Centerra Gold and its Kyrgyz subsidiaries, Kumtor Gold Company (KGC) and Kumtor Operating Company (KOC), have entered into a comprehensive settlement agreement with the Government of the Kyrgyz Republic regarding Kumtor Gold Project. The agreement resolves all existing arbitral and environmental claims, disputes, proceedings and court orders.
It also releases the company and its subsidiaries from future claims covering the same subject matter as the existing environmental claims arising from approved mine activities.
• The termination of the Kyrgyz Republic court order which, among other things, restricted KGC’s ability to transfer cash to Centerra. KGC is transferring the cash balance that is over and above its ordinary working capital requirements to Centerra and the company expects that to occur by September 15;
• An acknowledgement that there will be no restrictions on the ability of KGC to distribute funds to Centerra in the future;
• All restrictions are lifted on the free movement of KGC’s employees;
• The existing 2009 agreements governing the Kumtor project remain in full force and effect, including the tax and fiscal regime thereunder;
• No changes to current or planned operations at Kumtor project are required;
• Centerra has agreed to make a one-time lump sum payment totalling 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. These amounts are expected to be recorded as an expense and liability in the company’s third quarter results;
• 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 Strategic Agreement;
• The company has agreed to accelerate its annual payments to Kumtor’s Reclamation Trust Fund in the amount of US$6 million a year until the total amount contributed reaches the total estimated reclamation cost for the Kumtor project subject to a minimum total reclamation cost of US$69 million; and
• The company would consider, together with the Government, other potential investment opportunities in the Kyrgyz Republic and at the Kumtor project.
Centerra’s CEO Scott Perry said, “First and foremost, this agreement is a comprehensive resolution to all of the outstanding matters affecting the Kumtor project.
“Our arrangement provides for the lifting of all restrictions on the freedom of movement of employees as well as the restrictions on the ability of Kumtor to distribute funds to Centerra.
“The agreement also provides business certainty for future mining operations at the Kumtor project, as it preserves all rights of the company under the Kumtor Project Agreements and, in order to receive full payment, requires continued compliance by the Government with a number of conditions precedent that are designed to protect the company.
“Lastly, this agreement represents a symbol of commitment from Centerra and the Kyrgyz Republic Government, a commitment not only to stability for foreign investment in the Kyrgyz Republic but a commitment to the environment, health and well-being of the citizens of Kyrgyzstan.”