June 11, 2014 / 3:49 PM / 4 years ago

UPDATE 2-Kyrgyzstan OKs Centerra Gold's 2014 mine plan to avoid shutdown

(Adds comment from Centerra, stock price movement)

By Olga Dzyubenko

BISHKEK, June 11 (Reuters) - The government of Kyrgyzstan said on Wednesday it had approved Centerra Gold’s mine plan for 2014, rushing to meet a deadline set by the Canadian investor, which had threatened to shut operations at the country’s largest gold deposit.

“We have signed a relevant order. The company receives the right to continue its work,” Valery Dil, Kyrgyzstan’s deputy prime minister in charge of economy and investment, told Reuters.

“We chose the most rational option ... to avoid the mothballing of the company’s facilities and to avert unpredictable consequences for the economy and ecology.”

But in a statement released shortly after midday on Wednesday, Toronto-based Centerra Gold said it did not yet have official approval for the mine plan in hand.

“The company reiterates ... that absent the receipt of such approvals by the close of business on (Friday) June 13, 2014, it intends to begin an orderly shutdown of operations at the Kumtor project,” Centerra said.

Centerra’s stock jumped 6.4 percent to trade at C$4.33 on the Toronto Stock Exchange, ahead of its peers but off an earlier high of C$4.59.

Centerra has until Aug. 1 to coordinate its planned work at the Davydov Glacier at the site of its operations in the Tien Shan mountains, and register all the explored mineral reserves of its licence area, the Kyrgyz geology and mineral resources agency said.

The Kumtor mine, which lies near the Chinese border at an altitude of 4,000 metres (13,123 feet), has been a source of political tension in the impoverished Central Asian country, which has been trying to increase revenues from the project.

Kyrgyzstan’s state environment agency said last week that after looking into Centerra’s 2014 work plan for the mine, there were serious concerns that the plans could damage the glacier.

Centerra said last week that Kumtor had “significant geotechnical and other challenges,” including instability in the wall of the open pit, water flows and ice movement from the Davydov Glacier. The company has said it has been trying to get its mine plan and related operating permits approved since late last year.

The Kumtor mine, which was discovered by Soviet geologists, is a key source of foreign exchange for the country of 5.5 million people. It is also the main taxpayer and biggest employer in Kyrgyzstan.

A shutdown would further aggravate the bitter dispute between Centerra and the government, which wants more revenue from the mine.

Under a draft agreement 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 finalised.

Kumtor’s gold production is expected to be about 550,000 to 600,000 ounces in full-year 2014.

Stressing Kumtor’s role in the country’s economy and signaling its willingness to reach a compromise with the strategic investor, an official at the state geology and mineral resources agency said last week that the authorities could amend the water code, “taking into account Kumtor’s strategic position.” (Writing by Dmitry Solovyov, additional reporting by Nicole Mordant in Vancouver; editing by G Crosse, Dale Hudson and David Evans)

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