Korea Zinc pulls $1.8 billion share sale plan after probe
The world’s largest zinc smelter has been caught up for months in a fight between its largest shareholders over strategy and direction.
Two units of Canada’s Centerra Gold (TSX: CG) have filed a motion in a US Bankruptcy Court seeking penalties of $1 million a day against the Kyrgyzstan government, related to the May seizure of the Canadian company’s Kumtor gold mine.
The company’s Kumtor Gold Company (KGC) and Kumtor Operating Company CJSC (KOC) lodged the motion in the US Bankruptcy Court for the Southern District of New York.
The motion alleges the Kyrgyz government “blatantly and continuously” violates the court’s orders and has “continued and intensified” its efforts to deprive KGC and KOC of the protections afforded to them under Chapter 11 of the US Bankruptcy Code, much in the same way that it took over the mine.
The security service is investigating possible corruption in the deal that gave Centerra control over the country’s biggest gold mine
Centerra said in May KGC and KOC commenced bankruptcy proceedings following the nationalization of the miner’s Kumtor gold mine by the former Soviet republic. Also in May, the government seized control of Kyrgyzstan’s most significant foreign investment project in a move challenged by Centerra Gold through international arbitration.
The motion also seeks an order staying the Kyrgyz government’s efforts to dismiss the case.
The motion alleges “continued and willful” violations of the automatic stay afforded by the Bankruptcy Court.
These include continued Kyrgyz court proceedings that seek to change KGC and KOC’s corporate resolutions illegally; the maintenance of the preliminary injunction barring KGC and KOC legal counsel and various individuals from participating in Kyrgyz court proceedings; the extension of the mandate of the so-called temporary manager; the termination of all KGC and KOC contracts with the Kyrgyz government and its related entities; and, laying the groundwork for the conversion of the Kyrgyz government’s environmental and tax claims against the KGC and KOC into equity with the effect of giving the Kyrgyz government complete ownership and control over the KGC and KOC.
Reuters reports the Kyrgyz state security service and prosecutors had said earlier this month they had established enough evidence to press on with removing Centerra from the Kumtor gold mine.
The security service is investigating possible corruption in the deal that gave Centerra control over the country’s biggest gold mine and subsequent amendments to the agreement.
Centerra denies the allegations.
Attorneys for KGC and KOC will present the motion to the Bankruptcy Court hearing to be held on September 15.
Centerra’s CEO, Scott Perry, said earlier this month Centerra remained “financially strong” with solid performance at its other operations three months following the Kyrgyzstan government’s seizure of the Kumtor mine.
At C$9.40 per share, Centerra’s Toronto-quoted shares trading in Toronto are down 43.2% over the past 12 months, capitalizing it at C$2.79 billion ($2.2bn).
