Centerra Gold’s profit hit by troubles in Kyrgyzstan

By Cecilia Jamasmie

Canadian miner Centerra Gold (TSX:CG) posted late Wednesday a net loss of $68 million or $0.29 per share for the fourth quarter of 2012, as a direct consequence of the ongoing troubles with the Kyrgyzstan government, which forced the company to pay out $180.7 million for the de-recognition of its Kumtor mine in 2012.

The results are substantially worse than those published by the gold miner in the same period the year before, when it logged net earnings of $79.4 million or $0.34 per common share.

At the heart of Centerra’s troubles in the Kyrgyz Republic lays a study divulged last year, which accused the company of damaging the environment and stealing the country’s riches. That document drove the Kyrgyzstan government in July last year to cancel the ruling that gave Centerra surface rights at Kumtor and to charge the firm with a $152 million fine.

Until then Kumtor had operated without major interruptions since 1997, but political unrest has been a recurrent issue for Centerra Gold in Kyrgyzstan. The company has dealt with multiple nationalization concerns, a taxation evasion probe, an international arbitration case, and even a 2010 political revolution.

The Toronto-based company thought most of its problems were resolved a few years ago, when it inked a contract that established tax terms for Kumtor and gave the Kyrgyz government a 33% stake in Centerra. But recent comments from local authorities that imply the country wants to renegotiate the terms of the miner’s license for Kumtor, shows it remains a contentious topic in the Central Asian country.

Centerra Gold is a significant employer and taxpayer in in Kyrgyzstan and a key contributor to its economy. In fact, the Kumtor open pit gold mine accounts for 60% of the nation’s industrial output and, according to the company, it is the largest gold mine operated in Central Asia by a Western-based company.

The Canadian miner has been the subject of several recent research reports. Analysts at RBC Capital restated a “sector perform” rating on the company’s shares in a research note to investors on Tuesday. They now have an $11.00 price target on the stock. And analysts at Scotiabank cut their price target on shares of Centerra Gold from $20.00 to $17.00 in a research note to investors on Friday, Jan. 25. They now have an “outperform” rating on the stock.

Image by  Konstanttin/


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Source: Gold News