BUSINESS

Kyrgyzstan considers revoking Centerra's gold mining licence

06/22/2012 05:37 EDT | Updated 08/22/2012 05:12 EDT
BISHKEK, Kyrgyzstan - Legislators in Kyrgyzstan debated Friday whether to strip the operating licence of a Canadian-controlled company mining a major gold field in the Central Asian country after it was accused of damaging the environment.

The open-pit gold mine, which accounts for 12 per cent of the impoverished country's economy, has been the source of a series of toxic spills in past years, including a cyanide spill into a river.

Deputies supporting the motion argued that Kumtor Operating Company, is badly managed. Stripping it of its license would be a huge blow to Canada-based miner Centerra Glod Inc. (TSX:CG), which wholly controls KOC, and could further dampen investor confidence in the former Soviet republic.

It wasn't immediately clear when the deputies would vote on the motion.

Kyrgyzstan, a country of five million people on China's mountainous western border, has come to prominence in recent years because it hosts a U.S. airbase used to support military operations in nearby Afghanistan.

Criticism of KOC has been led by Sadyr Zhaparov, an opposition deputy who heads a parliamentary committee that has been preparing a report on the company over the last two months.

Zhaparov said the operating deal with Kumtor, sealed in 2009, is "unfair, goes against Kyrgyzstan's sovereignty and the interests of society, endangers national security and is causing irreparable environmental damage."

KOC called the parliamentary report "grossly inaccurate" and said its conclusions are "without factual basis." It said the Kumtor project has been operating at full capacity without interruption since 1997 and has generated US$1.9 billion for Kyrgyzstan, including $620 million in taxes.

Opponents of the current license want to see greater returns from the mine to the state.

Centerra is 33 per cent owned by the Kyrgyz state gold company Kyrgyzaltyn. KOC estimates that Kyrgyzaltyn's stake in Centerra is worth $1 billion.

That arrangement was fashioned during the rule of previous president Kurmanbek Bakiyev, who was ousted in a public uprising in 2010 and whose administration was widely perceived as being riddled with corruption. An earlier deal was reached under Bakiyev's predecessor, Askar Akayev, who was overthrown in a revolution in 2005.