1) 2005 2006
---------------------------------------------------------------------
Q1 Q2 Q3 Q4 YTD Q1 Year
$ per ounce Actual Actual Actual Actual Actual Forecast Forecast
---------------------------------------------------------------------
Kumtor 235 253 277 355 274 384 347
---------------------------------------------------------------------
Boroo 165 162 187 223 183 221 203
---------------------------------------------------------------------
Consolidated 211 221 245 300 241 321 294
---------------------------------------------------------------------
(1) Total cash cost is a non-GAAP measure. See "Non-GAAP measure,
total cash cost below.
Exploration and Business Development One of Centerra's priorities in 2006 is to continue to add to its reserves and resources base through its exploration program. Accordingly, the Company has budgeted $28 million of spending on its program for the 2006 year. The budget includes $21 million for exploration plus estimated costs associated with due diligence Research; analysis; your homework. This term has caught on in all industries, because it sounds so "wired." Who would want to do analysis or research when they can do due diligence. See wired. activities for potential acquisitions and the development of the feasibility study at the Gatsuurt deposit. Activities at Kumtor, Boroo, Gatsuurt and REN are planned as follows: Kumtor - Additional drilling programs are planned in the vicinity of the main Kumtor pit to test for strike and dip Strike and dip refer to the orientation or attitude of a geologic feature. The strike of a stratum or planar feature is a line representing the intersection of that feature with the horizontal. extensions of the SB and NB zones. A drilling program is planned in the Sarytor target area to further delineate and extend the resource outlined in 2005. The Sarytor area is located about five kilometers from the Kumtor mill. - Exploration work will continue on other target areas such as Bordoo and Akbel. Boroo - At Boroo, drill programs will focus on testing for additional mineralization around the peripheries of the pits. Gatsuurt - The Gatsuurt deposit is open at depth and additional drilling is planned to test the high grade mineralization beneath the Gatsuurt Central zone as a potential underground mining opportunity. - Exploration programs will continue to evaluate Centerra's significant land position. Drilling programs are planned to further explore the Ulan Bulag, Nart, Zurgaadai and Argal target areas. REN - Drilling programs will focus on testing under explored areas of favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. alteration Modification; changing a thing without obliterating it. An alteration is a variation made in the language or terms of a legal document that affects the rights and obligations of the parties to it. and mineralization along two main control structures the Corona Corona, city, United States Corona (kərō`nə), city (1990 pop. 76,095), Riverside co., S Calif.; inc. 1896. The city developed as a primary citrus fruit producer and shipping center. There is also light manufacturing. Dyke and East fault. Five Year Forecast Based on Revised Life-of-Mine: Centerra has substantially increased reserves at the Kumtor and Boroo mines since the initial public offering ("IPO") in June 2004. In the one and one-half years since the IPO, reserves at Kumtor have increased by 3.1 million ounces, Boroo by 600,000 ounces and the Gatsuurt project has been progressed significantly. These significant exploration results are reflected in an updated life-of-mine production data for Kumtor and Boroo, the next five years of which is summarized below. The full life-of-mine data can be found at Centerra's website at www. Centerragold.com. Centerra gold production in 2009 is now forecast to exceed one million ounces.
2006 2007 2008 2009 2010
---- ---- ---- ---- ----
Kumtor
Mined Ore tonnes 000's 7,569 6,775 5,138 4,926 6,939
Mined Waste tonnes 000's 93,385 124,800 107,293 113,514 116,337
Total Mined tonnes 000's 101,367 131,575 112,431 118,441 123,275
Ore Mined tonnes/day,000's 20.7 18.6 14.0 13.5 19.0
Total Mine tonnes/day,000's 278 360 307 324 338
Strip Ratio 12.4 18.4 20.9 23.0 16.8
Mill tonnes 000's 5,659 5,658 5,658 5,658 5,658
Mill 000's tonnes/day 15.5 15.5 15.5 15.5 15.5
Mill Grade - g/t 3.31 3.53 4.27 5.31 4.83
Mill Recovery - % 76.2% 82.9% 86.7% 87.4% 87.1%
Oz Poured 000's 461 533 673 843 764
Boroo
Mined Ore tonnes 000's 2,678 3,298 2,584 3,889 -
Mined Waste tonnes 000's 16,033 15,862 16,116 9,105 -
Total Mined tonnes 000's 18,710 19,160 18,700 12,995 -
Ore Mined tonnes/day 7.3 9.0 7.1 10.7 -
Total Mine tonnes/day 51 52 51 36 -
Strip Ratio 6.0 4.8 6.2 2.3 -
Mill Tonnes - 000's 2,355 2,347 2,347 2,347 2,347
Mill 000's tonnes/day 6.5 6.4 6.4 6.4 6.4
Mill Grade - g/t 3.86 3.79 3.26 2.98 1.41
Mill Recovery - % 91.6% 89.5% 89.1% 86.8% 87.2%
Oz Poured 000's - 100% 268 256 219 195 93
Oz Poured 000's - 95% 255 243 208 185 88
Consolidated 716 776 882 1,028 852
Administration Annual administration expenses are expected to amount to approximately $21 million. The forecast includes the ongoing costs of maintaining the corporate office and the continued implementation costs of regulatory standards. Corporate Income Taxes Corporate income taxes in the Kyrgyz Republic are calculated and provisioned at 20% of taxable income Under the federal tax law, gross income reduced by adjustments and allowable deductions. It is the income against which tax rates are applied to compute an individual or entity's tax liability. The essence of taxable income is the accrual of some gain, profit, or benefit to a taxpayer. . In 2006, the Boroo project will be in its third year of a three-year 100% income tax holiday. Capital Expenditures The capital requirement in 2006 is budgeted at $103 million. This includes $87 million in growth capital spending primarily attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to the addition of larger, more productive haulage trucks and shovels as well as other support and auxiliary equipment and infrastructure in support of the increase of mine life at Kumtor. Sensitivity of Revenue, Earnings & Cashflow from Changes in Gold Price A $25 per ounce change in the gold spot price would be expected to effect revenues, net earnings and cash from operations by approximately $18.2 million, $14.8 million ($0.21 per share) and $16.9 million respectively. Non-GAAP measure - Total Cash Cost This MD&A presents information about total cash cost of production of an ounce of gold for the operating properties of Centerra. Except as otherwise noted, total cash cost per ounce is calculated by dividing total cash costs, as determined using the industry standard published by the Gold Institute, by gold ounces produced for the relevant period. Total cash costs, as defined in the Gold Institute standard, include mine operating costs such as mining, processing, administration, royalties and production taxes, but exclude amortization, reclamation costs, financing costs and capital, development and exploration. Total cash cost per ounce has been included because certain investors use this information to assess performance and also to determine the ability of Centerra to generate cash flow for use in investing and other activities. The inclusion of total cash cost per ounce enables investors to better understand year-on-year changes in production costs, which in turn affect profitability and cash flow.
Total Cash Cost per Ounce can be Reconciled as follows:
Fourth Quarter 2005:
---------------------------------------------------------------------
Kyrgyz
$ millions, unless otherwise Republic Mongolia Total
specified (Kumtor) (Boroo)
----------------------------------
Cost of sales, as reported 28.5 14.3 42.8
Adjust for:
Refining fees and by-product
credits (0.1) - (0.1)
Non-operating costs (1.6) - (1.6)
Inventory movement 8.1 0.8 8.9
----------------------------------
Total cash cost - 100% 34.9 15.1 50.0
Ounces poured - 100% (000's) 98.9 67.7 166.6
Total cash cost per ounce 352.5 222.7 299.7
---------------------------------------------------------------------
Fourth Quarter 2004:
---------------------------------------------------------------------
Kyrgyz
$ millions, unless otherwise Republic Mongolia Total
specified (Kumtor) (Boroo)
----------------------------------
Cost of sales, as reported 32.1 9.9 42.0
Adjust for:
Refining fees and by-product
credits 0.1 - 0.1
Non-operating costs (1.1) (1.9) (3.0)
Inventory movement 5.5 4.0 9.5
----------------------------------
Total cash cost - 100% 36.6 12.0 48.6
Ounces poured - 100% (000's) 138.7 66.6 205.3
Total cash cost per ounce 268 181.0 240
---------------------------------------------------------------------
Twelve Months 2005:
---------------------------------------------------------------------
Kyrgyz
$ millions, unless otherwise Republic Mongolia Total
specified (Kumtor) (Boroo)
----------------------------------
Cost of sales, as reported 134.6 51.6 186.2
Adjust for:
Refining fees and by-product
credits 0.3 (0.3) 0.3
Non-operating costs (4.5) 1.0 (3.5)
Inventory movement 6.8 0.1 6.9
----------------------------------
Total cash cost - 100% 137.2 52.4 189.6
Ounces poured - 100% (000's) 501.5 285.8 787.3
Total cash cost per ounce 273.9 183.4 241.1
---------------------------------------------------------------------
Twelve Months 2004:
---------------------------------------------------------------------
Kyrgyz
$ millions, unless otherwise Republic Mongolia Total
specified (Kumtor) (Boroo)
----------------------------------
Cost of sales, as reported 81.2 28.7 109.9
Adjust for:
Refining fees and by-product
credits 1.2 - 1.2
Non-operating costs (2.7) (2.4) (5.1)
Inventory movement 9.6 6.2 15.8
Pre-acquisition operating
costs (1) 42.1 - 42.1
----------------------------------
Total cash cost - 100% 131.4 32.5 163.9
Ounces poured - 100% (000's) 657.3 217.9 875.2
Total cash cost per ounce 199.9 149.0 187.3
---------------------------------------------------------------------
(1) Total cash cost per ounce is calculated on a 100% basis. The
adjustment above is needed to increase the pre-acquisition cost
of sales (to June 30, 2004), which is recorded at Centerra's
share of 33.3%, to the full 100% value.
Centerra Gold Inc.
Consolidated Financial Statements
For the Quarter and Year Ended December 31, 2005
(Unaudited)
($US)
Centerra Gold Inc.
Consolidated Balance Sheets
(Unaudited)
(In Thousands of US$)
As at
Dec 31/05 Dec 31/04
---------------------------------------------------------------------
---------------------------------------------------------------------
Assets
Current assets
Cash $ 202,417 $ 152,591
Accounts receivable 8,951 2,596
Inventories 76,721 56,796
Prepaid expenses 17,151 12,943
------------------------
305,240 224,926
Property, plant and equipment 239,098 267,557
Goodwill 154,586 155,520
Long-term receivables, investments and other 7,357 12,456
------------------------
401,041 435,533
------------------------
Total assets $ 706,281 $ 660,459
------------------------
------------------------
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable and accrued liabilities $ 32,129 $ 32,023
Provision for reclamation 17,897 18,868
Future income taxes 7,013 5,407
------------------------
57,039 56,298
Minority interest 4,821 2,410
Shareholders' equity
Share capital (note 2) 522,383 522,383
Contributed surplus 29,739 29,503
Retained earnings 92,299 49,865
------------------------
644,421 601,751
------------------------
Total liabilities and shareholders' equity $ 706,281 $ 660,459
------------------------
------------------------
Commitments and Contingencies (note 7)
See accompanying notes to the consolidated financial statements.
Centerra Gold Inc.
Consolidated Statements of Earnings and Retained Earnings (Deficit)
(Unaudited)
(In Thousands of US$)
Three Months Ended Twelve Months Ended
Dec 31/05 Dec 31/04 Dec 31/05 Dec 31/04
---------------------------------------------------------------------
---------------------------------------------------------------------
Revenue from
Gold sales $ 75,044 $ 87,731 $ 338,583 $ 245,421
Management fees - - - 1,642
-------------------------------------------
$ 75,044 $ 87,731 $ 338,583 $ 247,063
-------------------------------------------
Expenses
Cost of sales 42,818 42,061 186,177 109,920
Depreciation, depletion
and reclamation 12,338 20,418 59,896 53,763
Exploration and business
development (note 4) 8,492 7,380 29,931 15,000
Interest and other (1,074) (2,807) (4,773) (7,582)
Administration 5,941 5,876 17,934 11,544
-------------------------------------------
68,515 72,928 289,165 182,645
-------------------------------------------
Earnings from operations 6,529 14,803 49,418 64,418
Other expense - - - 8,541
-------------------------------------------
Earnings before income
taxes and minority
interest 6,529 14,803 49,418 55,877
Income tax expense
(recovery) (note 5) (682) (849) 4,572 (156)
Minority interest 848 791 2,412 5,398
-------------------------------------------
Net earnings 6,363 14,861 42,434 50,635
Retained earnings
(deficit), beginning
of period 85,936 35,004 49,865 (770)
-------------------------------------------
Retained earnings
(deficit), end of period $ 92,299 $ 49,865 $ 92,299 $ 49,865
-------------------------------------------
-------------------------------------------
Basic and diluted
earnings per common
share (note 3) $ 0.09 $ 0.21 $ 0.59 $ 0.91
-------------------------------------------
-------------------------------------------
See accompanying notes to the consolidated financial statements.
Centerra Gold Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(In Thousands of US$)
Three Months Ended Twelve Months Ended
Dec 31/05 Dec 31/04 Dec 31/05 Dec 31/04
---------------------------------------------------------------------
---------------------------------------------------------------------
Operating activities
Net earnings $6,363 $14,861 $42,434 $50,635
Items not requiring
(providing) cash:
Depreciation, depletion
and reclamation 12,338 20,418 59,896 53,763
Deferred charges
recognized 1,083 (178) 5,397 6,978
Loss on settlement of debt - - - 9,084
Future income tax expense (1,361) (1,734) 2,540 (1,040)
Minority interest 848 791 2,412 5,398
Other (128) (5,094) 2,817 3,264
--------------------------------------------
19,143 29,064 115,496 128,082
Change in working capital (14,329) (4,110) (32,096) (39,605)
--------------------------------------------
Cash provided by operations 4,814 24,954 83,400 88,477
--------------------------------------------
Investing activities
Acquisition of net
business assets, net of
cash acquired - - - (2,697)
Additions to property,
plant and equipment (14,693) (4,294) (33,574) (11,785)
Net commissioning
recoveries - - - 4,223
Redemption of shares,
Cameco Ireland - - - 22,900
--------------------------------------------
Cash provided by (used in)
investing (14,693) (4,294) (33,574) 12,641
--------------------------------------------
Financing activities
Proceeds of share issue - - - 84,746
Repayment of long-term
debt - - - (41,509)
Advances from (to)
parent company - 1,055 - (1,865)
--------------------------------------------
Cash provided by (used in)
financing - 1,055 - 41,372
--------------------------------------------
Increase (decrease) in
cash during the period (9,879) 21,715 49,826 142,490
Cash at beginning of
the period 212,296 130,876 152,591 10,101
--------------------------------------------
Cash at end of the
period $ 202,417 $ 152,591 $ 202,417 $ 152,591
--------------------------------------------
--------------------------------------------
Centerra Gold Inc.
Notes to Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation The consolidated financial statements of Centerra Gold Inc. ("Centerra") have been prepared by management in accordance with Canadian generally accepted accounting principles and follow the same accounting principles and methods of application as the most recent annual consolidated financial statements. The financial statements should be read in conjunction with Centerra's annual consolidated financial statements included in the 2004 annual report. Centerra became a public company on June 30, 2004. Its predecessor predecessor - parent company, Cameco Gold Inc., was a division of Cameco Corporation ("Cameco"), which held a one-third interest in Kumtor, a 53% interest in Boroo, a 62% interest in REN and a 73% interest in Gatsuurt. The restructuring of Centerra resulted in the issue of common shares from the following events: 38,149,071 shares issued from the transfer of gold interests by Cameco Gold, 18,789,717 shares issued from the acquisition of the remaining 2/3 interest in Kumtor, 5,204,605 shares issued from the acquisition of an additional 42% in Boroo, 3,061,212 shares issued from the exchange of Kumtor's subordinated debt Subordinated Debt A loan (or security) that ranks below other loans (or securities) with regard to claims on assets or earnings. Also known as "junior security" or "subordinated loan". and 6,875,000 shares issued from an initial public offering, including the exercise of an over-allotment by the underwriters. Since June 30, 2004, Centerra's ownership interests consist of a 100% interest in the Kumtor mine, a 95% interest in the Boroo mine, a 62% interest in the REN deposit and a 100% interest in the Gatsuurt property. For accounting purposes, Centerra's consolidated statements reflect proportional proportional values expressed as a proportion of the total number of values in a series. proportional dwarf the patient is a miniature without disproportionate reductions or enlargements of body parts. consolidation of the Kumtor mine for the first half of 2004 and full consolidation from that point forward, while Boroo reflects full consolidation for the current and comparative periods. 2. Share Capital Centerra is authorised Adj. 1. authorised - endowed with authority authorized lawful - conformable to or allowed by law; "lawful methods of dissent" legitimate - of marriages and offspring; recognized as lawful to issue an unlimited number of common shares, class A non-voting non-voting adj non-voting shares → azioni fpl senza diritto di voto shares and preference shares with no par value. At December 31, 2005, only common shares had been issued as follows:
---------------------------------------------------------------------
Number Issued 2005 2005
(Number of Shares) (Thousands of $US)
---------------------------------------------------------------------
Beginning and end of period 72,079,605 $ 522,383
---------------------------------------------------------------------
3. Earnings Per Share Amounts Basic and diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of is determined by dividing net earnings by the basic and diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. weighted-average number of common shares outstanding respectively during the quarter and year.
---------------------------------------------------------------------
Three Months Ended Year Ended
Dec 31/05 Dec 31/04 Dec 31/05 Dec 31/04
------------------------------------------------
(Thousands) (Thousands)
Basic weighted
average number
of common shares
outstanding 72,080 72,080 72,080 55,604
Diluted weighted
average number of
common shares
outstanding 72,137 72,111 72,113 55,622
---------------------------------------------------------------------
Basic and diluted
earnings per common
share $0.09 $0.21 $0.59 $0.91
---------------------------------------------------------------------
4. Exploration and Business Development
---------------------------------------------------------------------
Three Months Ended Year Ended
Dec 31/05 Dec 31/04 Dec 31/05 Dec 31/04
------------------------------------------------
(Thousands) (Thousands)
---------------------------------------------------------------------
Exploration costs $ 7,070 $ 7,380 $ 25,857 $ 15,000
Business development
and feasibility costs 1,412 - 4,474 -
---------------------------------------------------------------------
$ 8,482 $ 7,380 $ 30,331 $ 15,000
---------------------------------------------------------------------
5. Income Taxes During the fourth quarter of 2005, a valuation allowance on Boroo's capital assets in the amount of $1.6 million was reversed, resulting from the impact of the new life of mine plan. 6. Related Party Transactions Cameco Corporation Centerra and its subsidiaries maintain inter-company advances to and from Cameco and several of its subsidiaries to fund operations. These advances, which are non-interest bearing and payable on demand, will be repaid in the ordinary course of business. Effective April 1, 2004 Centerra entered into an administrative services agreement with Cameco whereby Cameco has agreed to provide services and expertise to Centerra in return for reimbursement for all its direct and indirect costs relating to those services. As a result of the above items, the balance owing to Cameco at December 31, 2005 was $1.0 million ($3.7 million at December 31, 2004). Services under the services agreement, in the amount of $0.2 million and $0.8 million were provided by Cameco during the fourth quarter and full year 2005, ($0.2 million and $0.4 million during fourth quarter and full year 2004). Other The Company paid approximately $109,000 Cdn in the fourth quarter of 2005 (approximately $429,000 Cdn for the 2005 year) to Ms Marina Stephens, a lawyer and the spouse of President and Chief Executive Officer, Mr Homeniuk. Ms Stephens provides certain designated legal and business advisory services related to international operations. At December 31, 2005 a relocation loan in the amount of $250,000 Cdn was outstanding with Centerra's President and Chief Executive Officer, Mr. Homeniuk. The loan principal is payable in June 2010, while interest is charged as a taxable benefit to Mr. Homeniuk. Kyrgyzaltyn and the Government of the Kyrgyz Republic The table below summarizes 100% of the management fees, royalties and concession payments paid by Kumtor to Kyrgyzaltyn or the Government of the Kyrgyz Republic and the amounts paid by Kyrgyzaltyn to Kumtor according to the terms of a Gold and Silver Sales Agreement between Kumtor Operating Company ("KOC KOC Knights of Columbus KOC Kings of Chaos (gaming) KOC Kuwait Oil Company KoC Knights of Cydonia (Muse song) KOC Kiss on the Cheek KOC Kuwait Olympic Committee KOC Kids of Cracatau "), Kyrgyzaltyn and the Government of the Kyrgyz Republic. For periods prior to the restructuring, the Centerra financial statements reflect one-third of these charges in accordance with the accounting described in note 1.
---------------------------------------------------------------------
Three Months Ended Year Ended
Dec 31/05 Dec 31/04 Dec 31/05 Dec 31/04
------------------------------------------------
---------------------------------------------------------------------
Management fees
to Kyrgyzaltyn $ 131 $ 205 $ 747 $ 949
Concession payments
to the Kyrgyz
Republic 349 546 1,992 2,531
---------------------------------------------------------------------
$ 480 $ 751 $ 2,739 $ 3,480
---------------------------------------------------------------------
Gross gold and silver
sales to Kyrgyzaltyn $ 42,427 $ 58,931 $ 220,242 $ 257,739
Deduct: refinery and
financing charges (550) (729) (2,603) (2,766)
---------------------------------------------------------------------
Net sales revenue
received from
Kyrgyzaltyn $ 41,877 $ 58,202 $ 217,639 $ 254,973
---------------------------------------------------------------------
Effective as of December 22, 2005, Kyrgyzaltyn and KGC have agreed to temporarily permit Kyrgyzaltyn to pay within twelve days after date of shipment of gold from the Kumtor mine. No later than March 1, 2006, Kyrgyzaltyn will resume the prior practice of pre-paying for gold.Kyrgyzaltyn shall pay interest on unpaid amounts equal to LIBOR plus 0.25%. Kyrgyzaltyn has agreed to sell, after February 1, 2006 but before March 1, 2006, a sufficient number of Centerra shares to yield $11 million of proceeds. These proceeds, which will continue to be held by Kyrgyzaltyn, will fund a gold payment facility, to be used by Kyrgyzaltyn to resume the prior practice of pre-paying for gold. The obligations of Kyrgyzaltyn to KGC are secured by a pledge of a portion of the Centerra shares owned by Kyrgyzaltyn. 7. Commitments and Contingencies Contingencies (ISSN 1048-9851) is the bimonthly magazine of the American Academy of Actuaries, providing a large and diverse readership with general interest and technical articles on a wide range of issues related to the actuarial profession. Kumtor a) In its third quarter disclosure, the Company reported that it had filed tax objections to Kumtor's tax and customs assessments and that a review by the tax authorities had reversed portions of the previous assessment. There has been no further movement during the fourth quarter on the remaining open tax assessment items. These remaining issues are not expected to have a material impact on Centerra's financial position. b) In the fourth quarter, KGC entered into contracts to purchase plant and equipment for $62.2 million (December 31, 2004 - $5.5 million). These commitments are expected to be settled in the following financial year. Other The Company has entered into a five-year agreement ending June 30, 2009 for certain insurance coverage. Considerations under this agreement require annual payments of approximately $4.0 million, with a minimum guaranteed payment under this contract of $8.0 million. This minimum commitment level will be reached in June 2006. 8. Segmented Information Centerra has three reportable segments. The Kyrgyz Republic segment involves the operations of the Kumtor Gold Project and local exploration activities, and the Mongolian segment involves the operations of the Boroo Gold Project and local exploration activities. The North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. segment involves the head office located in Toronto, loans to each of the mine operations, as well as exploration activities on North American projects. Geographic geographic /geo·graph·ic/ (je?o-graf´ik) in pathology, of or referring to a pattern that is well demarcated, resembling outlines on a map. geographic pertaining to geography. Segmentation of Revenue All production from the Kumtor Gold Project was sold to the Kyrgyzaltyn refinery in the Kyrgyz Republic while production from the Boroo Gold Project was sold to a refinery that is located in Ontario Ontario, city, United States Ontario, city (1990 pop. 133,179), San Bernardino co., S Calif., near Los Angeles, in a region of vineyards; inc. 1891. , Canada.
Three months ended December 31, 2005
---------------------------------------------------------------------
($ millions) Kyrgyz North
Republic Mongolia America Total
---------------------------------------------------------------------
Revenue $ 40.7 $ 34.3 $ - $ 75.0
Expenses
Cost of sales 28.5 14.3 - 42.8
Depreciation, depletion
and reclamation 6.3 5.9 0.1 12.3
Exploration and business
development 4.2 2.7 1.6 8.5
Interest and other 0.4 0.4 (1.9) (1.1)
Administration 0.7 (0.1) 5.4 6.0
---------------------------------------------------------------------
Earnings (loss) before
income taxes and
minority interest 0.6 11.1 (5.2) 6.5
Income tax expense 0.7 (1.6) 0.2 (0.7)
Minority interest 0.8 0.8
---------------------------------------------------------------------
Net earnings (loss) $ (0.3) $ 11.5 $ (5.0) 6.4
---------------------------------------------------------------------
Capital expenditures
for the quarter $ 10.9 $ 3.1 $ 0.7 $ 14.7
---------------------------------------------------------------------
Three months ended December 31, 2004
---------------------------------------------------------------------
($ millions) Kyrgyz North
Republic Mongolia America Total
---------------------------------------------------------------------
Revenue $ 57.2 $ 30.5 $ - $ 87.7
Expenses
Cost of sales 32.1 9.9 - 42.0
Depreciation, depletion
and reclamation 13.8 6.5 0.1 20.4
Exploration and business
development 3.6 2.5 1.3 7.4
Interest and other 2.8 (2.9) (2.7) (2.8)
Administration 0.6 1.2 4.1 5.9
---------------------------------------------------------------------
Earnings before
income taxes and
minority interest 4.3 13.3 (2.8) 14.8
Income tax expense (1.0) - 0.1 (0.9)
Minority interest - 0.8 - 0.8
---------------------------------------------------------------------
Net earnings $ 5.3 $ 12.5 $ (2.9) $ 14.9
---------------------------------------------------------------------
Capital expenditures
for the quarter $ 2.7 $ 1.6 $ - $ 4.3
---------------------------------------------------------------------
Year ended December 31, 2005
---------------------------------------------------------------------
($ millions) Kyrgyz North
Republic Mongolia America Total
---------------------------------------------------------------------
Revenue $ 213.8 $ 124.8 $ - $ 338.6
Expenses
Cost of sales 134.6 51.6 - 186.2
Depreciation, depletion
and reclamation 35.2 24.2 0.4 59.9
Exploration and business
development 14.6 8.6 6.7 29.9
Interest and other 3.9 0.6 (9.3) (4.8)
Administration 2.8 0.8 14.4 18.0
---------------------------------------------------------------------
Earnings (loss) before
income taxes and
minority interest 22.7 38.9 (12.2) 49.4
Income tax expense 5.3 (1.6) 0.8 4.5
Minority interest 2.4 2.4
---------------------------------------------------------------------
Net earnings (loss) 17.4 38.1 (13.0) $ 42.4
---------------------------------------------------------------------
Total assets (excluding
PP&E and goodwill) 95.4 46.8 169.4 311.6
PP&E 147.1 89.3 2.7 239.1
Goodwill 129.7 24.9 154.6
Capital expenditures
for the period $ 21.5 $ 11.4 $ 0.7 $ 33.6
---------------------------------------------------------------------
Year ended December 31, 2004
---------------------------------------------------------------------
($ millions) Kyrgyz North
Republic Mongolia America Total
---------------------------------------------------------------------
Revenue $ 159.2 $ 87.9 $ - $ 247.1
Expenses
Cost of sales 81.2 28.7 - 109.9
Depreciation, depletion
and reclamation 31.9 21.8 0.1 53.8
Exploration and business
development 6.0 4.4 4.6 15.0
Interest and other 7.2 0.5 (15.3) (7.6)
Administration 1.3 2.7 7.6 11.6
Other expense - - 8.6 8.6
---------------------------------------------------------------------
Earnings (loss) before
income taxes 31.6 29.8 (5.6) 55.8
Income tax expense (recovery) (0.3) - 0.1 (0.2)
Minority interest - 5.4 - 5.4
---------------------------------------------------------------------
Net earnings (loss) $ 31.9 $ 24.4 $ (5.7) $ 50.6
---------------------------------------------------------------------
---------------------------------------------------------------------
Total assets (excluding
PP&E and goodwill) $ 76.8 $ 29.9 $ 130.8 $ 237.5
PP&E 163.0 102.7 1.8 267.5
Goodwill 129.7 25.8 - 155.5
Capital expenditures
for the year $ 4.7 $ 7.1 - $ 11.8
---------------------------------------------------------------------
9. Comparative Information Certain prior year balances have been reclassified to conform with the current year presentation. Centerra Gold Inc. (TSX:CG) |
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