A recent arson attack on a mining compound in Kyrgyzstan’s Talas Province is shaking foreign-investor confidence in the beleaguered Central Asian nation. The incident could have important ramifications for Kyrgyzstan’s economic rejuvenation efforts, as the country remains dependent on outside help to develop its lucrative precious metals sector.
The March 10 riot involved a mob that stormed the offices and work site of the Talas Copper Gold mining company, situated in Aral, a remote village in Talas Province known for having an abundance of petroglyphs. Company property was looted and burned. There were no reported injuries, but the damage estimate approached $1 million.
The cause of the incident remains the subject of debate. Some observers believe the attack was connected to a local political struggle and was designed to embarrass the incumbent provincial governor. Others suggest environmental concerns played a role. In addition, some are pointing to an economic motive: participants in the rioting were allegedly upset that the company hadn’t hired many locals to work at the site. Mining experts, however, say that the operation at Aral was still in the exploratory stage and thus work at the site was limited to a relatively small number of specialists and geologists.
Talas Copper Gold is a joint venture between South African mining giant Gold Fields and Orsu Metals Corp., which is listed on the London and Toronto stock exchanges. Representatives of the involved entities have remained circumspect since the incident. “Gold Fields cannot comment at this stage while the investigations into the incident, which are conducted with the support of the government of Kyrgyzstan, are ongoing,” Sven Lunsche, Gold Fields’ Corporate Affairs Manager, said. A spokesman for the Talas police department confirmed the incident took place, but declined to delve into details.
As Kyrgyzstan struggles to find a sense of economic stability after almost a year of political turmoil, the mining sector represents one of the few areas that can provide the government with a financial boost. At the same time, the government lacks the resources and know-how to develop its reserves of gold and other minerals, meaning that maintaining a high degree of investor confidence is crucial.
But the Talas incident has seriously undermined confidence by sending shockwaves through the foreign business community in Bishkek. For weeks, foreign executives have complained that local law enforcement agencies are unresponsive to their concerns. “I’m pleased that the matters have come to a head, the law enforcement agencies are going to have to take some action now,” said Hugh McKinnon, the executive director of Kentor Gold and the head of the International Business Council (IBC) in Bishkek.
“If people get a growing sense of impunity and independence out there, that they don’t have to obey law, that will result in small groups of people being able to dictate business development in the country,” McKinnon continued. “The central government can’t afford to let that happen so they have to do something about it.”
McKinnon and other Bishkek executives gathered March 14 for an open meeting in Bishkek of the IBC, during which they aired their concerns. “We are in uncharted territory; there is a lot of uncertainty about where we are going and business doesn’t like uncertainty,” McKinnon said. The executives had received word that Prime Minister Almazbek Atambayev would make a personal appearance to discuss investors’ concerns, but he never showed up.
Residents in Aral have complained that the Talas Copper Gold project poses potential environmental risks to the area. In response leading figures in the Kyrgyz mining sector called for an “educational campaign” about the environmental precautions they undertake and the economic benefits the industry brings.
“Business is ready to support the educational campaign,” said Kuban Ashyrkulov, the general director of the Andash Mining Company, which works in the same license area as Talas Copper Gold. But it is up to the government to ensure the safety and security of the mining industry, he insisted.
“I do not feel the full support of the central government in ensuring law and order in the regions. Authorities’ decisions are not executed in full, and in some cases, you can talk about them being openly sabotaged,” Ashyrkulov said. He also suggested the government take steps to ensure that at least a portion of the taxes paid by mining entities are directed to communities affected by mining operations.
Editor’s Note: Deirdre Tynan is a Bishkek-based reporter specializing in Central Asian affairs.