UPDATE 1-Centerra, Kyrgyz gov in talks to form company for Kumtor mine

Tue Jun 4, 2013 2:07pm EDT
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* Government company to swap interest in Centerra for stake in JV

* Government says new plan to generate more cash flow than current one

* Shares rise 1.2 pct

June 4 (Reuters) - The Central Asian state of Kyrgyzstan is in talks with Centerra Gold Inc to swap its one-third stake in the company for joint ownership of the flagship mine that underpins the economy of the restive ex-Soviet country.

Toronto-listed Centerra has come under pressure to redraw an agreement struck in 2009 to operate the Kumtor mine, hidden high in the Tien Shan mountains. Hundreds of protesters forced a brief stoppage to production last week.

A state commission has said Centerra is paying too little to run the mine and accused it of damaging the environment, while protesters have raised demands ranging from new jobs to building roads.

Centerra said that, according to the latest proposal, state gold company Kyrgyzaltyn would exchange its 32.7 percent interest in Centerra for "an interest of equivalent value" in a joint venture that would own the Kumtor project.

Centerra's shares rose 1.2 percent to C$4.22 on the Toronto Stock Exchange. They have lost about 57 percent of their value this year until Monday close.

"It's a positive that they're making progress and negotiations," said analyst David West of Salman Partners Inc.   Continued...