CGAU - Centerra Gold Announces Mount Milligan Mine Life Extension and Additional Agreement with Royal Gold | Benzinga
TORONTO, Feb. 14, 2024 (GLOBE NEWSWIRE) -- Centerra Gold Inc. ("Centerra" or the "Company") (TSX:CG) (NYSE:CGAU) is pleased to announce that the Company and its subsidiary, Thompson Creek Metals Company Inc. ("TCM"), have entered into an additional agreement with RGLD Gold AG, a subsidiary of Royal Gold, Inc. ("Royal Gold"), relating to the Mount Milligan Mine ("Mount Milligan"), which has resulted in a life of mine extension to 2035 and establishes favourable parameters for potential future mine life extensions. All dollar figures are in United States dollars unless otherwise stated.
President and CEO, Paul Tomory, commented, "We are pleased to announce a mutually beneficial additional agreement with Royal Gold, which has allowed us to immediately unlock additional reserves beyond the current mine life. Extending Mount Milligan's mine life by two years is a key first step in our strategy to realize the full potential of this cornerstone asset in a top-tier mining jurisdiction. Our strategy to further increase mine life at Mount Milligan has three prongs. First, we are immediately initiating a Preliminary Economic Assessment to study the incorporation of the significant drilled inventory to the west of the existing pit, and to evaluate options for capital projects in the mine and the mill that could lead to further mine life extensions, and will soon be starting the associated work on permitting and engagement with our First Nations partners and local stakeholders. Second, we will continue to invest in exploration drilling to unlock the large mineral endowment at Mount Milligan. Finally, we are continuing to advance a site optimization program at Mount Milligan, which began in the fourth quarter of 2023, with a focus on enhanced safety performance and cash flow improvement. We are encouraged by today's announcement and the prospects for continued optimization at Mount Milligan, which will benefit our shareholders, our partner Royal Gold, and Mount Milligan's First Nations partners, employees and local stakeholders."
Highlights of the Transaction
- Mutually beneficial additional agreement that unlocks incremental mineral reserves and resources at Mount Milligan: Immediately extends the mine life by two years to 2035, subject to normal course permitting, and grows mineral resources to 510 million tonnes, inclusive of reserves.
- Potential for future mine life increases beyond 2035: The additional agreement enables Centerra to study mine life extensions via the conversion of existing mineral resources into mineral reserves, most of which are classified in the measured and indicated categories, coupled with the potential addition of new mineral resources. It also establishes a strong platform for Centerra to continue to invest in further drilling at Mount Milligan.
- Beneficial outcome for all stakeholders at Mount Milligan: The additional agreement supports Centerra's strategy of extending Mount Milligan's mine life to, and potentially beyond, 2035 for the benefit of Centerra's shareholders, as well as Mount Milligan's First Nations partners, employees and local stakeholders.
- Centerra will receive increased cash payments for Mount Milligan gold and copper production sold to Royal Gold, starting in approximately 2030: When added to the streaming payments under the Existing Stream Agreement (as defined below), the additional agreement will effectively provide aggregate cash payments for gold and copper sold under the Existing Stream Agreement as follows:
- For gold, up to: (i) the lower of $850 per ounce and 50% of the gold spot price for the period between approximately 2030 and approximately 2035(1,2); and (ii) the lower of $1,050 per ounce and 66% of the gold spot price from and after approximately 2036(1,3);
- For copper, up to, (i) 50% of the copper spot price for the period between approximately 2030 and approximately 2035(1,2); and (ii) 66% of the copper spot price from and after approximately 2036(1,4).
- As part of the additional agreement, Centerra and TCM have agreed to make certain payments and deliveries to Royal Gold:
- Upfront cash payments of $24.5 million;
- A commitment to deliver an aggregate of 50,000 ounces of gold;
- Commencing in approximately 2030(1,5), payments equal to 5% of Mount Milligan's annual free cash flow, which increase by an additional 5% of annual free cash flow commencing in approximately 2036(1,6) (for a total of 10% per year after such date).
(1) Approximate year estimates are based on production forecasts.
(2) The 2030 timeframe relates to the first to occur of delivering, to Royal Gold, after January 1, 2024, 375,000 ounces of gold or 30,000 tonnes of copper.
(3) The 2036 timeframe relates specifically to the threshold of delivering to Royal Gold 665,000 ounces of gold after January 1, 2024.
(4) The 2036 timeframe relates specifically to the threshold of delivering to Royal Gold 60,000 tonnes of copper after January 1, 2024.
(5) January 1st of the year following the later of delivering to Royal Gold an aggregate of 375,000 ounces of gold and an aggregate of 30,000 tonnes of copper, in each case from and after January 1, 2024, but no later than January 1, 2036.
(6) January 1st of the year following the later of delivering to Royal Gold an aggregate of 665,000 ounces of gold and an aggregate of 60,000 tonnes of copper, in each case from and after January 1, 2024, but not later than January 1, 2036.
Mount Milligan Life of Mine Extension
2023 Year-End Mineral Reserves and Mineral Resources
As of December 31, 2023, Mount Milligan's proven and probable gold mineral reserves were an estimated 2.8 million ounces of contained gold (250 million tonnes at 0.35 grams per tonne ("g/t") gold), and its measured and indicated gold resources was 2.3 million ounces of contained gold (260 million tonnes at 0.27 g/t gold). As of December 31, 2023, the mine's proven and probable copper mineral reserves were an estimated 961 million pounds of contained copper (250 million tonnes at 0.17% copper) and its measured and indicated mineral resources were an estimated 851 million pounds (260 million tonnes at 0.15% copper).
Further Study, Preliminary Economic Assessment ("PEA"), Exploration and Optimization
Centerra will be initiating a PEA to evaluate the substantial mineral resources at Mount Milligan with a goal to unlock additional value beyond its current 2035 mine life. The scope of the PEA is expected to include significant drilling completed to the west of the pit not currently included in the existing resource, plus inclusion of existing resources, most of which are classified in the measured and indicated categories. The PEA will also evaluate several capital projects to support a further expansion of Mount Milligan's mine life, including options for a new tailings storage facility ("TSF") and potential process plant upgrades. The Company will also be starting the associated work on permitting and engagement with its First Nations partners and local stakeholders. The PEA is expected to be completed in first half of 2025.
The Company is also continuing its exploration drilling program aimed at expanding the mineral resource base significantly at Mount Milligan. In 2023, approximately 80% of the exploration drilling at Mount Milligan was carried out in the pit and three brownfield areas within the mining lease. In all these areas, results received showed mineralization extending west from the pit margin and below the ultimate pit boundary. Centerra is encouraged by the significant mineral endowment at Mount Milligan, setting the stage for potential future resource additions. At Goldmark and South Boundary, there are possibilities for near-surface additions. At North Slope, DWBX Extension and Saddle West, the Company continues to test for depth extensions. Centerra expects to invest approximately $5 to $7 million in exploration spending at Mount Milligan in 2024. For additional details and drill results from the 2023 Mount Milligan exploration program, please refer to the announcement entitled "Centerra Gold Announces 2023 Year-End Mineral Reserves and Resources and Provides Exploration Update", which was issued in conjunction with this news release on February 14, 2024.
Finally, in the fourth quarter of 2023, Centerra embarked on a site-wide optimization program at Mount Milligan focused holistically on assessments of operational health and safety, productivity, and cost efficiency opportunities, in concert with mine plan optimization. The comprehensive optimization program will set up Mount Milligan for long-term success to 2035 and beyond. The Company is encouraged by the preliminary cash flow improvement estimates from the first phases of work on the program.
Highlights of the Additional Royal Gold Agreement
The additional agreement entered into with Royal Gold (the "Additional Royal Gold Agreement"), which is effective immediately, provides supplementary payments to Mount Milligan that has enabled the reserve increase and corresponding extension of the mine life described above. The existing Amended and Restated Purchase and Sale Agreement with Royal Gold dated as of December 14, 2011, as amended (the "Existing Stream Agreement"), is not affected by the Additional Royal Gold Agreement. The Additional Royal Gold Agreement, taken together with the Existing Stream Agreement, will have the effect of increasing payments for Mount Milligan gold and copper production sold to Royal Gold under the Existing Stream Agreement, among other things. The percentage of gold and copper production streamed to Royal Gold remains unchanged at 35% gold and 18.75% copper.
Gold Stream