Oct. 23 (Bloomberg) -- Centerra Gold Inc., the operator of the Kumtor mine in Kyrgyzstan, plunged the most in 15 months after reports that the central Asian nation’s parliament rejected a proposed agreement to give the government a 50 percent stake in the mine.
Centerra fell 23 percent to C$4.10 at the close in Toronto, the biggest drop since June 28, 2012. The Toronto-based company has declined 56 percent this year.
Centerra said today in a statement it’s aware of news reports that the Kyrgyz parliament passed a decree rejecting the non-binding pact reached in September. Parliament set a deadline of Dec. 23 for concluding a new deal, the company said.
“Reports indicate that Parliament has instructed the government to continue negotiations with Centerra with a view to increasing the Kyrgyz Republic shareholding in a joint venture project to 67 percent,” Centerra said today. If a mutually acceptable solution can’t be found, the government is “to initiate the denouncement of the current project agreements governing the Kumtor project.”
In September, Centerra and the government agreed to discuss a deal that would involve state-controlled Kyrgyzaltyn JSC exchanging its 33 percent stake in the company for the mine stake. Centerra would remain the operator and manager of the mine under the proposed agreement.
Centerra, which also has operations in Mongolia, has been in negotiations with the Kyrgyz government to address concerns raised in a report by a state commission regarding taxes and ownership issues around the project. Kumtor is Centerra’s biggest producer.
Centerra said today it will continue talks with the government, which it believes still supports the September agreement. Any deal must be fair to all of the company’s shareholders, it said.
Centerra and then-majority shareholder Cameco Corp. agreed in 2009 to give the Kyrgyz government a bigger share in Centerra as part of a deal to end legal disputes threatening Kumtor. The agreement resolved back-tax obligations, set a new tax rate and settled a clash over the size of the project’s exploration and development concessions, Centerra said at the time.
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