Centerra Gold launches Kumtor arbitration, shares rise
Centerra Gold's Kumtor gold mine in the Kyrgyz Republic. Source: Centerra Gold Inc.
Centerra Gold Inc. [CG-TSX] has initiated bind 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.
Kumtor is the largest gold mine operated in Central Asia by a Western-based company.
Centerra said it seeks to enjoin the government from taking further steps to implement recently adopted legislation or to pursue recently procured fines and tax claims against Kumtor Gold Co. (KGC), all of which violate the government’s investment agreements with respect to the Kumtor mine.
Centerra also said it intends to hold the government accountable in the arbitration for any and all losses and damage that result from its recent actions against KGC and the Kumtor mine if no resolution is reached.
The announcement comes just days after the company said it had become aware of a number of legal and political developments in the Kyrgyz Republic, which it had said may impact the company’s ownership of the Kumtor mine and its rights under the 2009 restated project agreements which govern the mine.
The May 7, 2021 news release sparked a sharp drop in the company’s stock price. But on Monday, Centerra shares rose 3.2% or 28 cents to $8.92 on volume of 515,700. The shares trade in a 52-week range of $19.59 and $8.21.
“The leadership of the Kyrgyz Republic has acted with astonishing speed since the beginning of this year to undermine the basis on which the Kumtor Mine has been operated and has refused to engage with us on any matters it considers to be the subject of dispute,” said Centerra President and CEO Scott Perry.
“The Government’s actions have left Centerra with no choice but to exercise our legal rights, through the pursuit of arbitration and otherwise, to protect the interests of KGC, Centerra and our shareholders,” he said.
“In the event the Government wishes to engage in a constructive dialogue, we remain willing and available to do so.”
The Kumtor mine is 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.
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.
The Kyrgyz Republic, via Kyrgyzaltyn JSC, is Centerra’s largest shareholder with 77.4 million shares, worth about $772 million.
The wrongful and illegal actions of the Kyrgyz Republic include the passage by the Kyrgyz Republic Parliament on May 6, 2021 of a new law which enables the Government to impose and “external manager” to take control of the Kumtor Mine if the Government deems that KGC’s activities pose a risk to human safety and the environment. Also, a Government-supported and hastily issued decision of the Kyrgyz Republic court on May 7 to impose a $3 billion fine against KGC on the basis of private civilian environmental claims. In addition, the intimidation of KGC’s personnel by the Kyrgyz Republic State Commission and other Kyrgyz Republic state and law enforcement authorities, including police visits to homes of several senior KGC managers and a raid on KGC’s office in Bishkek on May 15.
After the news came Centerra Gold can be seen in green, otherwise it was not performing so well in recent days. But still the legal complications would result in a dip if the case doesn’t sort soon. Centerra has been fined $3.1bn by a district court in Kyrgyzstan. “No assurances can be given that any of the current or future legal claims and other disputes that have arisen in relation to KGC or the Kumtor Mine can be resolved without a material impact on the Company or potentially the loss of Centerra’s entire investment in the Kumtor Mine.” as stated in yahoo finance. I wonder what would happen ahead.