Centerra Gold: Analysts Express Concerns; Cut Price Targets

Centerra Gold Inc.'s (CAGDF.PK) Kumtor gold mine continues to operate, but investors are getting increasingly nervous about its future. A deadline has passed for the Kyrgyz Republic's parliament to ratify an investment agreement on Kumtor, and a court has canceled some exploration licenses.

The fact that the agreement has not been ratified suggests that the president and prime minister "have effectively lost control of parliament," according to RBC Capital Markets analyst Stephen Walker.

"Any outcome is possible, including loss of the asset," he wrote in a note to clients.

Mr. Walker expects the shares to continue to drift in a very uncertain environment, and cut his target on the stock to C$6.00 a share (from C$10.00). The new target came from weighing a couple of outcomes. His best-case scenario calls for the government to take a 40% stake in Centerra and an 18% gross revenue tax on Kumtor, which would value the shares at C$10.00 (the government currently plans to take a 29% stake, so this would be considerably worse for Centerra than the status quo). If Centerra loses Kumtor completely, it would be left with its Mongolian assets, which he values at C$2.39 a share.

Over at UBS Securities, analyst Brian MacArthur lowered his target to C$10.00 a share from C$14.50 because of the higher risk. He also expects that the Kyrgyz government will renegotiate a less favourable deal for Centerra.