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TORONTO – After months of political turmoil, Centerra Gold Inc. may finally be closing in on a resolution to one of the mining industry’s most volatile disputes. Reports out of Kyrgyzstan suggest the government and Centerra are nearing agreement on a joint venture to operate the Kumtor mine. The Kyrgyz prime minister said they are discussing a 50-50 split of the project, according to one report.
Centerra cautioned that no deal has been reached, and warned investors not to speculate on the potential terms of a settlement. However, it indicated that talks with the government over its flagship mine are going well. The two sides have been discussing a transaction that would convert the government’s 32.7% stake in Centerra into a direct stake in the project.
“Centerra believes that progress has been made in those discussions,” the company said in a statement Friday. A settlement would be a relief for investors, who have feared the prospect of outright nationalization of Kumtor for more than a year.
The trouble started in June of last year, when a Kyrgyz parliamentary commission released an 800-page report on Kumtor that accused Toronto-based Centerra of massive environmental destruction. Centerra dismissed the allegations as nonsense, but they gained momentum this year when the parliament decided to renegotiate its investment agreement with the company.
In the meantime, Centerra had to deal with hundreds of protestors, who temporarily set up a roadblock to the mine and shut down a substation that feeds power to it.
The company thought it resolved all ownership issues around Kumtor when it signed the investment agreement in 2009. But this series of events left it with little choice but to try to renegotiate the deal, or risk losing its agreement entirely.
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