Kyrgyzstan bets on gold, tackles problems

BISHKEK – Gold mining is one of the most profitable but also most problem-wracked industries in resource-poor Kyrgyzstan.

Last year, all mining contributed more than US $2 billion (94 billion KGS) to the Kyrgyz GDP. The industry paid almost 26% of all taxes the government collected.

Kyrgyzstan has the third-greatest gold reserves in the CIS, behind Russia and Uzbekistan, with about 170 placer and 2,500 lode gold deposits.

But the country lacks the funds to extract the precious metal, so foreign companies have invested heavily in Kyrgyz mines, said Nabi Eshnazarov, state secretary of the State Agency for Geology and Mineral Resources (GAGMR).

Despite its value, though, gold mining is viewed with suspicion by many concerned with pollution and possible loss of their land.

Because of the industry’s value, Kyrgyzstan is moving to settle the conflicts that have arisen among the government, gold mining companies and the population in the hope of attracting more foreign investment.

Miners now work five fields: Kumtor, Makmal, Solton-Sary, Terekkan and Djamgyr.

Kumtor is the undisputed giant, as 95% “ of the gold produced comes from Kumtor, Eshnazarov said. Kumtor is worked by the Kumtor Operating Co. (KOC), owned by Canada’s Centerra Gold, and mines 15-20 tonnes of gold yearly. However, this March, the company issued a statement saying that glacial movements would reduce this year’s gold extraction to less than 13 tonnes.

The company made the statement as parliament examined KOC’s activities. The inter-departmental commission that parliament formed is investigating the announcement’s timing, Alimdarov said, adding, the commission by September 1 also plans to study the mine’s handling of waste and other environmental issues and to suggest remedies for problems it finds.

A Centerra spokesperson declined to be interviewed for this story.

Conflicts arise

Three reasons hinder investment. “The political situation worries investors; second is the possibility of conflicts with the local population; third, our gold fields are high in the mountains and difficult to work,” Eshnazarov said. “But the last factor doesn’t scare off investors. Many people want to work in the ... fields. (And) investors have to find a common language with the local population.”

Last year saw various disputes between miners and the public, Eshnazarov said. In October, 10 men attacked a Talas Copper Gold camp near Aral village in the north. In August, 300 demonstrators in Talas Oblast demanded a halt to gold mining, citing environmental harm.

Conflicts can arise between miners and management, added Vitaly Alimdarov, an independent economist. “There was discontent with wages and with the amounts deducted for social security ... The situation became so bad that parliament debated it (in June).”

“All these conflicts were due to insufficient information about the real state of affairs,” he said. “(Parliament) decided to set up a commission to assess the environmental, social and economic aspects of the matter. ... It ... will present a complete analysis later this year.”

The main conflicts stem from environmental concerns, miners’ fear of earning less than foreign workers and the surrounding communities’ fear of losing their land to mine expansion, Eshnazarov said. The government is therefore analysing the situation and will take steps to prevent conflicts, he said.

Typical environmental impacts include mercury, cyanide and heavy metals pollution. In 1998, 2 tonnes of cyanide being transported to Kumtor spilled into the Barskaun River, creating an environmental emergency, according to published reports.

Prospects for change

A key demand is that the government and mining companies be transparent about the mining process, the income it brings and future mining plans, as well as all the environmental impact studies they conduct. Mining companies will have to meet with residents upon request to answer questions. Local governments will have to explain to regions unfamiliar with mining what benefits the mining will bring and how the residents’ land will be handled, where residents will obtain replacement property if mining begins on their land, and whether landowners will earn any income from mining, Eshnazarov said.

Mining companies also will have to give preference to locals when hiring and ensure their social benefits and salaries match those of foreign workers, per qualifications, he added.

NGOs will have the access they need to monitor mining companies’ activities and to obtain information on environmental influence, incomes and the workers’ situation, Eshnazarov said.

Regions that have become accustomed to mining suffer less conflict, said Kaliya Molodgaziyeva of the Drevo Zhizni NGO, which follows mining activities. “However, where farming takes place, it’s a different matter ... the information vacuum causes tension.”

Local populations are not “making ultimatums about shutting down the gold miners,” said Gulnara Izbarasova, spokeswoman for the NGO Consortium for Talas Oblast. Instead, they “want to (know) how the activities of the companies will affect the environment and welfare of the local population.”

At stake is the development of the mining industry. “The development of the mining industry will stimulate other industries: the creation of one job in mining creates three more jobs,” Eshnazarov said.

The lowest estimate is 2,500 mining-related jobs, and it could reach 10,000 jobs, said Kakhramon Ismailov, a Kyrgyz State University economic development lecturer.

“Development of the mining sector also means economic development … (of) infrastructure – roads, housing, restaurants, etc. … and this means more jobs,” he said. “Besides that, gold mining now represents more than half of all mining income, and mining is an important part of Kyrgyz income overall. Increasing gold mining will help Kyrgyzstan to become more financially independent.”