Centerra Gold's stock (CG) extended its plunge to a second day Thursday on worries that political unrest in the Central Asian country of Kyrgyzstan could disrupt operations at the company's Kumtor gold mine.
A day after Kyrgyz opposition forces said they had seized power after a deadly uprising, the company said in statement the turmoil had no impact on the huge mine.
The statement repeated what a Centerra spokesman told Reuters on Wednesday.
Even so, at least two analysts downgraded the Canadian company's shares, while one voiced concerns about the stability of an agreement with the government that sets the terms of Centerra's ownership of the mine.
Shares of Toronto-based Centerra, which is one-third owned by the country, were down 9.8 percent at $10.82 on the Toronto Stock Exchange at mid-morning.
The stock dropped 11.4 percent Wednesday following reports that protesters had toppled the country's government in a violent uprising that has so far killed dozens.
The mine is expected to produce up to 560,000 ounces of gold this year and accounts for nearly 10 percent of the central Asian country's economy.
Concerns about the mine's possible nationalization have dogged Centerra in the past. But the issue appeared to be resolved last year after Cameco Corp., Centerra's former parent company, struck a deal that doubled the Kyrgyz government's stake in the company.
Steven Butler, an analyst at Canaccord Adams, said in a note that the shaky political environment raises the risks for the ownership agreement.
"The increased political uncertainty in Kyrgyzstan will likely be an overhang on the stock price in the near to medium term, along with the risk associated with continuity of the ownership and fiscal terms applicable to Kumtor that were negotiated only one year ago," he said.
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The geo-political risk involved in mining has hit Centerra Gold pretty hard and brings into the question once again, whether its better to invest in the mining sector or the metal itself and is the leverage to gold prices worth the risk. Its something that we continue to wrestle with and at the moment we hold gold, silver and their associated stocks.
For disclosure purposes we do not own any of Centerra Gold stock and we publish every trade that we make and access to our portfolio is free.
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