Centerra to shut Kumtor gold mine if doesn't get permits
Canada's Centerra Gold (TSX:CG) has warned the government of Kyrgyzstan it is planning to shut down operations at its Kumtor gold mine unless its gets the necessary permits by June 13.
The Toronto-based company has been negotiating for months the possibility to swap the government’s stake in the company for a direct interest. A non-binding pact last year was rejected by the Kyrgyz parliament following public opposition. A new agreement was signed in December and approved last February by parliament, creating a joint venture that evenly splits control of the Kumtor gold mine.
Despite apparently having made peace, the company and authorities have continued talks. The deal, in fact, has not yet been finalized, and Centerra is still facing a $300 million ecological damages suit filed by the government.
Regardless of endless political turmoil, the Canadian gold miner has successfully operated the mine, located high in the Tien Shan mountains, since 1997. It has become is a significant employer and taxpayer in the country and a key contributor to the Kyrgyz economy.
The vast 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.
But all those benefits would go down the drain if Centerra decides to close shop. While the company said Monday it would keep staff on site for environmental and safety monitoring, as well as for security and required maintenance, it noted that Kumtor has "significant geotechnical and other challenges."
The firm said the wall of the open pit is unsteady, as it is being affected by ongoing water flows and ice movement from a nearby glacier.
"An extended shutdown without active monitoring and management of such challenges would likely have a material adverse impact on the Kumtor mine and the company's operations, future cash flows, earnings, results of operations and financial condition," it said in the release.
Output for this year was expected to almost double to as much as 600,000 ounces, according to Centerra, but that may change depending on whether it closes down Kumtor and the duration of such shutdown, it added.
Shares in the company collapsed on the news. They were down 23.2% to $3.54 at 2:32 pm ET.
Image courtesy of Kumtor Mine