Russian role in Kyrgyzstan revolt?

Just when it appeared that things were finally moving smoothly for Centerra Gold (CG-T), political unrest in Kyrgyzstan reared its head and damaged the company’s share price.

Just a month after reporting strong financial results, the company is being forced to contend with word that the very government that it finally secured a stable contract for its Kumtor gold mine with, is on the run.

On April 7, it was reported that President Kurmanbek Bakiyev was forced out of the capital after thousands of violent protesters over-ran state police and seized government offices.

Not that Bakiyev gave up without a fight. Government troops opened fire on the protesters in the capital of Bishkek with 65 reported dead.

But the government force wasn’t enough to quell the mob, which brandished its own automatic rifles. The protestors’ anger was said to have been motivated by a huge spike in energy prices and corruption in the government.

And while Bakiyev hadn’t officially resigned his post at presstime, he was said to have fled the capital by plane.

The opposition almost immediately installed former foreign minister Roza Otunbayeva as head of the new government until elections can be held in six months time.

The secular Muslim country of 5.3 million people is considered a strategic ally to the U.S., which has a military base within its boundaries that acts as a supply centre in the fight against the Taliban in nearby Afghanistan.

But Russians also have a significant presence in the country. While both the U.S. and Russian governments said they would cooperate in any response to the uprising, there is little doubt about which power peddles more influence in the country.

According to the Washington Post the Kremlin bolstered the opposition’s case in the months preceding the revolt after its relations with Bakiyev soured.

While Russian forces are not accused of any direct involvement in the uprising, an onslaught of bad press emanating from Russia, but broadcasted in Kyrgyzstan, helped ignite anger towards the president.

The media reports brandished Bakiyev as a corrupt leader, guilty of nepotism via his son’s appointment to a leading development agency.

These reports also alleged the president was stealing. The charge is said to be connected to the fact that Russia’s first installment of a multi-billion dollar aid package was taken by Bakiyev, without a tacit agreement being fulfilled.

That agreement was that the U.S. air base in the country would be closed down. While Bakiyev had originally agreed to the closure, he supposedly changed his mind when the U.S. agreed to triple its rent payments to the country.

Russia continued its retaliations by cutting off special pricing on fuel, which caused gasoline prices in the country to rise just as its government was increasing the price of electricity.

The energy related inflation was a key rallying point for Bakiyev’s opposition.

And while Bakiyev seems to have time to ponder the latest Russian foreign policy tactics, he must also realize “what goes around comes around.” Bakiyev himself rose to power on the back of street protests labeled the “Tulip Revolution” that culminated in him taking the post of president in 2005.

He was re-instated by a large majority in 2009, although the legitimacy of the election has been called into question by some international observers.

As for Centerra, the Torontobased company says operations at its flagship Kumtor mine, which sits 430 km southeast of Bishkek, continue uninterrupted. The government of Kyrgyzstan has a 33% stake in the project.

That bit of positive news helped to stem the dramatic drop in the company’s share price.

Centerra shares initially fell steeply on the news of the protest, touching a low of $10.84 on April 8 before finishing the day at $11.36 on 3.7 million shares traded. Its shares closed at $13.54 the day before news of the revolt was released.

Centerra says it is monitoring the situation to ensure that it is safe to continue transporting people and supplies to the mine.

The only other TSX-listed company with significant assets in the country is London-based Orsu Metals (OSU-T, OSU-L).

In contrast to Centerra, Orsu saw its share price shoot up immediately after news of the revolt was released. The Russian-managed company’s shares went up 25% in Toronto on April 8 to 31¢ before cooling off in the following days. At presstime, Orsu’s shares were trading at 24¢.

On April 6 — just a day before the uprising — Orsu announced that it had licences for two of its Kyrgyzstan projects extended and that it would accordingly drill 4,200 metres.

In other news, Centerra announced that Barrick Gold (ABX-T, ABX-N ) had blocked the sale of Centerra’s 64% interest in the REN joint-venture gold project in Nevada. Centerra had agreed to sell the stake to Rye Patch Gold (RPM-V) but the deal was conditional on Barrick waiving its preemptive rights on the project. The deal with Barrick will land Centerra US$35.2 million in cash.