Executive Summary / Key Takeaways

• Centerra Gold is executing a strategic pivot towards long-term, self-funded organic growth, underpinned by a robust balance sheet and a disciplined capital allocation strategy. This includes advancing significant projects like Mount Milligan, Kemess, and the recently approved Goldfield, designed to offset declining production at Öksüt and extend asset lives.
• The company's operational and technological enhancements, such as Mount Milligan's infill drilling and throughput upgrades, Goldfield's improved recoveries, and the Molybdenum Business Unit's vertical integration, are critical drivers for improved efficiency, lower costs, and enhanced margins.
• Despite near-term production headwinds and increased costs at Mount Milligan and Öksüt, Centerra delivered strong Q2 2025 adjusted net earnings of $53 million ($0.26 per share) and maintains over $920 million in liquidity, positioning it to fully fund its ambitious project pipeline.
• Centerra's commitment to shareholder returns is evident through its active share buyback program, with $42 million repurchased in H1 2025, and a consistent quarterly dividend, reflecting management's confidence in the company's intrinsic value and future cash flow generation.
• Operating in a gold market characterized by unprecedented prices, global instability, and strong central bank demand, Centerra's focused growth strategy and operational resilience position it favorably, particularly as a mid-tier producer with higher leverage to gold prices compared to larger peers.

Introduction: Centerra Gold's Strategic Reinvigoration

Centerra Gold Inc. (NYSE:CGAU), a Canadian-based gold and copper producer, is undergoing a significant strategic transformation, repositioning itself for sustained long-term growth in a dynamic global mining landscape. Incorporated in 2002, Centerra has built a diversified portfolio spanning North America and Turkey, anchored by its Mount Milligan gold-copper mine in British Columbia, Canada, and the Öksüt gold mine in Türkiye. The company's journey has seen notable operational shifts, including the temporary suspension and subsequent restart of Öksüt in 2022-2023, and a strategic re-evaluation of its development pipeline.

The global gold mining market, valued at approximately $215.49 billion in 2024, is projected to expand to $304.03 billion by 2034, demonstrating a Compound Annual Growth Rate (CAGR) of 3.5%. This growth is fueled by persistent global economic instability, inflation concerns, geopolitical tensions, and robust demand for gold as a safe-haven asset. Central bank gold buying has reached record levels, with emerging markets increasing reserves by over 25% in the past three years, providing structural support for gold prices. In this environment, gold mining companies are experiencing a "financial renaissance" in 2025, marked by expanding profit margins and increasing free cash flow, with mid-tier producers like Centerra showing 20-30% higher leverage to gold prices compared to larger majors.

Centerra's overarching strategy is to maximize value from its existing assets through operational excellence and targeted organic growth, all while maintaining a strong balance sheet and disciplined capital allocation. This approach is particularly relevant given the industry's historical tendency for value-destructive acquisitions, which saw gold equities lag metal prices significantly between 2020 and 2023. Centerra's focus on self-funded projects and shareholder returns aims to differentiate it from past industry missteps.

Competitive Context and Positioning

Centerra Gold occupies a mid-tier position within the highly competitive gold mining industry, competing with global giants like Barrick Gold Corporation , Newmont Corporation , Kinross Gold Corporation , and Agnico Eagle Mines Limited . While these larger peers benefit from extensive global footprints and economies of scale, Centerra distinguishes itself through a strong asset portfolio, operational efficiency, and an experienced management team adept at navigating complex regulatory environments.

Centerra's diversified projects, including Mount Milligan, Öksüt, Thompson Creek, Kemess, and Goldfield, provide stability against market volatility, a key competitive advantage. The company's operational efficiency initiatives have contributed to competitive all-in sustaining costs (AISC), enhancing margins. For instance, Centerra's TTM EBITDA margin stands at 21.80%, while its P/E ratio of 26.82 and P/B ratio of 1.19 indicate a potentially attractive valuation compared to some peers. For example, Newmont (NEM) has a P/E of 15.01 and P/B of 2.93, while Agnico Eagle (AEM) trades at a P/E of 16.07 and P/B of 3.91. Kinross (KGC) has a P/E of 22.01 and P/B of 4.38, and Barrick (GOLD) has a P/E of 28.16 and P/B of 2.49. These metrics suggest Centerra offers a compelling risk-reward profile, particularly given its growth pipeline.

The company's strategic emphasis on leveraging existing infrastructure at projects like Kemess significantly lowers execution risk compared to typical greenfield developments, providing a cost and timeline advantage over competitors. Furthermore, the vertical integration of its Molybdenum Business Unit, with Thompson Creek supplying high-quality concentrate to Langeloth, creates a unique competitive moat by improving margins and enabling the production of higher-value molybdenum products.

Operational Excellence and Technological Edge

Centerra's strategic narrative is deeply intertwined with its commitment to operational excellence and the continuous application of technological and process innovations across its assets. These efforts are not merely incremental but are foundational to extending mine lives, enhancing recoveries, and driving cost efficiencies.

At the Mount Milligan mine, recent operational challenges, including lower-than-anticipated gold grades from wider-spaced drilling zones, have prompted a renewed focus on technical solutions. The company initiated an infill and grade control drilling program in Q2 2025, designed to improve geological confidence and provide greater visibility on grades for future mine plans. This is complemented by enhanced mine-to-mill integration, aiming for better control of grades delivered to the mill. Furthermore, the ongoing Pre-Feasibility Study (PFS) for Mount Milligan is set to incorporate a 10% increase in annual mill throughput through ball mill motor upgrades at a modest capital cost. Management is also exploring plant modifications to aid in gold recovery, targeting an improvement to the mid-to-high 60s, up from lower Q4 2024 levels, through initiatives like "Float IQ" which adjusts the flotation circuit in real-time and optimizing concentrate blends. These efforts have already yielded tangible benefits, with milling costs at Mount Milligan in 2024 reduced by 11% compared to 2023, and by 12% for the first nine months of 2024 compared to the prior year period.

The Goldfield Project in Nevada, now advancing towards first production by the end of 2028, showcases Centerra's ability to optimize project economics through technical work. Recent crushing optimizations have significantly enhanced Goldfield's value proposition, improving recoveries to the 70s, compared to previous estimates in the 60s. The project's relatively simple process flow sheet also contributes to its low execution risk.

In its Molybdenum Business Unit, Centerra is leveraging vertical integration as a key differentiator. The Thompson Creek mine, upon its restart in H2 2027, is expected to produce one of the highest quality moly concentrates globally. This high-quality feed will enable the Langeloth metallurgical processing facility to blend with lower-quality third-party concentrates, leading to margin improvements and an increased volume of higher-margin final molybdenum products. This strategic advantage is expected to drive Langeloth to become an EBITDA positive business in 2025.

Beyond these operational specifics, Centerra's commitment to sustainability, exemplified by Öksüt achieving full compliance with the International Cyanide Management Code and ISO 5001 certification for energy management, reinforces its long-term license to operate and aligns with growing investor demand for responsible mining practices. These technological and operational advancements collectively contribute to Centerra's competitive moat, driving improved financial performance through lower costs, higher recoveries, and de-risked project execution, thereby enhancing its market positioning and long-term growth strategy.

Financial Performance: A Foundation for Growth

Centerra Gold's financial performance in recent periods reflects the impact of elevated commodity prices and the initial successes of its operational optimization programs, even amidst project development spending. For the second quarter of 2025, the company reported adjusted net earnings of $53 million, or $0.26 per share, surpassing forecasts by 55.09%. This strong performance was driven by robust metal prices, with an average realized gold price of $2,793 per ounce and copper at $3.62 per pound. Quarterly revenue for Q2 2025 stood at $288.3 million. Looking at the trailing twelve months (TTM), Centerra reported annual revenue of $1.21 billion and annual net income of $80.39 million.

The company's TTM gross profit margin is 28.91%, operating profit margin is 3.67%, and net profit margin is 6.20%. The TTM EBITDA margin stands at 21.80%, reflecting solid operational leverage.

Cash flow from operations before working capital and income taxes paid increased by 22% quarter-over-quarter to $98 million in Q2 2025. However, consolidated cash flow from operations was $25 million, resulting in a free cash flow deficit of $25 million for the quarter, largely due to significant tax and royalty payments at Öksüt and capital expenditures for the Thompson Creek restart. Mount Milligan remained a strong contributor, generating $57 million in cash from operations and $43 million in free cash flow in Q2 2025.

Centerra's liquidity position remains robust, ending Q2 2025 with a cash balance of $522 million and total liquidity exceeding $920 million. This strong financial footing is critical, as the company intends to fully fund its organic growth projects—Goldfield, Mount Milligan, Kemess, and Thompson Creek—from existing and future liquidity, without resorting to external debt or equity financing.

Centerra's commitment to shareholder returns is a key pillar of its capital allocation strategy. In the first half of 2025, the company repurchased 3.9 million shares for $27 million in Q2 alone, bringing the total to $42 million for the first six months, against a Board-approved $75 million for the year. A quarterly dividend of $0.07 per share was also declared. This balanced approach of investing in growth while returning capital underscores management's confidence in the company's long-term value proposition.

Growth Pipeline: Unlocking Future Value

Centerra Gold's future is being actively shaped by a robust organic growth pipeline designed to enhance its production profile and extend asset longevity. This strategy is particularly crucial as it aims to offset the natural declines at the Öksüt mine and ensure continuity in gold production.

The Mount Milligan mine is a cornerstone of this strategy. A Pre-Feasibility Study (PFS) is on track for completion in Q3 2025, with the objective of significantly increasing proven and probable reserves and extending the mine life beyond the current 2036 limit, which is constrained by tailings capacity. The PFS is evaluating engineering solutions for additional tailings capacity and plans to incorporate a 10% increase in annual mill throughput through modest capital investments in ball mill motor upgrades. This initiative is expected to unlock substantial value from Mount Milligan's mineral resources.

The Kemess Project in British Columbia represents another long-life gold-copper asset in the making. Centerra is advancing a Preliminary Economic Assessment (PEA), expected by the end of 2025, based on a combined open pit and conventional underground mining concept. This approach is anticipated to be less capital-intensive and offer a better cash flow profile than the previously considered block cave. Kemess benefits from significant existing infrastructure, including a 300-kilometer power line, a 50,000-ton per day processing plant (requiring refurbishment), and extensive site facilities, which are expected to substantially lower execution risk compared to a typical greenfield project. The project targets an average annual production of approximately 250,000 gold equivalent ounces, aiming to establish Centerra with two long-life gold-copper assets in British Columbia alongside Mount Milligan. Exploration guidance at Kemess has been doubled to $10 million - $12 million for 2025, with 28,500 meters of drilling planned to further delineate resources.

The Goldfield Project in Nevada is a strategic addition aimed at growing Centerra's near-term gold production profile. After a previous decision to put the project on hold, additional technical work, project optimizations, and favorable gold prices have significantly enhanced its economics, leading to a decision to proceed with development. Goldfield is expected to have a 7-year mine life, with average annual production of around 100,000 ounces in peak years (2029-2032) at an all-in sustaining cost of $1,392 per ounce and an initial capital cost of $252 million. First production is targeted for the end of 2028. To safeguard project economics during the ramp-up, Centerra has implemented a targeted hedging strategy for 50% of 2029 and 2030 gold production, with a floor of $3,200 per ounce and average caps of $4,435 (2029) and $4,705 (2030) at no cost to the company.

Finally, the Thompson Creek mine restart is advancing on schedule and budget, with first production anticipated in the second half of 2027. This $397 million capital investment is expected to be largely funded by cash flow from Mount Milligan and Öksüt. The progressive ramp-up of the Langeloth facility, aiming for 13 million to 15 million pounds of molybdenum roasted in 2025, is expected to drive the Molybdenum Business Unit to an EBITDA positive position this year.

Risks and Challenges

While Centerra Gold's growth trajectory appears promising, investors must consider several pertinent risks and challenges. Operational variability remains a key concern, as evidenced by Mount Milligan encountering zones with more challenging mineralization and lower-than-anticipated gold grades in the first half of 2025. This led to a revised 2025 gold production guidance for Mount Milligan of 145,000 to 165,000 ounces. The company is addressing this with infill drilling, but grade reconciliation can impact short-term production and costs.

Geopolitical and regulatory risks are also present, particularly concerning the Öksüt mine in Turkey. The Turkish government's updated royalty structure in July 2025, which expanded the royalty table up to $5,100 gold, has increased royalty costs per ounce due to elevated gold prices. Furthermore, while the devaluation of the Turkish Lira historically offset domestic inflation, the Lira's recent stabilization means inflation is now expected to outpace devaluation, potentially leading to higher operating costs at Öksüt in 2025. The Molybdenum Business Unit also faces potential tariff impacts at Langeloth, as approximately 60% of its third-party concentrate feed currently originates from South America. Centerra is exploring mitigation strategies, but this remains a factor to monitor.

Project execution risk, while mitigated by leveraging existing infrastructure at Kemess and Goldfield's relatively simple flow sheet, is inherent in any large-scale development. Delays or cost overruns could impact financial projections. Despite these challenges, Centerra's strong balance sheet and commitment to self-funding its projects provide a significant buffer against unforeseen issues.

Conclusion

Centerra Gold is strategically positioning itself for a new era of self-funded organic growth, leveraging its robust asset base and disciplined capital allocation. The company's proactive approach to operational optimization and technological integration at Mount Milligan, coupled with the advancement of high-potential projects like Kemess and Goldfield, forms a compelling investment thesis. These initiatives are designed to extend mine lives, enhance production profiles, and drive cost efficiencies, thereby unlocking significant long-term value.

In a gold market buoyed by global uncertainties and strong demand, Centerra's financial strength, characterized by over $920 million in liquidity and a debt-free balance sheet, provides the flexibility to execute its ambitious growth plans while consistently returning capital to shareholders. Although facing near-term operational adjustments and cost pressures at its operating mines, the strategic pipeline, particularly the Goldfield project's near-term gold production and the long-life potential of Mount Milligan and Kemess, is set to transform Centerra into a more diversified and resilient gold and copper producer. Investors looking for a mid-tier gold company with a clear growth strategy, strong financial discipline, and a commitment to shareholder value, even amidst evolving market dynamics, will find Centerra Gold an attractive consideration.