Canadian miner Centerra Gold Inc. (TSX:CG) said Tuesday the road leading to its flagship Kumtor mine in Kyrgyzstan has been blocked by an illegal community protest.
Although the company said operations have not been impacted, it warned the road block is interfering with the movement of supplies and personnel to and from the mine.
Hundreds of villagers are threatening to move in on the mine unless the government cancels its agreement with the investor, as they continue to demand the nationalization of Kumtor, which has long been the focus of infighting among political forces and regional clans in the country.
While Centerra is already working with the local authorities and the Government of the Kyrgyz Republic to resolve the situation, it said that if the road block is not removed in a timely manner “there may be a material negative impact on the company’s operations, including its ability to mine the ice and waste to maintain stable pit conditions, manage the relocation of certain mine infrastructure, and its gold production and financial results.”
The country’s parliament has set June 1 as a deadline for the government to renegotiate – or revoke– a deal struck in 2009 with the Toronto-based company.
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)