MAC: Mines and Communities

Kyrgyzstan standoff ends as Centerra Gold's mine plan approved

Published by MAC on 2014-06-18
Source: Financial Post, Eurasianet (2014-06-18)

This is one more chapter in a sorry tale which MAC has pursued over the years (see for instance Centerra and Kyrgyzstan - apparently - reach agreement on Kumtor).

The demands of many Kyrgyz citizens and NGOs (not only in Kyrgystan) on this calamity - and scandal - ridden mine continue to be flagrantly ignored by the government.

As this article reminds us: "A recent Fraser Institute survey ranked Kyrgyzstan as the single worst mining jurisdiction on the planet"

And that's saying something!

Kyrgyzstan standoff ends as Centerra Gold's mine plan approved

Peter Koven 

Financial Post

13 June 2014

TORONTO - No matter how bad the political turmoil gets in Kyrgyzstan, history shows that Centerra Gold Inc. manages to keep its Kumtor mine up and running.

That fact proved true again this week, as the company finally received government approval for its 2014 mine plan - five-and-a-half months after the year started.

"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," Kyrgyzstan deputy prime minister Valery Dil told Reuters.

The approval ends a standoff that began this month, when Toronto-based Centerra warned it would need to shut Kumtor down if the plan was not approved by June 13. It comes amid an ongoing dispute over ownership of the gold mine that shows no signs of ending.

The threat to shutter Kumtor was an unusually bold move by Centerra. During the past 17 years, the company has tried to operate as quietly and smoothly as possible, regardless of the many threats made by Kyrgyz politicians.

But recently, those threats have gotten increasingly worse. Centerra has faced allegations of massive environmental destruction, and the government forced the company to renegotiate the ownership terms of Kumtor even though there was a binding agreement in place. Those talks remain a black cloud over Centerra, and many observers believe that the delayed approval for the mine plan was tied to them.

Centerra's threat to shut down the mine sent a reminder to the Kyrgyz government that it needs the company's expertise to run Kumtor, and closing it would have major consequences. The mine is a crucial part of the former Soviet state's economy, accounting for 7.7% of gross domestic product last year.

Ultimately, that was reason enough for the government to grant the approval.

BMO analyst Andrew Breichmanas noted that a resolution of this issue was always in the best interests of all parties, "but considering the mine's tumultuous history a rational outcome could not be presumed."

Investors hope this approval will help the two sides resolve the ongoing ownership dispute.

Later last year, they reached broad agreement on a transaction that would convert Kyrgyzstan's 32.7% stake in Centerra into a 50% direct interest in the mine. But the deal is in flux after parliament made additional demands. Among other things, it wants further audits of the Kumtor operation and wants the government to continue pursuing claims of environmental and economic damages against Centerra.

A recent Fraser Institute survey ranked Kyrgyzstan as the single worst mining jurisdiction on the planet.

Financial Post with files from Reuters


Kyrgyzstan: Police and Protestors Clash over Gold Exploration

by Asel Kalybekova

Eurasianet

4 April 2014

Protestors in Kyrgyzstan's northwest have clashed with police and blocked a major road, alleging a Kazakh project to survey for gold is polluting the local environment. It's the latest in a string of violent, mining-related clashes in the Central Asian state. Once again, mining experts in Bishkek are skeptical about the protestors' motivations.

Early on April 3, several hundred protestors blocked the road leading from Talas, the largest town in Kyrgyzstan's northwestern Talas Province, to Taraz, in Kazakhstan. By evening, the number had swollen to 500 and some reports circulated that two officials had been kidnapped. At least 19 police were wounded in a confrontation with stone-throwing residents, 24.kg reported, citing an Interior Ministry official.

Up to 500 people blocked the road until late on April 4.

The protestors are demanding Kazakh mining concern Altyn Kumushtak, which has been exploring the Shiraldjin gold deposit since 2005, stop. In an interview with Radio Liberty's Kyrgyz Service, a self-identified participant in the riots, Nurlan Muzurov, said he and others "don't want deformed children, pollution of the water and the air."

In 2009, Altyn Kumushtak's license had been annulled and given to a Chinese company in one of many murky exchanges during the presidency of Kurmanbek Bakiyev, who was ousted amid bloody street protests in 2010. In 2013 the Kazakh company successfully appealed and won back the rights to the deposit.

Protests targeting foreign miners are common in Kyrgyzstan. Though environmental fears can be legitimate, many observers believe powerful individuals manipulate locals in order to seize deposits, shake down foreign investors, or destabilize the government. Locals in such remote and impoverished areas often do not have access to alternative sources of information.

In August, two men who had previously led environmentally themed protests against the Canadian-owned Kumtor goldmine were caught on tape demanding $3 million from a Kumtor representative in exchange for an apparent guarantee not to orchestrate protests. They have since been sentenced to jail terms and protests demanding their release continue. One protest apparently on their behalf last fall saw the local governor kidnapped, doused with petrol, and threatened with matches.

Altyn Kumushtak has not begun tapping the deposit at Shiraldjin, said Kadyrbek Kaketaev, a senior advisor at the State Geology Agency who retired last year. He believes the protestors have been bribed by local powerbrokers to riot. "These peoples' claims are groundless. Exploration does no such harm," Kaketaev told EurasiaNet.org.

Altyn Kumushtak has suspended operations, director Rustam Tashiev told the Vechernii Bishkek newspaper on April 4. He believes opposition leaders are stirring up trouble to seek concessions from the government. "We don't want to be a political card for the opposition," he said, adding that the company is evacuating employees and equipment.

Elsewhere in the same province, Talas Copper Gold, a subsidiary of South Africa's Gold Fields, was attacked twice by men on horseback wielding Molotov cocktails in 2011. The company has since pulled out of Kyrgyzstan.

 

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