Centerra Agrees to Discuss Kumtor Stake Swap With Kyrgyzstan

Centerra Gold Inc. (CG), the Canadian operator of the Kumtor pit in Kyrgyzstan, agreed to discuss a proposal that would give the country a 50 percent stake in the mine, the company’s largest operation.

The parties made a non-binding agreement that would involve state-controlled Kyrgyzaltyn JSC exchanging its 33 percent stake in the company for the mine stake, Toronto-based Centerra said yesterday in a statement. Centerra would remain the operator and manager of the mine, it said.

Centerra has been negotiating with the government to address concerns raised in a report by a state commission regarding taxes and ownership issues around the project. The Kumtor mine, one of the largest in Central Asia, is one of two producing mines owned by Centerra with output estimated to almost double this year to as much as 600,000 ounces, according to the company’s website.

The proposed transaction would result in all Kyrgyz state agency environmental claims being resolved, Centerra said. The board of the joint venture company would be composed of an equal number of Centerra and Kyrgyzaltyn representatives and major decisions would be subject to discussion and approval by the board.

Centerra and then-majority shareholder Cameco Corp. (CCO) agreed in 2009 to give the Kyrgyz government an increased share in Centerra as part of a settlement to end legal disputes threatening Kumtor. The agreement resolved back-tax obligations, set a new tax rate and settled a clash over the size of the project’s exploration and development concessions, Centerra said at the time.

To contact the reporters on this story: Jesse Riseborough in London at jriseborough@bloomberg.net; Liezel Hill in Toronto at lhill30@bloomberg.net

To contact the editors responsible for this story: John Viljoen at jviljoen@bloomberg.net; Simon Casey at scasey4@bloomberg.net

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