Centerra Gold has taken its dispute with the Kyrgyz Republic Government over the vast Kumtor gold mine to international arbitration. This follows the Central Asian country’s string of penalties and fees the firm considers to be without merit.

The company said the arbitration proceedings would be held in Sweden and would be conducted under the UNCITRAL rules of arbitration and the governing law of New York. UNCITRAL is the core legal body of the United Nations system in the field of international trade law.

Centerra’s move follows a local court hitting its subsidiary, Kumtor Operating Company, with a $10,000 fine, following a lawsuit from an environmental safety regulator. Another court has ordered the company to pay almost $100 million in fees related to mine waste.

Centerra’s decision also follows recent actions by Kyrgyz prosecutors, who raided the company’s offices to collect documents related to a separate case. That suit alleges financial violations by Centerra, which the firm said were related to a $200 million inter-corporate dividend.

Kumtor, which is the country’s largest gold mine, has been a source of political tension. For more than two years the Central Asian nation and the gold miner have been locked in a bitter dispute over Kumtor’s structuring.

Centerra suggested a 50/50 joint venture but former prime minister Joomart Otorbayev said last year that such a deal would not be in the country's interests. Rumours pointing to an imminent nationalization of the mine quickly spread after that, but were later denied by Kyrgyz authorities.

Otorbayev resigned later that month after failing to clinch the restructuring deal. His successor, Temir Sariyev, said at the time that resolving the issue would be among his priorities.

Despite the commencement of arbitration proceedings, Centerra has re-iterated to the Kyrgyz Government its openness to receive and discuss proposals to resolve all outstanding matters affecting the Kumtor project in a manner that is fair to all of Centerra’s shareholders.

The company believes that the project has always been operated in accordance with the provisions of the 2009 project agreements, including the 2009 Restated Investment Agreement which provides a complete code of all taxes, fees and other charges applicable to the project and that all disputes relating to the project shall be resolved through international arbitration.

The vast open pit gold mine, which lies near the Chinese border at an altitude of 4000 metres, is this year expected to produce 480,000-530,000 ounces at an all-in sustaining cost of between $817 and $902 per ounce.

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