Strikes at Kumtor mine take a toll on Kyrgyzstan's economy

2012-FEB-15

Kyrgyzstan's economy is being hurt by strike activities at its largest mine. Ever since it started operating in 1996, local supporters and opponents of the Kumtor mine have not been able to reconcile their disagreements. Now the country's government is trying to end these strikes by negotiating with the miners’ union, in the hope that Centerra Gold – the Canadian company operating Kumtor – might restart gold production as soon as possible.

Production at the mine has been on hold since February 6, and Kyrgyzstan's economy is suffering the consequences. Last year the Canadian mining company Centerra Gold contributed 11.7% to the country's GDP. Furthermore, in 2011 production at Kumtor accounted for 26.1% of Kyrgyzstan's industrial output. The dispute is escalating, and the government is urging striking workers to find a quick solution to the problems. The government in Bischkek cannot remain passive, as it depends heavily on the licensing fees and tax revenues from the mine.

Ever since the mine started operating in 1996, supporters and opponents of the mine have been in constant dispute. Opponents among local residents have repeatedly focused on the environmental damage done by the mine. However, the government relies heavily on tax proceeds from Kumtor to finance its expenses. Thus, an escalation of striking activities among mine workers is not in the government's interest.

According to Centerra Gold's management, the mine still has enough extracted ore to keep operating its stone mill. Unless some quick solution enables the mine to restart its operations, the drop in industrial production and the losses in licensing fees and tax revenues could take a strong toll on the country's economy. Despite this hickup, experts believe that Kyrgyzstan has great gold mining potential.