BISHKEK -- A Russian company has won a tender for the rights to develop Jerui, Kyrgyzstan's second-largest gold deposit, leading to criticisms that the deal goes against the Central Asian country's interests.
Vostok-Geoldobycha won with a bid of $100 million, millions lower than that of a competing bid from a Kyrgyz state company, and despite the possibility of a costly court battle with the site's former Kazakh investor.
Winning the tender gives Vostok-Geoldobycha the right to develop Jerui's estimated reserves of more than 97 tons of gold, the Kyrgyz State Geology Agency said on May 4.
Kyrgyzstan's state gold company Kyrgyzaltyn provided a bid of $111 million. Vostok-Geoldobycha, however, offered better technology and a better investment program, according to State Geology Agency head Duishenbek Zilaliev.
Kyrgyzaltyn Vice President Sagynbek Abdyrakhmanov told RFE/RL that the tender's result was "against Kyrgyzstan's national interests."
"We have full capacity to operate the mine ourselves. We have 30 years of experience," Abdyrakhmanov said. "However, our experience and our capacities have been ignored and the deposit was given to a foreign company."
The tender winner has the right to mine Jerui, located in northwestern Kyrgyzstan, for 20 years. The deal allows for possible extensions until reserves have been depleted.
The investor will also be required, at its own expense, to protect the interests of Kyrgyzstan and its government in international and local courts relating to claims filed by Jerui's previous license-holders, and to cover all possible costs.
Vostok-Geoldobycha, affiliated to Russian Platinum Corporation, might face such a situation later this year.
In 2013, Consolidated Exploration Holdings, part of Kazakhstan-based Visor Holding, filed a $549 million arbitration claim against Kyrgyzstan's government, saying its 60 percent stake in the Jerui project was illegally expropriated in 2010.
Consolidated Exploration Holdings said earlier that it was seeking compensation from the Kyrgyz government for withdrawal of its mining license. A hearing on the case is expected in November.
Jerui, discovered by Soviet geologists in 1968, has changed hands several times but has yet to be developed. It lies in a mountainous area between 3,000 and 3,600 meters above sea level.
Kyrgyzstan this year signed an accession agreement to join the Eurasia Economic Union, a Moscow-led alliance that also includes Belarus, Kazakhstan, and Armenia. Kyrgyz President Almazbek Atambaev has expressed hope that Kyrgyzstan could become a full member by May 2015.
Russian President Vladimir Putin has portrayed the union as beneficial to the national interests of all members, but critics have suggested that the bloc is an avenue for Moscow to exert economic pressure on neighboring states.
With reporting by Reuters and KyrTAG