CENTERRA Gold is continuing discussions with the Mongolian Government regarding development of the Gatsuurt Gold Project. The company expects that the Mongolian Parliament will consider the designation of Gatsuurt as a strategic deposit by the end of 2014.

If Parliament ultimately approves this designation, it would have the effect of excluding Gatsuurt from the application of the Mongolian Water and Forest Law and would allow Mongolia to acquire up to a 34% interest in Gatsuurt.

The Gatsuurt project has remained under care and maintenance due to the continued delays in permitting resulting from the Water and Forest Law which prohibits mining and exploration activities in water basin and forested areas. During its discussions Centerra was advised that the government is developing a list of deposits, which will include Gatsuurt, to be submitted to the Mongolian Parliament for consideration as strategic deposits.

Meanwhile, at the nearby operating Boroo project Centerra produced 28,001 ounces of gold in the first half of 2014 compared to 52,663 ounces of gold in the first half of 2013. The lower production resulted mainly from an unscheduled mill downtime and the processing of lower grade ore through the mill.

Additionally, fewer ounces were poured from the heap leach operation as fewer tonnes were placed under primary leach in the first half of 2014. Mill grades averaged 0.66 grams/tonne with a recovery of 61.3% in 2014, compared to 1.33 grams/tonne with a recovery of 57.0% in the first half of 2013.

The Boroo mill experienced an unscheduled maintenance shutdown when the ball mill contactor/breaker failed on May 16. Partial milling activities resumed on May 22 and full operation resumed on June 17 when a replacement unit was installed.

Subsequent to the end of the second quarter, the company and Boroo's trade union signed a new two-year collective agreement which will expire on June 30, 2016.

Boroo was the first hard rock gold mine in Mongolia and has produced about 1.8 million ounces of gold since it began operation in 2004. Mining activities were completed in September 2012, though the mill continued to process stockpiled ore during the first half of 2014. Heap leach processing activities continued during the second quarter, however crushing and stacking was completed in 2013. Centerra proposes that Gatsuurt ore be treated at Boroo.

Operating costs in the second quarter of 2014 were $12.5 million, similar to the second quarter of 2013. Lower milling activity was offset by a lower contribution of operating costs to inventory, as Boroo drew down on its inventory.

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