Kyrgyzaltyn conspired with the Kyrgyz government to take control of the mine under the guise of temporary ‘external management’.
centerra gold
According to the amended notice of arbitration, Kyrgyzaltyn conspired with the Kyrgyz government to take control of the mine under the guise of temporary ‘external management’. It appears to continue acting at the government’s behest concerning the Kumtor operation and its shareholding in Centerra, the company alleges.
The Kumtor external management has circulated monthly press releases exceptionally critical of Centerra, with the language use dripping of likely propaganda. For example, on June 25, the external management declared Kumtor was once more operating at full capacity and meeting all production expectations.
It said: “Initial hurdles resulting from the manoeuvres of Centerra designed to impede smooth operations have been overcome. Managers drew upon their experience and the goodwill of employees, suppliers and contractors to restore key systems and resume production at the mine.”
On a June 1 conference call, Centerra said it was conducting a “strategic review” of its ownership of Kumtor Gold Company and the Kumtor Operating Company.
“The seizure of the mine is based on false information and groundless allegations that undermine everything we have built together,” Scott Perry, Centerra’s president and CEO, said in an open letter to the people of Kyrgyzstan. “We fear that the government’s unjustified action will put thousands of well-paying jobs and the businesses of hundreds of Kyrgyz suppliers at risk.”
‘Our work’
On July 6, the external management published an open response to Perry’s letter, demanding he returned stolen Kyrgyz wealth. They accuse Perry and the company of running away from facing accountability under Kyrgyz law for environmental issues previously settled.
In the two months since the alleged Kumtor expropriation, the external management reports Kumtor has generated $82 million worth of gold, causing “great joy and enthusiasm among our citizens”.
“We would like to emphasize that in spite of you and because of our work, the country is now beginning to receive resources that help make the lives of our people easier,” says Kumtor external management. “There was no justice in the fact that our mine provided the lion share of the profits of Centerra.”
Centerra has in January guided for Kumtor to produce 470,000 to 510,000 oz. gold in 2021.
Centerra seeks to hold the Kyrgyz government and Kyrgyzaltyn responsible for all losses and damages that result from their coordinated campaign to seize the gold mine in violation of longstanding investment agreements and without compensation to Centerra.
The company also seeks to prevent the Kyrgyz government and Kyrgyzaltyn from taking any further actions to nationalize the mine or improperly dispose of it.
Kumtor is the largest of Centerra’s three gold mines, accounting for over 50% of the company’s total output. Since the seizure late in May, Centerra’s Kyrgyz subsidiaries have had to file for bankruptcy protection, and it has also sued the new external manager of the mine, claiming that he conspired to steal the asset from the company while he was a director.
The mine has produced more than 13.2 million ounces of gold between 1997 and the end of 2020. Last year’s output was slightly over 556,000 ounces. Centerra has guided in January for Kumtor to produce 470,000 to 510,000 oz. gold, with improving grades and production expected towards year-end.
Tax issues revived
In February, the country formed a commission in charge of reviewing the operation as the state Tax Service revived previously dismissed claims against Centerra.
The revenue agency alleges the Toronto-based miner owes more than $170 million, which could make it subject to penalties or sanctions.
Centerra has said the 2009 restated project agreements which govern the Kumtor mine contained a specific tax and fiscal regime. This states that no taxes are payable by its local unit Kumtor Gold Company on intercompany transactions with Centerra, including dividends.
Centerra is also facing a civil suit against the operation, requesting that its past practice of placing waste rock on glaciers be determined illegal. The claimants are demanding over $3 billion in environmental damages in favour of Kyrgyzstan.
