Government of the Kyrgyz Republic Announces Global Arrangement Agreement over Kumtor Gold Mine

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Apr 04, 2022, 09:33 ET

Government of Kyrgyzstan to take on full management and ownership of Kumtor Gold Mine
Centerra to pay US$50 million for the purpose of preserving and protecting natural resources in the Kyrgyz Republic
President Sadyr Japarov announces agreement in live address to the nation

BISHKEK, Kyrgyzstan, April 4, 2022 /PRNewswire/ -- President of the Kyrgyz Republic Sadyr Japarov announced today the signing of an agreement between his government and Centerra Gold Inc. resolving their disputes over the ownership and management of the Kumtor Gold Company (KGC).

In a live address to the nation, President Japarov hailed the agreement as "a historic breakthrough" and pledged to use the increased revenue towards achieving the country's sustainable development goals.

The agreement provides for a clean separation and resolution of all disputes between the Government of Kyrgyzstan, Centerra, and Kyrgyzaltyn, the Kyrgyz State-owned gold mining corporation, which is a major shareholder of Centerra. The agreement's provisions include:

The Kyrgyz Republic and Kyrgyzaltyn will assume all responsibility for Kumtor Mine, and will retain income earned from the mine after 15 May 2021.
Centerra will make a cash payment of US$50 million for the purpose of preserving and protecting natural resources in the Kyrgyz Republic, which will satisfy its obligation to repay an outstanding loan to KGC.
Centerra will make a further cash payment of approximately US$36.6 million to Kyrgyzaltyn, of which approximately US$25.5 million will be remitted to the Canadian tax authorities and the remaining approximately US$11.1 million will be paid to Kyrgyzaltyn.
In addition, US$53 million reclamation trust fund will be returned to the Kyrgyz Republic.
Kyrgyzaltyn and Centerra will exchange shares, with Kyrgyzaltyn returning its shares in Centerra, and receiving 100% ownership of KGC.
The Agreement also foresees the full and final release of all claims of the parties, termination of all legal proceedings involving the parties in all jurisdictions with no admissions of liability.

The Agreement has been approved by the Government of Kyrgyzstan, including both parliament and the cabinet. The Government of Kyrgyzstan, Centerra and Kyrgyzaltyn expect the arrangement to close no later than 90 days following the signing of the agreement, but further steps will need to be completed successfully in order for the deal to take full effect.

President Japarov further stated: "It is no exaggeration to say that today is a true turning point in the history of our country. Today our people have taken responsibility for their fate into their own hands. Our national assets are now exactly what they should be – in our own hands. This proves that we are on the path of development and growth."

"Throughout this dispute, we have maintained that this is not about nationalisation. It is not Kyrgyzstan against foreign companies. It was about the specific issues with the management of Kumtor mine. We have always said that Kyrgyzstan is open for business. We will always welcome investment from those who share our respect for the rule of law, our national assets, and our national interest. This agreement proves that."

"I want us to now move forward as one people. In spite of all that has happened, we must take decisive strides forward. This is what we as people free in our own sovereign state must do. Our destiny is in our hands now and it is time to take responsibility for our future. Today's decision on Kumtor mine is just the beginning of many more great accomplishments in the development and growth of our country."

Kumtor Mine has been under interim external management since May 2021. In January, the mine posted successful results for 2021, including US$856 million in revenue – of which US$621 million was generated under the interim management. 2021 also saw the mine reduce its overall extraction costs by US$220 per ounce.

NOTES TO EDITORS:

Kumtor Gold Company is the country's biggest economic asset. It is responsible for 12% of Kyrgyzstan's GDP, and 23% of its industrial output. More than 4,000 people work at the complex, and the majority are Kyrgyzstani citizens. Kumtor is one of largest gold mines in the world, and is located at a very high altitude next to glaciers.

Since the government's takeover of the mine in May 2021 following concerns over breached environmental allegations, the two parties have been engaged in international arbitration and other disputes in Kyrgyzstan and abroad. The Global arrangement agreement is meant to effect a complete and orderly separation with Centerra, and to ensure that, in the future, the economic benefits of the Kumtor mine stay in Kyrgyzstan and that the mine can be operated consistently with all environmental, tax and other legislation of the Kyrgyz Republic.

SOURCE Government of Kyrgyzstan