Kyrgyzstan sues Centerra Gold over alleged environmental damage

By bne IntelliNews December 9, 2013

bne -

Kyrgyzstan's environmental protection agency has launched a $300m lawsuit against Centerra Gold, the owner of the country's largest gold mine Kumtor, over alleged environmental damage. The case increases the pressure on the miner, which is in talks with the Kyrgyz government as Bishkek seeks to take a larger stake in the mine.

A spokesperson for the environmental protection and forestry agency announced December 7 that it is suing Centerra in a Bishkek court for $300m for environmental damage caused between 1996 and 2011. The agency says it launched the case after Centerra ignored a request to pay voluntary compensation, RIA Novosti reports. It also says Centerra subsidiary Kumtor Operating Company failed to pay a fixed fee set by the government for environmental damage.

Amidst ongoing resource nationalism around both the country and the Central Asian region, the Kyrgyz government has been trying to craft a deal for the state to take a larger stake in Kumtor, which is currently the largest foreign-owned gold mine in the former Soviet Union. Wary of a further hit to investor sentiment towards the country, the government has attempted to broker a moderate agreement.

However, it has as yet been unable to strike a deal that is acceptable to both Centerra and the Kyrgyz parliament. On October 23, a draft deal hading the state 50% ownership of Kumtor was rejected by an overwhelming majority parliament. MPs insist the government should receive a controlling stake, while the nationalist opposition is demanding nationalisation.

Under the draft agreement, Kyrgyzstan would have exchanged the 32.7% stake it has held in Centerra since the initial privatisation of Kumtor in 2009 for a 50% stake in a new joint venture that would manage the mine. However, the parliament has called for the state to take at least 67% in the new operator. The parliament set a deadline of December 23 for the conclusion of a new round of negotiations, which is fast approaching.

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