Fresh threats to Centerra's Kumtor gold mine in Kyrgyzstan

As “murky” qualified Kyrgyzstan minister of economy, Temir Sariev, the terms of the current agreement between the government and Centerra Gold (TSX:CG), reports

The news outlet echoes last week’s rumours indicating that the Kyrgyz Republic government is once again trying to force Centerra to renegotiate the terms of its mining license for the Kumtor open pit gold mine, the country’s largest foreign investment.

Centerra's Kumtor mine was given the green light under Kyrgyzstan deposed leader, Kurmanbek Bakiyev, who was accused of corruption.

Since Kumtor started running in 1997, it has generated $1.9 billion for the country and produced more than 8.4 million oz of gold.

But a document accusing Centerra of damaging the environment and stealing the country's riches, forced the Kyrgyzstan government in July last year to cancel the ruling that gave the company surface rights at Kumtor. The company, in turn, was fined $152 million.

Centerra Gold is a significant employer and taxpayer in the Central Asian 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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