Centerra Updates on Kyrgyz Republic Parliamentary Decree and New Environmental Claim for Kumtor Project

published: 22 February 2013

Centerra Gold Inc.Centerra Gold Inc. (TSX: CG) reports on two matters relating to its Kumtor mine in the Kyrgyz Republic. Further to the Company’s news release of February 20, 2013, Centerra understands from Kyrgyz media reports that the Kyrgyz Republic Parliament has adopted a decree (resolution), in respect of the previously reported State Commission report that recommends negotiations with Centerra within the next three months to revise the project agreements signed in 2009 that govern the Kumtor Project (collectively, the “Kumtor Project Agreement”). In addition, Centerra’s operating subsidiary in the Kyrgyz Republic, Kumtor Operating Company CJSC received today a claim from the State Agency for Environmental Protection and Forestry under the Government of the Kyrgyz Republic for approximately $315 million relating to alleged environmental damages at the Kumtor Project.

While Centerra has not yet reviewed an official version of the Decree, it continues to believe that the Kumtor Project Agreements are legal, valid and enforceable obligations. The Kumtor Project Agreements were reviewed and approved by the Kyrgyz Republic Government and the Parliament, and were the subject of a positive decision of the Kyrgyz Republic Constitutional Courts and a legal opinion by the Kyrgyz Republic Ministry of Justice. Furthermore, the Company notes that the Kumtor Project Agreements provide for all disputes to be resolved by international arbitration, if necessary. The Company will continue to hold discussions with the Government and other regulatory officials regarding the State Commission report and the Decree, with the objective of resolving these matters through constructive dialogue. However, there can be no assurances that the Company will be able to successfully resolve any of these matters currently affecting the Kumtor Project. There can also be no assurance that the Kyrgyz Republic Government and/or the Parliament will not take actions that are inconsistent with the Kyrgyz Republic’s obligations under the Kumtor Project Agreements or cancel government decrees, orders or licenses under which Kumtor currently operates. Any such actions could have a material adverse impact on the Company’s future cash flows, earnings, results of operations and financial conditions. For further information regarding the Kyrgyz Republic State Commission, please see the Company’s news release of February 20, 2013.

New Environmental Claim Received by the Kumtor Project
Centerra’s operating subsidiary, Kumtor Operating Company CJSC, received today a new claim from the State Agency for Environmental Protection and Forestry under the Government of the Kyrgyz Republic (“SAEF”) relating to alleged environmental damages at the Kumtor Project. This claim is in addition to the five environmental claims that Kumtor received in December 2012 for an aggregate amount of $152 million (see the Company’s news releases dated December 14, 2012 and February 20, 2013 for information on these five claims). The claim issued by SAEF is for approximately $315 million for alleged damage in relation to waste placed in the tailings management facility, waste rock dumps, and for the generation, management and treatment of other types of wastes. The claim covers the period from 1996 to 2011. Similar to the five claims received by the Kumtor Project in December 2012, the claim by SAEF references the review of the Kumtor Project carried out by the environmental and technical working group of the Kyrgyz Republic State Commission.

The Company is studying the claim but believes that the allegations contained in the claim are exaggerated or without merit. Centerra’s Kumtor Project complies with Kyrgyz Republic laws on environmental, safety and health standards. The Kumtor Project has been the subject of systematic audits and investigations over many years by Kyrgyz and international experts. In particular, in August 2012, the Safety, Health and Environment Committee of the Board of Directors of Centerra engaged an independent internationally recognized consultant to carry out a due diligence review of Kumtor’s performance on safety, health and environmental matters. The report issued in October 2012 concluded that “no major or materially significant environmental issues were identified” at Kumtor. The review focused on numerous environmental areas, including waste management and environmental management systems. The report can be found on the Kumtor website at under the “Environment” section.

The full text of the news release is available here.

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