The Parliament of the Kyrgyz Republic has given the government up to four months to finalize a draft deal with Centerra Gold on forming a 50-50 joint venture to run the Kumtor gold mine.
The resolution follows a parliamentary review of the previously announced non-binding Heads of Agreement (HoA) entered into by Centerra, the Government of the Kyrgyz Republic and Kyrgyzaltyn JSC in connection with a potential restructuring transaction under which Kyrgyzaltyn would exchange its 32.7% equity interest in Centerra for a 50% interest in a joint venture company that would own the Kumtor project.
Centerra says that while Parliament’s resolution appears to support the concept of the restructuring described in the HoA, the resolution also contains a number of recommendations that are materially inconsistent with the terms of the HoA. Among other things, the resolution calls for further audits of the Kumtor operation and for the Government and the General Prosecutor’s Office to continue pursuing claims for environmental and economic damages, which Centerra disputes.
Centerra expects to engage in further discussions with the government relating to the potential restructuring transaction reflected in the HoA and notes that any definitive agreements for a potential restructuring remain subject to required approvals in the Kyrgyz Republic, including of the Government and Parliament of the Kyrgyz Republic, the recommendation of the Centerra Special Committee and the approval of the Centerra Board, as well as compliance with all applicable legal and regulatory requirements and approvals, including a formal independent valuation and required shareholder approval.
Centerra remains committed to continuing discussions with the Kyrgyz Government, however there can be no assurance that the material differences between the Parliamentary resolution and the HoA can be resolved, that any definitive agreements will be reached between the parties or that any agreed upon transaction will receive required approvals or will be consummated.
The inability of Centerra to successfully resolve all outstanding matters affecting the Kumtor project would have a material adverse impact on Centerra’s future cash flows, earnings, results of operations and financial conditions.
Canadian-based Centerra Gold is focused on operating, developing, exploring and acquiring gold properties primarily in Asia, the former Soviet Union and other emerging markets worldwide. Centerra is the largest Western-based gold producer in Central Asia.