According to the director who was appointed to manage the project, the Kyrgyzstan government could not resist taking control of the huge Kumtor goldmine from its Canadian owner due to safety and environmental concerns.
In an interview with the Financial Times, Tengiz Bolturuk said the decision to appoint him as external manager was because of “systematic violations” of environmental law by Centerra Gold and its “predatory” attitudes toward natural resources. “I have seen it with my own eyes” he said in some of his first public comments.
In May, Bishkek seized control of Kumtor, the country’s most valuable asset producing 500,000 ounces of gold a year, after President Sadyr Japarov signed a new law allowing the government to take temporary control of mines that violate environmental regulations or endanger lives. It also fined the company with $3bn.
The move, which has alarmed banks and investors, came months after Japarov, a nationalist firebrand who fought for nationalisation of the mine a decade ago, came to power in a landslide election.
Kyrgyzstan’s largest source of revenue is gold production and Kumtor contributes the most to the country’s gross domestic product.
Centerra, whose annual revenue is more than half dependent on the mine, has responded by initiating international arbitration proceedings against government and seeking bankruptcy protection to its Kyrgyz subsidiaries.
It has also sued Bolturuk, who served as the government’s representative on the company’s board for six months until May 2021, claiming that he conspired to steal the asset from the company — allegations Bolturuk denies. 26 percent of Centerra is owned by the government.
The row highlights tensions that can arise between the mining sector, which spends billions of money to develop complex projects in remote regions of the globe, and host countries, who often feel they don’t get a fair share from the profits from their natural resources.
In a statement, Centerra said Bolturuk’s claims were entirely meritless and the state agency responsible for the environment had approved its mining permits every year.
“The mine’s environmental performance was also audited externally multiple times by the Kyrgyz government’s environmental consultant, AMEC Foster Wheeler, and the European Bank for Reconstruction and Development,” it said.
The company also said it was concerned about a build-up of water at the mine “potentially destabilising” the pit walls and creating an “environmental hazard if the water is not treated properly”.
“The government is also not permitting independent third parties to visit the mine to assess [the situation] . . . or assess whether it is still safe to operate the mine,” it said.
Kumtor is a large, western-operated gold mine in Central Asia. It is located between 3,600 and 4,000 metres above the sea level in the mountains above IssykKul Lake. The large amounts of ice needed to reach the gold ore deposit must be moved.
Bolturuk stated that the mine had reduced the amount ice being moved from glaciers to 1.8m cubes metres under his supervision, compared to 4.8m a yearly earlier.
“We will reduce this to almost to almost zero in two years”, he claimed. Centerra claimed that it had removed ice from the area of the open pit and infrastructure.
The shares of Toronto-listed Centerra have fallen by 40% this year, and analysts and investors are becoming more resigned to Kumtor’s taking over.
Over the weekend, Japarov said Kumtor was now 100 per cent owned by Kyrgyzstan, “and only formalities remain”. “That is, the necessary documents must be signed and this will be done,” he was quoted as saying by local media.
Edil Baisalov, Kyrgyzstan’s Deputy Prime Minister and former ambassador to the UK, said Bishkek was committed to resolving the dispute with Centerra.
“To this end, we remain open to reaching an out-of-court settlement that satisfies all parties. However, we are also ready to pursue legal arbitration to its proper and just conclusion,” he said in a statement.