TORONTO - A potential deal to resolve demands by the Kyrgyz government wasn't enough to sustain shares of Centerra Gold Inc. (TSX:CG), which gave up an early gain amid a general downturn for the Canadian gold sector on Tuesday.
Centerra shares were initially up in the first trading since the Toronto-based company announced its deal Monday but reversed direction later in the Tuesday session. They were down 15 cents or 2.3 per cent at $6.32 near midday.
A non-binding memorandum calls for the state-owned Kyrgyzaltyn JSC to exchange its 32.7 per cent equity interest in Centerra for a 50 per cent interest in a joint venture company that would own the Kumtor gold project.
Centerra would remain operator of the project and get half the seats on the joint venture's board.
The Canadian mining company would also receive US$100 million in future cash payments.
Centerra's shares initially gained, trading as high as $6.67 in Toronto.
CIBC World Markets said in a commentary that the markets seemed to have priced Centerra shares for a worse deal than the one that has been proposed in the non-binding memorandum, announced Monday after markets closed.
"We think that between the alleviation of the political concerns and very strong expected Q4 production, the shares can move higher," CIBC's commentary said.
CIBC World Markets says its price target for Centerra shares remains about $8 per share.
But the overall gold sector sustained major losses Tuesday as the price of bullion dropped sharply amid relaxed geo-political tensions surrounding Syria.
In late morning trading, the gold sector was down 3.68 per cent. Nearly all companies in the sector fell, with shares in Barrick Gold (TSX:ABX) down 3.36 per cent, or 67 cents, at $19.25.
December bullion also dropped steeply, coming down $25.20 to US$1,361.50 an ounce, while December copper was down two cents to $3.26 and the October crude contract on the New York Mercantile Exchange fell $3.04 to US$106.48 a barrel.
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