The latest salvo fired by Kyrgyz authorities in the long-running dispute over the distribution economic benefits of the mine appears to be retaliation against Centerra filing for international arbitration under UN and New York rules last week.
The dispute between the Kyrgyz Republic and Canada’s Centerra Gold took an ominous turn on Monday with authorities opening a criminal probe against managers at the firm’s giant Kumtor gold mine in the central Asian nation.
Toronto-based Centerra said in a statement on Monday the Kyrgyz Republic’s General Prosecutor’s Office has carried out searches at its wholly-owned Kumtor Gold Company’s offices and seized records relating to a charge that certain unnamed managers “engaged in transactions that deprived Kumtor of its assets or otherwise abused their authority, causing damage to the Kyrgyz Republic.”
Centerra also announced that a separate claim by the Kyrgyz government’s environmental protection agency for $220 million in relation to pollution at Kumtor was upheld in an inter-district court in the country. The injunction calls for a financial freeze at Kumtor prohibiting the company “from taking any actions relating to certain financial transactions including, transferring property or assets, declaring or paying dividends or making loans.”
The latest salvo fired by Kyrgyz authorities in the long-running dispute over the distribution economic benefits of the mine appears to be retaliation against Centerra filing for international arbitration under UN and New York rules last week.
Centerra, which has been mining Kumtor for 19 years, has said in the past that operations may have to cease if the impasse regarding environmental payments are not resolved.
Centerra says talks with the Kyrgyz government are ongoing but the disagreement has only become more bitter in recent months.
Len Homeniuk, a former chief executive officer of Centerra Gold, spent weeks under house arrest in Bulgaria, after being detained in July last year while on holiday with his family on a boat cruise on the Danube after Kyrgyzstan put him on Interpol’s wanted list last year.
What makes the actions by Kyrgyz authorities confounding is the fact that the state owns 32% of Centerra and Kumtor is central to the Kyrgyz Republic’s economy.
Kumtor is the largest non-state employer and taxpayer in the country and represents some 10% of its overall GDP makes up 25% of its industry and contributes 50% of export earnings. The mine has produced around 10 million ounces since inception and remaining reserves are 5.6 million ounces.
While rumours of outright nationalization have done the rounds before the vast open pit mine, which lies near the Chinese border at an altitude of 4,000 metres, is a technically highly challenging operation. Kumtor is expected to produce 480,000-530,000 ounces at an all-in sustaining cost between $817-$902 per ounce this year.
Centerra which sits on more than $500 million in cash is actively diversifying away from Kumtor as the risks associated with the operation have proved a drag on the company’s market valuation.
Centerra is worth $1.7 billion on the Toronto Stock Exchange, making it one of the cheapest counters in the sector on a cash per share and dividend yield basis. With the cash generated by Kumtor being used to develop projects in Mongolia, Turkey and Canada, Centerra wants to become a 1 million ounce per year producer over the next few years.
source: mining.com
