Oct 31 (Reuters) - The chief executive of Centerra Gold Inc said on Thursday he had little wiggle room to agree to demands from the parliament of Kyrgyzstan, which is seeking control over the company’s flagship mine in the central Asian country.
Ian Atkinson said Centerra’s minority shareholders, which own 67 percent of the company, were “cautiously supportive” of a 50-50 tentative ownership agreement signed with the Kyrgyzstan cabinet last month on its Kumtor gold mine.
But minority owners were unlikely to back any further reduction in the value of their investment.
“On a 50-50 basis, we think we can get their approval,” Centerra CEO Ian Atkinson said in an interview.
“However, if there is any significant change to that, that would result in further dilution or transfer of value to the Kyrgyz side, I think it would be difficult to see how we can get the necessary shareholder support,” Atkinson said.
Kyrgyzstan’s parliament voted last week to seek a 67 percent stake in the Kumtor mine, demanding a 50-50 agreement signed between the company and cabinet just last month be torn up in an intensifying row over a major foreign currency earner. The vote comes against a backdrop of riots and opposition calls to nationalize the Kumtor mine.
The September memorandum of understanding (MOU) paved the way for Kyrgyzstan to swap its 32.7 percent stake in the Canadian firm for 50 percent in a venture that would own Kumtor. As part of the agreement, Centerra will also receive $100 million to be paid over 10 years.
Atkinson said Centerra is in direct discussions with the Kyrgyzstan prime minister and the government over the future of the Kumtor mine.
Parliamentarians have given the government until Dec. 23 to report back on the discussions on setting up a new Kyrgyzstan majority-owned venture. Atkinson said talks could stretch on beyond that date.
“The challenge for the government and also for ourselves is to explain the benefits of the MOU, what it brings to the Kyrgyz Republic,” Atkinson said.
The Kumtor mine, high in the Tien Shan mountains, is a major foreign exchange earner for Kyrgyzstan and alone accounted for 12 percent of 2011 gross domestic product in the Central Asian nation of 5.5 million. It is also the country’s biggest employer.
Centerra’s shares have slumped from above $22 two years ago to $4.17 on Thursday.
Centerra reported a smaller quarterly net loss on Wednesday and said gold production more than doubled to 113,840 ounces. Kumtor contributed 90,289 ounces, up from 23,786 ounces in the same quarter in 2012.