May 10 (Bloomberg) -- Kyrgyzaltyn JSC, the Kyrgyzstan-controlled company that’s Centerra Gold Inc.’s largest shareholder, said it’s “concerned” about the Canadian gold producer’s performance and management.
Kyrgyzaltyn has “strong reservations” about Centerra’s proposed compensation for senior management, said Kylychbek Shakirov, deputy chairman of Kyrgyzaltyn’s management board on economics and finance. Kyrgyzaltyn is also concerned about a proposal to reappoint KPMG as auditors of the company and that management renominated Bruce Walter as a director, he said in comments today at Centerra’s annual shareholder meeting in Toronto.
Kyrgyzaltyn has a 33 percent stake in Centerra, which owns the Kumtor mine in Kyrgyzstan. Toronto-based Centerra is in negotiations with the government on ways to address concerns raised in a report by a state commission regarding taxes and ownership issues around the project, Chief Executive Officer Ian Atkinson said yesterday in an interview.
Centerra and then-majority shareholder Cameco Corp. agreed in 2009 to give the Kyrgyz government an increased share in Centerra as part of a settlement to end legal disputes threatening the Kumtor project. 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.
Kyrgyzstan doesn’t want to nationalize Kumtor or see steps taken that would negatively affect investment in the project, Shakirov said. The company wants to see a level playing field for investors in Kyrgyzstan, he said.
“The uniquely advantageous and one-sided arrangements negotiated in 2009 are clearly inconsistent with that objective in the long term,” he said.
The company isn’t prepared to reopen the 2009 agreement, Atkinson said yesterday.
“It was negotiated in a very open and transparent manner, it received all of the appropriate government approvals, presidential review signature and it was even tested in the Kyrgyz court,” he said.
While Centerra has a right to seek enforcement of its agreements with the Kyrgyz Republic through international arbitration, the company is committed to attempts to resolve outstanding issues through “constructive dialogue,” Chairman Stephen Lang said in a response to Shakirov’s comments.
The election of directors and the approval of the external auditors are matters that are subject to a vote of the shareholders, and Walter and KPMG have received the necessary approvals, Lang said.
Centerra yesterday reported earnings that beat analysts’ estimates for the fourth consecutive quarter. First-quarter profit was $51.4 million, or 21 cents a share, compared with $9.6 million, or 4 cents, a year earlier. The average of three analysts’ estimates was for 14 cents a share in the first quarter.
Atkinson, who replaced Lang as CEO last May, received total compensation of C$2.56 million ($2.51 million) in 2012, according to a filing dated April 8. Chief Financial Officer Jeff Parr received C$1.58 million.
Centerra gained 7.9 percent to C$4.25 at the close in Toronto.
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