MAC: Mines and Communities

Environmental cost of Kyrgyzstan's gold mine

Published by MAC on 2014-07-01
Source: Al Jazeera

Environmental cost of Kyrgyzstan's gold mine

Kyrgyzstan's government approves a Canadian firm's gold mine plan despite dangers to a fresh water source.

Tamila Varshalomidze

Al Jazeera

27 June 2014

The owners of a gold mine in Kyrgyzstan, which acts as a major source of revenue for the country, faces corruption allegations and environmental concerns.

Kumtor gold mine, run by the Canadian firm Centerra Gold as a joint venture with the government, has been accused by critics of cornering a major share of profits and ignoring environmental regulations - threatening a glacier that acts as crucial source of fresh water for the post-Soviet nation.

The mine, located at an altitude of 4,000 metres above sea level in the Central Tien-Shan mountain range, came close to a shutdown last June while the government debated its arrangement with the company that contributes tens of millions of dollars every year to the government's coffers. But, the Kyrgyz authorities rushed to approve the company's plan for 2014 as the mine closure would have rendered thousands of employees and contractors out of work.

The country's geology and mineral resources agency, however, has warned that the gold mine could further damage the nearby Davydov glacier.

"The consequences could be regrettable," said Amanda Wooden, associate professor of environmental politics and policy at Bucknell University, in Pennsylvania, the United States.

"The Kumtor mine is operating in a fragile mountain ecosystem, where this type of industry and at this massive scale is going to have an ecological impact, as mining officials recognise," Wooden told Al Jazeera.

Open-pit gold mine

Kumtor is the only open-pit gold mine in the world operating on an active glacier. Rock waste removed from the pit was - until recently - dumped on the Davydov glacier, a strategic fresh water reserve, which Kyrgyzstan also supplies to its neighbour Uzbekistan.

"Unfortunately, much of [the] international press coverage of the Kumtor issue is dismissive of the environmental concerns as "masquerading" for political interests," said Wooden. "This media portrayal is rather misleading, it disregards widespread public concern about ecosystem impacts, over a decade of local organising against the mine, and the mine's obvious controversial characteristics."

The gold mine's management said the environmental impact of their operations is exaggerated.

"Kumtor will be mining according to its approved mining plan for 2014 which will include managing the ice as we have done every year prior to this in our approved mining plans," John Pearson, Centerra Gold vice president, told Al Jazeera via email.

Wooden, who has researched gold mining politics in Kyrgyzstan for seven years, said public concerns about the mine mainly focuses around water quality, including how to keep a waste water pit maintained. He also mentioned that accidents, like the 1998 cyanide spill that still resonates in one of the poorest countries in the region, remains a constant fear.

Financial damage

Some local and international media organisations claimed that the spill killed several people and poisoned hundreds, contaminating Barskaun River and Lake Issyk-Kul.

Kyrgyzstan protesters demand nationalisation of Canadian-owned gold mine Kumtor

However, Pearson insisted that "no one was killed or poisoned as a result of the accident." An international independent group of experts said in its report that there was no major environmental impact of the accident.

Another report by the environmental organisation Earth Works Action said that the accident caused financial damage ranging from $20m to $42m. Accordingly, "the mine reached an agreement with the Kyrgyz government to pay a mere $4.5m."

Public sentiments against Centerra boiled over last September when protesters in the Issyk Kul region, where Kumtor is located, took the governor hostage and threatened to burn him alive in a car.

In May 2103, the government had to impose a state of emergency in the region after protesters blocked a road to Kumtor and cut off electricity supplies.

"We have to answer the question: Is the economy a priority, or should we protect the environment?" Kasiyet Karachokolova, a spokeswoman for Kyrgyzstan's state geology and mineral resources agency, said.

Earlier this month, Centerra announced it had received the approval for its controversial work plan as the government could not ignore its biggest taxpayer. The mine is crucial for Kyrgyzstan's economy, accounting for about 7.7 percent of gross domestic product last year.

"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," Valery Dil, Kyrgyzstan deputy prime minister in charge of economy and investment, told the Reuters news agency.

Revolving door governments

However, some critics, like Gani Abdrasylov, director of Kyrgyzstan's Bureau of Strategic Studies, believe that previous governments are also responsible.

"Over the last 20 years, the government has changed 20 times and all this time wrong kind of deals and decisions were made over Kumtor, prompting very painful reactions in the society," Abdrasylov said.

"Parliamentary commission, set up in 2012, has identified that deals made with the Canadian management over Kumtor in 2003 and 2009 were absolutely unfair and corrupt. The mine was giving 92 percent profit [eight percent is consumed with expenses] when our share was only 16 percent."

Last year, the government negotiated a new deal with the Canadian firm that increased the state's shares in the mine to 50 percent, but the parliament refused to approve the agreement, demanding increase in share to 67 percent.

Centerra, however, has defended the deal.

"Centerra has been working according to and within the parameters of its legally approved agreements. In fact, the 2009 agreement, which we are currently working under and paying all required taxes, fees and commitments was negotiated fairly, openly, transparently and was approved by the Kyrgyz parliament, and government," Pearson told Al Jazeera.

"The Kyrgyz Republic had international legal and financial advisors advising them on the agreement and it was signed into law by the president and then tested for its constitutionality by the courts in the Kyrgyz Republic. The justice minister then wrote an opinion verifying its constitutionality."

But some opposition politicians and their supporters have continued to call for the nationalisation of Kumtor, prompting President Albazbek Atambayev to warn that the move would destroy the country's investment climate as the country depends on foreign capital for industrialisation.

Centerra had threatened to take the case to international courts for arbitration, if the government gave in to the opposition demands.

"For the future, we see Centerra continuing to manage and operate the Kumtor the end of the mine life [2026]," Pearson told Al Jazeera.


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