Chaarat Gold says Centerra refused C$2B offer for firm, not just Kumtor

The vast open pit Kumtor mine is Kyrgyzstan’s largest gold operation. (Image courtesy of Kumtor Gold Company.)

Chaarat Gold Holdings (LON:CGH), the company that tried and failed to buy Centerra Gold’s (TSX:CG) Kumtor mine in Kyrgyzstan, revealed Wednesday the Canadian miner turned down an unconventional takeover offer, valued at about C$2 billion (roughly $1.52B), for the entire company.

The Central Asia-focused gold miner last month proposed buying the Toronto-based company in an all-cash transaction at 35% above Centerra’s share price, which was then C$5.48 (about $4.17).

Chaarat’s goal was to gain control of Kumtor, Kyrgyzstan’s largest gold mine, but after Centerra rejected the unsolicited offer, it went for the entire company. The move was not disclosed by either company at the time.

Chaarat’s intention is becoming a major regional player in Central Asia, with an annual production of 1 million ounces of gold.

Kumtor, which lies near the Chinese border at an altitude of 4,000 metres, has produced around 10 million ounces since inception and the remaining reserves are 5.6 million ounces. Last year alone, it yielded 562,749 ounces of gold, exceeding the upper end of its revised guidance.

“Due to the unwillingness of Centerra to engage with Chaarat, the Chaarat board is no longer pursuing either transaction,” the company said in a statement.

Chaarat noted its board still firmly believed in the strategic rationale for the Kumtor and Centerra proposals and was convinced that Chaarat was a “more natural long-term owner” of the Kumtor mine.

Centerra’s mine is located in the southern Tien Shan Metallogenic belt, in which Charaat owns a namesake project, comprising the Tulkubash and Kyzyltash deposits, which are set to yield 300,000 to 400,000 ounces of gold a year when in full production.

Chief executive officer, Artem Volynets, told his company believed Kyrgyzstan and the Kumtor mine would have been better off if Centerra accepted the deal. The country would have had an opportunity to swap their 26.5% stake in Centerra into direct economic ownership of 50% of the asset itself, giving them half of Kumtor’s free cash flow, Volynets explained.

“The other 50% of post-tax cash flow would have gone to Chaarat and all of that income would have been reinvested in the development of the company’s Kyrgyz mining assets, delivering further benefits to the Kyrgyz economy,” he noted.

The executive added that Chaarat was currently that assessing up to a dozen further targets in Central Asia and will focus on producing assets with competitive cash costs and upside potential in terms of operational efficiencies and exploration potential as well as potential synergies with the company’s other assets.

The news comes barely a day after it announced the potential acquisition of Polymetal’s Kapan project in Armenia for $55 million.

In recent months, Centerra Gold – the largest Western-based gold producer in Central Asia – has faced several disagreements with the Kyrgyz government and state-owned miner Kyrgyzaltyn over sharing profits from Kumtor.

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