UPDATE 2-Kyrgyzstan halts talks with Centerra on Kumtor; shares fall

(Adds analyst reaction, details on share price move)

BISHKEK/TORONTO, Dec 22 (Reuters) - Kyrgyzstan’s government said on Tuesday it had stopped talks with Canada’s Centerra Gold on restructuring their joint Kumtor project because the current agreement “ran counter to the country’s national interests.”

The decision, the latest twist in a drawn-out tussle over the mine’s fate, sent shares in Centerra sliding nearly 6 percent in afternoon trading in Toronto.

The government said it would propose a new restructuring project to develop Kumtor, the Central Asian nation’s largest gold field, seeking “an increase in financial flows” for Kyrgyzstan.

Centerra, which operates Kumtor, has been in talks with Kyrgyzstan for almost two years on a deal that would involve the ex-Soviet republic swapping its 32.7 percent stake in Centerra for half of a joint venture that would control the gold deposit.

RBC analyst Stephen Walker said the move should be neutral to Centerra shares, “as at this point it remains unclear what the government’s preferred ownership structure would be.”

Walker, who has an “underperform” rating on the stock, said in a note to clients that he would remain cautious until further clarity on the status of the issues in Kyrgyzstan is provided.

Centerra was not immediately reachable for comment.

Kyrgyzstan’s government is particularly unhappy with Centerra’s new, lower estimate of Kumtor’s reserves. In February it estimated proven and probable reserves at 6.1 million ounces of contained gold as of end-2014, compared with 8.5 million a year earlier.

Joomart Otorbayev resigned as Kyrgyzstan’s prime minister in April after failing to clinch the restructuring deal, and his successor, Temir Sariyev, said at the time that resolving the issue would be among his priorities.

Kyrgyzstan’s parliament, in turn, has threatened to nationalize the gold mine, which is the country’s main hard currency earner and accounted for 7.4 percent of its gross domestic product and 15.5 percent of industrial output last year.

Centerra shares were down 5.6 percent at C$6.87 in Toronto on Tuesday afternoon. (Reporting by Olga Dzyubenko and Euan Rocha; Writing by Dmitry Solovyov and Olzhas Auyezov; Editing by Andrew Osborn, William Hardy and Leslie Adler)