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Kyrgyz units in Centerra file for bankruptcy after mine seizure


The Toronto-based miner said he hoped the internationally recognized restructuring process would facilitate possible negotiations with the government of Kyrgyzstan, which now fully controls Kumtor.

Centerra also noted that the pending proceedings will not affect any other area of ​​the Company’s business, including its Mount Milligan copper-gold mine in Canada, ksüt gold mining in Turkey and molybdenum business in North America.

Centerra expects bankruptcy proceedings to prevent further efforts by Kyrgyzstan to strip Kumtor Gold of its assets

The move comes on the heels of the Kyrgyz government organizing a press tour of the mine last week, in which it said Kumtor was operating as usual.

“There are no problems at the Kumtor mine”, Nurdin Usenov, plant manager and interim operations manager told reporters. “All services are functioning, production targets are being met, there is sufficient inventory of spare parts, consumables, lubricants and fuel.

According to a new law passed in mid-May, the Kyrgyz government can take control for up to three months of any company operating under a concession agreement if that company violates regulations that damage or endanger residents and the environment.

The head of a Kyrgyz state commission investigating alleged wrongdoing at the Kumtor mine, Kamchybek Tashiev, said May 17th the agreement with Centerra Gold had to be revoked for “corruption” and “violations of safety and environmental regulations”.

At the same time, a Kyrgyz court fined KGC over $ 3 billion for allegedly dumping mining waste on glaciers near the mine, 4,000 meters above sea level. A state commission also recently claimed that the KGC owed more than $ 1 billion in unpaid taxes.

Former Kyrgyz Prime Minister Omurbek Babanov was detained Monday as part of the Kumtor Development Corruption Investigation.

Interior work?

The man who now controls the operation, Tengiz Bolturuk, was one of three representatives appointed by Kyrgyzstan to Centerra’s 11-person board.

Dual Kyrgyz-Canadian citizenship is pursued by the Canadian miner under the premise that he conspired to steal the assets of the company while he was a director.

Bolturuk had acquired a reputation as a very hostile colleague in Toronto, two sources familiar with his time on the board. says Eurasianet.

At home, he had also made a strong impression. In one letter published in the Kyrgyz media, employees of Kyrgyzaltyn, the state miner who held government shares in Centerra, expressed their displeasure at Bolturuk’s growing involvement in Kumtor’s operations.

The document claimed he had fired dozens of local workers and appeared to have positioned himself as the de facto head of the mine.

Strategic review

In one conference call Tuesday, Centerra said it was conducting a “strategic review” of its ownership of KGC and KOC.

“The seizure of the mine is based on false information and baseless allegations that undermine everything we have built together,” Scott Perry, President and CEO of Centerra said in an open letter to the Kyrgyz people. “We fear that the government’s unwarranted action endangers thousands of well-paying jobs and the businesses of hundreds of Kyrgyz suppliers.

Kumtor is the largest of Centerra’s three gold mines, accounting for over 50% of the company’s total production.

The operation is also crucial for Kyrgyzstan. It accounts for one-fifth of the total industrial production of the former Soviet country and produced over 13.2 million ounces of gold between 1997 and the end of 2020. Last year’s production was just over 556,000 ounces.

“The government has opened the door to what will probably be a multi-year deterioration in relations between Centerra and the Kyrgyz state”

Dalton Baretto, Canaccord Genuity

The arbitration process can take up to ten years and even if the Canadian minor is successful, there is no guarantee that they will receive the stipulated amount.

Dalton Baretto of Canaccord Genuity said in a May note that he was not surprised by Kyrgyzstan’s move.

“We have been waiting for something like this since President Japarov took power on January 10; However, the speed and scale of these reforms caught us off guard, ”he wrote.

The analyst added that he believed the government had opened the door to what was likely to be a multi-year deterioration in relations between Centerra and the Kyrgyz state.

“While Centerra Gold will take advantage of all avenues available for international trade disputes, we believe they are unlikely to be effective in the long run,” said Baretto.

Kumtor was the the subject of a number of disputes between the company and the Kyrgyz government.

Japarov, who took power after the violent riots of last October, once campaigned for the nationalization of the mine. After winning the January election and taking the job, however, he said he no longer considered it necessary.

Kyrgyzstan has a history of popular uprisings and political turmoil since gaining independence after the collapse of the Soviet Union in 1991. Protesters overthrew two prime ministers in the revolutions of 2005 and 2010.

Press tour of the Kumtor mine held on May 28, 2021. (Image courtesy of Kumtor Gold Company.)