August 3, 2010 / 2:31 PM / in 7 years

UPDATE 1-Red Back Mining Q2 gold production rises, shares rise

* Q2 gold production 106,362 ounces

* Q2 average realized gold price of $1,215/ounce

* Underground ops at Chirano mine to boost H2 production

* Shares rise 10 pct

Aug 3 (Reuters) - Canadian gold miner Red Back Mining Inc RBI.TO posted an increase in its quarterly gold production, and said mining volumes and grade from an underground operation at its Chirano mine will continue to boost production in the second half of the year.

On Monday, gold miner Kinross Gold Corp K.TO said it will buy 91 percent of Red Back that it does not already own for around $7 billion to create one of the world’s largest gold miners. [ID:nN02108994]

Underground mining at the high grade Akwaaba operation is scheduled to ramp up to about 100,000 tons a month in the fourth quarter, the company said.

“This will result in lower cash costs per ounce as higher mining volumes are achieved,” Red Back said.

Total gold production in the quarter was 106,362 ounces, up from 80,238 ounces last year.

Net income fell to $21.9 million, down from $24.7 million last year.

The average realized gold price rose to $1,215 an ounce in the quarter, up 31 percent from last year.

In May, the company said it expects to produce around 500,00 ounces of gold this year and expects to raise that to 800,000 in the next few years.

Shares of the company were up 10 percent at C$28.53 Tuesday morning on the Toronto Stock Exchange. (Reporting by Isheeta Sanghi in Bangalore; Editing by Don Sebastian)

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