The perpetually troublesome restructuring of the Kumtor Gold mine has hit a new snag. On Tuesday, the Kyrgyz government pulled out of talks with Centerra Gold on restructuring ownership of the country’s most important gold mine.
The Canadian company, according to a press release, was notified of the Kyrgyz government’s “intention to withdraw from further negotiations” regarding a restructuring scheme that would give Kyrgyzaltyn a 50 percent stake in a join venture that would own the Kumtor mine in exchange for its 32.7 percent stake in Centerra. The project isn’t dead, far from it, but the politicking continues. Centerra says that “In his letter, Prime Minister Sariyev indicates the government’s desire to begin new consultations with Centerra regarding the further efficient implementation of the Kumtor project.”
As reported by Eurasianet, the Kyrgyz government’s statement on the issue “complained that although a joint development deal had been in place since January 2014, negotiations have been at a standstill since the past April.”
In its press release, Centerra notes that the Kumtor project is currently governed by a June 2009 agreement. The mine, which is a key node in Kyrgyzstan’s economic structure, has weathered revolutions, allegations of corruption, repeated nationalization calls, organizational issues and environmental concerns. RFE/RL reports that the mine is Kyrgyzstan’s main source of hard currency earnings, “accounting for 7.4 percent of its gross domestic product and 15.5 percent of industrial output last year.”
In February 2015, Centerra reduced its estimates of Kumtor’s reserves from 8.5 million ounces to 6.1 million. In addition, throughout 2015 commodities prices-including of gold–have fallen. In April–incidentally when the Kyrgyz say negotiations stalled–the Kyrgyz Prime Minister Joomart Otorbaev resigned, the four Kyrgyz prime minister to do so since 2010. RFE/RL at the time reported that Otorbaev’s proposal of increasing Kyrgyz representation on Centerra’s board rather than forming a new joint venture did not sit well with parliamentarians. In June, environmental concerns rose to the forefront when the mine received a one-month extension on its emissions and waste permits. In July, Centerra was granted an extension through the end of the year but further extensions are in question as the Kyrgyz parliament is considering amendments to the country’s water code which would impact the mine. Last week, as reported by 24.kg, the Kyrgyz Minister of Economy “admitted stoppage of Kumtor if the amendments to the Water Code are not accepted.” It’s not clear that will happen before the New Year.
Prime Minister Temir Sariev told the Kyrgyz parliament that “The issue of Kumtor is too politicized but it should be addressed environmentally and economically.” He said that Centerra’s conditions for the 50-50 joint venture “did not suit us [Kyrgyzstan].” The government’s statement on the withdrawal from negotiations similarly referenced “absolutely unacceptable” conditions.
Both sides say they are keen to see the various disagreements settled. Centerra says it will “continue to engage constructively and in good faith with the government of the Kyrgyz Republic to resolve all outstanding matters affecting the Kumtor project in accordance with the Kumtor Project Agreements” and the Kyrgyz say they are “still deeply interested in ensuring the smooth production at the mine, and hopes for reciprocal positive steps from Centerra on reaching mutually beneficial agreements that will ensure the continued effectiveness of the implementation of Kumtor project in accordance with international best practices, standards and requirements of transparency of the extractive industries.”