Workers stand beside machinery in a tunnel in the Kumtor mine in Kyrgyzstan.VLADIMIR PIROGOV/Reuters
Centerra Gold Inc. is cutting its production guidance due to problems at its troubled Kumtor gold mine in central Asia, but chief executive officer Ian Atkinson said Thursday the operations are back on track.
The Toronto-based company cut its 2012 production guidance to between 415,000 and 425,000 ounces from an earlier estimate ranging from 450,000 to 470,000 ounces due to the need to mine more till waste material than expected.
Costs are also expected to be higher at a total cash cost of $600 (U.S.) to $620 per ounce produced, up from an August estimate of $590 to $615.
However, Mr. Aitkinson said the company was back into bedrock at Kumtor last month.
"Once you're down through the till and into bedrock you're fine. It is just predicting that till-bedrock interface which has caused the issue for us," Mr. Aitkinson said.
"The issue is behind us."
Delays at Kumtor, in Kyrgyzstan, this year were caused by ice movement in the pit that delayed access to a section of high grade ore.
However, the company has since spent $85-million to remove the ice, which not only provided access to the high grade ore, but also helped Centerra increase its planned pit size at the mine and extend the life of the project by five years to 2026.
"It has taken us six months to do a very detailed technical and financial review," Mr. Aitkinson said.
"We now have a much better pit plan that adds significantly to the reserves."
Centerra on Wednesday increased proven and probable reserves at Kumtor by 58 per cent, or 3.6 million contained ounces of gold.
Total open pit reserves were increased to 9.7 million, which now includes 1.2 million ounces that were part of an underground mine plan and two million ouncest below the underground grade cut-off.
Centerra reported a third-quarter loss of $46.8-million, or 20 cents per share, compared with a profit of $83.7-million, or 35 cents a share, in the year-ago period.
Revenue slumped to $68.8-million from $278.4-million in the third quarter of 2011, reflecting significantly higher gold production and sales a year ago.
Centerra says the third quarter loss includes $19.3-million of abnormal mining costs, and other operating expenses of $5.2-million for the care and maintenance of the underground development project at Kumtor.
BMO Capital Markets analyst Andrew Breichmanas said the quarterly results were "relatively meaningless, given the seven-week shutdown of the Kumtor process plant for maintenance."
However, Mr. Breichmanas noted risks remain as the company is still waiting for the Kyrgyz government's state commission report regarding the company that is expected later this month.
"Jurisdictional risks remain, but the stock appears to offer attractive value and is poised to deliver improved results," Mr. Breichmanas wrote in a report.