Greetings and welcome to the Centerra Gold 2021 Second Quarter Results Conference Call. During the presentation all participants will be in a listen-only mode. Afterwards we will conduct a question-and-answer session. [Operator Instructions]. As a reminder, this conference is being recorded Tuesday, August 10, 2021. I would now like to turn the conference over to Mr. John Pearson, Vice President, Investor Relations. Please go ahead, sir.

Thank you, Maria. Welcome to Centerra Gold’s second quarter 2021 results conference call. Summary slides are available on Centerra Gold’s website to accompany each of the speaker’s remarks. Today’s call is open to all members of the investment community and media in listen-only mode. Following the formal remarks, the operator will give the instructions for asking a question, and then we will open the phone line to those questions. Please note, that all figures are in U.S. dollars unless otherwise noted. Joining me on the call today is Scott Perry, President and Chief Executive Officer; Dan Desjardins, Chief Operating Officer; and Darren Millman, Chief Financial Officer. I would also like to caution everyone that certain statements made today may be forward-looking statements and as such are subject to known and unknown risks, which may cause our actual results to differ from those expressed or implied. Also, certain of these measures we will discuss today are non-GAAP measures. So please refer to our description of non-GAAP measures in our news release and MD&A issued earlier this morning. For a more detailed discussion of the material assumptions, risks and uncertainties, please refer to our news release and MD&A, along with the unaudited financial statements and notes and all of our other filings, which can be found on SEDAR and EDGAR and on the company’s website at centerragold.com. Now, I’ll turn the call over to Scott.

Thanks John and good day everyone. Thank you for joining us for our earnings conference call. I'm just referencing our accompanying slide presentation deck and I am just starting off on Slide number 5. I just want to start with some of the recent developments in the Kyrgyz Republic with regards our Kumtor mines. Just some prepared remarks that I just want to iterate here. So look, it has been nearly three months since the Kyrgyz Republic took control of the Kumtor mine and I would like to give you an update on where things stand with regard to the company. We here at Centerra are very saddened for what our employees and friends who worked at Kumtor are going through. Our thoughts and best wishes go out to all those that was closely affected by what the Kyrgyz government has done. It's important to note the key takeaway from the call today and our results is it's important to note that Centerra remains financially strong with solid performance and a healthy outlook at our other operations and businesses. These comprised the Mount Milligan gold and copper mine, the Öksüt gold mine, and our Molybdenum Business Unit. As illustrated in our future results, our cash position at the end of June was up by almost U.S. $60 million quarter-on-quarter and currently represents some $883 million. This represents total liquidity of almost U.S. $1.3 billion. We remain on track to achieve our 2021 production and cost items at both the Mount Milligan and Öksüt mines. Regarding the situation at Kumtor it remains widely unchanged since we updated you after the Kyrgyz government seized mine in mid-May using unsubstantiated environmental tax and safety claims to appoint a third quart [ph] external management to run the operation. Sadly, the government’s unjustified actions have…

Thanks, Scott. Good morning, everyone. Please move to Slide 11. Centerra continues to prioritize the health, safety and well-being of our employees, contractors, communities, and other stakeholders, as COVID-19 is still with us. We put a great emphasis on vaccinations in the past quarter, and all of our sites have higher vaccination rates than the regions that they work. We continue to modify our COVID-19 protocols at all our locations to help prevent infection and reduce the potential spread of COVID. All of these great efforts of our people have allowed for continuous operation. For 2021, we have a number of operating highlights. In Q2, we continued to focus on improving our safety performance of the Centerra company wide with good results. Our -- for Q2 was 0.18, much better than our target of 0.41, but we still had two reportable injuries in the quarter. We have an excellent program, we call it Work Safe Home Safe, which focuses on employee behavior working at home and we rolled training virtually with great success. And an excellent milestone is our Öksüt mine, we achieved 1 million people hours, lost time injury free, with the number now exceeding 1.5 million work hour. On the production front, we had another strong quarter at our two operating sites producing 69,854 ounces of gold and 19.8 million pounds of copper at an all in sustaining cost of $676 per ounce. Mount Milligan specifically produced 54,675 ounces at $486 per ounce with copper credit of 19.8 million pounds. Öksüt produced 15,179 ounces at $947. Again, overall we have a very competitive all in sustaining cost for the quarter of $676. Of note, the Mount Milligan mine had an excess of 8 million cubic meters of water in the tailings pond inventory at June 30th. We actually…

Thanks Dan and morning all. For those following on the slide deck I am on Slide 16. Centerra recorded 202 million in revenue during the quarter. This relates to our continuing operations as defined in our financial statements. This primarily includes the Mount Milligan mine, the Öksüt mine, and a Molybdenum Business Unit. Revenue materially consists of 94 million in gold sales, 50 million in copper sales, 46 million from our Molybdenum Business Unit. During the quarter, the company's continuing operations average gold price realized was $1,419 per ounce of gold and $2.92 per pound of copper. These incorporates the existing streaming arrangements over the Mount Milligan mine. In the quarter in our continued operations we sold 66,642 ounces of gold, 51,000 ounces from the Mount Milligan mine, which is a 47% increase compared to the prior year quarter and 15,000 gold ounces attributable to Öksüt mine and as you recall, the Öksüt mine only declared commercial production in May 31, 2020. Prior to the actions taken by the Kyrgyz Republic government the Kumtor mine produced and sold approximately 49,000 ounces of gold. We also sold 19.5 million pounds of copper in the quarter. The net earnings during the quarter from our continued operations was 33 million. This included the adjusting of 10.8 million non-cash expense attributable to the reclamation liability increase due to unfavorable discount rate movement. The adjusted earnings from continued operations perspective was 49.9 million for the quarter or $0.17 per share. Earnings attributable from an operations perspective were 42.4 million contributed from the Mount Milligan mine, 16.1 million contributed from the Öksüt mine, and a 14.8 million loss attributable to Molybdenum BC share. This was primarily attributable to the reclamation expense of 10.8 million mentioned earlier. The net loss including both continued and discontinued operations was…

Thanks, Darren. And just to round out and wrap up the call, I'll just speak to Slide 20. So again, just in terms of some of the key bullet points here in the left, first bullet point, as we heard Dan and Darren speak to, we are reiterating our gold production guidance for Mount Milligan and Öksüt. You can see it illustrated here. This year we are guiding for up to 310,000 ounces. And in terms of the corresponding all in sustaining costs, we are expecting to produce this gold as well as $750 per ounce. So given the prevailing metal price environment and that competitive all in sustaining cost profile, I think that's going to make for robust margins and I think you're seeing that bear into the free cash flow guidance, where we are guiding up to $175 million to this year. Fourth bullet point again, it was another strong operating quarter, we are seeing good operating momentum at our continuing operations so again producing some 70,000 ounces of gold at a very low competitive all in sustaining cost of $676 per ounce. And then just lastly, the final bullet point, as Darren just spoke to, I think we really are continuing to maintain and grow, appealing balance sheets, it's debt-free, finished the quarter with cash of $883 million and just given where we see our business going in terms of the free cash flow guidance to this year, in terms of the growing level of gold output coming from Turkey next year, I think this balanced sheet will continue to grow moving forward. So look, as I mentioned at the very outset of the call and as we've disclosed in our MD&A, there are a number of legal proceedings that we have commenced in connection with Kumtor, both against the Kyrgyz government and Kyrgyzaltyn. As we move into the question-and-answer portion of the call, I just want to caveat that unfortunately we will be limited in our ability to provide details related to those ongoing proceedings. So with that caveat, operator, Maria if I can now pass it over to you to coordinate the Q&A portion, please.

Thank you. [Operator Instructions]. Our first question comes from the line of Trevor Turnbull from Scotiabank. Your line is open.

Hi, thank you. Thank you, Scott. Maybe start with operations, just a quick question on Mount Milligan. I know that Darren was talking about the long-term water plan and solutions up there. Can you talk a little bit about what that might look like or what the CAPEX might be involved with that, I did notice that until that's finalized, you haven't provided any CAPEX guidance, but I wondered if you could just give order of magnitude description of it?

Yeah. Thanks Trevor. And Dan, are you happy to respond to that question just in terms of some of our current evaluations that are underway?

Absolutely. Good morning, Trevor. Right now, we are in a very, very strong position. The tailings are full. We're drawing in probably more than half of our required water from underground. And basically those are permanent facilities. Now we have a little bit of connecting up green power, in terms of hydroelectric permanent solutions to some of our pumps, but that's going very well. We are drawing right now from two very local rivers within four kilometers of the mine site, those were temporary installations that we've been setting up each year using a contractor. And, so we've -- that has been able to satisfy our water needs fully. So we're looking at two solutions right now. One is further distance away. We're still engineering the capital cost, but that'll be in the neighborhood of say 30 million to 40 million. And we also are still, strongly looking at very near mine solutions that would be certainly less than 10 million in terms of capital. But right now we're sitting in a very good position and we have permits to the end of 2023 for the way we're set up right now.

Okay. Thanks, Dan. I also had a quick question on Öksüt, just was there any or maybe I missed it, but was there any update on permitting for the Güneytepe pit?

Dan you want to take that too.

Yeah, absolutely. We continue to work with the government. There is still a court case between two of the government agencies on who has control of the land and that should be coming to fruition here in September when they go back into session. We've adjusted our plans, but certainly in the near term there is no effect and we also have re-engineered our access to the Güneytepe pit, in case we don't get permit for the larger footprint, we would be still able to access as our original feasibility plans indicated.

Okay, thank you. And then maybe I had a quick question on the dividends. You mentioned that you've raised the dividend, and that the dividends are essentially waived for the Kyrgyzaltyn shares. It said that they're waived to the extent that they can be attributed to KGC or Kumtor. And I guess I had a question about the language, does that mean that there is a portion of the dividend that Kyrgyzaltyn is eligible for that say is not attributable to Kumtor?

Yeah, Trevor it is Scott. No, it is our determination. I mean, as you know, dividends are paid out of retained earnings and it is our determination that the entirety of our retained earnings position has been attributable to Kumtor. So in terms of the dividend distribution during the quarter, again, the dissemination was that it's entirely attributable to Kumtor. So, as you know, there's a series of restrictions in place in terms of the Kyrgyzaltyn shareholding, in terms of their ability to receive dividends, in terms of their ability to transfer shares, since their ability to vote on those shares, so they will have no entitlement to the recently declared dividends.

Okay. That helps clear it up. And I guess my last point or comment is, is just on your summary slide that you closed with. You make a very compelling case on the continuing operations, in terms of their cost structures and their cash flow generation. But it doesn't really get to any per share metrics, which is kind of where I struggle. And I just wondered how you would kind of frame the investment thesis with respect to kind of per share metrics and per share valuation, should we be thinking about your capital structure as intact going forward with the Kyrgyzaltyn shares or should we be thinking that at some point there will be a reduced share count that negates, that essentially removes those shares from the calculus?

Yeah. I mean, if you look at our free cash flow guidance for this year, up to $175 million in cash, that's approximately $0.65 per share in terms of free cash flow, which moving forward, we expect that to grow just given the rising gold outputs that we're expecting from Turkey as we move into that higher grade sequence. So next year 2022, 2023, I think you're going to see some very meaningful increases in terms of the free cash flow generated from now continuing operations, shimming the current sort of prevailing metal price environment. Obviously in terms of our broader share counts, there are some opportunities here. Obviously we are open to engaging in negotiations with the political leadership in Kyrgyzstan, in terms of, looking to resolve the situation for a constructive dialogue. And look, we're certainly open to all possibilities, which could include, the Kyrgyzaltyn shareholding and what that could potentially mean for a reduction in our share counts. The other thing I want to mention is our balance sheet. I think I've been describing it as it as a peer leading balance sheet, relative size compared to peer groups. We think it's going to continue to grow and maybe there's opportunities there as well in terms of strategizing with the board around capital return initiatives, etcetera. But it's all kind of preliminary right now, Trevor, but I think as a management team and speaking on behalf the board, we do recognize that we have some opportunities here which we'll continue to evaluate. Obviously during the quarter you saw us take one small step or a measure or a token in terms of increasing the dividend by some 40%. But I think we certainly have the financial capacity to continue to evaluate other potential capital initiatives. So, sorry, Trevor. That was a long answer.

Yeah, no, that's good. I guess maybe one last question just with respect to you mentioned potentially you remain open to speaking to the government in ways that you may be able to talk to them about the shares. Are there also legal remedies and if so, are they something that you kind of need the other legal processes to take to kind of play out before you would consider those, in other words, the international arbitration, the case you have in Canada and so forth, do those need to kind of conclude before you think about next steps legally?

It's difficult for me to kind of respond to that Trevor. As I mentioned it is tough to comment on the legal proceedings. But right now our primary focus is on the international arbitration, as well as the Chapter 11 proceedings down in New York. They are the legal measures we're taking right now that we think best position us in terms of protecting the rights of our shareholders and the overall values, on behalf of our stakeholders.

Yeah. And then there's also the case in Canada against the temporary manager, kind of what is the outcome you're looking for there in that particular case?

It's all kind of out sort of legal measures, looking to substantiate that what's taken place here is invalid, it's without merit, and it's in direct contravention in terms of our project agreements and our investment agreements.

No. Okay. Fair enough. Alright, thank you, Scott. That's all I had.

The next question comes from the line of Michael Siperco from RBC Capital Markets. Please go ahead.

Thank you guys for taking my question. Scott, you just touched on it a little bit, but I was hoping you could talk a little bit more about that balance sheet and capital allocation and I suppose that would be a key question Kumtor notwithstanding, as you said, it is still preliminary but what really drives your thinking on those fronts, if we're looking at dividends, cash return, and M&A as well, I suppose, are you seeing opportunities out there, is it too early to think about that, can you give a little bit more color around how you're thinking about the balance sheet?

The -- we recognize that we have a significant sort of debt free balance sheet, and we think that's going to continue to grow just given where the position -- where the business is positioned and just the underlying profitability that you're seeing right now. We regularly sort of strategize and deliberate on this with the board. And I think over the last sort of 18 months you have seen us take a number of steps in regards to that dividend distributions. We very quickly reinstituted that dividend program. We then increased the dividends to $0.04 per share. And last year we increased it to $0.05 per share and you saw most recently we now declared a dividend of $0.07 per share. So on that front, we have been taking some steps. Obviously, there is potentially other capital return opportunities here. As I was mentioning earlier, we could be evaluating and thinking about our share counts. But one of the challenges we have, Michael is I don't think we can do anything until we have resolved the situation with Kumtor and the Kyrgyzaltyn shareholding. And so what I mean by that, say you're asking me about a share buyback scenario. Under that scenario if Kyrgyzaltyn was not participating, we'd be effectively increasing or concentrating their ownership position within the organization. And that brings with it a number of other considerations, that's part of the overall calculus. So I think until we have that result, it kind of restricts our ability to evaluate in earnest any kind of a share buyback scenario.

And on the M&A front, I mean, you still, obviously you've sold some assets, you've got some other assets in the portfolio. And again, looking at that cash balance and I agree it's a huge asset. Have you -- is it too early to think about longer-term strategy, is it still sort of dependent in the timeline on what happens in Kyrgyzstan?

I, myself, personally I like to kind of be a little bit more contrarian in terms of when we do get equivative in terms of inorganic growth. So for example, during the time I've been with Centerra, when we were quite active in terms of acquiring Mount Milligan or Kemess, it was in the low phase of the gold price cycle and gold was trading around 1250. I think that's a better time in terms of maximizing the likelihood of a value creating sort of transaction. So given where we are in the gold price cycle right now, I find it a little bit more difficult to envision doing things that are going to be representing compelling sort of value accretive opportunities. At the same time, I'm not ruling it out. Obviously I think in terms of our go forward position here be it our balance sheet, our profitability, our cost profile, I think we're in a fantastic position and it's something that we can look to capitalize on. But I think just speaking more broadly in terms of where the industry is positioned, I think the industry is doing really well. The industry is quite profitable with these gold prices and I think everyone's balance sheet have largely been repaired. So I think it's going to be difficult in terms of actionability, in terms of opportunities presenting themselves. And that's fine from my perspective, I'm willing to be patient and I think we've got a great business here moving forward, but we recognize that that balance sheet provides us a lot of optionality. I think that's a competitive position for us to be in.

Okay, great. Thanks. And maybe just one last one for me, high level on the dispute with Kyrgyzstan, obviously the situation is very different than it's been in the past. And this is maybe just my perception or opinion, but it does seem that based on local media reports that the government's comments are maybe more heated, the rhetoric is more heated, more specific commentary about past agreements, denunciation, that sort of thing. Absent direct contact with the government can you comment at all on what you're seeing in terms of their public statements, maybe relative to those past disputes?

Well, I'm seeing what you're seeing and it's a lot of hyperbole, it is a lot of rhetoric, and all of it is unsubstantiated. This has been the typical sort of Kyrgyz playbook. So, I think you've got to take the appropriate pinch of salt, if you will. We'll put it in that context. We don't react to it as you have seen. What we are focused on is obviously trying to engage with the Kyrgyz leadership and that's how I've always resolved these disputes, is through constructive dialogues. If you look at history, eventually, both sides eventually come to the table, but in the absence of having any meaningful engagements, it forces us to take the legal measures that you've seen us showing in terms of the arbitration and the Chapter 11 proceedings. So I think we just have to continue to watch and see how this unfolds Mike.

Okay, great. Thanks very much for the time.

The next question comes from the line of Anita Soni from CIBC World Markets. Your line is open.

Good morning. Thanks for taking my call. So I'm not really going to ask anything about Kumtor cause I think that's probably been after death at this point, but can you -- I want to focus a little bit on operations and some of the other moving parts, the Molybdenum business is now unmet, you said it's a net 35 million cash draw this year. Is that going to continue going forward in your view of when you look at 2022, 2023, have you -- think that that's an ongoing situation or should that only be a one-time kind of 2021 forecast?

Yeah. Thanks Anita. Darren, do you want to respond to that and in your response Darren, just make sure you point out that it's build up in inventory that will be monetized in due course. Over to you Darren.

Hi Anita. It's basically driven by, as you know, the Molybdenum prices has dramatically increased -- up and adding [indiscernible]. When we put out guidance for 2021 at the start of the year, I think we were leasing around $12 a pound. So it's predominantly driven by a working capital increase, call it 80% to 90% of that. We don't -- unless the Molybdenum prices continue to spike up again in 2022-2023, then you'll see potentially an additional buildup of all the need for additional cash into the business. But it's probably just driven by the Molybdenum price increase, nothing more. So if it's currently flat, obviously we'd like to recoup some of that 30 million of approximate cash inflow into the business. But, that's kind of the real driver behind it.

Okay. And then secondly Darren, Mount Milligan's depreciation increased. Can you just walk me through why it increased for this year?

I will try to reflect, why don’t you shoot the Mount Milligan like new life of mine. I think back in 2020, we obviously reduced the mine log. So, that was the driver of the sort of mine life, which means need to increase that depreciation period on period. So I'll have to look -- dive in a little bit deeper, but at the top of my head, that would be the driver and obviously we've had a high throughput, high production coming in during the quarter. So, obviously that'll be attached to that piece. Once again, we could dive in a bit further and get back to you as well, if you like.

Yeah. That would be helpful. I think what you're describing would drive, we will not be doing the movement that you're talking about it going up again, this quarter or for this year. So, anyway I just want to get around to understand what the main drivers there were? And then on corporate administration, I think there was an increase there, is that a $15 million, is that more along the lines of all the legal things that you're dealing with and perhaps on a long run rate, we should be more along the lines of the original number of 35 million to 40 million or even less now that you're not necessarily worrying about Kumtor mine?

Yes.

Okay. And then lastly, just on operations for Öksüt, the Keltepe Pit, I guess the Phase 3, 4, and 5 are largely -- the tripping there is largely complete, is that -- should we expect higher grades more along the line of reserve rates going to the back half of the year or will that be more next year?

Dan, do you want to speak to that please?

Yes, yes, certainly. And you are correct. We are now starting to already experience higher grades and we plan to carry that forward to really over the next two and half years.

Okay. And I guess one last question on Mount Milligan, it seems like you're running a little higher than the top end of your guidance range, particularly on gold. Is there something that we should be thinking about in the second half of the year in terms of throughput ramifications or grade ramifications that would look at more to the mid-point or within the guidance range or do you continue to expect some actual performance?

Dan, do you want to speak to that?

Certainly can. We are having excellent throughput and that is continuing into the third quarter, which is great. We are focused as well on both gold and copper, but we have gone through some fairly high grade gold sections of our pit. So we're still confident on guidance. We're also seeing excellent recovery in both copper and gold and hopefully that will continue, as we've got additional process controls in our plant. So we're still feeling very strong on our guidance there.

Okay. Thank you. That's it for my questions.

Our last question comes from the line of Mike Jalonen from Bank of America. Your line is open.

Good morning. Scott, yeah just following on a comment about better grades about Molybdenum earlier this year. I can't remember who said it, Scott, but that was ending a new life of mine studies at both Mount Milligan and Öksüt in October, November. I didn't say anything this time about those. Is that still the plan for those to be released or completed?

Yeah, hi Mike. So, Dan and his engineering technical services team, they're doing a number of evaluations in terms of what we're seeing, in terms of conceptual sort of life of mine opportunities at Mount Milligan as well as Öksüt. That work is well underway. But in terms of committing to a timeline, we haven't made that commitment in terms of our public disclosure, it is potentially an opportunity for us in terms of our typical year-end reserves and resources. And it really comes down to whether or not what is the materiality in terms of what we're seeing. If it's something material, then obviously we'd have to disclose it. If it's not material then maybe it is something that we don't disclose. That's something that we will continue to evaluate, and we just have to see how that unfolds here over the course of this year.

Okay. Well, thanks. And one last question, Scott, I guess if you put Kumtor to side, obviously, you got a great balance sheet, great free cash flow, but the gold load is awash with 300,000 to 400,000 ounce of gold producers. And I could go to the Denver Gold Forum, I'd be tripping all over them on the atrium or the bar. Just wondering how does the return obviously is one way but how this entire just stables itself among all these companies now?

Well, look, speaking, talking to my own book, obviously, I would put forward that what differentiates Centerra, what distinguishes Centerra, obviously the peer leading cash position, but I think also we've pretty much peer leading cost profile. If you look at our guidance for this year, it looks like results in Q2. I mean sub $700 per ounce, that really is lower first quarter. I think that distinguishes us. But then also we've got some natural organic growth taking place here as we move forward over the next two and half years and that's particularly in Turkey. As Dan mentioned earlier and we are getting into a high grade sequence, we're expecting our gold production levels at Öksüt to more than double 2022-2023 relative to this year. So, that's obviously going to make the growing free cash flow and growing profitability. I think as we spoke to we've been doing some things in terms of capital return initiatives or shareholder friendly initiatives. There have been some meaningful increases in our dividend distributions. If there is opportunity to do more that's something we have to continue to evaluate with the Board. But I think some of those attributes I just put forward Mike, I really do think that distinguishes Centerra in a favorable manner. And then obviously underpinning all of this would be the valuations and does that represent an interesting investment proposition, I think that's how it would sound Mike.

Okay, well thank you for that and good luck.

Thank Mike.

There are no further questions on the lines.

With that I'd like to thank everyone for joining us on our call today, and we will wrap up the call right now. Well, thank you everyone. Goodbye.

This does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.