Kumtor uncertainty incurring huge losses for Kyrgyzstan warns PM

By bne IntelliNews February 6, 2014

bne -

The uncertainty over the ownership of Kyrgyzstan's largest gold mine Kumtor has resulted in KGS4bn ($80m) worth of losses for the state budget, Prime Minister Zhantoro Satybaldiyev claimed on February 5.

Bishkek is still considering a proposal to give the Kyrgyz state a larger share in Kumtor, which is currently owned by international investor Centerra Gold, with the PM pushing against nationalist calls for more extreme measures. Satybaldiyev also warned at a parliament session that nationalising Kumtor would result in even steeper losses.

"We can't choose nationalization, because we plan to increase wages and pensions of citizens. Budget revenues are important for us. How many schools and hospitals we could build with these means," Satybaldiev told MPs, according to 24.kg.

In 2012, the Kyrgyz parliament approved plans to renegotiate the existing agreement with Centerra, signed under former president Kurmanbek Bakiyev, to get a better deal for Kyrgyzstan. The initial deal worked out between the government and Centerra was rejected by the parliament in October.

The government struck a new deal with the Toronto-listed investor in December. That latest non-binding agreement would see state-owned Kyrgyzaltyn take a 50% interest in a joint venture established to take over ownership of Kumtor. In exchange, Bishkek would hand over its 32.7% equity stake in Centerra, according to a December 24 statement from the Canadian company.

However, the deal currently on the table is not substantially different from the earlier plan - which was overwhelmingly rejected in parliament - raising fears that it will alsobe voted down. The majority of MPs reportedly insist the state should own at least 67% of Kumtor.

However, some of the five parties in parliament - including within the governing coalition - are pressing for a more extreme solution. The Ata-Meken party, a coalition partner of Satybakdiyev's Social Democratic Party, has proposed a draft government decree on nationalisation. The party says that since the government failed to increase Kyrgyzstan's stake in the mine to 67%, the government should unilaterally scrap the existing agreement and take over the mine.

Respublika, one of the two opposition parties represented in the parliament, also criticised the government's failure to hold out for a 67% stake, and proposed a vote of no confidence in the government.

Notice: Undefined index: social in /var/www/html/application/views/scripts/index/article.phtml on line 259

Related Articles

bne:Chart - Russia begins to steady the ship according to latest Despair Index

Henry Kirby in London - Ukraine and Russia’s latest “Despair Index” scores suggest that the two struggling economies could finally be turning the corner, following nearly two years of steady ... more

COMMMENT: Great challenges for Eurasia call for decisive solutions

Juha Kähkönen of the IMF - The Caucasus and Central Asia (CCA) region continues to navigate a wave of external shocks – the slump in global prices of oil and other key commodities, the slowdown ... more

IMF calls for Central Asia to tighten monetary policy

Naubet Bisenov in Almaty -   Caucasus and Central Asian (CCA) countries need to tighten their monetary policy to anchor inflation expectations, but excess tightening may weaken financial ... more