May 30, 2013 / 6:03 PM / 5 years ago

UPDATE 2-Centerra Gold suspends Kyrgyz mine operations

* Says protesters disrupted grid power supply to Kumtor

* Begins orderly shutdown of milling facility

* Road leading to Kumtor mine continues to be blocked

* Kyrgyz government says looking to peacefully resolve situation

By Bhaswati Mukhopadhyay

May 30 (Reuters) - Centerra Gold Inc said operations at its flagship mine in Kyrgyzstan have been suspended after villagers blocking the only road to the mine since Tuesday disrupted the power supply.

The company said Kumtor mine has begun an orderly shutdown of the milling facility using back-up diesel-generated power. The back-up generators are providing power to the camp and other facilities.

John Pearson, Centerra’s vice-president for investor relations, said the company was working with local authorities and the government to get the grid power restored.

Pearson said he could neither say when power would be back up, nor speculate on how long the back-up power would last.

“I do not have a date or any time frame (for production to start),” Pearson told Reuters.

Earlier this week, hundreds of villagers blocked the road to the mine, high in Kyrgyzstan’s Tien Shan mountains, threatening to move in on the mine if the government does not tear up its agreement with the investor.

Centerra Gold had estimated production of between 550,000 and 600,000 ounces from the mine this year.

The miner said if the grid power and road access is not restored in a timely manner, there may be a material negative impact on operations. This would include its gold production and financial results, the company reiterated.

“If it gets into a week of downtime, that is going to start impacting the quarterly production,” analyst David West of Salman Partners said.

Nationalist deputies and groups in Kyrgyzstan are calling for the nationalization of the mine and the parliament has set a deadline of June 1 for the government to renegotiate - or repudiate - a deal struck in 2009 with Centerra to operate the mine.

A state commission said Centerra has been paying too little to run Kumtor and accused it of causing environmental damage that resulted in $457 million in fines.

The Kumtor mine, set some 4,000 meters (13,000 ft) above sea level, has long been the focus of fights among political forces and regional clans in a nation that has seen two presidents toppled since 2005.

Kyrgyz Prime Minister Zhantoro Satybaldiyev held an emergency government meeting, attended by the country’s top security official, late on Thursday, his press service said.

“We must do whatever is possible to peacefully resolve the current situation, taking a proper decision today,” his press service quoted him as saying. It said he was going to hold an emergency meeting with the coalition majority of the parliament this night.

Local news agencies reported that the number of protesters blocking the only road to Kumtor had risen to well over 1,000 on Thursday.

Centerra’s Pearson said, “they gave us the demands but they aren’t talking to us. They only want to talk to the Prime Minister.”

Earlier on Thursday, the government published a bland and cautiously worded appeal to Kyrgyzstan’s population, urging it to keep calm and saying that the stoppage of Kumtor would be detrimental to the country’s economic progress.

The gold mine is the largest operated by a Western company in Central Asia and contributes roughly 12 percent of Kyrgyzstan’s economic output.

The mountainous nation, where gross domestic product per head is less than a tenth of that in oil-rich neighbor Kazakhstan, holds ample reserves of precious and rare earth metals and mercury discovered by Soviet geologists.

But vested interests of powerful local clans, which often defy the authority of central government, have kept strategic investors away.

“We are continuing to mine the ice and waste in the high movement area of the open pit. So that allows us to manage that area and maintain stable pit conditions,” Pearson said.

Shares of Toronto-listed Centerra were up about 5 percent at C$4.18 on Thursday afternoon on the Toronto Stock Exchange. The shares have lost 58 percent of their value so far this year.

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