Kyrgyzstan: Russian Firm Wins Rights to Disputed Gold Field
Kyrgyzstan has finally found a developer for its Jerooy deposit, one of the largest untapped gold fields known in Eurasia. But an outstanding $549 million claim and a hostile local population mean Kyrgyzstan is still years away from seeing any gold emerge from the ground.
The State Geology and Mineral Resources Agency declared Vostok-geoldobycha had won the tender for the 97-ton Jerooy deposit on May 4. Vostok-geoldobycha – owned by Russian oligarch Musa Bazhaev, Russia’s 160th richest man according to Forbes – offered the minimum bid of $100 million.
As part of the deal, Vostok-geoldobycha takes responsibility for a $549 million arbitration claim lodged against Kyrgyzstan’s government by Kazakhstan-based Visor Holding, which is scheduled to be heard in Washington in November. A Visor subsidiary lost its license to the deposit in late 2010 when officials said the company had failed to begin production on schedule.
Vostok-geoldobycha, a daughter company of Russia’s Amur Zoloto, beat off interest from the state mining concern Kyrgyzaltyn, which had partnered on its bid with London-based Unity Gold. (Unity had set tongues wagging when it listed Jerooy as one of its projects before the bidding had even concluded.)
According to Reuters, the tender commission preferred Vostok-geoldobycha’s bid despite the fact that Kyrgyzaltyn came in with a slightly higher offer:
Kyrgyzstan's state gold company Kyrgyzaltyn, the second bidder shortlisted in the tender, offered to pay $111 million for Jerooy's licence but lost because Vostok-geoldobycha has better technologies and a better investment programme, Kyrgyz state geology committee head Duishenbek Zilaliyev told journalists.
That the winning bidder is Russian has caused some consternation in the former Soviet republic. A vice president of the state gold company, Sagynbek Abdyrakhmanov, told RFE/RL that the result was "against Kyrgyzstan's national interests” and complained that Kyrgyzaltyn’s capabilities “have been ignored.”
Kyrgyzaltyn operates several small mines, but nothing as large and complex as the high-altitude Jerooy deposit, which Soviet geologists discovered in 1968 and which has never been exploited.
This was the second auction for Jerooy to occur since Visor filed its claim. A 2013 tender that opened at $300 million flopped amid anti-mining protests in Talas Province, where the deposit is located, and the legal concerns.
This being Kyrgyzstan, the tender announcement was accompanied by all sorts of speculation and accusations. Kyrgyz news outlet Vechernii Bishkek tied Vostok-geoldobycha's owner Bazhaev to former Kyrgyz Premier Omurbek Babanov, a businessman from Talas.
Bazhaev may need the help.
Residents of Talas are notorious for their opposition to mining in the province – worried about environmental degredation or paid off by rival miners, or both.
Mining executives rue the mineral-rich province more than any other in a country full of antipathy toward foreign miners. Repeatedly, angry locals have brought projects there to a standstill. Jerooy has already been the subject of numerous protests. According to one self-styled local leader speaking last month, “85 percent” of his community is against Jerooy's development.
Chris Rickleton is a journalist based in Almaty.