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A worker cleans a freshly produced bar of gold at Centerra's Boroo mine in MongoliaNIR ELIAS

Centerra Gold Inc. reported higher-than-expected quarterly earnings Friday, as increased production and strong gold prices helped the miner return to profit after a loss the year earlier.

The Canadian gold miner's net earnings came in at $29.8-million (U.S.), or 13 cents a share. That compares with a net loss of $79.6-million, or 36 cents, a year earlier, when lower gold recoveries and increased costs took a toll.

Analysts, on average, had expected earnings of 5 cents a share, according to Thomson Reuters I/B/E/S/.

Revenue was 46 per cent higher at $152.2-million.

The company, which has operations in Kyrgyzstan and Mongolia, also announced an inaugural dividend of 6 cents (Canadian) per share, to be paid out to shareholders in September.

UBS analyst Brian MacArthur, who has a buy rating and a $15.50 price target on Centerra, believes that the company's valuation continues to be weighed down at this time.

"In our view Centerra shares trade at a discount to its peers given general political risk in Mongolia and the Kyrgyz Republic," said Mr. MacArthur, who raised his 2010 earnings forecast for Centerra to $1.03 (U.S.), from 98 cents a share.

Centerra's flagship property is the Kumtor mine in Kyrgyzstan. The mine is one-third owned by the Kyrgyz government and accounts for 7 per cent of the Central Asian country's GDP.

In April, Kurmanbek Bakiyev was ousted as the country's president, and the worst ethnic bloodshed in the country's modern history ensued. At least 300 people were killed.

A new Kyrgyz constitution was approved in late June and Acting President Roza Otunbayeva was appointed until the end of 2011.

"It appears that stability has returned to the Kyrgyz Republic after the referendum held in June," Centerra chief executive officer Steve Lang said in a news release, adding that the unrest did not cause any interruptions at the Kumtor mine.

Centerra also owns the smaller Boroo mine in Mongolia. Regulatory issues with the government have plagued the operation since June of 2009.

The Boroo heap leach facility, which uses cyanide to extract gold from crushed ore, has been shut down since April 2009 pending a final operating permit and Centerra has removed all heap leach production from its 2010 production guidelines.

Even so, gold production at the Boroo mine rose for the quarter on increased recoveries.

"We are pleased with the performance of both operations during the quarter as we produced more gold than expected," Mr. Lang said in a release.

Centerra's gold production in the second quarter was 121,728 ounces compared with 110,457 ounces reported in the second quarter of 2009.