UPDATE 1-Centerra threatens to shut Kyrgyz gold mine if doesn't get permits

Mon Jun 2, 2014 2:11pm EDT
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(Adds context on the mine's importance in Kyrgyzstan, details on risk posed by shutdown)

June 2 (Reuters) - Centerra Gold Inc said on Monday it will begin to shut down operations at its Kumtor gold mine in Kyrgyzstan unless its new mine plan is approved by the government and permits are issued by June 13.

The Canadian company said it has been trying to get its 2014 mine plan and related operating permits approved since late last year, and will continue to cooperate with the authorities to that end.

Centerra shares were down 26 percent at C$3.41 on the Toronto Stock Exchange on Monday afternoon.

The Kumtor mine, located high in the Tien Shan mountains, is a key source of foreign exchange for Kyrgyzstan. Centerra has said the mine is Kyrgyzstan's biggest employer and taxpayer, and represents about 12 percent of its gross domestic product.

But Kumtor has long been a source of political tension in the Central Asian country. The government has rejected opposition calls for nationalization, while seeking ways to reap more revenue from the mine.

Under a draft agreement announced in December, Kyrgyzstan would swap its 32.7 percent stake in Centerra for half of the Kumtor mine, the company's main asset. But the deal has not been finalized, and Centerra is still facing a $300 million ecological damages suit filed by the government.

Centerra said on Monday that if the mine is shut down, it will keep staff on site for environmental and safety monitoring, security and required maintenance.

It noted that Kumtor has "significant geotechnical and other challenges," including instability in the wall of the open pit, water flows and ice movement from a nearby glacier.

"An extended shutdown without active monitoring and management of such challenges would likely have a material adverse impact on the Kumtor mine and the company's operations, future cash flows, earnings, results of operations and financial condition," it said in a release. (Reporting by Allison Martell; Editing by Chris Reese and Peter Galloway)