(REUTERS) -- Canadian miner Centerra Gold on Tuesday slashed its forecast for 2012 production at its flagship mine in Kyrgyzstan by about a third due to ice movement in the pit, a decline sure to weigh on the fragile economy of the Central Asian state.
Toronto-based Centerra Gold said any repeat of the 10-day strike that disrupted production at the Kumtor mine last month also could jeopardise its ability to meet a revised output target of 390,000 to 410,000 ounces this year.
Centerra had earlier forecast 2012 production at Kumtor of 575,000 to 625,000 ounces of gold, versus the 583,156 ounces achieved last year. The mine accounted for more than 90 percent of the company's total gold production last year.
The economy in Kyrgyzstan, a mountainous former Soviet republic where gross domestic product per capita is less than a tenth of that in neighbouring Kazakhstan, relies heavily on gold production from Kumtor and remittances from migrant workers.
Kumtor, one of the highest-altitude gold mines in the world at nearly 4,000 metres above sea level, contributed nearly 12 percent of the country's GDP and more than half of its export revenues last year.
This will mean a major decline in industrial production, GDP and tax revenues, said Orozbek Duisheyev, president of the Kyrgyz Association of Miners and Geologists. We're talking enormous losses, in the region of $200 million to $250 million.
Centerra Gold, in which the Kyrgyz state owns a 33 percent stake, said increased ice movement in the southeast section of the pit - exacerbated by the labour stoppage - would delay access to a separate zone where gold grades are higher.
As a result, production from the high-grade SB zone that had been expected this year would be deferred until 2013-2015, the company said in a statement. This would be partly offset by an acceleration of mining in the southwest section of the pit.
Kyrgyz President Almazbek Atambayev, sworn in last December in the first peaceful handover of the presidency since independence from the Soviet Union in 1991, has pledged to stamp out corruption to foster investment, particularly in mining.
Centerra said that its collective bargaining agreement with employees at the mine was due to expire at the end of 2012.
A work stoppage at any time during the year could have a significant impact on Kumtor achieving its revised forecast production, the company said.
Unionised employees at the mine went on strike last month over salary deductions for payments to Kyrgyzstan's social fund. The company said on Feb. 16 it expected the settlement to cost about $4 million this year.
Last month's dispute followed a brief disruption in December, when protesters interrupted fuel and other supplies to the mine by blocking a road. That dispute was quickly resolved by a deal for more community involvement.
Centerra also produces gold at the Boroo mine in Mongolia. The company last month reported a 36 percent increase in the size of its measured and indicated gold resources, driven by exploration at Kumtor and other projects in Russia and Mongolia.