Centerra Gold responds to rumours of Kumtor’s mine licence cancellation

Canadian Centerra Gold (TSX:CG) said Friday the company has not been approached about an alleged revocation of its mining license for the Kumtor open pit gold mine in Kyrgyzstan, as local media reported yesterday.

According to 24 News Agency, Kyrgyzstan minister of economy, Temir Sariyev implied that Centerra would have its permit revoked when stating that “mining of gold at Kumtor should not stop after denunciation of the agreement [with the Canadian company].”

He added that local officials were “guilty of the situation with Kumtor” and that “they all must be brought to justice, as they lobbied Kumtor agreements not serving the national interests of the country.”

In response, Centerra said in a statement the company would continue discussions with the government of the Kyrgyz Republic, aiming to solve discrepancies through constructive dialogue. “There can be no assurance, however, that this will be the case,” it added.

The document adds that the country’s Prime Minister J. Satybaldiyev has reportedly confirmed the government does not intend to nationalize the Kumtor project and, instead, are open to have further discussions with the company.

Centerra’s Kumtor mine was given the green light under Kyrgyzstan deposed leader, Kurmanbek Bakiyev, who was accused of corruption.

Since Kumtor started running in 1997, it has generated $1.9 billion for the country and produced more than 8.4 million oz of gold.

But a document accusing Centerra of damaging the environment and stealing the country’s riches, forced the Kyrgyzstan government in July last year to cancel the ruling that gave the company surface rights at Kumtor.

Centerra Gold is a significant employer and taxpayer in the Central Asian country and a key contributor to the Kyrgyz economy. In fact, the Kumtor open pit gold mine accounts for 60% of the nation’s industrial output and, according to the company, it is the largest gold mine operated in Central Asia by a Western-based company.

To give an idea of just how important Kumtor is to the country, Centerra’s announcement May 15 of reduced 2012 gold production guidance (from 642,000 ounces to 390,000 ounces) led to this pronouncement from Prime Minister Omurbek Babanov: “Kyrgyzstan’s annual GDP growth will fall to 1.8% from the original target of 7.5%.”

Kyrgyzstan, a land-locked country of five million people on China’s western border, has become infamous in recent years because it hosts a U.S. airbase used to support military operations in neighbouring Afghanistan.