Clare Nuttall in Almaty -

Centerra Gold, the operator of Kyrgyzstan's largest gold mine Kumtor, narrowly avoided losing its most important asset as the Kyrgyz parliament voted against expropriation on June 27. However, MPs backed plans to revise the agreement to get a better deal for the impoverished Central Asian country, reinforcing fears of rising resource nationalism amongst investors.

MPs want to see Kyrgyzstan increase its stake in Centerra above the 33% it has held in the Toronto-listed company since 2009, claiming the country should have greater control over the largest foreign-owned gold mine in the former Soviet Union.

Under the new parliamentary decree, the Kyrgyz government is required to revoke decrees and licenses relating to Kumtor. A special commission comprising members of the parliament, government and presidential administration as well as independent experts, will be set up by July 10, with the intention of submitting a revised agreement by November 1, Kabar reports.

Unsurprisingly, Centerra disputes the decision. The company says in a statement issued June 27 that it believes the resolution is "not legally binding on the Kyrgyz Government", and that the government and relevant state agency "cannot revoke its decrees and licenses without meeting the relevant criteria for revocation set out under applicable law."

"Centerra believes that the parliamentary report's findings are without merit," Centerra president and CEO, Ian Atkinson, said in the statement. "Kumtor has operated in full compliance with Kyrgyz and international standards and this has been proven over the years in systematic audits by Kyrgyz and international experts ... We believe ... that any discussion of the Kumtor project must take into account existing legal obligations and binding commitments."

However, analysts at Visor Capital suspect the company may have little choice but to give in. "We note rising political risk for Centerra, as it is highly likely that the company will have to agree with the proposed changes to the investment agreement," they write in a note. "Though the details of the changes are unclear at the moment, we believe they may negatively impact Centerra's expenditures."

The move to revoke the Kumtor agreement, which has been in place since 2009, has sent shockwaves through the country's small investor community, which is already worried about greater resource nationalism in Kyrgyzstan. Bishkek had to work hard to ease concerns about instability and expropriation after numerous assets - including the country's largest bank AsiaUniversalBank - were nationalised in the wake of the April 2010 revolution.

The latest decision will do little to aid that task, and is therefore likely to further deter much needed investment into the country. It will also probably hinder production at Kumtor, which accounts for a full 10-12% of GDP. That has seen the decision create divisions within Bishkek.

Officials from President Almazbek Atambaev's office have spoken out on the damage they say the decision will cause to the economy, with one official claiming to Reuters that it could cost Kyrgyzstan "millions of dollars." During a debate on the issue on June 25, MP Marat Sultanov went further, warning that the country stands to lose around $2bn.

The attempt to expropriate the mine was based on a June 18 report from a committee led by Sadyr Zhaparov, leader of the nationalist Ata-Zhurt party, which is currently in opposition. However, it failed to gain sufficient backing from MPs across the five parties represented in the parliament. Zhaparov's report makes a variety of accusations against Centerra, most of them focusing on claims of environmental damage. An environmental review of the mine's operations is now planned.

Meanwhile, the move to revoke the Kumtor licences only compounds what has been a difficult year for Centerra, which saw production at the mine suffer from a strike in February, and a blockade by local residents in early June. The company has also announced that delayed access to the mine's high-grade zone - due to increased ice movement - has forced it to lower its 2012 output guidance by over 30%.

However, such problems are nothing new for Centerra, which has faced the threat of nationalisation, tax and environment investigations several times since entering the Kyrgyz market, in addition to full-scale revolutions in 2005 and 2010. In 2009, in a bid to improve its deal, Kyrgyzstan - under former President Kurmanbek Bakiyev - pushed the company to renegotiate, giving it the current 33% stake, which is worth around $1bn. Centerra also agreed to a simplified tax regime for Kumtor.