Tuesday, January 29th 12:29 PM IST

Centerra Gold in trouble again in Kyrgyzstan

# Kyrgyzstan gold  # Kumtor  # gold reserves  # Centerra  

Centerra currently pays a 13 percent tax on its gross revenue and another 1 percent into a special fund for the development of the Issyk Kul Region, where Kumtor is based.

BISHKEK(BullionStreet): Canada's Centerra Gold is in trouble again in Kyrgyzstan after country's cabinet gave approval to end company’s privileged tax regime.

According to Kyrgyzstan's Economics Minister Temir Sariyev taxes must be paid on the basis of the country’s tax code rather than some other agreements.

The existing agreement signed between Kyrgyzstan and Centerra in 2009 stipulates special terms of operation and tax payments for Kumtor.

Kyrgyzstan is in deep economic crisis and wanted every bit of money to save it's cash-strapped government, analysts said.

Centerra currently pays a 13 percent tax on its gross revenue and another 1 percent into a special fund for the development of the Issyk Kul Region, where Kumtor is based.

The minister said other enterprises pay 17-20 percent and are demanding comparable terms.

Centerra’s management has said it may turn to international arbitration if the Kyrgyz government refuses to honor existing legal guarantees.

The state commission also said it had exposed violations of the country’s environmental legislation, and the Cabinet of Ministers is seeking damages totaling more than $140 million, largely a result of claims over the disposal of waste at the Kumtor site.

Centerra has called the claims “exaggerated or without foundation” and said Kyrgyz officials approved the removals in question.

The Kumtor gold mine is the largest in Central Asia and produced more than 8.4 million ounces of gold between 1997 and the end of 2011. Under the 2009 agreement, the Kyrgyz government acquired one-third of Centerra.

Centerra’s subsidiary, Kumtor Operating Company, is the largest revenue earner for the Kyrgyz budget.

In 2011, it accounted for 12 percent of Kyrgyzstan’s GDP and over half its industrial output.

iN 2012, those figures dropped to 6.6 percent and 37.9 percent, respectively, due to damaging work stoppages at the mine, which dragged down the entire economy.

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