Greetings, and welcome to the Centerra Gold fourth quarter and full year 2021 results conference call. During the presentation, all participants will be in a listen-only mode. Afterwards, we'll conduct a question-and-answer session. At that time, if you have a question, please press the 1 followed by the 4 on your telephone. If at any time during the conference you need to reach an operator, please press star zero. As a reminder, this conference is being recorded Friday, February 25, 2022. I would now like to turn the conference over to Toby Caron, Treasurer and Director of Investor Relations. Please go ahead.
Thank you, operator. Welcome to Centerra Gold's fourth quarter and full year 2021 results conference call. Summary slides are available on Centerra Gold's website to accompany each speaker's remarks. Today's call is open to all members of the investment community and media in listen-only mode. Following the formal remarks, the operator will give the instructions for asking a question, and then we will open the phone line to questions. Please note that all figures are in U.S. dollars, unless otherwise noted. Joining me on the call today are Scott Perry, President and Chief Executive Officer, Darren Millman, Chief Financial Officer, Dan Desjardins, Chief Operating Officer, Dennis Kwong, Vice President, Business Development and Exploration, and Malcolm Stallman, Vice President, Exploration.
I would like to caution everyone that certain statements made today may be forward-looking statements, and as such, are subject to known and unknown risks, which may cause our actual results to differ from those expressed or implied. Also, certain measures we will discuss today are non-GAAP measures. Please refer to the description of non-GAAP measures in our news release, and MD&A issued this morning. For a more detailed discussion of the material assumptions, risks, and uncertainties, please refer to our news release and MD&A, along with the audited financial statements and notes, and all of our other filings, which can be found on SEDAR, EDGAR, and the company's website at centerragold.com. Now I'll turn the call over to Scott.
Thanks, Toby, and a very good day to everyone. Thanks for joining us for our year-end earnings result conference call. As Toby mentioned, I'm just referencing the summary slides that are available on our website. Just starting off on slide number five, just wanna speak to some of the key bullet points there in the top left. 2021, it was another strong year in terms of the company-wide gold production profile. As you can see for the full year, we finished with some 308,000 ounces of gold output, which was at the very upper end of our guidance range. A good level of performance from both of the respective operations.
In terms of the third bullet point, just given that strong level of metal production, in terms of our corresponding all-in sustaining cost per ounce, I think it was, you know, it was a low, competitive $649 per ounce. Again, I'd just highlight that was favorably lower than our full year guidance range. You can see in parentheses there just each of the, all-in sustaining cost results at both Mount Milligan and Öksüt. I think underpinning a portfolio that is certainly lower cost quartile. You know, the strong metal price environment that we're seeing in gold and copper as well as our low, unit cost, just in the fourth bullet point here, we had an excellent year, in terms of free cash flow generation.
We generated $178 million of positive free cash flow, and again, that was above the upper end of guidance. A favorable result. With today's release, we've also reported our year-end reserve and resource update. I think a couple of the key highlights here is we have replenished our production depletion at our Öksüt operational gold mine. Then also in terms of our Mount Milligan operation, we have reported in terms of our gold resources, we've reported an increase of some 1.4 million ounces. In terms of our copper resource inventory, we've reported an increase of some 450 million pounds of copper.
As we communicated previously, we are embarking on a new technical study at Mount Milligan, and we expect to be releasing that in the second quarter of this year. One of the key objectives is to be you know upgrading a lot of this new resource into reserve category, which should underpin an extension in Mount Milligan's indicative reserve life. Just lastly, the last bullet point, as we announced on Tuesday morning, was the exciting acquisition of the Goldfield District project in Nevada. I will speak to this towards the end of this presentation. Again, an important development for Centerra that I think is gonna underpin our organic growth profile here in the medium term. Just referencing the charts down the bottom.
The chart in the bottom left is Mount Milligan. You can see the full-year result there. Again, $202 million in positive free cash flow, which is an excellent result. Then Öksüt, which is the middle chart, again, the column on the far right. Öksüt in 2021 generated $112 million of positive free cash flow. That also marked an important milestone at Öksüt. If you take the free cash flow that we generated in 2021 as well as the free cash flow that was generated in 2020, we have essentially paid back the entire upfront investment of $200 million. This has been a great experience for us and a real success.
Again, just want to recognize the leadership team in terms of the results they've achieved there. Just moving on to slide six of the presentation, just in terms of some of the key corporate highlights. Starting off with safety first. It was a good year in terms of safety. Öksüt during the year achieved 2 million hours of lost time incident-free operations. You can also then see that Endako achieved eight years, and our Thompson Creek Mine and Langeloth facility, they each achieved one year of continuous operations without a lost time injury. Again, important milestones and indicative that, you know, we're on the right path in terms of our pursuit, you know, our objective for zero harm operations.
Again, just wanna commend the leadership teams across the organization. Just in terms of the third bullet point, as we announced at the beginning of the year, we have been engaged in negotiations with the political leadership in Kyrgyzstan regarding the dispute over the Kumtor Mine and the illegal seizure of that operation. You know, generally speaking, the key aspect in terms of what we've been negotiating here in terms of resolving this is Centerra will be looking to relinquish its legal ownership of the operation to Kyrgyzstan, and in exchange, Kyrgyzstan will be looking to relinquish their 26% shareholding in Centerra. As and when that's relinquished, we'd then be looking to turn around and cancel those shares.
In terms of the current progress right now with our respective legal advisors, where we're working on negotiating the what I would call the global settlement agreement. As and when that negotiation is finalized, we'll be in a position to sign that and press release that accordingly. It continues to progress and hopefully we'll have more news on that forthcoming shortly. Just on the sixth bullet point, just wanna again just recognize Mount Milligan. You know, Mount Milligan had a record year in 2021 in terms of mill throughput. It was the highest level of throughput that we've seen in the history of the operation. Then you can see in terms of the free cash flow result, some $202 million.
That was also a record year in terms of being the highest level of free cash flow that's been generated by the operation. Just on the eighth bullet point here, third last bullet point, again, I spoke to this earlier, but you know, very low cost in terms of our all-in sustaining costs across the portfolio. Very competitive $649 per ounce. As I mentioned earlier, you can see in parenthesis, the portfolio is certainly one that's showcasing a first quartile cost structure. Second last bullet point, you know, we are anticipating that a lot of this strong production momentum's gonna carry into this year. We're guiding for up to 425,000 ounces of gold in terms of the midpoint of our guidance.
That makes for pretty compelling organic growth. Essentially, we're expecting up to a 40% increase in gold production this year over last year. Then in terms of the last bullet point here, that growing level of gold production as well as the sort of current metal price environment, we are expecting a corresponding increase in the level of free cash flow generation this year. We're guiding for up to $250 million of positive free cash flow. That's gonna present well just in terms of you know, the growth in our balance sheet and the underlying profitability within the business.
Just moving on to slide seven, just in terms of the, you know, our environmental, social, governance profile and just some of the key updates here. You know, as I spoke to earlier, safety continues to be of the, you know, absolutely paramount. I touched on some of the good milestones that we achieved in 2021. That'll continue to be an enduring focus here, moving forward over the course of this year. Third and fourth bullet points, you know, we continue to advance our various strategies and initiatives when it comes to climate change, as well as diversity, equity, and inclusion, and making good progress in that regard.
Then just the sixth bullet point there, Centerra is a member of the World Gold Council, and we have signed up to the World Gold Council's Responsible Gold Mining Principles, and we're currently rolling these out and implementing these principles at each of our operating and project assets and making very good progress there and very good head start to have achieve full compliance in the coming 12 months. With that, I'm now gonna turn the call over to Dan Desjardins, who's our Chief Operating Officer, and Dan can expand a little bit more on the operating highlights. Dan, over to you, please.
Thanks, Scott. Good morning, everyone. Please move to slide nine , and I'll start with the 2021 operating highlights. I'd like to start our 2021 operating highlights with a focus on safety. In Q4, our total reportable injury frequency rate, our TRIFR, was 1.89 due to a number of incidents at Mount Milligan and one more severe incident at Öksüt where a contractor injured his finger. Overall, our TRIFR was 1.02, which is well above our target and has given rise for a need for even further focus on our visible felt leadership in the field. Two positive milestones that Scott spoke to in the year were that Öksüt Mine did achieve 2 million work hours without a lost time incident.
Endako having eight years, although on care and maintenance, still has a number of activities at site and had eight years, and Thompson Creek and Langeloth facilities both went the year without a lost time injury. Centerra continues to prioritize the health and safety and wellbeing of its employees, contractors, communities, and other stakeholders, as COVID is still with us. Just as other businesses, we are seeing stresses in our supply chain and on a couple of our small capital projects, but our people have been staying ahead, and it is there. There's not been any material negative effect on our operations.
On a production front, we had another strong quarter at our two operating sites, producing 91,197 ounces of gold and 17 million pounds of copper at an all-in sustaining cost on a byproduct credit from continuing operations of $591 per ounce sold. On a full year, gold ounce production came in at, as Scott indicated, 308,141 ounces, which is right at the top end of guidance, with our copper production coming in at 73.3 million pounds in the middle of our guidance. Our gold production costs were a very competitive $604 per ounce at the bottom end of guidance, which was $600-$650 per ounce.
This was due to the increase in the ounce production and strong cost controls. For 2021, our all-in sustaining cost on a byproduct basis from continuing operations came in at $649 with Mount Milligan, a very low $508 per ounce with the strong copper credits and Öksüt at $668 per ounce. Please go to slide 10, and we'll specifically look at Mount Milligan. Over the past few years, we had a strong focus on our process water management. A very positive step forward occurred on January 6, 2022, when we obtained the amendment to our environmental assessment certificate to allow for options on our long-term water requirements.
We continue to work closely with our partners on our permitting requirements and environmental management plans, as well as licenses for occupation of the land required for pumping infrastructure. We will continue to construct the new staged flotation reactor, the SFR, but commissioning was set back due to the end of March, partly due to the supply disruptions, but also we had safety concerns during assembly that created the need to change our contractor. Although this did set us back, we felt that we must act on all safety issues as this is our most important value. We completed the first step of the Mount Milligan technical study, which was taking our 2021 drill results and produced the optimal resource pit.
The next stage will be to convert the resources to reserves and produce a new life of mine 43-101 technical study, which is on track for completion in the second quarter. As part of our new life of mine, we did complete nearly 40,000 meters of drilling in 68 holes. The assays were delayed, but we have now included all those in the resource update. The Mount Milligan team had a number of excellent production achievements under the leadership of our new general manager, Carol Fortin. Of note in the past year was the achievement of the highest throughput for the site since the operation began in 2014. In the table at the bottom, you can see that the recovery of both copper and gold are somewhat variable quarter to quarter.
This is due to ore type, but both copper and gold recoveries were slightly better than planned due to a new grinding process control system. We are anticipating continued improvements in our recoveries with the commissioning of the SFR in late Q1 and later a new flotation control system. Turning to slide 11, we will discuss Öksüt's highlights. Öksüt Mine had a very successful year and is on plan with mining in the fourth quarter at Keltepe phase II and higher grade Zone 4, as well as in Güneytepe. The higher grade output from the mine will continue through 2022. The exploration and infill drilling of 31,000 meters delivered enough additional reserves to cover the depletion for the year, and this was with the success of planning, and we are going to do 40,000 meters in 2022.
Öksüt is now running very much steady state. Therefore, the focus is on productivity and efficiency, and thus, we are putting out guidance that is a very competitive all-in sustaining cost for Öksüt on a byproduct basis for 2022 of $425-$475 per ounce of gold. In total, we placed 195,990 ounces on the heap, of which 16,200 was unirrigated. We poured 111,703 ounces, which was slightly above our 2021 guidance. Moving to slide 12, we can discuss Mount Milligan reserve and resource update. Mount Milligan was able to complete its drilling program and updated its resources with all the assay results. The new life of mine is planned to be released in Q2.
Therefore, this update, we have just depleted the reserves. The reserve therefore did decrease from 2.1 million ounces of gold to 1.8 million ounces, and for copper, from 837 million pounds to 736 million pounds. We did have a substantial increase though in Mount Milligan's resources, which is now increased in terms of gold from 1.39 million ounces to 2.7 million ounces of gold, and copper increased from 521 million pounds to 974 million pounds. We are taking all efforts to finalize the new 43-101 in Q2, and that will take into account this large increase in resources. On slide 13, for Öksüt, reserves and resources. At Öksüt, we did have an infill drilling as we did do near mine exploration as well.
The site was able to replace its throughput of 196,000 ounces with the additional 203,000 ounces. Therefore, an increase in total reserves of 1.13-1.14 million ounces. Öksüt resources also increased slightly from 230,000 ounces to 283,000 ounces with an average grade drop from 0.66 grams per ton to 0.50. This is due to the cutoff grade reduction from 1.6 grams per ton to 0.20 grams per ton. Moving to slide 22 in terms of guidance outlook.
For 2022, our consolidated gold production range is between 400 and 450 thousand ounces. Mount Milligan being 190 thousand ounces to 210, and Öksüt from 210 thousand ounces to 240 thousand ounces. For copper, Mount Milligan is targeting to produce between 70 and 80 million pounds. For our consolidated gold production cost guidance for 2022, that will be between $500 and $550 per ounce, with an all-in sustaining cost. On a byproduct basis, we are guiding a very competitive $600 - $650 per ounce. Milligan's all-in sustaining guidance within that is $575 -$625, and Öksüt with the higher production, is looking and guiding $425 - $475 per ounce.
Moving to slide 15, for 2022, we are guiding a total capital expenditure of $95 million-$105 million, of which sustaining capital is the majority coming in at $90 million-$100 million. The non-sustaining capital of only $5 million is a carry-forward from 2021 to complete the staged flotation reactor at Mount Milligan. Of note, we are looking to spend between $35 million-$45 million in exploration, including exploration at Mount Milligan of $12 million and Öksüt of five million. Additionally, in regards to the newly acquired Goldfield District project, the company expects to incur $15 million-$20 million in relation to the exploration activities at the project in 2022.
Overall, Centerra is guiding a strong free cash flow of $200-$250 million at a gold price of $1,700 per ounce and a copper price of $4 per pound. With that, I'll pass it over to Darren, our CFO, to review our fourth quarter and 2021 financial results.
Thanks, Dan. Good morning all. For those following on the slide deck, I'm on slide 17. Centerra recorded $251 million revenue during the quarter, consisting of the Mount Milligan mine, the Öksüt mine, and our molybdenum business unit. Revenue consisted of $136 million in gold sales and $62 million in copper sales, and $52 million from our molybdenum business unit. In the quarter, our continuing operations sold 90,312 ounces of gold, 58,642 ounces from the Mount Milligan mine, and 31,670 gold ounces attributable to Öksüt mine. We also sold 17.2 million pounds of copper in the quarter.
For the 2021 year, our continuing operation sold 314,757 ounces of gold, a 21% increase year-over-year. This representing the upper end of our 2021 guidance. We also sold 78 million pounds of copper, a 3% decrease at the Mount Milligan mine. This is attributable to the 16% decrease in copper grades processed during the quarter, during the year. This was positively offset by the 4% additional tons processed and the higher level of inventory held at the start of 2021. During the quarter, the company's operations average gold price realized was $1,504 per ounce and $3.59 per pound of copper. This incorporates the existing stream arrangement over the Mount Milligan mine.
Cash provided by operating activities from continued operations was $61.8 million for the quarter and $271 million for the year. Free cash flow from operations for the quarter was $38.7 million and $178.4 million for the year. At an operational level, the Mount Milligan mine generated $46 million free cash flow for the quarter and $201 million for the year. The Öksüt mine in the quarter generated $35 million free cash flow and $112 million for the year. The Öksüt mine is now in a higher grade gold sequencing, is highlighted by the 2022 guidance with up to 240,000 ounces of gold to be produced. The adjusted net earnings per share was $0.12 for the quarter and $0.79 for the full year.
I've been now speaking to slide 18. The net earnings from continued operations was $274.9 million in the quarter, with $35.4 million in adjusted net earnings. The earnings in the quarter attributable to operations were $50.9 million contributed from the Mount Milligan mine, $38.7 million contributed from the Öksüt mine, and a $1.2 million loss from the molybdenum business unit. During the year and for the quarter, there were several adjusting items of significance that I noted on this slide. I'll be only speaking to the quarterly adjusting items. Firstly, the Mount Milligan mine impairment reversal, net of tax recorded of $117.3 million. An initial impairment was recorded in Q3 2019.
Since then, the Mount Milligan mine has improved and it has improved with sustainable performance with a reduction in both mining and milling costs on a unit from a unit basis. This, together with the increase in underlying resources and the long-term copper and gold price increases, Centerra has made the decision with confidence to reverse the impairment. We look forward to sharing the new Mount Milligan technical report in Q1 of this year, together with the three year consolidated guidance update. Secondly, the gain on sale of the Greenstone property. An additional $25 million gain was recorded in the quarter. The trigger event being the construction decision made by Orion Mine Finance and its JV partners. This amount is due and payable to Centerra no later than December 2023.
Centerra has not recorded the additional consideration that is attached to the production milestones of the Greenstone project. Thirdly, the income and mining tax adjustments of $132.7 million was recorded. This is in connection to the Mount Milligan mine now recording a deferred tax asset, given the confidence management now has on income generation from the Mount Milligan mine and the company using a three year forward-look realization approach. The other adjusting items representing a combination of reclamation provision expense driven by other accounting standards and the need to apply current underlying discount rates together with the legal and other costs associated with the Kumtor file. I'll now move to slide 19.
From a cost perspective, Centerra's continued operations in the quarter recorded production cost of $550 per ounce of gold, and for the year, $604 per ounce sold. All-in sustaining costs on a byproduct basis of $591 per ounce was recorded in the quarter, and $649 per ounce for the year. At an asset level for the full year, Mount Milligan recorded all-in sustaining costs on a byproduct basis of $500 per ounce, outperforming the 2020-2021 guidance range of $530-$580 per ounce. Öksüt recorded all-in sustaining cost of $668 per ounce for the year, also outperforming the 2020 guidance range of $730-$780 per ounce.
The company exited 2021 with a cash balance of $947 million, the board declaring a quarterly dividend of $0.07 per share. I would like to draw your attention to the bottom left-hand chart. I would note in 2021, the free cash flow was $178 million. We see this growing to $220 million in 2022 using a $1,700 gold price and a $4 copper price at our midpoint. Obviously, a conservative pricing, obviously conservative in this current price environment. Based on our sensitivity analysis disclosed in January 2018 press release, a $100 increment in gold price movement will generate an additional $35 million cash for Centerra. Finally, the bottom right-hand chart, noting the 2022 column.
Our fully loaded or all-in cost is $725 per ounce of gold. Therefore, for each ounce of gold produced, a very healthy margin. With that, I'll pass it back to Scott.
Thanks, Darren. So just referencing slide 21. Just to recap, you know, as we announced this past Tuesday, you know, an important development here at Centerra is the acquisition of the Goldfield District project. I think this is gonna be important to the organization moving forward, just being one of our key sources of organic growth here over the medium term. In terms of the transaction and the rationale, you can see as per the slide, we're acquiring this project for $175 million in cash, with a further milestone payment of $31.5 million in cash or Centerra shares at our election. The $175 million in cash obviously means that our share count will not be growing.
In terms of the, you know, the value proposition here and the, you know, we expect this to be a, an accretive transaction, especially when you think about how we're increasing our shareholders', gold exposure, you know, be it resources, future reserves or future, incremental production. A lot of strategic rationale in terms of, pursuing this project, and you can see that illustrated on the slide here. Firstly, we think this adds a high-quality development project to our pipeline. It's a conventional open pit heap leach project, very similar to our operational Öksüt Gold Mine. We expect this to be a meaningful source of future low-cost production.
In terms of future construction, we would certainly note that this project should have low capital intensity, similar to our experience with our operational Öksüt gold mining operation in Turkey. You can see it's gonna improve our geographic profile. The project is located in Nevada, which is deemed a tier one mining jurisdiction. Importantly to Centerra, this is gonna favorably sort of reposition our portfolio just in terms of our geopolitical risk profile. I would like to think that's gonna support a you know a robust valuation moving forward, just in terms of our valuation multiples. In terms of the work done to date by the vendor, I would say it's been you know very very high quality.
One of the things we've certainly noticed and noted is there's a lot of, you know, strong support in terms of the communities, in terms of the county and in terms of the regulators and the agencies. We do expect to be establishing a strong license to operate here. One of the, you know, the important aspects here in terms of the industrial logic is it allows us to leverage our existing operating expertise. As we've commented previously, we see this being very similar to our Öksüt gold mine in Turkey, and that's gonna allow us to leverage a lot of our exploration, development, and operating expertise. And again, hopefully replicate that success that we've had with Öksüt and replicate that here with the Goldfield District project.
Second last, sort of row here, just in terms of the exploration potential, we think it is significant. It is a large land package, and in terms of the overall endowment here, in the history, it has produced some 4 million ounces of gold. We think it is still underexplored. We have a number of drill-ready targets that we'll be pursuing, and our objective here is to be expanding the known deposit and extending the mine life, and that'll certainly be a key focus here in 2022. Just lastly, we know this project well. We have been evaluating this since 2020.
The level of due diligence that we have undertaken here. It has been quite extensive and that obviously, you know, underpins our confidence in the overall sort of opportunity here. In terms of this year, I think some of the key milestones. In over the next 18 months, some of the key milestones we'll be pursuing with the Goldfield District project is in the first half of 2023, we'll be publishing a Centerra-authored resource for the property. And thereafter, we'll be publishing a feasibility study and moving this project forward so that it's in a position for a potential construction decision. Overall, I think it's an attractive value proposition.
We're very excited about this, and particularly so because this will represent our next source of organic growth for Centerra in the medium term. Just moving on to slide 22, just my final slide. Really what I've just highlighted on this slide, just in the bottom right-hand corner, as Darren spoke to, it was a very good year in terms of free cash flow generation. You can see the column on the far right. We generated some $178 million of positive free cash flow, and we're really looking forward to this year. You know, obviously our gold production, we've got good organic growth. Our gold production is growing by 30%-40%.
Just given the current metal price environment, that should certainly, you know, make for another strong year in terms of free cash flow. Again, in terms of the upper end of our guidance, we're guiding for up to $250 million of positive free cash flow. That level of profitability and cash flow generation, that's gonna certainly, you know, underpin our, you know, peer-leading balance sheet and, likewise our investment in Goldfield District project. Again, I think we're well positioned and in great stead for another year of strong performance at Centerra. With that, I'm gonna conclude our prepared remarks. Dina, if I can pass it back over to you just to facilitate the Q&A session, please.
Of course. If you'd like to register a question, please press the one followed by the four on your telephone. You will hear a three-tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration, please press the one followed by the three. Once again, to register for a question over the phone lines, please press the one followed by the four. It's just gonna be a moment for the first question. Our first question is coming from the line of Fahad Tariq with Credit Suisse. Please go ahead.
Hi. Good morning. Thanks for taking my question. Can you touch a little bit on how you're thinking about capital allocation? I mean, I think you touched on this right at the end of your presentation. You know, the balance sheet has $900 million of cash. The recent acquisition costs around $200 million with another $200 million of CapEx. Like, there's still quite a bit of capacity to maybe raise the dividend, do buybacks, maybe even further acquisitions. Just any thoughts on how you're thinking about, you know, the balance sheet and how to potentially, you know, leverage some of that cash. Thanks.
Yeah. Thanks, Fahad. You know, we certainly recognize that the balance sheet's in a very strong position. In terms of that cash balance, you could advocate that it's surplus to our sort of medium-term requirements moving forward. That's something that myself and the board, you know, we're cognizant of. We have been having a number of discussions around sort of potential shareholder-friendly capital return initiatives. In the past, we've always been primarily focused on our dividend distributions. If you look back over the last sort of two year period, you know, we increased our dividend to $0.04 per share per quarter, then to $0.05 per share per quarter, then, you know, most recently, we've increased it to $0.07 per share per quarter. There will continue to be discussions and deliberations on that with the board.
You know, we certainly have the opportunity to look at increasing our dividend distributions even more so. But we also, you know, we debate and we deliberate on, you know, potential share count reduction initiatives, you know, all the way, you know, considering things in terms of a normal course issuer bid, or do we do something more substantial in terms of a substantial issuer bid. We'll continue to evaluate these things, but, you know, the one thing that dictates the timeline around all of this is we're waiting until we've resolved the situation with the government of Kyrgyzstan.
As I mentioned a bit, you know, at the outset of the call, you know, progress is pretty good there in terms of the negotiations around finalizing the global settlement agreement. It's not until we've, you know, fully resolved that situation that we'll be able to actually embark on any sort of, you know, meaningful capital return initiative. The reason being, you know, they, the government of Kyrgyzstan, you know, through their agency, Kyrgyzaltyn, they are a 26% shareholder in Centerra. We wanna wait until we've resolved that shareholding, and thereafter I think that'll put us in a good position to really embark on those evaluations and discussions around, you know, what we could be doing, incrementally in terms of capital return initiatives.
Just switching gears to Goldfield. Can you just give us a rough idea of timeline? Like, what are some milestones maybe in 2022? Thanks.
Yeah. Look, over the next 18 months, we're in what we call the definition phase around the project. If I look at this year, for example, we're gonna be extensively focusing on infill drilling as well as our exploration investments. All of that work will be going into and, you know, supporting a property resource update that we'll be looking to publish in the first half of 2023. In parallel, the technical team will be, you know, commencing work on, you know, detailed engineering, you know, water studies as well as other technical aspects, you know, metallurgical test work, et cetera. A lot of that work will then support a new feasibility study for the project.
That feasibility study itself will then support a new technical report for the property. You know, the reason we're doing all of that is we wanna make sure that we're positioning the project for a construction decision over the next 18 months. You know, assuming we do get that construction decision and a positive approval from the board, you know, in terms of sanctioning the construction of the project, we're then looking at a two year construction timeline. Really the key sort of catalyst here, Fahad, is a resource update in the first half of 2023, and then shortly thereafter, we'll be publishing the feasibility study for the property.
Okay. Great. Thank you very much, Scott.
Our next question is coming from the line of Dalton Baretto with Canaccord. Please go ahead.
Thanks, operator. Good morning, everybody. Scott, congratulations on the Goldfield acquisition. You know, it looks good from my perspective. I just wanna follow up on that previous line of questioning there. There's some parameters out in the public domain that were put out there by the vendor. I'm just wondering, how much can we rely on those parameters in terms of resource size and grade, in terms of kind of mine life and annual production, just those sorts of metrics. Thank you.
Yeah, you know, look, Dalton, when we did our, you know, all of our due diligence and what have you and all the evaluations we've been doing over the last, you know, 18 months to nearly two years, you know, obviously, we relied on, you know, the work that the vendor's technical team has done, and they've done a lot of good work. But what we're seeing is a larger opportunity, especially in terms of the indicative or the conceptual resource. That's something we're gonna be, you know, quite focused on. You know, a lot of our investment this year, as I mentioned earlier, is focused on our sort of exploration programs that we're already, sort of drafting, if you will, or preparing, but also a lot of infill drilling as well.
You know, ultimately, what we think we're gonna be preparing here is a larger, hopefully a larger resource for the property and thereafter a more optimized feasibility study. I understand your question. I wanna put forward that you shouldn't rely on any previous technical studies because we're looking to optimize a lot of those studies. Again, you know, if we do have success with the drill bit, that's obviously gonna result in a different sort of profile as well. Hopefully that answers your question, Dalton.
Okay, that makes sense. That also segues into my next question. I understand that this project is fully permitted, which is a huge win in the U.S. As you go about optimizing, as you put it, will you put that permit at risk, or is everything you're gonna do within the constraints of that permit?
No, I would say, you know, more likely than not, we're gonna have to update some of those permits, which is, you know, there's mechanisms for that, and I would put forward that should be a relatively routine process. You can imagine in terms of our valuations and our diligence and what have you, we have had interactions with, you know, the local county, the regulators, the agencies, et cetera. We do see good support for this project and for the, you know, the conceptual development here. So I would not see that as an issue of high concern. We think there's very good support for this. Likewise, in terms of the permits that are already in place, I think we're just gonna be looking at amendments.
You know, we just have to wait and see how things go over the next 18 months with, you know, the overall resource and the conceptual design and, you know, what we are gonna be seeing here, you know, in terms of Centerra being the operator.
Okay, great. Just maybe switching gears with one last question. You mentioned the surplus cash, if you will, over the medium term, and you mentioned shareholder returns. Is M&A completely off the table now?
You know, from my perspective, I think, you know, we consider ourselves pretty fortunate to have acquired this Goldfield District project. When I think about our focus here over the medium term, I think we're just gonna be very focused on, you know, execution. Obviously, at Öksüt and Mount Milligan, we've got a pretty compelling year here in terms of, you know, organic growth in our gold production profile and, you know, the resulting profitability and free cash flow. You know, the team, we're gonna be very focused on, you know, moving forward, what we believe is gonna be our next source of organic growth in terms of Goldfield District project. I would see a lot of our focus being on that front. The thing.
I find most challenging personally, when I try and think about inorganic growth is just, you know, the current gold price environment. It's a pretty strong gold price. Valuations reflect that accordingly. It's really difficult when you think about, you know, potential inorganic growth opportunities. It's difficult, you know, in terms of identifying ones that can, you know, meaningfully create shareholder value. I think we're fortunate with this one. We see a pretty compelling value proposition here on the Goldfield District project, but they're few and far between.
Now, look, having said all of that, I think as and when we do you know resolve the situation with Kyrgyzstan and you know clean up the share capital structure and compress our share count, I think Centerra is gonna be you know a very clean organization. You know, potentially we have you know a peer-leading balance sheet. We've got a very low cost profile. We've got organic growth in front of us. You know, if opportunities are presented to Centerra, we would obviously you know consider those in line with our sort of fiduciary obligations. If there's something compelling there, then you know we would engage accordingly.
I'm giving you a long answer, Dalton, but I think just in terms of the status quo, I think a lot of our focus is gonna be on the Goldfield District project here over the short to medium term.
Thanks. That's helpful, Scott. I'll drop back in queue.
Our next question is coming from the line of Michael Jalonen with Bank of America. Please go ahead.
Good morning, Scott, Dan, and Darren. Thanks. A lot of my questions on Gemfields are answered. I'll skip to the Mount Milligan study coming out, I guess. Scott, thanks for the breakdown of the reserves and the resources. Very impressive M&I resource increase. I'm just wondering, basically in 2021 Mount Milligan mined, processed 0.46 grams per ton gold, as you know. The grade of deposit 0.38 and the grade of the M&I is 0.31. It seems to me that the grade, what we come up with a new plan, reserves go up, grade will come down. To maintain production, if I'm right with those assumptions, is Centerra looking at expanding Mount Milligan's processing capacity to keep production steady? Thanks.
Yeah. Thanks for the question, Mike. Right now we are not envisioning expanding the capacity of the mill facility. In terms of the sort of go forward, you know, gold production profile and copper production profile, we see it being, you know, relatively uniform year-over-year, and you'll see that as and when we finalize the new 43-101, and we can publish that. Look, having said all that though, just, Dan, is there anything that you'd wanna sort of put forward just in terms of responding to Mike?
Yep. Mike, it's excellent question. Mike, I guess two things. One is, yeah, the 43-101 that we'll put out will be within our permitted, which is 60,000 tons per day. So, we won't be envisioning it in that. But we are doing some scoping studies right now to see if there is an opportunity to either debottleneck and have a slight increase in our throughput or can we bolt on, you know, a gold plant or even, you know, substantially increase the throughput. So we're in the middle of that right now for the next, say, six months, just to take a look because as you indicated, as we increase the reserve resources, you know, is that opportunity there?
Right now with the high, the excellent productivity that Carol and her team are getting both in operational activity and also cost control, we can see ourselves making a good return even as the grade has lowered a little bit.
Okay. Well, thanks for that and good luck. Scott, I'll be happy to buy you a beer in the lobby bar next Monday night. Thanks. Take care.
Thank you.
Next question coming from the line of Mike Parkin with National Bank. Please go ahead.
Hey, guys. Most of my questions have been asked, but going back to Goldfield, I recognize that, you know, the old study you don't want us to kind of rely on. Is the strip ratio of that project proposed given that you're kind of starting off, you know, the same area? Is it kind of fair to assume that a strip ratio in and around that kind of level could be maintained with your early thoughts on the, what you're thinking?
Thanks, Mike. It's hard for me to really respond to that because, you know, we're gonna be optimizing a lot of those studies and you know, investing quite a bit in infill drilling and sort of exploration drilling that's focused on potentially expanding you know, each of the three deposits and more. You know, we have to sit down with all that information we'll be getting with the drill bit and you know, really look at optimizing these studies and really look at how we're you know, sequencing and phasing the development. I don't really wanna talk to you know, strip ratios or in-situ reserve grades or productivities or what have you.
I think what I would be comfortable saying is that we think this is gonna be quite similar to Öksüt. That's the kind of look and feel that we kinda have based on, you know, all our evaluations and all our modeling to date. I just don't wanna get ahead of the resource update and the feasibility study that we will be offering and publishing.
Right. I can appreciate that. One last question on it, though, is in terms of what is secured in terms of permits for water access, is that a limiting factor? Is that something that one of the amendments that you're looking to make would be looking to address if it sounds like, you know, potentially the scale of this project could be bigger than envisioned by the previous owner? That would thus kind of suggest that you need additional water access.
No. We looked at that pretty extensively. That was a key focus, you know, along with other facets. I think as I mentioned on Tuesday, you know, we even invested in additional hydrology drilling. We did a three-day water testing of the identified aquifer. You know, that aquifer is permitted already. Also, you know, the project or the vendor, they already have water supply agreements in place with the county and the state.
You know, coming out of that three-day water test that we invested in, we were able to, you know, validate or substantiate that it does supply sufficient water in terms of what the project would require, you know, in terms of our kind of envisioned production profile scenarios. We were quite satisfied in that regard. If I haven't mentioned already, the project already does have water right permits and, yeah, we deem them sufficient.
Okay. Super. Thank you, guys. That's it for me.
Next question is coming from the line of Anita Soni with CIBC World Markets. Please go ahead.
Hi. Thanks for taking my questions. Firstly, on Kumtor, I just wanted to understand in terms of the negotiations, you know, outside the cancellation of shares that you're talking about and you know, relinquishing Kumtor to the Kyrgyz government, is there anything else that we should be thinking about? I know there were
Significant tax obligations, and I think there were some environmental allegations. Would those all go away as well, or, you know, would there be something outstanding that we would also need to be thinking about?
Yeah, Anita, I think we put out a press release on January third, where we just updated the market on what are the key sort of commercial aspects that have been negotiated, and that all remains the same. There's no change to that. What we've been doing since that initial round of negotiations is we've now passed it over to our respective legal advisors, and they're now, you know, documenting and papering up the whole deal and, you know, putting together what we call a global settlement agreement.
A lot of the work right now, a lot of the negotiations is around the mechanics in terms of how would each party terminate and cancel, you know, any legal claims or what have you, that have been brought forward as part of this whole dispute. That will result in a number of conditions precedent to closing that would need to be satisfied. On the Kyrgyz side, as you referenced, you know, any civil claims, any criminal claims, any environmental claims, you know, all of those would have to be terminated permanently.
Then likewise, on the Centerra side, you know, in terms of the legal actions that we've launched, you know, for example, the international arbitration, the Chapter 11 proceedings, we would have to terminate those proceedings as well, you know, prior to closing. That's really what we're working on now is just agreeing on all the mechanics, et cetera. It's something, the sensitivity, for both sides perhaps, but definitely for ourselves, because I think as I've commented before, we absolutely want this to be a clean exit. That's what we're very focused on right now. As and when we're satisfied in that regard, that's when we'll be in a position to sign the deal and announce it accordingly.
Okay. The second question was just another follow-up on Mount Milligan. I just, you know, there's been a few moving parts. We had, you know, a resequencing of the plan, and I think that resulted in slightly lower production this year. I'm just trying to understand, you know, why really on the life of mine plan that you're putting out or the technical report that you're putting out, you know, why was that necessitated, and what are you hoping to achieve on that? As Mike referenced with the lower reserve grade or the lower resource grade, you know, if you said that the grades are gonna remain similar, when would they come down to the resource grade or the reserve grade?
Because presumably that would have to eventually happen.
Yeah. Dan, do you wanna respond to that, please?
Mike, I can certainly take a shot at it. Certainly, as we sequenced this past year, as we did our drilling, we realized that, you know, there's a good chance we're gonna be expanding the pit in a number of different directions and at depth. So we did change our locations. There are a couple places in the mine that are higher in copper and lower in gold and vice versa, a couple places where it's quite a bit higher in gold and lower in copper. So that really changed the sequencing over these next couple years in anticipation of what we probably see as, you know, new haul roads, new pit designs and access to these areas.
In terms of the grade that'll be in the reserves, I We don't have those numbers yet in terms of what we'll convert from resource to reserve. We are seeing that with the higher productivity, the higher recoveries and the lower costs, that we're certainly able to have good financial results, you know, with that added productivity, which will be incorporated into the new life of mine.
Okay, thanks. One last question on that, though. On the operating costs are coming down, so that's helping you get a lower cut-off grade. I understand that. When you think about things like the sustaining capital associated with that, is that included when you're thinking about the reserves when you do your sort of break-even analysis? I know lots of companies have different policies on that. I just want to understand what yours is.
No, absolutely, yeah. Yes.
Okay. All right. Thank you.
Our next question is coming from the line of Trevor Turnbull with Scotiabank. Please go ahead.
Hi. Maybe just sticking with Dan to follow up a little bit more on Mount Milligan. I was just curious if you could make any comment. You did talk about how the pit's likely gonna be expanding in several directions and at depth. Obviously, we're hoping for good reserve conversion given the size of the resource increase. Can you talk about how the general strip ratio may change relative to what we've seen? I mean, it's certainly possible to expand the pit and kind of maintain the same type of strip ratio, but I wondered if there was reason to think that might change. The follow-up to that, I guess, is how do we feel about tailings capacity? Is that something that's easy to expand, or do you have to look for new areas?
Finally, the long-term water plan. Is that? Maybe just remind me where you're at on the long-term water plan, please.
Okay, thank you. Well, let's start with the strip ratio. Again, we don't have the final reserve pit yet, but the strip ratio of Mount Milligan is very low. So there will not be a material change in that, I would not envision. In terms of tailings, as probably most people know, we did reduce the life of the mine two years ago. You know, with this additional resource and with the new pit, I don't believe we'd be looking at any. At this time, we're not gonna be expanding beyond what we had originally permitted before. Like, there won't be a tailings requirement there.
At some point in time, if we were to continue to expand the reserve and resources, there is space near mine that you could have either a second tailings or there would be a limit of how high you could raise it up. In terms of long-term water, you know, we're in a very excellent position right now. We're still in the area of 4.5 million cubic meters of water through the winter. We hardly dropped at all because we have additional aquifer water that we've been pulling in. So we're very comfortable and we continue to do exploration drilling for additional aquifer water, which seems to be very successful so far.
On the long-term water potential of taking to the surface, we indicated in the presentation our environmental framework approval with the environmental permits in January. We continue to work on submitting all of the information required with our partners in order to be able to move that forward if it's required. Right now, as we indicated, you know, we're at a very stable situation with the subsurface aquifer water. We feel we're in a very strong position. If we do require, which we have been taking water, although a limited amount this last summer.
We took 3 million cubic meters of water from a local creek, but we were permitted for six and we stopped because we had enough. Again, we're just working our way through that process, but so far it's been very positive and our First Nation partners and the regulators have been working with us very closely.
Okay. I appreciate that. That's all I had. Thanks, guys.
Our last question in queue is a follow-up question coming from the line of Dalton Baretto with Canaccord. Please go ahead.
Actually, operator, all of my questions have been answered. Thank you.
No further questions at this time.
Okay, thanks, operator. Again, thank you everyone for joining our call, and we wish everyone a good day and look forward to engaging and speaking in due course here moving forward. Thanks, everyone.
That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.