(REUTERS) -- Around 1,400 workers at Centerra Gold's flagship mine in Kyrgyzstan went on strike on Tuesday, a trade union leader said, halting production that contributes nearly 12 percent of GDP in the Central Asian republic.
Centerra Gold, owned 33 percent by the Kyrgyz state, announced the stoppage of the high-altitude Kumtor mine late on Monday. It gave no details about estimated output losses and said it was in talks with the union to resolve the dispute.
It said the union was demanding the company pay a mandatory employee contribution to Kyrgyzstan's social fund after a recent regulatory change that requires contributions to be deducted from wages, including premium payments for high-altitude work.
The strike will last as long as it takes for them to satisfy our demands, said Eldar Tadzhibayev, head of the Mining and Metallurgical Trade Union of the Kyrgyz Republic. He said the strike began at 0700 local time (0100 GMT).
The company will lose out on sizeable profits as they produce a lot of gold every day, he said.
The Kumtor mine, about 4,000m above sea level, produced 583,156 ounces of gold last year. Centerra has forecast production from the mine this year at between 575,000 and 625,000 ounces.
In a statement dated Jan. 17, the company said any stoppage during the year could have a significant impact on achieving its target.
The forecast production range for 2012 indicates approximate average daily production of between 1,571 and 1,708 ounces. Spot gold is currently trading at around $1,715 an ounce.
The economy in Kyrgyzstan, a mountainous former Soviet republic where per capita GDP is less than a tenth of that in neighbouring Kazakhstan, relies heavily on gold production from Kumtor and remittances from migrant workers.
The mine contributed 11.7 percent of Kyrgyzstan's gross domestic product in 2011 and 26.1 percent of industrial output, official data show.
The latest dispute at Kumtor follows a brief disruption to operations in December, when protesters interrupted fuel and other supplies to the mine by blocking a road. That dispute was quickly resolved by a deal for more community involvement.
Centerra said it believed the strike was illegal as it breached a collective agreement in force until Dec. 31, 2012. Kumtor Operating Company, the local unit responsible for running the mine, said no other employer in the country was paying the mandatory social fund contribution for its workers.
It said in a statement that the trade union had rejected a proposal by management last week to raise the base salary rate by 3 percent and to increase the bonus fund. It said a skeleton staff was working to maintain safety at the mine.
Centerra also produces gold at the Boroo mine in Mongolia. Including approximately 60,000 ounces from this mine, the company has forecast consolidated production of between 635,000 and 685,000 ounces in 2012, versus 642,380 ounces last year.