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UPDATE 1-Kinross launches gold plant in Russia's Chukotka

(Adds updated local government figures, quote)

MOSCOW, July 9 (Reuters) - Canadian miner Kinross Gold Corp K.TO launched a new gold processing plant in Chukotka on Wednesday as the remote Russian region prepares to more than triple gold output this year, the local government said.

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.MMPLZLq.L.

Total investment in the Kupol project, including exploration, construction of the plant and associated infrastructure, exceeded $750 million, the government of Chukotka said in a statement.

It 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 under the leadership of Roman Abramovich shows the resource-rich region has serious investment potential and is capable of stable economic growth,” Chukotka’s new governor, Roman Kopin, said in a statement.

“We will continue to implement the region’s strategy in this direction.”

Annual gold production in the region is expected to increase to more than 30 tonnes from 5 tonnes last year, the local government said, without giving a timetable. This year it expects to produce between 17 and 19 tonnes.

Highland Gold Mining Ltd HGM.L, part-owned by Abramovich's investment vehicle Millhouse LLC, plans to launch the Mayskoye field in Chukotka by 2010. Production there is forecast at between 250,000 and 275,000 ounces per year.

Millhouse also owns another gold property, Dvoinoye, in the region.

The Russian Gold Industrialists Union expects total Russian output to rise to 225 tonnes by 2015. Production will rise this year after five consecutive years of decline, due largely due to the start-up of Kupol.

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