Mongolian Government Suspends Centerra Mining Licence

VANCOUVER– As Centerra Gold’s (CG-T, CAGDF-O) headache in Kyrgyzstan dissipates, a fresh one is building in Mongolia.

Having just finalized a partnership with the Kyrgyz government on its Kumtor mine — staying speculation of full-bore nationalization — the Mongolian government has suspended Centerra’s operating licence for its Boroo mine.

The suspension adds to the company’s recent woes at Boroo, as workers have just ended what Centerra alleged was an illegal strike, starting on May 24 and ending June 16. The company said a deal struck with workers includes “enhanced future redundancy benefits” for permanent employees.

Centerra says the government notice of suspension at Boroo alleges problems with “record keeping, incorrect land use, and improper operating procedures.”

The suspension notice is valid for three months, by which time if Centerra has not resolved the problems with the Mongolian government, “there is a possibility that the licences will be revoked,” Centerra reports.

The basis and intent of the Mongolian government’s allegations are not clear.

The Mongolian ambassador to Canada, Dugerjav Gotov, says he has not received notice of the suspension and could not comment. A call to Centerra went unanswered at presstime.

Annual production at the 6,500- tonne-per-day mine over the past few years has been about 200,000 oz. to 300,000 oz. gold.

The suspension of operations comes at a particularly painful time for Centerra — after a first-quarter loss of US$20.3 million.

Combined quarterly production from Kumtor and Boroo was 103,200 oz. gold.

It also hurt as Centerra finally appeared to have cured political issues plaguing it at Kumtor, in Kyrgyzstan.

On June 11, the day before it announced the mine suspension in Mongolia, Centerra announced it had finalized an agreement for the Kumtor mine that was earlier ratified by both the Kyrgyz parliament and president.

The agreement lays out more straightforward taxes and gives the Kyrgyz government a stake in both Centerra and its majority stakeholder Cameco (CCO-T, CCJ-N).

On news of the suspension of operations, Centerra’s share price fell 82¢ to close at $6.48. By presstime, it had fallen further, and was trading at $5.58.

The Boroo mine is 110 km northwest of Ulaanbaatar.