Centerra’s Kumtor Gold files bankruptcy following government seizure

By Sarah Lizee

Olympia, Wash., June 1 – Kumtor Gold Co. CJSC filed Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of New York on Monday, according to court documents.

Parent company Centerra Gold Inc. said in a press release that the filing was made in order to protect the interests of itself and its stakeholders in response to the seizure of the Kumtor mine by the government of the Kyrgyz Republic.

Centerra said the actions are meant to preserve the value of the Kumtor Gold entities, which own and operate the mine, and prevent any further efforts by the Kyrgyz government to strip Kumtor Gold of its assets or otherwise improperly dispose of the mine.

The Kyrgyz Republic seized the Kumtor mine and the government installed a temporary “external manager” on May 17, Centerra said.

“Public statements by government officials and actions taken by the ‘external manager’ of the mine indicate that the government and others, including the state-owned entity Kyrgyzaltyn JSC, intend to use spurious environmental and tax claims being asserted against KGC to place KGC into some form of insolvency proceeding in the Kyrgyz Republic and potentially strip KGC of its assets,” Centerra said.

Due to the external manager taking control of the Kumtor mine and Kumtor Gold’s operations in the republic, Kumtor Gold is no longer able to defend effectively against these claims in the Kyrgyz Republic courts.

The parent company said it hopes the Chapter 11 process will facilitate potential negotiations with the Kyrgyz government.

The filing will not impact any other areas of Centerra’s business, including the Mount Milligan mine in Canada, the Oksut mine in Turkey and the molybdenum business in North America.

Centerra added that it is conducting a strategic review related to its ownership of Kumtor Gold.

“We have repeatedly asked the Kyrgyz government to discuss its concerns with us, yet it has refused to engage with us in any way,” Scott Perry, president and chief executive officer of Centerra, said in the news release.

“While we remain willing and available to hold a constructive dialogue with the Kyrgyz authorities, we will continue to use all available legal and financial means to protect the interests of Centerra and its stakeholders from the government’s concerted and premeditated effort to take control of the Kumtor mine.

“In particular, we will continue to pursue arbitration proceedings to enforce the longstanding agreements with the Kyrgyz republic that give Centerra, KGC and KOC the right to own and operate the Kumtor mine.

Those agreements are governed by New York law, and we expect the U.S. court proceedings will serve to further protect Centerra’s interests under their terms pending a restructuring or other resolution of the dispute.”

Centerra said it is not party to or affected by the Chapter 11 filing and remains financially strong with more than $800 million in cash and over $1.2 billion in liquidity as of March 31.

The Kumtor Gold entities are currently solvent, with total assets over $1.1 billion and no external bank debt. In its petition, Kumtor Gold listed $100 million to $500 million in liabilities.

Bishkek, Kyrgyzstan-based Kumtor Gold is owned by Toronto-based Centerra Gold, a mining and exploration company. The Chapter 11 case number of Kumtor Gold is 21-11051.

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