Toronto, Canada, May 31, 2021: Centerra Gold Inc. (“Centerra” or the “Company”) (TSX: CG) (NYSE: CGAU) today announced additional actions to protect the interests of Centerra and its stakeholders in response to the unjustified seizure of the Kumtor Mine by the Government of the Kyrgyz Republic. The actions are designed to preserve the value of Centerra’s wholly owned subsidiaries that own and operate the Kumtor Mine, Kumtor Gold Company (“KGC”) and Kumtor Operating Company (“KOC”), and prevent any further efforts by the Kyrgyz Government to strip KGC of its assets or otherwise improperly dispose of the Kumtor Mine in violation of its investment agreements with the Company.
Consistent with these objectives, KGC and KOC today commenced a filing in the Southern District of New York under Chapter 11 of the federal U.S. Bankruptcy Code. The court-supervised process provides, among other things, for a worldwide automatic stay of all claims against KGC and KOC.
Centerra hopes that this internationally recognized, orderly restructuring process will facilitate potential negotiations with the Kyrgyz Government. The Chapter 11 proceeding will not impact any other areas of the Company’s business, including the Mount Milligan Mine in Canada, the Öksüt Mine in Turkey and the molybdenum business in North America.
The Company also announced that it is conducting a strategic review related to its ownership of KGC and KOC that will consider alternatives available to enhance value to Centerra’s stakeholders in light of recent events involving the Kumtor Mine.
Scott Perry, President and Chief Executive Officer of Centerra, said: “We have repeatedly asked the Kyrgyz Government to discuss its concerns with us, yet it has refused to engage with us in any way. While we remain willing and available to hold a constructive dialogue with the Kyrgyz authorities, we will continue to use all available legal and financial means to protect the interests of Centerra and its stakeholders from the Government’s concerted and premeditated effort to take control of the Kumtor Mine. In particular, we will continue to pursue arbitration proceedings to enforce the longstanding agreements with the Kyrgyz Republic that give Centerra, KGC and KOC the right to own and operate the Kumtor Mine. Those agreements are governed by New York law, and we expect the U.S. court proceedings will serve to further protect Centerra’s interests under their terms pending a restructuring or other resolution of the dispute.”
Centerra Remains in a Strong Financial Position
Centerra is not a party to or affected by the Chapter 11 filing and remains financially strong with more than US$800 million in cash and in excess of US$1.2 billion in liquidity as of March 31, 2021. The restructuring proceeding initiated by KGC and KOC will not impact Centerra’s other operations and businesses.
KGC and KOC are currently solvent, with total assets (including the Kumtor Mine) in excess of US$1.1 billion and no external bank debt. Centerra believes that the Kumtor Mine remains a valuable asset notwithstanding the Kyrgyz Republic’s recent actions.
Strategic Review is Considering a Range of Options
Centerra has retained external advisors to assist with its strategic review, which is proceeding under the direction of a Special Committee of independent directors of the Board. As part of this review, Centerra is evaluating all possible alternatives to preserve and enhance value for its stakeholders while ensuring that the Kyrgyz Government does not directly or indirectly profit from its unlawful expropriation of the Kumtor Mine.
There can be no assurance that the strategic review, or the U.S. restructuring proceeding, will lead to the successful implementation of any particular transaction or other outcome. The Company therefore continues to pursue all alternative avenues of recourse, including arbitration and Canadian legal proceedings.
False Environmental and Tax Claims
As previously noted, the Kyrgyz Republic seized the Kumtor Mine and the Government installed a temporary “external manager” on May 17, 2021 in violation of its obligations to Centerra, KGC and KOC. Public statements by Government officials and actions taken by the “external manager” of the mine indicate that the Government and others, including the state-owned entity Kyrgyzaltyn JSC, intend to use spurious environmental and tax claims being asserted against KGC to place KGC into some form of insolvency proceeding in the Kyrgyz Republic and potentially strip KGC of its assets. Due to the “external manager” taking control of the Kumtor Mine and KGC’s operations in the Republic, KGC is no longer able to defend effectively against these claims in the Kyrgyz Republic courts.
Perry said: “KGC’s operations and activities have always carefully adhered to agreements with the Kyrgyz Government and applicable laws, including with regard to the environment, safety and taxation. We strongly believe that the Government’s claims are entirely without merit and a pretext for a cloaked form of nationalization of the Kumtor Mine without compensation. While these claims have not been asserted against Centerra itself, the actions of the Kyrgyz Government and others have compelled us to take steps to preserve the value of KGC and KOC for all our stakeholders and shine a light on the true intentions of the Kyrgyz Government and those acting in concert with it.” Select court documents and additional information can be found on the Company’s investor relations website at https://www.centerragold.com/investor/kgc-restructuring.
About Centerra
Centerra Gold Inc. is a Canadian-based gold mining company focused on operating, developing, exploring and acquiring gold properties in North America, Asia and other markets worldwide and is one of the largest Western-based gold producers in Central Asia. Centerra owns three mines, the Kumtor Mine in the Kyrgyz Republic, the Mount Milligan Mine in British Columbia, Canada and the Öksüt Mine in Turkey. Centerra's shares trade on the Toronto Stock Exchange (TSX) under the symbol CG and on the New York Stock Exchange (NYSE) under the symbol CGAU. The Company is based in Toronto, Ontario, Canada.
