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Kyrgyzstan: Gold Begins To Flow From Mine

Bishkek, 7 January 1997 (RFE/RL) -- Gold extraction has started at the Kumtor gold mine high in the mountains of Kyrgyzstan after a four-year preparatory period characterized by political storms.

An estimated 500 tons of pure gold are to be mined at Kumtor over the next two decades or more, bringing Kyrgyzstan an income of hundreds of millions of dollars by official estimates.

The mine sits at an altitude of about 4,000 meters amid the snows and winds of the wildly-beautiful Issyk-Kul region, close to the border with China.

At that altitude, merely walking 50 meters is exhausting, let alone working an entire shift. Humans and internal combustion engines feel the strain, gasping and wheezing in the thin air.

Cameco, the Canadian company which has built the mine in the last two years, can therefore point to a significant engineering achievement. At the official opening ceremony on December 17, Kyrgyz President Askar Akayev praised Kumtor as an excellent example of international cooperation. At the ceremony was Cameco's president, Bernard Mishel, who had flown from Canada for the occasion.

The two announced that some 13 tons of gold will be extracted from the mine in 1997 starting this month, and that up to 20 tons will be extracted annually thereafter. The seam of gold is not particularly well consolidated: one ton of ore will have to be treated to yield four grams of pure gold.

A primary separation will be made on site at Kumtor, then plans call for the ore to be transported some 400 kilometers for final refining at the Kara-Balta complex just outside the capital Bishkek. And thereby hangs a problem.

Kara-Balta is a former Soviet-era uranium processing complex which has been converted to gold refining. After conversion it reportedly achieved a gold purity extremely close to 100 percent, certainly sufficient to meet international bullion standards. But reports in the official Kyrgyz press quote the Canadians as saying that the quality of the refining has declined, and that little more than 98 percent purity is now being obtained. Cameco is not satisfied with that, and says the ore will have to be taken abroad for final refining.

Further, the company notes that Kara-Balta still has no certificate of official recognition from the London Bullion Market Association (LBMA), and without that recognition, the price of the Kumtor gold will suffer.

Highlighting the dilemma, the Kyrgyz official media say both Uzbekistan and Kazakhstan have in recent years opened gold refining complexes which have achieved LBMA certification.

Problems such as that recall the lengthy battle between Kyrgyz parliamentary deputies and the government over the entire Kumtor project.

The government first signed a contract with Cameco in December 1992. But deputies at the time questioned this, noting there had not been a tender process, and that other bids -- some of which appeared to offer more favorable conditions than Cameco -- appeared not to have been taken into consideration.

So the government revised the contract, but still in the end went ahead the following year with Cameco. That came amid continuing criticism from deputies, who appointed a special parliamentary commission to examine the issue. The commission alleged that the government had accepted a bribe, and at the end of 1993, Prime Minister Tursunbek Chyngyshev resigned after allegations of corruption were levelled at him.

RFE/RL's Kyrgyz Service reports the deputies remained concerned about many aspects of the project. They questioned the agreement between the government and Cameco, which divides profit one-third to the company and two-thirds to Kyrgyzstan. The deputies expressed preference for two-thirds of the physical gold to be allotted to Kyrgysztan on the grounds that this was a safer prospect than paper profits.

They also disliked the prospect of overseas shipment of partly refined gold, as this would put it beyond Kyrgyz ability to monitor the final results.

Deputies also had many questions about the environmental impact of the mine. Placed as it is at the head of the Barskoon Valley with its spectacular waterfalls, the mine lies above the beautiful and undisturbed Lake Issyk-Kul.

Would the lake suffer pollution from the truly enormous quantity of earth and rock which has to be moved and crushed to get to the gold? Cameco issued assurances that all would be well, but the deputies would have liked more concrete information. Likewise they questioned what would happen to the other valuable metals and minerals which usually accompany gold deposits, such as silver, wolfram and tellurum, which are known to be present at Kumtor. Who would benefit from these other resources?

Such criticisms continued into 1994 after the Prime Minister's resignation, and then, the parliament was dissolved in September of that year. This effectively ended criticism of the Kumtor project. A new parliament was elected in February 1995, but members obviously felt it was wiser not to return to the subject.