Centerra Gold Repays $112 Million of Debt in Third Quarter 2017 and Generates $62 Million Free Cash Flow(NG)

TORONTO, ON—(Marketwired – October 31, 2017) –

This news release contains forward–looking information that is subject to the risk factors and assumptions set out under “Caution Regarding Forward–looking Information”. It should be read in conjunction with the Company's unaudited interim condensed consolidated financial statements and the notes thereto for the three and nine month period ended September 30, 2017. The consolidated financial statements of Centerra are prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. All figures are in United States dollars unless otherwise stated.

All references in this document denoted with NG, indicate a non–GAAP term which is discussed under “Non–GAAP Measures”.

Centerra Gold Inc. (TSX: CG) today reported a net loss of $0.8 million or $nil per common share (basic) on revenues of $276.2 million in the third quarter of 2017. The third quarter 2017 result includes a one–time charge of $60 million ($0.20 per share) as a result of the settlement reached with the Government of the Kyrgyz Republic and a gain from proceeds received of $9.8 million ($6.9 million net of tax or $0.02 per share) on the sale of the ATO property in Mongolia. Excluding these items, adjusted earningsNG in the third quarter 2017 were $52.3 million or $0.18 per common share (basic). During the same period in 2016, the Company reported net earnings (and adjusted earningsNG) of $66.9 million or $0.28 per common share (basic) on revenues of $218.7 million.

The Company's results include Thompson Creek operations for the three and nine months ended September 30, 2017. Comparative results for the same periods in 2016 do not include Thompson Creek operations, as the Company closed the acquisition of Thompson Creek Metals Company Inc. on October 20, 2016.

2017 Third Quarter Highlights

  • Entered into a comprehensive settlement agreement with the Government of the Kyrgyz Republic to resolve all the outstanding matters affecting the Kumtor Project. Closing expected in the fourth quarter.
  • Repaid $111.9 million of debt in the quarter under the Company's credit facilities.
  • Produced a total of 200,201 ounces of gold, including 138,561 ounces at Kumtor and 61,640 ounces at Mount Milligan.
  • Sold a total of 174,099 ounces of gold in the quarter, including 99,514 ounces at Kumtor and 74,585 ounces at Mount Milligan. Kumtor's gold sales to the refinery were limited in the quarter.
  • Mount Milligan produced 13.7 million pounds of copper during the period and sold 18.6 million pounds of copper.
  • Company–wide all–in sustaining costs on a by–product basis per ounce soldNG for the third quarter were $722, excluding revenue–based tax in the Kyrgyz Republic and income tax.
  • Cash generated from operations totaled $119.5 million.
  • Cash provided by operating activities before changes in working capitalNG of $108.0 million (including $74.3 million from Kumtor and $48.0 million from Mount Milligan).
  • Cash, cash equivalents and short–term investments at September 30, 2017 was $352.1 million.
  • Gold doré inventory held at Kumtor as of September 30, 2017 valued at market at $53.4 million.
  • Revised Company–wide gold production guidance for 2017 to 775,000 to 815,000 ounces reflecting increased production guidance at Kumtor and lower payable gold production guidance at Mount Milligan.
  • Completed an updated feasibility study on the Gatsuurt Project which shows total open pit mineral reserves of 1.3 million contained ounces of gold (15.4 million tonnes at an average gold grade of 2.7 grams per tonne gold), using a gold price assumption of $1,250 per ounce of gold.

Commentary
Scott Perry CEO of Centerra Gold stated, “During the third quarter both of our operating sites completed the deployment of our Company–wide safety leadership program “Work Safe, Home Safe” with every employee. For the rest of the year we will continue to deploy the program at the balance of our sites, so that by year–end every Centerra employee will have received training.”

“In the quarter, we achieved an important milestone when we reached a comprehensive settlement agreement with the Government of the Kyrgyz Republic to resolve all of the outstanding matters affecting the Kumtor Project. The settlement provides for the lifting of all restrictions on the freedom of movement of Kumtor employees as well as the restrictions on the ability of Kumtor to distribute funds to Centerra. The agreement also provides business certainty for future mining operations at the Kumtor Project, as it preserves all rights of Centerra and Kumtor under the Kumtor Project Agreements.”

“Operationally, we had a good quarter producing 200,201 ounces of gold and 13.7 million pounds of copper at a low all–in sustaining cost on a by–product basis of $722 per ounce soldNG, reflecting Mount Milligan achieving all–in sustaining costs on a by–product basis per ounce soldNG (before tax) of $437.”

“Financially, both operations generated a significant amount of cash from operations before working capital changesNG during the quarter, Mount Milligan generated $48.0 million and Kumtor generated $74.3 million.”

“The lifting of Kumtor's cash restriction along with the positive cash flow generated from both our operations during the quarter enabled the Company to aggressively pay down its debt by approximately $112 million. Looking forward to the fourth quarter, our production levels are expected to increase which means the Company's cash position should continue to grow as the operations continue to generate positive cash flows. We are well positioned to achieve our updated production and cost guidance for the year, ranking the Company in the lower–cost quartile on the global gold producers All–In Sustaining Cost curve.”

Management Changes
The Company also announces that Frank Herbert, President of Centerra, will be retiring at December 31, 2017. Mr. Herbert joined Centerra in 2004 as General Counsel and was named President in 2015. In recognition of Frank's service, Stephen Lang, Chairman of Centerra, stated, “On behalf of the Board of Directors and the Company, I thank Frank for his leadership, hard work and integrity as well as his thoughtful advice and contributions to the strategic direction of the Company during his many years of service, particularly in the area of government relations and negotiations with the Kyrgyz Republic and Mongolia. We wish Frank well in his retirement.”

As part of the Company's succession plan, Mr. Yousef Rehman, Senior Legal Counsel, will be promoted to General Counsel. Mr. Herbert will work with Mr. Rehman to ensure a smooth transition. Yousef joined Centerra in 2013. Prior to joining Centerra, Yousef worked in the private sector and with Stikeman Elliott LLP on M&A and securities transactions. Since joining Centerra, Yousef has been involved in all of the Company's significant strategic initiatives, including the acquisition of Thompson Creek Minerals and the recently announced Strategic Agreement with the Kyrgyz Republic. Yousef holds undergraduate and law degrees from the University of Toronto and was called to the Ontario Bar in 2007. Additionally, upon Mr. Herbert's retirement, Scott Perry, CEO of Centerra, will take on the added title of President of Centerra. Mr. Perry joined Centerra and was named CEO in 2015.

Exploration Update
Exploration activities during the third quarter included drilling, geological mapping, soil/chip and channel sampling, and geophysics at the Company's various projects. Exploration expenditures for the third quarter of 2017 totalled $2.5 million compared to $3.5 million in the same period of 2016 ($6.6 million in the first nine months of 2017 compared to $8.6 million in the comparative period of 2016).

During the quarter, drilling activities were initiated at the Northern and Southern Siuna Project in Nicaragua (Calibre JV), the Klippen and Käringberget project areas in Sweden (Erris Resources JV) and the Kapyut Project in Armenia (100% owned). At the Yamaç Project in Turkey (100% owned) a drill program is expected to commence in the fourth quarter 2017. Centerra continues to advance other exploration opportunities in Turkey, Armenia, Canada, Mexico, Nicaragua and Sweden.

Brownfields Exploration
Turkey
Öksüt Gold Project
Drilling activities continued during the quarter at Öksüt with 12 drill holes completed for 1,870 metres, at a cost of $0.3 million ($0.6 million in the first nine months of 2017). The in–pit infill diamond drill holes were encouraging for both the Keltepe and Güneytepe deposits with some of the better intervals being:

Keltepe (in pit)
ODD0290 from 81.8 to 231.2 metres; 148.9 metres @ 2.41 g/t gold (“Au”) including 38.3 metres @ 5.96 g/t Au from 111 to 149.3 metres.

ODD0291 from 71.6 to 209.4 metres; 137.3 metres @ 1.47 g/t Au including 5.5 metres @ 2.48 g/t Au and 65.4 metres @ 2.32 g/t Au

Güneytepe (in pit)
ODD0281 from the surface; 80.8 metres @ 1.23 g/t Au
ODD0282 from 21.9 to 71.5 metres 49.6 metres @ 0.58 g/t Au including 12 metres @1.28 g/t Au
ODD0283 from the surface; 42.3 metres @ 1.07 g/t Au
ODD0284 from 72.5 to 83.7 metres 11.2 metres @ 0.35 g/t Au

These results will be incorporated into the year–end reserves/resources update.

The 2017 objectives for the 3,000 metres drill program were to upgrade the resources at Keltepe and Güneytepe, as well as to confirm oxide mineralization at Keltepe NW, Yelibelen and Büyüktepe target areas. The success of the infill drilling at both Keltepe and Güneytepe has warranted an additional 1,000 metres to be added to the 2017 drill program to improve the resource model and to close off Güneytepe mineralization.

The above mineralized intercepts were calculated using a cut–off grade of 0.2 g/t Au and a maximum internal dilution interval of 5.0 metres. Drill collar locations and associated graphics are available at the following link: http://media3.marketwire.com/docs/CGQ32017LOC.pdf

A listing of the drill results, drill hole locations and plan map for the Öksüt Project have been filed on the System for Electronic Document Analysis and Retrieval ('SEDAR') at www.sedar.com and are available at the Company's web site www.centerragold.com.

Canada
Mount Milligan Mine
A near pit drilling program (within the ultimate open pit) was completed in the third quarter for a total of 3,168 metres in six diamond drill holes. Drilling costs in the third quarter and first nine months of 2017 were $0.5 million and were charged to operating costs. Results for three holes were available at the end of the quarter. Intersected mineralization and some of the better results are:

17–039 from 103 to 151 metres; 48 metres @ 0.23 g/t Au, 0.25% Cu
17–040 from 164 to 198 metres; 34 metres @ 0.39 g/t Au, 0.38% Cu
17–041 from 46 to 134 metres; 88 metres @ 0.27 g/t Au, 0.16% Cu

These results, along with the results from the remainder of the planned program (3,650 metres), will be incorporated into the year–end reserves/resources update.

The above mineralized intercepts were calculated using a cut–off grade of 0.1 g/t Au and a maximum internal dilution interval of 4 metres. Drill collar locations and associated graphics are available at the following link: http://media3.marketwire.com/docs/CGQ32017LOC.pdf

A listing of the drill results, drill hole locations and plan map for the Mount Milligan Mine have been filed on the System for Electronic Document Analysis and Retrieval ('SEDAR') at www.sedar.com and are available at the Company's web site www.centerragold.com.

Qualified Person & QA/QC – Exploration
Exploration information and other related scientific and technical information in this news release regarding the Öksüt Project were prepared in accordance with the standards of the Canadian Institute of Mining, Metallurgy and Petroleum and National Instrument 43–101 (NI 43–101) and were prepared, reviewed, verified and compiled by Mustafa Cihan, Member of the Australian Institute of Geoscientists (AIG), Exploration Manager at Centerra's Turkish subsidiary Öksüt Madencilik A.Ş., who is the qualified person for the purpose of NI 43–101. Sample preparation, analytical techniques, laboratories used and quality assurance–quality control protocols used during the exploration drilling programs are done consistent with industry standards and independent certified assay labs are used.

Exploration information and other related scientific and technical information in this news release regarding the Mount Milligan Mine were prepared in accordance with the standards of NI 43–101 and were prepared, reviewed, verified and compiled by C. Paul Jago, Member of the Engineers and Geoscientists British Columbia, Exploration Manager at Centerra's Mount Milligan Mine, who is the qualified person for the purpose of NI 43–101. Sample preparation, analytical techniques, laboratories used and quality assurance–quality control protocols used during the exploration drilling programs are done consistent with industry standards and independent certified assay labs are used.

Gastuurt Project Update
In October 2017, the Company completed a feasibility study for the Gatsuurt Project (“the Feasibility Study”) located in central northern Mongolia. The Feasibility Study incorporates results from the technical and economic studies initiated in 2016, further optimization studies completed in 2017, updated capital and operating costs and the current Mongolian tax and royalty regime.

Highlights of the Feasibility Study:

  • Total open–pit mineral reserves of 1.3 million contained ounces of gold (15.4 million tonnes at an average gold grade of 2.7 grams per tonne gold (g/t Au) using a gold price assumption of $1,250 per ounce;
  • Mineral reserves consist of 339,000 contained ounces of gold in oxide material (4.9 million tonnes grading 2.2 g/t Au) and 977,000 contained ounces of gold in refractory sulphide material (10.5 million tonnes grading 2.9 g/t Au);
  • Life–of–mine (“LOM”) gold production of 1.1 million ounces and 10 years of operations; average annual gold production of 111,000 ounces;
  • Mill throughput of 4,800 tonnes per day (tpd) with average LOM mill head grade of 2.7 g/t Au and 84.4% recovery;
  • Planned conventional open pit and contract mining;
  • LOM strip ratio of 4.7:1 (waste: ore);
  • Total LOM construction capital cost of $245 million, includes Boroo mill refurbishment ($8 million), upgrades to the existing 55 km haul road ($14 million), a new 110kv and 35kv power line ($12 million), expansion of the existing tailings management facility ($21 million), water diversion and treatment ($10 million), the addition of flotation circuit, BIOX® plant and CIP plant ($95 million), owner's costs ($28 million) and a contingency of $27 million;
  • Total LOM sustaining capitalNG of $36.6 million excluding closure costs of $13.9 million;
  • LOM all–in sustaining costNG of $870 per ounce sold; after inclusion of growth capitalNG, LOM all–in costNG (excluding taxes) is $1,103 per ounce sold;
  • After–tax payback period of 7 years; and
  • After–tax net present value of (NPV) at 5% discount rate of $39.4 million, and an after–tax 9.3% project internal rate of return (“IRR”) on a pre–finance basis.

The Company has not made a development or construction decision on the Gatsuurt Project and expects to restart negotiations with the Mongolian Government based on the results of the Gatsuurt Feasibility Study.

The economic analysis in the Feasibility Study is based on the current Mongolian tax and royalty regime which includes a 25% income tax, a government royalty of 9%, a 3% estimated special royalty to the Mongolian Government and a 3% royalty held by a previous owner of the Gatsuurt Project. The Feasibility Study and LOM plan are subject to a number of assumptions and risks noted in the Material Assumptions and Risks Section (stated below).

 
Gatsuurt Mineral Resource and Reserve Summary
Mineral Reserves 1
Classification Tonnes ('000) Grade (Au g/t) Ounces (000)
Probable 15,356 2.7 1,316
  1. The mineral reserve has been calculated using a gold price of $1,250 per ounce and have been validated by the positive project NPV that uses a 5% discount rate.
 
Mineral Resources (Exclusive of Mineral Reserves) 1
Classification Tonnes ('000) Grade (Au g/t) Ounces (000)
Indicted 10,988 1.9 678
Classification Tonnes ('000) Grade (Au g/t) Ounces (000)
Inferred 3,812 2.1 263
  1. The mineral resources are exclusive of mineral reserves and have estimated on the basis of a gold price of $1,450 per ounce. The resources have been constrained by an economic open pit in accordance with CIM best practices.

The Feasibility Study plan for mining is to occur in two phases, initially targeting the oxide material that can be milled at the existing Boroo processing facility followed by the refractory sulphide material which requires the addition of a BIOX® circuit. The processing plan is to refurbish the existing Boroo mill to process the oxide material in the first three years while the BIOX® circuit is being constructed which will treat the refractory sulphide material in years 4 through 10. Initial capital expenditures for the processing of the oxide material are expected to be approximately $76 million excluding contingency of $8 million.

The LOM operating cost estimates used in the Feasibility Study on a per tonne processed basis are: mining $10.97, ore haulage $5.37, oxide processing $11.90, sulphide processing $26.42 and administration $8.92.

A technical report for the Gatsuurt Project will be prepared in accordance with National Instrument 43–101 and will be filed on SEDAR at www.sedar.com and on the Company's websites before year–end.

Material Assumptions & Risks
Material assumptions or factors that have been used in the Mineral Reserve and Mineral Resource estimates and the Gatsuurt Feasibility Study and LOM plan include the following:

  • A gold price of $1,250 per ounce,
  • An exchange rate of 2,200 MNT: US$1.

Other important assumptions (and corresponding risks) that are implicit in the Mineral Reserve and Mineral Resource estimates and Gatsuurt Feasibility Study and LOM plan are as follows:

  • All necessary permits, licenses, and approvals, including the EA/EIS and waste dump footprints, are received in a timely manner;
  • All licenses held by Centerra in relation to the Gatsuurt Project and all related administrative acts remain in good standing and are not revoked.
  • Ore tonnes, grade and metallurgical recoveries at the Gatsuurt Project remain consistent with the LOM plan to achieve the forecast gold production;
  • Tax and royalty rates remain at current levels for the life of the project;
  • Power and water supply will remain uninterrupted during operations;
  • No unplanned delays in or interruption of scheduled production at the Gatsuurt Project, including due to labour disruptions, civil unrest, natural phenomena, regulatory or political disputes, equipment breakdown, or other developmental and operational risks; and
  • The Gatsuurt Project does not make allowance for inflation, changes in exchange rates and movements in gold prices.

Production and cost forecasts and capital estimates are forward–looking information and are based on key assumptions and subject to material risk factors.

Qualified Person & QA/QC
The feasibility study was undertaken by Centerra staff with the assistance of several external consultants. Reserve and resource estimates, life–of–mine plan and other scientific and technical information in this news release were prepared in accordance with the standards of the Canadian Institute of Mining, Metallurgy and Petroleum and National Instrument 43–101 – Standards of Disclosure for Mineral Projects (“NI–43–101″) and were reviewed, verified and compiled by Centerra's geological and mining staff under the supervision of Gordon Reid, Professional Engineer and Centerra's Vice–President and Chief Operating Officer, who is the qualified person for the purpose of NI–43–101. Sample preparation, analytical techniques, laboratories used and quality assurance–quality control protocols used during the exploration drilling programs on the Gatsuurt Project have been done consistent with industry standards and independent certified assay labs have been used. Available quality control data indicates that the gold assay data used for resource estimation are reliable.

This Management Discussion and Analysis (“MD&A”) has been prepared as of October 31, 2017, and is intended to provide a review of the financial position and results of operations of Centerra Gold Inc. (“Centerra” or the “Company”) for the three and nine months ended September 30, 2017 in comparison with the corresponding period ended September 30, 2016. This discussion should be read in conjunction with the Company's unaudited condensed consolidated interim financial statements and the notes thereto for the three and nine months ended September 30, 2017. This MD&A should also be read in conjunction with the Company's audited annual consolidated financial statements for the years ended December 31, 2016 and 2015, the related MD&A and the Annual Information Form for the year ended December 31, 2016 (the “2016 Annual Information Form”). The Company's unaudited condensed consolidated interim financial statements and the notes thereto for the three and nine months ended September 30, 2017, 2016 Annual Report and 2016 Annual Information Form are available at www.centerragold.com and on the System for Electronic Document Analysis and Retrieval (“SEDAR”) at www.sedar.com. The consolidated financial statements of Centerra are prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. All figures are in United States dollars unless otherwise stated.

All references in this document denoted with NG, indicate a non–GAAP term which is discussed under “Non–GAAP Measures”.

1. Overview

Centerra is a gold mining company focused on operating, developing, exploring and acquiring gold properties in North America, Asia, and other markets worldwide. Centerra is a leading Canadian–based gold producer and is one of the largest Western–based gold producers in Central Asia. Centerra's principal operations are the Kumtor Mine located in the Kyrgyz Republic and the Mount Milligan Mine located in British Columbia, Canada.

The Company's significant wholly–owned subsidiaries include Kumtor Gold Company (“KGC” or “Kumtor”) in the Kyrgyz Republic, Thompson Creek Metals Company Inc. (“Thompson Creek”) in Canada, Langeloth Metallurgical Company LLC (“Langeloth”) and Thompson Creek Mining Co. in the United States of America , Öksüt Madencilik Sanayi vi TicaretA.S. (“OMAS”) in Turkey and Boroo Gold LLC and Centerra Gold Mongolia LLC (“CGM”) in Mongolia. Additionally, the Company holds, through Thompson Creek, a 75% joint venture interest in the Endako Mine in British Columbia, Canada. It also owns a 50% partnership interest in Greenstone Gold Mines LP (the “Greenstone Partnership”) which owns the Greenstone Gold development property including the Hardrock deposit, located in Ontario, Canada. See “Operating Mines and Facilities”, “Development Projects” and “Other Corporate Developments” for further details.

The Company also has agreements to earn interests in joint venture exploration properties located in Canada, Mexico, Sweden and Nicaragua.

The Company's results include Thompson Creek operations for the three and nine months ended September 30, 2017. Comparative results for the same periods in 2016 do not include Thompson Creek operations, as the Company closed the acquisition of Thompson Creek Metals Company Inc. on October 20, 2016.

Centerra's shares trade on the Toronto Stock Exchange (TSX) under the symbol CG. The Company is headquartered in Toronto, Ontario, Canada.

2. Market Conditions

Gold Price
During the third quarter of 2017, the spot gold price fluctuated between a low of $1,211 per ounce and a high of $1,346 per ounce. The average spot gold price for the third quarter was $1,278 per ounce, a decrease of $57 per ounce from the third quarter of 2016 average ($1,335 per ounce), and a $21 per ounce increase compared to the second quarter of 2017 average ($1,257 per ounce).

Copper Price
The average spot copper price for the quarter was $2.88 per pound, a $0.71 per pound increase compared to the third quarter of 2016 average of $2.17 per pound, and a $0.31 per pound increase compared to the second quarter of 2017 ($2.57 per pound).

Spot copper prices reached a 52–week record high of $3.13 per pound during the third quarter of 2017 with prices continuing to rise at the beginning of the fourth quarter.

Foreign Exchange Rates

USD to CAD
The average U.S. dollar exchange rate for the third quarter of 2017 (1.25) weakened by 4% when compared to the average of the third quarter of 2016 (1.30), with rates in the third quarter of 2017 ranging from 1.21 to 1.30 and averaging 1.25. The Bank of Canada executed two successive domestic interest rate hikes in July and September, raising the key overnight rate target from 0.5% to 1.0%. The Canadian dollar peaked in early September following news that Canadian second quarter growth was 4.5%, with the USD/CAD exchange rate briefly dipping below 1.21.

USD to Kyrgyz Som
The average U.S. dollar exchange rate for the third quarter of 2017 was consistent with the average of the second quarter of 2016 (68.2), with rates in the third quarter of 2017 ranging from 68.3 to 69.6 and averaging 68.9. The Kyrgyz som continues to be influenced by the strengthening of currencies of the Kyrgyz Republic's main trading partners – mainly Russia. The strengthening in the Russian ruble reflects higher oil prices and an improving economic situation.

Foreign Exchange Transactions
The Company receives its revenues through the sale of gold, copper and molybdenum in U.S. dollars. The Company has operations in the Canada, where the Mount Milligan Mine and its corporate head office are also located, Kyrgyz Republic, Turkey, Mongolia and the United States of America. During the first nine months of 2017, the Company incurred combined expenditures (including capital) totalling approximately $856 million. Approximately $411 million of this (48%) was in currencies other than the U.S. dollar. Centerra's non–U.S. dollar costs includes 50% in Canadian dollars, 42% in Kyrgyz soms, 4% in Euros, and 1% in Turkish lira. The average value of the Turkish lira depreciated against the U.S. dollar by approximately 2% from its value at December 31, 2016. The Euro, Canadian dollar, British pound, Mongolian tugrik and Kyrgyz som appreciated against the U.S. dollar by approximately 5%, 3%, 3%, 2% and 1%, respectively, from their value at December 31, 2016. The net impact of these movements in the nine months ended September 30 2017, after taking into account currencies held at the beginning of the year, was to increase annual costs by $6.3 million (increase of $13.6 million in the nine months ended September 30 2016), inclusive of an foreign exchange gain on derivatives of $1.2 million (nil for the nine months ended September 30 2016).

3. Consolidated Highlights Summary

                     
                     
($ millions, except as noted)   Three months ended
September 30,
  Nine months ended
September 30,
Financial Highlights   2017   2016 (6) % Change   2017   2016 (6) % Change
Revenue $ 276.2   218.7 26% $ 840.8   452.0 86%
Cost of sales   164.2   96.5 70%   501.3   244.4 105%
Earnings from mine operations   105.5   120.1 (12%)   321.9   199.2 62%
Corporate administration   12.6   5.9 113%   31.6   18.5 71%
Asset Impairment (net of tax)     100%   39.7   100%
Kyrgyz Republic settlement   60.0   100%   60.0   100%
Gain on sale of ATO (net of tax)   (6.9)   100%   (6.9)   100%
Thompson Creek Metals Inc. acquisition and integration expenses   0.0   0.0 100%   0.0   100%
                     
Net earnings (loss) $ (0.8) $ 66.9 (101%) $ 79.6 $ 87.9 –10%
Adjusted earnings (3)(4)   52.3   66.9 (22%)   172.4   87.9 96%
                     
Cash provided by operations   119.5   134.4 (11%)   330.5   201.0 64%
Cash provided by operations before changes in working capital (4)   108.0   119.3 (9%)   352.7   205.7 71%
Capital expenditures (sustaining) (4)   23.8   13.0 83%   62.5   49.9 25%
Capital expenditures (growth) (4)   5.2   4.7 11%   11.0   18.2 (40%)
Capital expenditures (stripping)   41.5   38.7 7%   168.4   78.4 115%
                     
Total assets $ 2,656.7   1,922.5 38% $ 2,656.7   1,922.5 38%
Long–term debt and long–term lease obligation   271.6   100%   271.6   100%
Cash, short–term investments and restricted cash   352.9   747.0 (53%)   352.9   747.0 (53%)
                     
Share Data                    
Earnings per common share – $ basic (1)(3) $ 0.00   0.28 $ 0.27   0.36 (25%)
Earnings per common share – $ diluted (1)(3) $ 0.00   0.28 $ 0.27   0.35 (23%)
Adjusted earnings per common share – $ basic (1)(3) $ 0.18   0.28 (36%) $ 0.59   0.36 64%
Adjusted earnings per common share – $ diluted (1)(3) $ 0.18   0.28 (36%) $ 0.59   0.35 69%
                     
Per Ounce Data (except as noted)                    
Average gold spot price – $/oz(2)   1,278   1,335 (4%)   1,252   1,260 (1%)
Average copper spot price – $/lbs(2)   2.88   100%   2.70   100%
Average realized gold price (Kumtor) – $/oz(4)   1,249   1,327 (6%)   1,237   1,275 (3%)
Average realized gold price (Mount Milligan – combined) – $/oz(4)   998   100%   1,003   100%
Average realized gold price (Consolidated) – $/oz(4)   1,142   1,327 (14%)   1,160   1,275 (9%)
                     
Operating Highlights                    
Gold produced – ounces poured   200,201   166,030 21%   568,564   350,199 62%
Gold sold – ounces sold   174,099   164,847 6%   550,238   354,500 55%
Payable Copper Produced (000's lbs)   13,677   100%   41,335   100%
Copper Sales (000's payable lbs)   18,644   100%   46,613   100%
                     
Operating costs (on a sales basis) (4) (5)   89.3   45.2 98%   259.4   124.3 109%
                     
Unit Costs                    
Operating costs (on a sales basis) – $/oz sold (4) (5) $ 513   274 87% $ 471   350 34%
Adjusted operating costs on a by–product basis – $/oz sold(4)(5) $ 329 $ 303 9% $ 336 $ 390 (14%)
Gold – All–in sustaining costs on a by–product basis – $/oz sold(4)(5) $ 722 $ 591 22% $ 739 $ 748 (1%)
Gold – All–in sustaining costs on a by–product basis (including taxes) – $/oz sold(4) (5) $ 849 $ 779 9% $ 863 $ 929 (7%)
                     
Gold – All–in sustaining costs on a co–product basis (before taxes) – $/oz sold(4)(5) $ 805 $ 591 36% $ 796 $ 748 6%
Copper – All–in sustaining costs on a co–product basis (before taxes) – $/pound sold(4)(5) $ 1.70 $ $ 1.68 $
                     
  1. As at September 30, 2017, the Company had 291,780,532 common shares issued and outstanding (291,782,075 common shares as of October 31, 2017). As of October 31, 2017, Centerra had 4,747,700 share options outstanding under its share option plan with exercise prices ranging from Cdn$3.82 per share to US$36.74 per share, with expiry dates between 2017 and 2024.
  2. Average for the period as reported by the London Bullion Market Association (US dollar Gold P.M. Fix Rate) and London Metal Exchange (LME). This is a non–GAAP measure and is discussed under “Non–GAAP Measures”.
  3. Adjusted earnings per common share (basic and diluted) for three and nine months ended September 30, 2017 were $0.18 and $0.59 respectively.
  4. Adjusted net earnings, adjusted earnings per common shares (basic and diluted), capital expenditures (sustaining and growth), operating costs (on a sales basis), adjusted operating costs per ounce sold, gold all–in sustaining costs on a by–product or co–product basis (excluding and including taxes) per ounce sold, gold all–in sustaining costs on a co–product or co–product basis (including taxes) per ounce sold, copper all–in sustaining costs on a co–product or co–product basis (including taxes) per ounce sold, cash provided by operation before changes in working capital, as well as average realized gold price per ounce and average realized copper price per pound are non–GAAP measures and are discussed under “Non–GAAP Measures”.
  5. Excludes Molybdenum business.
  6. No comparative results for Thompson Creek operations have been presented.
  1. Overview of Consolidated Results

Third Quarter 2017 compared to Third Quarter 2016
The Company recorded a net loss of $0.8 million in the third quarter of 2017, compared to net earnings of $66.9 million in the comparative quarter of 2016, reflecting 40% fewer gold ounces sold at Kumtor, as Kumtor had 17% lower gold production and limited its shipments of gold to Kyrgyzaltyn starting in September 2017 due to concerns about the financial stability of Kyrgyzaltyn's off–take bank which purchases the refined gold from Kyrgyzaltyn, lower average realized gold pricesNG, the acquisition of the Mount Milligan operations and a one–time charge for a settlement reached with the Kyrgyz Government of $60 million and a gain of $9.8 million ($6.9 million net of tax) on the sale of the ATO property in Mongolia. Excluding these one–time items, adjusted earningsNG in the third quarter of 2017 were $52.3 million compared to $66.9 million in the comparative quarter.

Production:
Gold production for the third quarter of 2017 totalled 200,201 ounces. Gold production at Kumtor was 138,561 ounces in the third quarter of 2017, 17% lower than the 166,030 ounces produced in the comparative quarter of 2016. The decrease in ounces poured at Kumtor is a result of milling lower grade ore and achieving lower recoveries from stockpiles and from the initial benches of the Sarytor pit, compared to the higher grade ore mined and processed from the lower benches in cut–back 17 of the Central pit during the comparative period. During the quarter, Mount Milligan produced 61,640 ounces of gold and 13.7 million pounds of copper.

Safety and Environment:
Centerra had six reportable injuries which included three lost time injuries, two medical aid injuries and one restricted work injury in the third quarter of 2017. During the third quarter both operating sites completed the deployment of the Company–wide safety leadership program “Work Safe, Home Safe” with every employee.

There was a reportable environmental incident during the third quarter of 2017. On July 9, 2017, a reportable spill occurred at Kumtor when a diesel fuel truck rolled over a safety berm on the technical road on its way to the mine site. Approximately 8.8 tonnes of diesel fuel leaked but was fully contained, with no release to any watershed. Clean–up of the affected area was initiated immediately and was completed on the same day. By the end of the third quarter of 2017, Kumtor and local authorities completed and closed their detailed investigations.

Financial Performance:
Revenue increased by 26% to $276.2 million in the third quarter of 2017 as a result of more gold ounces sold (174,099 ounces compared to 164,847 ounces in the third quarter of 2016), the addition of copper sales ($40.9 million) and molybdenum sales ($36.6 million) were partially offset by a 14% lower combined average realized gold price NG during the quarter ($1,141 per ounce compared to $1,327 per ounce in the same quarter of 2016). The increase in gold ounces sold results from the addition of Mount Milligan which recorded sales of 74,585 ounces of gold and contributed $74.4 million in gold revenues, partially offset by 40% lower gold ounces sold at Kumtor (99,514 ounces compared to 164,847 ounces in the same quarter of 2016) which was impacted by lower production and reduced gold shipments to Kyrgyzaltyn's refinery in the month of September.

Beginning in September 2017, Kumtor began to limit shipments of gold doré to Kyrgyzaltyn due to concerns about the financial stability of Kyrgyzaltyn's off–take bank which purchases gold refined by Kyrgyzaltyn and makes payment to Kumtor on behalf of Kyrgyzaltyn. At the end of the third quarter of 2017, Kumtor had in inventory 48,678 ounces of gold doré due to the reduction in shipments to Kyrgyzaltyn. See “Other Corporate Developments – Kyrgyz Republic”.

Cost of sales increased by 70% in the third quarter of 2017 ($164.2 million compared to $96.5 million in the third quarter of 2016) reflecting the addition of Mount Milligan (gold and copper sales) and the molybdenum business, partially offset by lower gold ounces sold from the Kumtor mine (as explained above). Depreciation, depletion and amortization (“DD&A”) associated with production was $41.1 million in the third quarter of 2017 as compared to $51.3 million in the same period of 2016, primarily due to lower sales and production volumes at Kumtor in the third quarter of 2017, partially offset by the addition of Mount Milligan and the molybdenum business in the third quarter of 2017.

As part of the settlement agreement with the Kyrgyz Republic the Company recorded a charge of $60 million (described above). Kumtor also accrued $2.0 million in the third quarter of 2017 as other operating expenses representing the increased annual payment for the new Nature Development Fund (See “Other Corporate Development – Kyrgyz Republic).

Corporate administration costs were $12.6 million in the third quarter 2017 compared to $5.9 million in the same period of 2016. The increase was mainly due to share–based compensation which increased by $3.6 million compared to the prior year, mainly due to increases in the Company's share price. The third quarter 2017 also included additional costs for legal and consulting in relation to settlement negotiations as well as costs for the Denver office (formerly Thompson Creek's corporate office).

Operating Costs (excluding molybdenum business):
Operating costs (on a sales basis)NG increased to $89.3 million in the third quarter of 2017 compared to $45.2 million in the same period of 2016, which reflects the addition of Mount Milligan ($62.7 million) and lower volumes sold at Kumtor.

Centerra's all–in sustaining costs on a by–product basis per ounce of gold soldNG, which excludes revenue–based tax and income tax, for the third quarter of 2017 increased to $722 from $591 in the comparative period mainly as a result of 40% less ounces sold at Kumtor ($135 per ounce), higher operating costs and capitalized stripping ($94 per ounce), higher administration and other costs ($88 per ounce), higher sustaining capitalNG ($26 per ounce), partially offset by the positive impact from the acquisition of Mount Milligan ($213 per ounce).

To view the Consolidated All–in Sustaining Costs on a by–product basis (per ounce sold) chart please click the following link: http://media3.marketwire.com/docs/1031pg12.jpg

First Nine Months 2017 compared to First Nine Months 2016
The Company recorded net earnings of $79.6 million in the first nine months of 2017, compared to net earnings of $87.9 million in the comparative period of 2016, reflecting more gold ounces sold at Kumtor, despite Kumtor limiting its shipments of gold to Kyrgyzaltyn starting in September 2017, the acquisition of the Mount Milligan operations, one–time charges for a settlement reached with the Kyrgyz Government of $60 million, an impairment charge of the Company's Mongolian assets of $41.3 million ($39.7 million net of tax) and a one–time credit representing a gain of $9.8 million ($6.9 million net of tax) on the sale of the ATO property in Mongolia. Excluding these one–time items, adjusted earningsNG for the first nine months of 2017 were $172.4 million compared to $87.9 million in the comparative period.

Production:
Gold production for the first nine months of 2017 totalled 568,564 ounces. Gold production at Kumtor was 404,584 ounces in the first nine months of 2017, 16% higher than the 350,199 ounces produced in the first nine months of 2016. The increase in ounces poured at Kumtor is a result of milling higher grade ore from stockpiles (3.51 g/t compared to 3.01 g/t) and realizing higher recoveries (78.6% compared to 77.0%) compared to the same period in 2016. Blending of the more complex, lower grade ore from the Sarytor pit impacted recoveries in the third quarter of 2017. During the first nine months of 2017, Mount Milligan produced 163,980 ounces of gold and 41.3 million pounds of copper.

Safety and Environment:
Centerra had eleven reportable injuries in the first nine months of 2017, including one fatal injury to a maintenance employee at Kumtor. There were five lost time injuries and four medical aid injuries.

During the first nine months of 2017 there was one reportable release to the environment. As noted above, a reportable incident occurred at Kumtor on July 9, 2017 when a diesel fuel truck rolled over a safety berm on the technical road on its way to the mine site.

Financial Performance:
Revenue increased to $840.8 million in the first nine months of 2017 from $452.0 million, as a result of additional gold ounces sold (550,238 ounces compared to 354,500 ounces), including copper sales of $96.8 million and molybdenum sales $105.7 million, partially offset by a 9% lower combined average realized gold price NG during the first nine months ($1,160 per ounce compared to $1,275 per ounce in the same period of 2016). The increase in gold ounces sold (369,431 ounces compared to 354,500 ounces in the same period of 2016) was mainly due to the addition from Mount Milligan while Kumtor's sales only grew by 4% due to the limitations on gold shipments in September to Kyrgyzaltyn, as described earlier. Mount Milligan sold 180,807 ounces of gold and 46.6 million pounds of copper during the first nine months of 2017 which contributed $278.0 million in revenues.

Cost of sales increased in the first nine months of 2017 to $501.3 million compared to $244.4 million in the first nine months of 2016, mainly resulting from the addition of Mount Milligan gold and copper sales and the molybdenum business. Depreciation, depletion and amortization associated with production was $146.2 million in the first nine months of 2017 as compared to $120.1 million in the same period of 2016 as a result of higher sales and the addition of Mount Milligan and the molybdenum business in the first nine months of 2017.

In the third quarter of 2017, the Company entered into a settlement agreement with the Kyrgyz Republic Government which resulted in a charge of $60 million. It also recorded a gain on the sale of the ATO property in Mongolia of $9.8 million (or $6.9 million net of tax).

Corporate administration costs were $31.6 million in the first nine months of 2017, an increase of $13.1 million compared to the same period of 2016, mainly due to an increase in share–based compensation of $6.3 million as a result of increases in the Company's share price, additional costs for legal and consulting mainly in relation to settlement negotiations ($1.2 million) and costs for the Denver office of $4.3 million (formerly Thompson Creek's corporate office).

Operating Costs (excluding molybdenum business):
Operating costs (on a sales basis)NG increased to $259.4 million in the first nine months of 2017 compared to $124.3 million in the same period of 2016, which includes Mount Milligan costs of $158.3 million.

Centerra's all–in sustaining costs on a by–product basis per ounce of gold soldNG, which excludes revenue–based tax and income tax, for the first nine months of 2017 decreased to $739 from $748 in the comparative period mainly as a result of the addition of gold and copper sales from Mount Milligan which was partially offset by higher capitalized stripping and spending on maintenance and labour at Kumtor and incremental administration costs, as a result of the Thompson Creek acquisition, in the first nine months of 2017 as compared to the same period of 2016.

5. Liquidity and Capital Resources

The Company believes its cash on hand and working capital as at September 30, 2017, together with future cash flows from operations and cash provided by the Company's existing credit facilities will be sufficient to fund its anticipated operating cash requirements, although there can be no assurance of this.

Starting in September 2017, Kumtor has limited its shipments of gold to Kyrgyzaltyn in response to concerns about the financial stability of the bank that purchases Kyrgyzaltyn's refined gold. Centerra understands that Kyrgyzaltyn expects to appoint a new purchaser bank in the fourth quarter at which time full shipments from Kumtor to Kyrgyzaltyn can be resumed. If a new purchaser bank is not appointed, Kumtor expects to continue limiting its shipments of gold to Kyrgyzaltyn such that the value of any shipment will not exceed the value of the Centerra Gold shares pledged by Kyrgyzaltyn. See “Caution Regarding Forward–Looking Information”.

Cashflow:
             
Unaudited ($ millions, except as noted) Three months ended
September 30,
Nine months ended
September 30,
  2017 2016 % Change 2017 2016 % Change
Cash provided by operations before changes in working capitalNG 108.0 119.3 (9%) 352.7 205.7 71%
  – Changes in working capital 11.4 15.1 (24%) (22.2) (4.6) 379%
Cash provided by operating activities 119.5 134.4 (11%) 330.5 201.0 64%
Cash used in investing activities:            
  – Capital additions (cash) (57.5) (50.6) 14% (203.7) (131.0) 56%
  – Short–term investment purchased, net 60.0 257.1 (77%) 156.6 (100%)
  – Decrease in restricted cash 239.2 100% 247.8 (0.3) (91214%)
  – Other investing items 7.1 (1.6) (539%) 10.2 (5.8) (274%)
Cash provided by investing activities 248.8 204.9 21% 54.3 19.4 179%
Cash used in financing activities:            
  – Debt (repayment) proceeds (111.9) 100% (171.9) 24.0 (816%)
  – Proceeds from subscription receipts issued 145.4 (100%) 145.4 (100%)
  – Dividends declared and paid (7.5) (100%) (22.1) (100%)
  – Payment of interest and borrowing costs (7.9) (2.0) 294% (23.2) (8.6) 169%
  – Proceeds from exercise of stock options 2.2 0.6 255% 2.2 1.3 69%
Cash (used in) provided by financing activities (117.5) 136.5 (187%) (192.8) 140.0 (238%)
Increase (decrease) in cash and cash equivalents 250.7 475.8 (53%) 191.9 360.4 (90%)
             

In the third quarter of 2017, Centerra generated cash from operations before working capital changesNG of $108.0 million, compared to $119.3 million in the prior period, as a result of lower earnings in the current quarter. Working capital movements in the first nine months of 2017 reflect a reduction in levels at Kumtor mainly due to timing, partially offset by increased levels at Mount Milligan and in the Moly business.

At the end of the third quarter of 2017, Kumtor had in inventory 48,678 ounces of gold doré due to a reduction in shipments in September to Kyrgyzaltyn. See “Other Corporate Developments”.

The Company generated $119.5 million in cash from operations in the third quarter of 2017, a decrease of $15.0 million compared to the third quarter of 2016, mainly as a result of lower earnings. In addition to lower gold production, Kumtor's gold sales in the third quarter of 2017 were limited (down 40% compared to the same period in 2016) as the Company reduced its gold shipments to Kyrgyzaltyn while Kyrgyzaltyn searches for alternative off–take banks to purchase its refined gold. The lower sales at Kumtor were partially offset by the contribution from Mount Milligan and from the molybdenum business in the third quarter of 2017.

Cash provided by investing activities increased to $248.8 million in the third quarter of 2017 as compared to $204.9 million in the third quarter of 2016, reflecting the release of Kumtor's restricted cash ($239.2 million), a reduction in net purchases of short–term investments, partially offset by an increase in capital spending (mainly additional sustaining capitalNG and capitalized stripping at Kumtor) as compared to the same quarter in 2016. On September 4, 2017, the Bishkek Inter–District Court lifted the interim court order which prohibited KGC from taking any actions relating to certain financial transactions including, transferring property or assets, declaring or paying dividends, pledging assets or making loans. As a result, KGC transferred cash balances over and above its ordinary working capital requirements to Centerra on September 15, 2017, when the lifting of the interim court order became effective.

Cash used in financing of $117.5 million in the third quarter of 2017 represents debt repayments under the Company's credit facilities. The Company made a quarterly payment on the Centerra B.C. Facility (defined below) term loan of $12.5 million and also paid in full the revolver balance of $74.4 million at the end of the quarter. In addition, the Company paid EBRD $25 million against its Corporate Facility (defined below) at the end of the third quarter of 2017. In the third quarter of 2016, the Company raised equity financing of $145.4 million in the form of subscription receipts in support of its acquisition of Thompson Creek Metals Inc., paid interest on borrowings and paid a dividend to its shareholders.

Cash, cash equivalents, restricted cash and short–term investments at September 30, 2017 decreased to $352.0 million (with no restricted cash at Kumtor) from $401.4 million at the end of June 2017 (including $299.2 million of restricted cash and investments at Kumtor) as cash from operations was more than offset by capital additions and cash used to repay debt. At December 31, 2016, cash and investment balances totaled $408.8 million (including $247.8 million of restricted cash at Kumtor).

Credit Facilities:
Centerra Corporate Facility
On February 12, 2016, the Company entered into a five–year $150 million revolving credit facility (the “Corporate Facility”) with the European Bank for Reconstruction and Development (“EBRD”). The Corporate Facility includes $50 million for the purpose of funding direct and indirect costs associated with the Gatsuurt Project. In February and September 2017, the Company repaid the $50 million reserved for the Gatsuurt Project in two $25 million instalments. At September 30, 2017, the Company had drawn $100 million under the Corporate Facility.

Funds drawn under the Corporate Facility are available to be re–drawn on a semi–annual basis and, at the Company's discretion, repayment of the loaned funds may be extended until 2021.

Centerra B.C Holdings Credit Facility
As part of the acquisition of Thompson Creek which closed on October 20, 2016, Centerra B.C. Holdings, a wholly–owned subsidiary of the Company, secured financing from a lending syndicate in the aggregate amount of $325 million (the “Centerra B.C. Facility”), consisting of a $250 million non–revolving term facility and a $75 million senior secured revolving credit facility. The revolving portion of the facility is to be repaid at the end of the five–year term. The principal amount of the term portion of the Centerra B.C. Facility is to be repaid in $12.5 million quarterly instalments which commenced on March 31, 2017.

In July 2017, the Company entered into an amendment of the Centerra B.C. Facility to increase the senior secured revolving credit facility under the Centerra B.C. Facility from $75 million to $125 million. As part of the amendment, the revolving facility must be reduced by $50 million by June 30, 2019. The amendment also includes additional favourable terms such as permitting upstream distributions of up to $50 million without the matching pre–payment requirement of the original agreement. Prior to the amendment, the Centerra B.C. Facility required Centerra B.C. Holdings to make a matching pre–payment on all distributions to Centerra. The amendment became effective in August 2017, when the conditions were satisfied, including the execution of hedges for a portion of the gold and copper production covering Mount Milligan's production from July 2017 to June 2019.

In September 2017, in addition to making the scheduled $12.5 million payment towards the non–revolving facility, the Company repaid the outstanding balance on the revolving facility ($74.4 million). As at September 30, 2017, $202.5 million was drawn on the Centerra B.C. Facility.

OMAS Facility
On April 5, 2016, OMAS, a wholly–owned subsidiary of the Company, entered into a 5–year $150 million credit facility agreement (the “OMAS Facility”). The purpose of the OMAS Facility is to assist in financing the construction of the Company's Öksüt Project. Availability of the OMAS Facility is subject to customary conditions precedent, including receipt of all necessary permits and approvals for the Öksüt Project. The Company is currently awaiting a pastureland permit at the Öksüt Project. If the conditions are not satisfied or waived by the specified deadline, or an additional extension is not granted by the lenders, the commitments under the OMAS Facility will be cancelled. In the second quarter of 2017, the previous deadline of June 30, 2017 for satisfaction of the conditions precedent was extended to December 31, 2017. As at September 30, 2017, the OMAS Facility remains undrawn. There can be no assurances that the Facility will be extended beyond December 31, 2017.

Centerra was in compliance with the terms of all of its facilities at September 30, 2017.

Capital Expenditures (spent and accrued):

             
             
$ millions Three months ended
September 30,
Nine months ended
September 30,
  2017 2016 % Change 2017 2016 % Change
Consolidated:            
Sustaining capitalNG 23.8 13.0 83% 62.5 49.9 25%
Capitalized stripping (1) 41.5 38.7 7% 168.4 78.4 115%
Growth capitalNG 5.2 4.7 11% 11.0 18.2 (40%)
Gatsuurt Project development 0.2 100% 2.4 100%
Öksüt Project development (2) 1.7 4.7 (65%) 6.0 9.9 (39%)
Greenstone Gold Property capital (3) 1.8 2.6 (30%) 6.7 7.9 (16%)
Total 74.2 63.7 16% 257.0 164.3 56%
             
  1. Includes cash component of $10.7 million and $43.4 million in the three and nine months ended September 30, 2017 respectively ($10.5 million and $20.8 million in the comparative periods of 2016, respectively).
  2. Nine months ended September 30, 2016 includes $3 million for the purchase of the net smelter royalty from Teck Resources Limited.
  3. In accordance with the Company's accounting policy, the 50% share paid on behalf of Premier Gold Mines Limited in the project is capitalized as part of mineral properties in Property, Plant & Equipment.

Capital expenditures in the third quarter of 2017 totalled $74.2 million compared to $63.7 million in the same period of 2016, resulting mainly from increased spending on capitalized stripping at Kumtor to develop cut–back 18 in the Central pit and in the Sarytor pit, higher sustaining capitalNG for equipment rebuilds and overhauls, partially offset by lower spending on the Company's development projects.

6. Financial Instruments

The Company seeks to manage its exposure to fluctuations in diesel fuel prices, commodity prices and foreign exchange rates by entering into derivative financial instruments from time–to–time.

Fuel Hedges:
In 2016, the Company established a diesel fuel price hedging strategy using derivative instruments to manage the risk associated with changes in diesel fuel prices on the cost of operations at the Kumtor Mine. The Company targets to hedge up to 70% of monthly diesel purchases at Kumtor for the first 12 months and 50% of the 13 through 24 month exposure. The Company hedges its exposure with crude oil futures contracts, as the price of diesel fuel closely correlates to the price of crude oil.

Gold and Copper Derivative Contracts:
The Company must satisfy its obligation under the gold and copper stream arrangement with RGLD Gold AG and Royal Gold Inc. (collectively “Royal Gold”) by delivering refined physical gold or LME copper warrants to Royal Gold after receiving payment from third–party purchasers who purchase concentrate from the Mount Milligan Mine. In order to hedge the metal price risk that arises when physical purchase and concentrate sales pricing periods do not match, the Company has entered into certain forward gold and copper purchases and forward sales contracts pursuant to which it purchases gold or copper at an average price during a future quotational period and sells gold or copper at the current spot price. These derivative contracts are not designated as hedging instruments.

Mount Milligan Gold and Copper Facility Hedges:

The Company entered into a hedging program required as part of the amendment to the Centerra B.C. Facility (see “Credit Facilities” section) to cover the period from July 2017 to June 2019.

The facility amendment required hedging of future un–streamed gold and un–streamed copper production at the Mount Milligan mine at a minimum average floor price of $1,200 per gold ounce and minimum average floor price of $2.50 per copper pound.

The hedge positions for each of these programs as at September 30, 2017 are summarized as follows:

                         
                    Settlement   As at September 30, 2017
Program   Instrument   Unit   Average strike price   Type   Q4–2017   2018   2019   Total position   Fair value gain (loss) ('000')
Fuel Hedges   Crude oil options (1)   Barrels   $65.53   Fixed   46,000   288,000   73,000   407,000   $ 441
                                     
Centerra B.C. Facility Hedging Program (Strategic Hedges):                                    
Copper Hedges   Forward contracts (1)   Pounds   $2.81   Fixed   7.1 million   6.8 million     13.9 million   $ (1,805)
Copper Hedges   Zero–cost collars (2)   Pounds   $2.46/$3.22   Fixed   2.8 million   38.6 million   27.5 million   68.9 million   $ (5,132)
Gold Hedges   Forward contracts (1)   Ounces   $1,282   Fixed   23,453   39,097     62,550   $ (516)
Gold Hedges   Zero–cost collars (2)   Ounces   $1,245/$1,363   Fixed   9,000   47,906   36,799   93,705   $ (452)
                                     
Gold/Copper Hedges (Royal Gold deliverables):                                    
Gold Derivative Contracts   Forward contracts (1)   Ounces   ND   Float   25,070       25,070   $ (504)
Copper Derivative Contracts   Forward contracts (1)   Pounds   ND   Float   4.4 million       4.4 million   $ (124)
                                     

ND = Royal Gold hedging program with floating terms, that are not defined as at September 30, 2017.

  1. Under the forward contracts (including crude oil options), the Company can buy and sell specified assets, typically metals or currency, at a specified price at a certain future date.
  2. Under the zero–cost collar: (i) the Company can put the number of gold ounces or copper pounds to the counterparty at the minimum price, if the price were to fall below the minimum, and (ii) the counterparty has the option to require the Company to sell to it the number of gold ounces or copper pounds at the maximum price, if the price were to rise above the maximum.

As noted above, the remaining gold hedging program in 2017 consists of 32,453 gold ounces, including 23,453 forward contracts at an average strike price of $1,276 per ounce and 9,000 zero–cost collars at an average strike price range of $1,225 to $1,372 per ounce. The remaining copper hedging program in 2017 consists of 9.9 million pounds of copper, including 7.1 million forward contracts at an average strike price of $2.73 per pound and 2.8 million pounds of zero–cost collars at an average strike price range of $2.25 to $3.21 per pound.

The gold hedging program is more heavily weighted to zero cost collars in 2018 and 2019 with 55% and 100%, respectively. This hedging strategy has also been adopted for copper hedges with 85% zero cost collars in 2018 and 100% in 2019.

Centerra does not enter into off–balance sheet arrangements with special purpose entities in the normal course of its business, nor does it have any unconsolidated affiliates.

7. Operating Mines and Facilities

Kumtor Mine

The Kumtor open pit mine, located in the Kyrgyz Republic, is one of the largest gold mines in Central Asia operated by a Western–based gold producer. It has been in production since 1997 and has produced over 11.3 million ounces of gold to September 30, 2017.

Recent Developments

  • On September 11, 2017, Centerra announced it had signed a comprehensive settlement agreement with the Government of the Kyrgyz Republic. See “Other Corporate Developments – Kyrgyz Republic”.
  • On September 4, 2017, the Bishkek Inter–District Court lifted the interim court order which prohibited KGC from taking any actions relating to certain financial transactions including, transferring property or assets, declaring or paying dividends, pledging assets or making loans. As a result, KGC transferred cash balances over and above its ordinary working capital requirements to Centerra on September 15, 2017, when the lifting of the interim court order became effective.
  • Gold revenues at Kumtor were lower in the third quarter of 2017 partially due to reduced gold shipments to Kyrgyzaltyn. Beginning in September 2017, Kumtor began to limit shipments of gold to Kyrgyzaltyn due to concerns about the financial stability of Kyrgyzaltyn's off–take bank which purchases the refined gold from Kyrgyzaltyn. At the end of the third quarter of 2017, Kumtor had in inventory 48,678 ounces of gold doré due to the reduction in shipments to Kyrgyzaltyn. See “Other Corporate Developments – Kyrgyz Republic” for further details.
 
Kumtor Operating Results
             
($ millions, except as noted) Three Months Ended
September 30
Nine Months Ended
September 30
2017 2016 % Change 2017 2016 % Change
Financial Highlights:            
Revenue – $ millions 124.3 218.7 (43%) 457.1 452.0 1%
             
Cost of sales (cash) 26.7 45.2 (41%) 101.1 124.3 (19%)
Cost of sales (non–cash) 27.8 51.3 (46%) 106.0 120.1 (12%)
Cost of sales (total) 54.5 96.5 (44%) 207.1 244.4 (15%)
             
Cost of sales – $/oz sold (1) 547 585 (7%) 561 689 (19%)
             
Cash provided by operations 79.5 149.0 (47%) 265.1 222.5 19%
Cash provided by operations before changes in working capital(1) 74.3 132.6 (44%) 279.2 243.4 15%
             
Operating Highlights:            
Tonnes mined – 000s 49,251 34,838 41% 131,108 108,856 20%
Tonnes ore mined – 000s 2,465 3,970 (38%) 2,477 8,687 (71%)
Average mining grade – g/t 1.93 5.32 (64%) 1.93 3.32 (42%)
Tonnes milled – 000s 1,505 1,571 (4%) 4,578 4,722 (3%)
Average mill head grade – g/t 3.47 4.11 (16%) 3.51 3.01 17%
Mill Recovery – % 80.5% 81.4% (1%) 78.6% 77.0% 2%
Mining costs – total ($/t mined material) 1.00 1.28 (22%) 1.11 1.28 (14%)
Milling costs ($/t milled material) 12.97 10.28 26% 11.24 10.04 12%
             
Gold produced – ounces 138,561 166,030 (17%) 404,584 350,199 16%
Gold sold – ounces 99,514 164,847 (40%) 369,431 354,500 4%
Average realized gold price (1) – $/oz sold $ 1,249 $ 1,327 (6%) $ 1,237 $ 1,275 (3%)
             
Capital Expenditures (sustaining) (1) – cash 15.5 13.0 19% 44.2 49.6 (11%)
Capital Expenditures (growth) (1) – cash 5.2 3.2 63% 11.0 13.3 (17%)
Capital Expenditures (stripping) (1) – cash 30.8 38.7 (20%) 125.0 78.4 59%
Capital expenditures (total) 51.5 54.9 (6%) 180.2 141.3 28%
             
Operating Costs (on a sales basis)(1) 26.7 45.2 (41%) 101.1 124.3 (19%)
             
             
Adjusted operating costs (1)– $/oz sold $ 338 $ 303 11% $ 321 $ 390 (18%)
Operating Costs (on a sales basis)– $/oz sold(1) $ 268 $ 274 (2%) $ 274 $ 350 (22%)
Gold – All–in sustaining costs on a by–product basis – $/oz sold(1) $ 807 $ 555 45% $ 782 $ 695 12%
Gold – All–in sustaining costs on a by–product basis (including taxes) – $/oz sold(1) $ 983 $ 742 32% $ 956 $ 875 9%
             
  1. Adjusted operating costs per ounce sold, all–in sustaining costs on a by–product basis (including and excluding taxes) per ounce sold, cash provided by operations before changes in working capital, cost of sales per ounce sold, operating costs (on as sales basis), average realized gold price per ounce sold and capital expenditures – cash (sustaining and growth) are non–GAAP measures and are discussed under “Non–GAAP Measures”.

Third Quarter 2017 compared to Third Quarter 2016

Production:
During the third quarter of 2017, Kumtor continued to develop both the Central pit through mining cut–back 18 and the Sarytor pit, which is approximately three kilometres south of the Central pit. Ore production commenced in Sarytor in July 2017, and is expected to supplement the historical stockpiled ore in advance of obtaining access to the higher–grade ore from the Central pit in the fourth quarter of 2018.

Total waste and ore mined in the third quarter of 2017 was 49.3 million tonnes, an increase of 14.4 million tonnes or 41% compared to the same period of period of 2016. The major reasons for this increase, were due to favorable weather conditions during the summer of 2017 compared to 2016, which resulted in fewer weather delays, 17% shorter average haulage distance compared to the same period of 2016 due to the commencement of mining at the Sarytor Pit, and various process improvements that increased truck payloads, average truck speeds and truck utilization hours.

During the third quarter of 2017, Kumtor produced 138,561 ounces of gold compared to 166,030 ounces of gold in the comparative period of 2016. The decrease in ounces poured is a result of, milling lower grade ore from the remaining stockpile of cut–back 17 Central pit ore and lower grade ore from the initial benches of the Sarytor Pit, compared to the higher grade ore mined and processed from the high grade, lower benches in cut–back 17 during the comparative period. During the third quarter of 2017, Kumtor's head grade was 3.47 g/t with a recovery of 80.5%, compared to 4.11 g/t and a recovery of 81.4% for the same period of 2016. Blending of the more complex, initial lower grade ore from the Sarytor pit impacted recoveries in the third quarter of 2017. Throughput through the mill decreased to 738 tpoh (“tonnes per operating hour”) compared to 760 tpoh in the same period of 2016 due to a scheduled shutdown to reline the SAG mill, ball mill and regrind mill.

Operating costs and All–in Measures:
Operating costs (on a sales basis)NG for the third quarter of 2017 decreased by $18.5 million to $26.7 million, as compared to the same quarter of 2017, reflecting 41% more tonnage moved including significant amount of waste removal in cut–back 18 of the Central pit which was capitalized in the third quarter of 2017. Including capitalized stripping, operating costs were $57.5 million compared to $83.9 million in the comparative third quarter of 2016. The increase in the major components of operating costs (mining, milling and site support) before changes in inventory is explained below.

To view the Mining Costs, including capitalized stripping (Third Quarter 2017 compared to Third Quarter 2016) chart please click the following link: http://media3.marketwire.com/docs/1031pg20.jpg

Mining costs, including capitalized stripping, totaled $49.2 million in the third quarter of 2017, which was $4.7 million higher than the comparative quarter of 2016. Increased costs for the third quarter of 2017 includes higher diesel costs ($1.8 million) mainly due to increased purchase price, higher blasting costs ($1.3 million) primarily due to increased blasting volumes, higher labour cost ($1.2 million) due to a new collective bargaining agreement and strengthening of the local currency. In addition higher maintenance cost ($0.7 million) resulted from additional repair work required on the 785 haul trucks.

To view the Milling Costs (Third Quarter 2017 compared to Third Quarter 2016) chart please click the following link: http://media3.marketwire.com/docs/1031pg21.jpg

Milling costs increased to $19.5 million in the third quarter of 2017, as compared to $16.1 million in the comparative quarter of 2016. The higher milling costs were due to comprehensive maintenance work during the planned total shutdown for the SAG, ball and regrind mills liners performed during the third quarter of 2017, whereas only SAG mill reline work occurred in the comparative period in 2016. During the shutdown, Kumtor took the opportunity to replace other mill components to boilers, derrick screens, and on the crusher.

Site Support Costs (Third Quarter 2017 compared to Third Quarter 2016):

Site support costs in the third quarter of 2017 totaled $10.5 million compared to $10.1 million in the comparative quarter in 2016. Site support costs increased slightly due to higher contractors costs for a major site clean–up initiative.

Other Cost movements:
DD&A associated with sales, decreased to $27.8 million in the third quarter of 2017, from $51.3 million in the comparative quarter of 2016, a 46% decrease. The decrease in 2017 is primarily due to 40% fewer ounces sold in the third quarter of 2017.

All–in sustaining costs on a by–product basis per ounce soldNG, which excludes revenue–based tax, was $807 for the third quarter of 2017 compared to $555 in the third quarter of 2016, representing an increase of 45%, primarily as a result of 40% fewer ounces sold. The third quarter of 2017 also includes the new environmental fee ($2.0 million accrued not yet paid) for the Nature Development Fund as a result of the comprehensive settlement agreement reached with the Kyrgyz Republic Government (impact $20 per ounce) – see “Other Corporate Development – Kyrgyz Republic”.

Including revenue–based taxes, all–in sustaining costs on a by–product basis per ounce soldNG was $983 for the third quarter of 2017 compared to $742 in the same period of 2016. The increase is due to the higher all–in sustaining costs (explained above).

First Nine Months 2017 compared to First Nine Months 2016

During the first nine months of 2017, mining at Kumtor focused on advancing cut–back 18 in the Central pit and developing the Sarytor pit.

Total waste and ore mined in the first nine months of 2017 was 131.1 million tonnes compared to 108.9 million tonnes in the comparative period of 2016, representing an increase of 20%. The main reasons for this increase was an 11% shorter average haulage distance in the comparative period of 2016 due to the shorter hauls required upon commencing mining activities at the Sarytor pit.

During the first nine months of 2017, the Company processed ore from stockpiles, including the higher grade ore remaining from cut–back 17 in the Central pit mined at the end of 2016. Kumtor produced 404,584 ounces of gold in the first nine months of 2017 compared to 350,199 ounces of gold in the first nine months of 2016. The increase in ounces poured is a result of milling higher grade ore from stockpiles, partially offset by blending the initial lower grade ore from the Sarytor pit, compared to the lower grade ore mined and processed from the initial benches in cut–back 17 during the comparative period. During the first nine months of 2017, Kumtor's average mill head grade was 3.51 g/t with a recovery of 78.6%, compared with 3.01 g/t and a recovery of 77.0% for the same period in 2016.

Operating costs and All–in Measures:
Operating costs (on a sales basis) decreased by $23.2 million to $101.1 million as compared to the same period of 2016. Including capitalized stripping, operating costs were $226.1 million compared to $202.7 million in the first nine months of 2016, reflecting 20% more tonnage moved including significant amount of waste removal in cut–back 18 in the Central pit capitalized in the first nine months of 2017. The increase in the major components of operating costs (mining, milling and site support) before changes in inventory is explained below.

To view the Mining Costs, including capitalized stripping (First Nine Months 2017 compared to First Nine Months 2016) chart please click the following link: http://media3.marketwire.com/docs/1031pg22.jpg

Mining costs, including capitalized stripping, totaled $145.1 million in the first nine months of 2017 compared to $139.5 million in the comparative period of 2016. Increased costs for the first nine months of 2017 includes higher labour cost ($3.0 million) due to a new collective bargaining agreement and strengthening of the local currency in comparison to 2016, higher maintenance cost ($2.5 million) resulting from higher repair costs across the fleet to support the increased mine production. In addition, costs were also higher for diesel purchases ($0.7 million) mainly due to higher prices and higher blasting costs ($0.5 million) mainly due to increased blasting volumes. These were partially offset by lower tire costs ($0.7 million) mainly due to lower purchase prices.

To view the Milling Costs (First Nine Months 2017 compared to First Nine Months 2016) chart please click the following link: http://media3.marketwire.com/docs/1031pg23.jpg

Milling costs of $51.5 million in the first nine months of 2017 compared to $47.4 million in the comparative period of 2016. The increase is mainly due to increased maintenance work during the mill planned shutdown for the SAG, ball and regrind mills liners performed during the third quarter of 2017 and increased mill reliability projects performed in the first nine months of 2017. In addition, costs for labour were higher in 2017 ($0.4 million) due to a new collective agreement and strengthening of the local currency.

Site support Costs (First Nine Months 2017 compared to First Nine Months 2016):
Site support costs in the first nine months of 2017 totaled $32.5 million compared to $31.8 million in the comparative year. Site support costs increased due to higher labour costs resulting from the collective bargaining agreement and strengthening of local currency.

Other Cost movements
DD&A associated with sales, decreased to $106.0 million in the first nine months of 2017, from $120.1 million in the comparative period of 2016. The overall depreciation costs were comparable after adjusting for the $18.4 million reversal of a non–cash inventory impairment recognized during the first nine months of 2016.

All–in sustaining costs on a by–product basis per ounce sold, which excludes revenue–based tax, was $782 for the first nine months of 2017 compared to $695 in the first nine months of 2016, representing an increase of 12%. The increase is due to $67.4 million higher capitalized stripping costs, which resulted from capitalizing 113.5 million tonnes from cut–back 18 in the Central pit and the Sarytor Pit in the first nine months of 2017, compared to 45.5 million tonnes from cut–back 18 in the comparative period of 2016. This was partially offset by 14,931 more ounces sold during the first nine months of 2017.

Including revenue–based taxes, all–in sustaining costs on a by–product basis per ounce sold was $956 for the first nine months of 2017 compared to $874 in the first nine months of 2016. The increase is due to higher all–in sustaining costs (explained above) partially offset by lower growth capital expenditures.

Mount Milligan Mine

The Mount Milligan Mine is an open pit mine located in north central British Columbia, Canada producing a gold and copper concentrate. Production at Mount Milligan is subject to a streaming arrangement with Royal Gold pursuant to which Royal Gold is entitled to receive 35% of the gold produced and 18.75% of the copper production at our Mount Milligan project. Royal Gold pays Centerra $435 per ounce of gold delivered and 15% of the spot price per metric tonne of copper delivered (the “Royal Gold Stream Arrangement”).

         
Mount Milligan Mine Operating Results   Three months ended   Nine months ended
Unaudited ($ millions, except as noted)   September 30, 2017 (1)   September 30, 2017 (1)
Financial Highlights:        
Gold sales – $ millions   74.4   181.2
Copper sales   40.9   96.8
Total Revenues   115.3   278.0
         
Cost of sales – cash   62.7   158.3
Cost of sales – non–cash   11.9   34.9
Cost of sales – total   74.6   193.1
Cash provided by operations   67.6   121.0
Cash provided by operations before changes in working capital (2)   48.0   108.8
Operating Highlights:        
Ore Mined (000's t)   5,005   16,725
Total Mined (000's t)   10,544   32,266
         
Tonnes Milled (000's t)   4,473   13,903
Mill Head Grade Copper (%)   0.18%   0.18%
Mill Head Grade Gold (g/t)   0.70   0.61
Copper Recovery – %   79.6%   79.1%
Gold Recovery – %   62.8%   61.7%
Mining costs – total ($/t mined material) $ 1.93 $ 1.76
Milling costs – total ($/t milled material) $ 6.48 $ 5.32
Concentrate Produced (dmt)   31,573   93,344
Payable Copper Produced (000's lbs) (5)   13,677   41,335
Payable Gold Produced (oz) (5)   61,640   163,980
         
Gold Sales (payable oz)(5)   74,585   180,807
Copper Sales (000's payable lbs)(5)   18,644   46,613
Average Realized Price – Gold (combined) – $/oz (2) (4) $ 998 $ 1,003
Average Realized Price – Copper (combined) – $/lb (2) (4) $ 2.19 $ 2.08
         
Capital expenditures – sustaining (2)   8.1   17.8
Capital expenditures – growth (2)    
Capital expenditures – total   8.1   17.8
         
Operating Costs (on a sales basis) ('000s) (3)   62,699   158,258
         
Operating Costs– $/oz sold   841   875
Adjusted Operating costs– $/oz sold (2) $ 318 $ 366
Gold – All in Sustaining costs on a by–product basis – $/oz sold (2) $ 437 $ 474
Gold – All in Sustaining costs on a by–product basis (including taxes) – $/oz sold (2) $ 459 $ 494
         
Gold – All in Sustaining costs on a co–product basis – $/oz sold (2) $ 632 $ 650
Copper – All in Sustaining costs on a co–product basis – $/pound sold (2) $ 1.70 $ 1.68
         

(1) No comparative results for Mount Milligan have been presented. Reporting of comparative information will start in the fourth quarter of 2017, from date of acquisition (October 20, 2016).
(2) Adjusted operating costs per ounce sold, all–in sustaining costs (for gold and copper) on a by–product or co–product basis (excluding and including tax) per ounce sold, cash provided by operations before changes in working capital, payable copper produced, payable gold produced, as well as average realized price per unit sold (gold and copper), and capital expenditures (sustaining and growth) are non–GAAP measures and are discussed under “Non–GAAP Measures”.
(3) Operating costs (on a sales basis) is comprised of mine operating costs such as mining, processing, site and regional office administration, royalties and production taxes, but excludes reclamation costs and depreciation, depletion and amortization.
(4) The average realized price of gold is a combination of market price paid by third parties and $435 per ounce paid by Royal Gold, while the average realized price of copper is a combination of market price paid by third parties and 15% of the spot price per metric tonne of copper delivered paid by Royal Gold, in each case under the Royal Gold Stream Arrangement.
(5) Mount Milligan payable production and sales are presented on a 100% basis (the Royal Gold Stream Agreement entitles it to 35% and 18.75% of gold and copper sales, respectively). Under the Royal Gold Stream Arrangement, Royal Gold will pay $435 per ounce of gold delivered and 15% of the spot price per metric tonne of copper delivered. Payable production for copper and gold reflects estimated metallurgical losses resulting from handling of the concentrate and payable metal deductions, subject to metal content, levied by smelters. The current payable percentage applied is approximately 95.0% for copper and 96.5% for gold, which may be revised on a prospective basis after sufficient history of payable amounts is determined.

Third Quarter 2017
In the third quarter 2017, total payable gold production was 61,640 ounces while total payable copper production was 13.7 million pounds. Total gross gold sales, representing four concentrate shipments, were $74.4 million with a total of 74,585 ounces of gold sold at an average realized priceNG of $998 per ounce. Total gross copper sales for the quarter were $40.9 million with a total of 18.6 million pounds sold at an average realized priceNG of $2.19 per pound. The gold and copper sales include sales to Royal Gold under the Royal Gold Stream Arrangement as described above and the impact of hedging transactions.

During the third quarter, total mill throughput was 4.5 million tonnes and averaged 48,619 tonnes per day (tpd) in the quarter. During July and August mill throughput averaged 52,600 tpd, but in September mill throughput was significantly impacted primarily by lower–than–expected availability of pebble crusher #1 (72%, which impacted the hourly throughput rates) and other supporting or auxiliary equipment such as blocked tailings trench, the premature failure of SAG discharger liners, and repair of the reclaim water line. During the quarter, the SAG Mill was also down for 4.5 days, planned maintenance, to complete a full liner change in the last week of September. Mount Milligan continues to upgrade its mill maintenance functions with the overall objective to reduce breakdown maintenance from greater than 70% in the first quarter 2017 to less than 20% by the first quarter 2018. An experienced Maintenance Manager and two experienced Maintenance General Foremen have been hired, and proactive high performance planner and scheduler training is ongoing for all mill maintenance planning and reliability staff. Mount Milligan anticipates over time steady improvement in mill equipment availability as a result.

Mine production was 10.5 million tonnes during the quarter and averaged 114,580 tpd. Mined total tonnes (ore and waste) were slightly behind plan due to the reduced mill throughput and increased focus on tailings dam core construction.

After several months of intensive data generation and analysis, the geometallurgical (GeoMet) team was able to identify significant relationships and trends between various complex ore types to mill throughput and recovery. From these studies, short– and long–term block models have been built to predict mill throughput, metal content, alteration, float speed, copper and gold recoveries, and concentrate production. These models are being monitored, validated and beginning to be used in mine planning and scheduling forecasts. Mineralogical limits of single–feed ore have been defined, and resulting ore blend parameters have been put into practice. As a result of these on–going projects, Mount Milligan expects to be able to more accurately predict and maximize future metal production.

In conjunction with the GeoMet program, mine engineering initiatives in drilling and blasting to target optimum fragmentation and particle size distribution for mill feed will continue into the fourth quarter.

Mount Milligan has worked closely with corporate and external consultants to develop and prioritize projects for expansion of the flotation circuit to improve metal recoveries. Continuous improvement initiatives to improve mill circuit efficiencies were undertaken such as improved process control through froth crowder installations, equipment sizing, and reagent control strategies. Primary cyclone surveys were conducted in conjunction with the manufacturer to find the optimum apex size, feed density and pressure for the installed cyclones.

First Nine months 2017
Year–to–date, mill throughput averaged 50,926 tonnes per day (tpd), while mine production averaged 118,164 tpd. Total mill throughput was 13.9 million tonnes and total mined tonnes was 32.3 million tonnes. Total payable copper was 41.3 million pounds while total payable gold was 163,980 ounces.

Year to date, the total gross gold sales were $181.2 million with a total of 180,807 ounces of gold sold for an average realized priceNG of $1,003 per ounce. Year–to–date total gross copper sales were $96.8 million with a total of 46.6 million pounds sold for an average realized priceNG of $2.08 per pound. Such amounts include gold and copper sales to Royal Gold under the Royal Gold Stream Arrangement as described above and the impact of hedging transactions.

Molybdenum Business

The molybdenum business includes two North American primary molybdenum mines that are currently on care and maintenance. The Thompson Creek Mine (“TC Mine”) (mine and mill) is in Idaho USA and is operated by Thompson Creek Mining Company. The 75%–owned Endako Mine (mine, mill and roaster) is in British Columbia, Canada. The U.S. operations also include the Langeloth metallurgical roasting facility (the “Langeloth Facility”) in Pennsylvania USA. TC Mine operates a commercial molybdenum beneficiation circuit to treat molybdenum concentrates to supplement the concentrate feed sourced directly for the Langeloth Facility. This beneficiation process at the TC Mine has allowed the Company to process high copper molybdenum concentrate, which is then transported to the Langeloth Facility for processing.

The molybdenum business provides tolling services for customers by converting molybdenum concentrates to molybdenum oxide powder and briquettes and ferromolybdenum products. Additionally, molybdenum concentrates are also purchased to convert to upgraded products which are then sold in the metallurgical and chemical markets.

     
Molybdenum Business Operating Results Three months ended Nine months ended
Unaudited ($ millions, except as noted) September 30, 2017 (1) September 30, 2017 (1)
     
Financial Highlights:    
Molybdenum (Mo) Sales – $ millions 35.0 99.9
Tolling, Calcining and Other 1.6 5.8
Total Revenues and Other Income 36.6 105.7
     
Cost of sales – cash 33.7 95.7
Cost of sales – non–cash 1.4 5.4
Cost of Sales – Total 35.1 101.1
     
Care & Maintenance costs – Molybdenum mines 3.3 9.9
     
Total capital expenditures 0.2 0.5
     
Cash used in operations (1.4) (7.2)
Cash (used in) provided by operations before changes in working capital(2) (0.3) 0.5
     
     
Production Highlights:    
Mo purchased (000's lbs) 4,899 11,997
     
Mo oxide roasted (000's lbs) 4,828 13,730
     
Mo sold (000's lbs) 3,925 11,110
     
Toll roasted and upgraded Mo (000's lbs) 901 3,591
  1. No comparative results for the molybdenum business have been presented. Reporting of comparative information will start in the fourth quarter of 2017, from date of acquisition (October 20, 2016).
  2. Cash (used in) provided by operations before changes in working capital, is a non–GAAP measures and is discussed under “Non–GAAP Measures”.

Third Quarter 2017

A total of 3.9 million pounds of molybdenum were sold and 0.9 million pounds were tolled during the third quarter of 2017 resulting in sales revenue of $36.6 million. Net of $3.3 million in care and maintenance expenses at the two closed molybdenum mines, as well as a total capital spending of $0.2 million, the molybdenum business consumed $0.3 million of cash from the operations (before changes in working capitalNG).

First Nine Months 2017

A total of 11.1 million pounds of molybdenum were sold and 3.6 million pounds were tolled during the first nine months of 2017 resulting in sales revenue of $105.7 million. Net of $9.9 million in care and maintenance expenses at the two molybdenum mines, as well as total capital spending of $0.5 million, the molybdenum business generated $0.5 million of cash from the operations (before changes in working capitalNG).

8. Development Projects

Öksüt Project:

At the Öksüt Project in Turkey, the Company spent $1.7 million and $6.0 million during the three and nine months ended September 30, 2017 respectively ($4.7 million and $9.9 million in the three and nine months ended September 30, 2016) on development activities to advance access and site preparation and to progress detailed engineering plans which are 93% complete.

The pastureland permit remains the only material permit currently outstanding and the Company is working with the relevant agencies to obtain the permit. After the receipt of the pastureland permit, the Company expects the first gold pour to occur approximately 18 months after the start of construction. There is no assurance that the approval of the key pastureland or other permits will be obtained by the Company in a timely manner or at all.

Gatsuurt Project:

In October 2017, the Company completed a feasibility study for the Gatsuurt Project (“the Feasibility Study”) located in central northern Mongolia. The Feasibility Study incorporates results from the technical and economic studies initiated in 2016, further optimization studies completed in 2017, updated capital and operating costs and the current Mongolian tax and royalty regime. The Company has not made a development or construction decision on the Gatsuurt Project and expects to restart negotiations with the Mongolian Government based on the results of the Gatsuurt Feasibility Study.

A technical report for the Gatsuurt Project will be prepared in accordance with National Instrument 43–101 and will be filed on SEDAR at www.sedar.com and on the Company's websites before year–end.

Greenstone Gold Property:

As previously disclosed, the Greenstone Partnership has not made a development or construction decision on the Hardrock Project. The Greenstone Partnership is evaluating programs to minimize the risk profile of the project including the advancement of permitting and discussions with First Nations communities.

The Company has completed the Environmental Impact Study/Environmental Assessment (“EIS/EA”) on the Hardrock Project, with a formal submission on July 18, 2017 to Federal and Provincial Governments, and the general public. Greenstone continues to have regular discussions with First Nations communities, focusing on consultation around the EIS/EA, and discussing key aspects of Long Term Relationship Agreements (“LTRA”) to be entered into.

In the third quarter of 2017, the Company spent $1.8 million on completing the EIS/EA submission, negotiating and supporting First Nations communities, and continued efforts on optimizing the feasibility study. In the third quarter of 2016, $5.3 million was spent on project development activities and completing the feasibility study. Centerra's funding to date totals $49.4 million.

9. Quarterly Results – Previous Eight Quarters

Over the last eight quarters, Centerra's results reflect the impact of decreasing input costs, such as diesel and consumables, which have seen a continued decrease since 2015. Over the same periods, gold prices declined through 2015, progressively increased over the first three quarters of 2016, until dropping in the fourth quarter following the 2016 U.S. election and resumed its steady increase over the first three quarters of 2017. The weakening of currencies as compared to the U.S. dollar has also had a positive impact on foreign–denominated costs (such as labour). The Company reduced its carrying value of its Mongolian assets by $41.3 million (pre–tax) in the second quarter of 2017 and provided $ 60 million regarding the Strategic Agreement in the third quarter of 2017. The quarterly production profile for 2017 is more consistent across each quarter, while the production profile in 2016 was more concentrated in the last nine months of the year. Non–cash costs have progressively increased at Kumtor due to its expanded mining fleet and the increased amortization of capitalized stripping resulting from increased stripping as the pit gets larger. The addition of Mount Milligan's results began with the closing of the acquisition of Thompson Creek on October 20, 2016. The quarterly financial results for the last eight quarters are shown below:

           
$ million, except per share data or as specified   2017   2016 2015
Quarterly data unaudited                
  Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4
Revenue 276 279 285 306 220 162 73 148
Net earnings (loss) (1) 23 57 64 67 3 18 (3)
Basic earnings (loss) per share 0.00 0.08 0.20 0.23 0.28 0.01 0.08 (0.01)
Diluted earnings (loss) per share 0.00 0.08 0.20 0.23 0.28 0.07 (0.01)
                 

10. Other Corporate Developments

The following is a summary of corporate developments with respect to matters affecting the Company and its subsidiaries. Readers are cautioned that there are a number of legal and regulatory matters that are currently affecting the Company and that the following is only a brief summary of such matters. For a more complete discussion of these matters, see the Company's news releases and its 2016 Annual Information Form and specifically the section entitled “Risks that can affect our business” therein available on SEDAR at www.sedar.com. The following summary also contains forward–looking statements and readers are referred to “Caution Regarding Forward–looking Information”.

Kyrgyz Republic

Strategic Agreement

On September 11, 2017, Centerra announced that the Company and its Kyrgyz subsidiaries (Kumtor Gold Company and Kumtor Operating Company) entered into a comprehensive settlement agreement (the “Strategic Agreement”) with the Government of the Kyrgyz Republic (the “Government”) on behalf of the Kyrgyz Republic.

Highlights of the Strategic Agreement include:

  • Full and final reciprocal releases and resolution of all existing arbitral and environmental claims, disputes, proceedings and court orders, and releases of the Company and its Kyrgyz subsidiaries from future claims covering the same subject matter as the existing environmental claims arising from approved mine activities;
  • the termination of the Kyrgyz Republic interim court order which, among other things, restricted KGC's ability to transfer cash to Centerra (KGC subsequently transferred cash balances over and above its ordinary working capital requirements to Centerra on September 15, 2017);
  • an acknowledgement that there will be no restrictions on the ability of KGC to distribute funds to Centerra in the future;
  • the lifting of all restrictions on the free movement of KGC's employees;
  • no admission on the part of Centerra or its Kyrgyz subsidiaries of: (i) any environmental wrongdoing, (ii) any non–compliance with Kyrgyz law or the Kumtor Project Agreements or (iii) any pre–existing obligation to make additional environmental or Reclamation Trust Fund payments or environmental remediation efforts;
  • the existing 2009 agreements governing the Kumtor Project (the “Kumtor Project Agreements”) remain in full force and effect, including the tax and fiscal regime thereunder;
  • no changes to current or planned operations at the Kumtor Project are required;
  • KGC has agreed to make a one–time lump sum payment totaling US$57 million to a new, government–administered Nature Development Fund (US$50 million) and to a new, government administered Cancer Care Support Fund (US$7 million) and within 12 months of closing make a further one–time payment of US$3 million to the Cancer Care Support Fund. These amounts are recorded as an expense and liability in the Company's third quarter results;
  • Annual payments of US$2.7 million to the new Nature Development Fund, conditional on the Government continuing to comply with its obligations under the Strategic Agreement.
  • KGC has agreed to accelerate its annual payments to Kumtor's Reclamation Trust Fund in the amount of US$6 million a year until the total amount contributed by KGC reaches the total estimated reclamation cost for the Kumtor Project (representing the independent assessment of Kumtor's current reclamation costs) subject to a minimum total reclamation cost of US$69 million (which is broadly in line with KGC's current estimated reclamation cost for the Kumtor Project);
  • KGC would consider, together with the Government, other potential investment opportunities in the Kyrgyz Republic and at the Kumtor Project; and
  • the releases of liability and all payments are subject to a range of initial conditions precedent, discussed in further detail below and are expected to be completed in the fourth quarter of 2017.

Further Details of the Strategic Agreement

Under the Strategic Agreement, KGC has committed to making contributions to (i) a new, government administered Nature Development Fund established for the purpose of financing environmental conservation projects and nature preservation in the Kyrgyz Republic, consisting of a one–time lump sum payment of US$50 million and ongoing annual payments of US$2.7 million, which annual payments are conditional on the Government continuing to comply with all conditions precedent under the Strategic Agreement, (ii) a new, government–administered Cancer Care Support Fund to be established for the purpose of funding cancer treatment, research, support and outreach in the Kyrgyz Republic, including a one–time lump sum payment of US$7 million and within 12 months of closing a further one–time payment of US$3 million, and (iii) the acceleration of payments to Kumtor's Reclamation Trust Fund in the amount of US$6 million a year until the total amount contributed by KGC to the Reclamation Trust Fund (which currently holds approximately US$26.4 million) reaches the total reclamation cost for the Kumtor Project determined in accordance with the existing Reclamation Trust Deed (subject to a minimum total reclamation cost of US$69 million), which annual payments are conditional on continued operation of the Kumtor Mine by KGC and KOC with all necessary permits and no expropriation–related action being taken on the part of the Government.

The Parties will also negotiate in good faith to amend and restate the existing Reclamation Trust Deed to: (i) provide for the accelerated Reclamation Trust Fund payments described above, (ii) require that such funds be held in highly liquid, safe US dollar–denominated short–term securities (such as obligations of the United States government), provided that, subject to the agreement of the Parties, no less than 20% of the funds shall be invested in highly liquid securities backed by the full faith and credit of the Kyrgyz Republic; and (iii) to establish a supervisory board to oversee such investments.

KGC has also agreed to take certain specified actions in respect of the recommendations previously made by the Government's environmental consultant, Amec Foster Wheeler, most of which have already been fully implemented.

The releases of liability and all payments are subject to a range of initial conditions precedent designed to protect Centerra, KGC and KOC, including (i) the approval by the Government of various outstanding items, including the Kumtor life–of–mine (LOM) plan, official reserves report and the tailings dam expansion, (ii) compliance by the Government with its obligations under the Kumtor Project Agreements, (iii) continued operation of the Kumtor Mine by KGC and KOC with all necessary permits, (iv) no expropriatory action having been taken by the Government, and (v) termination of the environmental disputes and the civil and criminal proceedings instigated by the Kyrgyz General Prosecutor's Office on terms satisfactory to Centerra.

Centerra is continuing to work closely with the Government to expeditiously satisfy the conditions precedent to the Strategic Agreement, which are expected to be completed in the fourth quarter of 2017.

Arbitration

In connection with the Strategic Agreement, the arbitration previously commenced by Centerra, KGC and KOC against the Government of the Kyrgyz Republic and Kyrgyzaltyn has been suspended until November 15, 2017. During the suspension, the parties will work towards completing the Strategic Agreement and the resolution of all outstanding matters affecting the Kumtor Project.

As previously disclosed, Centerra commenced an arbitration proceeding against the Kyrgyz Republic and Kyrgyzaltyn in 2016 in relation to certain ongoing disputes relating to the Kumtor Project and, on February 23, 2017, filed with the Permanent Court of Arbitration (“PCA”) a statement of claim seeking, among other things: (i) declarations that the arbitrator has jurisdiction to hear Centerra's claims; (ii) declarations that the actions of the Kyrgyz Republic and Kyrgyzaltyn have breached the Kumtor Project Agreements (defined below); (iii) ordering the Kyrgyz Republic to withdraw its environmental, dividend and land use claims (further discussed below), terminate related judgments and orders, declare those judgments and orders null and void and issued without jurisdiction; and (iv) ordering the Kyrgyz Republic and Kyrgyzaltyn to pay monetary damages, costs and interest.

In January 2017, Centerra filed with the PCA a request for partial relief of interim measures against the Kyrgyz Republic seeking (among other things) that the Kyrgyz Republic withdraw or stay (suspend) the Kyrgyz court proceedings and related decisions (discussed below), including the interim court order which prohibited KGC from distributing cash to its sole shareholder, Centerra. The interim freezing order of the Kyrgyz Republic court was subsequently terminated effective September 15, 2017.

The PCA ultimately rendered a decision in July 2017 which did not grant the relief sought by Centerra but did make certain determinations that supported Centerra's long–standing view that the Kyrgyz court proceedings are disputes which should be brought in international arbitration. The effect of the PCA decision was to prohibit the Kyrgyz Republic from taking further actions in the Kyrgyz court proceedings without advising Centerra and the PCA. As further discussed above and below, these court proceedings are dealt with under the Strategic Agreement which is expected to be completed in the fourth quarter 2017. In some cases, the court proceedings were terminated in early September 2017 (further discussed below).

Kyrgyz Republic Claims

The following is a summary of the claims in the Kyrgyz Republic against the Kumtor Project, including those made by Kyrgyz Republic state environmental agencies and the General Prosecutor's office. Claims described below regarding environmental claims commenced by SIETS and SAEPF, and the dividend (civil) and land use claims commenced by the Kyrgyz Republic General Prosecutor's Office are subject to the Interim Arbitration Decision described above. As noted above, the Strategic Agreement provides a pathway to the resolution of all such claims, disputes, proceedings and court orders.

SAEPF Claims

On September 4, 2017, the Bishkek Inter–District Court terminated a claim made bythe Chui–Bishkek–Talas Local Fund of Nature Protection and Forestry Development (the “Local Fund”) of the Kyrgyz Republic State Agency for Environmental Protection and Forestry (“SAEPF”) which sought compensation for alleged environmental pollution in the amount of 40,340,819 Kyrgyz soms (approximately $580,000 based on the exchange rate of 69.6105 Kyrgyz soms per US$1.00).

On September 4, 2017, the Bishkek Inter–District Court also terminated the claim made by SAEPF which had alleged that Kumtor owes additional environmental pollution fees in the amount of approximately $220 million. The court also lifted the interim court order which prohibited KGC from taking any actions relating to certain financial transactions including, transferring property or assets, declaring or paying dividends, pledging assets or making loans. As a result, KGC transferred cash balances over and above its ordinary working capital requirements to Centerra on September 15, 2017, when the lifting of the interim court order became effective.

SIETS Claims

As previously disclosed, on May 25, 2016, the Bishkek Inter–District Court in the Kyrgyz Republic ruled against Kumtor Operating Company (“KOC”), Centerra's wholly–owned subsidiary, on two claims made by the State Inspectorate Office for Environmental and Technical Safety of the Kyrgyz Republic (“SIETS”) in relation to the placement of waste rock at the Kumtor waste dumps and unrecorded wastes from Kumtor's effluent and sewage treatment plants. The Inter–District Court awarded damages of 6,698,878,290 Kyrgyz soms (approximately $96.2 million) and 663,839 Kyrgyz soms (approximately $9,500), respectively. On June 1, 2016, the Inter–District Court ruled against KOC on two other claims made by SIETS in relation to alleged land damage and failure to pay for water use. The Inter–District Court awarded damages of 161,840,109 Kyrgyz soms (approximately $2.3 million) and 188,533,730 Kyrgyz soms (approximately $2.7 million), respectively. Centerra, KOC and KGC (added by the Kyrgyz courts) strongly dispute the SIETS claims and have appealed the decisions to the Bishkek City Court and will, if necessary, appeal to the Kyrgyz Republic Supreme Court.

Such claims are expected to be terminated upon completion of the Strategic Agreement.

Kyrgyz Republic General Prosecutor's Office Proceedings

The Company is subject to a number of other criminal proceedings commenced by the Kyrgyz Republic General Prosecutor's Office and other Kyrgyz Republic state agencies as described below. However, the Strategic Agreement provides a pathway to the resolution of claims, except as noted below.

Criminal Proceedings Against Unnamed KGC Managers

On May 30, 2016, a criminal case was opened by the Kyrgyz Republic General Prosecutor's Office (“GPO”) against unnamed KGC managers alleging that such managers engaged in transactions that deprived KGC of its assets or otherwise abused their authority, causing damage to the Kyrgyz Republic. Specifically, the case appears to be focused on the reasonableness of certain of KGC's commercial transactions and in particular, the purchase of goods and supplies in the normal course of its business operations and the expenses relating to the relocation of the Kumtor Project's camp in 2014 and 2015. Further to such investigation, the GPO has carried out searches of KGC's offices and seized documents and records.

2013 KGC Dividend Civil and Criminal Proceeding

On June 3, 2016, the Inter–District Court renewed a claim previously commenced by the GPO seeking to unwind the $200 million dividend paid by KGC to Centerra in December 2013 (the “2013 Dividend”). On September 14, 2017, the Bishkek Inter–District Court determined to leave the claim without review and, accordingly, the claim has been terminated.

The Company understands that the GPO has also initiated a criminal investigation of executives of the Company and KGC in respect of the 2013 Dividend but that investigation is currently suspended.

Land Use Claim

As previously noted, KGC had challenged the purported 2012 cancellation of its land use (surface) rights over the Kumtor concession areas in the Kyrgyz Republic courts as well as in its arbitration claim (described above). On August 28, 2017, the Bishkek Inter–District Court terminated the proceeding commenced by the GPO in respect of Kumtor's land use rights over the Kumtor concession area.

KGC Employee Movement Restrictions

In connection with certain of the foregoing criminal investigations, restrictions had been imposed by the Kyrgyz Republic on certain KGC managers and employees, which prohibit them from leaving the Kyrgyz Republic. The Company understands that all such movement restrictions have now been lifted.

GPO Review of Kumtor Project Agreements

On June 14, 2016, according to reports in the Kyrgyz Republic, the Kyrgyz Republic President instructed the GPO to investigate the legality of the agreements relating to the Kumtor Project which were entered into in 2003, 2004 and 2009. The 2009 Restated Investment Agreement governing the Kumtor Project which was entered into in 2009 superseded entirely the 2003 and 2004 agreements. The 2009 Restated Investment Agreement was negotiated with the Kyrgyz Republic Government, Kyrgyzaltyn and their international advisers, and approved by all relevant Kyrgyz Republic state authorities, including the Kyrgyz Republic Parliament and any disputes under the 2009 Restated Investment Agreement are subject to resolution by international arbitration.

Criminal Charges Regarding 2016 Casualty at Kumtor Mill

On June 16, 2016, the Investigator of the Jety–Oguz District Department of Interior Affairs initiated criminal proceedings against two KGC managers in relation to the previously disclosed death of a KGC employee due to an industrial accident which occurred in January 2016. On July 11, 2017, the criminal proceedings were dismissed by the Kyrgyz courts but were later sent for new consideration by the courts upon the request of the deceased's family. This claim is not expected to be resolved in connection with the Strategic Agreement.

Management Assessment of Outstanding Kumtor Matters

As noted above, the Strategic Agreement contained no admission on the part of Centerra or its Kyrgyz subsidiaries of: (i) any environmental wrongdoing, (ii) any non–compliance with Kyrgyz law or the Kumtor Project Agreements or (iii) any pre–existing obligation to make additional environmental or Reclamation Trust Fund payments or environmental remediation efforts. The Company and KGC continue to dispute all of the allegations noted above.

While the Strategic Agreement provides a pathway for the resolution of all outstanding matters affecting the Kumtor Project, there are no assurances that all of the conditions precedent to the completion of the settlement contained in the Strategic Agreement will be satisfied. If the settlement contained in the Strategic Agreement is not completed, there are no assurances that (i) the Company will be able to successfully resolve any or all of the outstanding matters affecting the Kumtor Project or that any future discussions between the Kyrgyz Republic Government and Centerra will result in a mutually acceptable resolution; or (ii) the Kyrgyz Republic Government and/or Parliament will not take actions that are inconsistent with the Government's obligations under the Strategic Agreement or Kumtor Project Agreements, including adopting a law “denouncing” or purporting to cancel or invalidate the Kumtor Project Agreements or laws enacted in relation thereto which have the effect of nationalization of the Kumtor Project.

The inability to successfully resolve all such matters, whether through the Strategic Agreement or otherwise, could lead to suspension of operations of the Kumtor Project and would have a material adverse impact on the Company's future cash flows, earnings, results of operations and financial condition.

Furthermore, if all such claims are not resolved as provided for in the Strategic Agreement and despite the Company's view that all disputes related to the 2009 Restated Investment Agreement should be determined in arbitration, there are risks that the arbitrator may (i) reject the Company's claims; (ii) determine it does not have jurisdiction; and/or (iii) stay the arbitration pending determination of certain issues by the Kyrgyz Republic courts. Even if the Company receives an arbitral award in its favour against the Kyrgyz Republic and/or Kyrgyzaltyn, there are no assurances that it will be recognized or enforced in the Kyrgyz Republic. Accordingly, the Company may be obligated to pay part of or the full amounts of, among others, the SIETS and SAEPF claims regardless of the action taken by the arbitrator. The Company does not have insurance or litigation reserves to cover these costs. If the Company were obligated to pay these amounts, it would have a material adverse impact on the Company's future cash flows, earnings, results of operations and financial condition.

Bank Otkritie

Beginning in September 2017, Kumtor began to limit shipments to Kyrgyzaltyn due to concerns about the financial stability at the bank that purchases Kyrgyzaltyn's refined gold, Bank Otkritie Financial (“Bank Otkritie”), which has recently received significant financial support from the Central Bank of the Russian Federation. All gold doré produced at Kumtor is purchased at the mine site by Kyrgyzaltyn for processing at its refinery in the Kyrgyz Republic pursuant to the Restated Gold and Silver Sale Agreement dated June 6, 2009 entered into between KGC, Kyrgyzaltyn and the Kyrgyz Government. Bank Otkritie purchases refined gold from Kyrgyzaltyn and pays Kumtor directly.

While Kyrgyzaltyn is searching for alternative off–take banks to purchase its refined gold, the Company has decided to limit its gold doré shipments to Kyrgyzaltyn. The current value of shipments from the Kumtor mine site do not exceed the value of the security pledged by Kyrgyzaltyn in the form of Centerra Gold shares.

At the end of the third quarter of 2017, Kumtor had in inventory 48,678 ounces of gold doré due to a reduction in shipments to Kyrgyzaltyn.

The Company understands that Kyrgyzaltyn is in discussions with certain alternative purchaser banks and the Company will continue to work with Kyrgyzaltyn to that end. Centerra understands that Kyrgyzaltyn expects to appoint a new purchaser bank in the fourth quarter at which time full shipments from Kumtor to Kyrgyzaltyn can be resumed.

Mongolia

Gatsuurt – Illegal Mining

CGM and Centerra continue to work with appropriate Mongolian federal and aimag (local) governments, relevant state bodies and police to clear the Gatsuurt site from artisanal miners and to restrict their access to the site. Centerra does not condone any violence or use of force by Mongolian authorities and has communicated to Mongolian authorities that matters are to be resolved in a peaceful manner.

Claim Against the Mongolian Mineral Resources Authority to Annul Certain Administrative Decisions Related to Gatsuurt Mining Licenses.

In the first quarter of 2016, a non–governmental organization called “Movement to Save Mt. Noyon” filed a claim in Mongolian court against the Mongolian Mineral Resources Authority (MRAM) requesting that MRAM annul two administrative decisions related to the mining licenses underlying the Gatsuurt Project. Centerra Gold Mongolia (“CGM”), the wholly owned subsidiary of Centerra and the holder of these mining licenses, is involved in the claim as a third party. One administrative decision related to a routine approval of a change of name of the Gatsuurt license holder. That administrative decision does not affect the validity of the Gatsuurt licenses. The second decision related to a non–material license. The claimant's request has previously been granted twice (in May 2016 and May 2017) by the lower court and overturned both times on appeal. On July 26, 2017, the Mongolian lower court granted the claimant's request to suspend the two administrative acts and that decision has subsequently been upheld by an appellate court. While Centerra believes that this claim is without merit, there are no assurances that the claim will be resolved in favour of CGM. Subsequent adverse rulings of the Mongolian courts which may otherwise relate to the Gatsuurt licenses or delays in the court process may have a material adverse impact on the Company's future cash flows, earnings, results of operations or financial condition.

Sale of ATO

On January 31, 2017, Centerra Gold's Mongolian subsidiary, CGM entered into definitive agreements to sell the ATO Project, located in Eastern Mongolia, to Steppe Gold LLC and Steppe Gold Limited for gross proceed of $20.0 million. CGM received $0.8 million upon signing of the definitive agreements and $9 million at closing, which occurred on September 15, 2017. CGM is to receive additional $5 million cash payments on each of September 30, 2018 and September 30, 2019.

11. Accounting Estimates, Policies and Changes

Accounting Estimates
The preparation of the Company's consolidated financial statements in accordance with IFRS required management to make estimates and judgments that affect the amounts reported in the consolidated financial statements and accompanying notes. The critical estimates and judgments applied in the preparation of the Company's condensed consolidated interim financial statements for the three and nine months ended September 30, 2017 are consistent with those used in the Company's consolidated financial statements for the year ended December 31, 2016.

Accounting policies and recent changes
The accounting policies applied in the condensed consolidated interim financial statements for the three and nine months ended September 30, 2017 are consistent with those used in the Company's consolidated financial statements for the year ended December 31, 2016, with the exceptions listed in note 3 of the condensed consolidated interim financial statements.

Recently issued but not adopted accounting guidance
Note 3 in the condensed consolidated interim financial statements for the three and nine months ended September 30, 2017 presents a list of recently issued accounting standards not yet adopted by the Company, provides a brief description on the nature of these changes and potential impact on the Company. The recently issued accounting standards and amendments are as follows: IFRS 15, Revenue from Contracts with Customers and IFRS 16, Leases.

12. Disclosure Controls and Procedures and Internal Control Over Financial Reporting (“ICFR”)

Centerra adheres to the Committee of Sponsoring Organizations of the Treadway Commission's (COSO) revised 2013 Internal Control Framework for the design of its ICFR. In accordance with National Instrument 52–109, the design of the Company's DC&P and ICFR excludes the controls, policies and procedures related to Thompson Creek and its subsidiaries on the basis that Thompson Creek and its subsidiaries were acquired on October 20, 2016 and therefore have been an operating subsidiary less than one year.

The evaluation of disclosure controls and procedures and internal controls over financial reporting under COSO's 2013 Internal Control Framework was carried out under the supervision of and with the participation of management, including Centerra's CEO and CFO. Based on these evaluations, the CEO and the CFO concluded that the design and operation of these disclosure controls and procedures and internal control over financial reporting were effective.

13. 2017 Outlook

Production, cost and capital forecasts for 2017 are forward–looking information and are based on key assumptions and subject to material risk factors that could cause actual results to differ materially. These risks are discussed herein under the headings “2017 Outlook – Material Assumptions & Risks” and “Caution Regarding Forward–Looking Information” in this document. Also refer to the Company's 2016 Annual Information Form and specifically the section entitled “Risks that can affect our business” therein available on SEDAR.

2017 Gold Production
Centerra's 2017 gold production has been revised to 775,000 to 815,000 ounces compared to the previous guidance of 785,000 to 845,000 ounces disclosed in the Company's news release dated July 31, 2017 to reflect updated production forecasts at Kumtor and Mount Milligan.

Kumtor's gold production forecast is expected to be in the range of 540,000 to 560,000 ounces, which is higher than the previous guidance of 525,000 to 555,000 ounces provided in the July 31, 2017 news release and reflects higher forecasted gold production due to higher forecasted gold grades and recoveries.

Mount Milligan's payable gold production has been decreased to a new guidance range of 235,000 to 255,000 ounces lower from the previous guidance of 260,000 to 290,000 ounces disclosed in the previous guidance. The forecast for Mount Milligan's payable gold production has been revised due to lower than expected mill throughput as a result of lower equipment availabilities which led to lower gold production.

Mount Milligan experienced another drier than normal spring and summer. This has resulted in lower than expected reclaim water volumes in the Tailings Storage Facility (TSF) used for mill operations. There may be some minor disruptions to mill production in the fourth quarter 2017 as water is routed to the water intake pipe. The water shortfall is being mitigated by accessing water from the deep and shallow aquifers located adjacent to the TSF, and by seeking an amendment to the Environmental Assessment (EA) to allow pumping from a nearby lake. The local First Nations groups and BC regulatory agencies have committed to an expedited EA amendment process.

The Mongolian operations will continue with care and maintenance activities at the Boroo mine mainly focusing on reclamation work. Any revenue from Boroo gold production from the rinsing of the heap leach pad is offset against care and maintenance costs.

Centerra's 2017 guidance for capital spending, corporate administration, exploration, and community costs and DD&A is unchanged from the guidance disclosed in the Company's news release of July 31, 2017.

2017 Copper Production
Centerra expects concentrate production from the Mount Milligan Mine to be in the range of 125,000 to 135,000 dry metric tonnes for 2017, which is unchanged from the previous guidance. Payable copper production is expected to be in the range of 55 million pounds to 65 million pounds, which is unchanged from the previous guidance.

 
Centerra's 2017 production is forecast as follows:
2017 Production Guidance Units Kumtor Mount Milligan(1) Centerra
Gold        
Unstreamed Gold Payable Production (Koz) 540 – 560 153 – 166 693 – 726
Streamed Gold Payable Production(1) (Koz) 82 – 89 82 – 89
Total Gold Payable Production(2) (Koz) 540 – 560 235 – 255 775 – 815
         
Copper        
Unstreamed Copper Payable Production (Mlb) 45 – 53 45 – 53
Streamed Copper Payable Production(1) (Mlb) 10 – 12 10 – 12
Total Copper Payable Production(3) (Mlb) 55 – 65 55 – 65
         
Concentrate production in dry tonnes (Kt) 125 – 135 125 – 135
         
  1. The Royal Gold Stream Arrangement entitles Royal Gold to 35% and 18.75% of gold and copper sales, respectively, from the Mount Milligan Mine and Royal Gold will pay $435 per ounce of gold delivered and 15% of the spot price per metric tonne of copper delivered. The current payable percentage applied is approximately 95.0% for copper and 97.5% for gold, which may be revised on a prospective basis after sufficient history of payable amounts is determined.
  2. Gold production assumes 80.9% recovery at Kumtor and 62.5% recovery at Mount Milligan.
  3. Copper production assumes 78.7% recovery for copper at Mount Milligan.

2017 All–in Sustaining Unit CostsNG

 
Centerra's updated 2017 guidance for all–in sustaining costs per ounce soldNG is as follows:
Revised 2017 All–in Sustaining Unit CostsNG Kumtor Mount Milligan(2) Centerra(2)
Ounces sold forecast 540,000 – 560,000 235,000 – 255,000 775,000 – 815,000
US $ / gold ounce sold      
  Operating costs 254 – 263 839 – 909 438 – 461
  Changes in inventory 31 – 32 (19) – (21) 15 – 16
Operating costs (on a sales basis)(3) $285 – $295 $820 – $888 $453 – $477
  Selling & marketing 19 – 21 6
  Regional office administration 31 – 32 21 – 22
  Social development costs 2 1
  Environment Development Fund 4 2 – 3
  Treatment & refining charges 7 5 6
  Copper credits(2) (479) – (519) (151) – (159)
  Silver credits (9) (20) – (21) (12) – (13)
Subtotal (Adjusted operating costs)(1), (2) $320 – $331 $345 – $374 $326 – $343
  Accretion expense 2 2 3
  Capitalized stripping costs (cash) 302 – 313 207 – 217
  Sustaining capital expenditures(1) 113 – 118 115 – 124 114 – 120
  Corporate G&A and other operating expenses 21 – 23 55 – 58
All–in sustaining costs on a by–product basis(1), (2) $737 – $764 $483 – $523 $705 – $741
Revenue–based tax(4) and taxes(4) 169 – 175 20 – 21 122 – 129
All–in sustaining costs on a by–product basis (including taxes) (1), (2), (4) $906 – $939 $503 – $544 $827 – $870
       
Gold – All–in sustaining costs on a co–product basis ($/ounce) (1),(2) $737 – $764 $615 – $667 $748 – $787
Copper – All–in sustaining costs on a co–product basis ($/pound) (1),(2) $1.64 – $1.94 $1.64 – $1.94
  1. Adjusted operating costs per ounce sold, all–in sustaining costs per ounce sold on a by–product basis, all–in sustaining costs per ounce on a by–product basis plus taxes, all–in sustaining costs per ounce of gold sold or per pound of copper sold on a co–product basis and sustaining capital expenditures are non–GAAP measures and are discussed under “Non–GAAP Measures”.
  2. Mount Milligan payable production and ounces sold are presented on a 100% basis (the Royal Gold Stream Arrangement entitles it to 35% and 18.75% of gold and copper sales, respectively). Unit costs and consolidated unit costs include a credit for forecasted copper sales treated as by–product for all–in sustaining costs and all–in sustaining costs including taxes. The copper sales are based on a copper price assumption of $2.90 per pound sold for the fourth quarter of 2017 for Centerra's 81.25% share of copper production and the remaining 18.75% of copper revenue at $0.44 per pound for the fourth quarter of 2017 (15% of spot price, assuming spot at $2.90 per pound), representing the Royal Gold Stream Arrangement. Payable production for copper and gold reflects estimated metallurgical losses resulting from handling of the concentrate and payable metal deductions, subject to metal content, levied by smelters. The current payable percentage applied is approximately 95.0% for copper and 97.5% for gold, which may be revised on a prospective basis after sufficient history of payable amounts is determined.
  3. Operating costs (on a sales basis) are comprised of mine operating costs such as mining, processing, regional office administration, royalties and production taxes (except at Kumtor where revenue–based taxes are excluded), but excludes reclamation costs and depreciation, depletion and amortization. Operating costs (on a sales basis) represents the cash component of cost of sales associated with the ounces sold in the period.
  4. Includes revenue–based tax at Kumtor that reflects a forecast gold price assumption of $1,275 per ounce sold for the fourth quarter of 2017, the British Columbia mineral tax at Mount Milligan and income taxes.

Results in the chart may not add due to rounding.

Sensitivities
Centerra's revenues, earnings and cash flows for the remaining three months of 2017 are sensitive to changes in certain key inputs or currencies. The Company has estimated the impact of any such changes on revenues, net earnings and cash from operations.

       
  Change Impact on
($ millions)
Impact on
($ per ounce sold)
Costs Revenues Cash flows Net Earnings
(after tax)
AISC(2) on by–product basis
Gold Price $50/oz 1.3 – 1.6 8.9 – 10.5 7.6 – 8.9 7.6 – 8.9
Copper Price(3) 10% 0.4 0.1 – 1.6 0.1 – 1.2 0.1 – 1.2 0.1 – 1.9
Diesel Fuel 10% 2.1 2.1 2.1 2.6 – 2.7
Kyrgyz som(1) 1 som 0.5 0.5 0.5 0.6 – 0.7
Canadian dollar(1) 10 cents 6.0 6.0 6.0 7.3 – 7.6
  1. Appreciation of currency against the US dollar will result in higher costs and lower cash flow and earnings, depreciation of currency against the US dollar results in decreased costs and increased cash flow and earnings.
  2. All–in sustaining costs per ounce sold (“AISC”) on a by–product basis is a non–GAAP measure and is discussed under “Non–GAAP Measures”
  3. The Company has recalculated the sensitivities of its revenues, earnings and cash flows for remaining three months of 2017 to movements in copper price changes following the commencement in the first quarter of 2017 of a hedging program to mitigate the copper price risk by purchasing fixed price forward sales contracts and zero–cost collars.

Material Assumptions and Risks
Material assumptions or factors used to forecast production and costs for the remaining three months of 2017 include the following:

  • a gold price of $1,275 per ounce, changed from prior guidance of $1,200 per ounce
  • a copper price of $2.90 per pound, changed from prior guidance of $2.60 per pound
  • exchange rates:
    1. $1USD:$1.25 CAD, changed from prior guidance of $1.31 CAD
    2. $1USD:68.5 Kyrgyz som, changed from prior guidance of 70.0 Kyrgyz som
    3. $1USD:0.84 Euro, changed from prior guidance of 0.89 Euro
  • diesel fuel price assumption:
    1. $0.44/litre at Kumtor, changed from prior guidance of $0.43/litre
    2. $0.65/litre at Mount Milligan

The assumed diesel price of $0.44/litre at Kumtor assumes that no Russian export duty will be paid on the fuel exports from Russia to the Kyrgyz Republic. Diesel fuel is sourced from separate Russian suppliers. The diesel fuel price assumptions were made when the price of oil was approximately $57 per barrel. Crude oil is a component of diesel fuel purchased by the Company, such that changes in the price of Brent crude oil generally impacts diesel fuel prices. The Company established a hedging strategy to manage changes in diesel fuel prices on the cost of operations at the Kumtor mine. The diesel fuel hedging program is a 24–month rolling program. The Company targets to hedge up to 50% of monthly diesel purchases for 24 month exposure by entering into futures contracts for Brent crude oil.

Other material assumptions were used in forecasting production and costs for the remaining three months of 2017. These material assumptions include the following:

  • The Company and its applicable subsidiaries throughout the year continue to meet the terms of the Corporate Facility, the Centerra B.C. Facility and the Öksüt Facility in order to maintain current borrowings and compliance with the facilities financial covenants.
  • That any discussions between the Government of the Kyrgyz Republic and Centerra regarding steps to completion of the Strategic Agreement, including the resolution of all outstanding matters affecting the Kumtor mine are satisfactory to Centerra.
  • All mine plans, expertise and related permits and authorizations at Kumtor, receive timely approval from all relevant governmental agencies in the Kyrgyz Republic and are not subsequently withdrawn.
  • Any recurrence of political or civil unrest in the Kyrgyz Republic will not impact operations, including movement of people, supplies and gold shipments to and from the Kumtor mine and/or power to the mine site.
  • Any actions taken by the Kyrgyz Republic Parliament and Government do not have a material impact on operations or financial results. This includes any actions (i) being taken by the Parliament or Government to cancel the Kumtor Project Agreements; (ii) which are not consistent with the rights of Centerra and KGC under the Kumtor Project Agreements; or (iii) that cause any disruptions to the operation and management of KGC and / or the Kumtor Project.
  • The previously disclosed claims received from the Kyrgyz authorities (SIETS, SAEPF and GPO) and related Kyrgyz Republic court decisions, which have been terminated following signing of the Strategic Agreement, are not re–instated, and that other claims are resolved without material impact to Centerra as contemplated in the Strategic Agreement.
  • Any sanctions imposed on Russian entities do not have a negative effect on the costs or availability of inputs or equipment to the Kumtor Project.
  • Bank Otkritie, the bank that purchases Kyrgyzaltyn's refined gold from the Kumtor mine, continues to operate as a going concern and remits all payments for Kumtor gold sales when they fall due and that gold shipments return to normal volume levels in the fourth quarter.
  • The movement in the Central Valley Waste Dump at Kumtor, initially referred to in the Annual Information Form for the year ended December 31, 2013, and in the Lysii and Sarytor Waste Dumps, does not accelerate and will be managed to ensure continued safe operations, without impact to gold production.
  • The buttress constructed at the bottom of the Davidov glacier continues to function as planned.
  • The Company is able to manage the risks associated with the increased height of the pit walls at Kumtor.
  • The dewatering program at Kumtor continues to produce the expected results and the water management system works as planned.
  • The pit walls at Kumtor and Mount Milligan remain stable.
  • The resource block model at Kumtor and Mount Milligan reconciles as expected against production.
  • Grades and recoveries at Kumtor and Mount Milligan remain consistent with the 2017 production plan to achieve the forecast gold and copper production.
  • The Kumtor mill and the Mount Milligan processing plant continues to operate as expected.
  • The permanent secondary crushing plant at Mount Milligan continues to perform as designed.
  • The Mount Milligan processing facility continues to have access to sufficient water supplies to operate year round.
  • There are no unfavourable changes to concentrate sales arrangements at Mount Milligan and roasting arrangements at the Langeloth facility.
  • There are no adverse regulatory changes affecting Mount Milligan operations and molybdenum assets.
  • Exchange rates, prices of key consumables, costs of power, water usage fees, and any other cost assumptions at all operations and projects of the Company are not significantly higher than prices assumed in planning.
  • No unplanned delays in or interruption of scheduled production from our mines, including due to climate/weather conditions, political or civil unrest, natural phenomena, regulatory or political disputes, equipment breakdown or other developmental and operational risks.

The Company cannot give any assurances in this regard.

Production, cost and capital forecasts for 2017 are forward–looking information and are based on key assumptions and subject to material risk factors that could cause actual results to differ materially and which are discussed herein under the headings “Material Assumptions & Risks” and “Caution Regarding Forward–Looking Information” in this document.

Qualified Person & QA/QC – Production Information
The production information and other scientific and technical information presented in this document, including the production estimates were prepared in accordance with the standards of the Canadian Institute of Mining, Metallurgy and Petroleum and NI 43–101 and were prepared, reviewed, verified and compiled by Centerra's geological and mining staff under the supervision of Gordon Reid, Professional Engineer and Centerra's Vice– President and Chief Operating Officer, who is the qualified person for the purpose of NI 43–101. Sample preparation, analytical techniques, laboratories used and quality assurance–quality control protocols used during the exploration drilling programs are done consistent with industry standards and independent certified assay labs are used.

14. Non–GAAP Measures

This MD&A and news release contain the following non–GAAP financial measures: all–in sustaining costs per ounce sold on a by–product basis, all–in sustaining costs per ounce sold on a by–product basis including taxes, and all–in sustaining costs per ounce sold on a co–product basis. In addition, non–GAAP financial measures include operating costs (on a sales basis), adjusted operating costs in dollars (millions) and per ounce sold, as well as capital expenditures (sustaining) and capital expenditures (growth) and cash provided by operations before changes in working capital. These financial measures do not have any standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other issuers, even as compared to other issuers who may be applying the World Gold Council (“WGC”) guidelines, which can be found at http://www.gold.org.

Management believes that the use of these non–GAAP measures will assist analysts, investors and other stakeholders of the Company in understanding the costs associated with producing gold, understanding the economics of gold mining, assessing our operating performance, our ability to generate free cash flow from current operations and to generate free cash flow on an overall Company basis, and for planning and forecasting of future periods. However, the measures do have limitations as analytical tools as they may be influenced by the point in the life cycle of a specific mine and the level of additional exploration or expenditures a company has to make to fully develop its properties. Accordingly, these non–GAAP measures should not be considered in isolation, or as a substitute for, analysis of our results as reported under GAAP.

Definitions

The following is a description of the non–GAAP measures used in this MD&A. The definitions are similar to the WGC's Guidance Note on these non–GAAP measures:

  • Production costs represent operating costs associated with the mining, milling and site administration activities at the Company's operating sites, excluding costs unrelated to production such as mine standby and community costs related to current operations.
  • Operating costs (on a sales basis) include mine operating costs such as mining, processing, site support, royalties and operating taxes (except at Kumtor where revenue–based taxes are excluded), but exclude depreciation, depletion and amortization (DD&A), reclamation costs, financing costs, capital development and exploration.
  • Adjusted operating costs per ounce sold include operating costs (on a sales basis), regional office administration, mine standby costs, community costs related to current operations, refining fees and by–product credits.
  • All–in sustaining costs on a by–product basis per ounce sold include adjusted operating costs, the cash component of capitalized stripping costs, corporate general and administrative expenses, accretion expenses, and sustaining capital, net of copper and silver credits. The measure incorporates costs related to sustaining production. Copper and silver credits represent the expected revenue from the sale of these metals.
  • All–in sustaining costs on a by–product basis per ounce sold including taxes, include revenue–based tax at Kumtor and taxes (mining and income) at Mount Milligan.
  • All–in sustaining costs on a co–product basis per ounce of gold sold or per pound of copper sold, operating costs are allocated between copper and gold based on production. To calculate the allocation of operating costs, copper production has been converted to ounces of gold equivalent using the copper production for the periods presented, as well as an average of the futures prices during the quotational pricing period for copper and gold sold from Mount Milligan. In the second quarter of 2017, 489 pounds of copper was equivalent to one ounce of gold.
  • Adjusted earnings is calculated by adjusting net earnings (loss) as recorded in the condensed interim consolidated statements of income (loss) and comprehensive income (loss) for non–recurring items.
  • Capital expenditure (Sustaining) is a capital expenditure necessary to maintain existing levels of production. The sustaining capital expenditures maintain the existing mine fleet, mill and other facilities so that they function at levels consistent from year to year.
  • Capital expenditure (Growth) is capital expended to expand the business or operations by increasing productive capacity beyond current levels of performance.
  • Growth projects are defined as projects that are beyond the exploration stage but are pre–operational. For 2017, growth projects include Öksüt, Gatsuurt and the Greenstone Gold Property.
  • Average realized gold price is calculated by dividing revenue (including third party sales and the fixed amount received under the Royal Gold Stream Arrangement) derived from gold sales by the number of ounces sold.
  • Average realized copper price is calculated by dividing revenue (including third party sales and the fixed amount received under the Royal Gold Stream Arrangement) derived from copper sales by the number of pounds sold.
  • Free cash flow (unlevered) is calculated as cash provided by operations less additions to property, plant and equipment.
  • Cash provided by operations before changes in working capital starts with cash provided by operations and removes the changes in working capital as presented in the Company's Statement of Cash Flows.

Adjusted Operating Cost and All–in Sustaining Costs on a by–product basis (including and excluding taxes) per ounce of gold are non–GAAP measures and can be reconciled as follows:

                         
  Three months ending September 30, Nine months ending September 30,
(Unaudited – $ millions, unless otherwise specified) Consolidated (1) Kumtor(1) Mount Milligan(1) Consolidated (1) Kumtor(1) Mount Milligan(1)
  2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016
                         
Cost of sales excluding molybdenum segment, as reported 129.1 96.5 54.5 96.5 74.6 400.2 244.4 207.1 244.4 193.1
Less: Non–cash component 39.7 51.3 27.8 51.3 11.9 140.9 120.1 106.0 120.1 34.9
Cost of sales, cash component 89.4 45.2 26.7 45.2 62.7 259.3 124.3 101.1 124.3 158.3
Adjust for:                        
Regional office administration 4.1 3.6 4.1 3.6 12.4 10.7 12.4 10.7
Selling and marketing 1.5 1.5 3.8 3.8
Refining fees 1.1 1.2 0.8 1.1 0.3 3.6 2.5 2.7 2.5 0.9
By–product credits – copper (40.9) (40.9) (96.8) (96.8)
Community costs related to current operations 2.1 2.1 0.1 2.3 0.9 2.3 0.9
Adjusted Operating Costs 57.3 50.0 33.6 50.0 23.7 184.7 138.4 118.6 138.4 66.2
Corporate general administrative and other costs 13.3 5.8 0.1 0.7 32.8 18.2 0.2 1.4
Accretion expense 0.6 0.3 0.3 0.2 0.2 1.9 1.2 0.9 0.7 0.4
Capitalized stripping and ice unload 30.8 28.2 30.8 28.2 125.0 57.6 125.0 57.6
Capital expenditures (sustaining) 23.6 13.0 15.5 13.0 8.1 62.0 49.9 44.2 49.6 17.8
All–in Sustaining Costs on a by–product basis 125.7 97.3 80.3 91.4 32.6 406.4 265.2 288.8 246.3 85.7
Revenue–based taxes 17.6 30.8 17.6 30.8 64.5 63.7 64.5 63.7
Income and mining taxes 4.6 0.1 1.6 3.8 0.3 3.6
All–in Sustaining Costs on a by–product basis (including taxes) 147.8 128.2 97.8 122.2 34.2 474.7 329.3 353.3 310.0 89.4
Ounces sold (000) 174.1 164.8 99.5 164.8 74.6 550.2 354.5 369.4 354.5 180.8
Adjusted Operating Costs – $ /oz sold 329 303 338 302 318 336 390 321 390 366
Gold – All–in Sustaining Costs on a by–product basis – $ /oz sold 722 591 807 554 437 739 748 782 695 474
Gold – All–in Sustaining Costs on a by–product basis (including taxes) – $ /oz sold 849 779 983 741 459 863 929 956 874 494
                         
                         
Gold – All–in Sustaining Costs on a co–product basis (before taxes) – $ /oz sold 805 591 807 554 632 796 748 782 695 650
Copper – All–in Sustaining Costs on a co–product basis (before taxes) – $ /pound sold 1.70 n/a n/a n/a 1.70 1.68 n/a n/a n/a 1.68
(1) Results may not add due to rounding                        
                         

Adjusted earnings can be reconciled as follows:

Adjusted earnings is intended to provide investors with information about the Company's continuing income generating capabilities. Hence, this measure adjusts for the earnings impact of non–recurring items.

                 
    Three months ended September 30,   Nine months ended September 30,
($ millions, except as noted)   2017   2016   2017   2016
                 
Net earnings (loss) $ (0.8) $ 66.9 $ 79.6 $ 87.9
                 
Adjust for non–recurring items:                
  Asset Impairment (net of tax)       39.7  
  Kyrgyz Republic settlement   60.0     60.0  
  Proceeds from sale of ATO (net of tax)   (6.9)     (6.9)  
                 
Adjusted net earnings $ 52.3 $ 66.9 $ 172.4 $ 87.9
                 
Net earnings (loss) per share – basic $ $ 0.28 $ 0.27 $ 0.36
Net earnings (loss) per share – diluted $ $ 0.28 $ 0.27 $ 0.35
Adjusted net earnings per share – basic $ 0.18 $ 0.28 $ 0.59 $ 0.36
Adjusted net earnings per share – diluted $ 0.18 $ 0.28 $ 0.59 $ 0.35
                 
                 
                 
 
Free cash flow (unlevered) is calculated as follows:
                 
    Three months ended September 30,   Nine months ended September 30,
($ millions, except as noted)   2017   2016   2017   2016
                 
Cash provided by operations (1) $ 119.5 $ 134.4 $ 330.5 $ 201.0
                 
Adjust for:                
Additions to property, plant and equipment (1)   (57.5)   (50.6)   (203.7)   (131.0)
                 
Free cash flow $ 62.0 $ 83.8 $ 126.8 $ 70.0
                 
                 
(1) as presented in the Company's Condensed Interim Statements of Cash Flows    
 
             
Sustaining capital, growth capital and capitalized stripping presented in the All–in Sustaining cost measures can be reconciled as follows:
             
Three months ended September 30, Kumtor Mount Milligan Turkey Mongolia All other Consolidated
($ millions)  (Unaudited)            
2017            
Capitalized stripping –cash 30.8 30.8
Sustaining capital – cash 13.9 6.9 0.1 20.8
Growth capital – cash 5.1 5.1
Gatsuurt project development capital cash 0.2 0.2
Greenstone Gold Property pre–development capital cash 0.3 0.3
Öksüt project development capital – cash 1.4 1.4
Molybdenum business capital – cash 0.2 0.2
Net (increase) decrease in accruals included in additions to PP&E (1.6) 1.2 (1.1) (1.5)
             
Total – Additions to PP&E (1) 48.1 8.1 1.4 (0.9) 0.6 57.3
2016            
($ millions)  (Unaudited)            
Capitalized stripping –cash 28.2 28.2
Sustaining capital – cash 13.0 13.0
Growth capital – cash 3.2 1.5 4.7
Greenstone Gold Property pre–development capital cash 2.6 2.6
Öksüt project development capital – cash 4.7 4.7
Net (increase) decrease in accruals included in additions to PP&E (2.6) (2.6)
             
Total – Additions to PP&E (1) 41.8 4.7 4.1 50.6
             
Nine months ended September 30, Kumtor Mount Milligan Turkey Mongolia All other Consolidated
($ millions)  (Unaudited)            
2017            
Capitalized stripping –cash 125.0 125.0
Sustaining capital – cash 42.6 15.3 0.1 58.0
Growth capital – cash 10.9 10.9
Gatsuurt project development capital cash 2.4 2.4
Greenstone Gold Property pre–development capital cash 3.8 3.8
Öksüt project development capital – cash 4.8 4.8
Molybdenum business capital – cash 0.5 0.5
Net (increase) decrease in accruals included in additions to PP&E (1.6) 0.8 (1.1) (1.8)
             
Total – Additions to PP&E (1) 176.8 16.1 4.8 1.4 4.4 203.6
2016            
($ millions)  (Unaudited)            
Capitalized stripping –cash 57.6 57.6
Sustaining capital – cash 49.6 0.3 49.9
Growth capital – cash 13.3 5.0 18.3
Greenstone Gold Property pre–development capital cash 7.6 7.6
Öksüt project development capital – cash 9.9 9.9
Net (increase) decrease in accruals included in additions to PP&E (12.3) (12.3)
             
Total – Additions to PP&E (1) 108.2 9.9 12.9 131.0

(1)As reported in the Company's Consolidated Statement of Cash Flows as “Investing Activities – Additions to property, plant & equipment”.

Reconciliation of Cash Provided by Operations Before Changes in Working Capital:

  Three months ended September 30, 2017
  Kumtor Mount Milligan Molybdenum Other Consolidated
Cash generated from (used in) operations 79,489 67,588 (1,374) (26,249) 119,454
Add back (deduct):          
  Change in non–cash operating working capital (5,218) (19,540) 1,070 12,261 (11,427)
Net cash generated from (used in) operations before changes in non–cash working capital 74,271 48,048 (304) (13,988) 108,027
   
  Three months ended September 30, 2016
  Kumtor Mount Milligan Molybdenum Other Consolidated
Cash generated from (used in) operations 148,987 (14,612) 134,375
Add back (deduct):      
  Change in non–cash operating working capital (16,375) 1,265 (15,110)
Net cash generated from (used in) operations before changes in non–cash working capital 132,612 (13,347) 119,265
           
   
  Nine months ended September 30, 2017
  Kumtor Mount Milligan Molybdenum Other Consolidated
Cash generated from (used in) operations 265,130 121,043 (7,236) (48,425) 330,512
Add back (deduct):          
  Change in non–cash operating working capital 14,118 (12,194) 7,692 12,590 22,206
Net cash generated from (used in) operations before changes in non–cash working capital 279,248 108,849 456 (35,835) 352,718
           
  Nine months ended September 30, 2016
  Kumtor Mount Milligan Molybdenum Other Consolidated
Cash generated from (used in) operations 222,545 (21,498) 201,047
Add back (deduct):      
  Change in non–cash operating working capital 20,807 (16,172) 4,635
Net cash generated from (used in) operations before changes in non–cash working capital 243,352 (37,670) 205,682
           

Average realized gold price

The average realized gold price per ounce sold is calculated by dividing gold sales revenue, gross together with the final pricing adjustments and mark–to–market adjustments by the ounces sold, as shown in the table below:

         
  Three months ended
September 30,
Nine months ended
September 30,
  2017 2016 2017 2016
         
Gold sales reconciliation ($ millions)        
Gold sales – Kumtor 124.3 218.7 457.1 452.0
         
Gold sales – Mt. Milligan        
  Gold sales related to cash portion of Royal Gold stream 11.3 27.8
  Mark–to–market adjustments on sales to Royal Gold (1.1) (0.3)
  Final adjustments on sales to Royal Gold 0.3 0.0
Total gold sales under Royal Gold stream 10.5 27.5
         
  Gold sales to third party customers 62.1 151.2
  Mark–to–market adjustments (0.1) (1.4)
  Final pricing adjustments 2.3 4.7
Total gold sales to third party customers 64.3 154.6
Gold sales, net of adjustments 74.8 182.1
Refining and treatment costs (0.3) (0.9)
Total gold sales 74.4 181.2
         
Total gold revenue – Consolidated 198.7 218.7 638.3 452.0
         
Ounces of gold sold        
Gold ounces sold – Kumtor 99,514 164,847 369,431 354,500
Ounces sold to Royal Gold – Mt. Milligan 25,864 63,793
Ounces sold to Royal Gold – Mt. Milligan – Final adjustments (7,556)
Ounces sold to third party customers – Mt. Milligan 48,721 124,570
         
Total ounces sold – Consolidated 174,099 164,847 550,238 354,500
         
Average realized sales price for gold on a per ounce basis        
Average realized sales price – Kumtor 1,249 1,327 1,237 1,275
         
  Average realized gold price – Royal Gold 435 435
  Average realized gold price – Mark–to–market adjustments (44) (4)
  Average realized gold price – Final pricing adjustments 13 0
Average realized gold price – Mt. Milligan – Royal Gold 404 431
         
  Average realized gold price – Third party 1,275 1,214
  Average realized gold price – Mark–to–market adjustments (1) (11)
  Average realized gold price – Final pricing adjustments 47 38
Average realized gold price – Mt. Milligan – Third party 1,320 1,241
Average realized gold price – Mt. Milligan – Combined 998 1,003
         
Average realized sales price for gold – Consolidated 1,141 1,327 1,160 1,275

Average realized copper price

The average realized copper price per pound is calculated by dividing copper sales revenue, gross together with the final pricing adjustments and mark–to–market adjustments per pound, as shown in the table below:

     
     
Average realized sales price for Copper – Mt. Milligan Three months ended
September 30, 2017
Nine months ended
September 30, 2017
 
     
Copper sales reconciliation ($ millions)    
  Copper sales related to cash portion of Royal Gold stream 1.7 3.7
  Mark–to–market adjustments on Royal Gold stream (0.7) (0.7)
  Final adjustments on sales to Royal Gold 0.3 0.5
Total copper sales under Royal Gold stream 1.2 3.4
     
  Copper sales to third party customers 43.5 102.8
  Mark–to–market adjustments (0.6) 0.5
  Final price adjustments 2.2 3.6
Total copper sales to third party customers 45.0 106.8
Copper sales, net of adjustments 46.3 110.3
Refining and treatment costs (5.4) (13.5)
Copper sales 40.9 96.8
     
Pounds of copper sold (000's lbs)    
  Pounds sold to Royal Gold 3,504 8,725
  Pounds sold to third party customers 15,140 37,888
Total pounds sold 18,644 46,613
     
Average realized sales price for copper on a per pound basis    
  Copper sales related to cash portion of Royal Gold stream 0.48 0.42
  Mark–to–market adjustments on Royal Gold stream (0.20) (0.08)
  Final pricing adjustments on Royal Gold stream 0.07 0.05
Average realized copper price – Royal Gold 0.35 0.39
     
  Average realized copper price – Third party 2.87 2.71
  Average realized copper price – Mark–to–market adjustments (0.04) 0.01
  Average realized copper price – Final pricing adjustments 0.14 0.09
Average realized copper price – Third party 2.97 2.82
     
Average realized copper price – Combined 2.19 2.08
     
  1. Caution Regarding Forward–Looking Information

Information contained in this document which are not statements of historical facts, and the documents incorporated by reference herein, may be “forward–looking information” for the purposes of Canadian securities laws. Such forward–looking information involves risks, uncertainties and other factors that could cause actual results, performance, prospects and opportunities to differ materially from those expressed or implied by such forward looking information. The words “believe”, “expect”, “anticipate”, “contemplate”, “plan”, “intends”, “continue”, “budget”, “estimate”, “may”, “will”, “schedule”, “understand” and similar expressions identify forward–looking information. These forward–looking statements relate to, among other things: the Company's discussions with the Government of the Kyrgyz Republic, completion of the Strategic Agreement and future business certainty for the Kumtor Project; Work Safe Home Safe training; advancement of exploration projects; the Company's cash on hand, working capital, future cash flows and existing credit facilities being sufficient to fund anticipated operating cash requirements; Kyrgyzaltyn's appointment of a new purchaser bank and the resumption of full shipments from the Kumtor Project to Kyrgyzaltyn; the timing and outcomes of projects initiated at the Mount Milligan mine aimed at improving metal recovery and other opportunities; the resumption of negotiations with the Mongolian Government related to the Gatsuurt Project;; timing for development of, and gold production, from the Öksüt Project; the timing for receipt of proceeds from the sale of the ATO licenses; mining plans at Kumtor, including timing for accessing ore; and statements found under the heading, “2017 Outlook”, including forecast 2017 production and cost estimates.

Forward–looking information is necessarily based upon a number of estimates and assumptions that, while considered reasonable by Centerra, are inherently subject to significant political, business, economic and competitive uncertainties and contingencies. Known and unknown factors could cause actual results to differ materially from those projected in the forward looking information. Factors that could cause actual results or events to differ materially from current expectations include, among other things: (A) strategic, legal, planning and other risks, including: political risks associated with the Company's operations in the Kyrgyz Republic and Canada; risks that any of the conditions precedent to the Strategic Agreement will not be satisfied in a timely manner or at all, particularly as the Government may not bind the General Prosecutor's Office or the Parliament of the Kyrgyz Republic; a decision by the General Prosecutor's Office, or its successor the Anti–Corruption Service of the State Committee for National Security, to re–open at any time civil or criminal proceedings against Centerra, its subsidiaries or other stakeholders; the failure of the Government to comply with its continuing obligations under the Strategic Agreement, including the requirement that it comply at all times with its obligations under the Kumtor Project Agreements, allow for the continued operation of the Kumtor Mine by KGC and KOC and not take any expropriatory action; actions by the Government or any state agency or the General Prosecutor's Office that serve to restrict or otherwise interfere with the payment of funds by KGC and KOC to Centerra; resource nationalism including the management of external stakeholder expectations; the impact of changes in, or to the more aggressive enforcement of, laws, regulations and government practices, including with respect to the environment, in the jurisdictions in which the Company operates including any delays or refusals to grant required permits and licenses, unjustified civil or criminal action against the Company, its affiliates or its current or former employees; risks that community activism may result in increased contributory demands or business interruptions; the impact of any actions taken by the Kyrgyz Republic Government and Parliament relating to the Kumtor Project Agreements which are inconsistent with the rights of Centerra and KGC under the Kumtor Project Agreements; any impact on the purported cancellation of Kumtor's land use rights at the Kumtor Project; the risks related to other outstanding litigation affecting the Company's operations in the Kyrgyz Republic and elsewhere; the impact of the delay by relevant government agencies to provide required approvals, expertises and permits; potential impact on the Kumtor Project of investigations by Kyrgyz Republic instrumentalities; the terms pursuant to which the Mongolian Government will participate in, or to take a special royalty rate in, the Gatsuurt Project; the impact of constitutional changes in Turkey; the impact of any sanctions imposed by Canada, the United States or other jurisdictions against various Russian individuals and entities; the ability of the Company to successfully negotiate agreements for the development of the Gatsuurt Project; potential defects of title in the Company's properties that are not known as of the date hereof; the inability of the Company and its subsidiaries to enforce their legal rights in certain circumstances; the presence of a significant shareholder that is a state–owned company of the Kyrgyz Republic; risks related to anti–corruption legislation; risks related to the concentration of assets in Central Asia; Centerra's future exploration and development activities not being successful; Centerra not being able to replace mineral reserves; Aboriginal claims and consultative issues relating to the Company's properties which are in proximity to Aboriginal communities; and potential risks related to kidnapping or acts of terrorism; (B) risks relating to financial matters, including: sensitivity of the Company's business to the volatility of gold, copper and other mineral prices, the use of provisionally–priced sales contracts for production at Mount Milligan, reliance on a few key customers for the gold–copper concentrate at Mount Milligan, use of commodity derivatives, the imprecision of the Company's mineral reserves and resources estimates and the assumptions they rely on, the accuracy of the Company's production and cost estimates, the impact of restrictive covenants in the Company's credit facilities which may, among other things, restrict the Company from pursuing certain business activities or making distributions from its subsidiaries, the Company's ability to obtain future financing, the impact of global financial conditions, the impact of currency fluctuations, the effect of market conditions on the Company's short–term investments, the Company's ability to make payments including any payments of principal and interest on the Company's debt facilities depends on the cash flow of its subsidiaries; and (C) risks related to operational matters and geotechnical issues and the Company's continued ability to successfully manage such matters, including the movement of the Davidov Glacier, waste and ice movement and continued performance of the buttress at the Kumtor Project; the occurrence of further ground movements at the Kumtor Project and mechanical availability; the ability of the Company to successfully ramp–up to design criteria of the secondary crusher at Mount Milligan; the success of the Company's future exploration and development activities, including the financial and political risks inherent in carrying out exploration activities; inherent risks associated with the use of sodium cyanide in the mining operations; the adequacy of the Company's insurance to mitigate operational risks; mechanical breakdowns; the Company's ability to replace its mineral reserves; the occurrence of any labour unrest or disturbance and the ability of the Company to successfully re–negotiate collective agreements when required; the risk that Centerra's workforce may be exposed to widespread epidemic; seismic activity in the vicinity of the Company's properties; long lead times required for equipment and supplies given the remote location of some of the Company's operating properties; reliance on a limited number of suppliers for certain consumables, equipment and components; illegal mining on the Company's Mongolian properties; the Company's ability to accurately predict decommissioning and reclamation costs; the Company's ability to attract and retain qualified personnel; competition for mineral acquisition opportunities; and risks associated with the conduct of joint ventures/partnerships; the Company's ability to manage its projects effectively and to mitigate the potential lack of availability of contractors, budget and timing overruns and project resources. See section titled “Risks that can affect our business” in the 2016 Annual Information Form available on SEDAR at www.sedar.com.

Furthermore, market price fluctuations in gold and copper, as well as increased capital or production costs or reduced recovery rates may render ore reserves containing lower grades of mineralization uneconomic and may ultimately result in a restatement of reserves. The extent to which resources may ultimately be reclassified as proven or probable reserves is dependent upon the demonstration of their profitable recovery. Economic and technological factors which may change over time always influence the evaluation of reserves or resources. Centerra has not adjusted mineral resource figures in consideration of these risks and, therefore, Centerra can give no assurances that any mineral resource estimate will ultimately be reclassified as proven and probable reserves.

Mineral resources are not mineral reserves, and do not have demonstrated economic viability, but do have reasonable prospects for economic extraction. Measured and indicated resources are sufficiently well defined to allow geological and grade continuity to be reasonably assumed and permit the application of technical and economic parameters in assessing the economic viability of the resource. Inferred resources are estimated on limited information not sufficient to verify geological and grade continuity or to allow technical and economic parameters to be applied. Inferred resources are too speculative geologically to have economic considerations applied to them to enable them to be categorized as mineral reserves. There is no certainty that mineral resources of any category can be upgraded to mineral reserves through continued exploration.

There can be no assurances that forward–looking information and statements will prove to be accurate, as many factors and future events, both known and unknown could cause actual results, performance or achievements to vary or differ materially, from the results, performance or achievements that are or may be expressed or implied by such forward–looking statements contained herein or incorporated by reference. Accordingly, all such factors should be considered carefully when making decisions with respect to Centerra, and prospective investors should not place undue reliance on forward looking information. Forward–looking information is as of October 31, 2017. Centerra assumes no obligation to update or revise forward looking information to reflect changes in assumptions, changes in circumstances or any other events affecting such forward–looking information, except as required by applicable law.

 
Centerra Gold Inc.
Condensed Consolidated Interim Statements of Financial Position
(Unaudited)          
    September 30,     December 31,
    2017     2016
(Expressed in thousands of United States Dollars)          
           
Assets          
Current assets          
  Cash and cash equivalents $ 351,958   $ 160,017
  Short–term investments   81     74
  Restricted cash and restricted short–term investments       247,844
  Amounts receivable   68,863     48,097
  Inventories   487,667     540,753
  Prepaid expenses and other current assets   16,223     18,418
    924,792     1,015,203
Property, plant and equipment   1,662,384     1,564,891
Goodwill   16,070     16,070
Restricted cash   839     824
Reclamation deposits   26,409     32,035
Other assets   26,156     25,728
    1,731,858     1,639,548
Total assets $ 2,656,650   $ 2,654,751
           
Liabilities and Shareholders' equity          
Current liabilities          
  Accounts payable and accrued liabilities $ 172,010   $ 130,342
  Provision for Kyrgyz Republic settlement   60,000    
  Short–term debt   48,536     72,281
  Current portion of lease obligations   7,997    
  Revenue–based taxes payable   5,257     19,202
  Taxes payable   3,902     2,302
  Current portion of provision for reclamation   975     918
  Other current liabilities   9,968     1,563
    308,645     226,608
Long–term debt   247,614     392,851
Provision for reclamation   160,199     157,498
Lease obligations   23,990     29,901
Deferred income tax liability       1,661
Other liabilities   14,157     21,950
    445,960     603,861
Shareholders' equity          
  Share capital   948,105     944,633
  Contributed surplus   25,561     25,876
  Accumulated other comprehensive loss   (7,538)     (2,592)
  Retained earnings   935,917     856,365
    1,902,045     1,824,282
Total liabilities and Shareholders' equity $ 2,656,650   $ 2,654,751
           
         
Centerra Gold Inc.        
Condensed Consolidated Interim Statements of Earnings and Comprehensive Income (Loss)        
(Unaudited)        
    Three months ended   Nine months ended
    September 30,   September 30,
    2017   2016   2017   2016
(Expressed in thousands of United States Dollars)                
(except per share amounts)                
                 
  Gold sales $ 198,749 $ 218,745 $ 638,348 $ 452,000
  Copper sales   40,891     96,770  
  Molybdenum sales   34,961     99,855  
  Tolling, calcining and other   1,636     5,824  
Revenue   276,237   218,745   840,797   452,000
                 
  Cost of sales   164,236   96,516   501,320   244,381
  Standby costs (recovery), net   2,382   (1,542)   5,115   (2,238)
  Regional office administration   4,144   3,627   12,440   10,675
Earnings from mine operations   105,475   120,144   321,922   199,182
                 
  Revenue–based taxes   17,560   30,827   64,542   63,705
  Other operating expenses   5,111   130   9,779   1,396
  Care and maintenance expense   3,279     9,925  
  Pre–development project costs   853   2,309   3,284   7,593
  Exploration expenses and business development   2,460   5,840   6,702   13,029
  Thompson Creek Metals Inc. acquisition and integration expenses   647     2,085  
  Corporate administration   12,591   5,918   31,628   18,529
  Asset impairment       41,300  
  Kyrgyz Republic settlement   60,000     60,000  
Earnings from operations   2,974   75,120   92,677   94,930
  Other (income) loss, net   (10,208)   893   (13,403)   (843)
  Finance costs   9,428   1,720   24,418   4,394
Earnings before income tax   3,754   72,507   81,662   91,379
  Income tax expense   4,595   5,569   2,110   3,469
Net (loss) earnings $ (841) $ 66,938 $ 79,552 $ 87,910
                 
Other Comprehensive Income (Loss)                
Items that may be subsequently reclassified to (loss) earnings:                
  Net gain (loss) on translation of foreign operation   1,480   43   2,746   (176)
  Net movement in cashflow hedge net of taxes   (5,902)   (365)   (7,692)   (365)
Other comprehensive loss   (4,422)   (322)   (4,946)   (541)
Total comprehensive (loss) income $ (5,263) $ 66,616 $ 74,606 $ 87,369
                 
Basic (loss) earnings per common share $ (0.00) $ 0.28 $ 0.27 $ 0.36
Diluted (loss) earnings per common share $ (0.00) $ 0.28 $ 0.27 $ 0.35
                 
         
Centerra Gold Inc.
Condensed Consolidated Interim Statements of Cash Flows
(Unaudited)
    Three months ended   Nine months ended
    September 30,   September 30,
    2017   2016   2017   2016
(Expressed in thousands of United States Dollars)                
                 
Operating activities                
                 
Net earnings (loss) $ (841) $ 66,938 $ 79,552 $ 87,910
                 
Adjustments for the following items:                
  Depreciation, depletion and amortization   42,466   60,823   150,571   137,553
  Finance costs   9,428   1,720   24,418   4,394
  Loss on disposal of equipment   27     390   119
  Compensation expense on stock options   250   561   796   1,905
  Other share based compensation expense (reversal)   6,755   1,184   9,194   (365)
  Inventory impairment reversal     (15,431)     (27,217)
  Income tax expense   4,595   5,569   2,110   3,469
  Asset impairment       41,300  
  Kyrgyz Republic Settlement   60,000     60,000  
  Gain on sale of ATO Project   (9,800)     (9,800)  
      112,880   121,364   358,531   207,768
  Change in operating working capital   11,427   15,110   (22,206)   (4,635)
  Purchase and settlement of derivatives   (540)   (1,803)   (482)   (1,803)
  Payments toward provision for reclamation   (128)     (382)  
  Income taxes paid   (4,185)   (296)   (4,949)   (283)
Cash provided by operations   119,454   134,375   330,512   201,047
                 
Investing activities                
  Additions to property, plant and equipment   (57,469)   (50,579)   (203,748)   (131,001)
  Net redemption (purchase) of short–term investments   59,996   257,094   (7)   156,558
  Decrease (increase) in restricted cash   239,206   27   247,829   (272)
  Reclamation deposits recovery (payments) and other assets   (2,736)   (1,608)   384   (5,846)
  Proceeds from the sale of ATO Project   9,800     9,800  
Cash provided by investing   248,797   204,934   54,258   19,439
                 
Financing activities                
  Dividends paid – declared in period     (7,498)     (17,668)
  Dividends paid – from trust account         (4,466)
  Debt (repayment) proceeds   (111,864)     (171,865)   24,000
  Payment of interest and other borrowing costs   (7,860)   (1,997)   (23,166)   (8,600)
  Proceeds from common shares issued for options exercised   2,202   620   2,202   1,302
  Proceeds from subscription receipts issued       145,390       145,390
Cash (used in) provided by financing   (117,522)   136,515   (192,829)   139,958
Increase in cash during the period   250,729   475,824   191,941   360,444
Cash and cash equivalents at beginning of the period   101,229   245,233   160,017   360,613
Restricted cash in respect of subscription receipts     (145,390)     (145,390)
Restricted cash in respect of court order     (121,607)     (121,607)
Cash and cash equivalents at end of the period $ 351,958 $ 454,060 $ 351,958 $ 454,060
                 
Cash and cash equivalents consist of:                
Cash $ 308,905 $ 80,723 $ 308,905 $ 80,723
Cash equivalents   43,053   373,337   43,053   373,337
  $ 351,958 $ 454,060 $ 351,958 $ 454,060
                 

Refer to the notes that accompany the Company's unaudited condensed consolidated interim financial statements that are filed on SEDAR, as these form an integral part of these financial statements.

To view the Financial Statements and Notes for the three and nine months ended September 30, 2017, please visit the following link: http://media3.marketwire.com/docs/CGFSQ32017.pdf

The Unaudited Interim Consolidated Financial Statements and Notes for the three and nine months ended September 30, 2017 and Management's Discussion and Analysis for the three and nine months ended September 30, 2017 have been filed on the System for Electronic Document Analysis and Retrieval ('SEDAR') at www.sedar.com and are available at the Company's web site at: www.centerragold.com.

About Centerra
Centerra Gold Inc. is a Canadian–based gold mining company focused on operating, developing, exploring and acquiring gold properties in North America, Asia and other markets worldwide. Centerra operates two flagship assets, the Kumtor Mine in the Kyrgyz Republic and the Mount Milligan Mine in British Columbia, Canada and is the largest Western–based gold producer in Central Asia. Centerra's shares trade on the Toronto Stock Exchange (TSX) under the symbol CG. The Company is based in Toronto, Ontario, Canada.

Additional information on Centerra is available on the Company's website at www.centerragold.com and at SEDAR at www.sedar.com.

Conference Call
Centerra invites you to join its 2017 third quarter conference call on Wednesday, November 1, 2017 at 11:00AM Eastern Time. The call is open to all investors and the media. To join the call, please dial Toll–Free in North America +1 (800) 698–0460 or International callers dial +1 (303) 223–2683. Third quarter summary slides are available on Centerra Gold's website at www.centerragold.com . Alternatively, an audio feed web cast will be broadcast live by Thomson Reuters and can be accessed at Centerra Gold's website at www.centerragold.com . A recording of the call will be available on www.centerragold.com shortly after the call and via telephone until midnight Eastern Time on Wednesday, November 8, 2017 by calling (416) 626–4100 or (800) 558–5253 and using passcode 21858966.

Additional information on Centerra is available on the Company's web site at www.centerragold.com and at SEDAR at www.sedar.com.

Attachment Available: http://www.marketwire.com/library/MwGo/2017/10/30/11G147188/20–Q3_2017_NR–MDA_Combined_FINAL–51864bdf3925bfc0b86249261f2470e1.PDF

Yamaha ATV & Side-by-Side Racers Continue Domination in 2017

KENNESAW, GA—(Marketwired – October 31, 2017) – Yamaha Racing's factory–supported and bLU cRU ATV and Side–by–Side (SxS) racers continue their winning ways in 2017, taking championships in Grand National Cross Country (GNCC), Lucas Oil Off Road Racing Series (LOORRS), Lucas Oil Regional Off–Road Series (LORORS) and The Off–Road Championship (TORC).

Although he solidified it over a month ago, Yamaha factory–supported racer Walker Fowler grabbed the Holeshot Award and officially clinched his third–straight XC1 Pro ATV class championship title this past weekend during the GNCC finale at Ironman Raceway in Crawfordsville, Indiana. Racing his WFR / Maxxis / Moto–XPerts / Yamaha YFZ450R, Fowler finished first in 12 of 13 rounds, setting a new record for most overall wins in a single season, and was the only racer to podium in every round. Fowler secured the Yamaha bLU cRU championship bonus of $12,500 and led the series with 154 more points than second place finisher and fellow YFZ450R racer, Brycen Neal.

Thanks to GBC / Fly Racing / HMF / Yamaha's Johnny Gallagher taking his first–ever overall GNCC win in Round 6 with his YFZ450R, the best–selling 450–class Sport ATV in America* won every XC1 Pro ATV round. An additional title captured at the Ironman GNCC finale was by Traci Pickens on her YFZ450R. This win signifies her 10th WXC National Championship, tying the record for most championship wins by any GNCC racer, and further backs why Yamaha is the best–selling Sport ATV brand in America**.

New to Yamaha this year, and joining Fowler and Pickens atop the Ironman podium, reigning XC1 Pro UTV champion Cody Miller secured his second championship in a row in his Randy Hawkins N–Fab / Am–Pro YXZ1000R Sport Shift (SS). This victory marks the Proven Off–Road paddle–shifting YXZ1000R SS vehicle's inaugural year of racing, and first national cross country championship. For his XC1 Pro UTV championship win in the YXZ1000R SS, Miller takes home the $12,500 Yamaha bLU cRU championship bonus.

As part of GNCC's annual Breast Cancer Awareness efforts, Yamaha committed to donating $100 per Yamaha championship win and $50 per Yamaha race win at the Ironman series finale officially deemed a “pink race.” With 26 Yamaha racers earning championships and 29 total races won with Yamaha vehicles over the weekend, Yamaha donated a total of $4,050, supporting local breast cancer care and research for the Montgomery County Free Clinic (MCFC), a non–profit organization dedicated to providing free mammogram examinations across the Crawfordsville and Montgomery county region.

In short course last month, Yamaha factory–supported racer CJ Greaves captured the TORC Series' Pro Stock class championship in his Johnny G Motorsports prepared Monster Energy / Yamaha Racing / Maxxis Tires / Yamalube #933 YXZ1000R with a near–perfect 12 of 13 first–place finishes. For his TORC Series Pro Stock UTV victory in a YXZ1000R, Yamaha rewarded Greaves with the $15,000 bLU cRU championship bonus. The series ended with a YXZ podium sweep for Yamaha, with drivers Zach Martin and Jake Lunderby taking second and third respectively.

In TORC's Pro Mod UTV class, bLU cRU racer, Rodney Van Eperen secured an overall second–place finish driving his Powersports 1 / Johnny G Motorsports / Yamalube #945 non–turbo YXZ1000R — only eight points behind the leader, and against a fleet of turbos — further proving the YXZ1000R is the dominant, Proven Off–Road SxS for short course racing.

In the LOORRS national circuit, the YXZ1000R finished first through fifth overall in the Production 1000 UTV class, with Brock Heger and his Icon Vehicle Dynamics / AIRAID / Yamaha YXZ1000R on top with six first place wins, earning him the $15,000 bLU cRU championship bonus. Correspondingly finishing second through fifth in the series were Brandon Arthur, Paul O'Brien, Jason Weller, and Dustin Nelson. In the LOORRS Challenge Cup race, Yamaha's YXZ1000R again swept the podium with Mickey Thomas in first, Brock Heger in second, and Brandon Arthur in third.

Currently in LORORS Arizona, bLU cRU racer Corry Weller leads the Production 1000 UTV class in her Dragonfire Racing / Weller Racing Yamaha YXZ1000R with only two rounds remaining, and is additionally the only racer to podium in every race thus far. Fellow YXZ racers Paul O'Brien and Will Munns presently round out the top spots in second and third, respectively. Although Weller is leading the charge for the win, all three will be battling for the series championship and $7,500 bLU cRU bonus.

Earlier this year, five–time ATV MX Pro champion and Yamaha factory–supported racer, Chad Wienen returned as a dominant force for his sixth showing in the series aboard his Wienen Motorsports / SSI / 7240 / Walsh / Yamaha YFZ450R. Wienen finished on the podium in every round, with five first place finishes, allowing him to take second overall in the final standings. Capturing third place was fellow Yamaha factory–supported bLU cRU racer Thomas Brown on his Root River Racing / CST / Pro Motorsport / Yamaha YFZ450R.

Bringing Team USA to their first–ever victory in the Quadcross of European Nations (QXoN) on September 23 and 24 in Cingoli, Italy, the Proven Off–Road YFZ450R finished first in all three motos. Integral to Team USA's success, Brown secured two first–place finishes, with Wienen grabbing the holeshot and win in the second moto.

By the end of the season, Yamaha ATV and SxS racers across the country will have earned more than $60,000 in championship bonuses through the bLU cRU program. To view more information on Yamaha's bLU cRU program, including all guidelines and requirements, visit www.YamahabLUcRU.com.

The ATV and SxS titleholders listed above, along with this year's motorcycle champions, will be honored in November at the annual Yamaha Wall of Champions event in recognition of their exceptional racing performance. The ceremony will include a tour of Yamaha's state–of–the–art manufacturing facility in Newnan, Ga., where all Yamaha SxS and full–size ATVs are built for worldwide distribution.

Follow Yamaha online at www.Facebook.com/YamahaMotorUSA, www.Twitter.com/YamahaMotorUSA and www.Instagram.com/YamahaMotorUSA #Yamaha #YamahaRacing #bLUcRU #YXZ1000R #YFZ450R #ProvenOffRoad

About Yamaha Motor Corp., USA
Yamaha Motor Corporation, USA, is a recognized leader in the powersports industry. The company's ever–expanding product offerings include ATVs and Side–By–Side vehicles, Motorcycles and Scooters, Snowmobiles, Outboard Motors, Personal Watercraft, Boats, Outdoor Power Equipment, Golf Cars, Race Kart Engines, Unmanned Helicopters, e–Bikes, Accessories, Apparel, and much more. Yamaha Motor Corporation, USA products are sold through a nationwide network of dealers located in the United States.

Headquartered in California since 1960, YMUS also has facilities in Wisconsin and Georgia, as well as factory operations in Tennessee and Georgia. For more information about Yamaha, visit www.YamahaMotorsports.com.

*Based on IHS Markit Total new U.S. ATV registrations in the Yamaha defined 450cc class Sport ATV category for Calendar Year 2016.

** Based on IHS Markit Total new U.S. ATV registrations in the Yamaha defined Sport ATV category for Calendar Year 2016.

SxS Vehicles are recommended for use only by licensed drivers 16 years and older.

ATVs over 90cc are recommended for use only by riders 16 years and older.

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