July 31, 2008 / 1:16 PM / 10 years ago

UPDATE 2-Centerra suspends Kyrgyz arbitration, profit rises

(Adds details and analyst’s comments. In U.S. dollars.)

TORONTO, July 31 (Reuters) - Centerra Gold (CG.TO) said on Thursday it suspended arbitration proceedings while it tries to work out a deal with the Kyrgyz government over sharing income from its Kumtor mine in the Central Asian republic.

The gold company also said in a statement its second-quarter net profit tripled, lifted by a $42 million gain on the value of treasury shares.

Revenue rose 38 percent as output from Kumtor and a mine in Mongolia increased. But the cash cost of production surged, in part because of higher energy prices.

Centerra, which is 53 percent-owned by Cameco Corp (CCO.TO), has been scrambling to work out a deal with the Kyrgyz government since early June, when its original framework agreement expired.

The Canadian company on Thursday said it was holding discussions with the government and agreed to “a limited postponement” of arbitration until Sept. 29.

“This looks like it is going to drag on into September now,” said John Ing, president at Maison Placements Canada.

“Nowadays, in any of these foreign jurisdictions, permitting has become much more of an issue offsetting the geographical attractiveness of some of these (properties).”

The Canadian-based mid-tier gold miner earned $56 million, or 26 cents a share, in the quarter ended June 30. That was up from $18.6 million, or 9 cents, in the year-before period.

Excluding one-time items, Centerra earned $13.8 million, or 6 cents a share, in the current quarter.

Analysts had expected a profit of 12 cents a share before exceptional items, according to Reuters Estimates.

The quarter included a $42.2 million non-cash gain representing an adjustment to the value of treasury shares that it may issue following a Kumtor settlement with the Kyrgyz government.

Revenue rose 38 percent to $142.6 million, as realized gold prices climbed 33 percent to $889 per ounce.

Centerra produced 158,303 ounces of gold from its Kumtor mine in Kyrgyzstan and its Boroo mine in Mongolia, up 3 percent from the same period last year.

The cash cost for production rose to $553 an ounce from $349 an ounce in the year-prior quarter as it faced higher labor, fuel and maintenance costs.

The company said it is on track to achieve gold production and cost targets. In May, the company said it expects 2008 production of 770,000 to 830,000 ounces of gold at cash costs of between $360 and $400 an ounce. Between 580,000 and 620,000 ounces of that production is expected from Kumtor.

Shares of Centerra dipped 0.18 percent to C$5.55 on the Toronto Stock Exchange. ($1=$1.02 Canadian) (Reporting by Scott Anderson and Susan Taylor; Editing by Peter Galloway)

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