A general view of the Kumtor mine in Kyrgyzstan May 31, 2011.VLADIMIR PIROGOV/Reuters
Centerra Gold Inc. warned on Monday that it would start shutting down its key gold mine in Kyrgyzstan if the central Asian government did not provide the Canadian company with the relevant permits to operate its asset.
The news sent Centerra's stock down 22 per cent to $3.59 per share, its lowest level since December.
Since late last year, the Toronto-based company said it has been in discussions with Kyrgyz authorities to obtain the necessary approvals.
But "despite repeated submissions and discussions with senior officials," the permits have not been provided, Centerra said.
The company is planning to shut down all its mine and mill operations by the close of business June 13, a move that could slash Centerra's earnings if it lasts a long time.
Kumtor produced just over 600,000 ounces of gold last year, representing about 90 per cent of the company's overall production. The company's smaller mine in Mongolia, Boroo, produced just over 90,000 ounces in 2013.
Although the mine closure is bad news for Centerra, one analyst said it would also have a "detrimental effect on revenues for the Kyrgyz Government.
"There is a vested interest from both parties in keeping the mine in operation," Jonathan Guy, an analyst with RBC Dominion Securities, said in a note to clients.
Centerra said an extended shutdown "would likely have a material, adverse impact on the Kumtor mine and the company's operations, future cash flows, earnings, results of operations and financial condition."
Rachelle Younglai