Kyrgyzstan abandons mining auction after protest

* Demonstrators storm TV studio before auction

* State agency to reschedule auction of 12 mineral deposits

* Mining law amended in anti-corruption drive

* Impoverished Kyrgyzstan seeks foreign investment

By Olga Dzyubenko

BISHKEK, Aug 28 (Reuters) - Kyrgyzstan abandoned its first attempt to sell gold mining concessions after demonstrators stormed a live televised auction on Tuesday, disrupting attempts by the former Soviet republic to attract foreign investors to its untapped mineral riches.

Around 50 protesters, many wearing traditional Kyrgyz felt hats, burst into a television studio shouting nationalist slogans shortly before the scheduled live broadcast of the first auction under new mining laws adopted in April.

A Reuters correspondent in the studio saw officials flee the building as scuffles broke out between police and protesters, some of whom shouted: "We won't let you sell our motherland!"

Kyrgyzstan's new government revised its mining laws in an attempt to stamp out corruption and attract investors to bolster a fragile economy that relies heavily on output from a single gold mine, owned by Toronto-listed Centerra Gold.

The amendments require all small concessions to be auctioned publicly to the highest bidder, a move designed to end the clandestine exchange of licences for a handful of dollars with the sole purpose of re-sale.

Uchkunbek Tashbayev, director of the State Agency of Geology and Mineral Resources, said he believed the protest had been orchestrated by opponents of these reforms. He told Reuters that the auction would be rescheduled.

"This was the work of those who want to sell licences under the carpet," he said. "We must not deviate from this path."

Kyrgyzstan ranked joint 164th of 183 countries in Transparency International's 2011 Corruption Perception Index, level with Guinea. The country has overthrown two presidents since 2005 and has suffered periodic bouts of ethnic violence.

The disruption of the auction also comes less than a week after the coalition government, in place since December, collapsed under the strain of a shrinking economy and corruption allegations against the prime minister.

President Almazbek Atambayev has appointed the Social-Democratic Party of Kyrgyzstan, which he previously represented as prime minister, to form a new coalition within 15 days. The current cabinet is continuing in an acting capacity.

KUMTOR REVIEW

Atambayev has been a proponent of the mining law reforms, which would potentially unlock hundreds of mineral deposits mapped by Soviet geologists but never brought into production.

The economy has suffered this year from its reliance on Centerra Gold's Kumtor mine: a sharp fall in production due to ice movement in the high-altitude pit contributed to a 5 percentage-point contraction in GDP in the first seven months.

Angry villagers have sporadically blocked the only road to the mine and lawmakers directed the government in June to revise the current operating contract after a move by some deputies to nationalise the mine.

Several demonstrators inside the television studio called on the government to complete its Kumtor review before proceeding with the sale of other mineral assets.

The 11 small gold concessions and a coal licence offered for auction are tiny in comparison. Located across four provinces, most are still at the exploration stage, with starting prices ranging from ${esc.dollar}60 to ${esc.dollar}65,000.

According to a list of participants published by the agency prior to the auction, companies from Azerbaijan, China, Russia and Turkey had been due to bid alongside local firms. The list did not include any major mining companies.

"If there is no responsibility and no discipline, investors will not come," Economy Minister Temir Sariyev said in parliament. A date for the rescheduled auction has not yet been set. (Writing by Robin Paxton)