Centerra Gold shares slip as BC mine suffers from lack of water

Centerra Gold Inc. [CG-TSX] on Wednesday December 27 said mill processing operations at the Mount Milligan Mine in central British Columbia have been temporarily suspended due to lack of sufficient water resources. Mill processing operations are expected to resume at partial capacity by the end of January 2018, and reach full capacity after the spring melt.

Investors reacted by sending the shares down 11% or $0.80 to $6.45 in morning trading Wednesday.

The Mount Milligan Mine is one of two flagship assets in the Centerra Gold portfolio. The other is the Kumtor Mine, which is located in the Kyrgyz Republic. Located about 120 km northwest of Prince George, Mount Milligan is a conventional truck-shovel, open pit copper and gold mine. It features a copper processing plant with a design capacity of 62,500 tonnes per day.

Proven and probable reserves at the end of 2016 stood at 496.2 million tonnes, grading 0.187% copper or roughly 2 billion pounds of contained copper, and 0.36 g/t gold or 5.76 million ounces.

Centerra has previously said Mount Milligan experienced a drier than normal spring and summer during 2017, with a limited amount of snow melt. This resulted in lower than expected reclaim water volumes in the tailings storage facility, which is used in the mill processing operation, the company said.

The water shortage has been exacerbated by extremely cold temperatures at Mount Milligan, resulting in a greater than expected loss of water volumes in the tailings storage facility due to ice formation.

In the fourth quarter of 2017, the company tried to mitigate the water shortfall by drilling additional wells to draw water from nearby aquifers. But this proved insufficient to offset the loss of water volumes caused by the limited snow melt and cold temperatures.

As a further mitigation measure, the company is pursuing an amendment to Mount Milligan’s Environmental Assessment to allow it to pump water from a nearby lake (Phillips Lake).

It is expected that by the end of January 2018, there will be adequate fresh water available to restart mill processing operations, utilizing just one of the ball mills (38,000 tonnes per day to minimize water requirements). The company expects that additional fresh water will become available after the spring melt, typically in April. At that time, it expects to restart the second ball mill, returning mill processing operations to full capacity.

However, the company noted that the availability of water will be determined by natural forces which can be unpredictable.

Meanwhile, The Mount Milligan Mine continues to operate according to its mine plan and will continue to expose, mine and stockpile additional ores for future processing, the company said. So far this year, Mount Milligan has produced approximately 225,000 ounces of gold and roughly 54 million pounds of copper. During 2017, gold production at the Kumtor Mine has continued to be strong and the mine is expected produce 560,000 ounces of gold this year.

Centerra expects to issue its 2018 full year production guidance in mid-January, 2018. The company said it will release additional information about Mount Milligan as it becomes available.