May 4, 2015 / 10:50 AM / 5 years ago

Russian firm wins licence for Kyrgyzstan's disputed Jerooy gold deposit

BISHKEK, May 4 (Reuters) - A company owned by Russian businessman Musa Bazhaev has won a tender for rights to develop Jerooy, Kyrgyzstan’s second-largest gold deposit, despite a $549 million arbitration claim filed by its former Kazakh investor.

Vostok-geoldobycha won the tender by offering to pay the starting price of $100 million for the licence to develop the field with estimated reserves of more than 97 tonnes of gold, Kyrgyzstan’s State Geology and Mineral Resources Agency announced on Monday.

Vostok-geolodobycha is part of Amur Zoloto, a gold-producing unit unbundled from Russian Platinum which produces platinum group metals and is headed by Bazhaev.

Kyrgyzstan’s state gold company Kyrgyzaltyn, the second bidder shortlisted in the tender, offered to pay $111 million for Jerooy’s licence but lost because Vostok-geoldobycha has better technologies and a better investment programme, Kyrgyz state geology committee head Duishenbek Zilaliyev told journalists.

The hard-up Central Asian state of 5.5 million people tried to sell Jerooy at a tender in 2013, but no bids were submitted and investors said the starting price of $300 million set at the time was too high.

“We have now managed to prove that we can work honestly and openly,” Zilaliyev said. He was referring to scandals linked to the vested interests of regional groups and clans which have surrounded previous mineral resources tenders there.

But after winning the tender, the Russian investor may face legal risks.

In 2013, Consolidated Exploration Holdings, part of Kazakhstan-based Visor Holding, filed an arbitration claim against Kyrgyzstan’s government, saying its 60 percent stake in the Jerooy project had been illegally expropriated in 2010.

A Kyrgyz government official told Reuters in February that the sum of the claim currently totalled $549 million and a hearing for the case was expected in November this year.

“We have assessed all risks ... We are not frightened by them,” Konstantin Zlotnikov, a projects director at Russian Platinum, told Reuters after the tender. He did not elaborate.

Jerooy, discovered by Soviet geologists in 1968, has changed hands several times but has yet to be developed. It lies in mountains between 3,000 and 3,600 metres above sea level. (Reporting by Olga Dzyubenko; Writing by Dmitry Solovyov; Editing by Ruth Pitchford)

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