Greetings, and welcome to the Q1 2022 Results Conference Call. During the presentation, all participants will be in the listen-only mode. Afterwards, we will conduct a question-and-answer session. At that time, if you have a question, please press the one followed by the four 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 Wednesday, May 4th, 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 first quarter 2022 results conference call. Please note that presentation slides are available on Centerra'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 lines 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, and Darren Millman, Chief Financial Officer. 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 of the 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 material assumptions, risks, and uncertainties, please refer to our news release and MD&A along with the unaudited financial statements and notes and all of our other filings, which can be found on SEDAR, EDGAR, and on the company's website at centerragold.com. Now, I'll turn the call over to Scott.
Thank you, Toby, and a very good day to everyone. Thank you for joining us for our Q1 earnings conference call. Just referencing slide four of the accompanying presentation deck, and just referencing the bullet points in the top left. I think we had another good quarter in terms of metal production. You can see during the Q1 period, we produced just under 94,000 ounces of gold and some copper production of some 20.6 million pounds. This is a good level of metal output, and you see that in the third bullet point just in terms of our corresponding all-in sustaining costs. For the quarter, we were producing our gold at a very competitive, very low $395 per ounce.
Again, in parenthesis, you can see the individual contributions at the individual mine sites. Mount Milligan producing its gold as low as $15 per ounce, and Öksüt producing its gold as low as $451 per ounce in terms of the all-in sustaining cost metric. Mount Milligan is really benefiting from the strong copper price environment, whereby we take those copper revenues as a byproduct, and that's what's resulting in those very low all-in sustaining costs per ounce. Just in terms of some key developments during the quarter. First of all, just referencing the fourth bullet point. Back in February, we announced the acquisition of the Goldfield District project in Nevada.
We think this is a very exciting addition to our portfolio and our project pipeline moving forward. We think this is going to be a key source of organic growth for Centerra moving forward, and most likely will be our proverbial third leg to our stool. This year, the plan is really focusing on drilling and exploration. As we make our way into 2023, we want to be in a position to publish an inaugural resource on the property as well as a feasibility study, which we'll be looking to underpin a potential future construction decision. The fifth bullet point here, just in terms of Öksüt and the identification of mercury within the mineralogy. We're continuing to conduct several studies in terms of identifying potential technical solutions to remediate this challenge.
They are under evaluation as we speak. In addition to alternative means for monetizing our loaded gold in carbon, and I'll talk to this more in a future slide. Then just lastly, on the last bullet point here in the bottom left. Obviously, during the quarter, another key development on April 4th was when we entered into the global arrangement agreement with Kyrgyzaltyn and the government of the Kyrgyz Republic. This has been a very important development in terms of you know, resolving the Kumtor issue. I think this will be a good development for Centerra just in terms of us putting in place a clean exit and you know, moving forward with our business. Just onto the next slide, on slide five. A number of highlights here.
I won't speak to them all. So just the first bullet point, just from a safety perspective. We had a very good quarter in terms of our all-injury frequency rate. We're actually operating below target. We also had a number of milestones during the quarter, which, you know, gives us, you know, confidence that we can operate in an environment of zero harm. One of the particular milestones is at Öksüt, where we achieved 1 million hours of lost-time incident-free operations. So definitely want to commend the leadership team at Öksüt. Again, a number of highlights here. Again, I'll just reiterate the third last bullet point. You know, we're seeing very good levels of productivity and unit cost efficiency.
Again, just given the strong metal output, you can see in terms of the resulting all-in sustaining cost per ounce. You know, we're operating at a very low, very competitive, $395 per ounce. Just moving on to the next slide on slide six. Just in terms of our environmental, social, governance profile. Again, a number of bullet points here, just, you know, providing updates on some of the key initiatives during the quarter. Again, the first bullet point in terms of safety, obviously, this is absolutely paramount. That you know, that key milestone that we achieved at Öksüt, I think is indicative of our focus on obtaining a zero harm environment.
I do want to touch on the third last bullet point. Centerra Gold is a member of the World Gold Council. Some two to three years ago, the World Gold Council rolled out its Responsible Gold Mining Principles, which is essentially a set of 52 environmental social governance principles. You know, we as an association, we as an industry are looking to demonstrate full compliance with these principles by 2023. As part of this program, we did our year two assurance at our site. You know, pleased to report that we're in excellent stead and establishing compliance with these principles. You know, in very good stead for achieving the targeted deadlines.
Just moving on to slide seven, just looking at Mount Milligan in a little bit more detail. You know, first bullet point, as I mentioned earlier, Mount Milligan had a very good quarter with regards to metal output, especially so in terms of copper production, which was fortuitous, just given the strong prevailing copper price environment. This, you know, strong level of metal production, you see that in terms of the corresponding all-in sustaining cost per ounce. Again, producing our gold as low as $15 per ounce. Again, you know, really benefiting from the strong copper price environment and the strong, you know, and the quantum of copper by-product revenues that we're recognizing.
Third bullet point, one of the key capital projects we have been working on at Mount Milligan is installing a new circuit of Staged Flotation Reactors. The rationale here is we think this can add one to two additional percentage points of recovery on our gold and copper. Construction of this circuit has been underway for some time now, and we're now actually in the commissioning phase. We expect to have this circuit commissioned here in Q2 of this year. That should be beneficial just in terms of underpinning stronger gold and copper recovery efficiency rates here moving forward. Just the fourth bullet point, the team continues to work on the new NI 43-101 life of mine plan or the technical study for Mount Milligan.
Those who follow Centerra may recall that we had a lot of success at Mount Milligan last year in terms of growing our gold resources and our copper resources. What we're focusing on now with this new study is we're looking to convert as much of that new mineralization into reserve category. We think that's going to underpin a meaningful extension in Mount Milligan's delineated reserve asset life. That study is on track, and we expect to be publishing that here in the Q2 reporting period. Just onto the next slide, on slide eight. Just the first bullet point, I touched on this at the outset. You know, at Öksüt right now, we are operating at full capacity.
You know, be it our mining activities, stockpiling activities, crushing, stacking, you know, irrigation and leaching activities, all of that is continuing at full capacity. We're continuing to, you know, convert our ore into loaded gold in carbon form, which we're currently storing and stockpiling in a securitized manner. In the interim, what the team here is working on is several potential sort of engineering technical solutions in terms of how we can upgrade the ADR facility where we do our gold processing. Looking at, you know, remediating some of these challenges to make sure that we can remove the mercury and continue to pour gold on site.
In parallel, we're also in discussions, you know, looking at alternative means of monetizing our gold and carbon and, you know, in discussions with some offsite sort of treatment facilities looking at is that a potential solution here in the short- term. I think we're going to have a more meaningful update on this during the quarter, and we'll look forward to reporting back on that shortly. Just the last bullet point here, the fourth bullet point. You know, we continue to focus on our, you know, all of our productivities, our unit cost efficiencies, big focus on, you know, trying to lower our costs even further at Öksüt. As you would've seen, Öksüt did have a very strong quarter during the Q1 period.
They produced some 54,000 ounces of gold, and that's what resulted in, again, you know, the competitive all-in sustaining cost of $451 per ounce. The mine continues to perform really well, as we speak, you know, here in early Q2. Our productivities, unit cost efficiencies, et c., adsorbed gold. We're operating in line with target, if not ahead of target. With that, I'm now going to pass the call over to Darren Millman, our Chief Financial Officer, and Darren will drill down into some of the financial highlights a little bit more. Darren?
Thanks, Scott, and good morning, all. For those following on the slide deck, we're on slide nine. Centerra recorded $295 million revenue during the quarter, consisting of the Mount Milligan mine, the Öksüt mine, and our Molybdenum Business Unit. Revenue consisted of $156 million in gold sales, $68 million in copper sales, and $58 million from the Molybdenum Business Unit. In the quarter, our continuing operations sold 94,908 ounces of gold, 40,204 ounces from Mount Milligan mine, and 54,704 gold ounces attributable to the Öksüt mine. We also sold 19.4 million pounds of copper in the quarter. During the quarter, the company's operations average gold price realized was $1,687 per ounce and $3.77 per pound of copper.
This incorporates the existing streaming arrangements over the Mount Milligan mine. Cash provided by operating activities from continued operations was $28.3 million for the quarter. As noted in the MD&A, the Mount Milligan mine recognized four copper-gold shipment sales in the quarter, while only receiving three provisional cash payments. In the second quarter, we will receive the fourth shipment provisional cash payment of $42 million. Free cash flow from continued operations for the quarter was $9.1 million, once again impacted by the timing of the Mount Milligan fourth shipment cash receipt, together with the negative free cash flow of $20.1 million from the Molybdenum Business Unit. We forecast positive free cash flow at the Milligan business unit for the remainder of the year, with the release of working capital and reduced costs.
At an operational level, the Mount Milligan mine generated $6.4 million free cash flow for the quarter. The Öksüt mine in the quarter generated $61.4 million free cash flow. The Öksüt mine continuing operating activities of mining, stockpiling, crushing, stacking, and leaching activities in accordance with our 2022 plans up until gold and carbon form. The adjusted net earnings per share was $0.19 for the quarter. I'll just move over to slide 10. The net earnings from continued operations was $89.4 million in the quarter, with $56.4 million in adjusted net earnings recorded. The earnings in the quarter attributable to operations were $45.6 million contributed from the Mount Milligan mine, $67.4 million contributed from the Öksüt mine, and $6.4 million dollar loss from the Molybdenum Business Unit.
For the quarter, there were several adjusting items of significance that are noted on this slide. In particular, the Kumtor mine legal and other related cost of $6.5 million, and the reclamation provision adjustment on care and maintenance sites of $42 million, primarily a result of the risk-free interest rates applied to our underlying liabilities. Just moving on to slide 11. From a cost perspective, Centerra's continued operations in the quarter recorded production cost of $4,497 per ounce. All-in sustaining cost on a by-product basis of $395 per ounce. At an asset level, at Mount Milligan, we recorded all-in sustaining cost on a by-product basis of $15 per ounce. $75.5 million in copper credit was a significant contributor for this very low cost performance.
The Mount Milligan guidance remains unchanged at $575-$625 per ounce for the year, with a targeted gold production of between 190,000 - 210,000 ounces of gold and 70 million-80 million pounds of copper. Öksüt recorded all-in sustaining cost of $451 per ounce for the quarter. As noted in the MD&A, the Öksüt guidance is currently under review, with several technical options being evaluated together with monetization options review, both in the short- term and potentially life of mine. The company exited Q1 with a cash balance of $768 million, a reduction in cash balance compared to Q4. This attributable to the $176 million acquisition of the Goldfield projects in Nevada.
Given our strong financial performance together with our free cash flow expectations, the board declared a quarterly dividend of $0.07 per share. Finally, I draw your attention to the middle table of this slide. The company expects gold production at these levels in the form of gold and concentrate at the Mount Milligan mine and gold in carbon at the Öksüt mine. The company is planning to announce operational plans to address mercury issues experienced together with updated guidance in Q2 reporting. With that, I'll just pass it back to Scott.
Thank you, Darren. Just on the last slide here on slide 12. Again, as I spoke to earlier, just looking at the bullet points in the top left, you know, I think it was a good quarter in terms of metal output. I think in the third bullet point, you can see, you know, the business is performing really well from a fiscal perspective. Again, you know, very low competitive all-in sustaining cost of $395 per ounce. That's obviously what's, you know, really underpinning the strong profitability that we reported during the quarter. Also, you know, as we've highlighted, I think we've got a, you know, very strong, you know, financial foundation here.
In terms of the balance sheet, we finished the quarter with net cash of some $768 million. You know, with the addition of our undrawn revolving line of credit facility, we have some liquidity of approximately $1.17 billion. I think that certainly allows us to advocate that, you know, continuing to operate an internally fully funded business model moving forward. You know, the last two bullet points here in this table here in the bottom left, I think they also just speak to news developments that we'll be expecting to report on here in Q2. You know, firstly in terms of Öksüt and, you know, what is the solution here that we're going to be embarking on.
As we've mentioned, I think we'll have news flow on that, shortly here in the Q2 period. With the resolution agreement with the Kyrgyz Republic, as we've mentioned in our disclosures today, we expect to be closing that here in the Q2 period. I think the other thing I'll just draw on as well is, you know, the NI 43-101 study that is underway at Mount Milligan. Again, we expect to be finalizing that and publishing that here in the Q2 reporting period. Lastly, just from a management update perspective, you would've seen in today's release, we announced that Dan Desjardins has retired as the company's Vice President and Chief Operating Officer.
Obviously the company, you know, we certainly offer our sincere thanks and gratitude to Dan for his dedication, leadership, and contributions to the strategic direction of Centerra during his many years of service since Dan joined the company in 2015. Under Dan's leadership, you know, first as President of Kumtor Gold Company, and subsequently as Vice President and Chief Operating Officer, and, you know, really through his enduring passion for continuous improvement, the Kumtor Mine was certainly elevated to world-class status. Then more recently, with the construction of the Öksüt Mine, this was delivered on time and under budget and has since fully repaid its upfront investment within its first two years of commercial production.
Again, I want to go on the record and say the company thanks Dan for his contributions to Centerra over the many years, and we certainly wish Dan all the best in his retirement. You know, lastly, I'll just note an international search firm has been engaged to identify Dan's successor. With that really concludes our sort of prepared remarks. Beatrice, our operator, if I can pass the call back over to you for the Q&A session, please.
Thank you. If you would 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. One moment please for the first question. Our first question comes from the line of Trevor Turnbull with Scotiabank. Please proceed with your question.
Thank you, and thank you, Scott. Congratulations on the EA amendment up at Mount Milligan. With respect to that EA, you mentioned that long-term water is now secured for the life of the deposit, or for the project. I just wondered, does that statement include any potential changes that might come with the new mine plan?
Yes. Trevor, thanks for that question. Yes, I think that statement does allow for, you know, any additional mine life that's going to be delineated here with the new 43-101. Yes, the answer is yes.
Okay, great. A question on Öksüt. As you kind of work out a solution for the mercury there, I wondered how we should think about, how you'll account for costs in Q2. I just wondered, are you going to be able to defer, like, some of the costs, until the gold production and sales take place, or will the costs really be tied to kind of lower sales and therefore, potentially abnormally high for Q2?
I'm looking at Darren. Darren, do you want to respond to that, please?
Sure. Yeah, Trevor. We envisage just really a buildup of inventory, so gold and carbon inventory on our balance sheet. We don't imagine too much flowing through our profit and loss or income statement. There might be some idle costs associated with the gold room, but we don't feel that will be material. That's sort of how you'll see the flow through in hopefully just Q2.
Okay. That's fine. Maybe kind of a bigger picture question with respect to Öksüt. I noticed in the forward-looking statements that you talked about the deposits and in support of an updated resource and new life of mine plan. I just wondered. I didn't know if that was kind of boilerplate forward-looking statements, or if we should be watching for an updated mine plan and resource sometime in the near- term.
Yeah, Trevor, it's Scott. No, I don't think we'll be providing or publishing any new resource or life of mine plan in the short- term.
Okay. Then my very last question is about the moly business. Again, kind of pointing to those forward-looking statements, there was a reference to, you know, potentially restarting or divesting of the mining operations. I was wondering if you could just maybe share your thoughts on the potential for a restart of mining, maybe with respect to what kind of timing it would need or what type of investments might be required, if you went that route.
Yeah, Trevor, you know, it's very preliminary right now. You know, myself and the team and our technical team, what we are working on is looking at new feasibility studies, or I'm going to use the terminology reactivation studies for both Thompson Creek mine and the Endako mine. You know, really just trying to ascertain, trying to understand, you know, what is the potential economic benefits here? What would be the value proposition? You know, what would be the required upfront capital cost, as you mentioned? We just want to make sure we have a really good understanding of that. You know, what's really generating, you know, this, these studies is you look at the prevailing moly prices, and they've been quite consistently now trading at sort of, you know, $19-$20 per pound.
In addition, we are seeing, you know, more and more sort of external, supply demand sort of analysis that's suggesting that, you know, this level of moly pricing could continue. If you accept that sort of prevailing moly price environment, it could suggest that, you know, there is some deep value here, within our Molybdenum Business Unit. We want to make sure that we understand that. You know, once those studies are complete and, you know, kind of, you know, more finalized, that's something that we'll then need to kind of discuss, with the board. Again, you know, it, you know, you mentioned, you know, potentially divesting this, molybdenum business unit. You know, likewise, the strong prevailing moly price.
You know, we have seen interest from third- parties as well. Again, you know, it's important that we understand or we have a view on what is the value here, you know, if we do find ourselves engaging in any discussions with third- parties. I think I'm giving you a long answer, Trevor, but that's why we need to have those studies in hand. You know, we really need to understand, you know, what is the value proposition here, before we can embark on any next steps.
Yeah, that makes sense. Do you have a sense of timing for how long until the studies would be available?
You know, it's not something that we've committed to publishing externally. This is more so something that we're focused on internally as an organization. You know, I would like to think that myself and the broader management team will have sort of a final product that we can be discussing with our board in the next sort of three to four months, hopefully.
Okay. Just one quick follow-up on that. Because you continue to process some product through Thompson Creek, does that potentially give it a bit of an edge in terms of being a little closer or simpler in terms of reactivating, compared to say, Endako?
Yeah. The both concentrates that were historically produced from the Endako mine and the Thompson Creek mine were of high product. That enables additional margins to be recognized in the Langeloth metallurgical facility in Pittsburgh. There is benefits of either mine. I think we were doing those studies, as Scott mentioned. You know, the expectations, if we were to make that decision to restart either mine, that we would still continue with our existing business model of, you know, purchasing third-party concentrates and elevating or bettering those for selling in the steel industry, chemical industry. You know, it'd be more, the more throughput we can get through the Langeloth facility, the higher margins we can overall achieve as the business unit. It's more of an add-on, Trevor, is how I'd sort of look at it.
Okay. I really appreciate the color and look forward to hearing what you come up with. Thank you.
Our next question comes from the line of Michael Siperco with RBC Capital Markets. Please proceed with your question.
Thanks very much, Scott and team for taking my questions. A couple of follow-ups, but maybe first, just on the free cash flow number this quarter, I just want to be clear, this is an understated number, correct, on the timing of that cash received at Mount Milligan? In other words, we should be expecting a reversal of that increase in Q2, and assuming it had been received in Q1, the free cash flow number would be something closer to $60 million. Is that correct? Is that in the ballpark?
Yeah, that's in the ballpark.
Okay, very good. Following up on the questions on Öksüt. Am I understanding this right? In terms of production in Q2, basically we shouldn't be expecting any gold pour, just the buildup of inventory of gold and carbon for Q2. Is that correct where we stand today?
Michael, it's Scott here. That's a difficult question for me to answer right now. I think Darren said it in his prepared remarks. You know, we do shortly expect within the quarter to be providing a further operational update on Öksüt. Listen, the reason why I find it difficult to answer your question is one option we are looking at is monetizing our loaded gold and carbon at an offsite treatment facility. You know, we're in discussions right now with the principals there. You know, we've certainly been reassured that they've got the infrastructure, installations, technology, and the capacity to deal with our loaded gold and carbon.
Really what we're doing right now is we're sort of in the final stages of those discussions, negotiations about what that would look like. If that should all come to fruition here, then we would be actually, you know, producing gold during the quarter. But we're not there yet, but we're close. That's why I'm struggling to answer your question, Michael. I'm just going to pause and see if I've articulated myself well, if you know what I mean.
Yeah, no, I think that makes sense. I suppose the question then is this something that can be initiated within the quarter? Is this something that you can start doing, you know, tomorrow if everything works out, s hipping the gold and carbon?
Yes. Yes, the answer is yes. It can be initiated within the Q2 period. Again, they have the capacity. Again, it's just going to come down to, you know, what are the economics associated with that option? You know, obviously, how does that compare, you know, doing a trade-off study, how does that compare with, you know, fully remediating our ADR facility and treating it on site? You know, what's the trade-off there, time value of money, et c. That's what we're looking at right now. Yes, I think this could be a potential solution within the Q2 period, but you have to wait until we come back and report to the market on where we've landed on that.
Okay, fair enough. I guess one more on Öksüt. You referenced the potential solution of shipping gold and carbon over the life of mine. I mean, either way, depending on what comes out of this, and I realize you're in the middle of these studies, does anything change in your thinking about the deposit longer- term in terms of capital allocation, exploration, mine life extension, those sorts of things that you were talking about last year, or is it sort of too early to tell?
If I'm understanding the context of your question, I don't think anything changes, you know, with regards to our view of, you know, the resource, the reserves, the life of mine profile, how we're going to stage, sequence, develop the deposit. I think it, everything remains the same.
Okay. Got it. If I can just ask one more question. I suppose Trevor covered the moly business. Maybe I'll ask about Kemess. Any updated thinking about Kemess, either in terms of a project for you or a potential divestment, anything along those lines?
No, we've got no update, Michael.
Copy. Got it. Thanks very much. Those are my questions.
Thanks.
Our next question comes from the line of Anita Soni with CIBC. Please proceed with your question.
Good morning. Thanks, Scott, for taking my call. [Most of the questions have been answered and I'm not sure if I heard, but how much capacity to continue to, I guess, collect having to stop that as well?]
Anita, I apologize. You're really breaking up at our end. Operator, was that breaking up at your end as well?
Yes, it was.
Okay, sorry. Can you hear me?
Yeah, much better now, Anita, I think.
Okay. I was just asking, [what is the capacity to continue?] Is there a limit there?
Anita, I'm sorry, I'm going to frustrate you. You started breaking up again.
No, it's okay. We'll take it offline.
Okay. Sorry, Anita.
No problem.
Our next question comes from the line of Brian MacArthur with Raymond James. Please proceed with your question.
Good morning. Again, most of my questions have been answered, but can I just follow up on the Moly business? There was a statement made it's going to be positive free cash flow for the rest of the year. It was sort of negative $20 million, if I calculate this right, in the first quarter, and your guidance originally was consuming $15 million, I think, for the year. When you say it's going to be positive for the rest of the year, that means positive on a quarterly basis. You haven't changed your forecast that you're actually going to be positive cash flow for the whole year out of the business, i.e., you're going to recover that full $20 million. Has something changed or is it still the same?
Absolutely. We don't anticipate changing our guidance. The only real change we're anticipating now is the release of additional working capital. You might have noted, Brian, in the quarterly analysis, we make reference to working capital. It's in excess of $100 million. We're really just releasing a lot more of that than planned for the 2022 year. That's when I talk about, you know, free cash flow generation, it's a lot of it's just looking to release more working capital. We do anticipate to be, you know, pretty close to break even cash flow. That's sort of what we're referencing there.
Great. That's what I was trying to get at, the actual cash. I assume that all assumes, no money being spent on restarts or anything. That's just the current o ngoing business covering the care and maintenance costs plus release of working capital, right?
That's right.
Thank you very much.
Mr. Perry, there are no further questions at this time. I'll turn the call back to you. Please continue with your presentation or closing remarks.
Okay. Thank you, operator, and thank you everyone for joining us for the call. We'll conclude it there, and I wish everyone a very good day. Look forward to catching up soon. Thank you.
That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line.