UPDATE 2-Kyrgyzstan sets deadline to revise Centerra Gold deal

Thu Feb 21, 2013 4:24pm EST
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* Government to cancel contract unilaterally if no compromise

* Insists Centerra must pay for "colossal" environmental damage

* Centerra says 2009 deal "solid and transparent"; open to talks

By Olga Dzyubenko and Bhaswati Mukhopadhyay

Feb 21 (Reuters) - Kyrgyzstan has given Centerra Gold three months to redraw terms before ripping up an agreement to run its flagship mine in the Central Asian country, accusing the Canadian miner of "colossal" environmental damage and underpaying the state.

Parliament ended two days of fierce debate by passing a resolution on Thursday demanding the government revise a deal struck in 2009, a year before then-president Kurmanbek Bakiyev was driven from power by a popular revolt.

"If within three months our negotiations yield no results, the government will unilaterally cancel the agreement," Economy Minister Temir Sariyev said during the debate on Wednesday.

Centerra, whose shares have halved since the Kyrgyz government said in June it would review the mine deal, said the 2009 agreement was "solid and transparent" and it had already started talking to the government.

The Kumtor mine, bisected by a glacier 4,000 meters (13,000 ft) above sea level, is the largest gold mine in Central Asia operated by a Western company. It is the industrial centerpiece of the fragile Kyrgyz economy, contributing 12 percent of GDP in 2011.   Continued...