Kyrgyz law enforcement agencies search Centerra Gold’s office

Canada's Centerra Gold (TSX:CG) said Thursday prosecutors and other state law enforcement agencies conducted a search at the Bishkek offices of its unit Kumtor Gold.

The Toronto-based company, which operates Kyrgyzstan's largest gold mine Kumtor, said authorities claimed to be looking for documents related to alleged financial violations by its local unit.

Authorities are looking into a dividend paid by Kumtor to Centerra in 2013, which the miner says complied with the country's laws and 2009 agreements governing the project.

Kumtor, which lies near the Chinese border at an altitude of 4,000 metres, has been a source of political tension in the impoverished country.

For more than two years the Central Asian nation and the gold miner have been in talks on a deal to swap the government’s 32.7% stake in Centerra for half of a joint venture that would control the Kumtor gold mine.

Kyrgyzstan's authorities had recently reached Centerra to reiterate their dissatisfaction with current arrangements governing the project. They had also voiced their concern about a dividend paid by Kumtor to Centerra in 2013.

According to Centerra, such dividend complied with Kyrgyz laws and 2009 agreements governing the Kumtor project.

Last year, former prime minister Joomart Otorbayev suggested a 50/50 joint venture with Centerra was not in the country's interests and rumours pointing to an imminent nationalization of the mine, later denied by Kyrgyzstan authorities, spread out.

Otorbayev resigned later that month after failing to clinch the restructuring deal. His successor, Temir Sariyev, said at the time that resolving the issue would be among his priorities.

The vast open pit Kumtor gold mine is expected to produce 470,000-520,000 ounces at an all-in sustaining cost between $819-$908 per ounce this year.

The company said Kumtor’s operation were unaffected by the search.