July 21, 2010 / 1:40 PM / 8 years ago

RPT-UPDATE 2-Red Back cuts gold production outlook; shares fall

(Repeats to widen distribution)

* Cuts FY gold production outlook 9 pct

* Cuts FY gold production view at Tasiast 15 pct

* Backs production target at Chirano mine

* Sees lost ounces recovery in 2011

* Shares fall 6 pct (Adds details, analyst comments; updates share movement)

By Gowri Jayakumar

July 21 (Reuters) - Canadian gold miner Red Back Mining Inc RBI.TO cut its full-year gold production forecast 9 percent, hurt by a damaged water pipeline at its Tasiast mine in Mauritania, sending shares down 6 percent in morning trade.

Two sections of the pipeline, being replaced at an estimated cost of $4.8 million, are scheduled to be completed by mid-fourth quarter, Red Back said.

The Africa-focused miner now expects gold production for the year to be between 445,000 and 465,000 ounces, as it cut its production outlook at Tasiast 15 percent.

“This (pipeline) issue has affected our forecast gold production for the year, but those lost ounces will be recovered in early 2011,” Chief Executive Richard Clark said in a statement.

Production at the dump leach operations — gold extraction process using significant irrigation — at Tasiast suffered due to pipe failures, which leads to ounces accumulating like stockpile, said analyst Stuart McDougall of Jennings Capital Inc.

“Come 2011, Red Back needs to irrigate more aggressively to drawdown on the inventory,” he said.

In May, the company — which competes with Centamin Egypt Ltd (CEY.L) (CEE.TO), Eldorado Gold Corp (ELD.TO) and Afican Barrick Gold ABGL.L — reported leaks in water pipelines at the Tasiast mine. [ID:nSGE6420HI]

“I don’t think the market was anticipating the pipeline issue’s extension to actually affect 2010. That is a bit of a surprise, but it is temporary,” analyst McDougall said.

Red Back said it was on target to achieve forecast production for the year at its Chirano Mine in Ghana, with significant increases scheduled from the Akwaaba underground mine in the third and fourth quarters.

Red Back shares, which have shed about 8 percent in the past month, touched a low of C$23.77, before paring some losses to trade at C$24.52 Wednesday morning on the Toronto Stock Exchange. (Reporting by Gowri Jayakumar in Bangalore; Editing by Don Sebastian)

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