Centerra considers Kyrgyzstan's claims about KGC dividend payments unfounded
BISHKEK. Sept 4 (Interfax) - Canadian mining company Centerra Gold Inc. considers the Kyrgyz authorities' claims about illegal dividend payments from its subsidiary, CJSC Kumtor Gold Company (KGC), which is developing the republic's largest gold mine, Kumtor, unfounded, Centerra said in a statement.
This is the first official comment of Centerra Gold regarding the payment of $200 million in dividends in December 2013, which was given in response to criticism from the Kyrgyz authorities, who are accusing KGC's management of illegally sending funds abroad.
On December 6, 2013, KGC's board of directors, without the consent and without notifying the Kyrgyz government, decided to recommend that its single shareholder, Centerra Gold, announce a dividends payment of $200 million for 2012.
Based on this decision, on December 20, the sum was transferred to the account of Centerra Gold, in which Kyrgyzstan holds a 32.75% stake via state-owned OJSC Kyrgyzaltyn, and the remaining shares belong to international investment funds.
The General Prosecutor's Office of Kyrgyzstan felt that the payment of dividends was illegal. In March this year, the prosecutor's office opened a criminal investigation into the removal of funds from KGC. The general prosecutor feels that the decision concerning the transfer of funds should have been made with the agreement of the Kyrgyz government, because the Kumtor mine is a strategic asset.
As part of this criminal case, the CEO of Kyrgyzaltyn and KGC Board Chairman Dilger Zhaparov was arrested in May and later removed from his post. He was charged with abuse of office.
Centerra Gold considers all announcements made by some Kyrgyz officials regarding dividend payments incorrect and that the transfer of funds fully complied with Kyrgyz legislation.
Over the years of its work in Kyrgyzstan, Centerra Gold has invested about $2 billion in KGC for the development and operation of the Kumtor mine. The Canadian company is the only shareholder in KGC, and according to Kyrgyz law, the subsidiary has the full right to pay dividends to the parent company from its own profit, which it receives from production and gold sales.
Different Kyrgyz regulations and laws, including the law, On Investments, stipulate such a type of payment. According to Centerra Gold, similar provisions were laid down in the agreement governing the activities of the Kumtor project, each of which was approved by the Kyrgyz Parliament in 2009.
"The payment of such dividends is a legal and recognized mechanism so that Centerra can recoup its investments and receive income from its investments," the announcement said.
The company also is calling the attention of the authorities to the fact that Kyrgyzaltyn, as a shareholder of Centerra, in the case of KGC dividend payments, is receiving its share of income. In particular, since 2010, Centerra Gold has paid Kyrgyzstan more than $67 million in dividends, the announcement said.
