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BAMAKO, Sept 8 (Reuters) - Canada's Avnel Gold will continue production from its loss-making Kalana underground mine in Mali until the start of a new $188 million open-cast project at the site in the second half of next year, company and government officials said.
The Malian state holds a 20 percent stake in the Somika venture that has operated the mine since 2003, with the remainder held by Avnel.
Somika is in the process of converting the underground mine into a larger, open-pit project, but a slump in international gold prices has made its operations unprofitable.
"If all goes well, the construction of a new processing plant should begin in the second half of 2016 and the start of production in the first quarter of 2018," Abdoul Karim Maiga, Somika's country manager, said in an interview with Reuters.
The new mine has estimated gold reserves of 1.46 million ounces and is expected to produce 138,000 ounces of gold a year for the first four years of operations.
Production will then fall to 98,000 ounces a year for the remainder of its 14-year life.
Company officials said that it was continuing operations to avoid the negative impact of laying off more than 360 staff on the local community.
"It would be pointless to dismiss workers just to hire them back a year later, with the risk of not getting them all back and with the damage it would do the community," Maiga said. "The company will shoulder the losses until the start of the new project."
The new mine is expected to have a permanent workforce of around 600 workers, company officials said. (Reporting by Tiemoko Diallo; Writing by Daniel Flynn; Editing by Joe Bavier)