Kyrgyzstan launched its second foreign-run gold mine on Wednesday after the Chinese owners settled a dispute with local residents, raising hopes that bigger projects could follow in the Central Asian state.

China's Full Gold Mining held an official ceremony to open a relatively small mine and processing plant at the Ishtamberdy deposit in the southern Kyrgyz region of Jalalabad, company and government officials told Reuters by telephone.

Full Gold plans to start production of gold concentrate by the end of the year and to be processing 300,000 tonnes of ore annually by 2012, said Nabi Eshnazarov, Kyrgyzstan's deputy minister of natural resources.

This would yield up to 2 tonnes of gold concentrate annually, he said. The product would be exported as there was insufficient technology locally to produce ingot, he said.

Kyrgyzstan's economy depends heavily on production from a single gold mine, Kumtor, as well as remittances from migrant workers abroad. From its launch in May 1997 to the end of 2010, Kumtor produced 7.8 million ounces, or 243 tonnes, of gold.

The mine is owned by Toronto-listed Centerra Gold Inc , in which the Kyrgyz government has a 33 percent stake. It contributed 9.4 percent of gross domestic product and nearly half of Kyrgyzstan's industrial output last year, government data show.

While small in scale, the new Chinese project gives fresh impetus to attempts by Kyrgyzstan's coalition government to weed out the corruption and unrest that has stifled previous attempts to develop abundant mineral reserves.

Conflict with local residents and opponents in government have thwarted attempts by miners such as Australia's Kentor Gold to develop new projects, while legal disputes and ownership changes have for several years delayed the launch of the country's second major gold-mining project, Jerooy.

Other Chinese investors have met with protests at their development sites, while Full Gold has also had to overcome opposition from local residents, said Azamat Builashev, assistant to the company's Chinese president.

He said that a conflict with residents of the nearby village of Terek-Sai had been resolved when the company and several other local businesses agreed to pave the road linking local settlements.

The conflict has been settled. Everything is normal, he said.