Kyrgyzstan to reassess deal with Centerra Gold

Kyrgyzstan’s parliament has approved a review to the operating license for Centerra Gold (TSX:CG).¬† The Canadian company, currently developing a gold mine that accounts for 12% of the Central Asian nation’s economy, made the announcement this Wednesday.

The decision, approved by 67 votes to 11, implies an increase in the government’s current 33% stake of the gold miner which is developing Kumtor mine project.

Centerra Gold’s Kumtor open pit gold mine was given the greenlight under¬†Kyrgyzstan deposed leader,¬†Kurmanbek Bakiyev, who was accused of corruption.

Since Kumtor started running in 1997, it has generated $1.9 billion for Kyrgyzstan and produced more than 8.4 million oz of gold.

Centerra shares plunged to a two and a half ¬†year low last Friday after two days of debate in Kyrgyzstan’s legislature, motivated by a 300-page report that said the Canadian company was damaging the environment and stealing the country’s riches.

“The report makes a number of allegations including¬†claims of substantial environmental damage by Kumtor,” said Centerra‚Äôs President and CEO, Ian Atkinson, in a¬†news release.

“Judging from its summary conclusions,¬†however, Centerra believes that the report’s findings are without merit.‚ÄĚ

Referring to today’s resolution, Atkinson said the company¬†believes it is not legally binding on the Kyrgyz government and that the authorities¬†cannot revoke its decrees and licenses without meeting the¬†relevant criteria for revocation set out under applicable law.

Read Centerra’s Full Release Below:

Centerra Comments on Non-Binding Kyrgyz Parliamentary Resolution

Toronto, Canada, June 27, 2012:¬† Centerra Gold Inc. (TSX:CG) reported that the Kyrgyz Parliament issued a resolution today concerning Centerra’s Kumtor project. The resolution relates to a report released on June 18, 2012 by a Parliamentary Commission established to review Kumtor’s compliance with relevant operational, environmental, health and safety and community standards.

The resolution calls for the creation of a state commission to conduct a comprehensive and impartial examination of the parliamentary report and its conclusions, and to initiate revisions to the 2009 agreements governing the project (the New Agreements) that would impact the relevant concession area, tax regime, local operating company management structure and other matters, although the resolution does not contain any specifics regarding any such proposals. The resolution also calls upon the Government (or relevant state agency) to revoke government decrees and licenses in relation to the project. The Parliament voted to reject an alternative resolution that called for the Government to take steps toward nationalization of the Kumtor project.

Centerra believes the resolution is not legally binding on the Kyrgyz Government and that the Government (and relevant state agency) cannot revoke its decrees and licenses without meeting the relevant criteria for revocation set out under applicable law.

Centerra’s President and CEO, Ian Atkinson, commented: “As I have stated previously, Centerra believes that the parliamentary report’s findings are without merit. Kumtor has operated in full compliance with Kyrgyz and international standards and this has been proven over the years in systematic audits by Kyrgyz and international experts. We also have a long history of constructive dialogue with the Government and look forward to continuing that dialogue to resolve any outstanding concerns. We believe, however, that any discussion of the Kumtor project must take into account existing legal obligations and binding commitments. In particular, the Kyrgyz Government undertook a number of legal obligations and binding commitments in the New Agreements, which were approved by all relevant Kyrgyz governmental authorities, including the Kyrgyz Parliament and the Constitutional Court. These agreements form a solid foundation for the successful operation of the project, and enabled Centerra to make significant new investments in Kumtor. Centerra has confidence in the continuing validity of the New Agreements, which provide as well for disputes concerning the project to be resolved by international arbitration, if necessary.”

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