Cameco unit mines for goodwill in Kyrgyzstan

There's speculation in Kyrgyzstan that Canadian company, Cameco's huge Kumtor gold mine may now face criminal charges, after an investgation by the new government. On July 18th five villages, downstream of the mine, rallied to demand full damage compensation from the company, with a threat of civil disobedience if no satisfactory answer were forthcoming

Cameco unit mines for goodwill in Kyrgyzstan

By Graeme Smith, Toronto Globe and Mail

July 15, 2005

When the riots were finished, after the looting had stopped, the new leader of Kyrgyzstan held a private meeting with the country's biggest foreign investor.

Acting Kyrgyzstani President Kurmanbek Bakiev wanted to send a message to the Canadians: Clean up your image.

It wasn't the kind of thing that Andy Lewis, president of Kumtor Operating Co., a wholly owned subsidiary of Saskatoon-based Cameco Corp., was used to hearing from the government of this tiny, mountainous country in the middle of Asia.

"He said to us, 'We think it would help your cause if you'd explain yourself,' " Mr. Lewis said.

Such a request would have been unheard of during the rule of former president Askar Akayev, an old Soviet administrator who was exiled to Russia during the so-called Tulip Revolution in March.

Mr. Akayev, an academic who boasted about his transparency and openness, ruled the former Soviet republic for 15 years. But observers eventually saw his regime as a vehicle for his own financial gain.

During the first five years of Mr. Akayev's rule, Kyrgyzstan's gross domestic product dropped by about 50 per cent. Positive growth returned only in 1996, the same year that Mr. Akayev officially opened the Canadian gold mining project in the remote Tien Shan mountains.

The Kumtor operation is awesomely huge. Mr. Lewis peered at a panoramic photo of the open-pit mine, with its enormous steps carved into black rock, and pointed to a tiny fleck of white in the picture: "That's an 85-tonne truck," he said.

The project's significance to Kyrgyzstan's economy is similar in scale. It has poured about $490-million (U.S.) into the country since its inception, and accounts for about one-third of all export earnings.

But the mine has been dogged by complaints about environmental issues, worker safety and financial transparency.

The complaints began in earnest after a truck rolled off a road in 1998 and spilled 1.8 tonnes of cyanide into a river. The critics grew louder last summer after a restructuring deal in which Centerra Gold Inc., owned by Cameco, took over Kumtor. The government gave up control of the concession as part of the deal, swapping it for a bigger stake in the operation and a cash windfall -- a move denounced by members of parliament, but ultimately authorized by President Akayev.

Until recently, Mr. Lewis says his company refrained from responding to the critics.

"In the history of the project, there has been a conscious decision not to get into mudslinging discussions or arguments in the media," he said.

Activists such as Nataliya Ablova, director of the Bureau for Human Rights in Bishkek, Kyrgyzstan's capital, say that policy wasn't driven by high-mindedness. Rather, Ms. Ablova said, the company understood that it needed to convince only one person, Mr. Akayev, that the project was worthwhile.

"They thought Akayev would stay forever," she said. "Now they're very afraid."

In April, the post-revolutionary government hired investigators to examine allegations of money laundering by Mr. Akayev and his relatives. The gold mine was listed among 183 companies that would face scrutiny.

Mr. Lewis says his company wasn't mentioned in a brief report produced so far about Mr. Akayev's alleged wrongdoings. Still, he acknowledged that the political climate has shifted.

"There's more attention being paid to public opinion now," he said. "Whether or not there's more power to the people, certainly there's more listening to the people.

"As a result of that, if the people decide there's a cause they want to solve or get behind, it may be very difficult for the President and parliament in this new democratic regime to say: 'You're wrong, we're not listening to you.' "

That new attitude was reflected in Sunday's elections, which marked the first time in Kyrgyzstan's history that any candidates bothered to poll voters about what policies they would support.

Kumtor has launched its own poll, trying to gauge popular opinion about the company. It has also started a public relations campaign -- although, Mr. Lewis says, this involves some non-traditional tactics: "You're dealing with people who spend the summer living in yurts in the mountains."

So after sending local media a news release about, for example, its latest community project, Kumtor staff buy up newspapers themselves and distribute them in villages free of charge. Or, more simply, they distribute leaflets or throw parties.

"They're trying to buy public opinion," Ms. Ablova said.

Mr. Lewis, however, sees the exercise as a legacy project. Mining promises to sustain this fledgling democracy long after the Kumtor site stops production in 2010, he said, so promoting the industry can only help the country.

"We have a responsibility towards ensuring the stability of mining here," he said. "It's all about perception."

Graeme Smith is The Globe and Mail's Moscow bureau chief.