December 2, 2014 / 8:53 PM / 4 years ago

UPDATE 1-Kyrgyz leader calls for deal with Centerra Gold by year-end

(Adds Centerra response, stock price)

BISHKEK, Dec 2 (Reuters) - Kyrgyzstan’s President Almazbek Atambayev has said his country must resolve its long-running dispute with Centerra Gold this month, because otherwise it may face the prospect of nationalizing the Canadian company’s gold mine.

The Toronto-listed company operates Kumtor, the Central Asian nation’s largest gold mine. The firm has been in talks with the Kyrgyz government for more than a year on a deal that would involve the state swapping its 32.7 percent stake in Centerra for half of a joint venture that would control the gold deposit.

“The government must take some drastic, decisive steps. I am afraid that in the end we may have just one option, which is nationalization,” Atambayev said in an interview aired by local television channels on Monday and repeated by mass media on Tuesday.

Kumtor accounted for 7.7 percent of the country’s gross domestic product and 24 percent of its industrial output in 2013. Its future is a political issue in the impoverished nation of 5.5 million. The opposition wants it to be nationalized and uses it as a tool to put pressure on the government.

Centerra continues to work with the government to try to reach an agreement on the stake swap, company spokesman John Pearson said.

He said he interpreted Atambayev’s comments to mean “he wants to get the process moving and get it completed”.

The Kyrgyz government is due to report back to parliament on the progress it has made in negotiations with Centerra on Dec. 15, Pearson said.

Centerra’s stock was down 1.4 percent at C$5.50 on the Toronto Stock Exchange, falling less than other gold stocks. The S&P/TSX Global Gold index was down 2.7 percent on a weaker bullion price.

Atambayev, who has until now strongly objected to Kumtor’s nationalization, said both parliamentarians and government ministers were to blame for the stalled talks with Centerra.

“It looks like that today we can’t even establish a joint venture,” he said. “But in any case, the government has to resolve this issue immediately. It must go to parliament and make a joint decision.”

Kyrgyz Prime Minister Joomart Otorbayev told Reuters in an interview in June that he hoped the talks with Centerra could be finalized and said a compromise was crucial for creating an attractive investment climate. (Reporting by Olga Dzyubenko; Writing by Dmitry Solovyov; Editing by Jason Neely and Jonathan Oatis)

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