Centerra shares drop despite increasing reserve estimate of major gold project

Centerra Gold (TSX:CG) was trading low on Thursday morning, after the Canadian gold miner reported a $46.8 million quarterly loss due to higher costs and severely lower production at its Kumtor mine in Kyrgyzstan.

The company’s stock was down 45 cents to $10.36 on the Toronto Stock Exchange at 10:43AM EST.

Revenue fell to $68.8 million from $278.4 million in the third quarter of 2011.

The Toronto-based miner said the third quarter loss included $19.3 million of unusual mining costs, and other operating expenses of $5.2 million for the care and maintenance of Kumtor.

While the company had substantial losses during 2012, it also offered some good news regarding a 58% reserve increase at its underground flagship mine in Kyrgyzstan.

Centerra also extended the life of the mine to 2026, adding that Kumtor’s probable mineral reserves are now estimated at a total 9.7 million ounces of gold.

The company’s gold project in the Asian country has been under public scrutiny this year as opponents claims it is a large source of pollution. They also said that Centerra Gold has used accounting deceits to lower its tax responsibilities.

A protest against the miner in Kyrgyzstan’s capital Bishkek turned violent in October, as demonstrators clashed with police while demanding the nationalization of Kumtor.

Centerra denies all allegations of financial wrongdoing and divulged an independent report that proves claims against its Kumtor mine are groundless.

The company is a significant employer and taxpayer in the Central Asian country and a key contributor to the Kyrgyz economy. In fact, the Kumtor open pit gold mine accounts for 60% of the nation’s industrial output and, according to the company, it is the largest gold mine operated in Central Asia by a Western-based company.

The Canadian miner was granted the license for Kumtor under Kyrgyzstan deposed leader, Kurmanbek Bakiyev, who was accused of corruption.

Since it started running in 1997, Kumtor has generated $1.9 billion for Kyrgyzstan and produced more than 8.4 million oz. of gold.

Kyrgyzstan, a land-locked country of five million people on China’s western border, has become infamous in recent years because it hosts a U.S. airbase used to support military operations in neighbouring Afghanistan.

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