Following a decisive setback in a bitter fight with Kyrgyzstan government officials, Centerra Gold Inc. has said it will seek arbitration against Bishkek if the company cannot reach an agreement over the future of the country's largest gold mine.

Canada’s Centerra is under pressure from the Bishkek parliament, which demands the government hold 67% in a proposed joint venture to run the Kumtor project, a major foreign-currency earner for the Central Asian nation and former Soviet Republic of 5.5 million. Talks have foundered amid riots and opposition demands to nationalize Kumtor, which represented 12% of Kyrgyzstan's 2011 GDP.

Chief Executive Ian Atkinson told Reuters that, under a 2009 deal, Centerra has the right to arbitrate. “The government's well aware of that and been advised of it, not just by ourselves but also by their own legal advisers,” said Atkinson.

In Q3, Bishkek and Centerra signed a memorandum of understanding (MoU), paving the way for Kyrgyzstan to swap its 32.7% interest in the Canadian firm for 50% in a venture that would own Kumtor. In October, however, the legislature voted to annul the deal and seek control over the planned venture; the cabinet was given until December 23 to report on its talks with the company.

Kyrgyz President Almazbek Atambayev, for his part, admitted the order to seek 67% for the state in the Kumtor venture was “obviously unachievable.” He also discounted nationalization, saying the country could lose billions in court; the process, Atambayev added, could last 10 years.

Company officials, meanwhile, said Kumtor has received a new claim from Kyrgyzstan’s Green Party in the Bishkek Inter-District Court seeking $9 billion for alleged environmental damages at the operation since 1996. Centerra representatives have rejected its validity.

Centerra, however, has had no further production shutdowns at Kumtor since Q2, when Kumtor work was suspended after villagers blocked its only access road. In July, Centerra elevated its annual production outlook to between 615,000 to 675,000 oz from a previous 605,000 to 660,000 oz, compared with 2012’s production of 387,076 oz.

Centerra Gold Inc. is a miner focused on operating, developing, exploring and acquiring gold properties, primarily in Asia, the ex-Soviet Union and other emerging markets. Centerra is also the largest Western-based gold producer in Central Asia.

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