BISHKEK, Kyrgyzstan—In a world of industries and natural resources, economics can determine winners and losers. Such is evidenced by the Kumtor Gold mine of Kyrgyzstan, a mining project that continues to draw environmental concerns and corruption questions despite a recent ruling by the government to keep the mine in service. Kyrgyzstan is a small country located in Central Asia, bordering Kazakstan, China and Uzbekistan. With a population of approximately 5.6 million, the nation achieved independence in 1991 following the disintegration of the USSR.
The discovery of a gold mine in the country by the Soviets, however, opened a new chapter of economic possibilities for the country, as 1997 saw the beginning of commercial exploitation of the mine. Since production began, Kyrgyzstan’s gold mine has yielded approximately 300 tons of gold.
The Canadian firm Centerra Gold runs the mine as a joint venture with the Kyrgyzstan government. However, critics have argued that both parties have ignored environmental regulations. They believe exploitation of the mine threatens the Davydov Glacier, an important, active glacier that serves as a fresh water source for the country.
“The Kumtor mine is operating in a fragile mountain ecosystem,” Amanda Wooden, associate professor of environmental politics and policy at Bucknell University, said. “This type of industry and at this massive scale is going have an ecological impact, as mining officials recognize.”
While the mine is owned by Centerra Gold, the Kyrgyzstan government maintains a 33 percent investment in the company through Kyrgyzaltyn, the nation’s state-owned mining company. Recently, however, discourse has emerged as to whether the government should own a higher share of the mine.
The Kumtor mine is the only open-pit gold mine in the world. It lies near the Chinese border at an altitude of over 13,000 feet.
The mining project has seen its share of controversies, however, including a cyanide spill in 1998. At the time, local and international media organizations reported the spill killed several people and injured hundreds of others. An independent group of experts later stated in a report that no substantial environmental impacts occurred as a result of the spill.
Yet, a report by Earthworks noted that the spill caused financial damage in the tens of millions of dollars. The mine later reached an agreement with the government to pay $4.5 million in damages. Centerra and the Kyrgyzstan government have been under pressure to strike a more substantial deal following protests, riots and hunger strikes that have at times stalled production at the mine.
Over the past several years, the government began talks to nationalize the mine. Government officials stated their belief that the government’s share of the mine should increase from 33 to 67 percent. Yet, President Almazbek Atambayev continues to oppose both nationalization and an end of relations with Centerra.
The five-and-a-half month standoff ended last month when Centerra received government approval for its mining plan, nearly a half a year too late. Centerra had threatened to shut down the mine if its plan was not approved by June 13.
Nevertheless, the two sides reached a deal. Centerra said in a June 13 press release that the company “has always worked constructively and in good faith with the Kyrgyz Republic government and regulatory authorities to ensure the continuous operation of the Kumtor project for the benefit of all parties.”
Kyrgyzstan is not foreign to volatile political and socioeconomic events. Since becoming independent from the USSR, the country has seen two of its governments overthrown. The nation is rife with regional and ethnic differences, differences which date back for scores of years. In 2010, 470 people died and 400,000 were displaced in clashes following an election that sharply divided Kyrgyzstan and Uzbekistan citizens.
Last June, the mine faced a possible shutdown following possible corruption allegations. However, the mine continued to operate, as a possible shutdown would leave thousands of employees and contractors unemployed. The average salary of a Kyrgyzstan employee at the mine is more than seven times the national average. If the mine were to close, the country could lose $100 million and $50 million in direct and indirect taxes respectively, according to Economy Minister Temir Sariev.
Kyrgyzstan’s gold mine is the biggest employer and taxpayer in the country and accounts for 60 percent of the country’s industrial output and, last year, accounted for 7.7 percent of its gross domestic product. This year, the mine is expected to yield 550,000 to 600,000 ounces of gold. At the current rate of excavation, the mine is expected to yield gold through 2026.
The debate over whether a leading, job-producing industry should take complete precedence over a substantial natural resource for the small country is likely to continue. The Kumtor mine is producing a positive economic outlook for both the Kyrgyzstan government and Centerra while potentially causing irreversible damage to the Davydov Glacier. Kasiyet Karachokolova, spokeswoman for Kyrgyzstan’s state geology and mineral resources agency, said that country must make a decision.
“We have to answer the question: Is the economy a priority, or should we protect the environment?”
– Ethan Safran
Sources: Al Jazeera, Reuters, MINING.com, BBC News, The Economist, Silk Road Reporters, Financial Post, VICE, Renmark Financial Communications, Central Intelligence Agency Photo: The Star