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Kumtor is the largest non-state employer and taxpayer in Kyrgyzstan and represents some 10% of its overall GDP makes up 25% of its industry and contributes 50% of export earnings. (Image courtesy of Centerra Gold)
Canada’s Centerra Gold (TSX:CG), which recently complete the acquisition of US-based competitor Thompson Creek Metals (TSX:TCM), said Monday it expects to produce more gold than previously anticipated as a result of higher grade ore recovered from its Kumtor mine in the Kyrgyz Republic.
Reporting results for the third quarter of the year, the Toronto-based company said it is increasing its gold output guidance for the mine to 520,000 to 560,000 ounces and lowering all-in sustaining cost forecast to $666 – $718 per ounce.
It also posted net earnings of $87.9 million or $0.36 per common share for the first nine months of 2016, almost doubled the $44.5 million revenue logged in the same period last year.
The jump reflects in part a 19% higher average realized gold price in the period and an inventory impairment reversal of $15.4 million ($0.06 per share), Centerra said.
The gold company, which is the largest Western-based producer of the precious metal in Central Asia, has been actively diversifying away from Kumtor as the risks associated with the operation have proved a drag on the company’s market valuation.
In April, Kyrgyz prosecutors and other state law enforcement agencies raided Centerra’s office in Bishkek, the capital of Kyrgyzstan. (Image courtesy of Centerra Gold)
The issues around the operation are far from over. The company in fact warned that Kumtor Gold Company (KGC), its subsidiary in the Kyrgyz Republic, continues to be subject to an interim order that bans it from taking any actions relating to certain financial transactions, including transferring property or assets, declaring or paying dividends or making loans to Centerra.
While such order does not prohibit KGC from continuing to use its cash resources to operate the mine, it does mean that all the cash Kumtor generates continues to be held in KGC and is not being distributed to Centerra, the miner said
Such order is based on the claims that some of the company’s senior managers conducted improper commercial transactions. Centerra has repeatedly said it “strongly disputes” such accusations and believes they violate fundamental investment protections contained in the 2009 agreements governing the Kumtor Project.
The operation has been the focus of a number of disputes between the company and the Kyrgyz government.
Last year, Bulgarian authorities arrested a former CEO of the firm while on a cruise in the Danube River with his family. Len Homeniuk, then 68, spent 11 days in prison and was later put under house arrest in Sofia while fighting a Kyrgyz extradition request. The Bulgarian courts later rejected the request.
Kumtor has produced around 10 million ounces since inception and remaining reserves are 5.6 million ounces.
