LONDON (Reuters) - Peter Hambro Mining (LSE: POG.L - news) <POG.L>, Russia's second-largest gold miner, surprised shareholders on Monday by announcing its first dividend as it posted a 20 percent increase in 2007 profit on higher output and prices.

Shares in the group, which have shed 16 percent over the past two months, gained 2.7 percent to 12.41 pounds by 8:53 a.m., outperforming a 1 percent increase in the UK mining index.

"Peter Hambro has provided the market with a pleasant surprise ... The dividend should be matched at the interim stage as well, and so we estimate that the company is now sitting on a yield of about 1.2 percent," said analyst Charles Kernot at Seymour Pierce.

The yield is much higher than 0.2 percent for rival Randgold Resources (LSE: RRS.L - news) <RRS.L>, he added. "We cannot justify the difference in rating between these two companies and strongly recommend purchases."

The company plans to pay interim and final dividends of about equal amounts in future, the firm said in a statement.

"Almost 14 years after we founded the group, it gives me huge pleasure that the board is today proposing a maiden final dividend of 7.5 pence per share," Executive Chairman Peter Hambro said.

ACCOUNTING CHARGE

Earnings per share last year rose to 47.6 cents from 39.8 cents in 2006 on 44 percent higher revenues of $226.4 million. Operating profit rose 60 percent to $81.4 million (41 million pounds).

The firm said in January that 2007 gold output climbed 14 percent to 297,300 ounces. Its average realised gold sales price also rose by 14 percent, to $668 per ounce from $586 per ounce.

Profit was reduced by accounting rules that require the firm to include changes in the value of $180 million of gold exchangeable bonds it issued last year.

Without the non-cash charge of $12 million, profit would have jumped by about 60 percent.

The firm reiterated a target to boost output to between 350,000 ounces and 400,000 ounces this year.

Operating costs rose only 9 percent in dollar terms despite significantly higher prices hikes in energy, labour and materials.

Peter Hambro told Reuters that although he could not make a forecast regarding costs in 2008, the expected higher output on the back of the new Pioneer (Munich: 857040 - news) mine would help unit costs.

"What you might reasonably assume is that one of the ways that unit costs have been cut is by increasing production," Hambro said in an interview. "You could judge that we are likely to continue to keep our unit costs under control."

The company said plans were on track to move its listing from AIM to the main board of London's stock exchange, expected by the end of the year.

(Reporting by Eric Onstad, editing by Will Waterman)