Negotiations to form a joint venture (JV) between TSX-listed Centerra Resources and the Kyrgyz government received a boost this week when the parties inked a nonbinding memorandum of understanding regarding the future of the flagship Kumtor mine.
The Toronto-based firm had agreed to review a proposal that would give the Central Asian country a 50% stake in Centerra’s gold mine, in exchange for its 32.7% equity ownership in Centerra and $100-million that would be provided to Centerra by way of an adjustment to JV distributions otherwise owing to State-controlled Kyrgyzaltyn JSC.
While both parties to the JV would have an equal number of directors on the board, the Canadian miner would remain the operator and manager of the mine.
The Kyrgyz Parliament earlier this year decreed that the Kumtor project agreements, which were signed in 2009, should be revised, while Centerra was also facing multimillion-dollar environmental claims.
For longer than a year now, the company had dealt with local protests, demanding the mine’s nationalisation and more social benefits. In May, the Kyrgyz government imposed a state of emergency to protect the Kumtor mine from protesters.
The Canadian miner is a significant employer and taxpayer in the country and a critical contributor to the Kyrgyz economy.
Centerra expects to almost double its output from the Kumtor mine, located high in the Tien Shan mountains, to about 600 000 oz this year.