As Good as Gold?: The Recent Ups and Downs of the Kyrgyz Mining Industry
On August 10, a Bishkek court ruled in favor of more than two dozen residents of Barskoon thought to have been affected by cyanide poisoning caused by a 1998 traffic accident at the Kumtor gold mine in the Kyrgyz Republic.
Mining has become a critical component of the Kyrgyz Republic’s economy. The country’s mining sector has been developed over the last three decades to profit from its extensive mineral resources, including coal, gold, silver, copper, mercury, and others. The mining sector has grown to account for more than half of the Kyrgyz Republic’s industrial production and comprises 29.2 percent of total GDP. The Kyrgyz Republic has some small oil deposits, but gold remains its primary export commodity.
The Kyrgyz Republic’s decision to extract valuable minerals from the largest gold mine in the country, Kumtor, has generated extensive revenue for the country and has attracted and sustained foreign investment. In 1994, the Canadian uranium company Cameco contributed an initial $452 million in capital to jumpstart the project and has been involved with the mine ever since. Cameco has invested a total of $584 million for mining operations at Kumtor and has reported gains valuing at $1.483 billion between 1997 and 2009. The project is also beneficial for the Kyrgyz Republic. In 2017, the Kumtor Gold Mine accounted for 9.7 percent of the country’s GDP, contributing about $250 million.
While the Kyrgyz Republic continues to benefit from its extractive sector and sees it as an important engine for economic growth, mining is increasingly controversial, domestically. The Kumtor gold mine is the country’s most important mine but has also been a point of contention. Gold mines in the Kyrgyz Republic have been sites of public unrest over harmful ecological practices, the number of worker fatalities, and Chinese economic influence.
The ecological impacts are also becoming a concern domestically and internationally. In total, 92 radioactive and toxic sites resulting from mining activities have been identified in the country. The majority of these sites are located in areas prone to earthquakes, causing alarm for those living in the proximity of these operations. In August 2019, about 300 Kyrgyz villagers gathered at the Solton-Sary gold mine in the Naryn Region. The mine had been acquired by the Chinese company, Zhong Ji Mining after receiving a license to operate in 2012. The mine is reported to have deposits containing 11 tons of gold. On August 5, 2019, scuffles erupted between Kyrgyz protesters and Chinese mine workers, leaving 47 Chinese workers injured after rocks were hurled from both sides. Protesters claimed the mine was poisoning the surrounding soil, causing their cattle to die. They demanded that the mine be closed, and the Chinese workers expelled from the country. Zhong Ji Mining halted operations for a month after an environmental safety commission conducted tests.
The safety of workers at Kyrgyz gold mines has also become a concern. The Kumtor gold mine has seen numerous fatalities. In February 2020, an employee of the Canadian gold company Centerra Gold Inc. operating in the Kumtor mine was killed while working an excavator. A rockslide in December 2019 caused two workers to become missing and in 2017 an overturned truck resulted in one fatality and a large fuel spill. The high elevations and the surrounding glaciers make the Kumtor an extremely difficult place to operate and the deaths and the vague safety procedures are concerning for foreign investors.
China is one of the biggest investors in the Kyrgyz Republic and a key contributor to the success of the country’s mining sector. However, anti-Chinese sentiment is growing due to the perceived increase in Chinese influence over the country’s economy. The Export-Import Bank of China holds $1.7 billion of the Kyrgyz Republic’s $4 billion in external debt. Kyrgyz citizens concerned about becoming indebted to China have staged protests demanding the expulsion of Chinese workers at construction and mining sites. In January, dozens of Kyrgyz protesters were detained at an anti-Chinese rally in Bishkek when they demanded the government limit the number of work permits granted to Chinese citizens and pledge to reduce its debt to China. Protesters are often seen holding signs that read “defend our land,” expressing a broader discontent among citizens with foreign companies in the Kyrgyz Republic. Officials are concerned such protests could tarnish Chinese-Kyrgyz relations at a time when the Kyrgyz Republic is dependent on Chinese investment. The Kyrgyz government also worries that these protests could deter foreign companies from investing or otherwise engaging in the country’s lucrative mining sector.
Given the Kyrgyz Republic’s great dependence on mining for much-needed revenue and as an engine for economic growth, and the importance of foreign engagement in expanding the sector, the Kyrgyz Republic is under pressure to take both foreign and domestic pressures into account. Diversifying its foreign investment partners to reduce dependence on China is one such needed step and there have been efforts by the government to do so, including seeking to interest American firms in engaging in the Kyrgyz Republic. Improving environmental and safety standards to accommodate the concerns of foreign investors and local residents might be another. Making the sector more attractive to foreign investors can bring in new partners and inject new funds into the Kyrgyz Republic’s most important industry.