No boom yet for Kyrgyzstan mines

The bus loaded with supporters of a planned $100 million mine had just left its remote Kyrgyz village when a mob on horseback blocked the road. What happened next was a warning to foreign mining companies who had hoped democracy in Kyrgyzstan would improve the investment climate in the Central Asian republic.
“The supporters were dragged out of the bus and warned in no uncertain terms they should not show any support for the project,” said Hugh McKinnon, country manager for Kentor Gold, the Australian miner that holds the licence for the deposit. “This group of horsemen went round every household which has shown support for the project and threatened physical violence unless people agreed to back off.”
Four months on, Kentor Gold still hasn’t started work on the copper and gold mine it says could transform a corner of Talas province, cradle of the April 2010 revolution that ended nearly two decades of authoritarian rule in Kyrgyzstan. The country has promised much since electing a new parliament last October, the first in ex-Soviet Central Asia not beholden to a presidential strongman. But early hopes that Kyrgyzstan could become a model for a different way to do business in the region are fading.
“The last two governments didn’t encourage any great confidence in their ability to create a level playing field. There’s a hope that things might get better under the new government, but it’s very much ‘wait and see’,” says Nick Chalmers, mining analyst at Mirabaud Securities in London. “There have been instances in the past of companies coming unstuck when trying to move from exploration to production, and finding that the goalposts have been moved. Until ... this transition is tested under the new administration, scepticism will remain.”
‘Kyrgyzstan’s coalition government says it is committed to ditching the cronyism of previous regimes. Prime Minister Almazbek Atambayev says the Kyrgyz stake in the country’s main mine was “plundered” by former regimes, and calls his main task “the battle against corruption”. He has pledged transparent tenders for future projects so they won’t “fall into the hands of swindlers”.
Country ripe for mining boom

With around 100 sizeable gold fields mapped -- but never tapped -- by Soviet geologists, the country is ripe for a mining boom. Gold has doubled in value since 2007 and prices around $1,500 an ounce could help resuscitate an economy that contracted 1.4 per cent last year after the revolution and ethnic violence that killed hundreds. “From now on, all of Kyrgyzstan’s riches should not be used to line the pockets of certain families or leaders, but for the people of Kyrgyzstan,” Atambayev told Reuters in a wood-pannelled office deep inside the parliament building in the Kyrgyz capital, Bishkek.
The government plans to overhaul mining legislation and expects to make its recommendations in months. Change won’t be easy. Anti-corruption watchdog Transparency International ranked Kyrgyzstan joint 164th of 178 countries in its Corruption Perceptions Index for 2010, level with the Democratic Republic of Congo. That survey predates the current government, but unwinding years of graft is already proving tough. Members of parliament continue to argue over controversial jet fuel contracts for the U.S. military air base in the country that serves the NATO-led war in Afghanistan.
Then there’s local opposition to new projects. Some of that is genuine -- in Talas province, residents fear their valleys will become polluted and people will stop buying their vegetables, disrupting their traditional way of life. But some seems to be whipped up by local elites backed by politicians in Bishkek with the goal of extracting a ger share of future proceeds. As one international mining industry financier, who declined to be named because of his work in the country, said: “You need to have powerful sponsors.”