Centerra Gold Comments on Kyrgyz Republic Developments
May 07 2021 - 6:30AM
Centerra Gold Inc. (“Centerra”) (TSX: CG) (NYSE: CGAU) announced
today that it has become aware of a number of legal and political
developments in the Kyrgyz Republic which may affect Centerra’s
ownership of the Kumtor Mine and its rights under the 2009 restated
project agreements which govern the Kumtor Mine.
First, the Company understands that a law has
been passed by the Kyrgyz Republic Parliament which would enable
the Kyrgyz Republic Government to impose “external management” on
companies in the Kyrgyz Republic operating under concession
agreements. The law was proposed, passed three readings and was
adopted by Parliament in a single day and will now be referred to
the President of the Kyrgyz Republic for signature. The sponsor of
the law, Mr. Akylbek Japarov, notes that the only project operating
under a concession agreement in the Kyrgyz Republic is the Kumtor
Mine.
Accordingly, the Company understands that this
newly adopted law on external management would apply in
circumstances where Kumtor Gold Company (KGC) violates certain
Kyrgyz laws relating to safety and thereby creates an immediate
threat to the life or health of people: (i) prohibits KGC’s
managers from managing the mine (or else face criminal sanctions);
and (ii) enables the Prime Minister of the Kyrgyz Republic to
appoint an external manager to take control of all management
activities of KGC, including its bank accounts.
Centerra notes that Mr. A. Japarov is also the
Chairman of the Kyrgyz Republic State Commission which was formed
in February 2021 to review the activities of the Kumtor Mine and is
expected to report its findings shortly.
Second, the Company is aware of other draft laws
and decrees in the Kyrgyz Republic which seek to undermine the 2009
restated Kumtor project agreements and the tax and fiscal regime
under which the Kumtor Mine has operated since 2009. It is unclear
whether such drafts have progressed past the proposal stage.
Third, in March 2021, four Kyrgyz Republic
private citizens commenced a civil claim against KGC requesting
that KGC’s past practice of placing waste rock on glaciers be
determined to be illegal. This week the claimants have recently
amended their claim to demand over U.S.$3 billion in environmental
damages in favour of the Kyrgyz Republic. The Company
notes that one of the claimants, Mr. Kutmanov, is the son of Ms.
Dinara Kutmanova, the Director of the Kyrgyz Republic State Agency
for Environment Protection and Forestry.
Fourth, further to the Company’s March 18, 2021
news release, the Company has now received the results of the tax
audits and re-audits conducted by the Kyrgyz Republic State Tax
Service in respect of tax years 2015 through 2020. The results from
the State Tax Service are preliminary and still being analyzed by
KGC; however, on their face they assert additional taxes owing by
KGC in excess of U.S.$170 million. Such amounts are allegedly owing
on the same grounds as the previous tax claims received by the
Company for withholding taxes on dividends, certain payroll
deductions and social insurance contributions, though it is unclear
whether the amounts noted in the latest audit results overlap the
previously claimed amounts.
As the Company has noted many times, the 2009
restated Kumtor project agreements provide a solid foundation for
Kumtor’s operations and were approved by the Kyrgyz Republic
Parliament and Constitutional Court in 2009. Those agreements were
re-affirmed by the Government of the Kyrgyz Republic in 2017 when
it entered into the Strategic Agreement on Environmental Protection
and Investment Promotion which was completed and became effective
in 2019. KGC’s operations and activities have always carefully
adhered to those agreements and applicable laws. Furthermore, the
Strategic Agreement included a release of the Company and KGC by
the Kyrgyz Republic Government of all outstanding claims at such
time, including damages for harm allegedly caused to the
environment from storing production tails on glaciers. The Company
therefore believes strongly that the claims advanced by the State
Tax Service and such individual Kyrgyz Republic claimants are
entirely meritless and the new and draft Kyrgyz Republic laws noted
above, if implemented, would clearly violate the 2009 restated
project agreements and the 2009 Kyrgyz Republic laws which
confirmed such agreements. Furthermore, the Kumtor Mine’s
environmental performance adheres to international standards,
including those of the European Bank for Reconstruction and
Development, and have been audited multiple times by, among others,
the Kyrgyz Government’s own environmental consultant, AMEC Foster
Wheeler. AMEC’s reports have confirmed that the Kumtor Mine is
operated in accordance with international best practice and its
recommendations for improvements have been fully implemented by the
Company. Furthermore, in terms of Kumtor’s safety record, the mine
recently achieved, one year of operations free of any lost time
injuries.
The Company has benefited from a close and
constructive dialogue with the Kyrgyz Republic authorities over the
almost 30 years of the Kumtor Mine’s operations. Centerra remains
committed to continuing to work with such authorities to resolve
any outstanding issues in accordance with the 2009 restated project
agreements applicable to the Kumtor Mine, which provide for all
disputes to be resolved by international arbitration, if necessary.
However, no assurances can be given that any of the current or
future legal claims of the State Tax Service or individual
claimants, disputes as to the application of current or future
Kyrgyz Republic laws relating to the Kumtor Mine, the results of
the State Commission review or any other future regulatory, civil
or criminal claims impacting KGC or Centerra can be resolved
without a material impact on the Company.
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 operates
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.
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.
A PDF accompanying this announcement is available
at: http://ml.globenewswire.com/Resource/Download/c9340b61-0586-44fe-96b1-edb164e8f024
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