Gold should reach US$2,000 before year-end: President of Murenbeeld & Co.
Centerra Gold Inc. could part ways with Kyrgyzstan’s government over its seized flagship mine in the Central Asian nation, but the company’s top executive would like to discuss it first.
Relations between Centerra and the Kyrgyz Republic have soured so much since the government took control of Kumtor gold mine that it would be difficult to go back to the way things were, said Chief Executive Officer Scott Perry. Still, the Canadian company -- which hasn’t had high-level talks with senior management since President Sadyr Japarov assumed power last October -- wants to talk things over and find options to break the impasse.
“When you look at this current situation it’s clearly the ultimate logjam here between ourselves and the government,” Perry, 44, said Friday in an interview. “It’s clear what the government wants so let’s sit down, let’s engage, let’s negotiate.”
Centerra wouldn’t rule out “a clean divorce, and we can move on,” Perry said.
A split would be just one way for Centerra to resolve issues with Kyrgyzstan’s government, which also owns 26 per cent of the Toronto-based company. A separation would involve taking into account Kumtor’s value and what to do with the government’s stake in Centerra, both of which Perry called “valuable” assets. The Kyrgyz government didn’t immediately provide comment on its relations with Centerra or potential options.
Shares of Centerra fell 1.6 per cent to $9.85 at 9:37 a.m. trading in Toronto, its biggest drop since June 3. The stock has fallen 30 per cent this year.
Centerra’s troubles underline the mining industry’s challenges of dealing with foreign governments on thorny issues such as ownership and control of natural resources. Politicians from Peru, Chile and Zambia are seeking a bigger share of the metals windfall to address economic inequalities exacerbated by the pandemic. And nations including Indonesia and Papua New Guinea have renegotiated contracts with mining companies to ensure more mineral wealth stays in local hands.
At stake in Centerra’s case is the future of Kumtor, one of Kyrgyzstan’s largest foreign investment projects and an asset responsible for almost 60 per cent of Centerra’s 2020 revenue. The company owned and operated the mine through subsidiary Kumtor Gold Co. under a 2009 agreement with the government. The Kyrgyz Republic took over the mine late last month, using environmental concerns and tax issues to justify the seizure. Centerra said such claims are without merit and have no justification under longstanding investment agreements or applicable law.
“This is a premeditated, concerted plan to nationalize the mine and it’s unprecedented in terms of what they’ve done here, there’s a number of red lines that they’ve crossed,” Perry said. “That makes it very difficult for me when I try to envision us reverting back to the prior position, where we were the owner and operator of the mine.”
Centerra initiated international arbitration to challenge the Kyrgyz government’s moves, while Kumtor Gold filed for Chapter 11 bankruptcy in New York on May 31. Centerra may pursue other legal avenues in the coming weeks, Perry said, while declining to disclose details of those next steps.
The issue has drawn attention of the International Monetary Fund, which said in a June 8 statement that “a speedy and transparent resolution of the ongoing commercial dispute with the largest foreign investor would be critical to ensure uninterrupted gold production while protecting the environment,” without specifically naming Centerra.