TORONTO (CP) -- Centerra Gold Inc. [TSX:CG] is forecasting a 20% increase in gold production this year as it works to boost output after delays at its Kumtor mine in the Kyrgyz Republic led to a sharp drop in fourth-quarter profit.
The Toronto-based miner, controlled by uranium giant Cameco Corp. [TSX:CCO], said Wednesday it expects to produce 700,000 to 720,000 ounces of gold this year, about 20% more than in 2006.
''Kumptor met its revised mine plan and Boroo (in Mongolia), once again exceeding our expectations,'' CEO Len Homeniuk said in a call with analysts.
''Consolidated gold production from our mines was 586,000 ounces in 2006, exceeding our September revised forecast by over 11,000 ounces.''
The new forecast, however, remained below the 787,000 ounces of gold produced in 2005.
Centerra had reduced its 2007 production estimates for Kumtor by more than 58,000 ounces of gold in September to 440,000 to 475,000 ounces from 533,000 ounces after a pit wall movement in July at Kumptor that resulted in lower gold production and higher costs. That was the second such reduction, with Centerra having lowered its 2006 Kumptor production estimate by about 20 per cent.
Late Tuesday, the company reported net earnings of US$1.9 million on revenues of US$88.4 million for the three months ended Dec. 31, down from US$6.4 million on revenues of US$75 million in the fourth quarter of 2005.
Centerra, which reports its results in U.S. dollars, earned one cent per share during the quarter, down from three cents a share in the fourth quarter of 2005, after adjusting for a three-for-one stock split last June.
Centerra was also faced with a government-mandated program that increased salaries and a US$1.2-million land tax settlement payment at Kumtor - negatives that were partially offset by higher realized gold prices and a tax recovery of $8.1 million.
Merrill Lynch analyst Michael Jalonen said the earnings were below expectations of four cents per share, but the company's production forecast for 2007 was in line with its gold output estimate of 706,000 ounces.
For the 12 months of 2006, net earnings were US$60.6 million or 28 cents per common share on revenue of US$364.5 million. Cash provided by operations amounted to US$94.6 million.
That compared with earning of $42.4 million or 20 cents per common share on revenue of $338.6 million in 2005. Cash provided by operations in 2005 was $83.4 million.
Chief operating officer George Burns said the company had a total capital expenditure program of $110 million in 2007, which includes $25 million in maintenance capital.
Growth capital is expected to be $85 million, which includes $40 million at Kumtor and $45 million at Boroo.
Mining operations at Kumtor will take place in both the central pit south west pit this year, targeting the high grade mineralization of the SB Zone. The Boroo mine plans to construct a three million tonne per year heap leach operation in the second quarter, which is expected to be operational in the third quarter.
As of Dec. 31, Centerra's proven and probable reserves totalled seven million ounces of contained gold, compared to 7.2 million ounces in 2005. Measured and indicated resources to 5.6 million ounces from five million ounces.
Shares in Centerra closed at C$13.17 on the TSX Wednesday, down 36 cents or 2.7%.
Parent firm Cameco's shares fell 2.4% to close at C$43.78 after it reported its net profit dropped to C$40 million, about C$43 million below the same period in 2005, falling to 11 cents a share from $83 million or 23 cents a share the year before.
The Saskatoon-based company attributed the drop partly to flooding at northern Saskatchewan's Cigar Lake mine, which sent uranium prices soaring last year. Fourth-quarter revenues were C$512 million, down slightly from C$522 million during the same period a year earlier.
Centerra operates gold properties in central Asia, the former Soviet Union and other emerging markets. Kyrgyzstan, in central Asia, borders China to the south.
(c) The Canadian Press 2007
