Greetings, and welcome to the third quarter 2022 results conference call. During the presentation, all participants will be in a 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 Monday, November 7, 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 third quarter 2022 results conference call. Please note that presentation 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 line to questions. Please note that all figures are in U.S. dollars unless otherwise noted. Joining me on the call today are Paul Wright, Interim President and Chief Executive Officer, Paul Chawrun, Chief Operating Officer, and Darren Millman, Chief Financial Officer.
I would like to caution everyone that certain statements made today are 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 on the 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 Paul.
Thank you, Toby. Good morning and welcome to our third quarter conference call. Prior to commencing with our presentation, I wish to make a few brief comments regarding my time to date in this interim role. My priority over the last 60 days has been to get out to our business units to better understand the people, the physical assets, the challenges and opportunities. I'm pleased to report that the company now has highly competent, dedicated professionals running our operations, and I'm very optimistic for the future of the company.
I have and will continue to engage our shareholders as it relates to their opinions and concerns and work to ensure that there is clarity in terms of our strategy for the company going forward. Finally, the search for a permanent CEO is underway with an executive search firm retained and now active on the file.
Moving on to the presentation. I will, in three slides, briefly cover our short-term strategy and the corporate and ESG highlights. Turning to slide four on the deck. Top of the list, predictably, is returning Öksüt to normal operations through the completion of the modification of the agent and obtaining all regulatory approvals for the restart. This is closely followed by continual optimization of operations at the Mount Milligan mine and extensive mine site exploration. The recently completed LOM plan provides a stable platform for further enhancement, led by Paul Chawrun and team. The Goldfield project in Nevada, purchased earlier in 2022, is being advanced with an initial resource estimate incorporating ongoing drilling scheduled for mid-2023, with a feasibility study to follow.
Finally, in light of improving molybdenum prices, we are updating our view on the Molybdenum Business Unit, including the possibility of a restart of the company's 100% owned Thompson Creek mine. Turning to slide five. In August of this year, we suspended leaching operations while continuing with mining, crushing, and stacking activities at our Öksüt mine. Prior to the cessation or the temporary cessation of leaching in the quarter, we had added approximately 40,000 oz to the gold and carbon inventory. Application for the environmental impact assessment, EIA, was made at the end of August 2022. Progress in advancing the EIA remains in accordance with plan, with a public meeting conducted and completed November 1. We expect a completed submission by year-end. Mercury abatement additions to the ADR plant remain on schedule, with completion by year-end and anticipated final costs of approximately $5 million.
The resumption of active leaching and reactivation of the modified ADR plant is planned to follow shortly thereafter. That's thereafter the approval of the expansion EIA. In early October, Centerra announced details from new life of mine plan for the Mount Milligan mine, which Paul will highlight later in the presentation, and the full technical report will be released today. In early October, we also announced a normal course issuer bid, NCIB program, to purchase for cancellation up to 15.6 million shares, about 7% of Centerra's total issued and outstanding common shares. We plan to commence utilizing the NCIB to purchase shares before year-end and have established an automatic purchase program for periods for which management is under blackout. I'm pleased to report that the Goldfield project advancement continued in the third quarter.
The resource expansion and infill drill program is targeting over 65,000 m of diamond drilling and reverse circulation drilling. As previously mentioned, our plan is to issue an initial resource estimate for the project in mid-2023, with a feasibility study around year-end. In addition to my appointment, we also appointed Paul Chawrun as the company's new Chief Operating Officer in the third quarter, and he officially started with us in September. At the Q2 meeting, the Board granted a quarterly dividend of CAD 0.07 per share, and this is the 12th straight quarterly dividend.
Turning to slide six. Now, there's a number of ESG updates on the slide. I won't go through them all, but I will note that we published our 2021 ESG report in the third quarter. Additionally, in the third quarter, the company continued to demonstrate that safety remains Centerra's top priority, achieving one million hours milestone without a lost time injury at the Öksüt mine. I will now pass the baton over to Paul Chawrun to walk through Centerra's operational highlights for the third quarter. Over to you, Paul.
Thank you, Paul. On slide eight, we have the operating highlights at Mount Milligan for the quarter. Mount Milligan continues to be a low-cost mine, as you can see with our quarterly gold production costs at $729 per ounce and all-in sustaining costs on a byproduct basis at $615 per ounce. The total gold produced for the quarter was a little over 54,000 oz, and copper was 19 million pounds. The operating plan remains on track for year-end projections, with the quarterly total material movement at 11.9 million tons and ore mined at approximately 5.3 million tons. At the plant, quarterly ore throughput was 5.5 million tons, and that included a major shutdown in September. Both the mine and the plant are on track for record annual production.
The copper head grade was 0.2%, and the recovery was 82.4%, with the gold grade at 0.47 grams per ton and recovery at 66.2%. Copper grades are lower primarily because we are starting to feed a higher proportion of the high-grade gold, low-grade copper ore, or HGLC you'll see in the technical report, which will continue for the remainder of the year and into the future. Installation of the Staged Flotation Reactors were completed earlier this year. This quarter, we have demonstrated the benefits with elevated copper and gold recoveries in tandem with increased throughput and the periodic blending of low-grade copper ore. On slide nine, we provide the operating results for Öksüt. As the company has previously reported, the ADR plant and gold room operations have been suspended since March of this year.
Mining activities have continued through the quarter, including ore recovery, crushing, and stacking. Approximately 1,000,000 tons of ore was stacked at a grade of 1.96 grams per ton for over 63,000 oz contained placed onto the heap leach pad. Waste movement was reduced during the third quarter. The extent of further mining activities for the remainder of the year are currently being evaluated while the plant remains suspended. For the period that the plant was partially operating in the quarter, the total gold stored in carbon inventory increased by approximately 40,000-45,000 oz, bringing the total gold in carbon inventory to over 100,000 oz. Progress in advancing the EIA remains in accordance with plan, including the public consultation meeting recently held.
The update due to the ADR plant will include the mercury abatement addition and is progressing on schedule, with mechanical completion expected in December and cost to be about $5 million as expected. Moving on to slide 10. Our year-end production guidance remains on track. Copper production is expected to be between 70-80 million lbs, with gold production expected to be on the lower side within the range of 245,000-265,000 oz. Gold production from Mount Milligan is expected to be on the low end of the guidance range from 190,000-210,000 oz, primarily due to localized adjustments to the oxide transition zone on the current bench in the higher grade gold areas which were observed in October.
Please see slide 11 for the highlights of the Mount Milligan updated life of mine plan and reserves. In early October, we released that the proven and probable reserves at Mount Milligan were increased by 1.1 million contained oz of gold and by 260 million pounds of contained copper. This provides for an increase in mine life by over four years to 2033. The current life of mine payable gold production is 1.9 million oz. This produces a net cash flow of approximately $640 million at $1,500 gold and $3.25 copper, with significantly higher cash flow at the current spot prices. The total capital cost is $494 million, with the majority for the continued construction of the tailings and waste storage facility.
The replacement of mine mobile fleet as it ages. Recent inflationary cost pressures seen over the duration of 2022 will be taken into consideration when we issue the 2023 cost guidance. Exploration potential exists both near the existing pit limits and nearby on the mine lease. We have drilled approximately 50,000 meters since the resource cut off date and plan to continue drilling for the remainder of the year and into 2023. Now over to Darren, who will go through the quarterly financial results.
Thanks, Paul, and good morning all. For those following on the slide deck, I'll be speaking initially to slide 13. Centerra recorded $79 million in net revenue during the quarter, consisting of the Mount Milligan mine and the Molybdenum Business Unit. No revenue was recorded at the Öksüt mine. At the Mount Milligan mine, gross gold sales and copper sales were $68 million and $49 million, respectively. In the quarter, Mount Milligan sold 56,245 oz of gold and 19.6 million pounds of copper. As previously reported, the ADR plant is currently suspended. The Öksüt mine has no recorded gold sales or production in the quarter. However, stored gold and carbon inventory has continued to grow in the quarter, currently holding in excess of 100,000 recoverable ounces at September 30.
The cost associated with the oxide stored gold and carbon inventory is approximately $440 per ounce, which has been capitalized as current asset within inventory. The recorded costs will only flow through the earnings statement upon processing at the ADR plant. At the Molybdenum Business Unit, approximately 3.3 million lbs of molybdenum were sold, generating $61 million in revenue. During the quarter, the Mount Milligan mine operations average gold price was $1,204 per gold ounce and $2.49 per pound of copper. This incorporates the existing streams over the mine. Cash used in operating activities by operations were $17 million for the quarter and $35 million free cash flow deficit in the quarter.
As noted in the MD&A, the Mount Milligan mine recognized $33 million in positive operating cash flow and $21 million in free cash flow. As noted by Paul, another strong operational performance at the Mount Milligan mine. This was partially offset by higher production costs, including diesel fuel, grinding media, liners, and equipment rebuilds. Some of these items were offset by the weakening Canadian dollar . Given no sales occurring at the Öksüt mine in the quarter, with operations continuing, $23 million was used from our treasury. We expect a similar level of outflow in Q4. The net loss from continuing operations was $33.9 million in the quarter, with $15.9 million in adjusted net loss recorded.
The earnings in the quarter were attributable to $28.2 million contributed from the Mount Milligan mine, $1.3 million lost from the Öksüt mine, primarily exploration costs, and $1.4 million lost from the Molybdenum Business Unit. For the quarter, there were three adjustments. Firstly, the income tax expense of $20.4 million, resulting from the impact of the weakening of the Canadian dollar on the underlying tax bases at both the Mount Milligan mine and the Kemess mine. Reclamation cost recovery at sites on care and maintenance of $7.7 million, and Kumtor-related costs and other costs of $5.3 million.
Now moving to slide 14. I've largely covered off on most of the points. Just wanna highlight a few here. The company has exited Q3 with a cash balance of $581 million and just under $1 billion in liquidity. The liquidity does not factor in the gold and carbon with a current market value of approximately $165 million. Given the ADR's production capacity upon restart, we expect this to be monetized within a three-t o-four -month period. The Molybdenum Business Unit continues to implement its new streamlined business plan at its Langeloth facility, reducing inventories held and overall working capital to generate cash flow from operations of $7.2 million during the quarter. With improved molybdenum prices, the company continues to evaluate the strategic options for the business unit, including a potential restart of the Thompson Creek mine.
Finally, given our strong financial position, the board declared a quarterly dividend of CAD 0.07 per share. With that, I'll pass it back to Paul Wright.
Very nice. Thank you, Darren. Look, as we wrap up here, I'd like to reiterate a few points. Our guidance is on track with strong cash flows at the Mount Milligan mine in the third quarter. You know, we continue to make steady progress towards the Öksüt reopening. The KR deal was finally closed in the quarter. We have initiated a normal course issuer bid. And lastly, we've issued a new Mount Milligan technical report with an updated life of mine that highlighted a mine life extension and increased reserves. With that operator, please open up for questions.
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.
Yeah. Thank you, guys. I wondered, just with respect to the dividend that you just paid out this quarter, if we should expect that to continue while we're waiting for Öksüt to resume production and sales, given that you've got significant cash reserves.
Yeah, Trevor, I'll sort of answer that. I mean, presently, I think that would be not an unrealistic assumption. You know, obviously the board review management's recommendation on a quarterly basis as it relates to dividend payment. And that's the qualification I'd provide in any situation.
Sure. Okay. Then the only other question I had was, you mentioned having visited all the operations, and I know that Chief Operating Officer Paul Chawrun has also had a chance to see everything. In addition to your comment about being pleased with the teams that you have in place already, is there any other first impressions that either of you could share about operations for or opportunities for, say, change going forward?
Paul, I'll hand that over to you, sir.
Oh, yeah. Thanks, Trevor. I think just in general, these are great assets. It's what attracted me to the company in the first place. We have an excellent balance sheet. We'll put these, you know, put the optimization tests to all these assets, and as well, the moly business unit has strong potential as well. We'll be looking at a lot of those details. I think Centerra is poised for excellent growth going forward. I think it's one of the best stories out there once we get some of these current issues behind us.
Yeah.
Trevor.
Go ahead, Paul.
A little bit of color as it relates to Turkey. I mean, obviously, we've had some issues in Turkey. Some of those we certainly have to accept responsibility for. I would say that the quality of the operating team now in Turkey is probably superior to what the corporation started with. That, without a doubt, is up to the task to extract the maximum value from that investment.
Okay. Sounds good. That's all I had. Thank you.
Thank you. Our next question comes from the line of Anita Soni with CIBC World Markets. Please proceed with your question.
Good morning, Paul and Paul. Paul Wright, it's good to hear your voice again. I just wanted to ask a-
Likewise.
I just wanted to follow up on the permitting for the enlarged grazing land permit and then the extension of Öksüt's overall operating license. It says it's set to expire in January. I mean, if we're looking forward into next year reasonably, you know, considering that we're in November now, should we expect that the mining would resume in January, or will it take more time for these permits?
The permits, it's a bit like asking how long is a piece of string. I mean, we have our application in for our permits. We understand that they're progressing through the system as we'd expect. You know, we can't project accurately when we're going to receive those two permits. We do not have a heightened level of concern about the outcome. Certainly, the pasture land permit would allow us to accelerate waste removal in parts of the area. We would advance with those prior to the initial leaching operations, which are dependent upon the completion and approval of the new EIA.
Okay. I just wanted to follow up. In the last disclosure, there was some disclosure in Q2 about I think there were a number of individuals in the mercury room that had tested for higher levels of mercury. Can we get a follow-up on that? I didn't see anything in this MD&A.
Well, there's nothing further to comment in that regard, Anita.
Okay. All right. Thank you very much.
Thank you. Our next question comes from the line of Dalton Baretto with Canaccord Genuity. Please proceed with your question.
Thanks, good morning, guys. I wanted to ask about strategy and how your potential new CEO fits into this. I mean, you know, when I look at the pipeline, you know, you've got Kemess, which is a high copper component, you know, you guys are talking about the moly business. All of that seems completely off strategy to me. I'm just wondering, you know, where do you, Paul Wright, see this company going forward? What kind of, you know, attributes and background are you looking for in a new CEO? Will you be prepared to pull the trigger on any strategic mandates ahead of having someone in the chair? Thank you.
Yeah. I mean, that's a number of different questions, not all of which I think I'm probably the appropriate person to answer. I mean, I am an Interim CEO. You know, the process to identify and secure a new CEO is, you know, probably a four-to-six -month period of time. You know, my focus is really on stabilizing the operation and ensuring that we have an appropriate platform that's on strategy in terms of allowing the new CEO to grow a very successful business. I certainly see that as the opportunity. As it relates to any type of possible transaction, I mean, I can't say that that's a high priority at this stage.
You know, but nor would I completely preclude it because you never can determine when, you know, a possibility may turn up that makes a lot of sense. I think it's highly unlikely, given that, as I said, I'm an Interim CEO.
Okay, thank you for that color, Paul. Maybe switching to the operations, particularly permitting around Öksüt. Presumably, the EIA review is gonna take a little bit of time into the new year. The operating permit expires in January. Even if you get the enhanced grazing permits ahead of time, can you actually start doing anything if your operating permit's expired? Does your operating permit remain contingent on the EIA, or are they completely separate?
No, the operating permit or the renewal of the operating permit is a separate item. We would anticipate that to be obtained in advance of the existing operating permit expiring. With that in hand, in the pasture land, we would continue with our normal mining operations. Limited to sort of mining prior to the granting of the EIA and the ability to restart.
Great. That's all for me. Thank you.
Thank you. Our next question comes from the line of Brian MacArthur with Raymond James. Please proceed with your question.
Hi, good morning, and thank you for taking my question. I'd just like to follow up a little bit more on the molybdenum strategy. A couple of questions following up on Dalton. Would you go ahead and proceed without a new CEO on that strategy if you decide to reopen the Thompson Creek mine? I guess my second question is what needs to be done there? My third question is, I think Sojitz at one time had a partnership and had claim on the ore, whatever. If you could just go through with a little more color about why you would be doing that as opposed to, you know, historically, you sort of talked about selling that operation.
For those operations. Yeah, Look, I can deal with the front part of that, those questions. Darren, perhaps you can deal with the last element, 'cause I'm not quite familiar with Sojitz or these sorts of people. Look, I mean, we're in the phase of really pulling together the information, you know, and generating additional information, identifying what additional work needs to be done as it relates to technical studies to put ourselves in a position where we can critically assess the options that are available to us with the molybdenum business, particularly in the context of what we've seen as strengthening molybdenum prices.
This is not an imminent decision-making process. Certainly it would be unlikely that we would be making any significant decisions on the moly business prior to a new CEO who would obviously take ownership of those decisions. This would be, you know, a decision most likely made by my successor. I think it behooves us at this point to have a more fulsome understanding of what indeed are the options for the business, and whether or not ultimately the company decides to push forward is a ways off.
Just to clarify, Brian, the Thompson Creek mine is 100% owned by Centerra, which is the mine under review. The Endako mine is 75% owned by Centerra, 25% owned by Sojitz, and that isn't being progressed to the same extent as the Thompson Creek mine.
Great. Thank you very much.
Thank you. Our next question comes from the line of Lawson Winder with Bank of America Securities. Please proceed with your question.
Hello, good morning, and thank you for the update. I first wanted to ask about the sustaining CapEx guidance, which was reiterated for 2022, with the implication being a pretty substantial step up in the fourth quarter. It would be helpful if you could just walk through some of the items that are driving that spend. Thank you.
Um.
Paul?
Yeah, sorry, Darren here. I think if you look at the guidance, you actually note that we do note that it's gonna be at the lower end. There's nothing significant, you know, individually on that, but we do expect to be more on the lower end. If you look at our disclosure in the outlook comparative between year to date and going forward, you would note that, you know, specific items, but there's nothing of real substance in there.
Okay. Yeah, even the low end is higher, but I guess what you're saying is it's just a mix of things. There's not-
Sorry.
Nothing one-
No.
Okay.
No. There's no one. There's no individual, you know. I'd also flag. We did the big shutdown in Q3 for our Mount Milligan, so we're not expecting any large shutdowns in that quarter. Yeah, it's just, you know, really just business as usual and sort of call it catch up from the 2022 guidance.
Okay. I also wanted to ask about the Mount Milligan cost. We're expecting an update on 2023-2025 operating costs when you release your guidance in January. Could you give us an idea of where cost per ton was in Q3, both on the mining side and on the milling side? Sort of where you're seeing inflationary pressures and where there might be offsets, for example, like with the Canadian dollar. Thanks.
Okay. I'll take that. Yeah. I'll just go through the numbers. The mining was $202 per ton mined. Plant, $552 a ton, and admin was $237 a ton. In terms of comparing that to the LOM, that LOM was done earlier in the year. As with everybody in the industry, we have seen some cost increases on fuel, plant consumables, supplier parts, tires, in the range of, I'd say about 5%-20%. We will take that into consideration when we issue our three-year cost guidance early in the new year.
Okay. That's very helpful. Thank you.
Thank you. There are no further questions at this time. I will now turn the call back to you. Please continue with your presentation or closing remarks.
With that, I'd like to thank everyone for joining us on the call today. There'll be no further comments. Thank you very much.