BISHKEK, Kyrgyzstan - Shares of Centerra Gold plunged more than 20 per cent Friday as lawmakers in Kyrgyzstan debated whether to strip the company of its licence to mine a major gold field in the Central Asian country, with some accusing it of damaging the environment and profiting excessively.
The stock was down $2.81 or nearly 24 per cent at $8.97 on the Toronto Stock Exchange in morning trading.
The open-pit gold mine run by Centerra's Kumtor Operating Company subsidiary, which accounts for 12 per cent of the impoverished country's economy, has been the source of a string of toxic spills in past years, including a cyanide spill into a river.
Stripping it of its licence would be a huge blow to Toronto-based Centerra (TSX:CG) and could further dampen investor confidence in the former Soviet republic.
Centerra president and CEO Ian Atkinson said the more than 300-page report by a Kyrgyz parliamentary commission makes a number of allegations including claims of substantial environmental damage by Kumtor.
"Judging from its summary conclusions, however, Centerra believes that the report's findings are without merit," Atkinson said in a statement.
Centerra said the Kumtor project, which has been operating since 1997, is in full compliance with Kyrgyz laws and meets or exceeds Kyrgyz and international environmental, safety and health standards.
It wasn't immediately clear when the Kyrgyz deputies would vote on the motion.
Kyrgyzstan, a country of five million people on China's mountainous western border, has come to prominence in recent years because it hosts a U.S. air base used to support military operations in nearby Afghanistan.
Criticism of KOC has been led by Sadyr Zhaparov, a nationalist opposition deputy who heads a parliamentary committee that prepared a report being debated Friday.
Zhaparov said the operating deal with Kumtor is "unfair, goes against Kyrgyzstan's sovereignty and the interests of society, endangers national security and is causing irreparable environmental damage."
KOC called the parliamentary report "grossly inaccurate" and said its conclusions are "without factual basis."
It said the Kumtor project has been operating at full capacity without interruption since 1997 and has generated $1.9 billion for Kyrgyzstan, including $620 million in taxes.
Opponents of the current licence want to see greater returns from the mine to the state.
Centerra is 33 per cent owned by the Kyrgyz state gold company Kyrgyzaltyn. KOC estimates that Kyrgyzaltyn's stake in Centerra is worth $1 billion.
That arrangement was fashioned under former president Kurmanbek Bakiyev, who was ousted in a public uprising in 2010 and whose administration was widely perceived as being riddled with corruption. An earlier deal was reached under Bakiyev's predecessor, Askar Akayev, who was overthrown in a revolution in 2005.
Kyrgyzstan is currently governed by a broad parliamentary coalition and led by President Almazbek Atambayev. The parliament gained more influence after constitutional reforms passed in 2010.
Some deputies, including Maksat Sabirov, who is a deputy of the ruling coalition member Respublika, have argued for nationalizing Kumtor.
"What has been happened all these years at Kumtor is theft; 260 tons of gold were taken by the Canadians, but Kyrgyzstan has been left with just 1.5 tons," Sabirov said. "This is our land, our gold."
Justice Minister Almambet Shikmamatov said that the current arrangement with Kumtor was concluded unfairly, but that nationalizing Kumtor would be unconstitutional.
Current laws stipulate that for Kyrgyzstan to gain full control over the mine, it would need to buy back the stake it doesn't own at market prices, Shikmamatov said.
"Kyrgyzstan doesn't have that kind of money today," he said.
— With files from The Canadian Press