Monday, June 25, 2012 -
Investors rushed Friday to sell off shares of Canadian miner Centerra Gold as lawmakers in Kyrgyzstan debated whether to nationalize the country’s flagship goldmine.
Stocks of the largest miner in Kyrgyzstan went into free fall on the Toronto stock exchange, dropping 35 percent of their value in just hours Friday.
Meanwhile, members of the lower house of Parliament spent the day wading through a lengthy litany of alleged abuses, compiled by a parliamentary commission, that includes destruction of the environment and danger to Kyrgyzstan’s security.
The resulting collapse in confidence in Kumtor mine, which is one-third owned by the Kyrgyz government, also wiped more than $250 million from the value of the government’s investment Friday.
Centerra Gold may be stripped of its operating license as a punishment.
Centerra calls the charges nonsense and vows it will win.
“We believe this is something we’ve weathered in the past and will weather again. It’s one of the things we seem to be able to do,” the Financial Post cited chief financial officer Jeffrey Parr as saying.
Some Kyrgyz MPs have warned that revoking Centerra’s license will send a bad signal and seriously damage investor confidence in the country.
One Kyrgyz mining industry expert said if the Kumtor project was nationalized “the investor will immediately sue us in court, and we will lose this case.”
"If we follow this path, then we would have to pay $5 billion in compensation, while Kumtor will be standing idle ... We would not be able to run this project on our own," the Reuters news agency cited Orozbek Duisheyev, head of the country’s association of miners and geologists, as saying.
It is not known when the deputies will cast their votes.
Centerra began operating the mine in 1997. The Kumtor gold project is critical to the country’s national budget, as it generates some 12 percent of its gross domestic product.