Centerra earnings slide on lower grades, higher costs

Lower production and higher costs sent Centerra Gold‘s (CG-T) third quarter earnings plummeting by 69% to US$9 million during the three months ended Sept. 30.

That translates to US12 per share, and compares with year-earlier earnings of US$29 million (US40 per share). Revenue between the two periods slipped by nearly 12% to US$76.5 million.

Cash flow from operations was off 41% to US$17.2 million on lower production, increased exploration and corporate development activities, and a build-up in working capital due to the timing of gold shipments.

Still, Centerra says its quarterly gold production of 193,896 oz. (at an average cash cost of US$245 apiece) was better than expected, but 18% lower than a year earlier. The decline is mostly attributed to lower grades at the Kumtor mine in Kyrgyzstan, which slipped to 3.4 grams per tonne from 4.3 grams in the corresponding period of 2004. Cash costs in the third quarter of 2004 averaged US$174 per oz.

On the sales side, Centerra realized an average of US$429 per oz. of gold sold, a significant increase over the US$398 per oz. realized a year ago. This increase reflects an increase of US$39 per oz. in the quarter’s average spot gold price to US$440 per oz.

Centerra expects to produce around 177,000 oz. of gold at US$258 per oz. during the fourth quarter, with Kumtor pitching in 110,000 oz. (at US$307 per oz.), off about 10% from the third quarter as grades continue to decline. Grades at Kumtor are expected to improve in 2006.

For the full year, production is forecast about 800,000 oz. (with 783,500 oz. toward Centerra’s account) at a slightly higher cash cost of US$232 per oz.

At quarter’s end, Centerra had US$212 million in cash and some 72.1 million shares outstanding.