Are Centerra and Kyrgyzstan about to reach an agreement to separate permanently? – The Diplomat
Crossroads Asia | Politics | Central Asia
Nothing is set in stone, but Kyrgyzstan and Centerra Gold may be nearing the end of their long relationship.
Last January, the Canadian mining company Centerra Gold confirmed that it was in talks with the Kyrgyz government for an amicable settlement of their dispute over the Kumtor gold mine. March 28, the company confirmed reporting that the Kyrgyz Cabinet of Ministers had approved the decision to enter into an agreement with Centerra on the mine that would meet the basic conditions set by the company earlier in the year.
Nothing is set in stone, but Kyrgyzstan and Centerra may be nearing the end of their long relationship.
Centerra has been involved in Kyrgyzstan’s most lucrative gold mine, Kumtor, since 2004, although the first deals for the mine were made in 1992. The mine was both a key asset and a political thread interior – a flashpoint for occasional calls for nationalization. Kumtor accounted for nearly 10% of Kyrgyzstan’s GDP in 2019, demonstrating the importance of its mining to the Kyrgyz economy.
With populist President Sadyr Japarov coming to power, Kumtor was once again a target.
Japarov sadly served a few months in prison for trying to take over the Kyrgyz White House during a pro-nationalization protest in 2012. He was later acquitted and released, but ran into further trouble when a protest against Kumtor the following year in Karakol deviated. Japarov fled the country but was arrested upon his return in 2017 and jailed for an 11.5-year sentence that ended in dramatic early fashion when protesters in October 2020 freed him. He quickly made his release to power bear fruit, rise to the top of the Kyrgyz political stack by January 2021.
Kumtor’s latest problems began in May 2021 when the The Kyrgyz parliament passed a bill allowing the state to temporarily take control of the mine if certain conditions were met, namely violations of environmental regulations or other local damage. On the same day, a Kyrgyz court fined Centerra’s Kyrgyz subsidiary $3 billion following a lawsuit brought by four private citizens (one of whom was the son of the head of the National Committee of Ecology and Climate of Kyrgyzstan) on behalf of Kyrgyzstan demanding reparations for the mine’s past. environmentally harmful practices. The Kyrgyz government then materialized its new option to take over the mine and did so on May 17.
In the months that followed, the country and the company made headlines: Centerra announced that it would pursue arbitration and bankruptcy filing on behalf of its Kyrgyz subsidiaries in the United States; Kyrgyzstan welcomes back one of its exiled former presidents cooperate with the state investigation; Kyrgyzstan being blocked from trade on the London precious metals markets, then sue Centerra on blocked access to corporate computer systems; Centerra saying the mine production was down and the Kyrgyz says gold mine revenue was booming.
In January 2022, however, Centerra confirmed that it was in talks with Bishkek over the fate of the mine. I summarized the company’s position at the time:
The press release set out five expectations for any resolution of the conflict. These include returning shares of state-owned mining company Kyrgyzaltyn to Centerra, which Centerra would then cancel. Kyrgyzaltyn is currently Centerra’s largest single shareholder, with a 26.1% stake in the company. Centerra also said it would expect Kyrgyzaltyn’s two nominees to resign to Centerra’s board.
Additionally, Centerra expects Kyrgyzstan to assume full responsibility for the company’s two Kyrgyz subsidiaries and the Kumtor mine. Centerra also declared an expectation of cash payment “equal to the net amount of the three dividends paid by Centerra in 2021 that Kyrgyzaltyn JSC did not receive following the seizure of the mine and certain other financial counterparties associated with the settlement of ‘Inter-company balances between Centerra and its two Kyrgyz subsidiaries.’
Finally, Centerra would expect a “full and final release of all claims” and an end to all legal proceedings “in all jurisdictions without admission of liability.
Put simply: Centerra wants to wash her hands of Kumtor’s headache and walk away, with at least some compensation. Bishkek, for its part, might prefer an out-of-court settlement for fear of losing the mine seizure in court.
This remains the canvas for a possible agreement, at least as far as the Canadian firm is concerned. Importantly, Centerra’s most recent press release states that while negotiations are continuing, “there can be no assurance that any proposed transaction will be accepted or completed or as to the final economic and other terms of such transaction, if agreed”.
While the Kyrgyz Cabinet of Ministers reportedly approved the decision to strike a deal with Centerra, the details of that potential deal – a “peaceful divorce” as Kyrgyz Service of RFE/RL called him — have not been made public.