Centerra Gold blames weak Kyrgyz economy for pressure on gold miner

Mon Jun 6, 2016 6:55pm EDT
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By Nicole Mordant

VANCOUVER (Reuters) - A weaker economy in Kyrgyzstan is to blame for the Central Asian state "turning up the heat" on Centerra Gold Inc (CG.TO: Quote) in recent weeks as the country guns for a bigger slice of the miner's profits, Centerra's chief executive said on Monday.

In the past five weeks, the Canadian gold miner has, amongst others, been fined around $100 million for environmental damage by a court in Kyrgyzstan, another regulator filed a $230 million lawsuit against it and its local offices have been raided.

Centerra, through its Kumtor gold mine, is the biggest foreign investor and tax payer in Kyrgyzstan, contributing up to 10 percent of the impoverished nation's GDP. The state also owns a 32.7 percent stake in Centerra.

"The economy is not in as strong a shape as it has been in the past. The government is definitely positioning for a larger slice of the overall economics (of the Kumtor mine)," Scott Perry, Centerra's CEO said in an interview.

The former Soviet republic's economy is suffering in part because of the recession in Russia, a major partner. Its currency, the Kyrgyz som KGS=, dropped 22.4 percent against the dollar last year.

Centerra's stock fell as much as 4 percent on Monday after Centerra said Kyrgyzstan had launched more legal proceedings against it and that some of its managers have been warned not to leave the country.

The stock closed off its lows at C$7.19, down nearly 1 percent.

Kyrgyzstan's actions against Centerra have "gone too far", Perry said, which is why the company announced last week that it has taken its dispute to international arbitration.   Continued...