Centerra Gold announced on Tuesday that "recent substantial acceleration of ice and waste movement" at its massive Kumtor operation in Kyrgyzstan has forced it to cut production by roughly 200,000 ounces for 2012.
By lunchtime the $3.1 billion company had recovered some of the losses to trade at $13.17 or 18.3% weaker. The counter hit a low of $12.71 earlier in the day and has been decimated in trading this year – it is down 26.6% since January.
The Toronto-based company says the ice and waste flows were "exacerbated "by the 10-day strike which occurred in early February 2012.
Centerra now expects to produce 390,000 to 410,000 ounces during 2012 rather than the 575,000 – 625,000 ounces as previously forecast. The inaccessible area also happens to be the mine's high-grade zone.
Margins at the mine are still fat: cash costs in 2012 are forecast to be $430 – $465/oz.
During the labour action Centerra stopped all operations including exploration apart from a "minimal amount of mining" to manage the pit wall and other essential services.
Kumtor has been plagued by disruptions – in December access to the mine was blocked for a week by community protesters seeking greater involvement in the mine, but production was only marginally effected then.
In operation since 1997 Kumtor last year represented over 10% of Kyrgyzstan’s GDP and 54% of its industrial output. Kyrgyzstan holds 33% of the mine and Centerra the remainder.
The ex-Soviet republic of 5.5 million people with per capita GDP of only $880 has been plagued by ethnic strife since independence and the October 2011 presidential election when business tycoon Almazbek Atambayev was elected was the country’s first peaceful transfer of power.
International Business Times reported in October last year a mob of horsemen armed with sticks and petrol bombs attacked an exploration camp run by South African miner Gold Fields’ joint venture in Kyrgyzstan, the latest in a series of assaults on mining companies in the Central Asian state.