Kinross launches gold plant in Russia's Chukotka

By Robin Paxton

MOSCOW, July 9 (Reuters) - Canadian miner Kinross Gold Corp (K.TO: Quote, Profile, Research) launched a $500 million gold processing plant in Chukotka on Wednesday as the remote Russian region prepares to quadruple gold output by 2010, the local government said in a statement.

The plant will process ore from the Kupol field, owned 75 percent by Kinross and 25 percent by the local government, which has the potential to turn Kinross into the second-largest gold miner in Russia after Polyus Gold (PLZL.MM: Quote, Profile, Research) (PLZLq.L: Quote, Profile, Research).

The government of Chukotka said the new plant would produce between 13.8 and 14.6 tonnes (443,680-469,400 ounces) of precious metals, mainly gold and silver, this year.

It will ramp up the amount of ore processed daily to 3,000 tonnes in October from an initial 1,500 tonnes.

Kinross has previously said gold production at Kupol would reach 550,000 ounces per year from 2009. That would be equivalent to 10.5 percent of Russian gold output last year.

Gold prices <XAU=> have hit record highs of over $1,000 an ounce this year, as investors hedge against a weaker U.S. dollar and seek to profit from a commodities boom. Russia produced 169.2 tonnes in 2007, 6.8 percent of global mined gold output.

Mining is key to boosting the economy in Chukotka, a region straddling the Arctic Circle across the Bering Strait from Alaska. Until last week, its governor was billionaire Roman Abramovich, owner of English soccer club Chelsea.

"The experience of the local administration over the last seven years shows the resource-rich region has serious investment potential and is capable of stable economic growth," Chukotka's new governor, Roman Kopin, said in the statement.