A license for gold miner

A gold dispute goes on in Kyrgyzstan.

The Bishkek InterDistrict Court issued an

order invalidating the mining licenses covering the Southwest area and Sarytor

areas and the exploration license covering all of the Kumtor deposits last

Tuesday. The licenses were issued three years ago. It took the Themis less than

two hours to satisfy the claims of the Vice Speaker Kybanychbek Isabekov

against Centerra Gold Inc.

Themis la?..

A court affair between the vice speaker

and Centerra Gold Inc. has been carried out for over two years. For this period

the MP has won by court action over $1mln from the investor. This was not a

windfall win, with due regard to Kyrgyz political environment. Anyway, the name

of Kybanychbek Isabekov has become a frightening common name for foreign

investors in Kyrgyzstan.

Inspired by the previous success, Isabekov

has overacted. He has initiated new legal proceedings against Centerra Gold

Inc. in 2008. This time Isabekov appealed to find the agreements signed between

the gold miner and government of Nikolay Tanaev and licensees for the deposits

void and illegal.

The decision to cancel the agreements is

likely prompted by insatiable appetites of the government that has been sought

for two years to increase the country's stake in the Kumtor project, while

uranium miner Cameco's stake would drop. It turned out that this is the third

team of negotiators challenged with development of a new agreement to satisfy

the interests of government. What will be the outcomes of their work, if any, is

still unknown.

The Bishkek InterDistrict Court has long

mulled over how to settle the case. First the judge united the claims of the

vice speaker. However, on second thought the judge divided the execution into

two stages. The first stage completed last Tuesday. The court ruling came out

like a bolt out of the blue for both investors and observers.

Wanna be the third?

On Monday, June 16 the judge voiced his

intention to separate the claims into two categories. The first claim was

lodged against the State Agency on Geology and Mineral Resources. Centerra Gold

Inc. was supposed to be the third party to the proceeding as the claims of

Isabekov concerned the company activities.

As the court hearing started on Tuesday,

it turned out that the investor's representative was missing. The President of

Centerra hadn't return to Kyrgyzstan

and, therefore, failed to sign a power of attorney to the person authorized to

represent the company in the court.

The vice speaker accused the court of the

case protraction and demanded to continue the hearing in absentia of the gold

mining company. Thus, the Centerra Gold Inc. was denied the right to defend.

The court cancelled the licenses at a rate

of knots. It took the judge two hours to hear the evidence and make a scooping

judgment.

Beating the air

The complainant was pitiless. Kybanychbek

Isabekov is outspoken for his criticism of Centerra Gold Inc. He is convinced

that the investor must be expelled and the holy place is never empty. A

fallible argument. Gold mining in Kyrgyzstan, as the dispute with

Kumtor shows is a challenging and risky undertaking.

The claim of the vice speaker concerned

the Southwest area and Sarytor areas. The vice speaker stated that the State

Agency has issued the licenses in violation of the law since the agency had

never called for bids. The respondent party appealed to the legal

rules that allowed the agency to transfer the resources at its own discretion

as the investor had carried out the geological exploration on the deposits. The

argument did not influence the judge. Kybanychbek Isabekov insisted that the

company made use of the geological exploration held during the Soviet times.

The court believed Isabekov on the bare word. At last nobody checked the

accuracy of the statement.

Finally the court cancelled three

licenses. Earlier, the same ruling was passed by the Supreme Court in absentia

of the gold mining company's official representatives.

The second part of the Le ballet de la

Merlaison was planned for June 20. The court was expected to settle the claim

of Isabekov against the government. The vice speaker is determined to cancel

the agreements of 2003. However, today the court put off the hearing until July

2nd.

Some may call the situation a

"crackdown". Actually, this is just a game that will force the

investor to come to the terms with government. The court judgment pursues

a single aim of taking the licenses away and than giving it back...under new

terms. In case the Kyrgyz authorities will ever come to a final decision...