Kyrgyz officials risk corruption charges over Centerra’s Kumtor mine

At least nine former and current Kyrgyz officials may face corruption charges over a contract with Centerra Gold (TSX:CG) that gave the Canadian company control over the operations of Kumtor, the country's largest gold mine.

According to local news outlet News24, Kyrgyzstan's prosecutor-general Aida Salyanova told lawmakers Wednesday that at least nine of the 12 top authorities that signed the deal in 2003, could be charged with corruption and wrongdoing. The contract gave the Kyrgyz government a 17% stake in Kumtor, with Centerra owning the remaining 83%.

Three former ministers have already been charged with corruption in connection to Kumtor and others are under home arrest, Salyanova was quoted as saying.

The agreement, renegotiated in 2009, increased the Central Asian nation’s government interest in the mine to 33%, but it has been under revision for well over a year.

The most recent development came to light last week, when the Kyrgyz parliament rejected a new government-proposed contract in which Centerra and the Kyrgyz government would each own a 50% share.

Lawmakers have asked the government to work on a new deal with Centerra that increases the country's ownership in Kumtor to 67%, and set Dec. 23 as the deadline.

Prime Minister Zhantoro Satybaldiyev said today the government is working on three variants of the agreement, adding that he expects to reach a prompt solution, as a stoppage of Kumtor will have negative consequences for the economy. “Unfortunately, there is more politics than economics,” News24 quoted him as saying.

Despite endless political turmoil, Centerra 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.