November 5, 2010 / 6:37 PM / 7 years ago

UPDATE 2-Centerra backs FY gold output target despite weak Q3

* Q3 EPS $0.07 vs $0.09 last yr

* Q3 revenue down 23 pct at $115.5 mln

* Q3 production down 42 pct at 96,308 oz

* Says to cease mining at Mongolia project by end-Nov

* Shares up as much as 5 pct (Recasts, adds analyst comments, updates share mvt)

By Gowri Jayakumar

BANGALORE, Nov 5 (Reuters) - Centerra Gold (CG.TO), which reported a steep fall in third-quarter output, said high-grade deposits at its flagship project in Kyrgyzstan will help meet its annual production target, sending its shares up 5 percent.

The Toronto-based company has an annual production target of 640,000-700,000 ounces of gold, and has started mining the high-grade deposits at the SB Zone in its Kumtor mine.

Lower ore grades and a 10-day worker strike in October at Kumtor -- which accounted for a quarter of Kyrgyzstan’s industrial output last year -- had led to a 42 percent fall in third-quarter gold production. [ID:nSGE69A168]

Centerra expects to produce 530,000-570,000 ounces of gold for the full year at Kumtor.

Despite the hostile political climate in Kyrgyzstan, foreign investments will drive production and profits at the mine, which accounts for 70-80 percent of Centerra’s value, analyst Andrew Breichmanas at BMO Capital Markets-Canada said.

Centerra also said mining at its Boroo project in Mongolia will cease at the end of November and that it will lay off about 250 workers there on Dec. 1.

The company had originally planned to redeploy the workers to its Gatsuurt project in Mongolia, but delays in government approval and commissioning of the project hit the plan.

Centerra, which spent about $1.3 million on Gatsuurt in the quarter, said minimal capital spending was planned on the project going forward.

Breichmanas expects the company to spend up to $300 million next year on exploration and development activities, with potential buys in Turkey, Russia and China.

Centerra shares, which have gained 10 percent in value since the Kyrgyz strike was lifted on Oct. 10, touched a high as C$20.06 Friday on the Toronto Stock Exchange, but pared the gains and were flat at C$19.10 in afternoon trade. (Reporting by Gowri Jayakumar in Bangalore; Editing by Unnikrishnan Nair)

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