Centerra Gold's (CG.TO) shares plunged 27 percent on Tuesday after a Kyrgyz court stripped its licenses to develop the Kumtor gold deposit in the Central Asian state, while the company said Chief Executive Len Homeniuk has retired effective immediately.
Centerra, which is majority owned by Canadian uranium miner Cameco Corp (CCO.TO), said Stephen Lang would take over as president and chief executive, and that it would carefully review the strategic direction of the company.
On Tuesday, a court in the Kyrgyz capital Bishkek canceled all three licenses held by Centerra, saying the government had broken the law in the 1990s by extending Centerra's rights to the mine.
The case was triggered by parliament speaker Kubanychbek Isabekov, who said the rights had been extended illegally.
The ruling will take effect in 30 days, Judge Myktarbek Alymkulov told the court.
The government said it would challenge the decision in court and vowed to defend Centerra's position.
In a statement, Centerra said mining operations at Kumtor were continuing despite the order.
The company's shares, which have dropped 62 percent year-to-date, fell C$1.72 to C$4.77 on the Toronto Stock Exchange. Cameco, which owns 53 percent of Centerra, slid C$1.20 to C$37.95.
Calls to Centerra were not returned.
The dispute comes as Centerra faces worries about the ownership of Kumtor, Kyrgyzstan's biggest gold mine.
The company reached a deal with the government last summer that would see Kyrgyzstan double its stake in Centerra to about 30 percent, while Cameco's share would drop to just under 40 percent. A new simplified tax regime would also be introduced.
The deal, which would have erased lingering worries about the potential nationalization of the mine, expired earlier this month after a ratification deadline was missed.
Isabekov has said a parliamentary committee wants the Kyrgyz government to seek a larger stake in Centerra and higher taxes.
Kumtor, whose production accounts for about 4 percent of Kyrgyzstan's gross domestic product, is expected to produce between 580,000 and 620,000 ounces of gold this year.
The company is caught in a vise now between two government bodies, said John Ing, president of Toronto-based investment dealer Maison Placements.
Kapar Kurmanaliyev, head of the state geology and mineral resources agency, said the court's decision would be appealed.
Separately, the company said Centerra executive Jeffrey Parr would be promoted to chief financial officer, replacing David Petroff, who has resigned to pursue other interests.
The board of Centerra Gold plans to take this opportunity to carefully review the strategic direction of the company in order to assure its future growth, company Chairman Patrick James said in a statement. ($1=$1.02 Canadian) (Additional reporting by Olzhas Auyezov)
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