UPDATE 1-Kyrgyzstan to double stake in Centerra Gold

(Adds details, share movements; in U.S. dollars unless noted)

By Olga Dzyubenko

BISHKEK, Aug 30 (Reuters) - Kyrgyzstan will double its stake in the country's largest gold mine to over 30 percent by acquiring shares from the project's Canadian owner, Cameco Corp (CCO.TO), the ex-Soviet state's prime minister said on Thursday.

The deal, to be signed on Friday, will give the Kyrgyz government a bigger say in the future of the Kumtor mine, which accounts for more than 4 percent of gross domestic product in the impoverished Central Asian country.

Cameco said in a separate statement that it will record a one-time, after-tax loss of about C$120 million once the transfer of shares is completed.

Shares of Cameco were down C$1.20, or nearly 3 percent, at C$40.16 by mid-afternoon on the Toronto Stock Exchange, while Centerra shares rose 6 percent to C$7.41.

Kyrgyz Prime Minister Almazbek Atambayev also said the agreement would help arrest a decline in the shares of Centerra Gold Inc (CG.TO), the owner of the Kumtor mine, which has followed rumours about the nationalisation of the project.

"Shares have already made a sharp turn upward. Kyrgyzstan will possess in its treasury highly liquid shares, the value of which will exceed $1 billion within about two years," Atambayev told reporters.

The Kyrgyz government would increase its stake in Centerra, a subsidiary of Cameco that also owns gold deposits in Mongolia and the United States, to 30.6 percent from 15.66 percent, Atambayev said.

Toronto-listed Cameco, the world's largest uranium miner, will retain a 37.74 percent share in Centerra and other shareholders a combined 31.66 percent.

Atambayev did not disclose details of the deal, which must be approved by the Kyrgyz parliament and President Kurmanbek Bakiyev before coming into force. He said negotiations with Cameco had lasted several months.

"We have agreed very favourable conditions for Kyrgyz interests and ensured the continuation of the Kumtor project," Atambayev said.

The government plans to introduce a new tax regime for Centerra, with payments equalling 10 percent of production in 2008, rising to 11 percent in 2009 and 12 percent in 2010.

Centerra will also be granted new licences to exploit other parts of the Kumtor deposit, a representative of the state geological and mineral resources agency told Reuters.

Kumtor had produced 5.85 million ounces of gold by the end of 2006 since the project began in May 1997.

Cameco said last month it expected 2007 gold output at the mine to reach around 300,000 ounces, down from a previous forecast of 450,000 ounces as extension of the pit would require the removal of more waste than previously planned.

($1=$1.06 Canadian) (Additional reporting by Frank Pingue in Toronto)