Centerra Gold Inc. (“Centerra” or the “Company”) (TSX: CG) (NYSE:
CGAU) announced today that it has filed an application requesting
urgent interim measures in its international arbitration against
the government of the Kyrgyz Republic and Kyrgyzaltyn JSC, the
state-owned gold refining monopoly and Centerra’s largest
shareholder, to address critical operational and safety problems at
the Kumtor Mine.
Through this application, Centerra seeks to
prevent the Kyrgyz Republic and Kyrgyzaltyn JSC from causing
irreparable damage to the mine, destroying its integrity, value and
long-term viability. As previously disclosed, Centerra initiated
binding arbitration against the Kyrgyz government in response to
actions taken against the Company’s wholly owned subsidiary Kumtor
Gold Company (“KGC”), to expropriate the Kumtor Mine under the
guise of “external management” and strip KGC of its assets.
Dan Desjardins, the Chief Operating Officer of
Centerra who managed the Kumtor Mine for five years as the
President of KGC until January 2020, said: “Statements by Kyrgyz
officials since the government’s illegal seizure of the Kumtor Mine
indicate that they are departing from the approved mine plan in
ways that will cause irreversible damage. Based on recent reports,
the government has also failed to adequately protect the mine’s
infrastructure from flooding and other threats and may be facing
production difficulties. Their actions, and threatened actions in
pursuit of short-term profits at the expense of sustainability,
place the long-term viability of the Kumtor Mine at grave risk and
compromise the safety and livelihoods of its employees.”
Centerra seeks the following immediate relief pending a final
award in the arbitration:
- An order directing the Kyrgyz
Republic to refrain from deviating from the government-approved
2021 Kumtor Mine Plan and to provide Centerra with regular reports
on the mine’s operations;
- An order directing the Kyrgyz
Republic and Kyrgyzaltyn JSC to refrain from transferring any
Centerra shares or KGC assets without a prompt accounting and
payment of profits that otherwise would have been payable to the
Company into an escrow account; and
- An order directing the Kyrgyz
Republic and Kyrgyzaltyn JSC to refrain from interfering with the
arbitration process, including through spurious fines, tax claims
and legal proceedings, and intimidating or threatening Centerra’s
employees and agents.
Under applicable investment agreements,
Centerra’s claims will be adjudicated in arbitration proceedings to
be held in Stockholm, Sweden and conducted under the rules of the
United Nations Commission on International Trade Law (“UNCITRAL”).
The Permanent Court of Arbitration (“PCA”) has appointed The Rt.
Hon. Lord Hoffmann as the sole arbitrator of the matters in dispute
and the governing law of the arbitration is the law of the State of
New York and of England.
Centerra’s application states that the Kyrgyz
government and its agents are jeopardizing the Kumtor Mine itself
and Centerra’s ability to receive any award at the conclusion of
the arbitration as a result of the following egregious acts of
mismanagement:
- Maximizing Short-Term Output in Pursuit of a Quick
Profit Will Reduce the Life of the Mine
For more than 20 years, Centerra, through KGC,
successfully operated the Kumtor Mine by following carefully
designed mine plans that had been approved by successive
governments of the Kyrgyz Republic. Since the government seized the
mine on the weekend of May 15 and 16 2021, the government-appointed
mine managers appear to be departing from the mine plan, apparently
to extract quick profits by mining only high-grade ore. This could
make it infeasible to obtain the full value of the gold from the
mine, materially reducing the total output over the life of the
mine. Prior to the mine’s illegal seizure, Centerra had planned to
invest US$2 billion to extend the life of the mine by five years to
2031.
- Improper Operation of Specialized Water Pumps Could
Destabilize and Collapse the Pit Wall
Beginning in about 2015, as the pit depth
increased, Centerra management invested more than US$10 million to
build a highly specialized pump system to keep glacial meltwater
from entering the mining pit areas and similarly specialized pump
systems to remove any water that enters the pit. Based on
photographic evidence, the government-imposed management does not
appear to be operating those pumps effectively. Large amounts of
water can be seen streaming down the walls of the mine and glacial
meltwater is accumulating in the bottom of the pit well beyond
normal levels. The mine cannot operate effectively if water
collects at the bottom of the pit, because that is where the
highest-grade ore is mined. Allowing large amounts of glacial
meltwater to flow down the pit walls also destabilizes the walls
and can cause them to collapse.
- Transitioning to Underground Mining Risks Irreversible
Damage
The Kyrgyz government-appointed external
management has publicly stated that it plans to reconfigure the
Kumtor Mine from an open pit to an underground mine. KGC previously
engaged a mining contractor to study and develop underground mining
at the site, and after extensive work, the company determined that
it was not geologically and economically viable. The pursuit of an
underground mining plan risks causing irreversible damage to
Centerra’s longstanding investment in the open pit mine.
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. Centerra operates two
mines, the Mount Milligan Mine in British Columbia, Canada and the
Öksüt Mine in Turkey, and its Molybdenum Business Unit in the
United States. The Company owns the Kumtor Mine in the Kyrgyz
Republic, which is currently not under the Company’s control.
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.
Caution Regarding Forward-Looking
InformationInformation 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 claims brought and
relief sought by the Company against the Kyrgyz Republic and
Kyrgyzaltyn JSC in binding arbitration and the process thereof; the
Kyrgyz Government’s departure from previous mine plans, including
plans to move toward underground mining methods and to maximize
short term profit; and mismanagement of water pumping activities at
the Kumtor Mine.
Forward-looking information is necessarily based
upon a number of estimates and assumptions that, while considered
reasonable by Centerra, are inherently subject to significant
political, business, technical, 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 KGC or the
prolongation of such “external management”; the inability of the
“external management” to obtain equipment, spare parts, consumables
or other supplies; the Kyrgyz Government taking further steps to
nationalize or expropriate the Kumtor Mine, and/or utilizing the
purported environmental and tax claims being asserted against KGC
to strip KGC of its assets; 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; the uncertainty of
potential outcomes in the arbitration process; the inability of the
Company and its subsidiaries to collect on or enforce any favorable
arbitral and/or court judgement awarded against the Kyrgyz Republic
or Kyrgyzaltyn JSC; and the presence of a significant shareholder
that is a state-owned company of the Kyrgyz Republic. 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 September 27, 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.
A PDF accompanying this announcement is available
at: http://ml.globenewswire.com/Resource/Download/a12f6278-d2ab-44c8-bc64-2d86a1765f94
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