Kyrgyz parliament rejects mining deal with Centerra Gold

The Kyrgyz parliament rejected Wednesday a government-proposed deal with Canada's Centerra Gold (TSX:CG) on operating the country's largest gold mine, Kumtor.

The deal called for setting up a joint venture in which both Centerra and the Kyrgyz government would own 50% of shares. Under a 2009 deal, the Kyrgyz government stake was set at around 33%.

Kyrgyz lawmakers said the government must agree on a new deal with Centerra by December 23 to raise the country's ownership to 67%.

In an update on the situation, Centerra said "there can be no assurance that any transaction will be consummated or that the company will be able to successfully resolve any of the matters currently affecting the Kumtor project."

The gold company has been under pressure to rework a 2009 contract to operate the Kumtor for over a year, during which has faced massive protests from locals demanding the mine’s nationalization and more social benefits.

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.

The Kumtor mine output is expected to almost double this year to as much as 600,000 ounces, according to Centerra.