Centerra Gold Navigates Q1 Challenges Amid Strategic Growth Push

An aerial view of Centerra Gold’s Mount Milligan Mine in British Columbia, showcasing the scale of operations and ongoing projects.

Centerra Gold (TSX: CG.TO) reported its first-quarter 2025 results on May 6, revealing a mix of operational hurdles and strategic progress. While adjusted EPS fell to US$0.13—down 16% year-over-year—the company reaffirmed its full-year production guidance and highlighted advancements in key projects like the Kemess gold-copper complex and the Thompson Creek molybdenum restart. Here’s what investors need to know.

Key Financials at a Glance

• Adjusted EPS: US$0.13 (down 16% YoY), driven by lower production volumes and higher costs.
• Revenue: $299.5 million, a 2% decline from Q1 2024, as reduced gold and copper output offset higher metal prices.
• Gold Production: 59,379 ounces (down 47% YoY), with Mount Milligan and Öksüt mines both facing grade and weather-related challenges.
• Cost Metrics: Gold production costs surged 70% to US$1,271/oz, while all-in sustaining costs (AISC) rose 74% to US$1,491/oz, exceeding guidance.

Production Challenges and Strategic Priorities

Operational Setbacks:
- Mount Milligan: Lower-than-expected ore grades in peripheral zones and a planned mill shutdown cut gold output to 35,880 ounces (down 54% YoY).
- Öksüt: Weather delays and mine sequencing reduced production to 23,499 ounces (down 43% YoY), though management expects higher grades in H2.
- Copper: Output fell 19% to 11.6 million pounds due to lower throughput at Mount Milligan.

Growth Initiatives:
1. Kemess Project:
- Updated resources now include 2.7 million indicated gold ounces and 971 million pounds of copper, with a $10–12 million exploration budget in 2025.
- A Preliminary Economic Assessment (PEA) targeting a 15-year mine life with ~250,000 gold-equivalent ounces annually is expected by year-end.
- Existing infrastructure (e.g., a 380-km power line and processing plant) could reduce development risk.

1. Thompson Creek Restart:
2. Progress stands at 14% of the $397 million budget, with first production slated for late 2027.

Cost Dynamics and Balance Sheet Strength

While costs rose sharply in Q1, Centerra’s financial position remains robust:
- Cash Reserves: $608.2 million, with total liquidity at $1.0 billion.
- Share Buybacks: The company spent $14.9 million of its $75 million 2025 NCIB authorization, signaling confidence in its valuation.
- Dividend: Maintained at C$0.07 per share quarterly.

Cost Drivers:
- Lower production volumes amplified unit costs, but management expects AISC to normalize in H2 as grades improve.
- Streaming agreements reduced the realized gold price to $2,554/oz (vs. the market price of $2,860/oz), a recurring headwind.

Outlook and Risks

Guidance Reaffirmed:
- Gold Production: 270,000–310,000 ounces for 2025, relying on H2 grade improvements and mine sequencing.
- Free Cash Flow: Expected to rebound in H2, with Mount Milligan and Öksüt generating $27.4M and $41.6M in Q1 despite capital spending.

Key Risks:
- Cost Overruns: Kemess and Thompson Creek could face delays or budget inflation.
- Tax Pressures: Öksüt’s Q2 cash outflows are projected at $85–90 million for taxes and royalties.
- Commodity Prices: Lower gold prices could reduce margins, though the company benefits from elevated prices in the near term.

Conclusion: A Stock for the Long Game

Centerra’s Q1 results reflect short-term operational challenges, but its strategic focus on high-potential projects and robust liquidity position it to capitalize on long-term opportunities. With $1.0 billion in liquidity, a $75 million buyback program, and a PEA for Kemess on track, the company appears well-equipped to weather near-term headwinds.

Investors should monitor:
1. H2 Production: Whether grades improve at both mines to meet annual targets.
2. Kemess PEA: Results expected by year-end will clarify the project’s economic viability.
3. Cost Control: AISC must align with guidance ($1,400–$1,500/oz) to sustain margins.

While CG.TO’s stock has underperformed peers in 2025——its growth pipeline and financial flexibility make it a compelling play for investors willing to look beyond the next quarter.

In summary, Centerra’s Q1 results are a speed bump, not a roadblock. With Kemess and Thompson Creek on the horizon, the company’s trajectory hinges on execution—but the rewards for success could be substantial.