Exhibit 99.1
Centerra Gold Inc.
Condensed Consolidated Interim Financial Statements
Third Quarter 2021
(Unaudited)
(Expressed in thousands of United States dollars, except where otherwise indicated)
Centerra Gold Inc.
Condensed Consolidated Interim Statements of Financial Position
(Unaudited)
September 30, | December 31, | |||||||||||
2021 | 2020 | |||||||||||
(Expressed in thousands of United States dollars) | ||||||||||||
Assets | Notes | |||||||||||
Current assets | ||||||||||||
Cash and cash equivalents | $ | 911,702 | $ | 545,180 | ||||||||
Amounts receivable | 69,265 | 66,108 | ||||||||||
Inventories | 6 | 214,525 | 580,587 | |||||||||
Assets held-for-sale | 5 | - | 140,005 | |||||||||
Other current assets | 20 | 25,777 | 40,961 | |||||||||
1,221,269 | 1,372,841 | |||||||||||
Property, plant and equipment | 7 | 1,108,041 | 1,686,067 | |||||||||
Other non-current assets | 8, 20 | 10,579 | 77,101 | |||||||||
1,118,620 | 1,763,168 | |||||||||||
Total assets | $ | 2,339,889 | $ | 3,136,009 | ||||||||
Liabilities and shareholders' equity | ||||||||||||
Current liabilities | ||||||||||||
Accounts payable and accrued liabilities | $ | 174,637 | $ | 232,704 | ||||||||
Income taxes payable | 2,666 | 2,474 | ||||||||||
Liabilities held-for-sale | 5 | - | 2,255 | |||||||||
Other current liabilities | 20 | 16,640 | 20,395 | |||||||||
193,943 | 257,828 | |||||||||||
Deferred income tax liability | 48,431 | 39,473 | ||||||||||
Provision for reclamation | 295,076 | 351,149 | ||||||||||
Other non-current liabilities | 8, 20 | 19,441 | 21,541 | |||||||||
362,948 | 412,163 | |||||||||||
Shareholders' equity | ||||||||||||
Share capital | 982,138 | 975,122 | ||||||||||
Contributed surplus | 32,325 | 30,601 | ||||||||||
Accumulated other comprehensive income | 9,534 | 11,600 | ||||||||||
Retained earnings | 759,001 | 1,448,695 | ||||||||||
1,782,998 | 2,466,018 | |||||||||||
Total liabilities and shareholders' equity | $ | 2,339,889 | $ | 3,136,009 | ||||||||
Commitments and contingencies (note 18) | ||||||||||||
The accompanying notes form an integral part of these condensed consolidated interim financial statements. |
2 |
Centerra Gold Inc.
Condensed Consolidated Interim Statements of Earnings (Loss) and Comprehensive Income (Loss)
(Unaudited)
Three months ended | Nine months ended | |||||||||||||||||||
September 30, | September 30, | |||||||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||||||
(Expressed in thousands of United States dollars) | ||||||||||||||||||||
(except per share amounts) | ||||||||||||||||||||
Notes | ||||||||||||||||||||
Revenue | 9 | $ | 220,561 | $ | 251,247 | $ | 649,059 | $ | 509,264 | |||||||||||
Cost of sales | ||||||||||||||||||||
Production costs | 10 | 121,641 | 103,785 | 355,691 | 310,764 | |||||||||||||||
Depreciation, depletion and amortization | 30,413 | 30,764 | 89,461 | 70,771 | ||||||||||||||||
Earnings from mine operations | 68,507 | 116,698 | 203,907 | 127,729 | ||||||||||||||||
Exploration and development costs | 6,597 | 11,124 | 18,819 | 22,361 | ||||||||||||||||
Corporate administration | 11 | 8,881 | 6,439 | 19,676 | 28,324 | |||||||||||||||
Care and maintenance expense | 7,638 | 7,870 | 20,472 | 21,732 | ||||||||||||||||
Reclamation (recovery) expense | 12 | (871 | ) | 533 | (913 | ) | 44,038 | |||||||||||||
Other operating expenses | 13 | 2,627 | 2,932 | 10,392 | 8,866 | |||||||||||||||
Earnings from operations | 43,635 | 87,800 | 135,461 | 2,408 | ||||||||||||||||
Gain on sale of Greenstone Partnership | 5 | - | - | (72,274 | ) | - | ||||||||||||||
Other non-operating expenses | 14 | 6,975 | 101 | 14,067 | 4,425 | |||||||||||||||
Finance costs | 694 | 1,754 | 4,001 | 8,618 | ||||||||||||||||
Earnings (loss) before income tax | 35,966 | 85,945 | 189,667 | (10,635 | ) | |||||||||||||||
Income tax expense | 15 | 8,383 | 3,548 | 17,598 | 4,804 | |||||||||||||||
Net earnings (loss) from continuing operations | 27,583 | 82,397 | 172,069 | (15,439 | ) | |||||||||||||||
Net earnings (loss) from discontinued operations | 4 | - | 123,346 | (828,717 | ) | 328,766 | ||||||||||||||
Net earnings (loss) | $ | 27,583 | $ | 205,743 | $ | (656,648 | ) | $ | 313,327 | |||||||||||
Other Comprehensive Income (Loss) | ||||||||||||||||||||
Items that may be subsequently reclassified to earnings: | ||||||||||||||||||||
Net gain (loss) on translation of foreign operation | $ | - | $ | 732 | $ | 31 | $ | (875 | ) | |||||||||||
Net unrealized gain (loss) on derivative instruments | 20 | 3,799 | 4,905 | (2,097 | ) | 3,173 | ||||||||||||||
Other comprehensive income (loss) | 3,799 | 5,637 | (2,066 | ) | 2,298 | |||||||||||||||
Total comprehensive income (loss) | $ | 31,382 | $ | 211,379 | $ | (658,714 | ) | $ | 315,625 | |||||||||||
Earnings (loss) per share - continuing operations: | ||||||||||||||||||||
Basic | 16 | $ | 0.09 | $ | 0.28 | $ | 0.58 | $ | (0.05 | ) | ||||||||||
Diluted | 16 | $ | 0.09 | $ | 0.28 | $ | 0.56 | $ | (0.05 | ) | ||||||||||
Earnings (loss) per share: | ||||||||||||||||||||
Basic | 16 | $ | 0.09 | $ | 0.70 | $ | (2.21 | ) | $ | 1.06 | ||||||||||
Diluted | 16 | $ | 0.09 | $ | 0.68 | $ | (2.23 | ) | $ | 1.05 | ||||||||||
Cash dividends declared per common share (C$) | $ | 0.07 | $ | 0.05 | $ | 0.17 | $ | 0.13 | ||||||||||||
The accompanying notes form an integral part of these condensed consolidated interim financial statements. |
3 |
Centerra Gold Inc.
Condensed Consolidated Interim Statements of Cash Flows
(Unaudited)
Three months ended | Nine months ended | |||||||||||||||||||
September 30, | September 30, | |||||||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||||||
(Expressed in thousands of United States dollars) | ||||||||||||||||||||
Operating activities | Notes | |||||||||||||||||||
Net earnings (loss) from continuing operations | $ | 27,583 | $ | 82,397 | $ | 172,069 | $ | (15,439 | ) | |||||||||||
Adjustments: | ||||||||||||||||||||
Depreciation, depletion and amortization | 31,873 | 32,426 | 93,941 | 75,643 | ||||||||||||||||
Reclamation (recovery) expense | (871 | ) | 414 | (913 | ) | 43,919 | ||||||||||||||
Share-based compensation | 3,560 | 926 | 918 | 11,806 | ||||||||||||||||
Finance costs | 694 | 3,576 | 4,001 | 10,440 | ||||||||||||||||
Inventory impairment | - | - | - | 13,588 | ||||||||||||||||
Gain on sale of Greenstone Partnership | - | - | (72,274 | ) | - | |||||||||||||||
Income tax expense | 8,383 | 3,548 | 17,598 | 4,804 | ||||||||||||||||
Income taxes (paid) refunded | (4,829 | ) | 10,798 | (7,585 | ) | 20,647 | ||||||||||||||
Other | 452 | (682 | ) | 2,747 | (2,182 | ) | ||||||||||||||
66,845 | 133,403 | 210,502 | 163,226 | |||||||||||||||||
Changes in working capital | 17 | (4,477 | ) | 18,355 | (1,406 | ) | 24,820 | |||||||||||||
Cash provided by operating activities from continuing operations | 62,368 | 151,758 | 209,096 | 188,046 | ||||||||||||||||
Cash provided by operating activities from discontinued operations | - | 207,075 | 143,853 | 560,003 | ||||||||||||||||
Cash provided by operating activities | 62,368 | 358,833 | 352,949 | 748,049 | ||||||||||||||||
Investing activities | ||||||||||||||||||||
Property, plant and equipment additions | (21,416 | ) | (26,828 | ) | (69,383 | ) | (67,910 | ) | ||||||||||||
Proceeds from sale of Greenstone Partnership | 5 | - | - | 210,291 | - | |||||||||||||||
Proceeds from disposition of marketable securities | - | 2,902 | - | 2,902 | ||||||||||||||||
Proceeds from disposition of fixed assets | 1,154 | 29 | 1,889 | 317 | ||||||||||||||||
Decrease in restricted cash | 2 | 432 | 2,660 | 26,422 | ||||||||||||||||
Increase in other assets | 1 | (1,664 | ) | 187 | (526 | ) | ||||||||||||||
Cash (used in) provided by investing activities from continuing operations | (20,259 | ) | (25,129 | ) | 145,644 | (38,795 | ) | |||||||||||||
Cash used in investing activities from discontinued operations | - | (50,955 | ) | (96,081 | ) | (159,205 | ) | |||||||||||||
Cash (used in) provided by investing activities | (20,259 | ) | (76,084 | ) | 49,563 | (198,000 | ) | |||||||||||||
Financing activities | ||||||||||||||||||||
Dividends paid | 16 | (12,166 | ) | (11,277 | ) | (33,046 | ) | (28,269 | ) | |||||||||||
Debt drawdown | - | - | - | 250,000 | ||||||||||||||||
Debt repayment | - | - | - | (327,472 | ) | |||||||||||||||
Payment of borrowing costs | (488 | ) | (1,008 | ) | (2,093 | ) | (5,862 | ) | ||||||||||||
Repayment of lease obligations | (1,555 | ) | (1,284 | ) | (4,891 | ) | (4,436 | ) | ||||||||||||
Proceeds from common shares issued | 927 | 2,794 | 4,040 | 7,460 | ||||||||||||||||
Cash used in financing activities | (13,282 | ) | (10,775 | ) | (35,990 | ) | (108,579 | ) | ||||||||||||
Increase in cash during the period | 28,827 | 271,974 | 366,522 | 441,470 | ||||||||||||||||
Cash at beginning of the period | 882,875 | 212,213 | 545,180 | 42,717 | ||||||||||||||||
Cash at end of the period | $ | 911,702 | $ | 484,187 | $ | 911,702 | $ | 484,187 | ||||||||||||
The accompanying notes form an integral part of these condensed consolidated interim financial statements. |
4 |
Centerra Gold Inc. |
Condensed Consolidated Interim Statements of Shareholders' Equity |
(Unaudited) |
(Expressed in thousands of United States dollars, except share information) |
Number of | Share | Other | ||||||||||||||||||||||
Common | Capital | Contributed | Comprehensive | Retained | ||||||||||||||||||||
Shares | Amount | Surplus | Income (Loss) | Earnings | Total | |||||||||||||||||||
Balance at January 1, 2021 | 295,827,906 | $ | 975,122 | $ | 30,601 | $ | 11,600 | $ | 1,448,695 | $ | 2,466,018 | |||||||||||||
Net loss | - | - | - | - | (656,648 | ) | (656,648 | ) | ||||||||||||||||
Other comprehensive loss | - | - | - | (2,066 | ) | - | (2,066 | ) | ||||||||||||||||
Transactions with shareholders: | ||||||||||||||||||||||||
Share-based compensation | - | - | 4,046 | - | - | 4,046 | ||||||||||||||||||
Issued on exercise of stock options | 603,177 | 4,433 | (1,188 | ) | - | - | 3,245 | |||||||||||||||||
Issued under the employee share purchase plan | 101,560 | 935 | - | - | - | 935 | ||||||||||||||||||
Issued on redemption of restricted share units | 244,531 | 1,648 | (1,134 | ) | - | - | 514 | |||||||||||||||||
Dividend declared (C$0.17 per share) | - | - | - | - | (33,046 | ) | (33,046 | ) | ||||||||||||||||
Balance at September 30, 2021 | 296,777,174 | $ | 982,138 | $ | 32,325 | $ | 9,534 | $ | 759,001 | $ | 1,782,998 | |||||||||||||
Balance at January 1, 2020 | 293,690,456 | $ | 960,404 | $ | 26,278 | $ | (752 | ) | $ | 1,079,914 | $ | 2,065,844 | ||||||||||||
Net earnings | - | - | - | - | 313,327 | 313,327 | ||||||||||||||||||
Other comprehensive income | - | - | - | 2,298 | - | 2,298 | ||||||||||||||||||
Transactions with shareholders: | ||||||||||||||||||||||||
Share-based compensation | - | - | 9,257 | - | - | 9,257 | ||||||||||||||||||
Issued on exercise of stock options | 1,430,207 | 10,178 | (2,727 | ) | - | - | 7,451 | |||||||||||||||||
Issued under the employee share purchase plan | 100,918 | 813 | - | - | - | 813 | ||||||||||||||||||
Issued on redemption of restricted share units | 519,359 | 2,955 | (2,955 | ) | - | - | - | |||||||||||||||||
Dividends declared (C$0.13 per share) | - | - | - | - | (28,582 | ) | (28,582 | ) | ||||||||||||||||
Balance at September 30, 2020 | 295,740,940 | $ | 974,350 | $ | 29,853 | $ | 1,546 | $ | 1,364,659 | $ | 2,370,408 | |||||||||||||
5 |
Centerra Gold Inc.
Notes to the Condensed Consolidated Interim Financial Statements
(Unaudited)
(Expressed in thousands of United States dollars, except where otherwise indicated)
1. Nature of operations
Centerra Gold Inc. (“Centerra” or the “Company”) was incorporated under the Canada Business Corporations Act on November 7, 2002. Centerra’s common shares are listed on the Toronto Stock Exchange under the symbol “CG” and on the New York Stock Exchange under the symbol “CGAU”. The Company is domiciled in Canada and its registered office is located at 1 University Avenue, Suite 1500, Toronto, Ontario, M5J 2P1. The Company is primarily focused on operating, developing, exploring and acquiring gold and copper properties in North America, Turkey and other markets worldwide.
2. Basis of presentation
These unaudited condensed consolidated interim financial statements (“interim financial statements”) of the Company and its subsidiaries have been prepared in accordance with International Accounting Standard (“IAS”) 34, Interim Financial Reporting, as issued by the International Accounting Standards Board (“IASB”). These interim financial statements do not contain all of the disclosures required by International Financial Reporting Standards and should be read in conjunction with the Company’s audited consolidated financial statements as at and for the year ended December 31, 2020.
These financial statements were authorized for issuance by the Company’s Board of Directors on November 4, 2021.
3. Accounting policies
These interim financial statements have been prepared using accounting policies consistent with those used in the Company’s audited consolidated financial statements as at and for the year ended December 31, 2020. New standards and amendments issued but not yet effective or adopted are described below.
IAS 16, Property, Plant and Equipment
In May 2020, the IASB issued an amendment to IAS 16, Property, Plant and Equipment (“IAS16”), to prohibit the crediting to property, plant and equipment of amounts received from selling items produced while preparing an asset for its intended use. Instead, sales proceeds and related costs must be recognized in profit or loss. The amendment will require companies to distinguish between costs associated with producing and selling items before the item of property, plant and equipment is available for use and costs associated with making the item of property, plant and equipment available for its intended use. The amendment is effective for annual periods beginning on or after January 1, 2022, with earlier application permitted.
6 |
Centerra Gold Inc.
Notes to the Condensed Consolidated Interim Financial Statements
(Unaudited)
(Expressed in thousands of United States dollars, except where otherwise indicated)
The Company expects to adopt the revision to IAS 16 when it becomes effective on January 1, 2022. The Company has determined that the adoption of this standard would have no impact on its historical accounting.
IAS 1, Presentation of Financial Statements
In January 2020, the IASB issued an amendment to IAS 1, Presentation of Financial Statements, to clarify one of the requirements under the standard for classifying a liability as non-current in nature. The amendment includes:
- | Specifying that an entity’s right to defer settlement must exist at the end of the reporting period; |
- | Clarifying that classification is unaffected by management’s intentions or expectations about whether the entity will exercise its right to defer settlement; |
- | Clarifying how lending conditions affect classification; and |
- | Clarifying if the settlement of a lability refers to the transfer of cash, equity instruments, other assets or services. |
The Company will perform an assessment of the amendment on its financial statements prior to the effective date of January 1, 2023.
IAS 12, Income Taxes
In May 2021, the IASB published a narrow scope amendment to IAS 12 Income taxes. In September 2021, IAS 12 was revised to reflect this amendment. The amendment narrowed the scope of the recognition exemption so that it no longer applies to transactions that, on initial recognition, give rise to equal taxable and deductible temporary differences such as deferred taxes on leases and decommissioning obligations. The amendment is effective for annual periods beginning on or after January 1, 2023 and applied retrospectively.
The Company will perform an assessment of the amendment on its financial statements prior to the effective date of January 1, 2023.
Comparative figures
Certain comparative figures in the interim financial statements have been reclassified from statements previously presented to conform to the presentation of these interim financial statements as at and for the three months and nine months ended September 30, 2021 and 2020. These include reclassifications of amounts related to the discontinued operations described below.
7 |
Centerra Gold Inc.
Notes to the Condensed Consolidated Interim Financial Statements
(Unaudited)
(Expressed in thousands of United States dollars, except where otherwise indicated)
4. Discontinued operations
Loss of control of the Kumtor Mine
On May 6, 2021, the Kyrgyz Republic Parliament passed a temporary management law that allowed the Kyrgyz Republic, in certain circumstances, to assume management authority over Kumtor Gold Company (“KGC”), the Company’s wholly-owned subsidiary that owns the Kumtor Mine. Subsequently, as a result of several coordinated actions, the Kyrgyz Republic seized the Kumtor Mine on May 15, 2021 and appointed an external manager to direct the day-to-day activities of the mine, including production and sale of metals (i.e., a “loss of control event”).
On May 14, 2021, the Company initiated binding international arbitration proceedings against the Kyrgyz Republic to enforce its rights under the longstanding agreements governing the Kumtor Mine. Furthermore, on June 1, 2021, the Company’s two wholly-owned subsidiaries, KGC and Kumtor Operating Company (“KOC”), filed for protection under Chapter 11 of the Federal U.S. Bankruptcy Code in the Southern District of New York.
While the Company remains the legal owner of KGC and KOC, the Company concluded in the second quarter of 2021, that it had lost control of the Kumtor Mine because it cannot effectively exercise power over the relevant activities related to the mine and is no longer exposed to variable returns, nor can it affect the returns of the mine through its managerial involvement. As a result of the loss of control event, the Company deconsolidated the subsidiary, and derecognized the assets and liabilities of the Kumtor Mine at their carrying amounts at the date when control was lost. The Company deemed the loss of control a significant event and concluded that the Kumtor Mine should be treated as a discontinued operation. Consequently, all amounts related to the Kumtor Mine have been classified as a discontinued operation in both the current and comparative periods in the condensed consolidated interim statements of earnings (loss) and comprehensive income (loss) and condensed consolidated interim statements of cash flows and the associated notes to the interim financial statements. However, amounts related to the Kumtor Mine are included in condensed consolidated interim statements of financial position for the year ended December 31, 2020.
While the Company is planning to enforce its rights to the Kumtor Mine through the international arbitration proceedings and other available legal avenues, the Company’s participation in the future cash flows of the Kumtor Mine remains uncertain, and consequently no value was ascribed to the Company’s interest in KGC. A loss on the change control equal to the net carrying value of assets and liabilities of the Kumtor Mine at the date when control was lost, totalling $926.4 million, was recognized in the condensed consolidated interim statements of earnings (loss) and comprehensive income (loss).
8 |
Centerra Gold Inc.
Notes to the Condensed Consolidated Interim Financial Statements
(Unaudited)
(Expressed in thousands of United States dollars, except where otherwise indicated)
The Company assessed that there was no change in circumstances that would justify the remeasurement of its interest in KGC as at September 30, 2021.
The net earnings (loss) from discontinued operations from the Kumtor Mine, which include the results of operating activities while it was under the Company’s control up to May 15, 2021, for the three and nine months ended September 30, 2021 and 2020 are as follows:
Three months ended | Nine months ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Revenue | $ | - | $ | 270,395 | $ | 264,159 | $ | 809,343 | ||||||||
Cost of sales | ||||||||||||||||
Production costs | - | 48,508 | 72,613 | 158,346 | ||||||||||||
Depreciation | - | 52,417 | 57,912 | 170,875 | ||||||||||||
Standby costs | - | - | - | 6,728 | ||||||||||||
Earnings from mine operations | - | 169,470 | 133,634 | 473,394 | ||||||||||||
Revenue-based taxes | - | 37,875 | 36,984 | 113,339 | ||||||||||||
Exploration and development costs | - | 3,191 | 8,826 | 10,409 | ||||||||||||
Other operating expenses | - | 4,760 | 3,380 | 19,021 | ||||||||||||
Loss on the change of control of the Kumtor Mine | - | - | 926,350 | - | ||||||||||||
Earnings (loss) from operations | - | 123,644 | (841,906 | ) | 330,625 | |||||||||||
Other non-operating expenses (income) | - | 17 | (13,290 | ) | 1,024 | |||||||||||
Finance costs | - | 281 | 101 | 835 | ||||||||||||
Net earnings (loss) before income tax | $ | - | $ | 123,346 | $ | (828,717 | ) | $ | 328,766 | |||||||
Net earnings (loss) from discontinued operations | $ | - | $ | 123,346 | $ | (828,717 | ) | $ | 328,766 |
Other income for the nine months ended September 30, 2021 includes a realized gain of $14.2 million recognized upon early settlement of fuel hedge contracts related to the Kumtor Mine. Additionally, an unrealized gain of $1.1 million was recognized for the nine months ended September 30, 2021, upon the novation of other fuel hedge contracts which were re-assigned to the Mount Milligan Mine upon the loss of control of the Kumtor Mine.
9 |
Centerra Gold Inc.
Notes to the Condensed Consolidated Interim Financial Statements
(Unaudited)
(Expressed in thousands of United States dollars, except where otherwise indicated)
The assets and liabilities of the Kumtor Mine over which control was lost are summarized in the table below:
Current assets | ||||
Amounts receivable | $ | 38,238 | ||
Inventories | 333,556 | |||
Non-current assets | ||||
Property, plant and equipment | 629,374 | |||
Reclamation deposits | 52,918 | |||
Other non-current assets | 11,884 | |||
Assets derecognized | $ | 1,065,970 | ||
Current liabilities | ||||
Accounts payable and accrued liabilities | $ | 63,271 | ||
Revenue-based taxes payable | 17,003 | |||
Other current liabilities | 325 | |||
Non-current liabilities | ||||
Provision for reclamation | 56,451 | |||
Other non-current liabilities | 2,570 | |||
Liabilities derecognized | $ | 139,620 | ||
Net assets derecognized | $ | 926,350 |
While the Kyrgyz Republic brought forward various claims against KGC, the Company does not believe that they have any merit. Accordingly, the Company did not accrue any liability in the accounts of KGC with respect to any of these claims prior to the loss of control event. Refer to note 18 for disclosure regarding the contingency associated with the loss of control event.
5. Disposition of the interest in Greenstone Partnership
On January 19, 2021, the Company completed the sale of its 50% interest in the Greenstone Partnership to an affiliate of the Orion Mine Finance Group. As a result of the closing of this transaction, the Company received cash consideration of $210.0 million, and recognized a gain of $72.3 million in the first quarter of 2021.
The Company is entitled to receive further contingent payments based on the construction decision and subsequent production from the mine, which will be recorded should the various additional milestones be met.
10 |
Centerra Gold Inc.
Notes to the Condensed Consolidated Interim Financial Statements
(Unaudited)
(Expressed in thousands of United States dollars, except where otherwise indicated)
The following table summarizes the net assets of the Partnership interest disposed of:
January 19, 2021 | ||||
Cash and cash equivalents | $ | 188 | ||
Amounts receivable | 175 | |||
Property, plant and equipment | 139,642 | |||
Assets disposed of | $ | 140,005 | ||
Accounts payable and accrued liabilities | $ | (2,125 | ) | |
Lease obligations | (130 | ) | ||
Liabilities disposed of | $ | (2,255 | ) | |
Net assets disposed of | $ | 137,750 |
6. Inventories
September 30, 2021 | December 31, 2020 | |||||||
Stockpiles of ore(1) | $ | 37,935 | $ | 239,219 | ||||
Gold in-circuit | 14,337 | 28,906 | ||||||
Gold doré | 27 | 15,497 | ||||||
Copper and gold concentrate | 15,204 | 32,201 | ||||||
Molybdenum inventory | 82,009 | 57,238 | ||||||
Total product inventories | 149,512 | 373,061 | ||||||
Supplies (net of provision)(2) | 65,013 | 207,526 | ||||||
Total inventories | $ | 214,525 | $ | 580,587 |
(1) | Includes ore in stockpiles at the Mount Milligan Mine not scheduled for processing within the next 12 months, but available on-demand of $32.2 million (December 31, 2020 - $119.2 million, including $113.6 million related to Kumtor). |
(2) | Net of a provision for supplies inventory obsolescence of $8.0 million (December 31, 2020 - $29.2 million, including $21.2 million related to Kumtor). |
7. Property, plant and equipment
Buildings, | Capitalized | Construction | ||||||||||||||||||
Plant and | Mineral | Stripping | in | |||||||||||||||||
Equipment | Properties | Costs | Progress | Total | ||||||||||||||||
Net Book Value | ||||||||||||||||||||
Balance, January 1, 2020 | $ | 742,954 | $ | 460,806 | $ | 191,210 | $ | 274,546 | $ | 1,669,516 | ||||||||||
Balance, January 1, 2021 | 891,223 | 353,189 | 338,855 | 102,800 | 1,686,067 | |||||||||||||||
Balance, September 30, 2021 | 725,873 | 310,103 | 27,124 | 44,941 | 1,108,041 |
During the nine months ended September 30, 2021, $72.0 million of additions related to the Company’s continuing operations were capitalized to property, plant and equipment and $5.2 million of property, plant and equipment were disposed. During the nine months ended September 30, 2021, $95.7 million of additions related to the Kumtor Mine were capitalized to property, plant and equipment and, as a result of the loss of control of the Kumtor Mine (note 4), assets with a net book value of $629.4 million were derecognized.
11 |
Centerra Gold Inc.
Notes to the Condensed Consolidated Interim Financial Statements
(Unaudited)
(Expressed in thousands of United States dollars, except where otherwise indicated)
During the year ended December 31, 2020, $396.3 million of additions were capitalized to property, plant and equipment and $2.6 million of property, plant and equipment were disposed.
8. Other non-current assets and non-current liabilities
September 30, | December 31, | |||||||
2021 | 2020 | |||||||
Other non-current assets | ||||||||
Value-added tax receivable(1) | $ | 5,863 | $ | 7,734 | ||||
Long-term derivative assets(2) | 1,918 | 8,339 | ||||||
Prepayments for property, plant and equipment | 330 | 8,763 | ||||||
Reclamation deposits | 91 | 47,083 | ||||||
Other | 2,377 | 5,182 | ||||||
Total other non-current assets | $ | 10,579 | $ | 77,101 | ||||
Other non-current liabilities | ||||||||
Long-term portion of lease obligations | $ | 14,221 | $ | 14,340 | ||||
Post-retirement benefits | 4,030 | 4,060 | ||||||
Long-term derivative liabilities(2) | 1,190 | 3,141 | ||||||
Total other non-current liabilities | $ | 19,441 | $ | 21,541 | ||||
(1) | Relates to the Öksüt Mine. |
(2) | Relates to the fuel, foreign exchange and copper hedging contracts (note 20). |
9. Revenue
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Gold revenue | $ | 118,311 | $ | 162,560 | $ | 334,612 | $ | 264,694 | ||||||||
Copper revenue | 52,774 | 52,014 | 157,187 | 126,730 | ||||||||||||
Molybdenum revenue | 52,491 | 32,463 | 138,019 | 102,292 | ||||||||||||
By-product revenue(1) | 3,772 | 4,771 | 13,301 | 11,465 | ||||||||||||
Metal content and provisional pricing adjustments on concentrate sales | (6,787 | ) | (561 | ) | 5,940 | 4,083 | ||||||||||
Total revenue | $ | 220,561 | $ | 251,247 | $ | 649,059 | $ | 509,264 |
(1) | Includes silver, rhenium and sulfuric acid sales. |
12 |
Centerra Gold Inc.
Notes to the Condensed Consolidated Interim Financial Statements
(Unaudited)
(Expressed in thousands of United States dollars, except where otherwise indicated)
10. Production costs
Three months ended | Nine months ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Gold(1) | $ | 47,697 | $ | 47,502 | $ | 140,190 | $ | 116,615 | ||||||||
Copper(1) | 27,655 | 22,091 | 87,343 | 74,207 | ||||||||||||
Molybdenum | 46,289 | 34,192 | 128,158 | 119,942 | ||||||||||||
Production costs | $ | 121,641 | $ | 103,785 | $ | 355,691 | $ | 310,764 |
(1) | Allocated between gold and copper based on gold equivalent ounces. |
11. Corporate administration
Three months ended | Nine months ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Administration and office costs | $ | 5,843 | $ | 5,982 | $ | 18,685 | $ | 17,553 | ||||||||
Share-based compensation(1) | 3,038 | 457 | 991 | 10,771 | ||||||||||||
Corporate administration | $ | 8,881 | $ | 6,439 | $ | 19,676 | $ | 28,324 |
(1) | Relates to the share-based compensation liability of $10.8 million as at September 30, 2021 (December 31, 2020 - $28.2 million). |
12. Reclamation (recovery) expense
Reclamation recovery for the three months ended September 30, 2021, was $0.9 million (September 30, 2020 - $0.5 million expense) and was primarily attributable to changes in the foreign exchange rates at the Endako Mine.
Reclamation recovery for the nine months ended September 30, 2021 was $0.9 million and was primarily attributable to changes in the foreign exchange rates at the Endako Mine. Reclamation expense for the nine months ended September 30, 2020 was $44.0 million and was primarily attributable to changes in the discount rates at the Endako Mine and the Thompson Creek Mine.
13. Other operating expenses
Three months ended | Nine months ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Selling and marketing(1) | $ | 2,507 | $ | 2,387 | $ | 9,023 | $ | 7,577 | ||||||||
Other | 120 | 545 | 1,369 | 1,289 | ||||||||||||
Other operating expenses | $ | 2,627 | $ | 2,932 | $ | 10,392 | $ | 8,866 |
(1) | Primarily includes freight charges associated with the Mount Milligan Mine and the Langeloth processing facility. |
13 |
Centerra Gold Inc.
Notes to the Condensed Consolidated Interim Financial Statements
(Unaudited)
(Expressed in thousands of United States dollars, except where otherwise indicated)
14. Other non-operating expenses
Three months ended | Nine months ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Kumtor Mine litigation and related costs(1) | $ | 8,120 | $ | - | $ | 14,269 | $ | - | ||||||||
Other | (1,145 | ) | 101 | (202 | ) | 4,425 | ||||||||||
Other non-operating expenses | $ | 6,975 | $ | 101 | $ | 14,067 | $ | 4,425 |
(2) | Primarily includes legal fees related to the Company’s international arbitration claim against the Kyrgyz Republic, the filing for protection under Chapter 11 under the Federal U.S. Bankruptcy Code by KGC and KOC, and related consulting costs. |
15. Income tax expense
The Company’s effective income tax rate of 23.3% (2020 - 4.1%) for the three months ended September 30, 2021 is lower than the statutory Canadian income tax rate of 26.5% primarily because taxable income from the Mount Milligan Mine was reduced by previously unrecognized tax attributes.
The Company’s effective income tax rate of 9.3% (2020 – (45.2%)) for the nine months ended September 30, 2021 is lower than the statutory Canadian income tax rate of 26.5% primarily because tax benefits related to the Öksüt Mine’s Investment Incentive Certificate were recognized and taxable income from the Mount Milligan Mine was reduced by previously unrecognized tax attributes.
14 |
Centerra Gold Inc.
Notes to the Condensed Consolidated Interim Financial Statements
(Unaudited)
(Expressed in thousands of United States dollars, except where otherwise indicated)
16. Shareholder's equity
a. | Earnings (loss) per share |
Computation for basic and diluted earnings (loss) per share from continuing operations:
Three months ended | Nine months ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Earnings (loss) - continuing operations | $ | 27,583 | $ | 82,397 | $ | 172,069 | $ | (15,439 | ) | |||||||
Dilutive impact related to RSU plan | (225 | ) | (213 | ) | (830 | ) | (18 | ) | ||||||||
Dilutive impact related to PSU plan | - | (2,974 | ) | (3,951 | ) | - | ||||||||||
Diluted earnings (loss) - continuing operations for diluted earnings per share | $ | 27,358 | $ | 79,210 | $ | 167,288 | $ | (15,457 | ) | |||||||
Basic weighted average common shares | 296,772 | 295,376 | 296,501 | 294,358 | ||||||||||||
Dilutive impact of stock options | 541 | 1,933 | 733 | - | ||||||||||||
Dilutive impact related to RSU plan | 2,995 | 1,347 | 2,017 | - | ||||||||||||
Diluted weighted average common shares | 300,308 | 298,656 | 299,251 | 294,358 | ||||||||||||
Earnings (loss) per share - continuing operations: | ||||||||||||||||
Basic | $ | 0.09 | $ | 0.28 | $ | 0.58 | $ | (0.05 | ) | |||||||
Diluted | $ | 0.09 | $ | 0.28 | $ | 0.56 | $ | (0.05 | ) |
Basic and diluted earnings (loss) per share for discontinued operation:
Three months ended | Nine months ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Net earnings (loss) from discontinued operations | $ | - | $ | 123,346 | $ | (828,717 | ) | $ | 328,766 | |||||||
Basic and diluted weighted average common shares | 296,772 | 295,376 | 296,501 | 294,358 | ||||||||||||
Earnings (loss) per share discontinued operations - basic and diluted | $ | - | $ | 0.42 | $ | (2.79 | ) | $ | 1.12 |
15 |
Centerra Gold Inc.
Notes to the Condensed Consolidated Interim Financial Statements
(Unaudited)
(Expressed in thousands of United States dollars, except where otherwise indicated)
Computation for basic and diluted earnings (loss) per share:
Three months ended | Nine months ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Net earnings (loss) | $ | 27,583 | $ | 205,743 | $ | (656,648 | ) | $ | 313,327 | |||||||
Dilutive impact related to RSU plan | (225 | ) | (213 | ) | (830 | ) | (18 | ) | ||||||||
Dilutive impact related to PSU plan | - | (2,974 | ) | (3,951 | ) | - | ||||||||||
Diluted net earnings (loss) | $ | 27,358 | $ | 202,556 | $ | (661,429 | ) | $ | 313,309 | |||||||
Basic weighted average common shares | 296,772 | 295,376 | 296,501 | 294,358 | ||||||||||||
Dilutive impact of stock options | 541 | 1,933 | - | 1,482 | ||||||||||||
Dilutive impact related to RSU plan | 2,995 | 1,347 | - | 1,279 | ||||||||||||
Diluted weighted average common shares | 300,308 | 298,656 | 296,501 | 297,119 | ||||||||||||
Earnings (loss) per share: | ||||||||||||||||
Basic | $ | 0.09 | $ | 0.70 | $ | (2.21 | ) | $ | 1.06 | |||||||
Diluted | $ | 0.09 | $ | 0.68 | $ | (2.23 | ) | $ | 1.05 |
For the three months and nine months ended September 30, 2021 and 2020, certain potentially anti-dilutive securities, including stock options were excluded from the calculation of diluted earnings (loss) from continuing operations per share and diluted earnings (loss) per share due to the exercise prices being greater than the average market price of the Company’s common shares for the respective periods.
Anti-dilutive securities excluded from the calculations above are summarized below:
Three months ended | Nine months ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
(Thousands of units) | 2021 | 2020 | 2021 | 2020 | ||||||||||||
Excluded from earnings (loss) per share from continuing operations | - | - | - | 2,761 | ||||||||||||
Excluded from earnings (loss) per share | - | - | 2,393 | - |
b. | Dividends |
On May 17, 2021, the Company announced that, as a result of the seizure of the Kumtor Mine, dividends or distributions on the Company’s common shares that would otherwise be payable to Kyrgyzaltyn JSC (“Kyrgyzaltyn”) or its affiliates, would be waived and donated to the Company, to the extent such dividends or distributions could be attributed reasonably to KGC, the Kumtor Mine’s assets and operations or distributions from KGC under the 2009 Restated Shareholders’ Agreement (the “2009 RSA"). As a result, Kyrgyzaltyn did not receive its portion of the C$0.05 per share dividend paid on June 10, 2021 or the C$0.07 per share dividend paid on September 8, 2021. Based on the Company’s interpretation of the 2009 RSA, the Company does not believe it has an obligation to pay these amounts in the future, totaling $7.5 million ($7.0 million, net of withholding taxes).
16 |
Centerra Gold Inc.
Notes to the Condensed Consolidated Interim Financial Statements
(Unaudited)
(Expressed in thousands of United States dollars, except where otherwise indicated)
On November 4, 2021, the Board approved a quarterly dividend to shareholders of record on November 19, 2021. Based on the Company’s interpretation of the 2009 RSA, the Company does not believe it has an obligation to pay Kyrgyzaltyn its share of this dividend.
17. Supplemental disclosure
Changes in working capital related to continuing operations
Three months ended | Nine months ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Decrease in amounts receivable | $ | 11,158 | $ | 29,583 | $ | 917 | $ | 58,658 | ||||||||
(Increase) in inventories | (14,802 | ) | (545 | ) | (18,935 | ) | (5,281 | ) | ||||||||
Decrease in other current assets | 1,924 | 606 | 1,365 | 1,844 | ||||||||||||
Increase (Decrease) in accounts payable and accrued liabilities | 1,749 | 11,918 | 13,953 | (7,576 | ) | |||||||||||
(Decrease) Increase in income taxes payable | (4,506 | ) | (23,207 | ) | 1,294 | (22,825 | ) | |||||||||
Changes in working capital | $ | (4,477 | ) | $ | 18,355 | $ | (1,406 | ) | $ | 24,820 |
18. Commitments and contingencies
Commitments
As at September 30, 2021, the Company has entered into contracts to acquire property, plant and equipment totalling $0.7 million.
Contingencies
Kumtor Mine
As a result of the loss of control event, the Company deconsolidated KGC, and derecognized the assets and liabilities of the Kumtor Mine at their carrying amounts at the date when control was lost (note 4).
Arbitration Proceedings
On May 17, 2021, the Company announced that it initiated binding arbitration (the “Kumtor Arbitration Proceedings”) against the Kyrgyz Republic to enforce its rights under longstanding agreements governing the Kumtor Mine and to, among other things, hold the Government of the Kyrgyz Republic accountable in the arbitration for any and all losses and damage that result from its actions against KGC and the Kumtor Mine. Subsequently, this claim was amended to add Kyrgyzaltyn as a respondent in the Kumtor Arbitration Proceedings.
17 |
Centerra Gold Inc.
Notes to the Condensed Consolidated Interim Financial Statements
(Unaudited)
(Expressed in thousands of United States dollars, except where otherwise indicated)
These claims will be adjudicated by a single arbitrator in the Kumtor Arbitration Proceedings to be held at Stockholm, Sweden and conducted under the arbitration rules of the United Nations Commission on International Trade Law. The applicable governing law of most of the longstanding agreements with the Kyrgyz Republic and Kyrgyzaltyn is the law of the State of New York and of England. In the course of the third quarter of 2021, the arbitrator was appointed by the Permanent Court of Arbitration in the Hague, Netherlands. The Company subsequently filed an application, requesting urgent interim measures in the Kumtor Arbitration Proceedings to address certain critical operational and safety problems at the Kumtor Mine, to preserve the status quo at the Kumtor Mine and obtain some transparency and reporting as to the mine’s activities. However, on October 27, 2021, the appointed arbitrator resigned, citing the refusal by the Kyrgyz Republic and Kyrgyzaltyn to agree to protections he had requested against personal claims being brought against him by the parties or to pay his requested fees. The Company has requested that the Permanent Court of Arbitration and its designated appointing authority promptly appoint a replacement arbitrator.
While Centerra will continue to pursue all measures necessary to protect its rights in arbitration and in other legal proceedings, no assurances can be given that Centerra will be successful in any of the foregoing legal proceedings or that the Company will be able to negotiate a solution.
Mount Milligan Mine
As previously disclosed, in the Company’s consolidated financial statements for the year ended December 31, 2020, the Company received a notice of civil claim from H.R.S. Resources Corp. (“H.R.S.”), the holder of a 2% production royalty at the Mount Milligan Mine. H.R.S. claims that since November 2016 (when the royalty became payable) the Company has incorrectly calculated amounts payable under the production royalty agreement and has therefore underpaid amounts owing to H.R.S. The Company disputes the claim and believes it has correctly calculated the royalty payments in accordance with the agreement. The Company believes that the potential exposure in relation to this claim (i.e., the alleged underpayment) is not material.
18 |
Centerra Gold Inc.
Notes to the Condensed Consolidated Interim Financial Statements
(Unaudited)
(Expressed in thousands of United States dollars, except where otherwise indicated)
19. Related party transactions
The Company recognized the following significant related parties:
Kyrgyzaltyn
The breakdown of sales transactions in the normal course of business with Kyrgyzaltyn, prior to the loss of control event, is as follows:
Three months ended | Nine months ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Gross gold and silver sales to Kyrgyzaltyn | $ | - | $ | 271,979 | $ | 265,407 | $ | 814,405 | ||||||||
Refinery and financing charges | - | (1,584 | ) | (1,248 | ) | (5,062 | ) | |||||||||
Net revenue received from Kyrgyzaltyn(1) | $ | - | $ | 270,395 | $ | 264,159 | $ | 809,343 |
(1) | Presented in results from discontinued operations |
20. Financial instruments
The Company’s financial instruments include marketable securities, amounts receivable (including embedded derivatives), derivative instruments, accounts payable and accrued liabilities (including share-based compensation liability).
a. | Derivative Instruments |
September 30, 2021 | December 31, 2020 | |||||||
Derivative instruments assets | ||||||||
Current | ||||||||
Foreign exchange contracts | $ | 9,420 | $ | 13,780 | ||||
Fuel Contracts | 3,899 | 4,910 | ||||||
Copper Contracts | 1,973 | 1,468 | ||||||
15,292 | 20,158 | |||||||
Non-current | ||||||||
Foreign exchange contracts | 607 | 5,593 | ||||||
Fuel contracts | 1,283 | 2,746 | ||||||
Copper contracts | 28 | - | ||||||
1,918 | 8,339 | |||||||
Total derivative instrument assets | $ | 17,210 | $ | 28,497 |
19 |
Centerra Gold Inc.
Notes to the Condensed Consolidated Interim Financial Statements
(Unaudited)
(Expressed in thousands of United States dollars, except where otherwise indicated)
September 30, 2021 | December 31, 2020 | |||||||
Derivative instruments liabilities | ||||||||
Current | ||||||||
Foreign exchange contracts | $ | 66 | $ | - | ||||
Fuel contracts | - | 401 | ||||||
Copper contracts | 10,128 | 9,136 | ||||||
10,194 | 9,537 | |||||||
Non-current | ||||||||
Foreign exchange contracts | 1,161 | - | ||||||
Fuel contracts | - | 1,381 | ||||||
Copper contracts | 29 | 1,761 | ||||||
1,190 | 3,142 | |||||||
Total derivative instrument liabilities | $ | 11,384 | $ | 12,679 |
Hedge Derivatives
The derivative instruments outstanding as at September 30, 2021 that are accounted for as hedges are summarized below:
Average Strike Price | Total | |||||||||||
Instrument | Unit | 2021 | 2022 | 2023 | Type | Position(1) | ||||||
Fuel hedge contracts | ||||||||||||
ULSD zero-cost collars | Barrels | $54/$60 | $62/$68 | $73/$78 | Fixed | 76,752 | ||||||
ULSD swap contracts | Barrels | $65 | $61 | $75 | Fixed | 104,004 | ||||||
Foreign exchange contracts | ||||||||||||
USD/C$ zero-cost collars | C$ | $1.33/$1.39 | $1.30/$1.37 | $1.23/$1.29 | Fixed | 305,400,000 | ||||||
USD/C$ forward contracts | C$ | $1.35 | $1.29 | $1.27 | Fixed | 196,000,000 | ||||||
Copper contracts | ||||||||||||
Copper zero-cost collars | Pounds | N/A | $3.59/$4.82 | N/A | Fixed | 34,612,534 | ||||||
Copper forward contracts | Pounds | $3.40 | N/A | N/A | Fixed | 12,897,027 |
(1) | Total amounts expressed in the units identified. |
Fuel Contracts
The Company applies hedge accounting to derivative instruments that hedge a portion of its estimated future diesel fuel purchases at its Mount Milligan Mine to manage the risk associated with changes in diesel fuel prices to the cost of operations at the Mount Milligan Mine. The fuel hedge contracts are expected to settle by the end of the third quarter of 2023.
20 |
Centerra Gold Inc.
Notes to the Condensed Consolidated Interim Financial Statements
(Unaudited)
(Expressed in thousands of United States dollars, except where otherwise indicated)
In the second quarter of 2021, the Company discontinued all hedge positions related to future fuel purchases at the Kumtor Mine after May 15, 2021. Unwinding these positions in the second quarter resulted in a realized gain on discontinuance of $14.2 million recognized in net earnings (loss) from discontinued operations in the condensed consolidated interim statements of earnings (loss) and comprehensive income (loss). To the extent the Kumtor Mine’s hedging relationship was discontinued but the positions were novated and re-assigned to the Mount Milligan Mine, the Company recognized an unrealized gain of $1.1 million in net earnings (loss) from discontinued operations in the condensed consolidated interim statements of earnings (loss) and comprehensive income (loss), representing an amount in accumulated other comprehensive income up to the date the hedges were novated.
Foreign Exchange Contracts
The Company applies hedge accounting to the foreign exchange contracts it enters to hedge a portion of its future Canadian denominated expenditures. The foreign exchange contracts are expected to settle by the end of the third quarter of 2023.
Copper Contracts
The Company applies hedge accounting to copper contracts. In the third quarter of 2021, the Company extended its copper hedge program by entering zero-cost option collars to hedge approximately 50% of the Mount Milligan Mine’s expected copper sales (net of sales under Royal Gold streaming arrangement) by the end of 2022. The new contracts are expected to settle by the end of 2022. Subsequent to September 30, 2021, the Company further extended its copper hedge program by entering zero-cost option collars to hedge an additional 20% of the Mount Milligan Mine’s expected copper sales (net of sales under the Royal Gold streaming arrangement) in 2022 and approximately 35% of the Mount Milligan Mine’s expected copper sales (net of sales under the Royal Gold streaming arrangement) in 2023.
The table below includes the effective portion of changes in the fair value of the derivatives contracts recognized in other comprehensive income (“OCI”) and the amounts reclassified to the condensed consolidated interim statements of earnings (loss).
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Fair value movement of derivative financial instruments | $ | 10,081 | $ | 4,131 | $ | 8,211 | $ | 4,258 | ||||||||
Reclassified to net earnings (loss) from continuing operations | (6,282 | ) | 1,851 | (27,633 | ) | 1,851 | ||||||||||
Reclassified to net earnings (loss) from discontinued operations | - | (1,077 | ) | 17,325 | (2,936 | ) | ||||||||||
Gain (loss) included in OCI | $ | 3,799 | $ | 4,905 | $ | (2,097 | ) | $ | 3,173 |
21 |
Centerra Gold Inc.
Notes to the Condensed Consolidated Interim Financial Statements
(Unaudited)
(Expressed in thousands of United States dollars, except where otherwise indicated)
Non-Hedge Derivatives
The non-hedge derivative instruments outstanding as at September 30, 2021 are expected to settle by the end of 2021, and are summarized as follows:
Total | ||||||||
Instrument | Unit | Type | Position(1) | |||||
Royal Gold deliverables | ||||||||
Gold forward contracts | Ounces | Float | 21,162 | |||||
Copper forward contracts | Pounds | Float | 3,388,501 |
(1) | Total amounts expressed in the units identified. |
b. | Provisionally-priced contracts |
Certain gold-copper concentrate sales contracts contain an embedded derivative and are marked to market at the end of each reporting period. As at September 30, 2021 the Company’s trade receivables with embedded derivatives had a fair value of $15.4 million (December 31, 2020 - $12.4 million), representing a mark-to-market adjustment on 13.2 million pounds of copper and 67,396 ounces of gold (December 31, 2020 - 13.8 million pounds of copper and 25,672 ounces of gold).
21. Fair value measurement
Classification and the fair value measurement by the level of financial assets and liabilities in the condensed consolidated interim statement of financial position were as follows:
September 30, 2021 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Financial assets | ||||||||||||||||
Marketable securities | $ | 1,875 | $ | - | $ | - | $ | 1,875 | ||||||||
Provisionally-priced receivables | - | 15,424 | - | 15,424 | ||||||||||||
Derivative financial instruments | - | 17,210 | - | 17,210 | ||||||||||||
$ | 1,875 | $ | 32,634 | $ | - | $ | 34,509 | |||||||||
Financial liabilities | ||||||||||||||||
Derivative financial instruments | $ | - | $ | 11,384 | $ | - | $ | 11,384 | ||||||||
Share-based compensation liability | 10,833 | - | - | 10,833 | ||||||||||||
$ | 10,833 | $ | 11,384 | $ | - | $ | 22,217 |
22 |
Centerra Gold Inc.
Notes to the Condensed Consolidated Interim Financial Statements
(Unaudited)
(Expressed in thousands of United States dollars, except where otherwise indicated)
December 31, 2020 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Financial assets | ||||||||||||||||
Marketable securities | $ | 3,485 | $ | - | $ | - | $ | 3,485 | ||||||||
Provisionally-priced receivables | - | 12,415 | - | 12,415 | ||||||||||||
Derivative financial instruments | - | 28,497 | - | 28,497 | ||||||||||||
$ | 3,485 | $ | 40,912 | $ | - | $ | 44,397 | |||||||||
Financial liabilities | ||||||||||||||||
Derivative financial instruments | $ | - | $ | 12,679 | $ | - | $ | 12,679 | ||||||||
Share-based compensation liability | 28,184 | - | - | 28,184 | ||||||||||||
$ | 28,184 | $ | 12,679 | $ | - | $ | 40,863 |
During the nine months ended September 30, 2021, there were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into or out of Level 3 fair value measurements.
22. Segmented information
The Company bases its operating segments on the way information is reported and used by the Company's chief operating decision-maker (“CODM”). The results of operating segments are reviewed by the CODM in order to make decisions about resources to be allocated to the segments and to assess their respective performances.
The results of mine sites or business units that have been discontinued or the Company does not operate or does not control, or for which a disposal plan has been initiated, are not reviewed on a prospective basis as they are not important for the future allocation of resources. In the second quarter of 2021, the Kumtor Mine was reclassified as a discontinued operation and consequently is no longer being reviewed by the CODM. The results of the Kumtor Mine are presented as part of net earnings (loss) from discontinued operations in the current and comparative periods.
23 |
Centerra Gold Inc.
Notes to the Condensed Consolidated Interim Financial Statements
(Unaudited)
(Expressed in thousands of United States dollars, except where otherwise indicated)
Three months ended September 30, 2021 | ||||||||||||||||||||||||
(Thousands of U.S. dollars) | Öksüt | Mount Milligan | Molybdenum | Total Segments | Corporate and other | Total | ||||||||||||||||||
Revenue | $ | 66,010 | $ | 99,609 | $ | 54,942 | $ | 220,561 | $ | - | $ | 220,561 | ||||||||||||
Cost of sales | ||||||||||||||||||||||||
Production costs | 17,926 | 57,426 | 46,289 | 121,641 | - | 121,641 | ||||||||||||||||||
Depreciation | 9,277 | 19,482 | 1,654 | 30,413 | - | 30,413 | ||||||||||||||||||
Earnings from mine operations | 38,807 | 22,701 | 6,999 | 68,507 | - | 68,507 | ||||||||||||||||||
Exploration and development costs | 1,398 | 1,183 | - | 2,581 | 4,016 | 6,597 | ||||||||||||||||||
Corporate administration | - | - | - | - | 8,881 | 8,881 | ||||||||||||||||||
Care and maintenance | - | - | 3,594 | 3,594 | 4,044 | 7,638 | ||||||||||||||||||
Reclamation recovery | - | - | (871 | ) | (871 | ) | - | (871 | ) | |||||||||||||||
Other operating expenses | 52 | 2,160 | 415 | 2,627 | - | 2,627 | ||||||||||||||||||
Earnings (loss) from operations | 37,357 | 19,358 | 3,861 | 60,576 | 43,635 | |||||||||||||||||||
Other non-operating expenses | 6,975 | 6,975 | ||||||||||||||||||||||
Finance costs | 694 | 694 | ||||||||||||||||||||||
Earnings before income tax | 35,966 | |||||||||||||||||||||||
Income tax expense | 8,383 | 8,383 | ||||||||||||||||||||||
Net earnings from continuing operations | 27,583 | |||||||||||||||||||||||
Net earnings | $ | 27,583 | ||||||||||||||||||||||
Additions to property, plant and equipment | $ | 3,382 | $ | 20,809 | $ | 272 | $ | 24,463 | $ | 345 | $ | 24,808 |
Centerra Gold Inc.
Notes to the Condensed Consolidated Interim Financial Statements
(Unaudited)
(Expressed in thousands of United States dollars, except where otherwise indicated)
Three months ended September 30, 2020 | ||||||||||||||||||||||||
(Thousands of U.S. dollars) | Öksüt | Mount Milligan | Molybdenum | Total Segments | Corporate and other | Total | ||||||||||||||||||
Revenue | $ | 97,624 | $ | 120,360 | $ | 33,263 | $ | 251,247 | $ | - | $ | 251,247 | ||||||||||||
Cost of sales | ||||||||||||||||||||||||
Production costs | 18,120 | 51,473 | 34,192 | 103,785 | - | 103,785 | ||||||||||||||||||
Depreciation | 8,280 | 20,768 | 1,716 | 30,764 | - | 30,764 | ||||||||||||||||||
Earnings (loss) from mine operations | 71,224 | 48,119 | (2,645 | ) | 116,698 | - | 116,698 | |||||||||||||||||
Exploration and development costs | 664 | 2,366 | - | 3,030 | 8,094 | 11,124 | ||||||||||||||||||
Corporate administration | - | - | - | - | 6,439 | 6,439 | ||||||||||||||||||
Care and maintenance | - | - | 3,314 | 3,314 | 4,556 | 7,870 | ||||||||||||||||||
Reclamation expense | - | - | 533 | 533 | - | 533 | ||||||||||||||||||
Other operating expenses | 13 | 2,278 | 641 | 2,932 | - | 2,932 | ||||||||||||||||||
Earnings (loss) from operations | 70,547 | 43,475 | (7,133 | ) | 106,889 | 87,800 | ||||||||||||||||||
Other non-operating expenses | 101 | 101 | ||||||||||||||||||||||
Finance costs | 1,754 | 1,754 | ||||||||||||||||||||||
Earnings before income tax | 85,945 | |||||||||||||||||||||||
Income tax expense | 3,548 | 3,548 | ||||||||||||||||||||||
Net earnings from continuing operations | 82,397 | |||||||||||||||||||||||
Net earnings from discontinued operations | 123,346 | |||||||||||||||||||||||
Net earnings | $ | 205,743 | ||||||||||||||||||||||
Additions to property, plant and equipment(1) | $ | 9,852 | $ | 9,059 | $ | 1,570 | $ | 20,481 | $ | 8,851 | $ | 29,332 |
(1) | Excludes additions to property, plant and equipment related to discontinued operations of $50.1 million. |
Centerra Gold Inc.
Notes to the Condensed Consolidated Interim Financial Statements
(Unaudited)
(Expressed in thousands of United States dollars, except where otherwise indicated)
Nine months ended September 30, 2021 | ||||||||||||||||||||||||
(Thousands of U.S. dollars) | Öksüt | Mount Milligan | Molybdenum | Total Segments | Corporate and other | Total | ||||||||||||||||||
Revenue | $ | 142,550 | $ | 363,301 | $ | 143,208 | $ | 649,059 | $ | - | $ | 649,059 | ||||||||||||
Cost of sales | ||||||||||||||||||||||||
Production costs | 40,743 | 186,790 | 128,158 | 355,691 | - | 355,691 | ||||||||||||||||||
Depreciation | 22,380 | 62,168 | 4,913 | 89,461 | - | 89,461 | ||||||||||||||||||
Earnings from mine operations | 79,427 | 114,343 | 10,137 | 203,907 | - | 203,907 | ||||||||||||||||||
Exploration and development costs | 2,097 | 4,520 | - | 6,617 | 12,202 | 18,819 | ||||||||||||||||||
Corporate administration | - | - | - | - | 19,676 | 19,676 | ||||||||||||||||||
Care and maintenance | - | - | 10,293 | 10,293 | 10,179 | 20,472 | ||||||||||||||||||
Reclamation expense | - | - | (913 | ) | (913 | ) | - | (913 | ) | |||||||||||||||
Other operating expenses | 144 | 8,457 | 1,791 | 10,392 | - | 10,392 | ||||||||||||||||||
Earnings (loss) from operations | 77,186 | 101,366 | (1,034 | ) | 177,518 | 135,461 | ||||||||||||||||||
Gain on sale of Greenstone Partnership | (72,274 | ) | (72,274 | ) | ||||||||||||||||||||
Other non-operating expenses | 14,067 | 14,067 | ||||||||||||||||||||||
Finance costs | 4,001 | 4,001 | ||||||||||||||||||||||
Earnings before income tax | 189,667 | |||||||||||||||||||||||
Income tax expense | 17,598 | 17,598 | ||||||||||||||||||||||
Net earnings from continuing operations | 172,069 | |||||||||||||||||||||||
Net loss from discontinued operations | (828,717 | ) | ||||||||||||||||||||||
Net loss | $ | (656,648 | ) | |||||||||||||||||||||
Additions to property, plant and equipment(1) | $ | 15,609 | $ | 54,822 | $ | 1,122 | $ | 71,553 | $ | 455 | $ | 72,008 |
(1) | Excludes additions to property, plant and equipment related to discontinued operations of $95.7 million. |
Centerra Gold Inc.
Notes to the Condensed Consolidated Interim Financial Statements
(Unaudited)
(Expressed in thousands of United States dollars, except where otherwise indicated)
Nine months ended September 30, 2020 | ||||||||||||||||||||||||
(Thousands of U.S. dollars) | Öksüt | Mount Milligan | Molybdenum | Total Segments | Corporate and other | Total | ||||||||||||||||||
Revenue | $ | 112,195 | $ | 291,665 | $ | 105,404 | $ | 509,264 | $ | - | $ | 509,264 | ||||||||||||
Cost of sales | ||||||||||||||||||||||||
Production costs | 21,446 | 169,376 | 119,942 | 310,764 | - | 310,764 | ||||||||||||||||||
Depreciation | 8,873 | 56,706 | 5,192 | 70,771 | - | 70,771 | ||||||||||||||||||
Earnings (loss) from mine operations | 81,876 | 65,583 | (19,730 | ) | 127,729 | - | 127,729 | |||||||||||||||||
Exploration and development costs | 664 | 4,461 | 12 | 5,137 | 17,224 | 22,361 | ||||||||||||||||||
Corporate administration | - | - | - | - | 28,324 | 28,324 | ||||||||||||||||||
Care and maintenance | - | - | 9,782 | 9,782 | 11,950 | 21,732 | ||||||||||||||||||
Reclamation expense | - | - | 44,038 | 44,038 | - | 44,038 | ||||||||||||||||||
Other operating expenses | 17 | 7,010 | 1,839 | 8,866 | - | 8,866 | ||||||||||||||||||
Earnings (loss) from operations | 81,195 | 54,112 | (75,401 | ) | 59,906 | 2,408 | ||||||||||||||||||
Other non-operating expenses | 4,425 | 4,425 | ||||||||||||||||||||||
Finance costs | 8,618 | 8,618 | ||||||||||||||||||||||
Loss before income tax | (10,635 | ) | ||||||||||||||||||||||
Income tax expense | 4,804 | 4,804 | ||||||||||||||||||||||
Net loss from continuing operations | (15,439 | ) | ||||||||||||||||||||||
Net earnings from discontinued operations | 328,766 | |||||||||||||||||||||||
Net earnings | $ | 313,327 | ||||||||||||||||||||||
Additions to property, plant and equipment(1) | $ | 30,852 | $ | 22,068 | $ | 3,491 | $ | 56,411 | $ | 18,504 | $ | 74,915 | ||||||||||||
(1) | Excludes additions to property, plant and equipment related to discontinued operations of $176.4 million. |