Centerra Gold Q2 2025 Earnings Call Transcript

Quartr
Provided by Quartr
August 7, 2025

Key Takeaways

  • Positive Sentiment: In Q2, Centerra produced over 63,000 oz of gold and 12.4 M lbs of copper at Mount Milligan and Aksut, driving strong adjusted net earnings of $53 M and benefitting from high metal prices.
  • Positive Sentiment: Centerra approved the Goldfield project in Nevada with an after-tax NPV of $245 M and IRR of 30%, planning a seven-year mine life, ~100,000 oz annual peak production, fully funded from existing liquidity.
  • Negative Sentiment: Mount Milligan’s 2025 gold production guidance was revised down to 145,000–165,000 oz with by-product AISC now projected at $13.50–$14.50/oz, reflecting challenging mineralization zones and increased sustaining capital.
  • Negative Sentiment: Oksut’s full-year 2025 all-in sustaining cost guidance was updated to $16.75–$17.75/oz due to higher royalty expenses amid strong gold prices and a new Turkish royalty structure.
  • Positive Sentiment: Centerra generated a 22% QoQ increase in operating cash flow to $98 M, holds over $920 M in total liquidity, and returned $63 M to shareholders via share buybacks and dividends in H1 2025.
AI Generated. May Contain Errors.
Earnings Conference Call
Centerra Gold Q2 2025
00:00 / 00:00

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Operator

Thank you for standing by. This is the conference operator. Welcome to the Centerra Bold Second Quarter twenty twenty five Conference Call. As a reminder, all participants today are in listen only mode and the conference is being recorded. After today's presentation, there will be an opportunity to ask questions.

Operator

I would now like to turn the conference over to Lisa Wilkinson, Vice President of Investor Relations and Corporate Communications with Centerra Gold. Please go ahead.

Lisa Wilkinson
Lisa Wilkinson
VP - IR & Corporate Communications at Centerra Gold

Thank you, operator, and good morning, everyone. Welcome to Centerra Gold's second quarter twenty twenty five results conference call. Joining me on the call today are Paul Tomory, President and Chief Executive Officer David Hendrix, Chief Operating Officer and Ryan Snyder, Chief Financial Officer. Other members of the management team are available for the Q and A session. Our news published yesterday outlines our second quarter twenty twenty five results and is complemented by our MD and A and financial statements, which are available on SEDAR, EDGAR and our website.

Lisa Wilkinson
Lisa Wilkinson
VP - IR & Corporate Communications at Centerra Gold

All figures are in U. S. Dollars unless otherwise noted. Presentation slides accompanying this webcast are available on Centerra's website. Following the prepared remarks, we will open the call for questions.

Lisa Wilkinson
Lisa Wilkinson
VP - IR & Corporate Communications at Centerra Gold

Before we begin, I would like to remind everyone that today's discussion may include forward looking statements, which are subject to risks that could cause our actual results to differ from those expressed or implied. For more information, please refer to the cautionary statements in our presentation and the risk factors outlined in our annual information form. We will also be referring to certain non GAAP measures during today's discussion. For a detailed description of these measures, please see our news release and MD and A issued last evening. I will now turn the call over to Paul Tamori.

Paul Tomory
Paul Tomory
President, CEO & Director at Centerra Gold

Thank you, Lisa, and good morning, everyone. In the second quarter, both Mount Milligan and Ipsuite contributed to strong earnings, driven by high commodity prices. Gold and copper production in the quarter was over 63,000 ounces and 12,400,000 pounds of copper, respectively. The second quarter marked the first full period under the leadership of our new Chief Operating Officer, David Hendrix, and our newly appointed General Manager at Mount Milligan, Eric Dell. Their early impact has been substantial, bringing renewed operational focus and significantly enhancing our confidence in the mine's future performance through the initiation of an infill and grade control drilling program, among other initiatives.

Paul Tomory
Paul Tomory
President, CEO & Director at Centerra Gold

We are making solid progress on two studies that are expected to support Centerra's long life copper gold organic growth strategy in British Columbia, both of which are targeted for delivery in the 2025. At Mount Milligan, work on the PFS is on track to be completed in the third quarter. We are evaluating substantial mineral resources to unlock additional value beyond the current mine life of 02/1936, which is based on the available space in the existing tailings storage facility. We are progressing with the engineering solution for additional tailings capacity, and the PFS is set to incorporate an increase of annual mill throughput in the range of 10% through the ball mill motor upgrades, which will be at modest capital cost. At the Chemez project, we continue to advance work on a PEA based on an open pit and conventional underground mining concept, which is on track for completion by the 2025.

Paul Tomory
Paul Tomory
President, CEO & Director at Centerra Gold

Chemes has significant infrastructure already in place, requiring only targeted refurbishing to support operations. To complement this existing infrastructure, it is anticipated that new crushing, conveying and mining infrastructure will be developed to further support our operations and longer term efficiency. We expect the existing infrastructure to lower the execution risk of the project when compared to a typical greenfield project of this scale. Yesterday, we announced that we are advancing on the Goldfield project, which is located in the historic mining district of Nevada, one of the most reliable mining jurisdictions in the world. This is a strategic milestone that is expected to grow Centerra's near term gold production profile and can be fully funded from our existing liquidity.

Paul Tomory
Paul Tomory
President, CEO & Director at Centerra Gold

Over the last several months, we've undertaken additional technical work and project optimizations that have significantly enhanced Goldfield's value proposition. Favorable gold prices combined with these recent developments have improved the project's economics, enabling us to move forward with execution. Our technical study confirms attractive economics to the project, including an after tax NPV of two forty five million dollars and an after tax IRR of 30% using a long term gold price of $2,500 per ounce. We have implemented a targeted hedging strategy on 50% of gold production in 2029 and 2030 with a gold price floor of $3,200 per ounce and an average gold price cap of $4,435 in 2029 and $4,705 in 2030 at no cost to Centerra. This gold hedging strategy positions us to lock in strong margins to safeguard project economics and enable predictable cash flow during the ramp up period, while maintaining exposure to rising gold prices for the life of the mine.

Paul Tomory
Paul Tomory
President, CEO & Director at Centerra Gold

Just under 80% of the planned production over the life of mine remains unhedged and fully exposed to market gold prices. The project is expected to have a seven year mine life, average annual production of around 100,000 ounces in peak production years at an all in sustaining cost of $13.92 dollars per ounce and a competitive initial capital cost of $252,000,000 The project is well positioned to benefit from a short timeline to first production by the 2028 and low execution risk given its relatively simple process flow sheet. Goldfield is projected to grow our near term gold production profile, generate robust cash flow and deliver significant value to shareholders. We believe also that Goldfield is ideally positioned in our project development pipeline, bringing additional gold production online, helping to offset the natural declines of Oksut and to ensure continuity as we advance development of the longer life Mount Milligan and Chemes assets in British Columbia. I'd like to share an update on our sustainability initiatives.

Paul Tomory
Paul Tomory
President, CEO & Director at Centerra Gold

In June, we published our 2024 sustainability report. We achieved several important milestones this past year, and we remain committed to meet the rising expectations through greater transparency and aligned with the recognized sustainability frameworks and standards. With respect to some of the progress we've made, at Ipsut, we achieved full compliance with the International Cyanide Management Code, reinforcing our commitment to safe and environmentally responsible mining practices. We advanced our climate change strategy focusing on economically feasible decarbonization initiatives at the site level, refining our climate risk scenario analysis and continued to enhance our disclosures. As part of that broader effort, OXU earned an ISO 5,001 certification for energy management, helping us improve energy efficiency at site.

Paul Tomory
Paul Tomory
President, CEO & Director at Centerra Gold

We also strengthened our partnerships with indigenous owned businesses and reached 19% indigenous employee representation across our British Columbia operations. In terms of local economic impact, our local procurement spending rose by 26% year over year across all operating jurisdictions, reaching $134,000,000 And lastly, we are pleased to share that we have surpassed our twenty twenty six gender diversity goal for the second year in a row with women representing 38% of our Board and 33% of our executive officers. Together, these achievements reinforce our belief that strong sustainability performance is a key driver of long term value for all of our stakeholders. And with that, I'll pass the call over to David to walk through our operational performance for the quarter.

David Hendriks
David Hendriks
EVP & COO at Centerra Gold

Thanks, Paul. Slide eight shows operating highlights at Mount Milligan for the second quarter. Mount Milligan produced over 35,000 ounces of gold and 12,400,000 pounds of copper in the quarter. In the first half of the year, mining operations encountered zones with more challenging mineralization, resulting in lower than anticipated gold grades from these areas of the pits. While gold grades remain above the average grade of the reserve, we believe the variability is primarily attributed to certain zones being drilled with wider spacing.

David Hendriks
David Hendriks
EVP & COO at Centerra Gold

We have commenced an infill and grade control drilling program second quarter. This initiative is designed to improve geological confidence and will be integrated into the upcoming Mount Milligan PFS, contributing to a mine plan with greater visibility on grades moving forward. Also, as we continue to improve our understanding of the ore body at Mount Milligan and advance our broader site optimization program, we are enhancing our mine to mill integration to achieve better control of grades delivered to the mill. We have updated our twenty twenty five gold production guidance at Mount Milligan to between 145,165 ounces to recalibrate for the adjustment in grades. We have reaffirmed our 2025 copper production guidance of 50,000,000 to 60,000,000 pounds.

David Hendriks
David Hendriks
EVP & COO at Centerra Gold

Both gold and copper production and sales are expected to be weighted towards the second half of the year. In the second quarter, all in sustaining costs on a byproduct basis were $12.86 dollars per ounce, 10% higher than last quarter due to an increase in sustaining CapEx and lower ounces sold in the quarter. We have revised our 2025 cost guidance ranges at Mount Milligan to reflect updated production guidance figures. All in sustaining costs on a byproduct basis are now expected to be between $13.50 dollars and $14.50 dollars per ounce. On Slide nine, we show operating highlights at Aksut for the quarter.

David Hendriks
David Hendriks
EVP & COO at Centerra Gold

Second quarter production was over 28,250 ounces, better than planned due to higher grades resulting from mine sequencing. We have reaffirmed our 2025 production guidance at Aksut with production expected to be higher in the second half of the year as we access higher grade areas of the mine. In the second quarter, all in sustaining costs on a byproduct basis were $17.55 dollars per ounce, which is higher compared to last quarter, driven by a higher royalty expense per ounce due to elevated gold prices. We have revised our full year cost guidance ranges at Oksut to reflect both higher royalty costs stemming from the strong gold price environment and an updated royalty structure that was approved by the Turkish government this July 2025 all in sustaining costs on a byproduct basis are now expected to be $16.75 dollars to $17.75 dollars per ounce. The restart of Thompson Creek is advancing with approximately 20% of the total capital investment complete.

David Hendriks
David Hendriks
EVP & COO at Centerra Gold

In the second quarter, we invested $27,000,000 in non sustaining capital expenditures, bringing total investment spend since the September restart decision to $82,000,000 We have reaffirmed our 2025 guidance for non sustaining CapEx at Thompson Creek. The project remains in line with the total initial capital estimate of $397,000,000 as outlined in the feasibility study and is on track for first production in the 2027. I'll now pass it to Ryan to walk through our financial highlights for the quarter.

Ryan Snyder
Ryan Snyder
EVP & CFO at Centerra Gold

Thanks, David. Slide 11 details our second quarter financial results. Adjusted net earnings in the second quarter were 53,000,000 or $0.26 per share, which benefited from strong metal prices. Key adjustments to net earnings include $15,000,000 of unrealized gain on the remeasurements of the sale of the Greenstone partnership in 2021 and $12,000,000 of unrealized loss on the financial asset related to the additional agreement with Royal Gold, among other things. In the second quarter, sales were over 61,000 ounces of gold and 12,000,000 pounds of copper.

Ryan Snyder
Ryan Snyder
EVP & CFO at Centerra Gold

The average realized price was $2,793 per ounce of gold and $3.62 per pound of copper, which incorporates the existing streaming arrangements at Mt. Milliman. At the Molyndidum business unit, approximately 3,100,000 pounds of Molyndidum was sold in the second quarter at the Langloft facility at an average realized price of $21.43 per pound. Consolidated all in sustaining costs on a byproduct basis in the second quarter were $16.52 dollars per ounce. We have updated our 2025 all in sustaining cost guidance following lower expected production at Mount Milligan and higher royalty costs at Aksu, driven by elevated gold prices and the newly updated royalty structure.

Ryan Snyder
Ryan Snyder
EVP & CFO at Centerra Gold

We now expect consolidated all in sustaining costs on a byproduct basis to be between $16.50 dollars and $17.50 dollars per ounce in 2025. Slide 12 shows our financial highlights for the quarter. In the second quarter, we increased cash flow from operations before working capital and income taxes paid by 22% over last quarter, generating a total of $98,000,000 After routine statutory tax and royalty payments to the Turkish government, cash flow from operations on a consolidated basis for the quarter was $25,000,000 and we had a free cash flow deficit of $25,000,000 for the quarter. In the second quarter, Mount Milligan generated $57,000,000 in cash from operations and $43,000,000 in free cash flow. Offsuits cash flow in the quarter was impacted by the tax and royalty payments of $84,000,000 made to the Turkish government.

Ryan Snyder
Ryan Snyder
EVP & CFO at Centerra Gold

As a result, Oksut's cash used by operations was $18,000,000 in the second quarter and free cash flow deficit was 28,000,000 We expect to generate strong free cash flow in Oksut in the second half twenty twenty five. The Molybdenum business unit used $1,000,000 of cash in operations and had a free cash flow deficit of $27,000,000 this quarter, mainly related to spending on the Thompson Creek restart. Returning capital to shareholders remains a key pillar in our disciplined approach to capital allocation. In the second quarter, we increased our share buybacks by 80% compared to the previous quarter, repurchasing 3,900,000.0 shares for total consideration of $27,000,000 Our Board has approved the repurchase of up to $75,000,000 of Centerra shares through the NCIB in 2025, and we have repurchased $42,000,000 in the first half of the year. We also declared a quarterly dividend of $07 per share.

Ryan Snyder
Ryan Snyder
EVP & CFO at Centerra Gold

In the first six months of twenty twenty five, we have returned $63,000,000 to shareholders through dividends and buybacks. As part of our commitment to returning capital to our shareholders, we expect to remain active on the share buybacks subject to market conditions. At the end of the second quarter, our cash balance was $522,000,000 This results in total liquidity of over $920,000,000 well positioning us to fully fund our organic growth projects at Goldfield, Mount Milligan, Kemess and Thompson Creek, while continuing to return capital to shareholders. I'll pass it back to Paul for some closing remarks.

Paul Tomory
Paul Tomory
President, CEO & Director at Centerra Gold

Thanks, Ryan. We're very proud of the progress we've made in advancing our internal growth strategy. The decision to move forward with the Goldfield project is a key milestone that is expected to enhance our near term gold production profile and to create value for our shareholders. In parallel, we're actively advancing studies at both Mount Milligan and Chemess, which are on track to be completed in the second half of the year. The two studies represent significant milestones in advancing our gold growth development pipeline and are focused on unlocking additional value from our assets in British Columbia.

Paul Tomory
Paul Tomory
President, CEO & Director at Centerra Gold

Our internal growth strategy is underpinned by a strong balance sheet and disciplined capital allocation. All of our projects, Goldfield, Mount Milligan Chemist, Thompson Creek are expected to be self funded from our existing liquidity, reflecting our commitment to generating value while maintaining financial strength and flexibility. And with that operator, I'll open the call to questions.

Operator

Thank you. We will now begin the question and answer session. And today's first question is from Don DeMarco with National Bank. Please proceed.

Don DeMarco
Equity Research Analyst - Precious Metals at National Bank Financial

Thank you, operator, and good morning, Paul and team. Congratulations on continuing to progress on your internal growth strategy. First question has to with Mount Milligan mill. I see that you encountered some challenging mineralization. Are you seeing good results and improved confidence after implementing the additional infill drilling?

David Hendriks
David Hendriks
EVP & COO at Centerra Gold

Don. This is David. What we've done is we've really increased the density of drilling in the area that we've been mining for the Nektar for the last six months and will continue to mine over the next eighteen months. We're very confident with our new guidance number of the drilling results that we have will lead to a much better prediction of what we're doing. And also, those are the same that same information is being implemented into the study that's being done to look at the extension of the Mount Milligan mine life.

Don DeMarco
Equity Research Analyst - Precious Metals at National Bank Financial

Okay. Great. And then on to Goldfields. So I see the project go forward and it certainly makes sense to offset Auxut. But at first glance, the reserves of 700,000 ounces are unchanged from the end of last year when the company decided not to proceed.

Don DeMarco
Equity Research Analyst - Precious Metals at National Bank Financial

I think at that time it was partly because of the size of the reserves. So could you walk through what's new now versus last year? And is it primarily a higher gold price?

Paul Tomory
Paul Tomory
President, CEO & Director at Centerra Gold

Well, it's a combination of a couple of things, Don. You're right. I mean, the reserve that we have now is roughly equivalent to the resource we had on the books at the end of the year. However, we've done a bunch of technical work since the end of the year, principally focused on crushing optimization and getting better recoveries on a portion of the ore. So we just have a better view on achieving higher recoveries.

Paul Tomory
Paul Tomory
President, CEO & Director at Centerra Gold

We're up in the 70s now whereas before we were in the 60s. And of course, gold price is a major factor. We're $607,100 dollars an ounce higher than we were six months ago. With that color that we put in place on a portion of the ounces, the economics really light up here. So one way to look at it is the gold price has made up for inventory, in some ways to make this project quite attractive on an NPV basis.

Paul Tomory
Paul Tomory
President, CEO & Director at Centerra Gold

So the NPV at the 2,400 is in the mid-200s and certainly a lot higher than that at 3,200, 3,400. So it's really it's principally, I'd say, a gold price phenomenon, but also really good technical work on the dynamics between crushing and recovery versus running So a combination of all those.

Don DeMarco
Equity Research Analyst - Precious Metals at National Bank Financial

Okay, great. That's helpful. And so I guess in this environment, they say, if you've got it, then build it. And looking at your pipeline here, like how do you think about sequencing and financing Goldfields, Mount Milligan, PFS and Chemez? We're looking forward to the PA coming out.

Don DeMarco
Equity Research Analyst - Precious Metals at National Bank Financial

And if I sum up the CapEx on these projects with some assumptions on Chemez, it seems to maybe approach available liquidity.

Paul Tomory
Paul Tomory
President, CEO & Director at Centerra Gold

So absolutely, one of our key strengths here is that with available liquidity, we can fund all of that. So Thompson Creek, Goldfield, Chemez, Mount Milligan and still have some gas left in the tank. And that's at 2,500. So at spot, certainly, we remain in very significant go forward free cash flow generation mode. But no question about it, we can afford all these projects at 2,500 given existing liquidity.

Don DeMarco
Equity Research Analyst - Precious Metals at National Bank Financial

Okay, great. Okay, well, thanks for that. That's all for me and good luck with the rest of the quarter.

Paul Tomory
Paul Tomory
President, CEO & Director at Centerra Gold

Thanks a lot, Don.

Operator

And our next question comes from Lawson Winder with Bank of America Securities. Please proceed.

Lawson Winder
Lawson Winder
Director & Equity Research Analyst - Metals & Mining at Bank of America

Great. Thank you very much operator and good morning Paul and team. Thank you for today's update and all the detail you provided. When thinking about Mount Milligan and your sort of advancing understanding of the grade, when we look to 2026, how could the production profile differ versus the prior available technical report? And can you give us an early indication of directionally what we might be thinking in terms of production there versus 2025?

Paul Tomory
Paul Tomory
President, CEO & Director at Centerra Gold

Well, Dave can jump in on some of the detail here. But fundamentally, what we've been dealing with here over the last eighteen months is mining through a zone, as Dave said in his prepared remarks, that was not drilled to the same density as the vast majority of the rest of the ore body. And as a result of that, we've had some grade issues. And what Dave described is the implementation of a grade control and infill program that has certainly increased our understanding and vastly improved our confidence in the grades that we'll be mining. And as Dave said, that will be incorporated into PFS.

Paul Tomory
Paul Tomory
President, CEO & Director at Centerra Gold

I don't want to get ahead of ourselves on what's going to be in the PFS, but we're about a month away from that. And as we've been signaling, we're going to be adding a significant mine life through the addition of further tailings capacity. But what I can tell you is that Mount Milligan, if you look at over the last four or five years, that's roughly the average production profile in both gold and copper that one should expect, in fact, the entire mine life. There will be up years here and there as we hit pockets of higher grade, particularly on the gold side. But roughly speaking, what you've seen over the last five years is a good representative average of what we might see over the next several.

Paul Tomory
Paul Tomory
President, CEO & Director at Centerra Gold

But I stress there will be there are zones in that ore body that are higher grade gold and it will cause a few years to be higher. But we'll be putting out a very detailed production plan come September on the entire mine life at Mount Milligan.

Lawson Winder
Lawson Winder
Director & Equity Research Analyst - Metals & Mining at Bank of America

Yes. I look forward to that. And if you don't mind, like I wouldn't mind just trying to push you a little bit more on what we could expect in the technical study. I understand your reluctance to reveal too much. But I mean, at its core, it's about extending the mine life, but you've mentioned a 10% increase in throughput.

Lawson Winder
Lawson Winder
Director & Equity Research Analyst - Metals & Mining at Bank of America

In the past, we talked about potential increases in gold recoveries. Is that something that could be a feature in terms of the near term mine plan that might complement the long term extension? And is there anything else that you guys are thinking about in this study in terms of near term benefits to complement that longer term life extension?

Paul Tomory
Paul Tomory
President, CEO & Director at Centerra Gold

So what I can tell you is that the principal objectives of the study are number one, identify tailings capacity. That is why our mine life is currently limited to '2 36. And we have done that. We've got an engineered solution for incremental tailings capacity. Second, you pointed out a throughput increase.

Paul Tomory
Paul Tomory
President, CEO & Director at Centerra Gold

We're targeting 10% through relatively, what I would call, straightforward improvements in the existing circuit. On recovery, we are also looking at whether or not there are modifications we can make in the plant to aid in recovery. And we're positive that there may be something there, certainly over a life of mine basis. And what you're fishing for here is production in 2026, 2027. Look, I think what we've guided here for the for this year, as I said, give or take within a range is representative of what you might expect for the next several years.

Lawson Winder
Lawson Winder
Director & Equity Research Analyst - Metals & Mining at Bank of America

Okay. That's great. I appreciate the color. Every little bit helps. And then just if I could ask one final question on Goldfield.

Lawson Winder
Lawson Winder
Director & Equity Research Analyst - Metals & Mining at Bank of America

What are sort of if we think about the timeline to first production in 2028, let's call it, what is the bottleneck? And could you just walk us through sort of the key permits that need to be secured in order to ensure that 2028 first production? Thanks.

Paul Tomory
Paul Tomory
President, CEO & Director at Centerra Gold

Yes. So starting with the last part of the question there. Most of the permits are in place for Goldfield. As you saw on our plan view, there are a number of deposits there. The bulk of the ounces come from the Gemfield deposit.

Paul Tomory
Paul Tomory
President, CEO & Director at Centerra Gold

That is essentially permitted, but we have to make one minor amendment on having upside that pit versus what was previously permitted. So what I would say is there are some incremental permits to obtain on an expanded gem field as well as the other satellite pits. I would call these fairly routine Nevada type permits. The critical path for the project really goes through the completion of engineering, procurement and then execution. The bulk of the execution will take place in 'twenty seven and 'twenty eight, And we intend to mobilize the mining contractor.

Paul Tomory
Paul Tomory
President, CEO & Director at Centerra Gold

So the critical path runs through what I would call project activities, engineering procurement and then execution.

Lawson Winder
Lawson Winder
Director & Equity Research Analyst - Metals & Mining at Bank of America

Great. Thank you very much guys.

Paul Tomory
Paul Tomory
President, CEO & Director at Centerra Gold

Thank you, Lawson.

Operator

And the next question is from Raj Ray with BMO Capital Markets. Please proceed.

Raj Ray
Raj Ray
MD - Metals & Mining Research at BMO Capital Markets

Thank you, operator. Good morning, Paul and team. I have three questions if I may. First on Mount Milligan. Dave, can you point to how long you expect to be in this current zone that you're mining through that's giving lower grade reconciliation versus your reserve model?

Raj Ray
Raj Ray
MD - Metals & Mining Research at BMO Capital Markets

And is it going to grow substantially into 2026 or not? Secondly, with respect to the Oxford royalty, am I correct in assuming that this is more for Ryan, that the sliding scale is the same, which is basically for every $100 increase in gold price, the royalty increases by 125 basis point? And then do we have a question on Goldfield after that?

David Hendriks
David Hendriks
EVP & COO at Centerra Gold

Well, I'll go ahead and talk about the Mount Milligan piece. One thing that's pretty important is we're actually mining above the average grade of the deposit as we speak right now over at Mount Milligan. So what had happened was is there was an area that was meant to be a higher grade plum that did not work out the way we expected. So that's been, as I say, the drilling that has been done and is in the middle of being done, which will all be part of the PFS, we're pretty confident that we have a very good handle on what's going to happen for the next few years. I don't want to give you something that's six weeks early.

David Hendriks
David Hendriks
EVP & COO at Centerra Gold

I'll wait till the PFS comes out to give you the real numbers and everything else. But as Paul had commented, you can expect our revised guidance number is probably pretty appropriate for the next couple of years.

Ryan Snyder
Ryan Snyder
EVP & CFO at Centerra Gold

And then on Oksut, Raj, yes, they've updated the royalty table and just given where gold prices have gone versus what was there before. The old royalty table stopped at 2,100. So at the 2,100 gold price, that was the max royalty, which was 18.75% in Turkey. And I think we get a 40% reduction in that because we process our material in country. What they've done is expand that table all the way up to 5,100 just to take into account where gold may go.

Ryan Snyder
Ryan Snyder
EVP & CFO at Centerra Gold

Because of these larger numbers, it's now moving up every $300 adds 125 basis points prior to our reduction. And so yes, we're in a different world now. At the gold price we're in today, it's about a 22.5% royalty, and we get the 40% reduction. So the scale is increased in terms of how far up it can go, but it doesn't move with every $100 increment in gold anymore.

Raj Ray
Raj Ray
MD - Metals & Mining Research at BMO Capital Markets

Okay. That's great, Ryan. Thank you. And Paul, this is a question more for you. I'm trying to understand the strategic rationale behind going ahead with Goldfield.

Raj Ray
Raj Ray
MD - Metals & Mining Research at BMO Capital Markets

I mean, I understand the 30% after tax IRR, the NPV, the high growth price improvement and recovery. But like if I look at it, if I look at your capital allocation, how does this stack up against dividends and share buybacks over the next two to three years? Because the way I look at it, the free cash flow that you're going to generate over the next three years is pretty much going to be going back into building Goldfield for a project that not of great scale, at least at this point. And then there's a number of other projects you're looking at the same time. So is there a risk you might be stretched from a bench strength point of view? So can you comment on that?

Paul Tomory
Paul Tomory
President, CEO & Director at Centerra Gold

Yes, think it's a talent and a financial question in there. Certainly from a bench strength point of view, we've been building the internal capacity to operate and to build projects. We've significantly expanded our projects team. A number of the team have significant experience with Nevada heap leach projects. So from a talent point of view, we feel confident our ability to execute on Goldfield.

Paul Tomory
Paul Tomory
President, CEO & Director at Centerra Gold

But I think your bigger question here is on returns and liquidity. As you pointed out, it's a high IRR on Goldfield and that's at the consensus gold price at the higher gold prices, it's a much more significant return. But I stress here, our project development pipeline, Chemes, Milligan, Thompson Creek and Goldfield, we can fund that with existing liquidity while continuing our buyback program. This is a really important point I want to stress. We believe our shares remain a very compelling value proposition for our cash.

Paul Tomory
Paul Tomory
President, CEO & Director at Centerra Gold

We will continue to buy back and we believe it is appropriate to add gold exposure into the portfolio through Goldfield as another way to allocate our capital. So we believe that the returns are strong in the buyback and we also want to be strategically increasing our gold exposure.

Raj Ray
Raj Ray
MD - Metals & Mining Research at BMO Capital Markets

Thanks Paul. That's it for me.

Paul Tomory
Paul Tomory
President, CEO & Director at Centerra Gold

Thank you.

Operator

And the next question comes from Luke Bertuzzi with CIBC World Markets. Please proceed.

Paul Tomory
Paul Tomory
President, CEO & Director at Centerra Gold

Hi, Paul

Luke Bertozzi
Analyst at CIBC Capital Markets

and team. Thanks for taking my questions. Most of my questions have been answered at this point. Overall, think it's a great decision you guys are going ahead with Gold Fields to bridge the production gap after Oksut. Just curious, how does this change your thinking around M and A?

Paul Tomory
Paul Tomory
President, CEO & Director at Centerra Gold

So we have the makings of what we think is an attractive go forward production profile. We're still working on some of the components, meaning Milligan mine life extension, what does Chem S look like. But by the end of this year, that picture will come into tighter focus. So we believe we have a strong organic potential suite of assets that will have multi decades of potential. And that's what we're aiming for on our organic projects.

Paul Tomory
Paul Tomory
President, CEO & Director at Centerra Gold

So principally speaking, we don't really need to do substantive M and A. And certainly, with our shares trading where they are, we have zero intention of doing share based M and A. So to the extent that we would consider M and A, it would be modest, it would be bolt on or and cash based, something that is a complement to that which we have internally, as example, by some of the equity investments we've made or other for example, Thesis being a proximal asset to ChemF. So we look at things that might be geographically synergistic in the sequencing of capital spend and project development. But largely speaking, any M and A we consider and I'll repeat this, wouldn't endanger our ability to fund our projects organically.

Paul Tomory
Paul Tomory
President, CEO & Director at Centerra Gold

We don't intend to go back to the market for cash. And it would be cash based, modest in scale and something that fits in strategically with our production profile. So we're not going be doing big share based M and A.

Luke Bertozzi
Analyst at CIBC Capital Markets

Perfect. Thanks for the clarity on that. That's all for me. Have a good one, guys.

Operator

And the next question is a follow-up from Lawson Winder with Bank of America Securities. Please proceed.

Lawson Winder
Lawson Winder
Director & Equity Research Analyst - Metals & Mining at Bank of America

Yes. Thanks again, operator, Paul and Tim. Thank you for taking a follow-up for me. I just I wanted to ask again about Mount Milligan, just as you're considering the expanded resource. Do you with the new resource that you're considering for this the PFS coming up in September, do you get to a point where there is parts of the resource that are excluded from the Royal Gold stream?

Lawson Winder
Lawson Winder
Director & Equity Research Analyst - Metals & Mining at Bank of America

Or if not in this study, is there a path to kind of getting outside of that area of influence?

Paul Tomory
Paul Tomory
President, CEO & Director at Centerra Gold

No. The Royal Gold, their area I mean, there's an area that is not subject to them, but it's so far away that it's not we're not we're very unlikely to be mining in those areas. But I will remind you that we have the amended streaming agreement with Royal Gold. We're in two steps, the terms improved. Our broad vision for Mount Milligan is we as you know, we have the ten eleven year reserve right now, it's 2,036.

Paul Tomory
Paul Tomory
President, CEO & Director at Centerra Gold

We intend to add, give or take a decade of production here with this PFS, while continuing significant exploration to the Southwest and to the West. We continue to encounter encouraging results, continuity of mineralization, both at depth and near surface. So our perspective or at least our objective is to continue to add inventory beyond the life of the PFS for a potential third decade. Now work remains to be done there, but the mineralization shows strong continuity, and we're very optimistic about what we might find beyond the scope of the PFS. But the simple answer to your question is everything I've just mentioned will be subject to the Royal Gold Stream.

Lawson Winder
Lawson Winder
Director & Equity Research Analyst - Metals & Mining at Bank of America

Okay. Thank you very much, Paul. And guys enjoy the rest of your summers.

Paul Tomory
Paul Tomory
President, CEO & Director at Centerra Gold

Yes. Talk soon. Thanks, Lawson.

Operator

And at this time, this concludes the question and answer session and today's conference call. You may now disconnect your lines. Thank you for attending and participating in today's call and have a pleasant day.

Executives
    • Lisa Wilkinson
      Lisa Wilkinson
      VP - IR & Corporate Communications
    • Paul Tomory
      Paul Tomory
      President, CEO & Director
    • David Hendriks
      David Hendriks
      EVP & COO
    • Ryan Snyder
      Ryan Snyder
      EVP & CFO
Analysts
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