BISHKEK/JUNE 9 2021 (The Bulletin) — The IMF said that without a quick resolution to the row between Toronto-listed Centerra Gold and the Kyrgyz government over ownership of the country’s largest gold mine, Kyrgyzstan will miss its GDP estimates.

Conspicuously avoiding naming Centerra Gold or Kumtor, the gold mine at the centre of the row, the IMF also said in a statement that the expropriation of the mine undermined foreign investor confidence.

“Directors also stressed the criticality of political stability, policy predictability, and a market-friendly business environment,” the IMF’s executive said in comments on both a consultation session with Kyrgyz officials and also its GDP growth estimates for Kyrgyzstan of 3.8% this year and 6.4% in 2022.

“A speedy and transparent resolution of the ongoing commercial dispute with the largest foreign investor would be critical to ensure uninterrupted gold production while protecting the environment.”

The Kumtor gold mine is the lynchpin of the Kyrgyz economy, contributing up to 15% of its GDP.
Western investors based in Bishkek have said that the expropriation last month of the mine by the Kyrgyz government had turned Kyrgyzstan into an “investment pariah”. The government has justified its expropriation because of alleged environmental damage at Kumtor, an accusation that Centerra Gold disputes. Centerra Gold has launched international arbitration.

Despite the growing pressure, neither Pres. Sadyr Japarov nor senior Kyrgyz officials appear to be too concerned. Mr Japarov has not commented on the expropriation and has instead promoted the official who steered it to be the Kyrgyz economy minister. Officials have taken journalists on a press trip to Kumtor to show them how efficiently it is now being run.

ENDS

— This story was published in issue 487 of the Central Asia & South Caucasus Bulletin, on June 9 2021

— Copyright the Central Asia & South Caucasus Bulletin 2021

BISHKEK/JUNE 1 2021 (The Bulletin) — The Kyrgyz government said that it was now in full control of the Kumtor gold mine even though its Canadian owners have started legal action to stop its expropriation.

Showing off the Kumtor mine, sited in the Tien Shan mountains in eastern Kyrgyzstan, to journalists, Nurdin Usenov, the acting chief production manager, said that the site was operational and would stick to its previous output plans of 14.62 to 15.86 tonnes of gold this year.

“All units are working without interruptions at the moment,” he was quoted as saying.

The expropriation, hinged around an environmental fine, of Kumtor from Toronto-listed Centerra Gold has been swift. Foreign businessmen have said it has turned Kyrgyzstan into an “investment pariah” but for Pres. Sadyr Japarov, who seized power during a coup last year, taking over the highly-prized Kumtor is a political masterstroke, a domestic one at least. He has achieved in seven months what other Kyrgyz leaders had only talked about for years.

In Bishkek, the pressure on people associated with Kumtor appears to be ongoing. Media reported that police in the Kyrgyz capital had arrested five politicians, including former PM Omurbek Babanov, on various corruption charges linked to the mine.

Centerra Gold has launched international arbitration over ownership of Kumtor and on May 31 it said that its Bishkek subsidiary had filed for bankruptcy.

“The actions are designed to preserve the value of Centerra’s wholly owned subsidiaries … and prevent any further efforts by the Kyrgyz Government to strip KGC of its assets or otherwise improperly dispose of the Kumtor Mine in violation of its investment agreements with the Company,” it said in a statement.

ENDS

— This story was published in issue 486 of the Central Asia & South Caucasus Bulletin, on June 2 2021

— Copyright the Central Asia & South Caucasus Bulletin 2021

BISHKEK/MAY 25 2021 (The Bulletin) — — The expropriation of the Kumtor gold mine in Kyrgyzstan is having a knock-on effect on other businesses, British miner Chaarat Gold said in a statement to the London Stock Exchange in which it warned that it was having difficulties financing its Kyrgyz project.

Chaarat Gold, which also owns a gold concession in Armenia, is exploring the Tulkubash area in Kyrgyzstan and has now pushed back its expected extraction of the gold from the site to the end of 2023 because of the pandemic, political unrest and the expropriation of Kumtor which is
owned by Canada’s Centerra Gold.

“The extensive media coverage of the discussions between Centerra and the Kyrgyz Republic is expected to be negatively perceived by potential future debt or equity investors and possibly result in a delay in the project financing,” it said.

Foreign business leaders have said that Kyrgyzstan has turned itself into an “investment pariah” after the government slapped a $3.1b fine on Kumtor for environmental infringements and then took over the mine.

ENDS

— This story was published in issue 485 of the Central Asia & South Caucasus Bulletin, on May 25 2021

— Copyright the Central Asia & South Caucasus Bulletin 2021

BISHKEK/MAY 17 2021 (The Bulletin) — — Canada’s Centerra Gold accused Kyrgyzstan of illegally seizing control of the Kumtor gold mine, the country’s biggest industrial project.

As a response to the seizure of the mine, Centerra Gold said that it had started international arbitration proceedings and frozen Kyrgyzstan’s 26% stake in the company.

“The Kyrgyz Government effectively seized control of the Kumtor Mine over the weekend of May 15 and 16, 2021 by sending Government authorities to the mine, Kumtor’s office in Bishkek and the homes of several Kumtor employees,” it said in a statement. “Consequently, Centerra is no longer in control of the Kumtor Mine.”

Its shares, which are listed on the Toronto Stock Exchange, have lost a third of their value this month after the Kyrgyz parliament passed a law that would allow it to expropriate Kumtor and also issued it with a $3.1 environmental fine.

The Kyrgyz government has for more than a decade said that it wanted to own a direct stake in Kumtor but it has taken the firebrand populist Pres. Sadyr Japarov, who seized power after a coup in October, to push the process along to this point.

Immediately after taking power, Mr Japrov had sought to calm worried foreign investors by assuring them that despite previously calling for the nationalisation of Kutmor, he would leave it alone.

But now Western businessmen and diplomats based in Bishkek have looked on seemingly helpless as the Kyrgyz authorities started to make good on Mr Japarov’s long-held ambition.
In a joint statement, the Canadian and British governments said that the nationalisation of Kumtor was now “probable”.

“Measures that negatively impact trade and foreign direct investment will further undermine already fragile economic livelihoods of the Kyrgyz people,” they said.

ENDS

— This story was published in issue 484 of the Central Asia & South Caucasus Bulletin, on May 18 2021

— Copyright the Central Asia & South Caucasus Bulletin 2021

>> Canada’s Centerra Gold is going to have a tough fight on its hands if it wants to keep control of the Kumtor gold mine in Kyrgyzstan, writes James Kilner

MAY 11 2021 (The Bulletin) — Investors had already been wary of Kyrgyz president Sadyr Japarov. He has a reputation as a nationalistic firebrand, a populist with a ruthless streak.

Despite his reassurances when he seized power in Kyrgyzstan in October after being sprung from prison in a coup, they have been proved right. And now, as one well-plugged in observer in Bishkek who is close to foreign investors told The Bulletin, after passing a law and imposing a fine that sets up the expropriation of the Kumtor gold mine, Japarov has turned Kyrgyzstan into an “investment pariah”.

Kumtor is the biggest industrial asset in Kyrgyzstan, making up around 15% of its GDP. Various governments have tried to take a direct stake in Kumtor but Centerra Gold has managed to fend them off. Instead, the Kyrgyz government owns a 27% stake in Centerra Gold.
But Japarov, as we have seen since October, is determined.

Fighting on the streets of Bishkek between his supporters and police after a disputed parliamentary election in October now looks more and more like a set-up, a cover to spring Japarov from prison and grab the presidency. This wasn’t a popular uprising or a people’s revolution, this was a well-planned coup.

Within a fortnight, Japarov had seen off his rivals, faced down pressure from the Kremlin and forced Sooronbai Jeenbekov to give him the presidency. This year, he easily won a presidential election and then pushed through changes to the constitution that hands him more power.

All this while keeping his popularity ratings genuinely high. Japarov is the people’s champion and he knows it. It’s a role that he has been playing throughout his career and now that he has secured his position as president, he can claim what he sees as his crowning glory – taking control of Kumtor.

Centerra Gold has said that it will resist attempts by Kyrgyzstan to take control of Kumtor but in its statement there was also a hint of resignation.

It knows that with the lightning-quick passing through parliament of a law that allows the government to expropriate assets, followed by a ludicrously large $3.1b fine for environmental damage, that Japarov has set his sights on Kumtor.
And what Japarov wants, he gets. At least so far.

ENDS

— This story was published in issue 483 of the Central Asia & South Caucasus Bulletin, on May 11 2021

— Copyright the Central Asia & South Caucasus Bulletin 2021

BISHKEK/MAY 8 2021 (The Bulletin) — — A court in Kyrgyzstan slapped a $3.1b environmental fine on the Kumtor gold mine, owned by Canada’s Centerra Gold, the day after parliament passed a law that said that the state could take over companies that threaten people’s lives or the environment.

Centerra Gold said that the fine was “meritless” and observers said that the move looked like an attempt by the Kyrgyz government to set up the expropriation of the gold mine.

Shares in Centerra Gold, which holds other assets in Turkey and Canada, lost a third of their value. Centerra Gold, which is 27% owned by the Kyrgyz government, has resisted previous attempts by Kyrgyzstan to take a direct stake in Kumtor, the country’s single biggest industrial asset.

“However, no assurances can be given that…claims impacting KGC or Centerra can be resolved without a material impact on the Company,” it said in a reaction to the new law.

The law, that effectively legalises qualified expropriations, appeared to take people by surprise. Within one day it had been proposed, passed its three readings and been adopted by parliament. The sponsor of the bill was Akylbek Japarov, who is also the chairman of a state commission that was set up in February to investigate alleged shortcomings at Kumtor.

As for the $3.1b environmental fine, a judge said that Kumtor had illegally placed waste rock on glaciers at its high altitude site in the Tien Shan mountains.

Foreign investors have been wary of the nationalist and populist Pres. Sadyr Japarov since he soared to power in October after being sprung from prison during a coup. Since then he has secured his position as the champion of the people through a referendum that tweaked the constitution and an election win.

One Bishkek-based investor said that Kyrgyzstan was turning into an “investment pariah”.

ENDS

— This story was published in issue 483 of the Central Asia & South Caucasus Bulletin, on May 11 2021

— Copyright the Central Asia & South Caucasus Bulletin 2021