Centerra Gold Inc. (CG) Earnings Call Transcript & Summary

Welcome to the Centerra Gold Third Quarter 2026 Conference Call. [Operator Instructions] The conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Lisa Wilkinson, Vice President, Investor Relations and Corporate Communications with Centerra Gold. Please go ahead.

Thank you, operator, and good morning, everyone. Welcome to Centerra Gold's Third Quarter 2026 Results Conference Call. Joining me on the call today are Paul Tomory, President and Chief Executive Officer; Ryan Snyder, Chief Financial Officer; and Kelly Strong, our Chief Operating Officer. Other members of the executive team are available for the Q&A session. Our news release last night outlines our third quarter 2026 results and is complemented by our MD&A and financial statements, which are available on SEDAR+, EDGAR and our website. All figures are in U.S. dollars, unless otherwise noted. Presentation slides accompanying this webcast are available on Centerra's website. Following the prepared remarks, we will open the call for questions. Before we begin, I would like to remind everyone that today's discussion may include forward-looking statements, which are subject to risks that could cause our actual results to differ from those expressed or implied. For more information, please refer to the cautionary statements in our presentation and the risk factors outlined in our annual information form. We will also be referring to certain non-GAAP measures during today's discussion. For a detailed description of these measures, please see our news release and MD&A issued yesterday. I will now turn the call over to Paul Tomory.

Thank you, Lisa, and good morning, everyone. Our third quarter results reflect continued consistent execution at our operations. Mount Milligan delivered a fourth consecutive quarter on plan and remains on track to achieve its 2026 production guidance. Strong copper byproduct credits have enabled us to lower Mount Milligan's full year guidance for all-in sustaining costs, while Oksut production continues to track in line with its previously increased full year production guidance and original cost guidance ranges. We are pleased with our cost performance in the quarter and year-to-date, particularly in an environment of continued industry cost pressures. In the third quarter, we completed a record $53 million in share buybacks, bringing our year-to-date total share repurchases to $125 million. This demonstrates our commitment to shareholder returns and reflects the strength of our balance sheet, our ability to generate cash flow and our disciplined approach to capital allocation. Our growth pipeline is moving closer to several important milestones. Goldfield has achieved an important permitting milestone in the third quarter with all major permits now in place for the Gemfield deposit, which accounts for approximately 80% of the life of mine production. Development activities also advanced in the quarter, including detailed engineering, long lead equipment procurement and initial earthworks for stormwater diversion channels, overburden stockpiles and borrow material excavation. Further construction and site prep activities are planned for the remainder of 2026. The Goldfield project represents our next source of near-term gold production growth, with first production expected in late 2028. At Oksut, work on our Life of Mine Optimization study is well underway with results expected in early 2027 alongside our year-end disclosures. Our focus remains on maximizing the value of what has already been a very strong operation in our portfolio. Meanwhile, our team continues to advance engineering and technical work at Kemess with a PFS expected in mid-2027. Following the positive PEA released in January, Kemess represents a project with potential to become our second long-life gold, copper cornerstone asset in British Columbia. And finally, at Thompson Creek, we remain on track for first molybdenum production in mid-2027, now less than 1 year away and in a very constructive price environment. U.S. Moly offers exposure to strategic minerals with the ability to generate robust cash flow to support balance sheet strength and to help build our gold-focused projects. Molybdenum prices are continuing to trend very well above the assumptions used in our feasibility study, reinforcing the attractive economics of the project. Together with continued ramp-up at Langeloth, we see a significant opportunity to create value through an integrated U.S. molybdenum business. When we look across our portfolio, we see a high-quality asset base, a robust balance sheet, multiple organic growth opportunities across gold, copper and molybdenum and substantial exploration upside. We believe this positions the company to deliver meaningful long-term value for shareholders, and our key priorities remain on disciplined execution, advancing our growth projects and delivering strong operational performance. I'd now like to provide an update on our sustainability initiatives. Earlier this month, we held our Annual Sustainability Summit in Vancouver, bringing together environmental and community relations teams from across our operations and corporate office. The Summit provided an opportunity to share best practices, strengthen collaboration and advance company-wide initiatives in support of Centerra's broader sustainability strategy. By bringing together our sustainability leaders, we are working to ensure a consistent and coordinated approach to sustainability across our operations, supporting our long-term success and our commitment to creating lasting value for the communities in which we operate. During the third quarter, our teams also participated in several community initiatives across our operations. At Goldfield, our team participated in Goldfield Days, an annual event celebrating the town's rich mining history. Alongside our partners, we had the opportunity to engage with community members to showcase our activities at Goldfield and provide an up close look at some of the equipment being used on site. At Langeloth, our team donated specialized vehicle stabilization equipment to the Smith Township Volunteer Fire Department, supporting the department's emergency response capabilities and helping strengthen local emergency preparedness. These initiatives reflect our ongoing commitment to being a responsible operator and supporting communities where our employees live and work. With that, I'll turn the call over to Kelly Strong for his first quarterly operating update as our new Chief Operating Officer.

Thanks, Paul. I want to say how pleased I am to have joined Centerra as part of this team at an exciting time for the company. Since joining, I've had the opportunity to visit all of our mine sites and gain a deeper understanding of our operations and projects. I've been impressed by the quality of our assets and the depth of experience across the organization. I look forward to building on a strong operational foundation already in place with a continued focus on safe, reliable operations and disciplined execution as we advance our growth projects. Turning now to our third quarter operating results, starting with Mount Milligan. Mount Milligan produced over 44,000 ounces of gold in the quarter, a 15% increase over the previous quarter and consistent with the production profile previously outlined. Copper production totaled 12.8 million pounds, largely in line with the previous quarter, reflecting planned mine sequencing. Year-to-date gold and copper production remains aligned with the PFS mine plan and remain on track to achieve our full year production guidance of 140,000 to 155,000 ounces of gold and 50 million to 60 million pounds of copper. All-in sustaining costs on a byproduct basis were $985 per ounce in the third quarter, 22% lower quarter-over-quarter as a result of strong gold production and sales and copper byproduct credits. We reaffirm our full year gold production cost guidance of $1,450 to $1,550 per ounce at Mount Milligan, while strong year-to-date copper byproduct credits have enabled us to lower our full year AISC guidance to $1,100 to $1,200 per ounce from $1,200 to $1,300 per ounce. Moving on to Oksut. Third quarter gold production was over 31,000 ounces, driven by higher grades, enhanced operating practices and solution management. We remain on track to achieve the previously increased full year production guidance of 120,000 to 135,000 ounces of gold. AISC on a byproduct basis was $1,893 per ounce in the third quarter, an improvement over the previous quarter, driven by lower royalty expense per ounce due to lower gold prices. We continue to expect Oksut's full year AISC on a byproduct basis to be within our guidance range of $1,850 to $1,950 per ounce. At Thompson Creek, restart activities continue to advance as planned with approximately 65% of the infrastructure refurbishment complete at the end of September, increasing to 75% complete as of late October. During the third quarter, the project progressed with most long-lead equipment shipped. Installation of approximately 2/3 of the flotation tanks and agitators are completed and refurbishment of key mill equipment and electrical work advancing. In October, the final electrical equipment required for the mill refurbishment was delivered to site and construction of the tailings toe berm was completed. Non-sustaining CapEx in the third quarter was $81 million. Project to date capital expenditures have totaled $337 million. The project remains in line with the total CapEx estimate of $425 million to $450 million and is on track for first production by mid-2027. I'll now pass it over to Ryan to walk through our financial highlights for the quarter.

Thanks, Kelly. Shifting to the financials. Slide 11 details our third quarter financial results. Adjusted net earnings in the third quarter were $72 million or $0.37 per share. Key adjustments to net earnings include $10 million of deferred income tax adjustments and $7 million related to a reclamation provision revaluation recovery, among other things. In the third quarter, sales were over 74,000 ounces of gold and 13.2 million pounds of copper. The average realized price was $3,483 per ounce of gold and $5.74 per pound of copper, which incorporates the existing streaming arrangements at Mount Milligan. Approximately 4.6 million pounds of molybdenum was sold in the third quarter at the Langeloth facility at an average realized price of $33.43 per pound. Consolidated all-in sustaining costs on a byproduct basis in the third quarter were $1,775 per ounce. We remain well positioned to achieve our full year AISC guidance of $1,650 to $1,750 per ounce. Slide 12 shows our financial highlights. In the third quarter, we generated cash flow from operations of $143 million and free cash flow of $17 million. In the quarter, Mount Milligan generated $107 million in cash from operations and $63 million in free cash flow, and Oksut generated $68 million in cash from operations and $66 million in free cash flow. U.S. Moly generated $2.9 million of cash from operations and had a free cash flow deficit of $54 million, mainly related to spending on the Thompson Creek restart project. Returning capital to shareholders remains a key pillar in our disciplined approach to capital allocation. In the third quarter, we repurchased 2.6 million shares for a record total consideration of $53 million, bringing our total year-to-date share repurchases to $125 million. We continue to believe that repurchasing our shares is an accretive high-return use of cash. We also declared a quarterly dividend of $0.07 per share. At the end of the quarter, total liquidity was $998 million with $398 million of cash and $600 million available under our corporate credit facility. This strong financial position gives us the flexibility to fully fund our North American organic growth pipeline while continuing to return capital to shareholders. I'll pass it back to Paul for some concluding remarks.

Thanks, Ryan. We're very pleased with our performance through the first 9 months of 2026, reflecting consistent operational execution at Mount Milligan and Oksut, strong cost performance and continued progress across our growth pipeline. With several important milestones approaching, including first production at Thompson Creek in mid-2027 and continued advancement of the Goldfield project and the Kemess PFS, we are well positioned to deliver on our self-funded growth strategy. Our strong operating base and balance sheet provide the financial flexibility to advance these growth opportunities while continuing to return capital to our shareholders. With a disciplined approach to capital allocation and a clear path to meaningful production growth, we believe Centerra is well positioned to create long-term value for our shareholders. And operator, with that, we can open the call to questions.

[Operator Instructions] The first question comes from Luke Bertozzi with CIBC.

Congrats on a solid quarter. My first question is on Thompson Creek. With infrastructure refurbishment approximately 65% complete, what are the main critical path items between now and first production?

So we are 65% at the end of September. We're actually 75% here at the end of October. We had a tremendous month here on progress. We're into final structural, mechanical and electrical. The last of the electrical switchgear arrived over the course of the last couple of weeks. So we're doing final connections and final mechanical installations. We'll be in a position to start early commissioning works sometime late in the first quarter. So the critical path items are really simple installations and connections and powering up and commissioning.

Okay. That's helpful. And perhaps as a follow-up, with molybdenum prices quite strong right now, are there any practical opportunities to lock in pricing on a portion of the initial production? Is that something you'd consider to protect early cash flows?

Unfortunately, there's no real forward or hedging market available in molybdenum. Most contracts are effected essentially off a spot basis. So unfortunately, the answer is no. Molybdenum is not a market that can be hedged. So it's spot exposure all around.

Got you. Okay. I understand. And I guess my second question would be on capital allocation. Centerra's cash balance declined approximately $50 million this quarter, just with the investments in growth and the share buybacks. How do you think about a minimum cash balance you'd want to maintain through the remaining construction period? And how could that influence the pace of buybacks?

Well, look, let me just answer that first with an overarching view on strategy. Like we're really focused on numerator NAV and driving NAV per share growth through the development of our projects, all the while reducing the denominator by buying back our shares. So our capital allocation framework is informed by that, driving NAV in our projects and then reducing our share count through buybacks. Ryan will have a perspective on how we manage minimum cash, but we are very confident we can fund our entire growth program out of the balance sheet. And that really is how we govern our capital allocation strategy. But Ryan, why don't you talk about minimum balances?

Yes. I mean I'll echo what Paul said. I think we've long held a very large cash balance, and we don't need to hold $400 million or $500 million. We're happy to deploy that cash into our projects into their development as well as into share buybacks when it makes sense. And so you may see that cash step down again as we invest in both of those areas. And we'd like to hold somewhere in the range of $100 million to $200 million of cash, just the operational movements kind of month-over-month. But if there's good uses of investment of that cash, we also have the credit facility that we can access if necessary. So the focus for us, as Paul said, is investing in our projects and bringing them online and given where our share price is trading, continuing to buy back our shares.

The next question comes from Don DeMarco with National Bank.

We'll start off with a couple of questions on Thompson Creek. Great to see that it's advancing. First one for either Paul or Ryan. Just wondering how should we allocate CapEx over the remaining quarters of development? How much per quarter?

Don, it's Ryan. You see the number that we're at project to date, which is a little under $340 million. I would allocate that pretty evenly between now and the middle of next year as we get to first production. Again, that CapEx range in total is $425 million to $450 million, but it's about even between now and then.

Right. So really, Q3 was the high watermark of spend. We're going to see a big drop-off in spend heading into Q3, I would imagine then.

Yes. Q3 was a big quarter because there was a lot of activity in the mill. It was a big push to do the mill refurbishment and install equipment and things like that. As Paul said, we're kind of 75% done the installations and all of that. And so that is going to tail off a little bit into Q4 and into the front end of next year.

Okay. Great. And so then looking beyond completion and commissioning, can you frame the expectations for the ramp-up following first production? Look at the 2026 guidance when you released it, but can you give some color now on how you expect production and cost to trend or any milestones to watch in the first few quarters of operations?

Well, we're -- first of all, we're really happy with the timing where we remain very much on schedule here. And we reiterate our view, which we've held since the publishing of the study that we will have first production in the middle part of next year. And we're adhering to that, and we're tracking very well against that. I suppose that our strategy will be to disclose major milestones through the first quarter. I suspect the first one will come with our year-end release. We intend with our guidance to provide a little bit more granularity on production and cost for 2027. But as I mentioned, our timing is broadly in line. In fact, we're very happy with the schedule progress against the study.

Okay. Great. Well, we look forward to those details and congratulations so far. Then final question, just shifting to Mount Milligan. The mine has now delivered 4 consecutive quarters on plan. So what has structurally improved in the operation? And how confident are you that the recent operating consistency can carry through and over the longer-term mine plan?

Don, we've done 2 things. The PFS that we put out last year had as its principal objective, the extension of the mine life to 2045, which we achieved. But equally importantly, we wanted to have a higher degree of confidence in the technical parameters. So for example, ore characteristics around geochem, geomet, grade, pyrite, chalcopyrite. So we built in a much greater degree of understanding into the ore body model, and that was on the back of significant infill drilling. To supplement that, we've carried out over the past year, a pretty extensive grade control RC drilling program to give us better confidence in the material that we will be mining in the short term, so meaning looking out 1, 2, 3, 4 quarters. So a better understanding of the ore body model, a better understanding of the mine to mill interaction and a strong supplement with the grade control program has given us much greater confidence in our ability to forecast, plan and deliver at Mount Milligan. The other critical thing that we've done at Mount Milligan is we have significantly invested in the team. We have a world-class general manager leading the site. We have Kelly Strong here as our new Chief Operating Officer. So we've made significant investments in human capital in beefing up our capabilities at that site. So it's really a combination of a better technical understanding and a much stronger technical and operating team supporting the asset.

The next question comes from Simon Wildsmith with Desjardins.

Congrats on the solid quarter. Just 2 questions for me. So just firstly, on Thompson Creek cost to complete, just confirming that, that $337 million to date is comparable against the $425 million to $450 million? And if so, what's your confidence in landing inside that range, just given that, that's about 75% to 80% of the range versus the 65% completion. Just trying to, yes, I guess, just cadence on that and if you think you'll meet that range.

Yes. Simon, that is the right comparative that $337 million is being counted against that original $425 million to $450 million guidance we put out there. We still feel pretty good that we're on track for that range. Again, all the key equipment is already on site. So you're not really waiting on big pieces of equipment or procurement type areas where you could have cost inflation and things like that. And so really, it's the team on site putting the rest of the mill together and connecting everything, as Paul said, and continuing to do our stripping in the mining area, which we have a good handle on, and we've been doing for quite some period of time. So I feel pretty good about staying within that cost estimate as we kind of get to first production here.

Okay. I mean it sounds like we're sort of through that -- maybe through the peak. So, and then, yes, sort of last question. Just on U.S. Moly, strategic options with moly prices as strong as they are. So where does the potential review of a U.S. Moly sale or IPO stand? Would you monetize before -- and would you monetize before or after Thompson Creek reaches commercial production?