Kyrgyzstan is to review Canadian group Centerra Gold's contract to run the flagship Kumtor gold mine which accounts for 60 percent of national industrial output and is said to have done immense damage to the country's ecology.

The Kyrgyz parliament, which also voted not to nationalise the mine, said on Wednesday the state must revise its 33 percent stake in Centerra and have a share in Kumtor's gold production.

A special commission to be formed by July 10 has until Oct. 1 to prepare a revised contract.

Centerra shares plunged to a 2-1/2 year low last Friday after two days of debate in Kyrgyzstan's legislature, triggered by a report which said the miner was damaging the ecology and the health of local villagers.

The parliamentary commission head said at the time Centerra had done damage worth around $4 billion through its operations in Kyrgyzstan.

A resolution, backed mainly by the opposition, had said Kumtor should be nationalised and the government should create a state company which would sell some of its gold output to the central bank to replenish its reserves. It was rejected.

Those who understand the gist of the matter realise that it is impossible (to nationalise Kumtor), said deputy Ravshan Dzheyenbekov. The legislature today demonstrated a well-balanced and mature approach.

Centerra Gold, which also produces gold in Mongolia, last year accounted for over a half of all Kyrgyz export revenues.

Kyrgyzstan, a hard-up nation of 5.5 million neighbouring China and which hosts Russian and U.S. military airbases, has seen two presidents toppled by violent revolts since 2005. About 500 people were killed in ethnic clashes in June 2010.

Kumtor Operating Company said on Wednesday the opposition-backed report contained a long list of undeserved accusations which were mainly based on doubtful facts and assumptions.

These unfounded conclusions ... have dealt a blow to the business reputation of Kumtor Operating Company and of Centerra Gold, the company said. This has led to a sharp fall in the price of Centerra's Toronto-listed securities and slashed by over $300 million the price of the package of shares owned by the Kyrgyz Republic.

A senior official in the office of Kyrgyz President Almazbek Atambayev said the deputies' populism had cost Kyrgyzstan hundreds of millions of dollars.

Kumtor is the most important project for Kyrgyzstan's economy ... and it must be mutually advantageous and serve as a good example of cooperation with big foreign investors, he told Reuters, on condition of anonymity.

The irresponsible attitude to national interests shown by parliamentarians while debating the Kumtor issue ... will hardly encourage businessmen to invest in Kyrgyzstan's economy.

WHAT NEXT?

A special commission will be formed by July 10, bringing together government members, parliamentarians, officials from the presidential administration and independent consultants, to present by Oct. 1 a revised contract with Centerra.

The commission was also ordered to conduct by Oct. 1 an assessment of the ecological, industrial and social damage done by Kumtor Operating Co at the Kumtor deposit.

The mine lies in a harsh permafrost area 4,000 metres above sea level and has been hit by disruptions, with villagers of the central Asian state blocking the only road to the mine, demanding land and jobs.

Ice movement in the high-altitude pit has cut Kumtor's output, depressing Kyrgyzstan's annual GDP growth to 1.8 percent from an original target of 7.5 percent.

Centerra in March forecast output of 390,000-410,000 ounces this year, down from a previous estimate of 575,000-625,000. Kumtor accounted for more than 90 percent of the 583,156 ounces the company produced last year.