Russia's Petropavlovsk sees net profit next year as key project boosts output

* H1 net loss of $24.8 million

* Expects to report profit next year

* FY output guidance lifted to 420,000-450,000 ounces

* Brings back founder Peter Hambro as President (Adds details, CEO comments, share price)

By Anna Rzhevkina

Sept 27 (Reuters) - Russian gold miner Petropavlovsk expects to report a net profit next year as a key gold treatment project is set to boost production and cut costs, Chief (Taiwan OTC: 3345.TWO - news) Executive Pavel Maslovskiy said on Thursday.

The company swung to a net loss of $24.8 million in the first half on rising costs and lower sales but the company declined to give a forecast for the full year. It reported a net profit of $24.5 million in the first half of last year and $41.5 million for the full year.

The company's main project, known as a pressure oxidation hub (POX), allows the treatment of refractory gold ore that is difficult to process using traditional methods. Refactory gold contains ultra-fine gold particles that are resistant to recovery by standard methods.

Maslovskiy, who returned to the helm of the company in June after a boardroom battle, said POX would allow the company to "significantly" reduce costs.

"We should be on schedule and put commercial production in March, which means that we can produce roughly 150,000 ounces out of POX," Maslovskiy added.

Petropavlovsk (LSE: POG.L - news) also lifted its 2018 production outlook to 420,000-450,000 ounces from 400,000-410,000 ounces due to the inclusion of "high-grade sellable floatation concentrate".

It sees its gold production rising to about 500,000 ounces next year. Petropavlsk's share price was up 0.5% at 6.51 pence, still well below the highs it hit a decade ago and has lost 12 percent so far this year.

The miner also brought back its founder Peter Hambro as president and senior adviser to the board. Hambro was ousted last year amid a shareholder row over control of the company.

(Reporting by Anna Rzhevkina, writing and additional reporting by Anna Pruchnicka; Editing by Emelia Sithole-Matarise)