What happened
Shares of Centerra Gold (CGAU 0.66%) slumped on Monday and were trading 15% lower as of 12:30 p.m. ET. The Canadian-based gold stock, which also pays a dividend, announced its first-quarter numbers Monday morning and gave investors a pretty good reason to worry.
So what
One jarring number stood out in Centerra's earnings report: a net loss of $73.5 million. The company earned a net profit of $89.4 million in the same quarter last year.
What went so drastically wrong for Centerra? Practically everything: lower production, lower average realized prices for gold and copper, and higher production costs.
Centerra has only two operating mines -- Oksut in Turkey and Mount Milligan in Canada. Oksut didn't contribute anything to Centerra's top line last quarter as production of gold bars at the mine was suspended in March 2022 after mercury was detected in its processing plant. The plant is still awaiting the Turkish ministry's approval to resume operations.
As for Mount Milligan, Centerra blamed several factors for lower output in Q1, including lower ore grade, a planned shutdown, and material handling challenges during the winter months.
The result? Centerra now expects gold production at Mount Milligan to be at the lower end of its guidance range of 160,000 to 170,000 ounces this year, which could mean an almost 15% drop in production in 2023. That's not what investors want to hear at a time when gold prices are rising. Gold prices hit record highs earlier in May and are holding up firm since.
Now what
CEO Paul Tomory took over on May, 1 but has a lot to prove to investors. Getting Oksut back online is crucial for the gold miner's growth, but there's no knowing yet when that'll happen. Meanwhile, Centerra expects to incur average cash expenditures of $7 million to $10 million per month on Oksut to maintain partial operations even as its gold bar production remains offline. Those expenditures without any output from the mine could continue to hurt Centerra's prospects.
