Centerra Gold subsidiaries declare bankruptcy

Centerra Gold Inc. [CG-TSX] said Tuesday June 1 that its subsidiaries in the Kyrgyz Republic have filed for bankruptcy following the nationalization of its Kumtor gold mine.

The company said the measures have been taken to protect the interests of Centerra and its stakeholders in response to the unjustified seizure of the Kumtor mine by the government of the Kyrgyz Republic.

It said the bankruptcy filing is also designed to preserve the value of Centerra’s wholly-owned subsidiaries that own and operate the Kumtor mine, Kumtor Gold Co. (KGC) and Kumtor Operating Co. (KOC), and prevent any further efforts by the Kyrgyz Government to strip KGC of its assets or otherwise improperly dispose of the Kumtor mine in violation of its investment agreements with the company.

In keeping with these objectives, KGC and KOC on Tuesday commenced a filing in the Southern District of New York under Chapter 11 of the federal U.S. Bankruptcy Code.

On Tuesday, Centerra shares rose 0.4% or $0.04 to $9.82 on volume of 197,670. The shares trade in a 52-week range of $19.59 and $8.21.

Kumtor is the largest gold mine operated in Central Asia by a Western-based company. Mining operations there are carried out using conventional open-pit mining methods. Since 1997 it has produced over 13.2 million ounces of gold to the end of 2020.

Kumtor is one of two flagship assets in the Centerra Gold portfolio. The other is the Mt. Milligan Mine in British Columbia. The company’s portfolio also includes the Oksut Gold project in Turkey and the late stage Kemess development project in B.C.

The Chapter 11 proceeding will not impact any other areas of the company’s business, Centerra said in a press release.

The company also said it is conducting a strategic review related to its ownership of KGC and KOC that will consider alternatives available to enhance value Centerra’s stakeholders in light of recent events involving the Kumtor mine

“We have repeatedly asked the Kyrgyz Government to discuss its concerns with us, yet it has refused to engage with us in any way,” said Centerra President and CEO Scott Perry.

“While we remain willing and available to hold a constructive dialogue with the Kyrgyz authorities, we will continue to use all available legal and financial means to protect the interests of Centerra and its stakeholders from the Government’s concerted and premeditated effort to take control of the Kumtor Mine,” he said.

Meanwhile, he said Centerra is not a party to or affected by the Chapter 11 filing and remains financially strong with more than US$800 million in cash and in excess of US$1.2 billion in liquidity as of March 31, 2021.