Centerra soars on Mt Milligan gold-copper plan

[Redator]

Centerra Gold (TSX: CG; NYSE: CGAU) shares jumped to their highest level in more than three years after it released a pre-feasibility study that extended the life of its Mount Milligan open pit mine in British Columbia by about 10 years.

The study issued Thursday extends the producing mine’s life until 2045, boosts gold and copper reserves by at least 52% and production by about 12%, while estimating capital costs at $186 million. The mine is about 155 km north of Prince George in central BC.

“Mount Milligan’s [life-of-mine] extension marks a key milestone in advancing Centerra’s organic gold growth strategy,” president and CEO Paul Tomory said in a news release. “Ongoing exploration continues to highlight the potential to further expand mineral resources and extend mine life beyond the updated plan.”

The forecast extension for Mount Milligan, which ranks as a mid-tier project by reserve size and grade compared to other sites in BC, adds to a previous, two-year extension for Mount Milligan last year. In a deal in February 2024, Centerra paid Royal Gold (NASDAQ: RGLD) $125 million for cost support at the mine.

Company shares traded for C$13 apiece in Toronto on Friday morning, their highest level since April 2022, for a market capitalization of C$2.63 billion.

Raymond James analyst Brian MacArthur, in a note on Friday, gave Centerra an outperform rating and a share target price of C$13.50, based on the mine life extension and production increase.

56% more reserves

Proven and probable gold reserves jump 56% to 483.2 million tonnes grading 0.28 gram gold per tonne for 4.4 million oz. of contained gold, compared to the previous estimate from last year.

Copper reserves rise by 52% for a grade of 0.16% copper for 1.7 billion pounds. The increases are driven mostly by resource conversion from increased tailings capacity and infill drilling.

12% production bump

The optimized mine plan also boosts output by about 12% starting in 2029 to around150,000 oz. of gold and 69 million lb. of copper per year. Guidance for Mount Milligan this year totals 145,000 to 165,000 oz. of gold and 50 to 60 million lb. of copper. The production increase comes from a plant throughput rise by about 10% to 66,300 tonnes per day, the study says. The processing of low-grade stockpiles will happen from 2043 to 2045.

The $186 million in non-sustaining capital costs, which Centerra said won’t be needed until the mid-2030s, are fully funded from the company’s available liquidity and future cash flow.

Those costs break down into $114 million for a second tailings storage facility, which is to be spent from 2032 and 2033; $36 million for ball mill motor upgrades and flotation cells in 2028 that will raise throughput and increase recovery by around 1%; and $28 million for five new haul trucks to support moving more material and building more stockpiles.

The second tailings facility could add decades of storage capacity beyond 2045, Centerra said.

The mine’s post-tax net present value (at a 5% discount) is maintained at $1.5 billion in the study, based on long-term gold and copper price assumptions of $2,600 per oz. and $4.30 per lb., respectively. The NPV rises by 40% to about $2.1 billion at spot prices of $3,500 per oz. of gold and $4.50 per lb. of copper.