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Kyrgyzstan Ends Talks With Canada's Centerra Over Kumtor Mine

Kyrgyzstan's government cited "national interest" in halting talks on December 22 with Canada's Centerra Gold over restructuring their joint Kumtor gold mining project.

The government said it would propose a new restructuring of the venture to provide "an increase in financial flows" for Kyrgyzstan.

Kumtor is the Central Asian nation's largest gold field and the main source of hard currency earnings for the country, accounting for 7.4 percent of its gross domestic product and 15.5 percent of industrial output last year.

Centerra operates Kumtor and has been in talks with Kyrgyzstan for almost two years on a deal that would involve the ex-Soviet republic swapping its 32.7 percent stake in Centerra for half of a joint venture that would control the gold deposit.

The failure to clinch a restructuring deal led to the resignation of Joomart Otorbaev as Kyrgyzstan's prime minister in April. His successor, Temir Sariev, has said resolving the issue would be a priority.

Kyrgyzstan's parliament has threatened to nationalize the gold mine, reflecting public opinion. Sometimes violent public demonstrations have demanded nationalization of the project.

Kyrgyzstan's government is particularly unhappy with Centerra's new, lower estimate of Kumtor's reserves. In February it reduced its estimate of proven and probable reserves to 6.1 million ounces of contained gold as of the end of 2014, compared with 8.5 million a year earlier.

The Kyrgyz government has not extended the permits to allow mining at the site to continue next year, although Centerra officials say they are confident the paperwork will be issued.

In breaking off negotiations, the government complained that the company had "presented a series of conditions for the registration and governance of the joint venture that were absolutely unacceptable."

Prospects of reaching a deal have been complicated by a Canadian court's freezing of Kyrgyzstan's shares of stock in Centerra following international arbitration rulings in favor of foreign investors.

Kyrgyzstan's Centerra shares are the country's biggest foreign asset, making their seizure attractive as payment for arbitration awards.

The government's wrangling with Centerra, which is also the country's biggest taxpayer, sent the shares down nearly 6 percent in Toronto trading December 22.

With reporting by Reuters and AFP
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