Centerra Gold reports that on June 1 road access to the Kumtor Gold Mine was re-established and national grid power to the site was restored. The mine and mill have resumed operations as truck convoys are now able to bring supplies and consumables to site and personnel can be moved to and from the mine.
While most mining operations were suspended between May 30 and June 1 owing to protest action, the mine continued to operate sufficient equipment to continue to remove ice and waste from the high movement area of the pit.
Local protestors forced Centerra to suspend mining after setting up a roadblock on the road to the site and then on Thursday taking control of a power sub-station, shutting down all grid power to the operation. During 16 years of operations in the Kyrgyz Republic, Centerra has endured countless protests and political upheavals but those events have never forced the company to close its flagship mine. The gold mine is the largest operated in Central Asia by a Western company and alone worth roughly 12% of the republic’s economic output and more than half its exports.
Centerra warned last week that if grid power and road access were not restored soon, there would be a material negative impact on gold production and financial results. Vice-president of investor relations John Pearson says the protestors are not interested in talking to anyone but the Prime Minister. “It’s really up to the government at this point in time. There’s nothing we can do.” After these statements the government imposed a State of Emergency.
Centerra has faced increasingly serious political opposition since last year, when an extensive parliamentary report was released that made serious allegations against the company, including environmental destruction on a massive scale. Centerra dismissed the report as nonsense, but it has made an impact in the republic. Three months ago parliament approved a resolution to renegotiate the investment agreement with Centerra, and toss it out entirely if a deal can’t be reached. A number of Kyrgyz groups have called for nationalization of the mine.
Renegotiation demands are a major disappointment for the Canadian company which thought it had put an end to title concerns when it signed the investment agreement in 2009. Now it is back in negotiations to settle the matter.
Centerra is one of many miners facing growing resource nationalism but comes under more scrutiny than almost any of them, because Kumtor is such an enormous enterprise in Kyrgyz Republic. Centerra is by far the largest foreign investor in Kyrgyzstan, a volatile place that most companies refuse to touch.
Analysts believe government intervention will allow the mine to restart in the near-term but a full resolution of the issues appears challenging.
Recent unexpected waste movement has forced Centerra to adjust plans at Kumtor, following the faster-than-expected movement in a large section of the main Davidov Valley waste-rock dump. Centerra said that the rate of movement of the waste-rock dump increased by more than the company had expected and required an accelerated effort to relocate certain mine infrastructure. Employees in the affected buildings had to be moved to temporary work locations, until new facilities were constructed.
As a result of the movement, the company is now placing waste rock on permitted sites unaffected by the movement and is working on an alternative long-term waste-rock dumping plan. Centerra is working with the Kyrgyz regulatory authorities and external engineering advisers to fast-track approval of a plan and, based on discussions with the authorities, the company believes such approvals are likely to be forthcoming, but cannot be guaranteed.