Pro-nationalization protesters shut down Kyrgyzstan mine

News & Insights
May 31, 2013
Protesters are escalating their demonstrations at Kyrgyzstan’s Kumtor gold mine, operated by Canada-based Centerra Gold. After closing the mine and cutting a road to it, protesters have now sabotaged the mine’s electricity supply, according to the AP. The protesters allegedly want the extremely valuable mine to be nationalized.

Kumtor, which accounts for about 12 percent of the economy of the impoverished ex-Soviet nation, was at the center of heated political debate among those seeking its nationalization and officials who believe that would deter much-needed foreign investment.

Twelve percent is a big number, and it’s understandable why some in Kyrgyzstan seek to keep more of the mine’s profit within the country’s borders. But nationalization of assets like this generally has a significant chilling effect on future investment. Unless Kyrgyzstan’s government has the capacity to run this mine and all other resource development projects on its own (not likely), the effort could backfire. The best outcome the government and its citizens can hope for is that the protests pressure Centerra to renegotiate the terms of its mining concession with the state, though that could produce the same chilling effect.

Governments and their citizens are better served by solving problems like this before they emerge by working with investors to secure the best possible terms–for both sides–at the outset of a major project.