4 Apr 2022 16:11

Centerra handing Kumtor gold project to Kyrgyzstan for Kyrgyzaltyn stake in Canadian co

BISHKEK. April 4 (Interfax) - Kyrgyzstan has assumed full ownership of the Kumtor gold deposit, Kyrgyz President Sadyr Japarov said during an address on Monday.

"Kumtor has passed fully to [the ownership of] Kyrgyzstan, with 100% of the company's shares now belonging to the country. Centerra has ceased all litigation in the United States, Sweden, and Canada," Japarov said.

"We're expecting profit of around $200 million from the mine for 2022," he said.

Japarov said talks with Canada's Centerra Gold Inc., which used to develop Kumtor, had been difficult, but that Kyrgyzstan had stood its ground. He said that the Canadian company would make a one-off payment $50 million to Kyrgyzstan, according to the agreement reached.

"They tried to portray the dispute between the foreign company and Kyrgyzstan as a lawless seizure of the company, but we coped with the task of concluding a settlement agreement on our terms. The Kumtor decision is only the beginning of the road to the country's sustainable development," Japarov said.

He said that according to specialists, Kyrgyzstan could be able to earn some $5 billion from the mine in the next ten years and that up to 200 tonnes of gold would be produced.

Kyrgyzstan owns nearly 26% of Centerra via the state-owned gold miner Kyrgyzaltyn.

Centerra, for its part said it had entered into a "global arrangement agreement" with the Kyrgyz government "to effect a clean separation of the parties, including through the disposition of Centerra's ownership of the Kumtor Mine and investment in the Kyrgyz Republic, the elimination of Kyrgyzaltyn's involvement and interest in the company, and the resolution of their disputes."

The agreement provides for, among other things, Kyrgyzaltyn transferring to Centerra all of its 77.4 million Centerra common shares for cancellation, representing an approximate 26% equity interest in the company, for an aggregate purchase price of approximately C$972 million based on the closing price of C$12.56 per Centerra common share on the TSX on April 1.

The Kyrgyz authorities chose British company GLAS Specialist Services Limited as intermediary in concluding an escrow agreement within the framework of the global arrangement agreement on the Kumtor project, according to a government resolution approving the agreement with immediate effect and posted on the government's website.

Kumtor, one of the largest gold mines in Central Asia, is located in the Issyk-Kul region of northern Kyrgyzstan 60 kilometers from the border with China at an altitude of more than 4,000 meters.

The mine was developed by Centerra Gold subsidiary Kumtor Gold Company (KGC). The Kyrgyz authorities hit the company with more than $3 billion in financial claims for violating environmental laws in May 2021. The Kyrgyz government's press service announced on May 18 that external management had been appointed at the mine. Kyrgyz and Canadian citizen Tengiz Bolturuk was named temporary external manager of KGC.

The government announced on November 20 that the Kumtor mine no longer belonged to Centerra Gold. The Canadian company was forced to write off $926 million and report that it had lost control of the mine.

Centerra Gold Inc., which is based in Toronto, has assets in North America, Asia, and other regions. Its largest mine was once Kumtor, but is now Mount Milligan in Canada.