TORONTO – Centerra Gold Inc. (TSX:CG) says its Kumtor subsidiary is the target of a fresh criminal investigation by the Kyrgyz Republic and that several senior managers have been advised they won’t be allowed to leave the central Asian country.
The Toronto-based company didn’t disclose the identities of the managers or their positions.
In a statement released Monday, Centerra Gold and Kumtor Gold said they “strongly dispute” that any commercial transactions or any actions by their managers were improper.
Centerra said in the same statement that the environmental protection agency for the Kyrgyz Republic has alleged that Kumtor owes an additional US$220 million in environmental pollution fees.
The company said there was a court hearing held last Friday in relation to that allegation. Centerra said although it hasn’t received an official version of the court’s order, it understands that the court granted an immediate interim order to secure the agency’s claim, which the company says is limiting Kumtor Gold’s financial transactions, such as transferring assets or property or paying dividends while the fee dispute is ongoing.
Centerra said it plans to appeal the order.
Andrew Breichmanas, an analyst for BMO Nesbitt Burns, suggested the Kyrgyz government is responding after Centerra gave it a notice of arbitration in connection with various disputes relating to the Kumtor gold project, including the environmental claims.
“Retaliation by Kyrgyz authorities is not unexpected, but suggests that a negotiated settlement, as achieved in previous disputes, may be unattainable,” he wrote in a note to investors.
Scotiabank analyst Trevor Turnbull said Centerra’s latest woes in the Kyrgyz Republic don’t bode well.
“The recent restrictions placed on the Kumtor operating company and its management by the Kyrgyz courts and authorities are an extremely negative development, in our view,” he said in a note.
The Kumtor gold-mining operation has been the focus of a number of disputes between the company and the Kyrgyz government.
Last year, a former CEO of Centerra was arrested by Bulgarian authorities while on a cruise in the Danube River with his family.
Len Homeniuk, then 68, spent 11 days in prison and was later put under house arrest in Sofia while fighting a Kyrgyz extradition request. The Bulgarian courts later rejected the request.