Centerrra Gold: Better Days Ahead?

Centerra Gold Inc. (CAGDF.PK) has had a rough ride since March, losing more than 60% of its value. The gold-mining unit of Cameco Corp. has been unable to reach an investment agreement with the Kyrgyz Republic for its Kumtor mine, which still remains in operation. Meanwhile, some of its exploration licenses were cancelled and local bank accounts of its subsidiary were frozen last week.

However, while the stock continues to suffer, investors can take solace that the company’s management – including newly appointed CFO Jeffrey Parr, appear to have confidence that a rebound will come, recently buying shares at depressed prices.

On June 23, Mr. Parr bought 4,000 shares at C$5.39 each, while General Counsel and Corporate Secretary Frank Herbert bought 9,600 shares the same day for C$5.20 each to bring his holdings to 14,200 shares. Ron Colquhoun, vice president of project development and engineering at Centerra was also buying, picking up 4,500 shares to bring his total to 9,095.

Mr. Parr’s appointment as CFO is part of recent management changes at Centerra, which included replacing retiring CEO Leonard Homeniuk with Stephen Lang.

The bad news on Centerra has had analysts cutting their price targets on the company’s shares, including Stephen Walker at RBC Capital Markets who moved from C$10 to C$6 and suggested the best-case scenario would be for the government to take a 40% stake in Kumtor. He thinks an eventual agreement will pave the way for uranium giant Cameco to sell its stake in Centerra. On Monday, Mr. Walker shaved a dollar off his now C$50 price target for Cameco.

The Kyrgyz government currently plans to take a 29% stake in the mine, but if it decides to take all of Kumtor, Centerra would be left with only its assets in Mongolia and Nevada.

UBS Securities analyst Brian MacArthur also cut his target recently as a result of the higher risk, but it still represents significant upside at C$10 per share.