Centerra goes to arbitration with Kyrgyz government as Kumtor agreement expires
Mon Jun 2, 1:34 PM
Eric Shackleton, The Canadian Press
ca.news.finance.yahoo.com
By Eric Shackleton, The Canadian Press
TORONTO - Gold is still being dug out of the ground at the Kumtor mine in central Asia but its operator, Toronto-based Centerra Gold Inc. (TSX: CG.TO), is trying to resolve uncertainty over the project after agreements with the Kyrgyz government expired over the weekend.
"We haven't heard anything from the government, and the government just hasn't been communicating with us since the June 1 deadline came and went," John Pearson, Centerra director of investor relations, said Monday.
Gold production at the mine is continuing, he said.
"We've got an existing investment agreement in place and we continue to mine gold under ... this agreement."
But exploration activities on the project's Southwest and Sarytor licences has been halted by the country's State Agency on Geology and Mineral Resources Management, he said.
"We negotiated this framework agreement last August which gave the government an increased ownership percentage in Centerra in exchange for a simplified tax regime and other things like an expanded concession area" that included the Southwest and Sarytor licences, said Pearson.
Under the three-way agreement, the partion of Centerra owned by Cameco (TSX: CCO.TO) would fall to 41 per cent, while the Kyrgyz government's holding would grow to 29 per cent and public shareholders would own the remaining 30 per cent.
Cameco currently own 53 per cent of Centerra, the government just a little under 16 per cent and the rest by Centerra shareholders, said Pearson.
The deal also would increased Centerra's concession in Kyrgyzstan by more than 250 square kilometres.
The deadline for the new agreements to be ratified by parliament had been extended Feb. 15, then was extended to April 30 and then extended again to June 1, said Pearson.
The ratifying process, he said, has been delayed by a dispute and lawsuit involving the vice-speaker of the parliament and the government, said Pearson.
The speaker "brought the suit against the government ... in a lower court. We're not a party to that lawsuit," he said.
In a ruling, the Kyrgyz supreme court suspended certain agreements and licences pending the outcome of the lower court ruling in the lawsuit, said Pearson.
"But the lower court has yet to hear the claim. The case has been postponed on several occasions," he said.
"Even though this ruling has been made, they've said perfectly clear that the concession agreement and the 2003 decree (approving the restructuring of the Kumtor project) is regulated by international legislation," said Pearson.
Therefore "operations within that concession area, which is where we mine, should continue. So all of Kumtor mining operations are taking place in the concession area and gold production continues uninterrupted."
Is the government not happy with the expired agreements?
"You'd have to ask the government that," said Pearson. "As far as we know it is supported by the prime minister, the president, the government," said Pearson.
"All that was necessary to have it ratified was to have the parliament approve it, vote on it and that is what we were waiting for."
Centerra said it will now resume an international arbitration process to resolve disputes over Kumtor.
Centerra and Cameco had expected a framework agreement to be ratified late last week.
"The terms of the agreements were carefully negotiated to meet the objectives of all parties," Cameco, the world's largest uranium miner, said in a release.
"It is unfortunate the agreements could not be concluded."
From here, said Pearson, "we continue to operate the gold mine under the existing agreements. We continue to pay our taxes according to the existing investment agreement.
"I'm sure we'll be in contact with government and the government will be in communication with us," he said.
Since 1992, Centerra has invested over $770 million in the Kumtor project, said Pearson. "Since 1997 we've produced over six million ounces of gold at the site."
Shares in Cameco were down 58 cents, or 6.55 per cent, at $8.27 in thin trading at the Toronto Stock Exchange. |
