MAC: Mines and Communities

Kyrgyzstan Calls State of Emergency After Gold Mine Clashes

Published by MAC on 2013-06-03
Source: BBC, AP, EurasiaNet Blog, Financial Post (2013-05-31)

55 wounded, 80 detained in clashes at Canadian mine in Kyrgyzstan

State of emergency declared after protests at Centerra Gold facility

The Associated Press

31 May 2013

Hundreds of stone-throwing protesters besieged a Canadian gold mine in Kyrgyzstan on Friday, clashing violently with riot police and prompting the president to declare a state of emergency.

Over 50 people were wounded and 80 detained in the clashes, authorities said.

The protest also triggered widespread unrest in the southern city of Jalal-Abad, where hundreds of people stormed the governor's office.

The twin developments threatened further turmoil in this impoverished Central Asian nation of five million, which hosts a U.S. base supporting military operations in nearby Afghanistan.

Protesters want the Kumtor gold mine in the northeastern part of the country to be nationalized and the company to provide more benefits.

Largest foreign-owned gold mine in post-Soviet bloc

The mine, operated by Toronto-based Centerra Gold (TSX:CG), is the largest foreign-owned gold mine in the former Soviet Union. It accounts for about 12 per cent of the nation's economy and has been at the centre of heated debate between those favouring nationalization and officials who believe that would deter much-needed foreign investment.

Centerra said Friday that an orderly shutdown of its milling facility using power from a backup diesel generator was continuing and that mining operations have been suspended other than those to manage ice and waste.

"Until safe and secure access and grid power has been restored to the facility, it will not be possible for the company to determine the extent of the impact on the operations, including gold production and financial results," the company said in a statement.

Shares in the company were down 39 cents or nearly 10 per cent at $3.76 in trading on the Toronto Stock Exchange on Friday.

Electricity cut off

The demonstrations began earlier this week when protesters blocked the road leading to the mine in the northern Tian Shan mountains.

On Thursday night, several hundred demonstrators, some on horseback, besieged a power transformer unit in the village of Tamga and cut off electricity to the mine for several hours. Riot police moved in overnight, detaining about 80 protesters and restoring the power supply.

By Friday, riot police used stun grenades and rubber bullets to disperse some 2,000 protesters who attempted to storm the Kumtor mine office, the Health Ministry said.

It said at least 55 people, including 13 police, were wounded in clashes and a police bus was set on fire.

Kyrgyz President Almazbek Atambayev declared a state of emergency in the area and the Defence Ministry announced it was deploying forces to protect key facilities.

'Have patience,' deputy PM urges

A senior cabinet member visited the area Friday and tried to persuade the protesters to disperse, saying that further disruptions would cripple the mine and cause significant economic losses.

"The government is asking you to have patience and wait until the autumn, when we will look at the issue," Deputy Prime Minister Shamil Atakhanov told protesters.

But shortly after he spoke, protesters went back to the power transformer unit and cut the power again, forcing the mine to suspend operations.

The protest quickly spread, engulfing the southern city of Jalal-Abad, where several hundred people stormed a local governor's building, drove officials out and appointed one a "people's governor," the Interfax news agency reported.

The man, Medet Usenov, told Interfax the protesters were demanding the release of several opposition lawmakers jailed on charges of attempting to overthrow the government last October when a demonstration in the capital of Bishkek to demand the nationalization of Kumtor spiralled into a violent confrontation with police.

He added that they intend to name local mayors and district administrators throughout Jalal-Abad province.

Government accuses opposition

Kyrgyz media speculated on Friday that the current government's political rivals could be behind the protests. Former Kyrgyz President Roza Otunbayeva told the AKIpress news agency that they are a planned attempt to topple the government.

Politics in Kyrgyzstan are shaped by clan loyalties and sharp divisions between the north and the south. The ex-Soviet nation on China's mountainous western frontier has seen the violent overthrow of two governments since gaining independence in 1991.

In 2010, the government was overthrown and clashes between ethnic Kyrgyz and minority Uzbeks killed at least 470 people, mostly Uzbeks, and displaced about 400,000 people.


Kyrgyz police move in on Centerra gold mine protesters

BBC News

31 May 2013

Reports say there have been injuries on both sides as special forces clashed with protesters

There have been angry clashes in Kyrgyzstan after hundreds of police moved in to disperse a protest over a valuable Canadian-owned gold mine.

About 1,000 people have been camped out for days calling for a bigger share of the profits from the Kumtor mine, owned by Canada's Centerra Gold group.

The government has now declared a state of emergency around the gold mine.

The mining group says it has paid $1bn (£660m) in taxes since it was formed and spends millions on social projects.

The government and Kumtor Gold, a subsidiary of Centerra Gold, have warned that output could be affected if the situation is not resolved. In a statement, the government also promised to work towards a bigger share of revenue for the country.

"We have a contract in place which clearly states the economic conditions set out regarding the mine, as to the taxes that we pay," John Pearson, Vice President of Investor Relations at Centerra Gold told the BBC.

"Are there other areas where we can work with the Kyrgyz government? I'm sure there are, and we will come to an acceptable solution," Mr Pearson added.

Normally, shift workers from the mine should have arrived here to be replaced by another team of miners, but the company has kept their employees on site for their safety.

A BBC Kyrgyz correspondent at the scene says there have been injuries on both sides and more than 1,000 people have blocked the main road to Bishkek, with many demanding to see the president or prime minister.

Police reportedly fired tear gas at the protesters, who pelted special forces with stones.

Reports that protesters had seized government buildings in the south-western city of Jalalabad were denied by local police.

A criminal case has also been opened against those who damaged the power supply, under a new law criminalising the occupation of government buildings and enterprises. Protesters had seized an electricity station in an effort to cut power to the mine.

Protests quietened down as evening broke with only a few people remaining, apparently guarding the site from where power to the mine was interrupted again.

Biggest tax-payer

At 4,000m (1,300ft) above sea leve, Kumtor, in the country's Issy-kuil region, is one of the highest gold mines in the world, situated in the permafrost of the Tien Shan mountains of China and Central Asia.

Its economic importance for one of the region's poorest countries is enormous, with the mine accounting for 12% of Kyrgyzstan's GDP and more than half of all its exports in 2011.

But a state commission, which was formed to re-assess the mining deal struck with Centerra Gold in 2009, says the company is paying too little.

Some protesters have also called for the mine to be nationalised outright.

In Kumtor Gold's response to the grievances aired, it added that despite being the largest tax-payer in the country and funding many projects, it could not be expected to solve all of Kyrgyzstan's problems.

But analysts say that the current stand-off is the latest in a series of disputes which have piled pressure on parent company Centerra Gold and the Kyrgyz government, worried it might deter foreign investors.

"Over the past year Kumtor has certainly been used as a political vehicle," Mr Pearson said.

"Since we are the largest business enterprise and the largest tax payer in Kyrgyzstan, we do become an easy target for various individuals or groups to use us as a political football so to speak," he added.

--

At the scene - Nazgul Kongurbaeva BBC Kyrgyz, Barskoon

In the village that has been at the centre of the gold mine protests, police and protesters are locked in a waiting game.

Around 200 special forces are sitting in the sun, equipped with helmets, batons and riot shields.

Hundreds of protesters are lining the road that leads from here to the mine and which has been partially blocked with mounds of earth and stones.

Some have told me that they have hardened their stance and now demand a shutdown of the mine.

They accuse the police of having started the earlier clashes, but officers have told me that there were provocateurs in the crowd who set things off. I have seen some protesters with police batons which they could have captured during the earlier confrontation.


Kyrgyzstan Calls State of Emergency After Gold Mine Clashes

by David Trilling

EurasiaNet Blog: Inside the Cocoon

31 May 2013

Authorities in Kyrgyzstan have declared a state of emergency and curfew after police clashed with protestors who have forced the country's largest enterprise, the Kumtor gold mine, to shut down operations.

Since Tuesday, hundreds of protestors have blocked the road to the high-altitude mine (or thousands, depending on the source). They are demanding Kumtor pay for new schools, hospitals and roads in the region, and calling on the government to tear up the existing operating agreement. On May 30, protestors seized an electrical substation and cut power to the mine.

Officials said 92 people had been arrested and 55 wounded, including security forces, in the May 31 clashes around Barskoon on the southern shore of Lake Issyk-Kul. Police used stun grenades and rubber bullets, according to Kloop.kg. Some local news sites reported that protestors took the head of the district hostage, later exchanging him for detained protestors.

In an open letter to the prime minister, Kumtor outlined how it has fulfilled many of the protestors' demands through the tens of millions of dollars it pays into a development fund for Issyk-Kul province and other contributions.

But few in Issyk-Kul see any benefit from those contributions. The company has said local authorities give it little say in how the funds are used and fears much of the money disappears into Kyrgyzstan's seemingly bottomless pit of corruption.

The clashes this week comes as Bishkek is negotiating a new operating agreement with Toronto-listed Centerra Gold, which owns Kumtor. Since a bloody uprising toppled President Kurmanbek Bakiyev in 2010, Centerra has been repeatedly targeted for allegedly getting too sweet a deal in a 2009 agreement with the Bakiyev regime. Some lawmakers, leading street rallies of their own, have called for nationalization. Though the government of Prime Minister Jantoro Satybaldiyev rules that out, it has not yet announced the results or substance of its ongoing negotiations, which are due to be finalized on June 1.

Though electricity has been restored, Centerra has put mining operations on hold, a source in the company confirmed on May 31. The source, who is familiar with the regular roadblocks since Bakiyev's overthrow, described the protestors this week as especially aggressive.

Operations at the complex, high-altitude mine cannot be started and stopped quickly, so the shutdown is likely to hurt Centerra's production targets and thus Kyrgyzstan's budget as tax revenues fall. That, in turn, should impact the government's ability to pay wages and pensions. Kumtor is responsible for over 50 percent of exports and, in a good year, 12 percent of Kyrgyzstan's GDP.

Ironically, since the Issyk-Kul Development Fund is based on 1 percent of Kumtor's gross revenues, the protestors' infrastructure demands will also see less funding: "By stopping the mine they are also cutting off the cash which could build roads, schools and hospitals," said the company official.

The clashes are a serious test of the government's authority and ability to project power outside the capital. Some observers feel the security forces are too timid to end effectively the illegal roadblock. Since Bakiyev's bloody overthrow, prosecutors have accused a number of soldiers of murder when they fired into the crowd to protect the former president in April 2010. Though the trials have not concluded, few other members of the security forces want to be in their position, citing "orders from above" as a defense.

**UPDATE: Late on May 31, protests spread to Jalal-Abad, where some reports say demonstrators have attacked a government building and are demanding the release of Kamchybek Tashiev. Tashiev, who hails from Jalal-Abad, led violent protests for the nationalization of Kumtor last October. He is serving a short jail sentence in Bishkek. Demonstrators in Jalal-Abad and Maili-Suu are also calling for the Kumtor operating agreement to be nullified.


‘There's nothing we can do': Protests force Centerra to suspend Kyrgyzstan mining operations

Peter Koven 

Financial Post (Canada)

30 May 2013

TORONTO - During 16 years of operations in Kyrgyzstan, Centerra Gold Inc. has endured countless protests and political upheavals. But those events never forced the company to close its flagship Kumtor mine.

That changed on Thursday, when the Toronto-based miner had to suspend mining after protesters took control of a substation and shut down all grid power to the operation. Hundreds of demonstrators have also set up a roadblock to Kumtor, demanding that the state's investment agreement with Centerra be torn up.

The mess appears to be getting worse by the day, and Toronto-based Centerra believes a political solution is the only way to end it. The government has a legal obligation to ensure access to power and security in the area.

"It's really up to the government at this point in time. There's nothing we can do," said John Pearson, Centerra's vice-president of investor relations. He added that the protestors are not interested in talking to anyone but the prime minister at this point.

The question is how the prime minister of the former Soviet state will respond to this crisis.

While anti-Kumtor protests are nothing new, Centerra has faced increasingly serious political opposition since last summer, when an 800-page parliamentary report was released that made some outrageous allegations against the company, including environmental destruction on a massive scale.

Centerra dismissed the report as nonsense, but it clearly made an impact. Three months ago, parliament approved a resolution to renegotiate the state's investment agreement with Centerra, and toss it out entirely if a deal can't be reached. Numerous groups have called for outright nationalization of the mine.

To add insult to injury, a Kyrgyz government representative showed up at Centerra's annual meeting in Toronto last month and said the state had "strong reservations" about the company's management compensation.

The demands for renegotiation are a major disappointment for Centerra, which thought it put an end to title concerns when it signed the investment agreement in 2009. Now it is back in negotiations, with a reported deadline of June 1 to settle the matter. The company refused to comment on how the talks are going, or how Prime Minister Zhantoro Satybaldiyev actually feels about the agreement.

Centerra is one of many Canadian miners facing growing resource nationalism around the world. But it comes under more scrutiny than almost any of them, simply because Kumtor is such an enormous enterprise in Kyrgyzstan. It makes up 12% of the country's gross domestic product and more than half its exports. Centerra is by far the largest foreign investor in Kyrgyzstan, a volatile place that most companies refuse to touch.

BMO Capital Markets analyst Andrew Breichmanas wrote that government intervention should allow the mine to restart in the near term, but a full resolution of the issues "appears challenging given the importance of Kumtor to the Kyrgyz economy and its frequent use as a populist political target."

Centerra warned that if grid power and road access are not restored soon, there will be a "material negative impact" on gold production and financial results.

Despite the turmoil, the miner's shares rose 4% on Thursday amid a positive day for the gold price. It is proof that investors have confidence that the company can resolve the political problems, as it has many times in the past. Over the last few years, Centerra has endured multiple nationalization threats, a taxation evasion probe, an international arbitration case, and even a 2010 political revolution.

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