Centerra’s Mine in Limbo: Resource Nationalism Rears it’s Head in Kyrgyzstan
Commentary – ProspectingJournal.com –
Kyrgyzstan, a member of the former Soviet Republic and home to five million, has become the latest nation to debate the merits of resource nationalism. Joining the ranks of Peru and Indonesia, Kyrgyzstan is at odds with a mining corporation, Canada’s own Centerra Gold (TSX: CG). The debate is reasonable, faced with the possibility of environmental degradation the country longs for a greater share of the resources they consider their own. But questions remain: is it feasible? And at what cost?
The conflict centers around Centerra’s Kumtor open pit gold mine, one of the largest in Central Asia. The Kyrgyz Parliament is considering revoking Centerra’s mining license, after a special commission accused the company of endangering the environment and acting against national interests. The company has responded in a recent press release stating that “the project is in full compliance with Kyrgyz laws, meets or exceeds Kyrgyz and international environmental, safety and health standards.” The company’s stock plunged on Friday as Krygyzstan’s parliament debated the issue but remains undecided. A vote on the future of Kumtor is expected to take place on Wednesday.
As always with resource nationalism — there’s big money involved. For Kyrgyzstan, one of the poorest countries in central Asia, the impact of Kumtor is huge. The gold mine accounts for a whopping 12 per cent of GDP and has generated $620-million in taxes alone for the nation. Additionally, Centerra is 33 per cent owned by the Kyrgyz state and if the project were to be nationalized the state could end up spending between $2-5 billion in compensation. No small amount for a country with a GDP of just over $13 billion. A vote against Kumtor could also halt any future foreign investment.
The Kyrgyz Parliament will make a decision on Kumtor’s future on Wednesday. The mine’s opposition will accuse Centerra (perhaps rightfully) of endangering the fragile environment and robbing the nation of its riches. While the supporters will argue the mine’s contributions to the Kyrgyz economy are too important to risk. Ultimately, the decision will act as another reminder that miners carry not only the weight of shareholder expectations, but the moral responsibility to tie economic fortune to environmental accountability in the nations they operate in.