TORONTO (miningweekly.com) – TSX-listed miner Centerra Gold on Wednesday warned that it had become aware of Kyrgyz news reports stating that the country's Parliament had passed a decree rejecting the nonbinding memorandum of understanding (MoU) inked between the Kyrgyz government, the State-owned mining company Kyrgyzaltyn JSC and Centerra on September 9.

Centerra said reports indicated that Parliament had instructed the government to continue negotiations with the company with a view to increasing the Kyrgyz shareholding in the Kumtor joint venture (JV) project to 67%, and should the parties fail to reach a mutually acceptable solution, government should start denouncing the current project agreements.

The company said it understood that a new deadline of December 23 had been set by Parliament for the parties to conclude these discussions.

Further, Centerra said it was still under the impression that the government continued to support the MoU.

“Centerra expects to continue discussions with the government with the objective of resolving matters through constructive dialogue; however, [it] maintains that any agreement to resolve matters must be fair to all of Centerra’s shareholders,” the company said in a statement.

Discussions were ongoing and any definitive agreement would be subject to compliance with all applicable legal and regulatory requirements and approvals, including any independent valuation and minority shareholder approval requirements.

Centerra cautioned that there could be no assurance that any transaction would be consummated or that the company would be able to successfully resolve any of the matters currently affecting the Kumtor project.

NATIONALISATION THREATS

Negotiations to form a new JV between Centerra Resources and the Kyrgyz government received a boost early last month when the parties signed the nonbinding MoU regarding the future of the country’s flagship Kumtor mine.

Under the terms of the MoU, the Toronto-based firm had agreed to review a proposal that would give the Central Asian country a 50% stake in Centerra’s gold mine, in exchange for its 32.7% equity ownership in Centerra and $100-million that would be provided to Centerra by way of an adjustment to JV distributions otherwise owing to State-controlled Kyrgyzaltyn JSC.

While both parties to the JV would have an equal number of directors on the board, the Canadian miner would remain the operator and manager of the mine.

The Kyrgyz Parliament earlier this year decreed that the Kumtor project agreements, which were signed in 2009, should be revised, while Centerra was also facing multimillion-dollar environmental claims.

For longer than a year now, the company had dealt with local protests, demanding the mine’s nationalisation and more social benefits. In May, the Kyrgyz government imposed a state of emergency to protect the Kumtor mine from protesters.

The Canadian miner is a significant employer and taxpayer in the country and a critical contributor to the Kyrgyz economy.

Centerra expects to almost double its output from the Kumtor mine, located high in the Tien Shan mountains, to about 600 000 oz this year.

The company’s TSX-listed stock fell as low as C$3.96 on Wednesday morning, down nearly 26% from Tuesday’s close. By noon, shares were trading down 22.47% at C$4.14 apiece.