Ladies and gentlemen, thank you for standing by. Welcome to the Centerra Gold 2018 Fourth Quarter and Year End Results Conference Call and Webcast. [Operator Instructions]. As a reminder, this conference is being recorded, Monday, February 25, 2019. I would now like to turn the conference over to John Pearson, Vice President, Investor Relations.

Please go ahead..

Thank you, Edison. I'd like to welcome everyone to Centerra Gold's 2018 fourth quarter and 2018 year end conference call. Today's call is open to all members of the investment community and media and summary slides are also available on Centerra Gold's website.

Following the formal remarks, the operator will give the instructions for asking a question and we will then open the phone line to questions. Please note that all figures are in US dollars unless otherwise noted.

Joining me on the call today is Scott Perry, President and Chief Executive Officer; Darren Millman, Chief Financial Officer; and joining us by phone remotely is Yousef Rehman, our General Counsel.

I'd like to caution everyone that certain statements made on this call today may be forward-looking statements and as such, are subject to known and unknown risks, which may cause actual results to differ from those expressed or implied.

Also, certain of the measures we will discuss today are non-GAAP measures, and I refer you to our description of the non-GAAP measures in the combined news release and MD&A.

And for a more detailed discussion of the material assumptions, risks and uncertainties, please refer to our news release and MD&A which were released on Friday evening along with the unaudited financial statements and notes and to our other filings, which all can be found on SEDAR and the company's website.

So at this time, I will now turn the call over to Scott..

Okay. Thank you, John and good morning, ladies and gentlemen and thanks for joining our call. I'm just starting off on slide four of our accompanying presentation deck. As you can see on this slide, we're really looking to recognize some of the exemplary assets of our team at Öksüt.

First and foremost, starting off with safety, the team continues to demonstrate great performance. We currently stand at 1.2 million hours of lost time incident pre operations, which is just an outstanding milestone for the project and the team, given that they're in the construction phase. Construction is progressing really well.

Later on in this deck, we've got some images just to really demonstrate a lot of the activities taking place on surface, the various infrastructure and installations that - most importantly constructions exactly in line with schedule. We continue to put forward that this project will be delivered on time, on budget, which is fantastic.

Obviously, it's going to be a key source of high quality, low cost production for Centerra and just absolutely paramount in terms of our strategy moving forward and continuing to diversify the company.

In terms of the 2018 production result, you can see here in the third bullet point we've produced just under 730,000 ounces of gold, 47 million pounds of copper for the year relative to our guidance that exceeded the top end of guidance. So a very strong end to 2018. We saw that really resonate in terms of our low all-in sustaining costs for the year.

Just referencing the fourth bullet point here, we actually finished the year at an all-in sustaining cost of $754 per ounce, which was actually $28 per ounce lower than our revised guidance. So again, a very strong finish to the year both, at both operations and again just really reflects the strong production levels.

Let us move down towards some of the later bullet points in the slide. You can see in terms of free cash flow generation in the quarter, Mount Milligan generated $31 million of positive free cash flow and Kumtor generated $107 million of positive free cash flow. So very strong profitability at the operating level.

We continue to rationalize our portfolio. One of the key announcements in Q4 was that we divested of our Mongolian business unit for net proceeds of USD35 million and that transaction closed in October. Just the last two bullet points.

I think, what really represents the strong level of free cash flow generation is in Q4, in the fourth quarter, we repaid some $140 million of debt, again that just really illustrates the strength of the cash flow, the strength of the profitability and obviously the strong balance sheet that we will be carrying over into 2019.

And you can see that with the last bullet point there, we finished the year with total liquidity of $641 million. So in terms of the business plan moving forward, with that liquidity and the strong profitability, Centerra's growth and construction and what have you is all fully funded internally.

Just moving on to the next slide, on slide 5, just a few highlights, just in terms of the financials and Darren will talk to this in more detail. But again, just the ring chart there in the top right, you can see that's where we finished the year in terms of our overall treasury position and total liquidity. Cash reserves around 152 million.

And then in terms of the undrawn capacity in our revolving line of credit facility, we've got around $389 million. If you aggregate that with the Öksüt construction credit facility, that denotes the 641 million in total liquidity. The bottom left there, we finished the year, strong balance sheet in terms of our net debt position, it's USD46 million.

So in terms of our overall indebtedness or leverage ratio, I think we're very competitive relative to our comparative peer group. I always like to highlight the last chart there in the bottom right, just in terms of the positive retained earnings, again 2018 was another year of positive after tax earnings.

And you can see, when you look at the blue segment in those column charts, generally speaking year-over-year, we have been growing our retained earnings balance, regardless of where we are in the prevailing gold price environment, which is illustrated by the red line chart.

So again, I think that also just speaks to the underlying quality of the operating assets. Just moving on to the next slide, on slide 6, I keep talking about the profitability of the retained earnings.

I think this chart puts it in perspective, just in terms of Centerra's business, our portfolio and being one of high margins, what we're illustrating here is the world industry cost curve in terms of the all-in sustaining costs and then we just illustrated where each of Centerra's assets reside, relative to that industry wide cost curve.

So you can see Centerra involved, we're right there at the 25 percentile sort of mark, our all-in sustaining cost guidance for this year in the midpoint is around $750 per ounce, but I think what's really exciting is when you look at Centerra's organic growth opportunities, obviously, the key one right now, which is in construction is Öksüt in Turkey and you can see on the far left there, we're expecting Öksüt to be producing gold as low as $490 per ounce.

That's going to be very complementary to what is already a very low cost profile for Centerra. So very excited to see Öksüt coming online as soon as Q1 of 2020. I'm just going to move on to slide 8 of the presentation deck, just to talk a little bit more about some of the operating highlights.

So again on slide 8, second bullet point there, I think that's the key one again, just want to recognize all of our employee's efforts throughout the company, was a very strong finish to the year in 2018.

And you're seeing that in terms of our gold production and our all-in sustaining cost performance, we really outperformed the very favorable end on both set of metrics. That strong performance is carrying over into 2019.

You can see the third bullet point here, we're guiding for gold production as high as 740,000 ounces for the year and at all-in sustaining costs as low as $723 per ounce. I think where you're really going to see a lot of this strong momentum is at Kumtor.

We've made great strides in terms of our mine planning and sequencing and just the way we're phasing in the pit.

We're essentially ahead of our life of mine plan, if you will, have 43 one-on-one plan and I think where you can see that is if you look at the quarter-over-quarter gold production profile, Kumtor this year, we're expecting it to be a lot more uniform, a lot more evenly distributed on a quarterly basis.

So again, I think that's a real positive in terms of Centerra being able to showcase Kumtor's profitability on a quarter-over-quarter basis.

Second last bullet point here, just on Öksüt, I mentioned earlier, the project's progressing really well and doing everything safely, which is fantastic project on time, on budget, as at the end of 2018, we were essentially 38% complete on construction.

And then just the last highlight here, just in terms of our Greenstone project, which is another key asset within our organic growth pipeline, in December of 2018, we received the federal environmental assessment approval.

So now we're just waiting on the provincial environmental assessment approval and we expect to have that in hand here most likely in Q1 of this year.

Just moving on to slide 9, just to cover off on Mount Milligan, which is obviously our second key asset in in British Columbia and Canada, just in terms of the mill productivity adherence under the first bullet point, you can see in the fourth quarter, the mill was operating at approximately 44,000 tonnes per operating day.

That was an intentional strategy whereby we were limiting the speed of the mill or slowing down our overall processing speed, if you will, just to make sure that we're conserving an adequate amount of water in terms of managing our water balance at Mount Milligan. For the full year, you can see Mount Milligan achieved 47,000 tonnes per operating day.

So again, both of these metrics, it's lower than what's always been sort of targeted 55,000 tons per day sort of capacity rate, but again, that was an intentional strategy in terms of managing the water balance. As I referenced, the fourth bullet point, we expect to be receiving our three year sort of medium term water permits here shortly.

That will give us access to new ancillary water sources in terms of Philip Lake, Meadows Creek and Rainbow Creek as well as ground water sources. We expect to have these permits in hand shortly, which is ideal, given that the spring melt season usually commences in the first half of April.

So when we have these permits in hand and as and when the spring melt season commences, that's going to put us in a fantastic position to realize significant loss of water that will allow us to totally replenish our overall water balance at Mount Milligan and will then allow us to operate the mill at full speed, being 55,000 tons per day, will be operating the mill at full speed for the remainder of the year, once that spring melt season commences.

Just moving on to the next slide, on slide 10 and this is my last slide and I'll pass it over to Darren, just included - John's included some images here just to - some of the recent construction activities at Öksüt, again our project in Turkey, this is what's going to be our third operating asset and we're expecting first gold here in Q1 of 2020.

You can see with these images, it really highlights all the infrastructure and installations on surface is coming together pretty quickly.

So very excited about - the project is in its sort of critical phase right now, being the winter season in Turkey, season to date, if you will, our performance in productivity has been in line, if not ahead of budget, we can continue to maintain that level of positive progress, then just obviously increases the likelihood that much more of obviously the project being delivered on time, on budget, but even the potential to maybe bring the project forward.

So again, just want to recognize that - our team's efforts, they are doing a fantastic job. So with that, I'm going to pass the call over to Darren Millman, our Chief Financial Officer and Darren, over to you..

Thanks, Scott. Good morning, everyone. For those following on the slides, I'm now speaking to slide 12. Total revenue from operations during the quarter was 391 million, 247 million in gold sales in the quarter, attributable to the Kumtor operations, a 13% increase in ounces sold compared to the comparative year quarter.

This however was offset by lower gold prices realized. 89 million was from copper gold sales from the Mount Milligan operations. The company sold 8% more gold ounces than in the comparative quarter and 13.6 million pounds of copper.

However, these increases in gold and copper sales were offset by the decrease in copper market prices experienced in the quarter. Net earnings for the quarter was 49 million. There was no items classified as adjusting items recorded in the quarter, but I would highlight a 41.8 million reclamation expense.

This was materially - attributable to the Thompson Creek mine currently on care and maintenance.

The underlying expense for the water treatment at the Thompson Creek mine is over 100 for the period, with the initial water treatment capital expenditure of 6 million to be incurred in year 44 at an average operating expenses to range from 0.3 million to 1.4 million over the long term.

The earnings was $0.17 per share, which included reclamation charge of $0.14 cents per share. On a consolidated level, Centerra realized gold prices during the quarter of 1157 per ounce and 1190 per ounce in the prior year quarter. Copper during the same period was $1.76 per pound and 223 per pound, both net of the streams.

I'm now referring to slide 13. 269,754 ounces of gold was sold during the quarter and 13.6 million pounds of copper. Consolidated all-in sustaining costs of $576 per ounce was achieved in the quarter and Kumtor recording an all-in sustaining cost of $508 per ounce with Mount Milligan recording an all-in sustaining cost of $689 per ounce.

Consolidated all in sustaining costs for the year was 754 per ounce with Kumtor recording all-in sustaining of 694 with Mount Milligan recording all-in sustaining of 764. Our operating cash flow before changes in working capital during the quarter was 157 million.

Another strong finish for the year from Kumtor with $144 million coming from the operations and 28 million coming from Mount Milligan operations. The molybdenum business unit incurring a 3 million cash outflow in the quarter.

This strong free cash flow has enabled us to reduce debt by 105 million in the year and at year end, with a net debt position of 46 million. The company remains in a very strong financial position with 641 million in liquidity and comfortably funding to develop of the Öksüt project. With that, I'll pass it over to the operator to open up Q&A..

[Operator Instructions] Our first question comes from the line of Bryce Adams at CIBC..

So you've spoken about rescheduling the mine sequencing at Kumtor, the grade profile was very strong in Q4. I was just wondering if there's any chance of that high grade zone and as high grade rolling into the early part of 2019..

Yeah. Hi, Bryce. It's Scott. I think we have - looking at our guidance, from memory, we were guiding about 28% of the gold production in 2019 will be in Q4. And then if you think about Q1, Q2, Q3, the remaining portion of the gold production will be evenly distributed over those quarters.

So, yes, we are seeing some of the higher grade material that we've established access to, you will see some of that coming into Q1. So, I think it's going to be a robust quarter. Our guidance is for gold production of up to 565,000 ounces.

If you kind of take the midpoint of our production guidance, and then take 21% of that, that's kind of where we're targeting in Q1..

Okay.

But if the first three quarters were not to be uniform, probably there is potential for Q1 to be the kicker?.

No. I think the way we're managing it is it'll be evenly distributed. So, I would guide you to 21% of the annual gold rush target being in Q1..

Okay. And then the second question would be on recoveries, gold recoveries at Kumtor and gold recoveries at Mount Milligan, both pretty strong result there.

Just wondering if you could talk to that a little bit more?.

Yeah. So at both operations, it's really attributable to the high grade, but especially so at Kumtor. If you've had a chance to look at our MD&A, you would have seen the grade was very high, very strong in Q4 and typically a lot of milling operations in terms of the recovery leach curve, it's generally a fixed tail grade.

So when that fee grade is higher, you tend to see the higher recovery. So that's predominantly what's driving that growth at Kumtor. At Mount Milligan, as you point out, we had high recoveries as well, on the gold, we're averaging around 67% and a lot of what that's attributable to is the lower throughput.

So yeah, we're running the mill at a slower speed, but as a result, you're getting a lot more retention time in terms of the back end of the circuit and that facilitates stronger recoveries. So that would be the key theme there in Q4..

[Operator Instructions] The next question comes from the line of Mike Parkin with National Bank..

Just a couple of ones related to the water treatment comments in the press release, for the Thompson Creek and the Endako, obviously we've got a figure for Thompson Creek, can you just give us a bit more color on how that is to kind of flow over the next 10 years in terms of expenditures, is there more heavy waiting or is it kind of a consistent spend on a go forward basis and you mentioned that you're reviewing your long Term water treatment at Endako, can you give us a bit more color on that as well?.

So thanks, Mike. It's Darren here. So basically the Thompson Creek mine expecting expenditures to be at similar levels as we've incurred 2018 into 2019 and that to continue in the short to medium term.

As I referred to in the MD&A and the financial statements, we're not really expecting significant expenditure to be increasing for reclamation cost at the Thompson Creek mine until year 44 in which we incur approximately 6 million for the water treatment.

And then the operating expenditure will then take an increase, ranging between 300,000 up to 1.4 million, so, that's very much down the track. Endako, we view actually all our reclamation expenditures on an annual basis. At the moment, we're in discussions and with the relevant local authorities, and it's more from a bonding perspective is our focus.

So what we're required to establish the financial assurance purposes, we don't expect the same potential increase or there could be potentially a decrease in Endako, given we are sort of remediating that on a regular basis, so that we raised obviously in the BC government perspective, has been a push for additional water requirements.

So it's a difficult one to answer on that piece, but we're not expecting anything material to the same level we recently experienced at Thompson Creek..

[Operator Instructions] And there would appear to be no further questions on the telephone lines..

With that, we'll end the call then. I want to thank everyone for joining us this morning on our call and we'll end it now. Thanks..

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line..