Centerra Gold (CG.TO) could face a court ruling as early as this week that may force it to stop mining its Kumtor deposit in Kyrgyzstan, a company spokesman said on Wednesday.
The company's shares fell 25 percent on Tuesday after the Kyrgyz court suspended an exploration license and two mining licenses covering areas around the Kumtor deposit, a high-grade mine expected to produce around 600,000 ounces of gold this year.
Centerra is still mining the deposit, but company spokesman John Pearson said the court is expected to soon rule on a challenge to other licenses, including the main deposit.
A decision could come as early as the end of this week, he told Reuters.
I wouldn't want to speculate on that, he said when asked about the chances Centerra may have to stop mining activities.
We have to wait and see what the lower court says.
Pearson was quick to point out that a Kyrgyz Supreme Court ruling on June 2 -- which suspended the licenses pending the lower court decision -- said that issues surrounding the mining agreement are regulated by international legislation, and so should be able to continue.
However, he also noted that the other licenses that were invalidated were also covered by international agreements, and noted that Centerra has not been party to the proceedings.
It has to be considered a possibility, for sure, Canaccord Adams analyst Steven Butler said of the loss of the main mining license.
Adding to uncertainty surrounding the deposit has been the lack of movement in ratifying an ownership agreement entered into last summer with the Kyrgyz government, which should calm persistent worries about nationalization.
The agreement, which would see Kyrgyzstan double its stake in Centerra while majority shareholder Cameco Corp (CCO.TO) would reduce its stake, passed by a June 1 deadline without ratification, and is now effectively in limbo.
SHARES REBOUND, DOUBTS ABOUND
While Centerra's shares staged a partial rebound on Wednesday, analysts cut targets as uncertainty over the company continued to build.
Stephen Walker of RBC Capital Market cut his 12-month price target to C$6 from C$10, factoring in a likely delay surrounding the legal process, and the possibility that Centerra could lose the mine's production.
He also said the failure of the Kyrgyz parliament to ratify the ownership agreement suggests that the Kyrgyz president and prime minister have effectively lost control of parliament, and that any outcome is possible, including loss of the asset.
UBS analyst Brian MacArthur cut his target on the company to C$10 from C$14.50, while Canaccord's Butler put his target on the stock under review.
The stock rose 85 Canadian cents to C$5.62 on the Toronto Stock Exchange, but is still down 55 percent so far this year.
The concessions that have already been suspended cover areas containing about 300,000 ounces of gold that Centerra had been expecting to mine in 2009 and 2010.
The company also announced on Tuesday that Chief Executive Len Homeniuk is retiring, and will be replaced by Stephen Lang.
Centerra will also review its strategic direction.
There's lots of places in the world that have gold deposits, and maybe we should be looking further afield, Pearson said.
(Reporting by Cameron French)
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