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The fate of one of the largest gold mines in the world, nestled in the remote mountains of Kyrgyzstan, could rest on the outcome of an obscure Canadian court battle.
Toronto-based Centerra Gold Inc. owns the Kumtor mine, but has faced political pressure and protests over its environmental impact and over whether Kyrgyzstan is getting its fair share of the profits.
Centerra is essentially a legal bystander, however, as a court case in Toronto proceeds over whether another company can seize millions of dollars worth of Centerra shares that are held by a Kyrgyzstani state-owned enterprise. If the shares are seized, Centerra says, a restructuring plan aimed at giving the Kyrgyzstani government a bigger stake in the mine would become impossible.
The Canadian court battle involves another Toronto-based natural resources company, Stans Energy Corp., which alleges that it was unfairly blocked from developing an open-pit rare earth metals mine in Kyrgyzstan.
Stans challenged this decision in international arbitration proceedings in Moscow, alleging that Kyrgyzstan violated the Moscow Convention, a 1997 treaty among post-Soviet countries on foreign investment. In June, Stans Energy won an order in Moscow demanding that Kyrgyzstan pay the company $118-million (U.S.). Kyrgyzstan has refused to pay and has appealed that decision in Russia’s courts.
In the mean time, Stans went looking for Kyrgyzstani state assets outside the country to seize. That’s where Centerra comes in. Kyrgyzaltyn JSC, a Kyrgyzstani state-owned enterprise, owns 32.7 per cent of Centerra’s shares.
So Stans launched an action in Ontario Superior Court to have $118-million-worth of those shares frozen, pending a future court decision on whether they could be seized. Lawyers for Kyrgyzaltyn are seeking to appeal the freeze order.
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