Kyrgyzstan: Government Claims 33 percent Stake in Kumtor Gold Mine

The Kyrgyz government says it has secured a 33 percent stake in the Kumtor gold mine and a host of financial concessions from operators Centerra Gold Inc.

However, Centerra, which is dominated by the Canadian-owned Cameco, swiftly issued a statement saying discussions are "ongoing."

"The Company confirms that significant progress has been made in its discussions with the government and Cameco Corporation. Such discussions have reached the point that a draft agreement has been submitted to the government and to the company's board of directors for review and consideration. The company will make a further announcement when warranted," Centerra said on April 22.

If agreed, the partial takeover represents something of a coup for President Kurmanbek Bakiyev's administration.

Kumtor is Kyrgyzstan's largest gold mine and currently provides annual tax revenues of approximately $30 million, representing 10 percent of Kyrgyzstan's economic earnings.

The Kyrgyz state initially owned two-thirds of the open-pit project, but a controversial restructuring plan and sale of government shares in 2004 under ex-President Askar Akaev created a new company, Centerra Gold, controlled by Cameco. The government's stake dwindled to just under 16 percent. The deal was widely criticized as corrupt and against national interests.

The latest round of negotiations have been protracted, but, according to a statement released by Prime Minister Igor Chudinov's office, they should yield $3.432 billion in taxes and fees until 2026 under new arrangements that will see Kumtor pay tax at a rate of 18 percent exclusive of regular custom fees and value-added taxes.

In addition, the statement says Kumtor will make a one-time payment of $22.4 million for back-taxes due in 2008.

Other concessions to the Kyrgyz government include a quarterly payment of $1.25 million in land fees and $310,000 annually to offset environmental damage.