Centerra Gold, Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Project Updates: Mount Milligan has initiated an infill and grade control drilling program, with PFS on track for completion in Q3 2025; Kemess PEA on track for end-2025; Goldfield Project advanced in Nevada with after-tax NPV of $245M and IRR of 30% at $2,500 gold price.
• Sustainability: Published 2024 sustainability report; Oksut earned ISO 5001 certification; 19% indigenous employee representation; local procurement rose 26% year-over-year; surpassed 2026 gender diversity goal.
• Capital Allocation: Increased share buybacks by 80% in Q2, repurchasing 3.9 million shares; declared quarterly dividend of $0.07 per share; Board approved repurchase of up to $75M of shares in 2025.

Segment Performance

• Mount Milligan: Second quarter production: over 35,000 ounces of gold and 12.4 million pounds of copper. 2025 gold production guidance revised to 145,000-165,000 ounces; copper production guidance reaffirmed at 50-60 million pounds. All-in sustaining costs revised to $1,350-$1,450 per ounce.
• Oksut: Second quarter production: over 28,250 ounces. 2025 all-in sustaining costs revised to $1,675-$1,775 per ounce, with production expected higher in the second half.
• Molybdenum: Second quarter sales: ~3.1 million pounds of molybdenum at $21.43 per pound. Cash used by operations: $1 million, free cash flow deficit: $27 million.

Guidance

• Mount Milligan: 2025 gold production guidance 145,000-165,000 ounces, copper 50-60 million pounds; all-in sustaining costs $1,350-$1,450 per ounce.
• Oksut: 2025 all-in sustaining costs $1,675-$1,775 per ounce.
• Goldfield: 7-year mine life, ~100,000 ounces annual production in peak years, after-tax NPV $245M, IRR 30% at $2,500 gold price.

Risks

• Mineralization variability at Mount Milligan affecting production guidance.
• Royalty cost increases at Oksut due to higher gold prices and updated royalty structure.
• Potential stretch in capital allocation and bench strength with multiple projects in development.

Question and Answer

Q: Congratulations on continuing to progress on your internal growth strategy. First question has to do with Mount Milligan. I see that you encountered some challenging mineralization. Are you seeing good results and improved confidence after implementing the additional infill drilling?

A: David Hendriks: What we've done is we've really increased the density of drilling in the area that we've been mining for the last 6 months, and we will continue to mine over the next 18 months. We're very confident with our new guidance number of the drilling results that we have will lead to a much better prediction of what we're doing. And also, those are the same -- that same information is being implemented into the study that's being done to look at the extension of the Mount Milligan mine life.

Q: Okay. Great. And then on to Goldfield, so I see the project go forward, and it certainly makes sense to offset Oksut. But at first glance, the reserves of 700,000 ounces are unchanged from the end of last year when the company decided not to proceed. And I think at that time, it was partly because of the size of the reserves. So could you walk through what's new now versus last year? And is it primarily a higher gold price?

A: Paul Botond Stilicho Tomory: Well, it's a combination of a couple of things, Don. You're right. I mean the reserve that we have now is roughly equivalent to the resource we had on the books at the end of the year. However, we've done a bunch of technical work since the end of the year, principally focused on crushing optimization and getting better recoveries on a portion of the ore. So we just have a better view on achieving higher recoveries. We're up in the 70s now, whereas before we were in the 60s. And of course, gold price is a major factor. We're $600, $700 an ounce higher than we were 6 months ago. And with that collar that we put in place on a portion of the ounces, the economics really light up here. So one way to look at it is the gold price has made up for inventory in some ways to make this project quite attractive on an NPV basis. So the NPV at the $2,400 is in the mid-200s and certainly a lot higher than that at $3,000, 3,200, 3,400. So it's really -- it's principally, I'd say, a gold price phenomenon, but also really good technical work on the dynamics between crushing and recovery versus run of mine, so a combination of all those.

Q: When thinking about Mount Milligan and your sort of advancing understanding of the grade, when we look to 2026, how could the production profile differ versus the prior available technical report? And can you give us an early indication of directionally what we might be thinking in terms of production there versus 2025?

A: Paul Botond Stilicho Tomory: Well, Dave can jump in on some of the detail here. But fundamentally, we're -- what we've been dealing with here over the last 18 months is mining through a zone, as Dave said in his prepared remarks, that was not drilled to the same density as the vast majority of the rest of the ore body. And as a result of that, we've had some grade issues. And what Dave described is the implementation of a grade control and infill program, that has certainly increased our understanding and vastly improved our confidence in the grades that we're going to be mining. And as Dave said, that will be incorporated in the PFS. I don't want to get ahead of ourselves on what's going to be in the PFS, but we're about a month away from that. And as we've been signaling, we're going to be adding a significant mine life through the addition of further tailings capacity. But what I can tell you is that Mount Milligan, if you look at it over the last 4, 5 years, that's roughly the average production profile in both gold and copper that one should expect in fact, for the entire mine life. There will be up years here and there as we hit pockets of higher grade, particularly on the gold side. But roughly speaking, what you've seen over the last 5 years is a good representative average of what we might see over the next several. But I stress, there will be -- there are zones in that ore body that are higher-grade gold, and it will cause a few years to be higher. But we'll be putting out a very detailed production plan come September on the entire mine life at Mount Milligan.

Q: I have three questions, if I may. First, on Mount Milligan. Dave, can you point to how long you expect to be in this current zone that you're mining through that's giving lower-grade reconciliation versus your reserve model? And is it going to go substantially into '26 or not? Secondly, with respect to the Oksut royalty, am I correct in assuming that this is more [ broad ], that the sliding scale is the same, which is basically for every $100 increase in gold price, the royalty increases by 125 basis points? And then I do have a question on Goldfield after that.

A: David Hendriks: Well, I'll go ahead and talk about the Mount Milligan piece. One thing that's pretty important is we're actually mining above the average grade of the deposit, as we speak right now, over at Mount Milligan. So what had happened was there was an area that was meant to be "a higher-grade plum" that did not work out the way we expected. So that's been -- as I say, the drilling that has been done and is in the middle of being done, which will all be part of the PFS, we're pretty confident that we have a very good handle on what's going to happen for the next few years. I don't want to give you something that's 6 weeks early. I'll wait until the PFS comes out to give you the real numbers and everything else. But as Paul had commented, you can expect our revised guidance number is probably pretty appropriate for the next couple of years. Ryan Snyder: And then on Oksut, Raj, yes, they've updated the royalty table, just given where gold prices have gone versus what was there before. The old royalty table stopped at $2,100. So at $2,100 gold price, that was the max royalty, which was 18.75% in Turkey. And I think you know we get a 40% reduction in that because we process our material in country. What they've done is expand that table all the way up to 5,100 just to take into account where gold may go. Because of these larger numbers, it's now moving up every $300 adds 125 basis points prior to our reduction. And so yes, we're in a different world now. At the gold price we're in today, it's about a 22.5% royalty and we get the 40% reduction. So the scale has increased in terms of how far up it can go, but it doesn't move with every $100 increment in gold anymore.

Q: Most of my questions have been answered at this point. Overall, I think it's a great decision you guys are going out of Goldfield to bridge the production gap after Oksut. Just curious, how does this change your thinking around M&A?

A: Paul Botond Stilicho Tomory: So we have the makings of what we think is an attractive go-forward production profile. We're still working on some of the components, meaning Milligan mine life extension, where does Kemess look like. But by the end of this year, that picture will come into tighter focus. So we believe we have a strong organic potential suite of assets that will have multi-decades of potential. And that's what we're aiming for on our organic projects. So principally speaking, we don't really need to do substantive M&A. And certainly, with our shares trading where they are, we have zero intention of doing share-based M&A. So to the extent that we would consider M&A, it would be modest. It would be bolt-on and cash-based, something that is a complement to that, which we have internally, as exampled by some of the equity investments we've made or other -- for example, thesis being a proximal asset to Kemess. So we look at things that might be geographically synergistic, synergistic in the sequencing of capital spend and project development. But largely speaking, any M&A we consider, and I'll repeat this, wouldn't endanger our ability to fund our projects organically. We don't intend to go back to the market for cash. And it would be cash-based, modest in scale and something that fits in strategically with our production profile. So we're not going to be doing big share-based M&A.

Q: I just -- I wanted to ask again about Mount Milligan, just as you're considering the expanded resource, do you -- with the new resource that you're considering for this -- the PFS coming up in September, do you get to a point where there is parts of the resource that are excluded from the Royal Gold stream? Or if not in this study, is there a path to kind of getting outside of that area of influence?

A: Paul Botond Stilicho Tomory: No, the Royal Gold, their area -- I mean, there is an area that is not subject to them, but it's so far away that it's not -- we're not -- we're very unlikely to be mining in those areas. But I will remind you that we have the amended streaming agreement with Royal Gold, where in two steps, the terms improved. Our broad vision for Mount Milligan is we -- as you know, we have the 10 -- the 11-year reserve right now, it's 2036. We intend to add, give or take, a decade of production here with this PFS while continuing significant exploration to the Southwest and to the West. We continue to encounter encouraging results, continuity of mineralization, both at depth and near surface. So our perspective or at least our objective is to continue to add inventory beyond the life of the PFS for a potential third decade. Now, work remains to be done there, but the mineralization shows strong continuity, and we're very optimistic about what we might find beyond the scope of the PFS. But the simple answer to your question is everything I've just mentioned will be subject to the Royal Gold stream.