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Centerra Gold shares plummet as permit issue halts production from Turkish mine

·3 min read
Picture 1.jpg
Picture 1.jpg

Shares of Centerra Gold Inc. fell to their lowest value in more than two years as the miner nearly halved its annual gold production guidance and reported an adjusted net loss of US$36.2 million, down from a profit of US$78.3 million in the same quarter last year.

The Toronto-based company now aims to produce 245,000 to 256,000 ounces of gold compared to its previous guidance range of 400,000 to 450,000 ounces after revealing that it doesn’t expect further gold production this year from its Oksut mine in Turkey.

The company said during its Q2 earnings release that it had been asked by Turkish authorities to submit a new environmental impact assessment (EIA) for the mine after mercury was detected in the project’s gold recovery process in March.

“We have met with the ministry of environment yesterday and in terms of the solution … they have recommended that we file a new EIA,” the company’s CEO, Scott Perry, said during a conference call with investors on Wednesday.

“We will be submitting (the EIA) by the end of this month … in terms of when that EIA will be approved, right now we don’t have a high degree of confidence that would allow us to provide an outlook (for the mine) for 2023,” he added.

The company is also evaluating whether to suspend mining and crushing activities at the project.

In March, Centerra had suspended gold bar production at the Oksut mine after mercury was detected in the gold room of its absorption-desorption recovery (ADR) plant, used to recover gold. Soon after, the company detected elevated mercury values in 12 individuals, who Centerra says are currently doing well and ready to return to work.

The company is upgrading its facilities to prevent recurrence, a process that is expected to be completed by the end of this year.

Since the suspension, the mine’s ore has been processed into a gold-in-carbon form. On Aug. 9, Turkey’s environment ministry denied Centerra’s request to use more activated carbon than permitted in the mine’s EIA, an increase the company required because it was unable to operate the gold room at the ADR plant, which allows it to recycle activated carbon.

Following these discussions with the ministry, Centerra was asked to submit a new EIA altogether. “I am hopeful that it will be an expedited process, but I can’t really (give) any more clarity or visibility,” said Perry when asked when the EIA is likely to be approved.

Gold production for the quarter was 42,728 ounces, solely from the company’s Mount Milligan mine in British Columbia, compared to overall production of 93,784 ounces of gold in the previous quarter and 69,854 ounces in the Q2 last year.The Oksut mine produced about 58,469 recoverable ounces of gold that have been stored as gold-in-carbon inventory.

Aside from being unable to sell the gold from the Oksut mine, the company also said a lower-than-expected volume of gold sold at Mount Milligan and a decline in revenue earned from its copper projects due to falling prices contributed to its loss from operations.

The company produced 17.3 million pounds of copper compared to 19.5 million in the same quarter last year.

Bank of Montreal analyst Trevor Turnbull described Centerra’s latest update as negative in a research note to clients on Wednesday.

“We are downgrading our recommendation … due to the uncertainty over the timing of Oksut’s permits, concern that the extending mine life plan at Mount Milligan could come with capital cost risk, and the unknowns implied by the suspension of 2023 guidance,” he wrote.

He added that Centerra’s net loss of 12 cents per share was below his expectation of a 4-cent per share profit.

Centerra shares ended the day at $6.27, down 21.6 per cent in Toronto after touching $6.20, their lowest value since March 2020. The company has a market cap of $1.37 billion..

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