The company, which operates three open pit gold mines in the Russian Far East, said in a statement that net profit came in at $108.2 million for the six months to end June, compared to analyst forecasts for $90 million and a loss last year of $55.4 million.

Chairman and founder Peter Hambro said the company was confident of meeting its full year production target having fallen short in 2010.

"We are on track with plans to produce 600,000 oz of gold in 2011, the target we gave at the start of the year. The second half is always slightly better than the first half and we expect more mining of high grade material," Hambro told Reuters by telephone.

Petropavlovsk shares were up 1.8 percent at 0831 GMT, compared to a 1.2 percent rise in the British mining index

The price of gold has hit a series of all time records in recent weeks as investors pile into the traditional safe haven to escape volatility on the world's stockmarkets.

Spot gold was trading at $1736 an ounce by 0800 GMT, having come close to an unprecedented $2,000 earlier in the month.

"I've said for a long time that gold would reach $2,000 by the end of this year and I don't see any reason why it should go down. It could be $2,500 by the end of next year," Hambro said.

"For those who want stability, gold is a four letter word: Tina. There is no alternative," he added.

Petropavlovsk produced 219,100 oz of gold in the first half, in line with expectations, and 506,810 ounces in 2010, compared to a target of 510-530,000.

The firm announced an interim dividend of 5 pence a shares, 67 percent increase on the same period last year.

Analysts at Liberum Capital said Petropavlosk had beaten its estimates and could be expected to beat targets in the second half.

"With scope for positive production surprises in H2 of 2011 and a solid near term outlook for gold, we expect (Petropavlovsk) to outperform in H2," they said in a note.

Copyright Reuters, 2011