This Is What Gold Mining Companies Should Focus On – Centerra Gold
(Kitco News) – Mining companies need to continue to clean up their balance sheets as investment capital continues to slowly enter the sector, says one mining executive.
Image courtesy of Centerra Gold
Scott Perry, chief executive officer of Centerra Gold, said in an interview with Kitco News that one of the company’s priorities is to pay down its debt so it has a healthy balance sheet in case the sector has to deal with lean times again.
Perry’s comments come as Centerra gold repaid $111.9 million in debt in the third quarter. Perry said that for the year to date, the company has paid off about $172 million of its debt. Last year the company used debt financing to raise $300 million as part of its $1.1 billion purchase of Thompson Creek and its Mount Milligan project.
“I would like to see us continue to aggressively pay off our debt,” he said. “Our goal in this metals price environment is to continue to grow our net cash position.”
Perry explained that Centerra’s philosophy has helped the company grow as the sector has struggled to attract much-needed funds. He explained that the company’s ability to diversify its gold production has been a direct result of its balance sheet.
“The only reason we got Thomson Creek was because we had such a strong balance sheet, significant cash reserves and we were in the right place at the right time,” he said. “The rest of the market was kind of handicapped and in a weak position because of their balance sheets.”
For Centerra, the Thomson Creek purchase last year has been a strategic move with fantastic results, Perry said.
According to the company’s earnings report, 61,640 ounces of gold were produced at Mount Milligan, generating revenues of $48 million during the quarter. The purchase of a Canada-based project has also helped Centerra, diversify its portfolio to reduce its geopolitical risks.
Before its Thomson Creek purchase, Centerra was completely reliant on its Kumtor mine in the Kyrgyz Republic for its cash flow. As an example of its political risk, in the third quarter the company said that it paid a $60 million settlement to the Kyrgyz government. While the mine is not in a great mining jurisdiction, Perry said that the deposit’s assets outweigh the current risks.
“We have got one of the world’s best gold mines and it provides a lot of cash flow that lets us build out the company and diversify,” he said