Centerra Gold suspends Kumtor Mine operations

Canadian miner Centerra Gold Inc. (TSX:CG) said Thursday the national grid power supply to its flagship Kumtor mine in Kyrgyzstan has been disrupted by local protestors who have been blocking the road leading to the site since Tuesday.

They demand  the nationalization of the mine, the focus of infighting among political forces and regional clans the Central Asian country.

The mine has begun an orderly shutdown of the milling facility using back-up diesel-generated power, said the company. The camp and other facilities at site are also currently operating on back-up power, added in a press release. Mining operations have also been suspended other than continuing operations to manage the ice and waste in the high movement area of the open pit.

The Toronto-based firm said it continues to cooperate closely with the Kyrgyzstan government and local authorities, hoping to find  a peaceful resolution.

However, if grid power and road access is not restored in a timely manner the miner warned there would be a material negative impact on its operations, including its gold production and financial results.

The country’s parliament has set June 1 as a deadline for the government to renegotiate – or revoke– a deal struck in 2009 with the Toronto-based company.

Centerra Gold 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.

To give an idea of just how important Kumtor — the largest gold deposit operated in central Asia by a western company— is to the country, Centerra’s announcement May 15 of reduced 2012 gold production guidance (from 642,000 ounces to 390,000 ounces) led to this pronouncement from Prime Minister Omurbek Babanov: “Kyrgyzstan’s annual GDP growth will fall to 1.8% from the original target of 7.5%.”

Kyrgyzstan, a land-locked country of five million people on China’s western border, has become infamous in recent years because it hosts a U.S. airbase used to support military operations in neighbouring Afghanistan.

(Image of Kumtor courtesy of Centerra Gold)

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