Centerra Gold Inc. (“Centerra” or the “Company”) (TSX: CG) (NYSE:
CGAU) today announced additional actions to protect the interests
of Centerra and its stakeholders in response to the unjustified
seizure of the Kumtor Mine by the Government of the Kyrgyz
Republic. The actions are designed to preserve the value of
Centerra’s wholly owned subsidiaries that own and operate the
Kumtor Mine, Kumtor Gold Company (“KGC”) and Kumtor Operating
Company (“KOC”), and prevent any further efforts by the Kyrgyz
Government to strip KGC of its assets or otherwise improperly
dispose of the Kumtor Mine in violation of its investment
agreements with the Company.
Consistent with these objectives, KGC and KOC
today commenced a filing in the Southern District of New York under
Chapter 11 of the federal U.S. Bankruptcy Code. The
court-supervised process provides, among other things, for a
worldwide automatic stay of all claims against KGC and KOC.
Centerra hopes that this internationally recognized, orderly
restructuring process will facilitate potential negotiations with
the Kyrgyz Government. The Chapter 11 proceeding will not impact
any other areas of the Company’s business, including the Mount
Milligan Mine in Canada, the Öksüt Mine in Turkey and the
molybdenum business in North America.
The Company also announced that it is conducting
a strategic review related to its ownership of KGC and KOC that
will consider alternatives available to enhance value to Centerra’s
stakeholders in light of recent events involving the Kumtor
Mine.
Scott Perry, President and Chief Executive
Officer of Centerra, said: “We have repeatedly asked the Kyrgyz
Government to discuss its concerns with us, yet it has refused to
engage with us in any way. While we remain willing and available to
hold a constructive dialogue with the Kyrgyz authorities, we will
continue to use all available legal and financial means to protect
the interests of Centerra and its stakeholders from the
Government’s concerted and premeditated effort to take control of
the Kumtor Mine. In particular, we will continue to pursue
arbitration proceedings to enforce the longstanding agreements with
the Kyrgyz Republic that give Centerra, KGC and KOC the right to
own and operate the Kumtor Mine. Those agreements are governed by
New York law, and we expect the U.S. court proceedings will serve
to further protect Centerra’s interests under their terms pending a
restructuring or other resolution of the dispute.”
Centerra Remains in a Strong Financial
Position
Centerra is not a party to or affected by the
Chapter 11 filing and remains financially strong with more than
US$800 million in cash and in excess of US$1.2 billion in liquidity
as of March 31, 2021. The restructuring proceeding initiated by KGC
and KOC will not impact Centerra’s other operations and
businesses.
KGC and KOC are currently solvent, with total
assets (including the Kumtor Mine) in excess of US$1.1 billion and
no external bank debt. Centerra believes that the Kumtor Mine
remains a valuable asset notwithstanding the Kyrgyz Republic’s
recent actions.
Strategic Review is Considering a Range
of Options
Centerra has retained external advisors to
assist with its strategic review, which is proceeding under the
direction of a Special Committee of independent directors of the
Board. As part of this review, Centerra is evaluating all possible
alternatives to preserve and enhance value for its stakeholders
while ensuring that the Kyrgyz Government does not directly or
indirectly profit from its unlawful expropriation of the Kumtor
Mine.
There can be no assurance that the strategic
review, or the U.S. restructuring proceeding, will lead to the
successful implementation of any particular transaction or other
outcome. The Company therefore continues to pursue all alternative
avenues of recourse, including arbitration and Canadian legal
proceedings.
False Environmental and Tax
Claims
As previously noted, the Kyrgyz Republic seized
the Kumtor Mine and the Government installed a temporary “external
manager” on May 17, 2021 in violation of its obligations to
Centerra, KGC and KOC. Public statements by Government officials
and actions taken by the “external manager” of the mine indicate
that the Government and others, including the state-owned entity
Kyrgyzaltyn JSC, intend to use spurious environmental and tax
claims being asserted against KGC to place KGC into some form of
insolvency proceeding in the Kyrgyz Republic and potentially strip
KGC of its assets. Due to the “external manager” taking control of
the Kumtor Mine and KGC’s operations in the Republic, KGC is no
longer able to defend effectively against these claims in the
Kyrgyz Republic courts.
Perry said: “KGC’s operations and activities
have always carefully adhered to agreements with the Kyrgyz
Government and applicable laws, including with regard to the
environment, safety and taxation. We strongly believe that the
Government’s claims are entirely without merit and a pretext for a
cloaked form of nationalization of the Kumtor Mine without
compensation. While these claims have not been asserted against
Centerra itself, the actions of the Kyrgyz Government and others
have compelled us to take steps to preserve the value of KGC and
KOC for all our stakeholders and shine a light on the true
intentions of the Kyrgyz Government and those acting in concert
with it.”
Select court documents and additional
information can be found on the Company’s investor relations
website at
https://www.centerragold.com/investor/kgc-restructuring.
About CenterraCenterra Gold
Inc. is a Canadian-based gold mining company focused on operating,
developing, exploring and acquiring gold properties in North
America, Asia and other markets worldwide and is one of the largest
Western-based gold producers in Central Asia. Centerra owns three
mines, the Kumtor Mine in the Kyrgyz Republic, the Mount Milligan
Mine in British Columbia, Canada and the Öksüt Mine in Turkey.
Centerra's shares trade on the Toronto Stock Exchange (TSX) under
the symbol CG and on the New York Stock Exchange (NYSE) under the
symbol CGAU. The Company is based in Toronto, Ontario, Canada.
Additional Toronto Stock Exchange
Disclosure In circumstances where a significant subsidiary
of a listed issuer commences Chapter 11 proceedings the TSX may
conduct a review process in respect of the issuer. Centerra
understands that the TSX will not commence a delisting review
pursuant to Part VII of the TSX Company Manual at this time, and
the Company will continue to keep the TSX apprised of
developments.
Caution Regarding Forward-Looking
Information Information contained in this document which
are not statements of historical facts may be “forward-looking
information” for the purposes of Canadian securities laws and
within the meaning of the United States Private Securities
Litigation Reform Act of 1995. Such forward-looking information
involves risks, uncertainties and other factors that could cause
actual results, performance, prospects and opportunities to differ
materially from those expressed or implied by such forward looking
information. The words “believe”, “expect”, “anticipate”,
“contemplate”, “plan”, “intends”, “continue”, “budget”, “estimate”,
“may”, “will”, “schedule”, “understand” and similar expressions
identify forward-looking information. These forward-looking
statements relate to, among other things: the U.S. restructuring
proceeding and its potential to benefit Centerra and its
stakeholders, including the ability to protect KGC, KOC and
Centerra’s stakeholders from future actions of the Kyrgyz
Government; the anticipated impact of the U.S. restructuring
proceeding on Centerra’s other operations and businesses; the
intentions and strategies of the Government of the Kyrgyz Republic
and others, including Kyrgyzaltyn JSC, relating to KGC and the
Kumtor Mine; the value of the Kumtor Mine to Centerra and its
stakeholders; the strategic review process, including the potential
of the strategic review process to preserve or enhance value for
the Company’s stakeholders and the Company's ability to identify
and consummate any such potential transactions; the merit of the
Kyrgyz Government’s environmental and tax claims and anticipated
determinations thereon in arbitration and U.S. court proceedings;
and Centerra’s pursuit of alternative legal avenues to, and its
ability to, protect the Company and its stakeholders against
actions of the Government of the Kyrgyz Republic and others.
Forward-looking information is necessarily based
upon a number of estimates and assumptions that, while considered
reasonable by Centerra, are inherently subject to significant
technical, political, business, economic and competitive
uncertainties and contingencies. Known and unknown factors could
cause actual results to differ materially from those projected in
the forward-looking information. Factors and assumptions that could
cause actual results or events to differ materially from current
expectations include, among other things: the continued imposition
by the Kyrgyz Government of external management on the KGC or the
prolongation of such external management; the ongoing failure of
the Kyrgyz Republic Government to comply with its continuing
obligations under the 2017 Strategic Agreement on Environmental
Protection and Investment Promotion and the 2009 Restated Project
Agreements governing the Kumtor Mine; the Kyrgyz Government
nationalizing or expropriating the Kumtor mine, or utilizing the
purported environmental and tax claims being asserted against KGC
to strip KGC of its assets; the failure of the Kyrgyz Republic, its
instrumentalities or others to comply with the automatic worldwide
stay of all claims against KGC and KOC; the ability of KGC and KOC
to pursue restructuring proceedings under Chapter 11 of the U.S.
Bankruptcy Code; continued actions by the Kyrgyz Republic
Government or any state agency or the General Prosecutor's Office
that serve to restrict or otherwise interfere with the payment of
funds by KGC and KOC to Centerra; resource nationalism including
the management of external stakeholder expectations; the impact of
changes in, or to the more aggressive enforcement of, laws,
regulations and government practices, including unjustified civil
or criminal action against the Company, its affiliates or its
current or former employees, including the interaction of claims of
harm to the environment or human health with the new Kyrgyz
Republic law that enabled imposition of external management on the
Kumtor Mine by the Kyrgyz Republic Government; potential impact on
the Kumtor Mine of investigations by Kyrgyz Republic
instrumentalities; the inability of the Company and its
subsidiaries to enforce their legal rights in certain circumstances
or to collect on any favorable arbitral judgement awarded against
the Kyrgyz Republic; other political risks associated with the
Company’s operations in the Kyrgyz Republic; the presence of a
significant shareholder that is a state-owned company of the Kyrgyz
Republic; the U.S. restructuring proceeding potentially having an
impact on Centerra or any of its other businesses or operations,
and the impact adversely affecting the Company or any of its other
businesses or operations; the Company’s ability to identify
potential transactions through the strategic review process,
successfully implement such transactions, and achieve expected
benefits therefrom; that Centerra’s shares will continue trading on
the TSX and/or NYSE; Centerra’s ability to access sources of debt
and equity capital, if needed; and Centerra’s ability to make
capital investments and the amounts of capital investments in its
other businesses and operations. For additional risk factors,
please see section titled “Risks Factors” in the Company’s most
recently filed Annual Information Form available on SEDAR at
www.sedar.com and EDGAR www.sec.gov/edgar.
There can be no assurances that forward-looking
information and statements will prove to be accurate, as many
factors and future events, both known and unknown could cause
actual results, performance or achievements to vary or differ
materially from the results, performance or achievements that are
or may be expressed or implied by such forward-looking statements
contained herein or incorporated by reference. Accordingly, all
such factors should be considered carefully when making decisions
with respect to Centerra, and prospective investors should not
place undue reliance on forward-looking information.
Forward-looking information is as of May 31, 2021. Centerra assumes
no obligation to update or revise forward-looking information to
reflect changes in assumptions, changes in circumstances or any
other events affecting such forward-looking information, except as
required by applicable law.
For more information:John W.
PearsonVice President, Investor Relations(416)
204-1953john.pearson@centerragold.com
Additional information on Centerra is
available on the Company’s web site at
www.centerragold.com on SEDAR at www.sedar.com
and on EDGAR at www.sec.gov/edgar.
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