Kyrgyz president blames "sabotage" for failure of Jerooy auction

By bne IntelliNews May 15, 2013

bne -

Kyrgyzstan's President Almazbek Atambaev on May 14 blamed clan politics and "open sabotage" for the failure of the government's attempt to find a developer for Jerooy, the country's second largest gold deposit.

Atambaev said the high starting price and protests by local residents against plans to develop the deposit were responsible for the auction's failure. Just one party came forward before the deadline for bids to develop Jerooy, which has an estimated 100 tonnes of gold according to Kyrgyz government officials.

Bishkek has not disclosed the name of the bidder except to say it was a foreign investor. Since at least two bids were needed for the auction to go ahead, the process has been abandoned. Government officials are due to meet on May 16 to decide their next steps.

At a government meeting, Atambaev said that the starting price of $300m was far too high. He argued that powerful local clans put pressure on the government committee handling the auction to deliberately set a high starting price to deter bidders.

"A very heavy price was knowingly set, and what happened? We lose a year of field development; we are losing billions of soms, which could have been paid into next year's budget to be used for roads, pensions and wages," Atambaev complained, accoding to Vecherniy Bishkek. "This is an open sabotage. This must stop," he insisted.

Also deterring potential investors was a $400m lawsuit launched by Kazakhstan's Visor Holding shortly after the tender was announced. Visor says the Kyrgyz government illegally appropriated its licence to develop Jerooy in 2010, and has filed for arbitration with the Washington-based International Centre for Settlement of Investment Disputes (ICSID).

At the same time, residents in the Talas region, where Jerooy is located, have demonstrated against plans to develop the deposit. Those protests also came under fire from Atambaev, who criticised an increase in "mob rule" in the country.

"We have, as it turns out, 200 people in Talas who say that the deposit should not be developed for 50 years. Will they give up their salaries, pensions, care in hospitals, education? Let's open our eyes, with such ochlocracy our country will cease to exist!" Atambaev thundered.

Kyrgyzstan has been seeking to restore its reputation among international investors following the 2005 and 2010 revolutions, and mass ethnic violence in June 2010. However, continuing protests, directed in particular against the foreign owners of the country's largest gold mine Kumtor, have deterred the return of investors. The government is currently considering its position on Kumtor, majority owned by Canada's Centerra Gold. Officials say they plan to renegotiate the investment agreement, which were signed under former president Kurmanbek Bakiyev.

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