Centerra sues ex-director for expropriation of Kumtor mine
In the lawsuit, filed Thursday in Ontario Superior Court, Centerra claims Bolturuk, a dual Canadian and Kyrgyz citizen, violated his duty of loyalty and confidentiality to the company by going behind his back.
Bolturuk joined Centerra’s board of directors in December 2020 and resigned on May 17, 2021, exactly two before the Kyrgyz authorities announced that he had been appointed “external director” of the 100% subsidiary of the miner, Kumtor Gold Company (KGC), which operated Kumtor until his epileptic seizure.
Centerra also claims that prior to the seizure of the mine, state-owned Kyrgyzaltyn JSC attempted to embezzle $ 29 million into an unauthorized bank account using a forged payment instruction sent to a third party.
Kyrgyzstan said it had taken control of the Kumtor mine due to Centerra’s “abdication of its basic duty of care”, accusing it had suspended deliveries of materials necessary for the operation of the Kyrgyzstan. mine and had disabled the “critical sensors” used to monitor stability. mine and the movement of nearby glaciers.
“We can assure our shareholders that we are pursuing all avenues available to us in connection with recent events, including against anyone who violates their obligations to Centerra and its shareholders,” said Scott Perry, CEO of Centerra. said in the statement.
“In the meantime, to distract from their unprecedented and needless seizure of the Kumtor mine, Kyrgyz officials and Mr. Bolturuk continue to make unwarranted allegations related to environmental and safety conditions,” Perry added. .
The events of this week have left Centerra’s future on the line. Kumtor is the largest of its three gold mines, accounting for over 50% of the company’s total production.
The operation is also crucial for Kyrgyzstan. The mine accounts for one-fifth of the total industrial output of the former Soviet country and produced more than 13.2 million ounces of gold between 1997 and the end of 2020. Last year’s production was just over 556,000 ounces.
The arbitration process can take up to ten years and even if the Canadian minor is successful, there is no guarantee that they will receive the stipulated amount.
Canaccord Genuity’s Dalton Baretto said in a note last week that he was not surprised by Kyrgyzstan’s move.
“We have been planning something like this since President Japarov took power on January 10; however, the speed and scale of these reforms caught us off guard, ”he wrote.
The analyst added that he believed the government had opened the door to what was likely to be a multi-year deterioration in relations between Centerra and the Kyrgyz state.
“While Centerra Gold will take advantage of all avenues available for international trade disputes, we believe these are unlikely to be effective in the long run,” said Baretto.
Kumtor has been the subject of a number of disputes between the company and the Kyrgyz government.
Japarov, who seized power after violent riots last October, has already campaigned for the nationalization of the mine. However, after assuming the post, he said he no longer considered it necessary.
Kyrgyzstan has a history of popular uprisings and political unrest, since gaining independence after the collapse of the Soviet Union in 1991. Protesters ousted two previous PMs in revolutions in 2005 and 2010.