Kyrgyzstan’s parliament voted overwhelmingly on October 23 not to accept a deal with Canada’s Centerra Gold, leaving the fate of the country’s only significant industrial asset, and the one-year-old government, uncertain yet again.
Eighty-four deputies voted to scrap a September 10 memorandum between the government and the Toronto-listed company that would increase Kyrgyzstan’s stake in the high-altitude Kumtor gold mine from roughly 33 percent to an even 50 percent. Two deputies voted to support the memorandum.
Later in the day, parliament demanded the government negotiate no less than a 67-percent share in the mine. That resolution also instructed the General Prosecutor’s office to open criminal cases connected with earlier iterations of the operating agreement, dating from 2003.
Earlier this year parliament demanded the government renegotiate a 2009 agreement with Centerra. The ongoing negotiations are the fourth since the mine began operations in the mid-1990s, which helps explain why a Canadian think-tank this year ranked Kyrgyzstan the world’s fifth-worst place to invest in mining. The government now has until December 23 to broker a deal. Should the two parties fail to agree, deputies vowed to break unilaterally the 2009 operating agreement. Since Kyrgyzstan does not have the cash to buy Centerra out, that move would likely look a lot like expropriation.
Prime Minister Jantoro Satybaldiyev’s struggles to get parliament to accept the deal over the past month and a half turned sour in late September, when his opponents used the opportunity to call for his resignation. Moreover, the discord seems to be fanning passions throughout the country. Earlier this week another foreign-operated gold operation was attacked in Kyrgyzstan’s south, its office partially burned.
Many lawmakers argue that Kumtor’s profits are not doing enough to benefit their dirt-poor country. The mine is enormous, contributing 12 percent of GDP in a good year and roughly half of industrial output. It has produced over 270 tons of gold since opening in the mid-1990s. The average Kyrgyz sees little of that money; some say because of Centerra’s greed, others because of widespread government corruption and mismanagement.
But violent youth groups’ regular calls for nationalization often look more like mobster negotiating tactics than the gripes of villagers who have little faith that their government is really interested in equitably distributing proceeds from the mine.
Centerra argues that it has invested $840 million since the last time it renegotiated, in 2009, extending the life of the mine by over a decade.
At this point, other foreign miners in Bishkek say, Kyrgyzstan is unlikely to get more than a lengthy and expensive arbitration dispute that will further damage the country’s image as an investment destination.
Outside the mine, protests continued on October 23. In addition to calling for nationalization, some 800 protestors demanded authorities release demonstrators arrested during another Kumtor-related protest earlier this month, Radio Liberty reported. Ten men are being held on charges of taking the regional governor hostage, assault and hooliganism. That rally had been organized to demand the release of several men charged with attempting to extort $3 million from Centerra.
Yesterday one MP who abstained from today’s vote announced he and several colleagues would be traveling to Canada to discuss the situation with their counterparts in Ottawa. On the way they are scheduled to stop and attend an investment forum in the US.