Kyrgyzstan: Centerra to invest $25 million to extend Kumtor gold mine’s life


BISHKEK (TCA) — Canadian Centerra Gold Inc intends to invest about $25 million in further geological exploration to extend the life of the Kumtor gold mine in Kyrgyzstan, Chief Executive Officer of Centerra Gold Inc., Scott Perry, said during his meeting with Prime Minister of Kyrgyzstan Sapar Isakov on April 4.

Kumtor, the largest gold mine in Central Asia, is located in Kyrgyzstan’s Tien Shan mountains. Canada-based Centerra owns 100% of the Kumtor mine through its wholly owned subsidiary Kumtor Gold Company. The Kyrgyz Republic holds 26.6% shares in Centerra through the state gold company KyrgyzAltyn.

The Kyrgyz Prime Minister and Centerra’s CEO discussed the development prospects of Kumtor Gold Company and expressed interest in deepening cooperation. Kyrgyzstan and Centerra are consistently fulfilling the terms of the strategic agreement signed on September 11, 2017, Isakov said.

According to Scott Perry, the Kumtor Gold Company (KGC) has done its utmost to implement the recommendations of the International Association for Measurement and Evaluation of Communication (AMEC), which the Kyrgyz Government attracted as an independent international consultant to improve the environmental situation at the Kumtor mine.

Isakov also spoke on extending the life of the mine, which, according to experts and official documents, is expected to operate no more than 8-10 years.

Since 2012, Centerra Gold has not invested in geological exploration of Kumtor because there were some disagreements between the Kyrgyz Government and the company.
After the conclusion of the new agreement, the company decided to resume investments in geological exploration, and to extend the mine’s life. The company will invest about $25 million in geological exploration, Perry said.

The meeting discussed the latest positive changes in the company. The KGC top management of five persons currently includes three Kyrgyz citizens. The company provides jobs to about five thousand local specialists and is the largest taxpayer in the private sector of Kyrgyzstan.

Isakov stressed the importance of expanding the mineral resource base of the country. Currently, the Government considers the possibility of creating a new joint venture with Kyrgyzaltyn OJSC on a parity basis for fields outside the concession areas of the Kumtor gold mine. Scott Perry promised that Centerra Gold will assist Kyrgyzstan in this initiative.

Perry also told Isakov about the company’s work to modernize production at Kumtor to increase the amount of gold extracted. The works will be fully completed by the end of this year, which will have a positive effect on the total volume of gold production, revenue, tax and other mandatory payments from the company.

New agreement

In September 2017, the Kyrgyz Government headed by Sapar Isakov entered into a new agreement with Centerra Gold Inc. on the Kumtor mine. Under the terms of the agreement, Centerra took on new obligations aimed at expanding the financing of environmental activities, primarily in the water area of Lake Issyk-Kul. Canadian investors should allocate $170 million to Kyrgyzstan for environmental damage compensation, social needs and geological exploration.

The annual environmental payment was increased from $310,000 to $3 million.

Earlier this year, Prime Minister Isakov signed a decree establishing the Public Foundation “Nature Development Fund”, aimed to improve the environmental situation in the country, including the implementation of the Kumtor project. The Kumtor Gold Company contributed a $50 million one-time payment to the Fund and will annually invest $2.7 million until the end of the Kumtor mine operation.

According to the Kyrgyz Government, the mechanism for the further development of the Reclamation Fund of the Kumtor project was clearly defined, and its funds will now be placed in the financial institutions of the country and will be replenished every year by $6 million.

After the conclusion of this agreement, the Kyrgyz side agreed to withdraw the claims for environmental damage caused by the development of the Kumtor deposit.

Last offer

Last December, during his previous meeting with Isakov, Scott Perry offered Kyrgyzstan to buy out a 100% stake in the Kumtor enterprise but local experts advised to carefully study this issue adding that there is a big risk.

On the instructions of the Government, experts are studying this issue, and the decision has not yet been made.

Despite the fact that in eight years the mine could be closed, Centerra develops other deposits, and Kyrgyzstan, holding 26.6% shares in Centerra, can receive dividends from them.

Problems solved

More than 20 years have passed since the development of the Kumtor mine started, and during these years several unsuccessful attempts were made to conclude an agreement beneficial to the Kyrgyz side.

Previously, for the past seven or eight years, scandals around Kumtor did not abate. It was the object of political manipulation and the reason for the social crisis.

After the April Revolution of 2010, the authorities promised to solve the Kumtor problem but the matter was not brought to an end.

The Government headed by Jantoro Satybaldiyev (2012-2014) proposed to create of a joint venture with an equal division of shares, but the Kyrgyz Parliament did not support this initiative.

The next Prime Minister, Joomart Otorbaev, who headed the Government from March 2014 to April 2015, proposed to protect the interests of Kyrgyzstan by changing the composition of the company’s Board of Directors jointly with other shareholders of Centerra. But his attempt did not bring results either.

The new Government, headed by Sapar Isakov, completed the work conducted by the previous Cabinet headed by Sooronbai Jeenbekov (now President of Kyrgyzstan).

The agreement with Centerra Gold is an important step forward and a good signal for investors, as it will help increase foreign direct investment in the country, said the head of the mission of the International Monetary Fund, Edward Jemael.