Shares of Centerra Gold Inc. (TSX: T.CG, Stock Forum) tumbled Wednesday after Kyrgyzstan’s parliament voted to revise the Toronto company’s operating license for its Kumtor mine in the central Asian country.
Centerra shares, which closed at $10.05 on Tuesday, tumbled as low as $8.82 in early trading Wednesday, a sure sign that the parliamentary motion is viewed by investors as a big setback.
The Kyrgyz parliament voted overwhelmingly to back a motion that calls for the government to boost its current one-third interest in the Kumtor mine, which hosts 8.1 million ounces of proven and probable gold reserves, making it one of the largest gold mines in central Asia.
In 2011, Kumtor produced 583,156 ounces of gold.
Deputies say a 2009 operating agreement doesn’t give the Kyrgyz government enough revenue, even though that revenue stream already accounts for 12% of the Kyrgystan economy.
Centerra issued a statement Wednesday saying it doesn’t believe the resolution is legally binding on the Kyrgyz government and that the government (and relevant state agency) cannot revoke its decrees and licenses without meeting the relevant criteria for revocation set up under applicable law.
“As I have stated previously, Centerra believes that the parliamentary report’s findings are without merit,’’ said Centerra’s President and Chief Executive Officer Ian Atkinson. Centerra also said it believes that any discussion of the Kumtor project must take into account existing legal obligations and binding commitments.
At Wednesday’s trading levels, Centerra has a market cap of $2.32 billion, based on 236.3 million shares outstanding. The 52-week range is $23.69 and $7.66.