Centerra slips on Kumtor slide

Shares in Centerra Gold (CG-T, CAGDF-O) took a quick tumble in late-afternoon trading in Toronto on July 18, after the company trimmed its production forecast owing to a recent rock slide at the Kumtor gold mine in Kyrgyzstan.

Centerra says the incident on July 13 involved a “significant portion” of the northeast wall of the Kumtor pit. A slope monitoring system allowed for the advance evacuation of the mining area.

The movement occurred above the higher-grade stockwork area that Centerra planned to mine later this year and into 2007. Accordingly, the company has trimmed its 2006 production forecast to around 300,000 oz. at a cash cost of about US$530 per oz. from its previous projection of 410,000 to 420,000 oz. at US$370 to US$380 per oz.

An assessment of the impact on 2007 production is ongoing. The company is looking to accelerate the delivery of mine equipment to help improve production.

The stockwork area remains uncovered but is inaccessible owing to safety concerns. The company plans lay out a new mining sequence that will defer mining from the area. The mine’s reserves will not be affected as the slide is completely contained by the ultimate pit design.

Centerra says normal mining operations continue in the southern end of the pit, as does milling of low-grade stockpiles.

During the first three months of 2006 Kumtor produced 88,848 oz. of gold at an average cash cost of US$427 apiece. In 2005, the mine poured 501,000 oz. of gold, down 24% from a year earlier owing to lower head grades, which slipped to 3.4 grams per tonne from 4.4 grams. Total cash costs increased US$74 per oz. to US$274 per oz.

At year end, the mine’s reserves had significantly increased to 40.2 million tonnes grading 3.8 grams gold per tonne by the end of 2005, owing to the newly defined high-grade mineralization at the south end of the pit.

Centerra owns 100% of the Kumtor gold mine through its wholly owned subsidiary Kumtor Gold.

Late last year, protesters claiming long-term effects from a 1998 cyanide spill and demanding further compensation blocked the road connecting Centerra’s Kumtor gold mine to major centres in Kyrgyzstan for a week. The mine continued to operate during the protest.

Centerra shares were off 79, or 6.3%, at $11.81 in late-afternoon trading in Toronto following the news on July 18. Cameco (CCO-T, CCJ-N), which owns 52.7% of Centerra was down 62 at $43.53. State-owned Kyrgyzaltyn owns around 15.7% of Centerra’s outstanding shares.