Centerra Gold punished as Kumtor strike enters second week

The Toronto-based company says the strike that started a week ago is illegal and that all operations including exploration have been suspended apart from a “minimal amount of mining” to manage the pit wall and other essential services.

Centerra said last week the trade union is demanding that Kumtor pay the mandatory employee contribution to the Kyrgyz Republic social fund in addition to the mandatory employer contribution paid by Kumtor.

Recent regulatory changes now require that social fund contributions be deducted from wages including premium payments for work at high altitude. Centerra says the collective agreement in place until the end of the year makes the strike illegal.

In December access to the mine was blocked for a week by community protesters seeking greater involvement in the mine, but production was only marginally effected.

Centerra announced in January that its 2011 consolidated gold production totalled 642,380 ounces, which includes 583,156 ounces from the Kumtor and 59,224 ounces from its Boroo mine in Mongolia.

The Canadian company forecast 2012 consolidated gold production to be range from 635,000 to 685,000 ounces, with as much as 625,000 coming from Kumtor. Margins at the mine are fat: cash costs in 2012 are forecast to be $430 – $465/oz.

Centerra last week increased its measured and indicated resource base by 36% or 1.8 million contained ounces of gold to 6.7 million contained ounces of gold with the bulk at Kumtor. The company also has development projects in Mongolia and Russia.

In operation since 1997 Kumtor last year represented over 10% of Kyrgyzstan’s GDP and 54% of its industrial output. Kyrgyzstan holds 33% of the mine and Canada’s Centerra the remainder.

The ex-Soviet republic of 5.5 million people with per capita GDP of only $880 has been plagued by ethnic strife since independence and the October 2011 presidential election when business tycoon Almazbek Atambayev was elected was the country’s first peaceful transfer of power.

International Business Times reported in October last year a mob of horsemen armed with sticks and petrol bombs attacked an exploration camp run by South African miner Gold Fields’ joint venture in Kyrgyzstan, the latest in a series of assaults on mining companies in the Central Asian state.

Image of Kyrgyzstan Prime Minister, Almazbek Atambayev presenting a traditional coat or ‘Kementay’ to Syed Yousuf Raza Gilani on occasion of a dinner on March 15, 2011 in Bishkek by Asianet-Pakistan / Shutterstock.com.