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Wednesday, 1st February 2006 (3952 views)

Gold exploration firm Centerra Gold has pleased investors by announcing bullish production forecasts after seeing both fourth quarter production and profits drop.

Centerra, which operates mines in Mongolia and the former Soviet Union, expects gold production to increase from 716,000 ounces this year to over one million ounces in 2009.

This was enough to send the Canada-based firm's shares north, despite a lacklustre Q4 performance.

Centerra blamed its lower profit haul on increased costs, including taxes, labour, royalties and consumables.

Some onlookers had hoped for more given its average realised gold price during the quarter vaulted from $430 to $476 year-on-year.

But Geoff Stanley, an analyst at BMO Nesbitt Burns, says investors tend to set their hopes too high when gold prices are booming.

"[Centerra is] suffering the same pressures that most companies in the industry are suffering," he told CBC News.

"The gold price goes up, costs go up, and margins don't expand nearly as much as the market would hope."

Centerra's gold production fell from 205,274 ounces to 166,704 ounces over the same period.

The Toronto-based gold junior plans to invest $21 million into exploration work this year. Half of the money will be pumped into its Kumtor project in Kyrgyzstan.

 

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