July 30, 2010 / 6:18 PM / 7 years ago

UPDATE 3-Centerra posts profit on strong gold price

* Q2 EPS $0.13 vs yr-ago loss of $0.36/shr

* Q2 revenue up 46 pct to $152.2 mln (Adds details on results, analyst comment; In U.S. dollars unless noted)

By Julie Gordon

TORONTO, July 30 (Reuters) - Centerra Gold CG.TO reported higher-than-expected quarterly earnings on Friday, as increased production and strong gold prices helped the miner return to profit after a loss the year earlier.

The Canadian gold miner’s net earnings came in at $29.8 million, or 13 cents a share. That compares with a net loss of $79.6 million, or 36 cents, a year earlier, when lower gold recoveries and increased costs took a toll.

Analysts, on average, had expected earnings of 5 cents a share, according to Thomson Reuters I/B/E/S/.

Revenue was 46 percent higher at $152.2 million.

The company, which has operations in Kyrgyzstan and Mongolia, also announced an inaugural dividend of 6 Canadian cents per share, to be paid out to shareholders in September.

UBS analyst Brian MacArthur, who has a buy rating and a C$15.50 price target on Centerra, believes that the company’s valuation continues to be weighed down at this time.

On Friday, shares in Centerra were holding steady at C$13.12 on the Toronto Stock Exchange.

“In our view Centerra shares trade at a discount to its peers given general political risk in Mongolia and the Kyrgyz Republic,” said MacArthur, who raised his 2010 earnings forecast for Centerra to $1.03, from 98 cents a share.

POLITICAL RISK

Centerra’s flagship property is the Kumtor mine in Kyrgyzstan. The mine is one-third owned by the Kyrgyz government and accounts for 7 percent of the Central Asian country’s GDP.

In April, former Kurmanbek Bakiyev was ousted as the country’s president, and the worst ethnic bloodshed in the country’s modern history ensued. At least 300 people were killed.

A new Kyrgyz constitution was approved in late June and Acting President Roza Otunbayeva was appointed until the end of 2011.

“It appears that stability has returned to the Kyrgyz Republic after the referendum held in June,” Centerra Chief Executive Steve Lang said in a press release, adding that the unrest did not cause any interruptions at the Kumtor mine.

Centerra also owns the smaller Boroo mine in Mongolia. Regulatory issues with the government have plagued the operation since June of 2009.

The Boroo heap leach facility, which uses cyanide to extract gold from crushed ore, has been shut down since April 2009 pending a final operating permit and Centerra has removed all heap leach production from its 2010 production guidelines.

Even so, gold production at the Boroo mine rose for the quarter on increased recoveries.

“We are pleased with the performance of both operations during the quarter as we produced more gold than expected,” Lang said in a press release.

Centerra’s gold production in the second quarter was 121,728 ounces compared with 110,457 ounces reported in the second quarter of 2009.

$1=$1.03 Canadian Reporting by Julie Gordon and Euan Rocha; Editing by Frank McGurty

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