Centerra strikes B.C. mine deal with Royal Gold, shares rise

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Centerra Gold Inc. [CG-TSX, CAGDF-OTC] said it has entered into additional agreements with Royal Gold Inc. [RGLD-NASDAQ] relating to its Mount Milligan mine in British Columbia.

This has resulted in a life of mine extension of two years to 2035 and established favourable parameters for mine life extensions, Centerra said in a press release.

While the existing stream agreement with Royal Gold stays the same until 2029, starting in 2030, Centerra will receive increased cash payments for Mount Milligan gold and copper production sold to Royal Gold. As part of the additional agreement, Centerra has pledged to make a $24.5 million upfront cash payment, a commitment to deliver 50,000 ounces of gold and a 5% free cash flow interest on Mount Milligan (up to 10% in 2036) to Royal Gold

Centerra said its strategy to further increase mine life at Mount Milligan has three prongs. First it will immediately initiate a preliminary economic assessment to study the incorporation of the significant drilled inventory to the west of the existing pit and to evaluate options for capital projects in the mine and mill that could lead to further mine life extensions.

Second, Centerra will continue to invest in exploration drilling to unlock the large mineral endowment at Mount Milligan.

Finally, it will continue to advance a site optimization program at Mount Milligan, which began in the fourth quarter of 2023, with a focus on enhanced safety performance and cash flow improvement.

Centerra shares jumped 7.3% or 45 cents to $6.59 on Wednesday, The shares trade in 52-week range of $10.28 and $6.07.

Centerra operates two mines including Mount Milligan and the Oksut Mine in Turkey. It also owns the Goldfield District Project in Nevada, the Kemess Underground Project in B.C. and the Molybdenum Business Unit in the U.S. and Canada.

Centerra said it produced 350,317 ounces of gold in 2023, which was near the midpoint of its 2023 gold production guidance range of between 340,000 and 360,000 ounces. That included 129,259 ounces in the fourth quarter of 2023.

The company produced 19.7 million pounds of copper in the fourth quarter and 61.9 million pounds in 2023. That amount was in line with the production guidance range of 60 million to 70 million pounds.

As of December 31, 2023, Centerra reported cash and cash equivalents of $613 million.

In 2024, Centerra is guiding investors to anticipate annual gold production of between 370,000 to 410,000 ounces, an 11% increase from the midpoint of guidance year-over year. In 2024, the company expects to produce 55 million to 65 million pounds of copper.

Gold production at Mount Milligan is expected to be in the range of 180,000 to 200,000 ounces, a 22% increase of the midpoint year-over-year, driven by mine sequencing and higher gold grades. The copper production target is 55 to 65 million pounds in 2024.

At Oksut, 2024 gold production is expected to be in the range of 190,000 to 210,000 ounces. The company said gold production is expected to be weighted more towards the first half of 2024, as the elevated leach pad inventories and stockpiles are processed through the absorption, and recovery (ADR) plant.

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