Kyrgyzstan’s largest investor has announced a tentative deal that would end months of gridlock over one of the country’s most valuable assets.
In a statement posted on its website September 9, Toronto-based Centerra Gold said
it had entered a “non-binding memorandum of understanding” with Bishkek that would see the Kyrgyz government trade its 32.7 percent interest in Centerra, plus $100 million in future profits, for a 50 percent stake in a joint venture that would own and operate the Kumtor gold mine. Kumtor, which has yielded about 270 tons of gold since 1997, is Centerra’s most productive mine.
In February, Kyrgyzstan’s parliament passed a resolution that required the government to negotiate a more lucrative deal with Centerra or unilaterally revoke the 2009 operating agreement. That resolution came on the back of efforts by some opposition figures to nationalize the mine.
Kumtor, which, in a good year, accounts for 12 percent of Kyrgyzstan’s GDP and over half of industrial output, has been the focus of relentless environmental-themed protests over the past year. While there is no doubt the operation is not good for the pristine environment around the high-altitude mine, and Bishkek has sought hundreds of millions in fines, a video that appeared recently may have undercut some environmental claims by allegedly showing several local protest leaders attempting to extort $3 million from Centerra. Opposition figures have also rallied around environmental concerns, but in Kyrgyzstan’s cynical political theater, at times they look more intent on destabilizing the ruling coalition than seeking ecological justice.
Centerra said the restructuring deal was still dependent on a resolution of all of the government’s environmental claims, which one insider close to the Kyrgyz government told EurasiaNet.org is still no sure thing.
It is also unclear how the Kyrgyz public will respond to news that the restructuring will cost them $100 million in future profits, a fortune in the impoverished country.
Under the tentative deal, the 2009 tax regime would remain in force, Centerra would continue to operate the mine, and the board of the joint venture would consist of an equal number of Kyrgyz and Centerra executives. If an agreement is reached, it would be the fourth since Canadian investors began developing the previously untapped deposit in the mid-1990s.
The government was due to present the terms to parliament today. In a statement released September 10 after a late-night cabinet meeting, Prime Minister Jantoro Satybaldiyev called the memorandum an “important step.”
“The government is determined to restore historical justice for the people of Kyrgyzstan, and we are poised to achieve such results. In particular, it is an increase in income from the mine by more than 80 percent for Kyrgyzstan and a significant improvement in the position of Kyrgyzstan in the supervision of the Kumtor mine. We recognize the need to finalize a number of issues before signing the final agreements, but the agreements that we have today promise to solve the current problems," Satybaldiyev said.
For its part, Centerra warned, “no binding agreement between the parties has been reached and any definitive agreement for a potential restructuring remains subject to Centerra Special Committee and Board approval.”