Centerra Gold Inc.CGAUNYSE
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Operator: Thank you for standing by. This is the conference operator. Welcome to the Centerra Gold Third Quarter 2025 Conference Call. [Operator Instructions] The conference is being recorded. I would now like to turn the conference over to Lisa Wilkinson, Vice President, Investor Relations and Corporate Communications with Centerra Gold. Please go ahead, ma'am.
Lisa Wilkinson: Thank you, operator, and good morning, everyone. Welcome to Centerra Gold's Third Quarter 2025 Results Conference Call. Joining me on the call today are Paul Tomory, President and Chief Executive Officer; David Hendriks, Chief Operating Officer; and Ryan Snyder, Chief Financial Officer. Our news published yesterday outlines our third quarter 2025 results and is complemented by our MD&A and financial statements, which are available on SEDAR, EDGAR and our website. All figures are in U.S. dollars unless otherwise noted. Presentation slides accompanying this webcast are available on Centerra's website. Following the prepared remarks, we will open the call for questions. Before we begin, I would like to remind everyone that today's discussion may include forward-looking statements, which are subject to risks that could cause our actual results to differ from those expressed or implied. For more information, please refer to the cautionary statements in our presentation and the risk factors outlined in our annual information form. We will also be referring to certain non-GAAP measures during today's discussion. For a detailed description of these measures, please see our news release and MD&A issued last night. I will now turn the call over to Paul Tomory.
Paul Botond Tomory: Thank you, Lisa, and good morning, everyone. In the third quarter, we sustained robust margins and generated nearly $100 million of free cash flow, driven by strong operational performance at OÖit and elevated metal prices. Gold and copper production in the quarter was almost 82,000 ounces and 13.4 million pounds, respectively. Our cash balance increased to over $560 million in the quarter, demonstrating our ability to fund the Thompson Creek restart project while returning $32 million of capital to shareholders through disciplined share buybacks and our quarterly dividend. We also continue to deploy capital strategically through our equity investment in Liberty Gold, reflecting our balanced approach to growth and value creation. Our self-funded growth strategy continues to advance across multiple fronts. We published the Mount Milligan pre-feasibility study, which I'll come back to, and we also expect to publish a preliminary economic assessment for Kemess in the first quarter of 2026. Together, these assets form a robust pipeline of long-life gold and copper projects in British Columbia. In Nevada, development has advanced at the Goldfield project, which provides Centerra with additional exposure to future gold production. In the quarter, engineering progressed as planned, early mobilization efforts progressed on site, and we are building out a dedicated project execution team. These early actions mark important steps towards project readiness and position Goldfield for disciplined and efficient execution. Each of these growth opportunities as well as the Thompson Creek restart project in Idaho can be funded using our existing liquidity and cash flow from operations, positioning Centerra to deliver sustainable low-risk growth while maintaining our strategic approach to capital allocation. In September, we announced the results of the PFS for Mount Milligan, extending the life of mine by approximately 10 years to 2045. This is supported by an optimized mine plan, delivering average annual production of 150,000 ounces of gold and 69 million pounds of copper from 2026 to 2042, followed by the processing of low-grade stockpiles from 2043 to 2045. The study outlines disciplined nonsustaining capital expenditures of approximately $186 million, most of which are not required until the early to mid-2030s, all fully funded from available liquidity and future cash flow. Key investments include $114 million for a second tailings storage facility to be spent across 2032 and 2033 and providing the potential for future raises, which could add multiple decades of storage capacity beyond the 2045 life of mine. $36 million for ball mill motor upgrades and flotation cells in 2028 to increase process plant throughput by about 10% to 66,000 tonnes per day and increase recovery by approximately 1%. And lastly, $28 million for 5 new haul trucks to support longer haul distances, higher material movement rates and stockpile development. Proven and probable reserves increased significantly to 4.4 million ounces of gold and 1.7 billion pounds of copper, representing a 56% and 52% increase, respectively, from year-end 2024. Recent drilling confirms mineralization remains open to the west of the current resource pit and Centerra continues to advance exploration aimed at expanding the mineral resource and assessing opportunities to extend the mine life beyond the updated plan. The PFS reaffirms Mount Milligan's strong economics with an after-tax NPV of approximately $1.5 billion at $2,600 per ounce gold, which increases to over $2 billion at $3,500 per ounce of gold. Mount Milligan remains a strategic cornerstone asset in Centerra's portfolio with 20 years of mine life, meaningful gold and copper production, strong cash flow and a significant opportunity for future exploration potential in a top-tier mining jurisdiction. Now I'd like to share an update on our sustainability initiatives. As part of our climate change strategy and commitment to sustainability and operational innovation, we're advancing a renewable diesel pilot project at Mount Milligan. This initiative will establish clear reliability metrics, account for seasonal variations and evaluate performance analytics across our fleet. By exploring renewable diesel, we aim to meaningfully reduce greenhouse gas emissions at Mount Milligan and move towards lowering Centerra's overall carbon footprint. At the same time, Mount Milligan's life of mine extension marks a major milestone in advancing Centerra's gold growth strategy and reaffirms our commitment to social responsibility. This includes the launch of the eighth pre-employment training and education readiness program, which supports unemployed and underemployed First Nations members in local communities through skills training, followed by direct employment opportunities. Between 2023 and 2025, we've also achieved double-digit growth in our local spend with First Nations owned and affiliated businesses. That same commitment drives our work at Oksut, where our community initiatives [indiscernible] focus on education, sports, environment and social development. Through these programs, we are proud to have supported more than 13,000 students, helping to build stronger, more resilient communities where we operate. And with that, I'll pass the call over to Dave to walk through our operational performance highlights.
David Hendriks: Thanks, Paul. Slide 8 shows operating highlights at Mount Milligan for the third quarter. Mount Milligan produced over 32,500 ounces of gold and 13.4 million pounds of copper in the quarter. In 2025, mining operations encountered zones with more complex mineralization, the impact of which were incorporated in the recently published PFS. Year-to-date and full year gold and copper production remains in line with the PFS. In the third quarter, all-in sustaining costs on a byproduct basis were $1,461 per ounce, 14% higher than last quarter due to an increase in sustaining CapEx and lower ounces sold in the quarter. Full year 2025 costs are expected to be near the low end of the guidance ranges. Slide 9 shows the quarterly operating highlights at Oksut, reflecting another period of strong performance. Third quarter production was 49,000 ounces, better than planned due to higher grades resulting from mine sequencing. As a result, we have reaffirmed our 2025 production guidance at Oksut with production expected near the upper end of the guidance range. In the third quarter, all-in sustaining costs on a byproduct basis were $1,473 per ounce, which is 16% lower compared to last quarter, driven by higher ounces sold and lower sustaining CapEx, partially offset by higher royalty expenses due to elevated gold prices and new royalty rates in [ Turkey. ] Full year 2025 cost guidance is expected to be near the low end of the range, benefiting from expected higher sales and continued strong operational performance. We have initiated a life of mine optimization study at Oksut to evaluate the asset's full potential, including the incremental production potential of residual leaching of the heap and expanding the pit to pursue additional mineralization. The study will explore options to extend gold recovery from existing leach pads through improved solution management, which will enhance residual metal extraction efficiency. The study is expected to be completed by the end of 2026 and will support updates to the mine's long-term reclamation and site management plans, ensuring the operation continues to maximize metal recovery and cash flow in a safe and responsible manner. The restart of Thompson Creek is advancing with approximately 29% of the total capital investment complete. In the third quarter, we invested $31 million in nonsustaining capital expenditures, bringing total investment spend since the September 2024 restart decision to $113 million. We have reaffirmed our 2025 guidance for nonsustaining CapEx at Thompson Creek. The project remains on track and first production is expected in the second half of 2027. I'll now pass it to Ryan to walk through our financial highlights for the quarter.
Ryan Snyder: Thanks, David. Slide 11 details our third quarter financial results. Adjusted net earnings in the third quarter were $66 million or $0.33 per share, which benefited from strong production from Öksüt and elevated metal prices. Key adjustments to net earnings include $194 million related to the noncash impairment reversal at Goldfield, $27 million of unrealized gain net of taxes on the financial assets related to the additional agreement with Royal Gold and $16 million of unrealized gain on the remeasurement of the sale of the Greenstone partnership in 2021, among other things. In the third quarter, sales were over 80,000 ounces of gold and 13 million pounds of copper. The average realized price was $3,178 per ounce of gold and $3.73 per pound of copper, which incorporates the existing streaming arrangements at Mount Milligan. At the molybdenum business unit, approximately 3.1 million pounds of molybdenum was sold in the third quarter at the Langeloth facility at an average realized price of $24.42 per pound. Consolidated all-in sustaining costs on a byproduct basis in the third quarter were $1,652 per ounce. We expect consolidated all-in sustaining costs on a byproduct basis to be near the low end of the guidance range for both Mount Milligan and Oksut in 2025. Slide 12 shows our financial highlights for the quarter. In the third quarter, we generated robust cash flow from operations of $162 million and free cash flow of $99 million, driven by strong operational performance at Oksut and elevated metal prices. In the third quarter, Mount Milligan generated $64 million in cash from operations and $45 million in free cash flow. OÖü generated $139 million in cash from operations and $134 million in free cash flow. The molybdenum business unit used $16 million of cash in operations and had a free cash flow deficit of $54 million this quarter, mainly related to spending on the Thompson Creek restart and a working capital increase at [ Langeloth, ] partially due to high molybdenum prices. Returning capital to shareholders remains a key pillar in our disciplined approach to capital allocation. In the third quarter, we repurchased 2.8 million shares for total consideration of $22 million, and we continue to believe that repurchasing our shares is an accretive high-return use of cash. Our Board has increased the approved level of share repurchases through the NCIB in 2025 to $100 million, and we have repurchased $64 million year-to-date. We also declared a quarterly dividend of $0.07 per share. Year-to-date, we have returned over $95 million to shareholders through dividends and share buybacks. As part of our commitment to returning capital to our shareholders, we expect to remain active on the share buybacks subject to market conditions. At the end of the third quarter, our cash balance was $562 million, bringing total liquidity to over $960 million. We also hold an additional $85 million in equity investments. This strong financial position gives us the flexibility to fully fund our organic growth projects at Mount Milligan, Goldfield, Kemess and Thompson Creek while continuing to return capital to shareholders. I'll pass it back to Paul for some closing remarks.
Paul Botond Tomory: Thanks, Ryan. We're proud of the continued progress in advancing our internal self-funded growth strategy. The recently published Mount Milligan PFS represents a major step forward in unlocking additional value from this cornerstone asset and provides a clear view of the mine's long-term potential. Alongside this, we continue to advance the Kemess study, which is expected to be completed in the first quarter of 2026. These efforts reflect our disciplined approach to capital allocation and our commitment to enhancing shareholder value through a robust pipeline of self-funded growth opportunities supported by a strong balance sheet. And with that, operator, I'll open the call to questions, please.
Operator: [Operator Instructions] And your first question today will come from Luke Bertozzi with CIBC.
Luke Bertozzi: On the solid quarter. It's great to see higher commodity prices flowing right into free cash flow. I noticed gold recovery at Mount Milligan was a bit low compared to prior quarters and the recent technical report. Can you provide a bit of color on what drove the lower recovery in Q3 as well as your expectations for Q4?
David Hendriks: Thanks very much for the question. This is Dave. On the recovery piece, we had remodeled the entire deposit. And one of the things that we did when we put the PFS out was looking at the ratio of the pyrite to the Kao pyrites. And that ratio has been more pyrite in the last quarter than we had modeled in there, and that has led to the low recoveries. What we have done through the end of the year is we will be able to get through to our ounces for guidance based on moving a little bit more higher material. And so we're able to satisfy ourselves that we understand the piece of the pyrite tocalcopyrite ratio, which is impacting our recovery.
Operator: And your next question today will come from Don DeMarco with National Bank.
Don DeMarco: Congratulations on the strong quarter. I'll start with Oksut. So I see that during the quarter, you had 1.5 million tonnes stacked at a grade of 1.82 grams per tonne. So considering heap leach residence times and so on, does this suggest that we might see another strong grade quarter in Q1 '26 after the production normalizes in Q4?
Paul Botond Tomory: Yes. I think what we'll see going forward there, Don, is that through the end of the year, again, we reaffirmed our guidance number. We're pretty confident that we'll get there. And then we should see some good strong production going into next year as well. 100%, that will impact us going into Q1 of 2026. As Don, this is a bit of a segue into the longer-term study we're launching at Oksut. This mine has reconciled positively since day 1. And we're pretty confident that there's a lot more gold in those heaps than our previous metallurgical models showed. And so what we've kicked off here is looking at how we might be able to exploit those accumulated inventories in that heap. So as we said in our release and in Dave's prepared remarks, we've initiated a study on how to access what we believe are significant accumulated inventories of gold in those heaps. But this asset continues to perform extremely well on reconciliation, and that's what you're seeing in those stacked ounces and in accumulated inventories.
Don DeMarco: Okay. And for my next question, U.S.-based assets have been trending favorably under the current administration. So I've got 2 parts to this question. Is there a read-through to improving optics for the MBU? And given that moly is a critical mineral with applications in defense and aerospace and so on, is there a potential for a strategic deal with the U.S. government?
Paul Botond Tomory: Okay. So on your first question, there is no doubt that the whole mining and metal space has become a more favorable place over the last year. And particularly for molybdenum, we are a U.S.-based mine feeding a U.S.-based roaster, principally selling refined molybdenum products to domestic U.S. steel mills. And we've seen increased confidence in that sector in the U.S. steelmaking sector. Molybdenum, as you know, goes into high-performance steels that are used in everything from pipelines to nuclear power to defense, aerospace, shipbuilding, all sectors that are seeing an uptick in potential steel demand. So yes, the whole U.S. minerals and mining space, particularly what we have fully permitted in-flight project certainly has become more attractive. In terms of a U.S. government deal, it's something that we monitor. We don't need funding. We were fully funded right through the build. The project is on track, as we said in our prepared remarks. And at this stage, we're going to continue to monitor the situation with the government, but there's nothing to report. And other than to say that it's -- as I said in the previous comment that it's a very favorable environment right now.
Operator: And your next question today will come from Frederic Bolton with BMO Capital Markets.
Frederic Bolton: Just a couple of questions from me. I just want to follow up on Luke's first question about Mount Milligan. There's mentioned that there was a mention of the grinding circuit being impacted during the quarter. Can you just expand on that and whether that's an issue that's been resolved? And my second question relates to Oxford. If the life of mine optimization study that concludes towards the end of 2026, if that results in an expansion of the pit, would that require additional permitting from the Turkish government? Or would that require a new [indiscernible]
Paul Botond Tomory: Okay. So let me take the Oksut question first. So the mine life -- the current reserve life ends in 2029. So that will be -- and we still anticipate at this point that, that will be when the last tonne comes out of the pit. What this optimization study looks at is the accumulated inventories on the heaps because the mine has reconciled positive, we believe, and we're going to be proving this up with Sonic drilling and other means over the next little while, we believe that there's significant accumulated inventories. This can be done in the context of the current footprint. There would have to be permit modifications for residual leaching, but there's broad understanding what that might look like. So the principal focus of the study is how to manage what we believe are accumulated inventories, better solution management with the cyanide solution. And lastly, as part of the study, we will also evaluate whether or not there might be a sulfide inventory below the current oxide -- beyond the current oxide boundary at depth. It's still very early to say what that might look like. And of course, if there were more material that would require permanent modifications, but it's early days, and we're going to be assessing the study as is principally residual leaching, but secondarily, whether or not there are potential extensions to the pit into the sulfides. So that's the Oksut point. On Mount Milligan. So as Dave said, the purpose of this PFS, of course, was to extend mine life, but it was also to reset our understanding on grade recovery and throughput fundamentally, how do we mine a plan that has an optimal blend of the various characteristics so that we're not impacted on recovery. This year, we're still dealing with, in effect, having mined ourselves into a corner on some of this material. As Dave described, we've been impacted by high pyrite and chalcopyrite, which depresses recovery. In the PFS, what we've done is we've created a mine plan that blends down the pyrite so that we can get back up to the recoveries that we intend to be at. And same, by the way, goes for grade. So the PFS, one of its major objectives was to create a mine plan that provides for a more optimal feed source and feed blending into the mill. So we expect to start working our way through that. It's not something you can turn around overnight, but it's something we expect to work our way through certainly starting in the first quarter of next year. Did I answer your question?
Frederic Bolton: Yes, thank you.
Operator: And your next question today will come from Brian MacArthur with Raymond James.
Brian MacArthur: Paul, just so I'm clear on this Oksut, I think you've answered this. But assuming we don't do the sulfides and we just do the residual leach, are we just talking about -- are we removing material again from leach pad to leach pad? Or are we just going to be able to reuse the current leach pads and get more material out? So effectively, my real question goes to this, the capital for this is very, very little, and there's no mining involved, assuming we don't go to the sulfide. Is that right?
Paul Botond Tomory: Yes, it would be a very low CapEx spend. Both Dave and I have a lot of experience with this type of stuff in Nevada. Dave, why don't you describe what we're going to be looking at here a scope on the residual work?
David Hendriks: Yes, there's a couple of different pieces. One of the studies we'll look at is certainly reshaping the heaps will be a big part of this. So that's just dozer time and everything else. So it takes a little bit of capital to get that done. But that gives us a big opportunity to be able to get in there. And then we'll look at our solution flow and decide, is it best to just go with a straight piece? Do we want to try and up the fig grades by going through the areas a couple of different times and having some -- maybe an additional pond or 2 to do things. And so it's just a piece of what we'll look at is what's the best way to get the gold out in the -- an appropriate time line and leaving us in a good position for closure. So whether that ends up being a little bit more capital, it will only be more capital from the standpoint that we'll be able to get a lot more ounces out. And that's just something that we will plug away at, and it will continue to evolve over the next few years. We'll have a study published at the end of next year that will give us a good level of confidence. And whatever we put in there, I'm sure we'll beat that as well. There's a lot of opportunity taking ounces out of old heaps. We've done it a bunch of times, and we look forward to initiating that work in Turkey.
Brian MacArthur: It makes great sense and great return on capital. So just with that, though, as you get this information, is there any opportunity to get better recoveries in the later part of the current mine life? Like obviously, the study is done in 2026. We start to get benefit even in '28 or '29? Or is it -- or do you just have to -- I mean, I haven't been there for a while, just reconfiguring things, how you actually do this.
David Hendriks: A lot of it comes down to how much solution that we have and how we're able to put it through the heaps. So are we going to just run it through one at a time? Do we try and build the preg right up by going through a couple of different areas? And that's the study we'll look at. So my expectation is that we would be able to increase the grades going to the plant and get more ounces early, but continue to get ounces late. But that could take 18 months, 2 years to get that up and running because it would require probably some additional pumping. Therefore, we need to do some minor modifications to permitting and everything else. So it's an iterative process and expect that we would be able to do very well with it over the next period of time. And you are 100% correct, very low capital for the return that we would get out of it.
Operator: And your next question today will come from Steven Green with TD Securities.
Terence Ortslan: I think you answered my questions on Oksut. But just to finish that off, do you have any oxide targets in the project area and or potentially regional opportunities just to take advantage of your position in Turkey at the end of the mine.
David Hendriks: Yes. One of the pieces of this optimization study is really a 360 around the site and exploration 360 around the site, bringing in some different people to take a look at what we've been doing there for the last 10 years and give us an opportunity to make sure we're not leaving something behind. And then also working with the deposits in the area. So that is part of the work that we will continue to do, and that will be a part of the life of mine optimization study.
Operator: Seeing no further questions, this will conclude our question-and-answer session as well as today's conference call. You may now disconnect your lines. Thank you for participating, and have a pleasant day.