MAC: Mines and Communities

Mining conflicts in Kyrgyzstan

Published by MAC on 2012-06-12
Source: Reuters, statement (2012-06-01)

Over a hundred members of a Kyrgystani national youth movement have prevented workers and fuel from entering a key gold mine run by Canada's Centerra Gold.

The protestors are demanding new jobs and revision of the current ownership agreement, under which the state owns 33 percent of the company.

Meanwhile, South Africa's Gold Fields says its seeking the support of local people to re-commence exploration deal for copper and gold in Kyrgyzstan. The company withdrew late last year, after horsemen stormed its camp and beat a security manager.

Centerra is also under attack for its operations in Mongolia. A consortium of Canadian and Mongolian organisations has filed a complaint with the Canadian government, accusing the company of violating Mongolian law and international corporate responsibility guidelines.

Kyrgyz villagers block only road to Centerra Gold mine

By Olga Dzyubenko

Reuters

31 May 2012

BISHKEK - Kyrgyz villagers demanding land and jobs blocked the only road to Centerra Gold's Kumtor mine on Thursday, the latest in a series of disruptions that could jeopardise gold production crucial to the fragile economy of the Central Asian state.

More than 100 members of a national youth movement stopped miners and fuel supplies from entering the gorge that runs to the mine, which contributed nearly 12 percent of Kyrgyzstan's gross domestic product last year, witnesses and officials said.

"The road is blocked," said Sergei Dedyukhin, a spokesman for Kumtor Operating Company, the local unit of Centerra Gold. "Foreign employees coming down from the mine are not being allowed to pass and are having to return to the mine."

The economy in Kyrgyzstan, a mountainous former Soviet republic where per capita GDP is less than a tenth of that in neighbouring Kazakhstan, relies heavily on Kumtor's gold production and remittances from migrant workers.

One of the highest altitude gold mines in the world at nearly 4,000 metres above sea level, Kumtor contributed more than half of Kyrgyzstan's export revenue last year.

Toronto-based Centerra Gold has said any repeat of a 10-day strike in February could jeopardise the mine's ability to meet a 2012 output target, which has already been reduced by a third due to ice movement in the high-altitude pit.

Naris Kalchayev, a local leader of the Kyrgyz Youth Council, said the blockade would continue until the company responded to demands for environmental protection and the return of 16,000 hectares of land to the local region.

He estimated the number of protesters at 200 to 250 and said cars leaving the mine were being allowed passage. Trucks carrying miners and fuel in the other direction, however, were being stopped.

Dedyukhin said the number of protesters was 100 to 150 and that their demands included new jobs and the revision of the current ownership agreement. The Kyrgyz state owns 33 percent of Centerra Gold, which also produces gold in Mongolia.

Disruption

Kyrgyz President Almazbek Atambayev, in power since December, aims to attract investment to develop new mines in a country where Soviet geologists mapped potential reserves of gold, copper, mercury and coal.

His spokesman, Kadyr Toktogulov, said the president had expressed concern about the latest blockade and said community action should not harm the country's economy.

"Dissatisfaction should be expressed by means other than disrupting the work of one of the country's key enterprises," Toktogulov said.

Unionised employees at Kumtor went on strike in February over salary deductions for payments to Kyrgyzstan's social fund. Centerra Gold said on February 16 it expected the settlement to cost about $4 million this year.

That dispute followed a brief disruption in December, when protesters interrupted supplies to the mine by blocking a road near the company's marshalling yard. That dispute was quickly resolved by a deal for community involvement.

Centerra Gold forecasts gold output of 390,000 to 410,000 ounces this year, down from its previous estimate of 575,000 to 625,000 ounces. Kumtor accounted for over 90 percent of the 583,156 ounces produced by Centerra last year.

In a separate statement on Thursday, Kumtor Operating Company said it had transferred an additional $30 million to the Kyrgyz budget this week, responding to a government request to pay part of its gross revenue tax in advance.

(Writing by Robin Paxton, editing by Jane Baird)


Gold Fields seeks support of local Kyrgyz villagers

By Olga Dzyubenko

Reuters

1 June 2012

ARAL, Kyrgyzstan - South African miner Gold Fields hopes an exploration deal in Kyrgyzstan has bought time to find something just as valuable as the copper and gold it seeks: the support of the local population in this volatile corner of Central Asia.

Its joint venture in the former Soviet republic has resumed drilling eight months after horsemen armed with petrol bombs and sticks stormed its remote camp, beating a security manager and issuing death threats to local residents.

The world's fourth-largest gold miner now plans to replicate its experience in the Peruvian Andes, where it built a mine in a region where community opposition disrupted rival projects.

"We've learnt over the last five years that it's critically important to get community support for projects," Gold Fields Chief Executive Nick Holland told Reuters. "It's probably even more important than government support in the first instance."

Faced with growing resource nationalism in developed nations and stable emerging markets, international miners are venturing into increasingly risky environments in search of their next big deposit. Countries previously off-limits are now on their radar.

Though Soviet geologists identified hundreds of metal deposits in Kyrgyzstan, only one major mine - Centerra Gold's Kumtor - has been constructed in the two decades since independence.

That mine contributed 12 percent of GDP and more than half of Kyrgyzstan's exports last year. But even Kumtor has had its problems as protesters have sporadically disrupted production by blocking the roads that carry crucial supplies to the mine.

Revolutions have unseated two Kyrgyz presidents since 2005. The country, which is on a drug trafficking route out of Afghanistan, ranked near the foot of Transparency International's latest 183-country Corruption Perceptions Index.

Almazbek Atambayev, who in December became the first Kyrgyz leader to assume the presidency without a revolution, has vowed to weed out corruption, which includes the trading of licences for mines that are not developed.

New legislation requiring public auctions of new mining concessions has yet to be tested. More important, development of new mines must overcome strong local opposition in communities such as Aral.

The farming community of 5,000 people, in a valley 260 km (163 miles) west of the capital Bishkek, is the closest settlement to the four exploration licences held by Talas Copper Gold.

The joint venture, which Gold Fields operates with Toronto- and AIM-listed Orsu Metals, has spent about $20 million over five years and holds the rights to explore the region until the end of 2015.

"This is mainly a copper project, but there's also enough gold to warrant interest," chief geologist Viktor Adyrkhayev said. "Given the volumes of ore, the project would take no less than 10 years and would require around 2,000 employees."

Many residents of Aral are worried, though. Who will get these jobs? And how will mining transform their community? While the Kumtor mine is hidden 4,000 metres above sea level, far from the nearest settlement, Aral is only 2 km from the company's camp.

Nurkali Abdyldayev, a 48-year-old mathematics teacher in the village school, said he was concerned that blasting at the pit and convoys of ore-bearing trucks would disrupt pastoral life.

"The deposit is very close to the village. We want to live in a clean home." His voice rising, he added: "Our state is corrupt. They will plough everything out from under us and leave."

Reconciliation

Opposition to the project boiled over in the early hours of October 8, when local men rode on horseback into the camp. The security manager was beaten as he fled a burning farmhouse. It was the second attack on the camp within a year.

Unable to guarantee the safety of local residents in the face of subsequent death threats, the company ceased drilling and began work instead on an agreement with the local community.

The agreement, signed in January, gives local residents priority when staff are recruited and will compensate landowners for any damage that may occur in the course of drilling. In return, residents agreed to resolve any disputes through talks.

There is a twist in the tale. Three suspects were detained by local police. After discussions within the community, six more local men confessed to the attack and agreed to refurbish the burnt-out farmhouse at their own expense.

The nine men appeared in court in January. Eight were put on three years' probation, and charges against the ninth were dropped. Talas Copper Gold withdrew its compensation claim and has hosted the men at the camp as they rebuild the farmhouse.

David Grant, general director for Gold Fields Kyrgyzstan, said that resolution of this conflict, including rebuilding the house, was "a strong, visible sign of reconciliation, which indicates that this project has much more positive times ahead".

Holland said he believed environmental concerns were the root of local opposition, even though some mining executives in Kyrgyzstan have blamed officials for whipping up anti-mining sentiment for political gain.

"We don't believe there's any clandestine objective to drive people out. There's genuine concern: it's a pristine area and they want to make sure mining is done responsibly," he said in a telephone interview from Bishkek after meeting the president.

"People have been opposed to mining because they haven't understood the benefits," he said. "It's a fledgling industry in this country."

The example to follow in Kyrgyzstan, said Holland, was the Cerro Corona mine in Peru. Gold Fields built the mine in the volatile region of Cajamarca, where mass protests have stalled Newmont Mining's $4.8 billion Minas Conga project.

"It took two years of detailed collaboration and discussion," Holland said. "We've trained a lot of people who are operating the mine for us. We used a lot of local contractors to help build the mine."

Envy

At Taldybulak, the most prospective of its four licence areas, Talas Copper Gold will drill holes to a depth of 800 metres, up to three times deeper than the Soviets ever searched.

A scoping study released in 2010 envisages an open-pit mine that would produce a copper, gold and molybdenum concentrate. The total estimated resource is 11.7 million ounces of gold equivalent, although these resources are not proven.

Pensioner Erkinbek Malayev chairs the committee formed this year to represent the community's interests and act as a go-between with the company. While agreeing to drilling, he is not convinced a mine will be in the best interests of the village.

"It's not worth continuing this project if it harms the village," he said. "People are thinking of their children and how they will live."

But many in Kyrgyzstan see mining as the quickest route out of poverty for an economy subsidised by cash sent home by hundreds of thousands of migrant workers. Per capita GDP is less than a tenth of that in oil-rich neighbour Kazakhstan.

"If the people decide Kyrgyzstan has no other route to development, we need to do this. We cannot live forever in debt," said Malayev. "We watch TV. We see how other countries live, and we envy them."


Centerra Gold Inc. Flouting Mongolia's Environmental Protection Laws: Organizations File Complaint with Canadian Government

Joint press release

14 March 2012

OTTAWA, ONTARIO -- A consortium of Canadian and Mongolian organisations has filed a complaint with the Canadian government over apparent violations of Mongolian law and international corporate responsibility guidelines by Centerra Gold Inc. in its Mongolian operations.

MiningWatch Canada and its Mongolian partners, the United Mongolian Movement of Rivers and Lakes (UMMRL) and OT Watch lodged a complaint with the Canadian Government's National Contact Point for the OECD Guidelines for Multinational Enterprises concerning Toronto-based Centerra Gold Inc. and its alleged failure to respect Mongolian laws. The complaint is supported by the US-based Southwest Research and Information Center and the British NGO, Rights and Accountability in Development (RAID).

The NGOs allege that Centerra Gold's operations at the Boroo Mine and its Gatsuurt gold deposit in Selenge Province, Mongolia are in violation of key provisions of the OECD Guidelines. Forty-two OECD and non-OECD governments, including Canada, have adopted the Guidelines, which are seen as the leading international instrument for the promotion of responsible business conduct.

The Guidelines clearly state that 'obeying domestic laws in the first obligation of enterprises.' Centerra's proposed mine is situated in a forested area in the headwater of the Gatsuurt River, where mineral exploration and mining operations are prohibited. The law protecting the forests and rivers was passed in July 2009. In 2010 the Mongolian Cabinet issued a list of 254 licences to be revoked, among them Centerra Gold's licences for the Gatsuurt project. By the end of that year the company had already completed extensive mine working and a 55-kilometre haulage road from Boroo to Gatsuurt.

During 2010, the company was notified on at least two occasions by the authorities that its Gatsuurt licence might be revoked and that until a decision had been taken, it should halt its activities. Despite these formal notifications, according to UMMRL and OT Watch, who visited the Gatsuurt site in July 2011, the company has continued extensive forest cutting and disruption of the Gatsuurt River.

"The company seems to be trying to present the Mongolian government with a 'fait accompli', said Sukhgerel Dugersuren of OT Watch. "At the same time it is lobbying hard to have the law amended."

Herders complain that the forest cutting and use of explosives have released arsenic and other heavy metals into the Gatsuurt River, which is now too contaminated to be safe to drink. Livestock have developed lesions and local people suffer from skin disorders that they attribute to the company's activities.

The Gatsuurt ore has high concentrations of arsenic, according to a Centerra technical report, raising pollution concerns. Paul Robinson, an environmental expert based at Southwest Research and Information Center, explains: "If Gatsuurt proceeds, groundwater contamination problems will only get worse. Centerra plans to dispose of the spent ore at the existing tailings pile at Boroo where the arsenic release to groundwater has already been detected."

The NGOs warn that Centerra Gold's practices, in addition to flouting international guidelines, augment the risk of increasing social tension and conflict in Mongolia as a result of the rapid expansion of mining activities and weak regulation. Their petition calls on the Canadian NCP to intervene to resolve the problems with Centerra Gold.

The complaint can be consulted online at: http://www.miningwatch.ca/news/centerra-gold-inc-flouting-mongolia-s-environmental-protection-laws-organizations-file

Contacts:

Jamie Kneen, Communications Coordinator
MiningWatch Canada
(613) 569-3439

Sukhgerel Dugersuren, Executive Director
OT Watch
+976-98905828 or +976-99185828 (cell)

Tricia Feeney, Executive Director
RAID
+447796 178 447 (cell)

Paul Robinson, Research Director
SRIC
(505) 262-1862

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