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Future of Centerra mine uncertain as Kyrgyz Gov’t revising settlement deal

Kumtor mine, 100% owned by Centerra through its subsidiary Kumtor Gold, is located in the southern Tien Shan Metallogenic belt. (Image courtesy of Centerra Gold)

Fresh doubt has been cast over a deal reached in September between Centerra Gold and the Kyrgyz Republic ending long-dragged disputes after the country’s Prime Minister said Tuesday the new government was reviewing the agreement.

According to radio Azattyk, minister Muhammadkaliy Abylgaziev also said his administration would submit to parliament its own proposals regarding the document, without saying when, or how radical those suggested changes might be.

The news comes on the heels of recent charges of corruption against former Prime Minister Sapar Isakov, who signed the deal with Centerra ending a drawn out environmental dispute over the firm’s Kumtor gold mine, the country’s largest.

Kyrgyz Prime Minister said he would submit to parliament ‘his thoughts’ regarding the document, without saying when, or how radical those proposals might be.

Among the stipulations, the pact increased Centerra’s annual environmental contributions in exchange for the government dropping a $100 million lawsuit in a local court.

Other key terms included a comprehensive settlement and release of all outstanding arbitral and environmental claims, disputes, proceedings and court orders, and releases of the company and its Kyrgyz subsidiaries from future claims covering the same subject matter as the existing environmental claims arising from approved mine activities.

The agreement, which Centerra expected to sign on June 22, also provided for the termination of the Kyrgyz court order which, among other provisions, restricted subsidiary Kumtor Gold Company (KGC) to transfer cash to Centerra, the largest Western-based gold producer in Central Asia.

As part of the settlement, the Kyrgyz government would also acknowledge there would be no future restrictions on the ability of KGC to distribute funds to Centerra.

Further, all restrictions would be lifted on the free movement of KGC’s employees.

“While the agreement provides a pathway for the resolution of all outstanding matters affecting the Kumtor Project, there are no assurances that all of the conditions precedent to the completion of the settlement will be satisfied,” Centerra warned in April.

Kumtor, which lies near the Chinese border at an altitude of 4,000 metres, has produced around 11m ounces since inception and remaining reserves are pegged at 5.6m ounces.

Centerra didn’t respond to requests for comments on the new development by the time this article was published.