Canada’s Centerra Gold (TSX:CG) on Wednesday outlined the terms of advanced negotiations with the Kyrgyz Republic in its drawn out environmental dispute over the firm’s Kumtor gold mine in the central Asian nation.
Centerra’s press release came after details of the proposed agreement contained in a government statement to a parliamentary committee, appeared in the Kyrgyz media. The proposed settlement agreement would end mutual lawsuits and calls on Toronto-based Centerra to pay $50m to a so-called Nature Development Fund and increase annual contributions to the fund to $3m from $300,000 before. A cancer care support fund set up by the government will receive a further $10m from the company.
Centerra will also invest $6m annually in a Kumtor reclamation fund based inside the country to a minimum of $69m. That figure matches the company’s own estimate of the site’s total rehabilitation costs.
Centerra cautioned however that the terms are still to be finalized and that its board has not yet formally approved a deal. The Kyrgyz government owns just under a third of Kumtor and the mine contributes nearly 10% of the country’s GDP.
The miner, the largest Western-based gold producer in Central Asia, successfully sought international arbitration in May last year, following the Kyrgyz Republic’s string of penalties, fines, accusations of environmental damage and violation of business deals.
Last year a Kyrgyz court ordered Centerra’s local subsidiary, Kumtor Gold Company (KGC), to pay about $98m in fines related to mine waste while another government body filed a $230m lawsuit against the firm.
Kumtor, which lies near the Chinese border at an altitude of 4,000 metres, has produced around 11m ounces since inception and remaining reserves are pegged at 5.6m ounces. In November Centerra said it was increasing its gold output guidance for the mine to 525,000 to 555,000 ounces and lowering all-in sustaining cost forecast to $751 – $795 per ounce.
Centerra has been shopping for assets in safer jurisdictions and last year acquired US-based Thompson Creek Metals (TSX:TCM), picking up the Mount Milligan copper-gold mine in British Columbia, Canada, in a $1.1 billion deal.
Shares in Centerra were trading up 8.2% early afternoon in Toronto after a halt on the stock was lifted. The company is worth $2.3 billion on the TSX and is sporting gains of more than 30% so far in 2017.
