Kyrgyzstan to review contract with Centerra Gold

Wed Jun 27, 2012 12:49pm EDT
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By Olga Dzyubenko

BISHKEK (Reuters) - Kyrgyzstan wants to renegotiate a contract with Centerra Gold Inc CG.TO under which the Canadian company operates a gold mine that accounts for 60 percent of the Central Asian nation's industrial output, after a report that said the project has damaged the environment.

Stopping short of voting to nationalize the Kumtor mine, lawmakers instead directed the government to revise the contract, which gives Kyrgyzstan a 33 percent stake in the company while Centerra retains full ownership of the mine and its output.

Deputies also ordered an environment review of the operation, which lies in a harsh permafrost area 4,000 meters above sea level. Angry villagers have sporadically blocked the only road to the mine, demanding land and jobs.

"Those who understand the gist of the matter realize that it is impossible (to nationalize Kumtor)," said Deputy Ravshan Dzheyenbekov. "The legislature today demonstrated a well-balanced and mature approach."

The resolution, passed on Wednesday, calls on the government to revoke decrees and licenses in relation to the project, Centerra said in a statement on Wednesday. The company considers the resolution not legally binding.

The decision to review of the 2009 mining agreement follows a parliamentary report last week that said Centerra's operations in Kyrgyzstan were damaging the environment and the health of local villagers.

Centerra maintains that the report is without merit. It insists the Kumtor mine, which produced some 580,000 ounces of gold last year, is compliant with local and international environmental, health and safety standards.

The Toronto-based miner's stock were down 2.4 percent at C$9.81 on Wednesday on the Toronto Stock Exchange. Shares plunged last Friday to a 2-1/2 year low after calls from the Kyrgyz parliament to nationalize Kumtor. That resolution was rejected.   Continued...