BUSINESS

Centerra tumbles to second-quarter loss on "abnormal mining costs"

08/01/2012 08:52 EDT | Updated 10/01/2012 05:12 EDT
TORONTO - Centerra Gold Inc. (TSX:CG) says it swung to a loss of $54.6 million in its second-quarter as it took a hit from what it called "abnormal mining costs" at its Kumtor operation in the Kyrgyz Republic, as revenue fell 63 per cent.

The Toronto-based gold miner said the loss amounted to 23 cents per share, down from a profit of $71.1 million or 30 cents per share in the year-ago quarter.

Revenues slumped to $89.7 million from $243.8 million, reflecting higher gold production and sales a year ago.

The average analyst estimate had been for a loss of 14 cents per share on $90 million in revenue, according to Thomson Reuters.

The second-quarter loss includes $13.5 million in abnormal mining costs and an operating expense of $21 million related to a micro-credit financing program in Kyrgyz Republic in April.

It also booked a charge of $7.2 million for a gold metal reconciliation adjustment of the stockpiles at Kumtor.

"As expected, our gold production was down for the second quarter," said Ian Atkinson, president and CEO of Centerra Gold.

"At Kumtor, the technical and financial study of the potential for expanding the limits of the ultimate pit is continuing. However, the work done to date has produced very encouraging results and indicates that a much larger open pit is feasible, which would result in a significant addition to the open pit reserves and a substantially extended mine life," he said.

Atkinson added that Centerra's share price has been hit by recent developments in the Kyrgyz Republic.

The stock fell more than 30 per cent after Niyazbek Aldashev resigned from the company's board of directors.

A managing partner of international law firm Lorenz LLC in its Bishkek, Kyrgyzstan, office, Aldashev was co-chairman of Centerra's corporate social responsibility committee and a member of the audit committee and the human resources and compensation committee.

The central Asian country's parliament recently backed a motion to review the operating licence of a Canadian mining company developing a major gold mine that accounts for 12 per cent of the country's economy.

A state commission is to be set up to assess the environmental damage that deputies say served as a leading motivation for reviewing the licensing agreement.

The motion by Kyrgysztan's parliament calls for an increase in the government's current 33 per cent stake in Centerra.

Centerra has said the Kumtor project, which has been operating since 1997, is in full compliance with Kyrgyz laws and meets or exceeds Kyrgyz and international environmental, safety and health standards.

The company has also said the project has generated $1.9 billion in benefits for Kyrgyzstan, including $620 million in taxes.

"We believe that the Kyrgyz Parliamentary Commission's report regarding the Kumtor gold project released on June 18, 2012, and its findings are without merit," he said.

"We believe that Kumtor has operated in full compliance with Kyrgyz laws and meets or exceeds Kyrgyz and international environmental, safety and health standards."