Centerra confirms Kumtor talks, shares up 14%

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Centerra Gold Inc. [CG-TSX, CGAU-NYSE] said it is engaged in negotiations with representatives of the Kyrgyz Republic to resolve their dispute related to seizure of Centerra’s Kumtor Mine by the Kyrgyz government in May, 2021.

Centerra shares advanced on the news, rising almost 14% or $1.35 to $11.10. The shares are currently trading in a 52-week range of $16 and $8.21.

Further to statements in the Kyrgyz media regarding the potential negotiated transfer of the Kumtor Mine to the Kyrgyz Republic, Centerra said it expects that the framework for any resolution would involve the following principal terms:

  • Centerra receiving the approximately 26.1% in Centerra common shares (77.4 million) held by the state-owned gold refiner, Kyrgyzaltan JSC. Upon receipt, Centerra would cancel the shares surrendered by Kyrgyzaltan JSC
  • The Kyrgyz Republic receiving, and assuming all responsibility for the company’s two Kyrgyz subsidiaries and the Kumtor Mine.
  • Payment by Centerra of a cash amount equal to the net amount of the three dividends paid by Centerra in 2021 that Kyrgyzaltan JSC did not receive as a result of the seizure of the mine and certain other financial consideration associated with the settlement of inter-company balances between Centerra and its two Kyrgyz subsidiaries.
  • The resignation from Centerra’s board of directors of Kyrgyzaltan JSC’s two nominees.
  • Full and final releases of all claims of the parties and termination of all legal proceedings involving the parties in all jurisdictions with no admission or liability.

Under the terms mentioned above, the Kyrgyz government would be able to operate the Kumtor mine without international legal challenges and likely have its status restored with the LBMA (London Bullion Marketing Association) for gold delivery gold sales.

The Kumtor mine was previously one of two flagship assets in the Centerra Gold portfolio. The other is the Mt. Milligan Mine, which is located 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.

Kumtor has been the largest gold mine operated in Central Asia by a Western-based company. Mining operations are carried out using conventional open-it mining methods.

In June, 2021, Centerra initiated binding arbitration against the Government of the Kyrgyz Republic to enforce its rights under longstanding investment agreements with that government in relation to its Kumtor gold mine.

Centerra has long maintained that the Kyrgyz government’s seizure of the Kumtor Mine is based on a false, and misleading allegations. “In particular, the government has made inaccurate claims relating to the alleged breaches of environmental and safety standards in the past operation of the Kumtor Mine, corporate conduct and investment in the Kyrgyz Republic,” Centerra has said.

“These claims are entirely meritless and have no justifications under longstanding investment agreements or applicable law,” the company said. “Under our management, the Kumtor Mine was a world-class facility operated by the Kyrgyz citizens to the highest international environmental, safety and engineering standards and contributed more than US$4.48 billion to the Kyrgyz economy.”

Mining operations at Kumtor are carried out using conventional open-it mining methods. Since 1997 it has produced over 13.2 million ounces of gold to the end of 2020.


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