Centerra Gold Inc. [CG-TSX] on Wednesday August 7 released another update on a strategic agreement with the government of the Kyrgyz Republic that aims to end a lengthy environmental dispute over its Kumtor gold mine.
The agreement reached in September, 2017 was designed to end mutual lawsuits, drop all environmental claims, halt court proceedings and allow Centerra to transfer funds from the country that had been frozen by the Kyrgyz Republic.
On Wednesday, Centerra issued a statement saying that all conditions precedent to the completion of the strategic agreement have been satisfied or waived. It said all parties have therefore acknowledged that the first completion date (as defined by the strategic agreement) has occurred.
“All parties to the strategic agreement, are now moving to terminate the remaining legal proceedings affecting the Kumtor Project, in particular, the international arbitration proceeding at the Permanent Court of Arbitration as well as certain civil proceedings,’’ Centerra said in a press release.
In an earlier updates, Centerra said it and The Kyrgyz government had agreed to extend the deadline for all conditions to be met under the strategic agreement until July 23, 2018.
As most of the final conditions had already been satisfied, the extension was viewed as a response to the recent dismissal of the previous government following a vote of no confidence.
It was previously reported that after the new Prime Minister had a chance to review the agreement, the new administration was expected to submit to parliament its own proposals regarding the proposed agreement. However, it wasn’t clear how radical those proposals might be.
On Wednesday, Centerra said that at the request of the Kyrgyz Republic Government, it has committed to certain additional contributions in the Kyrgyz Republic (over and above those required under the strategic agreement) to strengthen its social license to operate in Kyrgyz Republic. They include:
- A US$5 million lump sum contribution to a new Kyrgyz Republic Social Partnership for a Regional Development Fund within five business days of the second completion date.
- A US$5 million lump sum contribution to the Regional Fund within 12 months of the Second Completion Date.
- Monthly contributions to the Regional Fund equivalent to 0.4% of Centerra’s revenue from the Kumtor Project earned after the second completion date.
- An annual contribution of US$1 million to the Kyrgyz Republic Nature Development Fund.
- Exploration expenditures of at least US$16 million at the Kumtor Project over a two-year period. The company expects to have invested this amount by the end of 2019.
Centerra Gold shares advanced on the news, rising 5.3% or $0.59 to $11.74. The shares are trading in a 52-week range of $4.76 and $11.23.
Centerra operates two flagship assets. They are the Kumtor mine in the Kyrgyz Republic and the Mount Milligan mine in British Columbia.
Centerra is the largest Western-based gold producer in central Asia.
Kumtor lies near the Chinese border at an altitude of 4,000 metres and has produced roughly 11 million ounces of gold so far.
In 2017, the mine exceeded its revised production guidance by producing 562,749 ounces of gold at an all-in sustaining cost of US$698/oz.
Overall, the company produced 785,316 ounces of gold in 2017.
Centerra recently restarted its second ball mill circuit at its Mount Milligan mine.
As announced on February 5, 2018, milling operations were restarted (albeit at a reduced capacity) following a shutdown in December 2017 due to a lack of sufficient water resources.
The company was able to resume mill operations by using one of its two ball mills to minimize water requirements.