Centerra Gold asked to pay over $300m Kyrgyzstan for alleged ecological damage

Canada's Centerra Gold (TSX:CG) may have to pay the Kyrgyz Republic over US$300 million, as the country’s environmental protection and forestry filed Friday an ecology damage suit against the miner’s controversial Kumtor mine.

According to the state environmental protection and forestry agency (SAEPF), the decision comes as the Toronto-based company ignored the body’s earlier request for voluntary compensation, News 24 reports.

The SAEPF claims that since Kumtor began operation in the country the company’s subsidiary, Kumtor Operating Company, has not paid a fixed fee the agency charges to all natural resources-related corporations.

The compulsory “environmental pollution fee” is a nominal compensation for eventual damage to the environment caused by emissions, discharge of pollutants and wastes resulting from operating a business, such as a mine.

Ongoing negotiations

Centerra  has been under pressure to rework a 2009 contract to operate the Kumtor for over a year, during which has faced massive protests from locals demanding the mine’s nationalization and more social benefits.

The company almost closed a deal with the Kyrgyz government in October, which aimed to created a joint venture between the parties to run the gold operation. The proposed agreement, however, was rejected by the parliament, which set Dec. 23 as the new deadline for the government to present an improved deal.

Despite endless political turmoil, Centerra’s has successfully operated the Kumtor mine since 1997. The Canadian miner is a significant employer and taxpayer in the country and a key contributor to the Kyrgyz economy.

In fact, the Kumtor open pit gold mine accounts for 60% of the nation's industrial output and, according to the company, it is the largest gold mine operated in Central Asia by a Western-based company.

Since it began production, Kumtor has generated $1.9 billion for Kyrgyzstan and produced more than 8.4 million ounces of gold.

The Kumtor mine output is expected to almost double this year to as much as 600,000 ounces, according to Centerra.

Image: Statue of Kyrgyzstan’s national hero “Manas," by neiljs.