Forming a joint venture with Centerra Gold to develop Kumtor gold mine was no longer in the interests of the Kyrgyz Republic following a drop in the mine’s reserves, according to the country’s Prime Minister Joomart Otorbayev.
The state and the Canadian-based company have been in talks since late 2013 on a deal that would involve Kyrgyzstan swapping its 32.7% stake in Centerra for half a joint venture that would control the Kumtor mine. The mine’s output is crucial for the Kyrgyz economy, accounting for 7.4% of the country’s GDP and 15.5% of industrial output in 2014.
But in February, Centerra published its 2014 year-end reserve and resource update, which showed that Kumtor’s proven and probable reserves totalled an estimated 6.1 million ounces of contained gold, compared to 8.5 million contained ounces as of end-2013.
“I now don’t believe that, given the current mining plan, this proposed joint venture is still in our national interests,” the Prime Minister said. “If we had stuck to that earlier mining plan which existed before, Kyrgyzstan would have received more than $2 billion.”
Otorbayev said that instead of the Kumtor joint venture, Kyrgyzstan now wanted to increase the number of its members on Centerra Gold’s board of directors. Kyrgyzstan currently has three representatives on the 11-member board.
Kyrgyzstan has been trying to get more revenue from the Kumtor mine, which lies near the Chinese border at an altitude of 4000 metres but this has become a source of political tension in the central Asian country of 5.5 million people.
In late February, the parliament turned up the pressure on Centerra when it threatened to nationalize the Kumtor mine unless it agreed within a month to a proposed joint venture.
Otorbayev last week made no mention of nationalization, a strategy backed by the country’s nationalist opposition and which is becoming a key topic ahead of a parliamentary election due this autumn.
In a subsequent public statement, Centerra said it was aware of certain statements made by the Prime Minister suggesting that the restructuring of the Kumtor project as a 50/50 joint venture between Centerra and Kyrgyzaltyn JSC would not be in the interests of the Kyrgyz Republic.
“Centerra will continue to engage constructively and in good faith with the Government of the Kyrgyz Republic to resolve all outstanding matters affecting the Kumtor project. There are no assurances that continued discussions between the Kyrgyz Government and Centerra will result in a mutually acceptable solution regarding the Kumtor project, that any agreed upon proposal for restructuring would receive the necessary legal and regulatory approvals under Kyrgyz law and/or Canadian law and that the Kyrgyz Republic Government and/or Parliament will not take actions that are inconsistent with the Government’s obligations under the Kumtor Project Agreements, including adopting a law ‘denouncing’ or purporting to cancel or invalidate the Kumtor Project Agreements or laws enacted in relation thereto.”