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Centerra Gold Reports Fourth Quarter Earnings Per Share of $0.09

Posted on: Tuesday, 31 January 2006, 12:00 CST

Successful Exploration Program Results in 2.7 Million Ounces of New Reserves

(All figures are in United States dollars)

Centerra Gold Inc. (TSX:CG) today reported net earnings of $6.4 million ($0.09 per common share) in the fourth quarter of 2005, based on revenues of $75 million. Cash provided by operations, net of working capital changes and other operating items was $4.8 million. Earnings and cashflow were negatively affected during the quarter by a deferral of a gold shipment as well as the build up of accounts receivable from a gold shipment at Boroo for which payment was received in January 2006. Also during the fourth quarter of 2005, gold production was 166,704 ounces and cash costs were $300 per ounce. In the fourth quarter of 2004, Centerra reported net earnings of $14.9 million ($0.21 per common share), cash from operations of $25 million and revenues of $87.7 million. In the same period, gold production was 205,274 ounces at an average cash cost of $237 per ounce.

For the 12 months ended December 31, 2005, Centerra generated net earnings of $42.4 million (or $0.59 per common share) compared to $50.6 million (or $0.91 per common share) in 2004. Cash provided by operations was $83.4 million in 2005 compared to $88.5 million in 2004. Revenues were $338.6 million compared to $247.1 in 2004. Centerra's share of gold production reached a record 787,275 ounces in 2005 compared to 640,779 ounces in 2004. Cash costs increased to $241 per ounce from $187 per ounce in 2004.

2005 Highlights

- Centerra's reserves totaled 6.2 million ounces of contained gold at the end of 2005, on a 100% project basis (Centerra's share is 6.1 million ounces), an increase of 2.7 million ounces from the end of 2004, before mining of 917,000 ounces of contained gold in 2005.

- Measured and indicated resources at the end of 2005 totaled 6.3 million ounces of contained gold on a 100% project basis (Centerra's share is 5.8 million ounces), an increase of 2.5 million ounces over 2004.

- These reserves additions result in almost three years of additional mine life at Kumtor and one year at Boroo.

- The Gatsuurt feasibility study was completed with the potential to significantly extend the life of the Boroo assets.

- An updated life-of-mine plan has Centerra's gold production exceeding one million ounces in 2009.

- In 2005, Centerra spent $25.5 million on exploration.

- Strong cash flow provided by operations in 2005 resulted in cash on hand of $202 million; Centerra continues to be hedge and debt-free.

- At Kumtor, capital was committed for the purchase of larger, more productive haulage trucks and mine shovels.

Commentary

"2005 was a very good year for Centerra thanks to strong fundamentals in the gold market, solid financial and operating performance and excellent results from our exploration initiatives" said Len Homeniuk, President and CEO. "In fact, based on updated estimates, Centerra's annual gold production is expected to exceed one million ounces in 2009. This is a good time to be in the gold business and we are very excited about our prospects for sustainable growth."

Financial Summary

Centerra Gold became a public company on June 30, 2004. The prior year production and financial figures shown throughout reflect Centerra's ownership interest in Kumtor and Boroo are as follows: a 33% interest in Kumtor until June 22, 2004 and 100% thereafter and a 100% interest in Boroo since commercial production commenced on March 31, 2004. This increase in ownership since 2004 was a significant factor in the higher production and revenue recognized in 2005.

Centerra's share of production at the Kumtor and Boroo mines was 166,704 ounces poured for the fourth quarter of 2005 and a record 787,275 ounces for the full year of 2005. This compares with 205,274 and 640,779 ounces for the fourth quarter of 2004 and full year of 2004 respectively. Lower production in the fourth quarter of 2005 was primarily the result of lower average ore grade at Kumtor.

Revenues for the fourth quarter of 2005 declined 14.5% to $75.0 million from $87.7 million during the same period one year ago. For the full year 2005, revenues increased 37% to $338.6 million from $247.1 million in 2004. The year-over-year decline in fourth quarter revenue was due to the grade related reduction in ounces produced at the Kumtor mine, partially offset by a higher average realized gold price ($476 per ounce in the fourth quarter of 2005 versus $430 per ounce in the fourth quarter of 2004).

For the full year of 2005, the average realized gold price improved by 9% to $433 per ounce from $397 per ounce for the full year of 2004.

Centerra's total cash cost per ounce of gold in 2005 was $300 for the fourth quarter and $241 for the year. Comparative cash costs in 2004 were $237 for the fourth quarter and $187 for the year. The year-over-year increases in unit cash costs were due to lower ore grade and production at Kumtor and higher costs of labour, taxes and consumables at both mines. (Total cash cost is a non-GAAP measure and is discussed under "Non-GAAP Measure - Total Cash Cost" below.)

Net earnings totaled $6.4 million or $0.09 per share in the fourth quarter of 2005 and $42.4 ($0.59 per share) for the 12 months of 2005. The comparative results for 2004 were $14.9 million or $0.21 per share for the fourth quarter and $50.6 million or $0.91 per share for the entire year.

In 2005, the Company generated $83.4 million in cash from operations of which $4.8 million was generated in the fourth quarter. This compares with 2004 results of $88.5 million in cash from operations for the year and $25 million in the fourth quarter. Cash generated from operations was lower during the fourth quarter of 2005 due primarily to a build up in working capital inventory related to the deferral of a gold shipment as a result of maintenance at the Kyrgyzaltyn refinery, as well as a build up of accounts receivable due to a late shipment at Boroo, which was paid in January 2006.

Sustaining capital expenditures in 2005 amounted to $15 million. Centerra's cash position stood at $202 million at the end of 2005. The Company has no debt or gold hedge positions.

Reserves and Resources Update

In a separate news release dated January 23, 2006, Centerra issued an updated estimate of the resources and reserves at its operating mines and advanced projects. Also included was an update on its drilling activities at the Kumtor pit. Complete listings of these results and relevant maps are available on the Company's website at:

cnrp.ccnmatthews.com/client/centerra/release.jsp?actionFor=576967&rele aseSeq=0&year=2006 (Due to the length of the URL it may be necessary to copy and paste it into your web browser)

www.centerragold.com/properties/exploration_update_January_2006

At the Kumtor mine 2.3 million ounces of reserves have been added, before the mining of 614,000 ounces of contained gold in 2005, with almost all of this addition being the result of drilling at the SB Zone at the south end of the currently operating pit. Reserve grade has also increased by 18% from 3.3 g/t to 3.8 g/t gold due to the higher grade mineralization being delineated in the SB Zone. At the Boroo mine 349,000 ounces of reserves have been added, which replaces reserves mined in 2005. Additionally, 2.5 million ounces of measured and indicated resources have been added to Centerra's resource base.

As of December 31, 2005, on a 100% project basis, Centerra's proven and probable reserves totaled 6.2 million ounces of contained gold (Centerra's share is 6.1 million ounces), which includes an increase of 2.7 million ounces offset by 917,000 ounces mined in 2005.

As of December 31, 2005, on a 100% project basis, Centerra's measured and indicated resources totaled 6.3 million ounces of contained gold (Centerra's share is 5.8 million ounces), which includes an increase of 2.5 million ounces over the December 31, 2004 figures.

The Gatsuurt resource base has been significantly expanded by recent drilling programs on the main zone. A feasibility study was completed in 2005. The preferred option, supported by the study, is to modify the existing Boroo facility by adding a bio-oxidation (BIOX) circuit and processing the refractory material from Gatsuurt at the modified facility following depletion of the Boroo reserves. This has the potential to significantly extend the life of the Boroo facility. Further analysis to optimize the project is continuing.

Outlook - Five Year Forecast Based on Revised Life-of-Mine Plan

Centerra has substantially increased reserves at the Kumtor and Boroo mines since its initial public offering (IPO) in June 2004. In the one and one-half years since the IPO, reserves at Kumtor have increased by 3.1 million ounces, Boroo by 600,000 ounces and the Gatsuurt project has been progressed significantly. These significant exploration results gives rise to updated life-of-mine production data for Kumtor and Boroo, the next five years of which are summarized below. The full life-of-mine data can be found on Centerra's website at:

http://www.centerragold.com/media/pdf/properties/kumtor/life_of_mine_k umtor.pdf

Centerra's gold production in 2009 is now forecast to exceed the one million ounce per year threshold.

Q1 Five Year Annual Forecast 2006 2006 2007 2008 2009 2010 --------------------------------------------- Kumtor Oz Poured 000's 101 461 533 673 843 764 Total Cash cost (1) $ 384 $ 347 Boroo Oz Poured 000's (2) 64 268 256 219 195 93 Total Cash cost (1) $ 221 $ 203 Consolidated 162 716 776 882 1,028 852 Consolidated Total Cash Cost (1) $ 321 $ 294 (1) Per ounce Total Cash Cost is a Non-GAAP measure and is discussed under "Non-GAAP Measure - Total Cash Cost". (2) Centerra's share of Boroo's production is 95%.

Centerra has committed to capital spending of $103 million for 2006. This includes $87 million of growth capital related to the addition of larger, more productive haulage trucks and shovels as well as other support and auxiliary equipment and infrastructure in support of the increase of mine life at Kumtor. The delivery of the new fleet will be largely completed by year-end 2006. On a life-of-mine basis this capital spending represents $18 per reserve ounce, when amortized over the remaining life of the mine. The remaining $16 million of capital spending is for maintenance capital at both mine sites.

The foregoing life-of-mine information is forward-looking information that involves risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by such forward-looking information. See below under "About Centerra" for a further discussion of the factors that could cause actual results to differ materially.

The life-of-mine information is based on the 2005 year-end reserves estimates, which were estimated using a gold price of US$400, and the implementation of the Company's expenditure plan to replace its mining fleet and related equipment and infrastructure.

About Centerra

Centerra is a growth-oriented gold company focused on acquiring, exploring, developing and operating gold properties primarily in Central Asia, the former Soviet Union and other emerging markets. Centerra's shares trade on the Toronto Stock Exchange (TSX) under the symbol CG. The Company is based in Toronto, Canada.

Statements contained in this news release, including those under the headings "Outlook -- Revised Five Year Forecast Based on Life-of-Mine Plan", which are not historical facts are forward-looking statements that involve risks, uncertainties and other factors that could cause actual results, performance, prospects and opportunities to differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results or events to differ materially from current expectations include, among other things: volatility and sensitivity to market prices for gold; replacement of reserves; procurement of required capital equipment and operating parts and supplies; equipment failure; unexpected geological or hydrological conditions; political risks arising from operating in certain developing countries; imprecision in reserve estimates; success of future exploration and development initiatives; competition; operating performance of the facilities; environmental and safety risks including increased regulatory burdens; seismic activity, weather and other natural phenomena; failure to obtain necessary permits and approvals from government authorities; changes in government regulations and policies including tax and trade laws and policies; ability to maintain and further improve positive labour relations; and other development and operating risks.

Reserve and resource figures included are estimates and no assurances can be given that the indicated levels of gold will be produced or that Centerra will receive the gold price assumed in determining its reserves. Such estimates are expressions of judgment based on knowledge, mining experience, analysis of drilling results and industry practices. Valid estimates made at a given time may significantly change when new information becomes available. While Centerra believes that the reserve and resource estimates included are well established and the best estimates of Centerra's management, by their nature reserve and resource estimates are imprecise and depend, to a certain extent, upon statistical inferences which may ultimately prove unreliable. Furthermore, market price fluctuations in gold, as well as increased capital or production costs or reduced recovery rates may render ore reserves containing lower grades of mineralization uneconomic and may ultimately result in a restatement of reserves. The extent to which resources may ultimately be reclassified as proven or probable reserves is dependent upon the demonstration of their profitable recovery. The evaluation of reserves or resources is always influenced by economic and technological factors, which may change over time.

Resources figures included herein have not been adjusted in consideration of these risks and, therefore, no assurances can be given that any resource estimate will ultimately be reclassified as proven or probable reserves.

If Centerra's reserve or resource estimates for its gold properties are inaccurate or are reduced in the future, this could have an adverse impact on Centerra's future cash flows, earnings, results of operations and financial condition.

Centerra estimates the future mine life of its operations. No assurance can be given that mine life estimates will be achieved. Failure to achieve these estimates could have an adverse impact on Centerra's future cash flows, earnings, results of operations and financial condition.

Mineral resources are not mineral reserves, and do not have demonstrated economic viability, but do have reasonable prospects for economic extraction. Measured and indicated resources are sufficiently well defined to allow geological and grade continuity to be reasonably assumed and permit the application of technical and economic parameters in assessing the economic viability of the resource. Inferred resources are estimated on limited information not sufficient to verify geological and grade continuity or to allow technical and economic parameters to be applied. Inferred resources are too speculative geologically to have economic considerations applied to them to enable them to be categorized as mineral reserves as there is no certainty that mineral resources can be upgraded to mineral reserves through continued exploration. Centerra Gold reports its reserves and resources separately.

Although Centerra believes that the assumptions inherent in the forward-looking statements are reasonable, undue reliance should not be placed on these statements, which only apply as of the date of this report. Centerra disclaims any intention or obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Qualified Person

Robert S. Chapman, P. Geo., Centerra's Director, Mergers & Acquisitions, who is a Qualified Person for the purpose of National Instrument 43-101 is the person responsible for the preparation of the technical information in this news release and related exploration results on Centerra's website.

Conference Call

Centerra invites you to join its third-quarter conference call on Tuesday January 31, 2006 at 2:00 pm Eastern time. The call is open to all investors and the media. To join the call, please dial (416) 620-9644 or (1-877) 871-4106 (Canada and U.S.). Alternatively, an audio feed will be available on www.centerragold.com. A recorded version of the call will be available on www.centerragold.com shortly after the call and via telephone until midnight on Tuesday, February 7, 2006 by calling (416) 626-4100 or (1-800) 558-5253 and using pass code 21281533.

Additional information on Centerra is available on the Company's web site at: www.centerragold.com and at SEDAR at www.sedar.com.

Management's Discussion and Analysis

The following discussion of the financial condition and results of operations of Centerra Gold Inc. (Centerra or the Company) for the three and twelve months ended December 31, 2005 should be read in conjunction with the unaudited consolidated financial statements and the notes of the Company for the period ended December 31, 2005, as well as the audited consolidated financial statements for the company for the year ended December 31, 2004 and management's discussion and analysis of the audited statements, both of which are included in the 2004 Annual Report. The financial statements of Centerra are prepared in accordance with Canadian generally accepted accounting principles (GAAP) and, unless otherwise specified, all figures are in United States dollars. The company's 2004 Annual Report and the Annual Information Form are available at www.centerragold.com and on SEDAR at www.sedar.com.

Caution Regarding Forward-Looking Statements

Statements contained herein, including those under the heading "Outlook", which are not historical facts are forward-looking statements that involve risks, uncertainties and other factors that could cause actual results, performance, prospects and opportunities to differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results or events to differ materially from current expectations include, among other things: volatility and sensitivity to market prices for gold; replacement of reserves; procurement of required capital equipment and operating parts and supplies, equipment failure; unexpected geological or hydrological conditions; political risks arising from operating in certain developing countries; imprecision in reserve estimates; success of future exploration and development initiatives; competition; operating performance of the facilities; environmental and safety risks including increased regulatory burdens; seismic activity, weather and other natural phenomena; failure to obtain necessary permits and approvals from government authorities; changes in government regulations and policies; including tax and trade laws and policies; ability to maintain and further improve positive labour relations; and other development and operating risks.

Reserve and resource figures included are estimates and no assurances can be given that the indicated levels of gold will be produced or that Centerra will receive the gold price assumed in determining its reserves. Such estimates are expressions of judgment based on knowledge, mining experience, analysis of drilling results and industry practices. Valid estimates made at a given time may significantly change when new information becomes available. While Centerra believes that the reserve and resource estimates included are well established and the best estimates of Centerra's management, by their nature reserve and resource estimates are imprecise and depend, to a certain extent, upon statistical inferences which may ultimately prove unreliable.

Furthermore, market price fluctuations in gold, as well as increased capital or production costs or reduced recovery rates may render ore reserves containing lower grades of mineralization uneconomic and may ultimately result in a restatement of reserves. The extent to which resources may ultimately be reclassified as proven or probable reserves is dependent upon the demonstration of their profitable recovery. The evaluation of reserves or resources is always influenced by economic and technological factors, which may change over time.

Resources figures included herein have not been adjusted in consideration of these risks and, therefore, no assurances can be given that any resource estimate will ultimately be reclassified as proven or probable reserves.

If Centerra's reserve or resource estimates for its gold properties are inaccurate or are reduced in the future, this could have an adverse impact on Centerra's future cash flows, earnings, results of operations and financial condition.

Centerra estimates the future mine life of its operations. No assurance can be given that mine life estimates will be achieved. Failure to achieve these estimates could have an adverse impact on Centerra's future cash flows, earnings, results of operations and financial condition.

Although Centerra believes that the assumptions inherent in the forward-looking statements are reasonable, undue reliance should not be placed on these statements, which only apply as of the date of this report. Centerra disclaims any intention or obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Mineral resources are not mineral reserves, and do not have demonstrated economic viability, but do have reasonable prospects for economic extraction. Measured and indicated resources are sufficiently well defined to allow geological and grade continuity to be reasonably assumed and permit the application of technical and economic parameters in assessing the economic viability of the resource. Inferred resources are estimated on limited information not sufficient to verify geological and grade continuity or to allow technical and economic parameters to be applied. Inferred resources are too speculative geologically to have economic considerations applied to them to enable them to be categorized as mineral reserves as there is no certainty that mineral resources can be upgraded to mineral reserves through continued exploration.

Consolidated Financial Results

For accounting purposes, Centerra's consolidated financial results for the three and twelve months ended December 31, 2005 reflect fully consolidated interests in the Kumtor and Boroo mines, a 62% interest in REN and a 100% interest in Gatsuurt.

Highlights - Centerra --------------------------------------------------------------------- Three months ended Twelve months ended December 31 December 31 --------------------------------------------------------------------- Financial Highlights 2005 2004 2005 2004 --------------------------------------------------------------------- Revenue - $ millions 75.0 87.7 338.6 247.1 --------------------------------------------------------------------- Gross profit - $ millions (1) 19.9 25.3 92.5 83.4 --------------------------------------------------------------------- Net earnings - $ millions 6.4 14.9 42.4 50.6 --------------------------------------------------------------------- Cash provided from operations - $ millions 4.8 25.0 83.4 88.5 --------------------------------------------------------------------- Sales volume - ounces (2) 157,665 204,089 781,274 618,843 --------------------------------------------------------------------- Ounces poured (2) 166,704 205,274 787,275 640,779 --------------------------------------------------------------------- Average realized price - $/oz (3) 476 430 433 397 --------------------------------------------------------------------- Gold spot market price - $/oz - average for period 485 434 445 409 --------------------------------------------------------------------- Total cash cost - $/oz (4) 300 237 241 187 --------------------------------------------------------------------- Earnings per common share - $ - basic and diluted 0.09 0.21 0.59 0.91 --------------------------------------------------------------------- Weighted average shares outstanding - basic - (thousands) 72,080 72,080 72,080 55,604 --------------------------------------------------------------------- (1) Gross profit is defined as total revenues less cost of sales and depreciation, depletion and reclamation. (2) Comprising one-third of Kumtor to June 22, 2004 and 100% thereafter, and 100% of Boroo from March 1, 2004. (3) Net of the effect of gold hedges, closed in 2004. (4) Total cash cost is a non-GAAP measure and is discussed under "Non-GAAP Measure - Total Cash Cost".

Fourth Quarter Results

Gold Production and Revenue

Fourth quarter revenue in 2005 was $75.0 million compared to $87.7 million in the same quarter last year. Production decreased to 166,704 ounces in the fourth quarter of 2005 from 205,274 ounces reported in the fourth quarter of 2004 mainly as a result of lower ore grade at Kumtor.

Centerra realized an average gold price of $476 per ounce for the fourth quarter of 2005 (including the amortization of $1.1 million of deferred charges), a significant increase over the $430 per ounce realized in the same quarter in 2004. This increase was due to higher spot gold prices that averaged $485 per ounce in the fourth quarter of 2005, compared to $434 per ounce in the prior year quarter.

Centerra's gold production is unhedged. The impact of prior closures of hedge position's is discussed below under "Gold Hedging".

Cost of Sales

Cost of sales in the quarter remained virtually unchanged year over year at $43 million, reflecting higher mine production and mill throughput at Boroo and the higher cost of labour, taxes, and consumables. On a unit basis, the total cash cost per ounce was $300, up from $237 in 2004, mostly due to lower gold production at Kumtor related to the lower ore grade in 2005.

Depreciation, Depletion and Reclamation

Depreciation, depletion and reclamation decreased to $12.3 million in the fourth quarter of 2005 from $20.4 million in the prior year quarter mainly due to the lower production at Kumtor. On a per unit basis, depreciation and amortization for the fourth quarter of 2005 was $78 per ounce sold compared to $100 per ounce sold in the fourth quarter of 2004, reflecting the addition of the reserves announced in January 2005.

Exploration & Business Development

Exploration and business development costs of $8.5 million in the fourth quarter of 2005 increased from $7.4 million in the fourth quarter of 2004 and reflect the continuation of an enhanced drilling program in support of the Company's growth objective to increase reserves at and around its existing mines as well as investment in growth initiatives including the Gatsuurt feasibility study.

Interest and Other

Interest and other expenses resulted in a net recovery of $1.1 million in the fourth quarter of 2005 reflecting interest earned of $1.7 million on the Company's cash and short term investments, partially offset by a foreign exchange loss of $0.6 million. The comparable amount in the fourth quarter of 2004 was a net recovery of $2.8 million representing a foreign exchange gain on Centerra's Canadian dollar cash balance combined with interest earned on cash and short term investments. The Company has no outstanding interest-bearing debt.

Administration

Administration costs for the fourth quarter of 2005 were $6.0 million compared to $5.9 million in the same period last year.

Income Tax

The tax recovery of $0.7 million in the fourth quarter of 2005 ($0.8 million recovery in fourth quarter 2004), includes the recognition of a $1.6 million reversal of a valuation allowance on Boroo's capital assets, related to the new life of mine plan

Net Earnings

Net earnings for the fourth quarter of 2005 were $6.4 million or $0.09 per share compared to $14.9 million or $0.21 per share for the same period in 2004. This decrease reflects lower production levels at Kumtor and an increase in administration and operating costs, including labour, taxes and consumables.

Liquidity and Capital Resources

Cash provided from operations was $4.8 million for the fourth quarter of 2005 compared to $25.0 million for the prior year fourth quarter. The decrease was mainly due to the lower production levels and an increase in working capital resulting from the timing of shipments and payments.

Cash used in investing activities in the fourth quarter of 2005 was $14.7 million for capital spending, compared to a total $4.3 million in the same quarter of 2004. In the fourth quarter of 2005, $4.5 million was spent on maintenance projects while $10.1 million was spent on growth projects.

Cash on hand was $202 million at the end of the fourth quarter of 2005, of which $48 million was held in Canadian dollars for anticipated Canadian dollar expenditures.

Centerra has sufficient cash to carry out its business plan in 2006.

Year-End Results

Revenue increased for the twelve months ended December 31, 2005 reflecting increased ownership at Kumtor and Boroo, a full year of production at Boroo, and higher spot gold prices. Net earnings were down year over year, primarily due to the lower grade and production at Kumtor, during the second half of the year and the higher cost of labour, taxes, and consumables.

Revenue for the twelve months of 2005 was $338.6 million compared to $247.1 million in the same period in 2004. Average realized prices were $433 per ounce in 2005 compared to $397 in 2004. Net earnings for the twelve months ended 2005, decreased to $42.4 million ($0.59 per share) compared to $50.6 million ($0.91 per share) in 2004 reflecting lower grades and production, and higher costs which were partially offset by higher realized gold prices in 2005.

Cash flow from operations for the twelve months of 2005 was $83.4 million compared to $88.5 million in the previous year. This change is primarily the result of increased working capital levels.

Share Capital

As of December 31, 2005, Centerra had 72,079,605 common shares outstanding and 200,183 share options outstanding under its stock option plans.

Gold Hedges

The deferred charges, net of deferred revenue, related to the closing of the gold hedges in 2004, will be recognized in future periods. During the fourth quarter of 2005, $1.1 million of these deferred charges were recorded in the income statement.

--------------------------------------------------------------------- $ millions Total --------------------------------------------------------------------- Balance as at December 31, 2004 8.2 --------------------------------------------------------------------- Amortized in 2005 (5.4) --------------------------------------------------------------------- Balance as at December 31, 2005 2.8 ---------------------------------------------------------------------

At December 31, 2005, deferred charges on the balance sheet totaled $2.8 million and are expected to be amortized as follows:

Recognition of Deferred Charges (Net of Deferred Revenue) --------------------------------------------------------------------- $ millions Q1 Q2 Q3 Q4 Total --------------------------------------------------------------------- 2006 1.9 (0.6) 0.4 0.6 2.3 --------------------------------------------------------------------- 2007 0.5 -- -- -- 0.5 --------------------------------------------------------------------- Total 2.8 ---------------------------------------------------------------------

Market Update

During the fourth quarter of 2005, the spot market gold price reached a high of $537 per ounce and closed the period at $513 per ounce. For the three months ended December 31, 2005, the spot market gold price averaged $485.

Mine Operations

Operating and financial results of the Kumtor and Boroo mines are shown on a 100% basis. With the completion of the Kumtor restructuring and the acquisition of the AGR minority interest in the second quarter of 2004, Centerra owns 100% of Kumtor and 95% of Boroo.

Kumtor - 100% Basis

The Kumtor open pit mine, located in the Kyrgyz Republic, is the largest gold mine in Central Asia operated by a Western-based producer. It has been operating since 1997 and has produced more than five and one-half million ounces. During the fourth quarter of 2005, Kumtor experienced no lost-time accidents. Through 2005, Kumtor experienced one lost time accident involving a company employee, and contractors experienced three lost time accidents. Kumtor had no reportable environmental spills during 2005.

--------------------------------------------------------------------- Three months ended Twelve months ended December 31 December 31 --------------------------------------------------------------------- Kumtor Operating Results 2005 2004 2005 2004 --------------------------------------------------------------------- Sales volume - ounces 87,333 136,646 498,086 632,788 --------------------------------------------------------------------- Revenue - $ millions (3) 40.7 57.2 213.8 240.9 --------------------------------------------------------------------- Average realized price - $/oz (3) 466 419 429 381 --------------------------------------------------------------------- Tonnes mined - 000s 20,862 21,618 81,038 84,855 --------------------------------------------------------------------- Tonnes ore mined - 000s 1,890 1,329 6,135 3,303 --------------------------------------------------------------------- Tonnes milled - 000s 1,425 1,383 5,649 5,654 --------------------------------------------------------------------- Average mill head grade - g/t (1) 2.77 4.0 3.38 4.4 --------------------------------------------------------------------- Recovery - % 77.6% 80.2% 81.2% 82.1% --------------------------------------------------------------------- Ounces recovered 98,368 141,882 497,497 657,523 --------------------------------------------------------------------- Ounces poured 98,973 138,702 501,487 657,329 --------------------------------------------------------------------- Total cash costs - $/oz (2) 352 264 274 200 --------------------------------------------------------------------- Capital expenditures - $ millions 10.9 2.7 21.5 4.7 --------------------------------------------------------------------- (1) g/t means grams per tonne. (2) Total cash cost is a non-GAAP measure and is discussed under "Non-GAAP measure - Total cash cost". (3) Net of the effect of gold hedges, eliminated in 2004.

Revenue

Fourth quarter revenue in 2005 decreased to $40.7 million from $57.2 million in the fourth quarter of 2004 due to lower grades and production. This was partially offset by an increase in the average realized gold price to $466 per ounce in the fourth quarter of 2005 from $419 per ounce in the same period last year. Production was 98,973 poured ounces in the fourth quarter of 2005, 28% less than the same quarter in 2004, due to lower ore grades (an average of 2.77 g/t in the fourth quarter of 2005 compared to 4.0 g/t in the fourth quarter of 2004).

Revenue for the twelve months ended December 31, 2005 declined from the same period in 2004, reflecting reduced production, as a result of lower grades, partially offset by higher realized prices.

The higher average realized price for the three and twelve month periods was due to higher gold spot prices and the elimination of gold hedges in 2004.

Cost of Sales

The cost of sales for the fourth quarter of 2005 and twelve months ended December 31, 2005 was $28.5 million and $134.6 million, respectively, compared to $32.2 million and $122.5 million for the fourth quarter of 2005 and twelve months ended December 31, 2004.

Total cash costs per ounce increased to $352 in the fourth quarter of 2005 from $264 in the fourth quarter of 2004. Total unit cash costs for the twelve months ended December 31, 2005 increased to $274 compared to $200 for the twelve months ended December 31, 2004. These increases are primarily a result of a lower average grade fed to the mill and the higher cost of labour, taxes and consumables.

Exploration & Business Development

Exploration and business development expenditures totaled $4.0 million for the fourth quarter of 2005 and $14.6 million for the year ended December 31, 2005. The expenditures relate primarily to ongoing drilling in the immediate vicinity of the open pit, and the Sarytor Zones. See also the Company's news release of January 23, 2006.

Boroo - 100% Basis

The Boroo open pit gold mine in Mongolia began commercial production on March 1, 2004. The mine had no lost-time injuries in the fourth quarter and experienced two lost-time accidents during the year. Boroo had no reportable environmental spills during 2005.

--------------------------------------------------------------------- Three months ended Twelve months ended December 31 December 31 --------------------------------------------------------------------- Boroo Operating Results 2005 2004 2005 2004 --------------------------------------------------------------------- Sales volume - ounces (1) 70,332 67,443 283,188 217,679 --------------------------------------------------------------------- Revenue - $ millions (3) 34.3 30.5 124.8 87.9 --------------------------------------------------------------------- Average realized price - $/oz (3) 488 452 441 404 --------------------------------------------------------------------- Tonnes mined - 000s 4,705 3,688 18,582 13,656 --------------------------------------------------------------------- Tonnes ore mined - 000s 1,108 473 2,865 1,837 --------------------------------------------------------------------- Tonnes milled - 000s 589 504 2,231 1,849 --------------------------------------------------------------------- Average mill head grade (g/t) 3.85 4.50 4.23 4.50 --------------------------------------------------------------------- Recovery - % 90.8% 94.0% 91.5% 93.7% --------------------------------------------------------------------- Ounces recovered (1) 66,295 68,268 277,522 251,740 --------------------------------------------------------------------- Ounces poured (1) 67,731 66,572 285,788 217,998 --------------------------------------------------------------------- Total cash cost - $/oz (2) 223 181 183 149 --------------------------------------------------------------------- Capital expenditures - $ millions 3.1 1.6 11.4 7.1 --------------------------------------------------------------------- (1) Does not include pre-commissioning production or sales volumes for January and February 2004 of 27,703 ounces. (2) Total cash cost is a non-GAAP measure and is discussed under "Non-GAAP measure - Total cash cost". (3) Net of the effect of gold hedges, eliminated in 2004.

Revenue

Fourth quarter revenue increased to $34.3 million in 2005 from $30.5 million in the same period a year ago as a result of a higher realized gold price and higher production. Production was 67,731 poured ounces in the fourth quarter of 2005, up 2% from the fourth quarter of 2004 mostly due to higher throughput resulting from productivity improvements. These improvements offset lower ore grades (3.85 g/t in the fourth quarter of 2005 compared to 4.50 g/t in the fourth quarter of 2004).

Revenue for the twelve months ended December 31, 2005 was $124.8 million compared to $87.9 million in the same period of 2004, reflecting a higher realized price per ounce and increased production during the first full year of commercial operations.

Higher average realized prices for the fourth quarter of 2005 and the full year were due to higher gold prices realized and the elimination of gold hedges in 2004.

Cost of Sales

The cost of sales for the fourth quarter of 2005 and twelve months ended December 31, 2005 was $14.4 million and $51.6 million, respectively, compared to $9.8 million and $28.7 million in the fourth quarter and twelve months of 2005, reflecting the higher sales and production levels.

Total cash costs per ounce increased to $223 in the fourth quarter of 2005 compared to $181 in the same period in 2004. For the year ended December 31, 2005, total cash costs per ounce increased to $183 from $149 in the year ended December 31, 2004. The increase resulted from the scheduled rebuild of the mining fleet, and the higher cost of labour, taxes, and consumables.

Exploration & Business Development

Exploration and business development expenditures in Mongolia totaled $2.7 million in the fourth quarter of 2005. For the year ended December 31, 2005, $8.6 million was spent in Mongolia, of which $2.2 million was spent in the immediate mine area, $5.3 million was spent at Gatsuurt and $0.6 million was spent on Mongolian licenses. In a separate news release dated January 23, 2006, Centerra issued an updated estimate of the resources and reserves at its operating mines and advanced projects.

The Gatsuurt resource base has been significantly expanded by recent drilling programs on the main zone. A feasibility study was completed in 2005. The preferred option, supported by the study, is to modify the existing Boroo facility by adding a bio-oxidation (BIOX) circuit and processing the refractory material from Gatsuurt at the modified facility following depletion of the Boroo reserves. This has the potential to significantly extend the life of the Boroo facility. Further analysis to optimize the project is continuing.

Other Financial Information - Related Party Transactions

Cameco Corporation

Centerra and its subsidiaries maintain inter-company advances to and from Cameco Corporation ("Cameco") and several of its subsidiaries to fund operations. These advances, which are non-interest bearing and payable on demand, will be repaid in the ordinary course of business.

Effective April 1, 2004, Centerra entered into an administrative services agreement with Cameco whereby Cameco agreed to provide services and expertise to Centerra in return for reimbursement of all of its direct and indirect costs relating to these services.

As a result of the above items, the balance owing to Cameco at December 31, 2005 was $1.0 million with $0.2 million of services provided by Cameco during the fourth quarter of 2005 ($0.8 million of services for the twelve months ended December 31, 2005).

Kyrgyzaltyn and the Government of the Kyrgyz Republic

The table below summarizes 100% of the management fees, royalties and concession payments paid by the Kumtor Gold Company ("KGC") to Kyrgyzaltyn JSC ("Kyrgyzaltyn") or the Government of the Kyrgyz Republic and the amounts paid by Kyrgyzaltyn to KGC according to the terms of the Gold and Silver Sales Agreement between Kumtor Operating Company, Kyrgyzaltyn and the Government of the Kyrgyz Republic. For periods prior to the restructuring, the Centerra financial statements reflect one-third of the charges.

--------------------------------------------------------------------- $ thousands Three months ended Twelve months ended December 31 December 31 --------------------------------------------------------------------- Related Parties in the Kyrgyz Republic 2005 2004 2005 2004 --------------------------------------------------------------------- Management fees to Kyrgyzaltyn 131 205 747 949 --------------------------------------------------------------------- Concession payments to Kyrgyz Republic 349 546 1,992 2,531 --------------------------------------------------------------------- Total 480 751 2,739 3,480 --------------------------------------------------------------------- Gross gold and silver sales to Kyrgyzaltyn 42,427 58,931 220,242 257,739 --------------------------------------------------------------------- Deduct: refinery and financing charges (550) (729) (2,603) (2,766) --------------------------------------------------------------------- Net sales revenue received from Kyrgyzaltyn 41,877 58,202 217,639 254,973 ---------------------------------------------------------------------

Effective as of December 22, 2005, Kyrgyzaltyn and KGC have agreed to temporarily permit Kyrgyzaltyn to pay within twelve days after date of shipment of gold from the Kumtor mine. No later than March 1, 2006, Kyrgyzaltyn will resume the prior practice of pre-paying for gold.

Kyrgyzaltyn shall pay interest on unpaid amounts equal to LIBOR plus 0.25%. Kyrgyzaltyn has agreed to sell, after February 1, 2006 but before March 1, 2006, a sufficient number of Centerra shares to yield $11 million of proceeds. These proceeds, which will continue to be held by Kyrgyzaltyn, will fund a gold payment facility, to be used by Kyrgyzaltyn to resume the prior practice of pre-paying for gold. The obligations of Kyrgyzaltyn to KGC are secured by a pledge of a portion of the Centerra shares owned by Kyrgyzaltyn.

Other

In addition, the Company paid approximately $109,000 Cdn in the fourth quarter of 2005 (approximately $429,000 Cdn for the twelve months ended December 31, 2005) to Ms. Marina Stephens, a lawyer and the spouse of President and Chief Executive Officer, Mr. Homeniuk. Ms. Stephens provides legal and business advisory services related to international operations.

As at December 31, 2005, a relocation loan in the amount of $250,000 Cdn was outstanding with Centerra's President and Chief Executive Officer, Mr. Homeniuk. The loan principal is payable in June 2010, while interest is charged as a taxable benefit to Mr. Homeniuk.

Quarterly Results - Last Eight Quarters

Over the last eight quarters, Centerra's results reflect the positive impact of rising gold prices, the increased ownership in both Kumtor and Boroo in June 2004, partially offset by rising cash costs and reduced production due to lower grades at Kumtor in the last half of 2005.

--------------------------------------------------------------------- 2005 2004 $ millions, except -------------------------------------------------- per share data Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 --------------------------------------------------------------------- Revenue 75 77 95 92 88 86 47 26 --------------------------------------------------------------------- Net earnings 6 9 15 12 15 29 (1) 8 --------------------------------------------------------------------- Net Earnings per share (basic & diluted) 0.09 0.12 0.21 0.17 0.21 0.40 (0.02) 0.20 ---------------------------------------------------------------------

Other Corporate Developments

Kyrgyz Republic

In 2005 the Kyrgyz Republic went through a major change in its political life. The former President of the Kyrgyz Republic, Mr. Askar Akayev, was ousted from office following an earlier parliamentary election.

The newly elected parliament designated Mr. Kurmanbeck Bakiyev as the new president of the Kyrgyz Republic. Subsequently, Mr. Kurmanbeck Bakiyev won a presidential election and was confirmed as the President of the Kyrgyz Republic for a five year term. Mr. Felix Kulov has been appointed the Prime Minister of the Kyrgyz Republic.

Throughout 2005, Centerra Gold Inc. and its Kyrgyz subsidiaries worked closely with the new authorities in the Kyrgyz Republic to resolve a number of outstanding issues regarding the Kumtor project, including tax and customs disputes, road blocks and various investigations into the previous Government's activities.

To date, most of the outstanding issues have been resolved. The Company continues its cooperative efforts to resolve the outstanding issues with the newly appointed Government, local authorities of the Issyk-Kul region, where the Kumtor mine is located, and other authorities. The political situation in the Kyrgyz Republic appears to have stabilized somewhat during the last quarter of 2005 and the Company reports normal course of business in the country.

Mongolia

Mongolia is currently engaged in the process of reforming its Government, following dissolution of the previously established coalition cabinet, formed by the two most prominent Mongolian parties. The new cabinet is expected to be dominated by members from the current majority party (Mongolian People's Revolutionary Party). It is expected that the new Government will resume normal work in the near future.

Prior to its dissolution, the previous cabinet was expected to review and implement certain changes to the Mongolian mining code that had the potential to negatively affect the investment climate for the mining industry in Mongolia (although with no direct impact on existing projects, such as Centerra's Boroo project). To date, the new cabinet's position regarding the changes to the Mongolian mining code proposed by the previous cabinet is unclear.

Outlook

Production and Unit Cost - 2005 by Quarter and 2006 Forecast

Centerra is forecasting production in the first quarter of 2006 to total 165,000 ounces.

Production at Kumtor during the first quarter of 2006 is projected to be 101,000 ounces, relatively unchanged from the fourth quarter of 2005 while cash costs are expected to increase approximately 8% to $384 per ounce in the first quarter of 2006.

Production at Boroo is projected at 64,000 ounces during the first quarter of 2006, approximately 6% lower than the fourth quarter of 2005 as a result of reduced tonnes milled while cash costs are forecast to remain flat at $221 per ounce in the first quarter of 2006.

For the 2006 year, Centerra is forecasting production of 729,000 ounces, approximately 8% lower than in 2005. Cash costs are forecast to increase to $294 per ounce in 2006 from $241 per ounce in 2005.

The mill head grade at Kumtor is expected to average 3.34 g/t in 2006 compared to 3.38 g/t in 2005 and production from the mine is expected to total 461,000 ounces at an average cash cost of $347 per ounce. Kumtor's life-of-mine plan is focused on accessing the highest available ore grades; this will require mining through lower grades in 2006.

At Boroo, production is expected to decline to a total of 268,000 ounces in 2006 due primarily to a lower mill head grade which is expected to average 3.88 g/t in 2006 compared to 4.23 g/t in 2005. Total cash cost is forecasted to be $203 per ounce in 2006.

In 2006, a $25 per ounce change in the gold spot price is anticipated to effect revenues, net earnings and cash from operations by approximately $18.2 million, $14.8 million and $16.9 million respectively.

Centerra's production and unit costs are forecast as follows: --------------------------------------------------------------------- Ounces except where noted 2005 2006 --------------------------------------------------------------------- Ounces except Q1 Q2 Q3 Q4 YTD Q1 Year where noted Actual Actual Actual Actual Actual Forecast Forecast --------------------------------------------------------------------- Kumtor production (100% Centerra share) 141,558 137,794 123,162 98,973 501,487 101,000 461,000 --------------------------------------------------------------------- --------------------------------------------------------------------- Boroo's production (1) 68,297 71,659 67,197 64,344 271,497 60,800 255,000 --------------------------------------------------------------------- Centerra's share of total production 209,855 209,453 190,359 163,317 772,984 161,800 716,000 --------------------------------------------------------------------- (1) Centerra's share of Boroo's production is 95% --------------------------------------------------------------------- Total cash cost (1) 2005 2006 --------------------------------------------------------------------- Q1 Q2 Q3 Q4 YTD Q1 Year $ per ounce Actual Actual Actual Actual Actual Forecast Forecast --------------------------------------------------------------------- Kumtor 235 253 277 355 274 384 347 --------------------------------------------------------------------- Boroo 165 162 187 223 183 221 203 --------------------------------------------------------------------- Consolidated 211 221 245 300 241 321 294 --------------------------------------------------------------------- (1) Total cash cost is a non-GAAP measure. See "Non-GAAP measure, total cash cost below.

Exploration and Business Development

One of Centerra's priorities in 2006 is to continue to add to its reserves and resources base through its exploration program. Accordingly, the Company has budgeted $28 million of spending on its program for the 2006 year.

The budget includes $21 million for exploration plus estimated costs associated with due diligence activities for potential acquisitions and the development of the feasibility study at the Gatsuurt deposit.

Activities at Kumtor, Boroo, Gatsuurt and REN are planned as follows:

Kumtor

- Additional drilling programs are planned in the vicinity of the main Kumtor pit to test for strike and dip extensions of the SB and NB zones. A drilling program is planned in the Sarytor target area to further delineate and extend the resource outlined in 2005. The Sarytor area is located about five kilometers from the Kumtor mill.

- Exploration work will continue on other target areas such as Bordoo and Akbel.

Boroo

- At Boroo, drill programs will focus on testing for additional mineralization around the peripheries of the pits.

Gatsuurt

- The Gatsuurt deposit is open at depth and additional drilling is planned to test the high grade mineralization beneath the Gatsuurt Central zone as a potential underground mining opportunity.

- Exploration programs will continue to evaluate Centerra's significant land position. Drilling programs are planned to further explore the Ulan Bulag, Nart, Zurgaadai and Argal target areas.

REN

- Drilling programs will focus on testing under explored areas of favorable alteration and mineralization along two main control structures the Corona Dyke and East fault.

Five Year Forecast Based on Revised Life-of-Mine:

Centerra has substantially increased reserves at the Kumtor and Boroo mines since the initial public offering ("IPO") in June 2004. In the one and one-half years since the IPO, reserves at Kumtor have increased by 3.1 million ounces, Boroo by 600,000 ounces and the Gatsuurt project has been progressed significantly. These significant exploration results are reflected in an updated life-of-mine production data for Kumtor and Boroo, the next five years of which is summarized below. The full life-of-mine data can be found at Centerra's website at www. Centerragold.com. Centerra gold production in 2009 is now forecast to exceed one million ounces.

2006 2007 2008 2009 2010 ---- ---- ---- ---- ---- Kumtor Mined Ore tonnes 000's 7,569 6,775 5,138 4,926 6,939 Mined Waste tonnes 000's 93,385 124,800 107,293 113,514 116,337 Total Mined tonnes 000's 101,367 131,575 112,431 118,441 123,275 Ore Mined tonnes/day,000's 20.7 18.6 14.0 13.5 19.0 Total Mine tonnes/day,000's 278 360 307 324 338 Strip Ratio 12.4 18.4 20.9 23.0 16.8 Mill tonnes 000's 5,659 5,658 5,658 5,658 5,658 Mill 000's tonnes/day 15.5 15.5 15.5 15.5 15.5 Mill Grade - g/t 3.31 3.53 4.27 5.31 4.83 Mill Recovery - % 76.2% 82.9% 86.7% 87.4% 87.1% Oz Poured 000's 461 533 673 843 764 Boroo Mined Ore tonnes 000's 2,678 3,298 2,584 3,889 - Mined Waste tonnes 000's 16,033 15,862 16,116 9,105 - Total Mined tonnes 000's 18,710 19,160 18,700 12,995 - Ore Mined tonnes/day 7.3 9.0 7.1 10.7 - Total Mine tonnes/day 51 52 51 36 - Strip Ratio 6.0 4.8 6.2 2.3 - Mill Tonnes - 000's 2,355 2,347 2,347 2,347 2,347 Mill 000's tonnes/day 6.5 6.4 6.4 6.4 6.4 Mill Grade - g/t 3.86 3.79 3.26 2.98 1.41 Mill Recovery - % 91.6% 89.5% 89.1% 86.8% 87.2% Oz Poured 000's - 100% 268 256 219 195 93 Oz Poured 000's - 95% 255 243 208 185 88 Consolidated 716 776 882 1,028 852

Administration

Annual administration expenses are expected to amount to approximately $21 million. The forecast includes the ongoing costs of maintaining the corporate office and the continued implementation costs of regulatory standards.

Corporate Income Taxes

Corporate income taxes in the Kyrgyz Republic are calculated and provisioned at 20% of taxable income. In 2006, the Boroo project will be in its third year of a three-year 100% income tax holiday.

Capital Expenditures

The capital requirement in 2006 is budgeted at $103 million. This includes $87 million in growth capital spending primarily attributable to the addition of larger, more productive haulage trucks and shovels as well as other support and auxiliary equipment and infrastructure in support of the increase of mine life at Kumtor.

Sensitivity of Revenue, Earnings & Cashflow from Changes in Gold Price

A $25 per ounce change in the gold spot price would be expected to effect revenues, net earnings and cash from operations by approximately $18.2 million, $14.8 million ($0.21 per share) and $16.9 million respectively.

Non-GAAP measure - Total Cash Cost

This MD&A presents information about total cash cost of production of an ounce of gold for the operating properties of Centerra. Except as otherwise noted, total cash cost per ounce is calculated by dividing total cash costs, as determined using the industry standard published by the Gold Institute, by gold ounces produced for the relevant period.

Total cash costs, as defined in the Gold Institute standard, include mine operating costs such as mining, processing, administration, royalties and production taxes, but exclude amortization, reclamation costs, financing costs and capital, development and exploration.

Total cash cost per ounce has been included because certain investors use this information to assess performance and also to determine the ability of Centerra to generate cash flow for use in investing and other activities. The inclusion of total cash cost per ounce enables investors to better understand year-on-year changes in production costs, which in turn affect profitability and cash flow.

Total Cash Cost per Ounce can be Reconciled as follows: Fourth Quarter 2005: --------------------------------------------------------------------- Kyrgyz $ millions, unless otherwise Republic Mongolia Total specified (Kumtor) (Boroo) ---------------------------------- Cost of sales, as reported 28.5 14.3 42.8 Adjust for: Refining fees and by-product credits (0.1) - (0.1) Non-operating costs (1.6) - (1.6) Inventory movement 8.1 0.8 8.9 ---------------------------------- Total cash cost - 100% 34.9 15.1 50.0 Ounces poured - 100% (000's) 98.9 67.7 166.6 Total cash cost per ounce 352.5 222.7 299.7 --------------------------------------------------------------------- Fourth Quarter 2004: --------------------------------------------------------------------- Kyrgyz $ millions, unless otherwise Republic Mongolia Total specified (Kumtor) (Boroo) ---------------------------------- Cost of sales, as reported 32.1 9.9 42.0 Adjust for: Refining fees and by-product credits 0.1 - 0.1 Non-operating costs (1.1) (1.9) (3.0) Inventory movement 5.5

Source: Business Wire

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