Kumtor good to mine through 2017
Centerra Gold (TSX:CG) has been given the okay by Kyrgyzstan to operate its Kumtor gold mine throughout 2017.
The Toronto-based company said on Thursday it has been granted the necessary permits and approvals for its 2017 mine plan. The approvals include the industrial safety and subsoil expertise, the environmental expertise, the 2017 maximum allowable emissions permit and waste disposal permits. Kumtor routinely discharges water from its tailings facility starting in the spring, and Centerra will need prior approval for that to happen.
But while the weather seems clear for sailing as Centerra embarks on another year of operations at Kumtor, it would not come as a surprise to see storm clouds brewing.
Earlier this year a court ruled that Centerra’s local subsidiary, Kumtor Operating Company (KOC), must pay about $98 million in fees related to their mine waste. That was on top of an earlier court decision ordering Kumtor, the country’s biggest gold mine, to pay a $10,000 fine. There are also corporate legal complications that prevent Centerra from flowing money from its subsidiary.
Kumtor Gold Company (KGC) continues to be subject to an interim order that bans it from taking any actions relating to certain financial transactions, including transferring property or assets, declaring or paying dividends or making loans to Centerra.
While such order does not prohibit KGC from continuing to use its cash resources to operate the mine, it does mean that all the cash Kumtor generates continues to be held in KGC and is not being distributed to Centerra, the miner said.
Such order is based on the claims that some of the company’s senior managers conducted improper commercial transactions. Centerra has repeatedly said it “strongly disputes” such accusations and believes they violate fundamental investment protections contained in the 2009 agreements governing the Kumtor project.
The operation has been the focus of a number of disputes between the company and the Kyrgyz government.
Kumtor has produced around 10 million ounces since inception and remaining reserves are 5.6 million ounces. In November Centerra said it is increasing its gold output guidance for the mine to 520,000 to 560,000 ounces and lowering all-in sustaining cost forecast to $666 – $718 per ounce.
Despite the rosier picture for Kumtor, Centerra has been trying to distance itself from its problems in Kyrgyzstan by shopping for assets in safer jurisdictions. This past summer the company bought out U.S.-based Thompson Creek Metals (TSX:TCM) including the Mount Milligan copper-gold mine in British Columbia, Canada. Centerra also owns a mine in Mongolia.