Centerra Gold’s Net Income Plunges 52% in Q3 2024 Amid Surging Costs and Slowing Production
Centerra Gold (TSX: CG) reported its third-quarter financial results for 2024, showcasing consistent operating performance yet grappling with notable pressures on revenue and production costs. The Toronto-based mining company achieved quarterly revenues of $323.9 million, a 6% decline compared to the $343.9 million generated in the same quarter last year.
This year-over-year revenue drop, as well as a 9% decline from the prior quarter, reflects reduced production volumes in both gold and copper, exacerbated by lower molybdenum contributions and ongoing global cost pressures impacting mining operations.
Gold production in Q3 2024 totaled 93,712 ounces, a sharp 26% drop from 126,221 ounces in Q3 2023. Centerra’s flagship Mount Milligan mine experienced lower-than-anticipated output, contributing 42,993 ounces of gold compared to last year’s 61,091 ounces in the same quarter. This decrease impacted the overall contribution from Mount Milligan, which has been central to Centerra’s output strategy.
Although Öksüt mine managed to produce 50,719 ounces of gold, Centerra’s production costs surged to $973 per ounce, a striking 51% increase from last year’s $643 per ounce. This rise reflects increased labor and material costs as well as higher maintenance expenditures aimed at sustaining long-term production levels.
Copper production also fell year-over-year, with the company producing 13.7 million pounds in Q3 2024, down from 15 million pounds in Q3 2023. Despite this decrease, the average realized copper price rose to $3.37 per pound, a 13% improvement over last year’s $2.99, partially mitigating the revenue loss from lower volumes.
The increased realized copper prices reflect favorable global market trends, but Centerra’s reduced copper production affected its operational leverage and the potential for higher revenue. Centerra has stated it expects full-year copper output to range between 55 and 65 million pounds, yet this target remains at risk if production inefficiencies persist.
Net earnings for Q3 2024 were $28.8 million, or $0.14 per share, marking a 52% decrease from the $60.6 million, or $0.28 per share, reported in the same period last year. Adjusted net earnings, which exclude one-time and non-operational items, stood at $38.6 million, or $0.19 per share, down from $44.4 million, or $0.21 per share, in Q3 2023.
The contraction in adjusted earnings points to an underlying strain on profitability, as Centerra navigates increasing all-in sustaining costs (AISC), which reached $1,302 per ounce this quarter. This 57% rise from Q3 2023’s AISC of $827 per ounce reflects the impacts of inflation and higher overhead in maintaining older facilities, as well as currency pressures from foreign operations, particularly in Turkey.
Operating cash flow in Q3 2024 amounted to $103.6 million, a 38% decline from $166.6 million in Q3 2023, and a decrease from the $111 million generated in the previous quarter. Free cash flow was $37.4 million this quarter, compared to $144.5 million a year ago—a substantial 74% drop. The free cash flow shortfall underscores the capital-intensive requirements of the company’s current projects, with sustaining capital expenditures rising to $35.3 million and total capital expenditure more than tripling year-over-year to $79.7 million.
These investments are largely tied to developments at Mount Milligan, including tailings storage enhancements and additional waste rock capacity at Öksüt. However, these projects, though intended to support long-term productivity, may require continued investment, raising questions about their immediate returns.
Centerra’s liquidity position remains solid, ending the quarter with $604.3 million in cash and cash equivalents, up from $565 million at the close of the previous quarter. This improved cash balance follows Centerra’s approach to capital returns, including a $12 million share buyback in Q3 and a quarterly dividend of $0.07 per share.
The Molybdenum Business Unit, which saw a restructured business plan involving the restart of the Thompson Creek mine, represents Centerra’s efforts to diversify revenue streams and enhance asset utilization. Yet the segment’s net present value (NPV) of $472 million is heavily reliant on the optimization of the Langeloth Metallurgical Facility’s output.
Centerra’s management highlighted ongoing strategic plans, including a renewed buyback program for share repurchases, signaling confidence in asset value and future growth. Nevertheless, the elevated costs and production constraints at Mount Milligan and Öksüt could challenge the sustainability of share buybacks and dividends if production inefficiencies and heightened expenditures persist.
Centerra Gold last traded at $9.84 on the TSX.
Information for this briefing was found via Sedar and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
