Toronto, Canada-based Centerra Gold Inc. (TSX:CG, Financial) (CGAU, Financial) confirmed recently that it is engaging in negotiations with the Kyrgyz Republic to resolve disputes related to the seizure of Centerra’s Kumtor Mine last May, much to investors’ relief.
The government takeover of Centerra Gold’s mine understandably put a major dent in the company’s earnings, which is why news of the negotiation is music to investors’ ears. The report caused Centerra shares to jump by over 12% to $10.97 per share, which has since settled to $10.78. With this, the stock has started 2022 on a more solid footing after losing almost 34% of its value last year.
Centerra is a gold mining company focused on operating, developing, exploring and acquiring gold properties in North America, Turkey and other markets worldwide. It has a market cap of approximately $3 billion.
In May 2021, the company entered into arbitration against the Kyrgyz Republic after it took control of the country's largest mine from Centerra for allegedly posing danger to human lives and the environment. The company has denied all allegations. Centerra executives also froze the government's stake in the company when it seized the mine, meaning it does not have voting rights, nor is it entitled to dividends, Reuters reported.
“Centerra on Monday laid out a framework for any resolution of the dispute, saying it should receive around 26.1% of its common stock held by state-owned Kyrgyzaltyn JSC,” said the news agency. “It also said the state should assume all responsibility for the company's two Kyrgyz subsidiaries as well as the Kumtor mine.
"At present, the parties are finalizing the discussion of an amicable agreement, including, among other things, the condition for the full transfer of the Kumtor Gold Company to the Kyrgyz Republic," Kyrgyzstan President Sadyr Zhaparov said in a statement two days ago.
Last month, a source said to be close to the government told Reuters that Kyrgyzstan was pushing for an out-of-court settlement over the dispute. “Centerra and Kyrgyzstan have a long history of disputes over how to share profit from the 550,000-ounce gold mine.”
Regarding the possible negotiated transfer of the Kumtor Mine to the Kyrgyz Republic, Centerra said in a release it expects that the framework for any resolution would involve the following principal terms:
- Centerra receiving the approximately 26.1% in Centerra common shares held by Kyrgyzaltyn JSC (an instrumentality of the Kyrgyz Republic). Upon receipt, Centerra would cancel the shares surrendered by Kyrgyzaltyn JSC.
- The Kyrgyz Republic receiving, and assuming all responsibility for, the Company’s two Kyrgyz subsidiaries and the Kumtor Mine.
- Payment by Centerra of a cash amount equal to the net amount of the three dividends paid by Centerra in 2021 that Kyrgyzaltyn JSC did not receive as a result of the seizure of the mine and certain other financial consideration associated with the settlement of inter-company balances between Centerra and its two Kyrgyz subsidiaries.
- The resignation from Centerra’s Board of Directors of Kyrgyzaltyn JSC’s two nominees.
- Full and final releases of all claims of the parties and termination of all legal proceedings involving the parties in all jurisdictions with no admissions of liability.
“Negotiations with representatives of the Kyrgyz Republic are ongoing, and there can be no assurance that any proposed resolution will be consummated or as to the final economic and other terms and conditions of any such resolution, if agreed,” the Centerra release added. “Any such resolution would need to be formalized in a definitive agreement and would be subject to compliance with all applicable legal and regulatory requirements.”
