Kyrgyzstan’s largest industrial enterprise, the Canadian-operated Kumtor gold mine, says it will stop production next week if the Kyrgyz government does not approve the necessary work permits. The announcement, which sent the company’s stock plummeting to its lowest point this year, comes less than a month after a rancorous board meeting where Kyrgyz representatives complained their Canadian partners ignored their decisive vote on the company’s management structure.
Toronto-listed Centerra Gold, which is one-third owned by Kyrgyzaltyn, the Kyrgyz government’s state-owned gold company, says its has worked since late 2013 to secure the necessary mining and environmental permits and approval of its 2014 action plan.
“Unfortunately, this year, despite repeated submissions and discussions with senior officials, such approvals and permits have not been provided. The continuing absence of such approval and permits creates significant uncertainty and risks for Centerra and its employees,” the company said in a June 2 statement.
Without the permits, Kumtor will begin stopping operations on Friday, June 13. Slowing down or temporarily stopping work at Kumtor negatively impacts revenues for longer than any stoppage, because work can only be gradually resumed at the high-altitude, high-tech mine in Kyrgyzstan’s Tien Shan mountains.
The permit dispute comes amid drawn-out negotiations over the future of Kumtor, with the Kyrgyz government seeking to change the operating contract for the third time in ten years. After several years of sometimes violent street protests, and hostility from populist lawmakers, in February parliament voted to accept a restructuring roadmap that would evenly split control of the mine between Kyrgyzstan and Centerra.
Yet since February, there has been little progress disclosed on the deal.
Signs of continuing tension were clear in early May at the Centerra shareholders annual meeting in Toronto. During the meeting, shareholders led by Kyrgyzaltyn voted to remove Stephen Lang as chairman of the Centerra board, yet Centerra decided to retain him. Kyrgyz representatives said they were disappointed that the company “decided effectively to ignore the outcome of the voting process,” where Lang received 46.65 percent. Kyrgyzaltyn is Centerra’s largest shareholder.
“It will be impossible for us to explain to the Kyrgyz people how this can happen under Ontario company law when Canada is thought to be a country that enjoys a sophisticated democracy with a developed rule of law,” Kyrgyzaltyn spokesman Kalkaman Berdibaev said in an emailed statement at the time.
The Kyrgyz government also stands to lose should Kumtor shut down this month. “There is a vested interest from both parties in keeping the mine in operation,” Jonathan Guy, an analyst with RBC Dominion Securities, said in a note to clients quoted by Toronto’s Globe and Mail. Any shutdown would have a “detrimental effect on revenues for the Kyrgyz government.”