GO
Loading...

UPDATE 1-Kyrgyzstan files $304 mln ecology damage suit against Centerra

Olga Dzyubenko
Friday, 6 Dec 2013 | 11:59 AM ET

* Centerra rejects government's claim

* Kyrgyzstan ups pressure, wants 67 pct in proposed venture

* Govt has till Dec. 23 to report on venture talks

(Adds comments from Centerra vice president, market reaction)

BISHKEK, Dec 6 (Reuters) - Kyrgyzstan is suing Canada's Centerra Gold for 15 billion soms ($304 million) over what the government says is ecological damage, marking a new twist in a bitter row with the investor running the largest Kyrgyz gold mine.

The state environmental protection and forestry agency said in a statement that it had filed the lawsuit at an economic court in the Kyrgyz capital Bishkek, saying Centerra Gold had ignored its earlier request for voluntary compensation.

It said the alleged ecological damage included "emissions of pollutants and waste dumps." It said its claim referred to the company's operations between 1996 and 2011.

John Pearson, Centerra's vice president of investor relations, said the claims were first disclosed in February.

"As we said before, we feel that these are unfounded allegations and are without merit," he said.

Centerra Gold had said earlier that it viewed the government's claim as exaggerated and unfounded.

"The company disagrees with these charges and plans to give explanations on this matter in the nearest time," said a spokesman for the Kumtor Operating Company (KOC), the Centerra subsidiary that runs the Kumtor mine in the Tien Shan mountains.

The Toronto-listed miner, a major foreign-currency earner for the Central Asian nation of 5.5 million, is already under pressure from the Kyrgyz parliament, which demands the state hold 67 percent in a proposed joint venture to run the mine.

In September, the government and Centerra Gold signed a memorandum of understanding, paving the way for Kyrgzstan to swap its 32.7 percent stake in the Canadian firm for 50 percent in a venture that would own Kumtor.

But in October the legislature voted to tear up the document and seek control over the planned venture. It gave the cabinet until Dec. 23 to report on its talks with Centerra Gold on setting up the venture.

Pearson said Centerra is having "constructive dialogue" with the Kyrgyz government.

The Kumtor mine, bisected by a glacier 4,000 metres (13,000 feet) above sea level, is the largest gold mine in Central Asia operated by a Western company. It is the industrial centerpiece of the fragile Kyrgyz economy, alone contributing 12 percent of gross domestic product in 2011.

Kyrgyzstan's GDP shrank by 0.9 percent last year, after Centerra Gold reduced output at Kumtor by 40 percent as a result of ice movement in the pit.

In July, Centerra Gold raised its annual consolidated gold production outlook to a range of 615,000 to 675,000 ounces from its previous range of 605,000 to 660,000 ounces, compared with 387,076 ounces produced in 2012.

Shares fell 3.7 percent to C$3.60 on the Toronto Stock Exchange.

(Reporting by Olga Dzyubenko, with additional reporting by Allison Martell in Toronto; Writing by Dmitry Solovyov; Editing by Dale Hudson and Marguerita Choy)