Centerra Gold’s Q1 2025 Results: Navigating Challenges with Cash and Strategy

Centerra Gold Inc (CGAU) has emerged from its first quarter of 2025 with a mixed performance, balancing operational headwinds with strategic progress and financial resilience. While production declines at its core mines—Mount Milligan (Canada) and Öksüt (Türkiye)—pressed margins, the company’s robust liquidity, disciplined capital allocation, and advancing projects like the Kemess gold-copper deposit position it for long-term growth. Below is an analysis of the key takeaways for investors.

Operational Performance Under Pressure

Centerra’s Q1 production figures were dragged down by lower grades and external factors:
- Gold production fell 47% year-over-year to 59,379 ounces, with Mount Milligan’s output down 47% to 35,880 ounces due to lower-grade ore in peripheral zones. Öksüt’s gold production dropped 41% to 23,499 ounces, partly due to adverse weather.
- Copper production declined 19% to 11.6 million pounds, reflecting reduced throughput at Mount Milligan.

However, sales volumes remained strong, with gold sales hitting 61,132 ounces at an average realized price of $2,554/ounce—up 39% year-over-year—thanks to higher gold prices.

Financial Resilience Amid Costs and Capital Spending

Despite operational challenges, Centerra maintained a $1.0 billion liquidity buffer ($608.2 million cash + $400 million credit facility), underscoring financial flexibility. Key financial metrics:
- Free cash flow (NG) dropped to $10.0 million (vs. $81.2 million in Q1 2024) due to elevated capital spending, including $25.8 million for the Thompson Creek Mine restart.
- All-In Sustaining Costs (AISC) rose to $1,491/ounce, driven by higher sustaining capital at Mount Milligan and royalty-driven costs at Öksüt.

Investors should note that AISC guidance for 2025 remains tight at $1,400–$1,500/ounce, suggesting cost management improvements as production stabilizes.

Strategic Projects: The Silver Lining

Centerra’s focus on high-potential projects is its strongest growth lever:
1. Kemess Project (British Columbia):
- Updated mineral resources now include 2.7 million ounces of indicated gold and 971 million pounds of indicated copper, with a Preliminary Economic Assessment (PEA) expected by year-end.
- The project targets a 15-year mine life producing ~250,000 gold-equivalent ounces annually, leveraging existing infrastructure (e.g., power lines, a mothballed processing plant) to reduce capital intensity.

1. Thompson Creek Mine (Idaho):

2. Progress on the restart reached 14% of total capital spending, with first production targeted for late 2027. The project’s feasibility remains intact, with costs within the $397 million estimate.

3. Mine Life Extensions:

4. A Pre-feasibility Study (PFS) for Mount Milligan aims to extend its life beyond 2036 by increasing mill throughput by 10% and optimizing tailings capacity.

Risks and Challenges

• Near-Term Liquidity Pressures: Öksüt faces $85–$90 million in Q2 cash outflows for taxes and royalties, testing working capital management.
• Execution Risks: Delays at Thompson Creek or Kemess could disrupt cash flow and shareholder returns.
• Commodity Price Sensitivity: While higher gold prices boosted revenue, they also increased royalties at Öksüt, highlighting a trade-off between top-line gains and margin pressures.

Investor Takeaways and Conclusion

Centerra Gold’s Q1 results reflect a company in transition: navigating short-term production dips while investing for long-term growth. Key data points support a cautiously optimistic outlook:
- Liquidity: $1.0 billion provides ample cushion for capital-intensive projects and share buybacks.
- Shareholder Returns: The $0.07/quarter dividend and $75 million NCIB authorization prioritize capital discipline.
- Project Pipeline: The Kemess PEA and Thompson Creek restart, if executed successfully, could add 250,000+ ounces annually by 2028, significantly boosting production.

Final Analysis:
CGAU’s valuation is compelling at current levels—its trailing P/E of 12x (based on 2024 EPS) is below sector averages, and its $1.0 billion cash pile offers a margin of safety. However, investors must weigh near-term execution risks against the long-term upside of Kemess and Thompson Creek. For those with a 3–5 year horizon, Centerra’s balance of cash, projects, and cost discipline makes it a Hold with Upside Potential as development milestones are achieved.

Disclosure: The author holds no position in CGAU at the time of writing.