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MOSCOW, Dec 16 (Reuters) - Canada's Centerra Gold said on Monday it would consider taking Kyrgyzstan to arbitration if the company cannot reach an agreement with the government, a potential escalation of a bitter row over the country's largest gold mine.
The Toronto-listed firm is under pressure from the Kyrgyz parliament, which demands the state hold 67 percent in a proposed joint venture to run the Kumtor mine, a major foreign-currency earner for the Central Asian nation of 5.5 million.
Negotiations have taken place against a backdrop of riots and opposition calls to nationalise Kumtor, which accounted for 12 percent of Kyrgyzstan's gross domestic product in 2011.
Centerra is actively working with the Kyrgyz government to reach an agreement, but would seek arbitration were talks to fail, Chief Executive Ian Atkinson told Reuters during a visit to Moscow.
"Under our 2009 agreements we do have the right to go through arbitration. The government's well aware of that and been advised of it not just by ourselves but also by their own legal advisers," said Atkinson, who is flying to the Kyrgyz capital Bishkek this week to continue talks.
"If parliament does make a decision to denounce the agreements or nationalise the mine, we've got to work in the best interests of all Centerra's shareholders and that is an avenue that we have to look at and take quite seriously."
In September, the government and Centerra signed a memorandum of understanding, paving 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.
But in October, the legislature voted to tear up the deal and seek control over the planned venture. It gave the cabinet until Dec. 23 to report on its talks with Centerra.
Kyrgyz President Almazbek Atambayev said on Monday the order to seek 67 percent for the state in the Kumtor venture was "obviously unachievable".
If Kyrgyzstan were to withdraw from the current agreement, prompting legal action, the current 33-67 percent split in Centerra's favour would remain in place while any case is heard before the courts, Atambayev said.
"This would take five to 10 years and would inflict huge damage on Kyrgyzstan," Atambayev told reporters in Bishkek.
The president ruled out nationalising Kumtor, saying the country could face a lawsuit amounting to billions of dollars if the mine were taken under state control.
Atkinson expressed hope that a negotiated resolution would be found.
"We've been operating since 1997, we've gone through four presidents and numerous prime ministers - we've always continued operations and through dialogue found a constructive way to get our challenges resolved," he said.
Centerra has had no further production shutdowns in Kyrgyzstan since May, when it suspended work at Kumtor after villagers blocked the only road to the mine, Atkinson said, maintaining the firm's output forecast for 2013.
In July, Centerra Gold raised its annual consolidated gold production outlook to a range of 615,000 to 675,000 ounces from its previous range of 605,000 to 660,000 ounces, compared with 387,076 ounces produced in 2012.
He warned of the dangers facing Kyrgyzstan if parliament were to wrest back control of Centerra's Kyrgyz interests.
"There have been threats to denounce the agreements and potentially nationalise the operation - this would increase the instability in the region," Atkinson said.