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Centerra Gold : Kyrgyzstan has to take decisive steps to use Kumtor gold mine effectively

04/27/2015 | 02:04pm US/Eastern

Written by Maria Levina

BISHKEK (TCA) — On April 24, members of the Kyrgyz Parliament met with the candidates to the Board of Directors of Centerra Gold Inc., Martin Graham and Lord Clanwilliam, whom the Kyrgyz Government proposes to include in the new Centerra Board.

The meeting was attended by the head of the parliamentary majority coalition, the Ar-Namys parliamentary faction leader Felix Kulov, Ata Meken faction leader Omurbek Tekebayev, Prime Minister Joomart Otorbayev, and Vice Prime Minister Valery Dill. Otorbayev said that Oracle Capital Group executives Martin Graham and Lord Clanwilliam approached him with a proposal to resolve the current situation around Kumtor.

Centerra owns 100% of the Kumtor gold mine through its wholly owned subsidiary Kumtor Gold Company. The Kyrgyz Republic holds 33% shares in Centerra through the state gold company KyrgyzAltyn. Kumtor, the largest gold mine in Central Asia, is located in Kyrgyzstan's Tien Shan mountains.

A Centerra shareholders meeting is scheduled for May 8, and new Kyrgyzstan's candidates to the Board of Directors could be presented. Earlier this month, Otorbayev proposed to change the Board, but there were opponents in the country which had created difficulties, and this situation has led to the resignation of the Prime Minister on April 24, right after the meeting with the candidates. As a result, Kyrgyzstan will be able to raise the issue of changing of the Board of Directors only in August at the next shareholders' meeting, said Tekebayev.

According to the candidates, the current situation over Kumtor does not meet the interests of all parties. In Canada many board members of Centerra work in several companies at the same time, and this is not effective. The company should be managed in the interests of shareholders but not the narrow interests of its leadership. This is a fundamental principle of corporate governance.

There are also many questions concerning environmental protection. Therefore, it is important to develop a strategy that would take into account the interests of all shareholders including Kyrgyzstan.

According to the press service of the Kyrgyz Parliament, the meeting came to the conclusion that Kumtor's nationalization is not in the interests of both the Government of Kyrgyzstan and other shareholders. "Nationalization would be unprofitable for us but beneficial for the Centerra management, which would close all the existing problems," said Kulov.

If Kyrgyzstan decides to nationalize Kumtor, the country will have to invest heavily to ensure proper mine decommissioning. Moreover, Kumtor's nationalization would scare off potential investors.

"We have been approached by disgruntled Centerra shareholders," Lord Clanwilliam told a press conference in Bishkek. "So we've come here to test the water and see if we would get support from Kyrgyzaltyn for nomination to the board of Centerra."

The candidates wanted to meet with Centerra shareholders — the management of Kyrgyzaltyn and Centerra Gold, but the Centerra management did not allow them to visit the Kumtor mine.

"We are surprised and dismayed that the Centerra management refused this access to the mine that immediately leads to thinking that they have something to hide. So the Centerra management denied the opportunity to hear their side of the story but we benefited from very professional briefing from Kyrgyzaltyn and from other mining specialists and what we heard was very unsatisfactory," he said.

Centerra should focus on Kumtor but its management does not pay enough attention to the mine. It is necessary to improve the performance of the Kumtor mine, to revise income and expenses, and determine where to invest to get more profit, Lord Clanwilliam said.

The mine plan is until 2026. On March 26, the company released a new mining plan with a decrease of 21% which will significantly reduce Kyrgyzstan's benefits of participating in the project.

"It's time for Kyrgyzstan to accept and understand that Kumtor had served for the country well in the past and brought substantial revenues to the country. But every mine comes to a close at some point in time, and Kumtor's end of life is now visible on the horizon," Graham said.

Now the country must take decisive steps to use the mine effectively.

Last week, Kyrgyz MPs discussed alternative options to solve the problem of Kumtor — to buy 18% of Centerra shares at the stock exchange to become the owner of a controlling stake. To do this, Kyrgyzstan needs $200 million. MPs urged the citizens of Kyrgyzstan to be true patriots and altogether buy Centerra shares.

(c) 2015 The Times Of central Asia. All Rights Reserved. Provided by SyndiGate Media Inc. (, source Middle East & North African Newspapers

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