Kyrgyzstan: Gold Miner Fined Again as Saga Rolls on

Kyrgyzstan’s largest foreign investor is in hot water again and has been ordered to pay out 6.7 billion som ($98 million) in fines for claimed environmental violations.

24.kg news agency reported that a judge at the Inter-District Court of Bishkek on May 25 ruled in favor of the penalty as part of a handful of lawsuits filed against Kumtor Operating Company by the State Ecology and Technical Inspection Agency.

Kumtor’s parent company, Toronto-based Center Gold, said in a statement that the award was related to accusations that the miner placed waste rock on dumps “subject to tariffs that are normally applicable to industrial or domestic waste.”

Local media has cited authorities as saying waste rock was placed too close to waterways, which risked contaminating rivers and and would eventually require the construction of water purification facilities downstream.

The longer-term concern surrounds the major glaciers alongside which the Kumtor mine is located. Kyrgyz officials, as well international environmentalists, worry that the practice of piling excess amount of waste rock on top of glaciers is causing them irreparable damage. Kumtor, meanwhile, has engaged its own independent expertise to evaluate the impact of its operations on the glaciers and apparently found the threat to be “insignificant.”

On May 24, the Inter-District Court of Bishkek fined Kumtor another $10,000 after it found it guilty of failing to record waste being expelled from the concession’s sewage treatment facility.

Centerra has said it refutes the environmental agency’s claims and is reserving the right to refer the cases to international arbitration.

Despite the government professing to be concerned about the environment, there are also grounds to believe its ultimate intent is not quite so idealistic.

These legal tussles need to be seen as part of a broader, long-term clinch between Kyrgyzstan and Centerra — in which the Central Asian state’s government owns an almost one-third stake. Bishkek had hoped to renegotiate the terms of the Kumtor mine concession, but those talks collapsed last year, obliterating what little goodwill remained.

The environmental claims are only one out of multi-pronged assault by the government on Kumtor.

In late April, rifle-toting security services officers mounted a raid on the company’s offices as part of a probe into alleged corruption. The state prosecutor’s office and the State Committee for National Security said they were digging into payments made by Centerra’s local affiliate to the mother company in Canada going back as far as 2013.

Centerra has played some games of its own. Late last year, the board issued an additional 4.6 million shares as a means of covering the expense of company liabilities to third parties. The share dilution led to Kyrgyzstan owning less of Centerra, down from 32.7 percent to 32.1 percent

The nuclear option that has perennially hovered in the air over the Kumtor saga is nationalization. That seems a highly remote possibility in the near term given Kyrgyzstan’s desperate economic troubles. Instead, Bishkek appears intent on slowly bleeding and poking Centerra, which is a strategy that may work fine, but only until it doesn’t.

Kyrgyzstan: Gold Miner Fined Again as Saga Rolls on

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