Centerra Gold Inc. (“Centerra” or the “Company”) (TSX: CG) (NYSE:
CGAU) announced today that it has entered into a global arrangement
agreement (the “Agreement”) with Kyrgyzaltyn JSC (“Kyrgyzaltyn”)
and the Government of the Kyrgyz Republic (the “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. Centerra understands that the Agreement has been
approved by the Government of the Kyrgyz Republic, including both
the Kyrgyz Parliament and the Cabinet of Ministers.
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,
2022). In satisfaction of the purchase price, Kyrgyzaltyn will
receive from Centerra a 100% equity interest in the Company’s two
Kyrgyz subsidiaries and, indirectly, the Kumtor Mine (with
Kyrgyzaltyn and the Kyrgyz Republic assuming all responsibility for
the Kumtor Mine), plus a cash payment of approximately US$36
million (the “Share Exchange” and, together with the other
transactions contemplated by the Agreement, the “Arrangement”). In
connection with the Share Exchange, the Agreement also is
conditioned on the full and final release of all claims of the
parties, termination of all legal proceedings involving the parties
in all jurisdictions with no admissions of liability and payment by
Centerra of US$50 million to KGC at closing of the Arrangement on
account of an inter-company balance, as well as certain other
principal elements described below.
Scott Perry, President and Chief Executive
Officer of Centerra, said: “This arrangement is expected to provide
value to Centerra’s stakeholders while allowing Centerra to move
forward with a renewed focus on our core operations, including our
Mount Milligan and Öksüt mines, where we expect to see continued
strong operational performance. To the entire Kumtor team and the
people of the Kyrgyz Republic, I want to express how proud I am of
all we have achieved together over the past several decades and
wish you continued success.”
Subject to the satisfaction or waiver of the
conditions precedent to the Arrangement described below, the
parties expect the Arrangement to close no later than 90 days
following the signing of the Agreement.
Details of the Arrangement
The Arrangement comprises the following
principal elements:
- Centerra receiving all of its
common shares held by Kyrgyzaltyn, representing an approximately
26% equity interest in Centerra, 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, 2022). Upon
receipt, Centerra will cancel the shares surrendered.
- Kyrgyzaltyn receiving a 100% stake
in the Company’s two Kyrgyz subsidiaries, Kumtor Gold Company CJSC
(“KGC”) and Kumtor Operating Company CJSC (“KOC”) (and, indirectly,
the Kumtor Mine), and a cash payment of approximately US$36
million, in satisfaction of the purchase price for Kyrgyzaltyn’s
Centerra common shares.
- Approximately US$25 million of the
cash payment will be withheld by Centerra and remitted to the
Canadian tax authorities on account of Canadian withholding tax
payable by Kyrgyzaltyn on the Share Exchange and the balance of the
cash payment of approximately US$11 million will be paid to
Kyrgyzaltyn on closing of the Arrangement.
- The Kyrgyz Republic and Kyrgyzaltyn
assuming all responsibility for the Kumtor Mine, including all
reclamation obligations.
- Full and final releases of all
claims of the parties.
- All environmental, tax and other
claims, fines, penalties or proceedings, including all criminal
investigations and proceedings, in the Kyrgyz Republic (the “Kyrgyz
Proceedings”) to be withdrawn and terminated to Centerra’s sole
satisfaction within 45 days of the date of the Agreement.
- Binding international arbitration
proceedings previously commenced by the Company against the
Government of the Kyrgyz Republic and Kyrgyzaltyn are to be
suspended within two business days following the date of the
Agreement and terminated within two business days of the closing of
the Arrangement.
- No further steps are to be taken by
the Kyrgyz Republic or Centerra in relation to the proceedings
commenced by the Company in the Ontario Superior Court of Justice
against Tengiz Bolturuk, a former member of Centerra’s Board of
Directors, from the date hereof. From the closing of the
Arrangement, Centerra will consent to an order setting aside the
judgement issued in the Ontario Superior Court of Justice against
Mr. Bolturuk on February 15, 2022.
- Subject to certain conditions and
following the withdrawal and termination of the Kyrgyz Proceedings,
KGC and KOC will work together with the Kyrgyz Republic to petition
the court to dismiss the Chapter 11 proceedings in U.S. Bankruptcy
Court for the Southern District of New York, effective as of the
closing of the Arrangement.
- Centerra extinguishing the
inter-company balance between Centerra and KGC by paying US$50
million to KGC on closing of the Arrangement and, as to the
balance, through an offsetting dividend to be declared by KGC
immediately prior to closing of the Arrangement.
- The resignation from Centerra’s
Board of Directors of Kyrgyzaltyn’s two nominees and the
termination of the shareholders agreement between, among others,
Centerra and Kyrgyzaltyn.
- Termination of all agreements
entered into by Centerra in respect of the Kumtor Project vis-à-vis
Centerra’s rights and obligations.
- Transfer of the Kumtor reclamation
trust funds to a Kyrgyz reclamation account held by KGC.
There can be no assurance that Kyrgyzaltyn and
the Kyrgyz Government will not take unilateral actions which are
inconsistent with their obligations under the Agreement or that the
conditions precedent to the Arrangement (including the termination
or withdrawal of Kyrgyz Proceedings to the satisfaction of
Centerra) will be satisfied in a timely manner or at all. There can
similarly be no assurance that the Arrangement will be approved by
Centerra shareholders or the Ontario court, as described below, or
that the Arrangement will not be challenged by third parties. If
Centerra is unable to complete the Arrangement in a manner that
provides for a clean separation from Kyrgyzaltyn and the Kyrgyz
Republic, including the termination or withdrawal of Kyrgyz
Proceedings to its satisfaction, the Arrangement may not close.
Accordingly, there can be no assurance that the Arrangement will be
consummated on the terms described herein or at all.
Centerra Shareholders to Vote on the
Arrangement
The Share Exchange, among certain other aspects
of the Arrangement, will be implemented by way of a court-approved
plan of arrangement of the Company under the Canada Business
Corporations Act, requiring the approval of at least a majority of
the votes cast by Centerra shareholders (excluding for this purpose
votes attached to Centerra common shares held by Kyrgyzaltyn and
any other persons required to be excluded under applicable Canadian
law) and at least two-thirds of the votes cast by all Centerra
shareholders, in each case represented in person or by proxy at a
special meeting of Centerra shareholders. In addition to such
Centerra shareholder and Ontario court approvals and the principal
elements of the Arrangement described above, the Arrangement is
subject to a number of customary conditions precedent.
Full details of the Agreement, the Arrangement
and the transactions contemplated thereby, the background to the
Arrangement, the rationale for the Arrangement and the risks
related thereto, among other matters, will be included in the
management information circular mailed to Centerra shareholders in
connection with the special meeting of Centerra shareholders to
consider and approve the Arrangement. Centerra expects to hold this
shareholder meeting in the second quarter of 2022.
Centerra Board of Directors Approval and
Recommendation
The Arrangement has been approved by the Board
of Directors of Centerra, following the recommendation of a special
committee of independent directors of Centerra. The Centerra Board
of Directors recommends that the Centerra shareholders vote in
favour of the Arrangement.
Cautionary Note 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”, “potential”, “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
completion of the Arrangement and the satisfaction of all
conditions precedent required to implement the Arrangement; the
expected benefits of the Arrangement; the expected timing to close
the Arrangement; the expected timing to suspend and terminate the
various proceedings contemplated by the Arrangement, including the
withdrawal or termination of the Kyrgyz Proceedings; and the timing
of Centerra’s special meeting of shareholders and matters related
thereto.
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: risks that any of the
conditions precedent to the Arrangement will not be satisfied in a
timely manner or at all; the impact of any actions taken by the
Kyrgyz Republic Parliament or the Kyrgyz Government, or any of its
instrumentalities, prior to the completion of the Arrangement, the
failure of the Kyrgyz Government to comply with its obligations
under the Agreement; 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, prior to the completion of the Arrangement;
political and regulatory risks in the Kyrgyz Republic, resource
nationalism, the impact of changes in, the impact of changes in, or
to the more aggressive enforcement of, laws, regulations and
government practices, including in connection with pending or new
civil or criminal action against the Company, its affiliates or its
current or former employees; the uncertainty of potential outcomes
in the Kyrgyz Proceedings, the arbitration process, the Chapter 11
proceedings, or the proceedings before the Ontario court against
Tengiz Bolturuk; the presence of a significant shareholder that is
a state-owned company of the Kyrgyz Republic and possible conflicts
of interest related thereto; and other actions which could be taken
by the Company in response to the ongoing situation involving the
Kumtor Mine. For additional risk factors, please see section titled
“Risk 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 April 3, 2022. 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.
About Centerra Gold
Centerra Gold Inc. is a Canadian-based gold
mining company focused on operating, developing, exploring and
acquiring gold and copper properties in North America, Turkey, and
other markets worldwide. Centerra operates two mines: the Mount
Milligan Mine in British Columbia, Canada, and the Öksüt Mine in
Turkey. While the Company still owns the Kumtor Mine in the Kyrgyz
Republic, it is currently no longer under the Company’s control.
The Company also owns the Goldfield District Project in Nevada,
United States, the Kemess Underground Project in British Columbia,
Canada, and owns and operates the Molybdenum Business Unit in the
United States. 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:
Toby Caron Treasurer and Director, Investor
Relations (416) 204-1694 toby.caron@centerragold.com
Shae FrosstManager, Investor Relations(416)
204-2159shae.frosst@centerragold.com
Additional information on Centerra is
available on the Company’s website 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/b95693b0-1650-4ed5-82ab-7361a4cf1b03
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