Centerra shares soar on Kyrgyzstan deal

Canada's Centerra Gold (TSX:CG) on Wednesday announced a deal in its drawn out environmental dispute against the Kyrgyz Republic over to the firm’s Kumtor gold mine in the central Asian nation

The comprehensive settlement agreement ends mutual lawsuits and calls on Toronto-based Centerra to contribute $50m to a so-called Nature Development Fund and increase annual payouts to the fund to $3m from $300,000 before. A cancer care support fund set up the government will receive a further $10m from the company. Centerra will also invest $6m in a Kumtor reclamation fund based inside the country annually to a minimum of $69m which is what the company's estimates would be the site's total rehabilitation costs.

The miner, the largest Western-based gold producer in Central Asia, successfully sought international arbitration in May last year, following the country’s string of penalties, fees and accusations of damaging the environment and violating business deals.

An earlier Kyrgyz court order forced Centerra's local subsidiary, Kumtor Gold Company (KGC), to pay about $98 million in fees related to mine waste while another government body filed a $230m lawsuit against the firm.

Kumtor, which lies near the Chinese border at an altitude of 4,000 metres, has produced around 10m ounces since inception and remaining reserves are pegged at 5.6m ounces. In November Centerra said it was increasing its gold output guidance for the mine to 520,000 to 560,000 ounces and lowering all-in sustaining cost forecast to $666 – $718 per ounce.

Centerra has been shopping for assets in safer jurisdictions and last year it bought out US-based Thompson Creek Metals (TSX:TCM) including the Mount Milligan copper-gold mine in British Columbia, Canada.

Shares in Centerra were trading up 7.9% early afternoon in Toronto after a halt on the stock was lifted. The company is worth $2.5 billion on the TSX and is sporting gains of more than 30% so far in 2017.

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