BISHKEK (TCA) — Kumtor Gold Company, which is developing Kyrgyzstan’s Kumtor gold mine, presented results for the first quarter of 2016 at a press conference on May 27 in Bishkek.
The Kumtor open pit mine is the largest gold mine in Central Asia. It has been operating since May 1997 and, as of March 31, 2016, has produced approximately 10.51 million ounces or 326.79 tons of gold. KGC is a wholly-owned subsidiary of Canada-based Centerra Gold Inc. and is the operator of the Kumtor project responsible for the entire production cycle.
According the National Statistical Committee of Kyrgyzstan, Kumtor’s share in the country’s GDP was 6.8% in 2015; Kumtor’s share in the total volume of industrial production was 22.5%. In 2015 Kumtor produced more than 16 tons of gold.
Operating results
According to President of the Kumtor Gold Company Daniel Desjardins, in the first three months of 2016, KGC produced 86,444 ounces or 2,688.7 kg of gold and contributed to Kyrgyzstan’s budget more than 1.6 billion soms in taxes and mandatory payments.
The company produced 86,444 ounces compared to 164,272 ounces of gold in the comparative period of 2015. The decrease resulted from the processing of lower grade ore. Gold sales in the first quarter of 2016 were 61,744 ounces, or 1.92 tons. Total revenues from gold sales in the first quarter were $73.2 million.
The Dore bars produced by Kumtor are purchased by Kyrgyzstan’s Kyrgyzaltyn gold company for processing at the Kara-Balta refinery.
Kumtor is currently constructing a heavy vehicle workshop and expects to complete this project during the second quarter of 2016, Desjardins said.
The Kumtor mine is expected to produce between 480,000 and 530,000 ounces, or 14.9 and 16.5 tons, of gold in 2016.
Nothing to hide
Centerra is determined to continue working with the Kyrgyz Government to resolve all the issues and find mutually acceptable solutions. Kumtor Gold Company has nothing to hide, said Desjardins, commenting on the searches by Kyrgyz authorities in the Bishkek office of the company on April 28.
According to Desjardins, Centerra issued a document according to which the management and employees of the company have to fully cooperate with the investigation bodies, because there is nothing to hide in the company.
On April 28, the Kyrgyz General Prosecutor’s Office (GPO) and other law enforcement agencies conducted a search at the KGC Bishkek offices with the purpose to collect documents relating to a criminal case concerning alleged financial violations by KGC in connection with past inter-corporate transactions between KGC and Centerra. The GPO made a claim in relation to a $200 million inter-corporate dividend paid by Kumtor Gold Company to Centerra.
Reporters asked why two KGC Vice Presidents, Mark Burton and Leslie Louw, left Kyrgyzstan after the searches. Desjardins explained that they left the country for the planned holidays. Kumtor has been the subject of systemic audits and investigations over the years, and there was no reason to change their pre-planned vacation. Leslie Louw has already returned to Kyrgyzstan.
Ecology
Centerra and Kumtor Gold Company will also continue their cooperation with the Government of Kyrgyzstan and the State Agency for Geology and Mineral Resources (SAGMR) to resolve environmental issues, Desjardins said.
All works at the mine are maintained according to modern standards of environmental safety. However, on April 28, 2016 the company received a letter from the SAGMR saying that Kumtor had not fully complied with all the requirements of AMEC, an international company hired by Kyrgyzstan’s Government.
According to Desjardins, the company has complied with all recommendations issued by AMEC during the past three years although the AMEC recommendations are not mandatory by law and the KGC has performed them voluntarily.
Environmental lawsuits
Centerra and Kumtor Gold Company will appeal against the decision of the Bishkek Inter-District Court in the higher courts, Desjardins said.
Total, four court decisions were made on the environmental claims. The Bishkek Inter-District Court ruled against Kumtor Gold Company on an environmental claim brought by the State Inspectorate for Environmental and Technical Safety of the Kyrgyz Republic (SIETS) and fined the company for about 6.7 billion soms (approximately $98.4 million). SIETS claims that the placement of waste rock on Kumtor’s waste dumps is subject to tariffs that are normally applicable to industrial or domestic waste.
There is also a claim submitted to the Inter-District Court by the State Agency for Environment and Forestry Protection (SAEFP) which claims that KGC owes additional environmental pollution fees, with damages amounting to about $220 million.
Centerra strongly disputes the SIETS and SAEFP claims and considers them without merit, Desjardins said. The Kumtor Project has always been operated in accordance with the provisions of the 2009 project agreements governing the Kumtor Project, he added.
The absence of permits and approvals of Kumtor’s 2016 annual mine plan would result in a shutdown of the Kumtor Project on July 1, 2016. The Kumtor project is of great importance for the economy of Kyrgyzstan and the closure of the mine even for a certain period of time could lead to serious economic consequences, said the KGC President. The company has already informed the Government and the media that one week of the mine’s downtime will result in lost 15,400 ounces of gold. If the mine does not work 6 or 8 weeks, the company will not be able to produce gold until the second half of 2017, and if the mine’s downtime is longer, then it can be completely lost.
