Centerra Gold reports that last week the Bishkek City Court dismissed three appeals commenced by the State Inspectorate Office for Environmental and Technical Safety of the Kyrgyz Republic (SIETS) regarding environmental claims in relation to the Kumtor Gold Project.

The claims related to: (i) unpaid use of water from Petrov Lake; (ii) unaccounted industrial and household waste; and (iii) damages cause to land resources (top soil).

The Bishkek City Court dismissed the appeals and upheld earlier court decisions which rejected the claims based on the existence of the international arbitration clause in the Restated Investment Agreement between the Government of the Kyrgyz Republic, Kyrgyzaltyn, Centerra and Kumtor. These decisions of the court are consistent with an earlier ruling by the same court which dismissed another SIETS claim relating to the placement of waste rock on glaciers.

As previously disclosed, these four claims by SIETS were for an aggregate amount of US$152 million. The decisions of the Bishkek City Court can be appealed by SIETS within a year of their respective decision dates.

Kumtor received a claim in February 2013 by the State Agency for Environmental Protection and Forestry under the Government of the Kyrgyz Republic (SAEPF) seeking approximately $315 million for alleged environmental breaches. SAEPF has now commenced court proceedings in the Bishkek Inter-District Court in respect of this claim.

Centerra also reports that Kumtor has received a new court claim filed by the Green Party of Kyrgyzstan in the Bishkek Inter-District Court which seeks damages of approximately $9 billion for alleged environmental damages arising from the Kumtor operations since 1996. The company believes that this claim is without merit and, in any event, is subject to the international arbitration provision of the Restated Investment Agreement.

The claimant, Green Party, requests that the damages be paid by Kumtor to the Issyk-Kul Nature Protection and Forestry Development Fund, a Kyrgyz state fund. The claim by the Green Party relates to allegations substantially similar to the claims raised by SIETS and SAEPF.

Centerra believes that, consistent with the court rulings dealing with the SIETS claims, the claims commenced by SAEPF and the Green Party are subject to the dispute resolution provisions (international arbitration) of the Restated Investment Agreement.

The company also notes that it entered into a Release Agreement with the Kyrgyz Republic Government dated June 6, 2009, whereby the parties agreed to release each other from any claims in respect of any matter arising or existing prior to June 6, 2009, whether such matters were known or unknown as of June 6, 2009, subject to certain exceptions which are not applicable in the circumstances.

The Restated Investment Agreement, Release Agreement and the other project agreements governing the Kumtor project were reviewed and approved by the Kyrgyz Republic Government and Parliament, and were the subject of a positive decision by the Kyrgyz Republic Constitutional Courts and a legal opinion of the Kyrgyz Republic Ministry of Justice.

Centerra will defend against these court claims commenced by SAEFP and the Green Party, and believes that it has good arguments that the claims should to be dismissed on the basis of the arbitration provisions and/or the Release Agreement. Centerra will also be calling upon the Kyrgyz Republic Government to challenge the ability of the Kyrgyz Republic courts to hear these matters.

Meantime, Centerra has extended its existing US$150 million revolving credit facility with the European Bank for Reconstruction and Development (EBRD) until February 17, 2015.

Centerra’s president and CEO Ian Atkinson says, “We are very pleased that we have been able to extend this facility with EBRD and to continue our partnership with them on the Kumtor project. While Centerra has a strong balance sheet and we generate significant operating cash flow, we feel it is important to have the added financial flexibility that a corporate revolving credit facility gives us.”