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 hasn’t officially resigned his post, 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 Russia also has a significant presence in the country. While both the U.S. and Russia said they would co-operate in any response to the uprising, it was Russia that offered its support to the new government first.
At this point, however, there is no evidence that Russia was connected to the uprising, although its policies towards the nation did play a part in the end of Bakiyev.
That’s because an end to preferential customs rates on oil that it exported to the country, helped contribute to the spike in energy prices.
In an apparent case of “what goes around comes around”, Bakiyev himself rose to power on the back of street protests. The movement, which culminated in his taking the post of president in 2005, was labelled the “Tulip Revolution.”
The president was re-instated by a large majority in 2009, although the legitimacy of the election has been called into question.
And while the country had been enjoying a relatively stable run of government Bakiyev was criticized for shrugging off democratic standards and increasing his own private wealth.
In recent months country has seen a clamp down on free media and opposition leaders claim to have been increasing intimidated with physical violence.
As for Centerra, the Toronto-based 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, touching a low of $10.84 on Apr. 8 before finishing the day stronger to close 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 in the country to be sure that it is safe to continue to transport 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 actually saw its share price climb since word of the revolt was released. The Russian-managed company’s shares were up 25% in Toronto on Apr.8 to 31¢ on 288,000 shares traded.
On Apr. 6 – just a day before the uprising – the company announced that it had licences for two of its Kyrgyzstan projects extended and that it would accordingly drill 4,200 metres on the grounds.