Centerra mulls offering stake in Kumtor mine to Kyrgyz government amid violent protests – by Peter Koven (National Post – June 5, 2013)

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TORONTO – As it faces a barrage of nationalization threats in Kyrgyzstan, Centerra Gold Inc. is studying a possible solution: giving the government a direct stake in its flagship mine.

Centerra revealed Tuesday that it negotiating a potential transaction with the Kyrgyz government that would convert the state’s 32.7% ownership of Centerra shares into direct ownership of the Kumtor mine through a joint venture.

The talks come amid a major crisis for Centerra. Last week, the Toronto-based miner had to temporarily shut down Kumtor after hundreds of protestors set up a roadblock near the mine and shut down a substation that was providing grid power.

The government later declared a state of emergency as hundreds of protestors clashed with riot police near Kumtor. The mine has since re-opened and the road is now clear again. “Probably by today or tomorrow, we’ll be at full capacity again,” said John Pearson, Centerra’s vice-president of investor relations.

The protestors were demanding that the government’s 2009 investment agreement with Centerra be torn up, with some calling for outright nationalization. Three months ago, the Kyrgyz parliament approved a resolution to renegotiate the deal, or toss it out it if no deal is reached.

While Centerra provided no details on the negotiations, one potential benefit of giving the government a direct stake is that it would directly address the nationalization demands. It may also help Centerra defend itself against allegations that Kumtor is responsible for environmental destruction on a massive scale. The company has stated that those claims, which were detailed in an 800-page parliamentary report last year, are nonsense.

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