Centerra Gold moves forward with Nevada mine as precious metals surge

The gold producer had paused development at Goldfield due to economic uncertainties

Rowan Dunne

Published

8 hours ago

Bull market conditions in the gold sector have prompted Centerra Gold Inc. (TSE: CG) (NYSE: CGAU) (FRA: GOU) to proceed with development of a Nevada mine. Between 2023 to 2024 the precious metals producer was uncertain about the project’s future.

On Wednesday, the company outlined details about the Goldfield operation’s positive economic outlook and said impending construction and development would enable first production by the end of 2028.

Based on a recent technical assessment, the site is estimated to have an after tax net present value of US$245 million and will benefit from a 30 per cent internal rate of return. Centerra’s assumed long-term gold price for the duration of production is only US$2,500 too — well below its current value and the future expectations of many analysts.

“Over the last several months, Centerra has undertaken additional technical work and project optimizations that have significantly enhanced Goldfield’s value proposition and have de-risked the project,” said chief executive, Paul Tomory, in a news release on Aug. 6.

“Favourable gold prices combined with these recent developments have improved the project’s economics, enabling us to move forward with execution.”

The open pit heap leach operation will crank out approximately 100,000 gold ounces per year over a 7-year mine life. A mineral resource estimate in February determined that Goldfield held about 706,000 measured and indicated ounces.

Market observers expect stock ascension

Market analyst sentiment about Centerra is generally bullish and the average share target is approximately C$13.61. Stock is currently trading for C$9.68. The National Bank of Canada (TSE: NA) (OTCMKTS: NTIOF) (FRA: NBC), for instance, recently gave the mining company an outperform rating and share price target of C$14.75.

The high price of gold and silver has boosted the average rate of investor intrigue for mid-tier producers such as Centerra, Fortuna Mining Corp (TSE: FVI) (NYSE: FSM) (FRA: F4S0) and Agnico Eagle Mines Ltd (TSE: AEM) (NYSE: AEM) (FRA: AE9). Junior mining companies with promising gold projects have also become more appealing long-term prospects, like NevGold Corp (CVE: NAU) (OTCMKTS: NAUFF) (FRA: 5E50).

Centerra currently has US$922.3 million in total liquidity, a cash balance of US$522.3 million and debt through a corporate credit facility valued at US$400 million. The company declared a quarterly dividend of C$0.07 last week.

Centerra’s recent strategy prioritizes juniors

Taking a 9.9 per cent holding in Midland Exploration Inc (CVE: MD) (OTCMKTS: MIDLF) through a US$6.1-million-dollar investment is Centerra’s other most recent notable activity. This occurred at the end of July.

This investment built on the company securing stakes in a cohort of other juniors within the past year.

“Midland [the latest] brings a strong portfolio across Quebec’s Abitibi, James Bay, and Nunavik regions,” commented Rua Gold Inc (CVE: RUA) (OTCMKTS: NZAUF) (FRA: X9R) CEO, Robert Eckford, on social media, “plus partnerships with heavyweights like BHP Group Ltd (NYSE: BHP), Rio Tinto Ltd (NYSE: RIO) (FRA: CRA1) and Agnico.”

“This isn’t a flurry of random deals. It’s a strategy.”

Kenorland Minerals Ltd (CVE: KLD) (OTCMKTS: KLDCF) (FRA: 3WQ0), Dryden Gold Corp (CVE: DRY) (OTCMKTS: DRYGF) (FRA: X7W) and Thesis Gold Inc (CVE: TAU) (OTCMKTS: THSGF) (FRA: 0110) are other juniors Centerra has invested in over the past 365 days.