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General view of Kumtor open pit gold mine in Tien Shan mountains.SHAMIL ZHUMATOV

Workers at Canadian gold miner Centerra Gold Inc.'s key mine in central Asia have gone on strike over a pay dispute.

Centerra , the Toronto-based international gold producer, said unionized employees at its Kumtor Mine in the troubled Kyrgyz Republic began a strike Friday. The miner said it believes the work stoppage is illegal since the workers have a contract that expires at the end of the year.

The dispute centres on worker demands for a 100 per cent wage increase, reflecting the improving finances of the gold mining sector. The company has countered with a 25 per cent offer.

Centerra says production at the mine has been suspended and the company is in talks with the union to settle the strike.

Centerra is the largest largest Western-based gold producer in Central Asia. The company, which also operates in Mongolia, raised revenues sharply and generated strong profits from the Kumtor open-pit mine in the latest quarter, cashing in on soaring gold prices.

The gold miner announced at the end of July its first quarterly dividend in its history after reporting a second-quarter net profit of $29.8-million (U.S.) as revenues soared to $152.2-million, well above expectations.

The results compared with a loss of $79.6-million in the second quarter of 2009 when revenue was $104.3-million.

The Kumtor mine in the Tien Shan mountains, is a joint venture of Centerra, the Kyrgyz government and other investors. The operation employs about 1,000 people in total and generates a quarter of Kyrgyzstan's industrial output and a third of all exports in the poor country.

It is also a major contributor to the budget of the troubled former Soviet republic, where the president was overthrown in April and hundreds of people were killed in ethnic clashes in June.

Centerra was the former gold mining division of uranium giant Cameco Inc. but was spun off as a separate company a few years ago. Cameco has sold its stake in the company.

Centerra has forecast its total 2010 consolidated gold production to be in a range of 640,000 to 700,000 ounces. Kumtor alone produced over 525,000 ounces of gold last year.

In a statement Friday, Kumtor's management said "the demand to crease salaries by 100 per cent is not realistic and is not clearly substantiated."

The Interfax news agency quoted Kumtor trade union member Adil Idrisov as saying the strike was open-ended. But he said that workers were ready to resume work in return for a 50 per cent pay rise, Interfax reported.