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Centerra’s vs Kyrgyz Gov battle overshadows results

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Guidance for 2017 is far higher than the 2016 results; 715–795,000oz of gold and 25,000-30,000 tonnes of copper.

The Canadian company said in its results statement it might have to go to the market for money after drawing down all non-project-specific loans. Its net earnings for 2016 were US$$151.5 million, or $0.60 per share.

This was up on 2015 when the end-of-year numbers were hit by an impairment charge from the Kygyzstan government over the Kumtor gold mine.

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The flagship mine produced 550,960 ounces in 2016, out of just under 600,000oz in total from the company. But the cash from the above-guidance production is locked up in the central-Asia country, able to be spent on Kumtor but nothing else.

The mine generated $237 million in 2016.

Centerra is circumspect about its spending abilities this year.

“It is expected that all planned capital and operating expenditures of the company for 2017 can be funded out of cash, short-term investment and cash generated from the Mount Milligan mine, although there can be no assurance of this,” the company said.

CEO Scott Perry said operationally 2016 had been a good year, barring a death in January at the Kyrgyz mine.

“Kumtor had another strong year and we exceeded the mid-point (540,000oz) of Centerra’s favourably revised gold production guidance for 2016,” he said.

“I am pleased to report that we also significantly beat our unit-cost guidance for the year as our all-in sustaining costs were $682 per ounce sold.”

Guidance for 2017 is far higher than the 2016 results; 715–795,000oz of gold and 25,000-30,000 tonnes of copper.

RBC Capital Markets analysts Melissa Oliphant and Stephen Walker said the cash limitations outweighed the positive mining results.

“We view Centerra’s fourth quarter report as negative for the shares, as we expect investors to focus on commentary regarding ongoing legal issues with the Kyrgyz government and related liquidity concerns,” their note said.

RBC laid out the scenario: “Excluding $248 million of restricted cash held at Kumtor (going into 2017), fourth quarter cash and equivalents were $160 million, of which $50 million can only be used for Mongolian purposes and $51.6 million can only be used for Mt. Milligan, leaving $58.5 million of discretionary cash.

“Fourth quarter debt was $465 million including the fully-drawn $150 million corporate credit facility. While the $150 million Oksut facility is undrawn, it is contingent on the receipt of permits by June 30, 2017.”

Source: Mining journal

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