Rising Global Gold Demand And De-Dollarization Will Expand Production

Key Takeaways

• Expansion and optimization of existing operations, along with scalable U.S. assets, could drive substantial growth in production, earnings, and shareholder value.
  
• Strong cash reserves and industry-leading ESG commitment support both self-funded growth and potential market outperformance amid evolving global gold demand and responsible mining standards.
  
• Tightening ESG regulations, rising operating costs, and declining gold demand challenge Centerra Gold's profitability, reserve stability, and ability to attract and retain investors.

Catalysts

Engages in the acquisition, exploration, development, and operation of gold and copper properties in North America, Turkey, and internationally.

• While analysts broadly agree that Mount Milligan's prefeasibility study and drilling program could moderately extend mine life and boost reserves, the extensive tailings capacity evaluation and throughput increase under consideration could enable a step-change in annual output-potentially raising production and revenues by more than current expectations.
  
• Analyst consensus sees ramp-up at Thompson Creek and Langeloth as increasing production, but a successful restart and rapid scaling-combined with robust U.S. steel sector demand-could transform these assets into significant cash flow drivers, materially expanding future net earnings and margin contributions beyond what is modeled.
  
• Centerra's strong cash position and stated intention to fund all major growth projects with existing liquidity sets up the company not only to self-finance Mount Milligan, Kemess, and Thompson Creek, but also to aggressively repurchase shares, which could accelerate EPS growth and shareholder value if gold prices keep rising amid global geopolitical uncertainty.
  
• The company's strategic brownfield focus-leveraging existing infrastructure at Kemess and pursuing regional synergies with neighboring deposits-could unlock meaningful low-cost production capacity, supporting multi-year revenue growth and improved operating leverage as global central banks continue buying gold, stabilizing and potentially increasing prices.
  
• Heightened global standards for responsible mining and Centerra's ongoing ESG leadership position the company to capture outsize market share and possibly command premium pricing, helping to defend and expand net margins as the mining industry consolidates and sustainable gold becomes a more valuable asset class.

Centerra Gold Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Centerra Gold compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Centerra Gold's revenue will grow by 9.1% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 3.7% today to 23.8% in 3 years time.
• The bullish analysts expect earnings to reach $374.1 million (and earnings per share of $1.69) by about July 2028, up from $44.4 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 6.8x on those 2028 earnings, down from 34.7x today. This future PE is lower than the current PE for the CA Metals and Mining industry at 17.2x.
• Analysts expect the number of shares outstanding to decline by 2.43% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.58%, as per the Simply Wall St company report.

Centerra Gold Future Earnings Per Share Growth

Risks

• Centerra Gold faces significant long-term regulatory risk as global ESG standards tighten and environmental permitting becomes more stringent, which could increase operating costs and delay project timelines, ultimately putting sustained pressure on net margins and future earnings growth.
  
• The company's core gold business is exposed to declining long-term demand due to both the global energy transition reducing investor focus on traditional hedges like gold, and potential substitution from digital assets or new technologies, which could drive lower average realized prices and depress revenue over time.
  
• Reserve depletion and replacement remain ongoing challenges, highlighted by Mount Milligan's production variability and the shift of Kemess resources to a higher proportion of inferred grades, indicating continued pressure on maintaining or growing gold and copper output to support future revenue streams.
  
• Operating costs are increasing at Centerra's legacy mines, with first quarter all-in sustaining costs rising at both Mount Milligan and Oksut due to lower grades, higher sustaining capital expenditures, and weather-related disruptions, signaling future cost pressures that could further compress profit margins if not offset by higher commodity prices.
  
• Demographic shifts and changing investor priorities toward ESG-aligned investments may amplify Centerra's cost of capital and limit its ability to attract long-term shareholders, contributing to volatility in its share price and higher financing costs for ongoing and future projects.

Valuation

• The assumed bullish price target for Centerra Gold is CA$14.9, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Centerra Gold's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of CA$14.9, and the most bearish reporting a price target of just CA$8.92.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $1.6 billion, earnings will come to $374.1 million, and it would be trading on a PE ratio of 6.8x, assuming you use a discount rate of 6.6%.
  
• Given the current share price of CA$10.14, the bullish analyst price target of CA$14.9 is 32.0% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.