(New throughout, adds comment from company, expectation of
trading stake for royalty, potential lawsuit from Kyrgyzstan)
By Terrence Edwards
ULAN BATOR, Feb 4 (Reuters) - Canada's Centerra Gold Inc
CG.TO has received the go-ahead from lawmakers in Mongolia to
mine the Gatsuurt deposit after a five-year delay, as that
resource-rich country looks to bolster its economic activity and
gold reserves.
Mongolia's once-booming economy has taken a steep slide,
with the Asian Development Bank estimating 2015 growth at less
than 3 percent compared with 17.5 percent in 2011. Mongolia
hopes to boost revenue and stimulate growth by advancing
projects such as Gatsuurt, despite some backlash.
The parliament passed a bill on Thursday granting the
country 34 percent ownership of the Gatsuurt mine, with 1.6
million ounces of probable gold reserves, a government website
says. Centerra, which also owns the Boroo mine in Mongolia, will
hold the remaining 66 percent of equity.
With the parliament's approval, the government can now
negotiate the final conditions for mining with Centerra, whose
stock rose 2 percent.
Toronto-based Centerra said it expects the government's 34
percent stake will be replaced with a 3 percent royalty, based
on its discussions with the government.
"The Gatsuurt project represents an exciting opportunity to
use Centerra's existing Boroo mill and other infrastructure to
develop the 1.6 million ounce Gatsuurt deposit with very modest
initial capital investment," said Centerra Chief Executive Scott
Perry.
Ore from Gatsuurt will be trucked to facilities in Boroo, 55
kilometres (34 miles) away, for processing.
Approval comes a year after legislators rejected the first
deal, which proposed a smaller government stake in return for
larger royalty fees. It also follows an agreement signed last
May to relaunch an expansion project at Mongolia's $4-6 billion
Oyu Tolgoi copper mine, owned by Rio Tinto RIO.AX RIO.L .
Centerra has been waiting since 2010 for a decision from the
government on whether it could proceed, after a law banned
mining at certain areas near forests and water sources,
including Gatsuurt.
In December 2014, Gatsuurt was included in a list of
strategic deposits exempt from the restrictions, but requiring
government ownership.
Environmentalists and conservationists oppose the
development, concerned about historical artefacts discovered in
neighbouring sites at the Noyon Uul mountain.
The government ramped up efforts to reach a deal when
artisanal miners began mining the area illegally.
Separately, on Thursday, a Kyrgyz representative on
Centerra's board said Kyrgyzstan may sue the company over its
plans to issue additional shares, which will dilute the Central
Asian nation's stake slightly. L8N15J3HD
(With additional reporting by Susan Taylor in Toronto; Editing
by Sue-Lin Wong, David Evans and David Gregorio)