Boroo back in action (July 10, 2006)

Centerra Gold (CG-T, CAGDF-O) has resumed normal operations at its Boroo gold mine, 110 km northwest of the Mongolian capital Ulaanbaatar.

Operations were suspended on June 14 owing to a demonstration by around 100 protesters led by the Popular Party. Centerra says that most of the protesters left voluntarily, while Mongolian police removed the remainder.

Centerra says the Mongolian cabinet recently criticized the fringe party for its statements regarding the Boroo project. It adds that the cabinet has confirmed that Boroo operates in accordance with Mongolian law and that the Popular Party’s demands are illegitimate and unconstitutional.

The company continues to monitor the situation.

During the first three months of 2006, Boroo poured 64,963 oz. gold at a total cash cost of US$215 apiece. Production for the full year is forecast at 270,000-275,000 oz. at total cash costs of US$210-US$215 per oz.

At last count, Boroo was home to probable reserves totalling 10 million tonnes running 3.5 grams gold per tonne, or 1.15 million contained ounces gold.

Centerra says Boroo is excluded from Mongolia’s recently passed 68% profits tax on gold mining operations owing to an existing stability agreement that runs until July 2013. The operation is exempt from all income taxes until 2007.

Centerra has a 95% equity interest in the operation, the first significant foreign investment for industrial development in Mongolia since 1979. Uranium giant Cameco (cco-t, ccj-n) owns 53% of Centerra 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.

In 2005, Kumtor produced 501,000 oz. gold, down 24% from a year earlier owing to lower head grade, 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, thanks to some newly defined high-grade mineralization at the south end of the Kumtor pit.