June/July 2009

Agreement announced

Centerra deal sets stage for further development in Kyrgyzstan

By P. Diekmeyer

Centerra Gold put to rest close to a year’s worth of uncertainly late last May when it announced that it had reached agreement with the Kyrgyz government regarding outstanding issues related to the massive Kumtor Project. The new deal, which includes provisions related to taxation, the expansion of the company’s existing concession area and the level of the Kyrgyz government’s stake in the overall project, replaces an earlier arrangement, which the Kyrgyz parliament refused to ratify.

According to Centerra Gold executives, among the agreement’s key benefits was the certainty that it provided regarding conditions under which existing operations as well as future exploration and development would take place.

“There is significant potential for reserve expansion at the site,” Stephen Lang, the company’s president and COO told a group of Montreal investors, a few days after the agreement was announced. “However the lack of a conclusive settlement was slowing things down.”

According to Lang, one feature of the new deal that sets it apart from many similar agreements is the scale of moneys that will be channelled back into the local economy. The new simplified 14 per cent tax rate, which will be levied on total mine revenues, includes a one per cent monthly contribution to the local Issyk-Kul Oblast Development Fund. “Adjoining communities often get left out in these types of developments,” said Lang. “So this agreement is somewhat unique in that regard.”

The Kumtor Project, one of the world’s largest gold developments, has been producing close to 600,000 ounces per year since 1997. However, the fact that a finalized framework agreement was only recently concluded and ratified signals the importance of effective government relations by gold developers.

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