Kyrgyzstan promotes out-of-court settlement with Centerra on Kumtor Gold Mine

Kyrgyzstan is promoting an out-of-court settlement with Canada's Centerra Gold to resolve disputes over confiscation of the company's Kumtor gold mine and legal challenges between the two sides, according to a source close to the government.

Centerra launched an arbitration against the Kyrgyz government in May after it took over the country's largest mine on suspicion of posing a threat to human life or the environment.

A court in Kyrgyzstan ruled that Kumtor Gold Company (KGC), which operates a 550000-ounce gold mine, violated environmental law by placing waste rocks on a glacier and fined it $3.1 billion.

There has been a long-running dispute between Centerra and Kyrgyzstan over how to share the profits of the Kumtol mine, the largest industrial company in the former Soviet republic.

International arbitration procedures are costly and may last for years.

Sources close to the government and another person familiar with the matter said the two sides discussed a potential solution between the two sides at a meeting in Geneva from September 28 to 30.

Sources close to the government added that Kyrgyzstan remained keen to find an out-of-court settlement in the coming weeks after no agreement was reached at the September meeting.

"We are still willing to reach an out-of-court settlement to the satisfaction of all parties," Kyrgyz Deputy Prime Minister Erdir Bessarov said in a statement. However, we are also prepared to draw appropriate and impartial conclusions through legal arbitration. "

He said the Central Asian country would continue to investigate "convincing evidence" of Centerra corruption and other violations.

Centerra denied all the charges.

The September meeting included discussions about the future of the Kumtor mine, the alleged damage to the environment and tax losses, the losses suffered by Centerra since the mine was seized and the potential sale of a 26 per cent stake in Centerra held by state-owned Kyrgyzstan JSC.

Centerra froze government shares when it seized the mine, which means it does not have the right to vote and is not entitled to dividends.

Centerra declined to comment on potential solutions and the Geneva meeting, referring to an October statement saying that the company was "open to an agreed solution to the Kyrgyz government's claim, but that it must reflect the fair value of the mine and compensation to other parties. Losses caused by government actions. "

One of Centerra's top 10 shareholders revealed that it was in the best interests of both sides to negotiate a settlement as soon as possible and avoid a protracted legal battle.

Centerra has said it can survive without the Kumtor mine because its assets in Canada and Turkey are expected to achieve a combined free cash flow of $125 million to $175 million by 2021, enough to keep the company debt-free, with a cash position of $911.7 million this year.

Kyrgyzstan regards Kumtor Gold as a state-owned enterprise, but will face the problem of free gold sales after its state-owned gold refinery is excluded from the list of internationally acceptable sources.

Kyrgyzstan also filed a separate lawsuit on Wednesday, accusing Centerra of preventing users and administrators from accessing Kumtor's computers since May 2021.

The latest stand-off between the two sides began shortly after Sadr Japarov (Sadyr Japarov) came to power in (Sadyr Japarov), Bishkek, after violent riots in October last year.

Centerra's shares have fallen 39 per cent this year.