Kyrgyzstan’s president signed a law Friday that allows the government to seize control of its largest gold mine if the facility’s Canadian operator is found to have violated environmental standards.
The move comes as authorities ratchet up pressure on Centerra Gold, the Canada-headquartered miner that controls the Kumtor Gold mine by claiming the company has committed environmental and tax violations worth more than $4 billion.
Kumtor, a mine situated in the east of the country at over 4,000 metres (13,100 feet) above sea level, accounts for up to 10 percent of the threadbare national economy.
Britain and Canada on Friday issued a joint statement warning of “far-reaching implications for foreign direct investment in Kyrgyzstan” over the passage of the law and the potential nationalisation of the mine.
Centerra said last week that the law, which allows for “external management” of the mine for a three-month period, violates the 2009 agreement that governs the mine and calls legal claims against the company “entirely meritless”.
It is not clear what would happen after the end of the three-month period of external management that the government can now choose to impose.
The terms of the company’s agreement with the government allow for international arbitration of any disputes that cannot be settled in country.
The head of a state commission investigating violations at the mine announced Wednesday a claim of more than $1 billion in tax violations against the company.
That came after a court fined the company’s Kyrgyz subsidiary over $3 billion for dumping mining waste on glaciers.
Kyrgyzstan, a poor, mountainous country with few natural resources, has regularly accused Centerra, a Toronto Stock Exchange-listed company of which Kyrgyzstan owns more than a quarter, of shortchanging it over Kumtor.
President Sadyr Japarov’s sudden rise to power last October after getting freed from jail during a political crisis was particularly bad news for Centerra.
As an opposition politician Japarov led an unsuccessful bid to nationalise the mine both inside parliament and on the streets, where he oversaw several chaotic rallies against the company.
During one of these rallies in 2013 a provincial governor was kidnapped — a development that formed the basis for the 2017 arrest and sentencing of Japarov to over 11 years in jail on hostage-taking charges.