Centerra Gold Inc. (TSX: CG) commented ongoing discussions between the Company and the Government of the Kyrgyz Republic (the “Government”) in relation to the Company’s Kumtor Project. The Company is aware of press reports in the Kyrgyz Republic today describing statements made by the Government to a Parliamentary committee, which included terms of a proposed settlement between the parties.
The Company confirms that its discussions with the Government regarding a settlement have reached an advanced stage but cautions that they remain subject to completion, including finalization of all relevant terms of the settlement, formal approval by Centerra’s Board of Directors and execution of definitive agreements. The key terms of the current proposed settlement with the Government include, among other things:
- The comprehensive settlement of all outstanding disputes and court and other proceedings affecting the Kumtor Project;
- An affirmation that the existing 2009 agreements governing the Kumtor Project (the “Kumtor Project Agreements”) remain in full force and effect, including the tax and fiscal regime thereunder;
- No admission on the part of Centerra or its Kyrgyz subsidiaries of (i) environmental wrongdoings, (ii) non-compliance with Kyrgyz law or the Kumtor Project Agreements or (iii) any pre-existing obligation to make additional environmental or Reclamation Trust Fund payments or environmental remediation efforts;
- The Company’s Kyrgyz subsidiary, Kumtor Gold Company (“KGC”) would make a one-time lump sum payment totaling US$57 million to a new government administered Nature Development Fund (US$50 million) and to a new government administered Cancer Care Support Fund (US$7 million) and within 12 months of closing make a further one-time payment of US$3 million to the Cancer Care Support Fund;
- Annual payments of US$2.7 million to the new Nature Development Fund, conditional on the Government continuing to comply with its obligations under the settlement agreement;
- KGC would accelerate its annual payments to the Kumtor’s Reclamation Trust Fund in the amount of US$6 million a year until the total amount contributed by KGC reaches the total estimated reclamation cost for the Kumtor Project (representing the independent assessment of Kumtor’s current reclamation costs, subject to a minimum total reclamation cost of US$69 million). $69 million is broadly in line with KGC’s current estimated reclamation cost for the Kumtor Project;
- KGC would take certain specified actions in respect of the recommendations previously made by the Government’s environmental consultant, Amec Foster Wheeler, most of which have already been fully implemented;
- KGC would consider, together with the Government, other potential investment opportunities in the Kyrgyz Republic and at the Kumtor Project; and
- All obligations under any definitive agreement would be subject to a range of initial conditions precedent, including that certain key permits and approvals for the Kumtor Project shall have been received.
The Company intends to continue such discussions and will make further announcements as and when warranted. However, there are no assurances that: (i) the Company will be able to successfully resolve any or all of the outstanding matters affecting the Kumtor Project; (ii) any discussions between the Kyrgyz Republic Government and Centerra will result in a mutually acceptable settlement and resolution; (iii) the Company will receive the necessary legal and regulatory approvals under Kyrgyz law and/or Canadian law for any such resolution; or (iv) the Kyrgyz Republic Government and/or Parliament will not take actions that are inconsistent with the Government’s obligations under the Kumtor Project Agreements. The inability to successfully resolve all such matters could lead to suspension of operations of the Kumtor Project and would have a material adverse impact on the Company’s future cash flows, earnings, results of operations and financial condition.