3 Min Read
VANCOUVER, June 6 (Reuters) - A weaker economy in Kyrgyzstan is to blame for the Central Asian state "turning up the heat" on Centerra Gold Inc 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, 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.
This is not the first time Centerra has filed for international arbitration against the Kyrgyz government. It previously did so in 2008 while negotiating an investment agreement but later suspended the action when talks progressed, Centerra spokesman John Pearson said.
Centerra has been increasingly open about its desire to diversify its operations away from Kyrgyzstan. It has not been investing in expansions or exploration at the Kumtor mine, which is its flagship operation. Instead it is spending money on projects in more mining-friendly jurisdictions such as Turkey, Mongolia and Canada, and is some 18 months away from having two other mines in operation.
The company is also open to making acquisitions although they would have to show double-digit returns to compete with its in-house projects, Perry said in a presentation in Vancouver on Monday. (Reporting by Nicole Mordant; Editing by Bernard Orr)