Kyrgyzstan: Court Orders Canadian Mining Entity to Cough Up Back Taxes

A court in Kyrgyzstan has ordered the Canadian-controlled company that operates the Kumtor gold mine to pay almost $2.5 million in back taxes.

The November 17 verdict confirms a ruling made by the same Bishkek court in April. A court representative, Toraga Isabekov, accused the mining entity, Centerra, of "purposefully dragging out the resolution of this matter," according to a report distributed by the AKIpress news agency.

Bermet Karagulova, the presiding judge, ruled in favor of Kyrgyz tax collectors, saying Centerra owed the state taxes for the use of non-agricultural land between 2002 and 2008 in the Jeti-Oguz region at the southeastern end of Lake Issyk-Kul.

Centerra and the Kyrgyz government are currently locked in protracted negotiations over the gold mine. Under the terms of a proposed agreement, Centerra's stake, via its Canadian parent company Cameco, would be reduced to 41 percent while the Kyrgyz government would raise its interest in the mine from 16 percent to 29 percent. Public shareholders would own the remaining 30 percent. At present, Centerra controls 53 percent of the mine's shares.

Kumtor, Kyrgyzstan's largest gold mine, is a vital strategic asset for the Kyrgyz economy, providing millions in tax revenue for state coffers. Centerra recently revised downward its gold production estimate for Kumtor - from an upper range of 830,000 ounces to 790,000 ounces.

Although the Kyrgyz state initially owned two-thirds of the Kumtor project, a controversial restructuring plan and sale of government shares in 2004 under ex-President Askar Akayev created a new company, Centerra Gold, dominated by Cameco. The government's stake dwindled to 16 percent. [For background see the Eurasia Insight archive]. The deal was widely criticized as corrupt and against national interests.