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Kumtor situation: Three months of external management at the mine

It has been three months since external management was introduced at Kumtor mine. The company’s new executives say everything is going according to plan, but the country’s economic indicators suggest the opposite. Litigation concerning the gold mine continues.

24.kg news agency collected data on all the events that took place at Kumtor over the past period.

Perpetual management

When the issue of introduction of temporary external management was discussed in the Parliament, only three months of such a regime were mentioned. Officials, however, immediately agreed on its possible extension, if necessary. The need, of course, has appeared — not all violations have been eliminated. The mine is still managed by Tengiz Bolturuk.

In addition, it turned out that the documents adopted by the Parliament and the Cabinet of Ministers do not contain a single word about the terms of external management.

«Yes, there is no clause on timing in the decree of the Cabinet of Ministers on introduction of external management. Article 65-1 of the law on joint stock companies says that the temporary external manager is obliged to ensure maintenance in proper condition. He is appointed when industrial societies violate environmental and other norms. He works until the violations are eliminated or the right to use the subsoil is suspended. The external manager is obliged to report monthly. The external manager of Kumtor Tengiz Bolturuk submits reports. The Cabinet, represented by the State Property Management Fund, reads them,» Deputy Chairman of the State Property Management Fund of Kyrgyzstan, Meder Mashiev, told 24.kg news agency.

What’s going on at the mine

The press service of Kumtor Gold Company informs that large-scale production modernization processes have been launched at the mine. The external manager initiated a new mine development strategy. Delineation of the ore zone, development of a project for processing of ore from the tailings, and modernization of the mill are underway.

Kumtor Gold Company CJSC (KGC) is operating in a safe, stable, and planned manner, new management of the company says.

Since May 17, 2021, the Kumtor mine has been operating as planned with the supply carried out promptly and in full. At the same time, the company admitted that after the introduction of external management, some of the suppliers announced suspension of cooperation unilaterally. The company is currently working with alternative suppliers.

The volume of gold production this year will be about 470,000-510,000 ounces, or 14.62-15.86 tons of gold. The company intends to adhere to the achievement of production targets.

It is known that 44,000 ounces of gold were sold in the first month after the introduction of temporary external management at the company. Total revenue was $ 82,234 million and gross profit was $ 40,282 million. The prime cost was $ 41,952 million.

Data on the volume of ore mining, revenues and taxes paid for the three months of external management have not yet been presented. The press service of Kumtor promises to provide them in the near future.

Economy continues to decline

External manager Tengiz Bolturuk assures that the mine is working stably. There are no production problems, but the figures indicate the opposite.

For seven months, the economy fell by 1.6 percent. Compared to June, the decline slowed down by 0.1 percent.

The situation is similar in industry. Taking into account the work of Kumtor, a decline of 10.3 percent is registered.

Excluding the work of the gold mining company, the industry is showing an astonishing growth of 16.3 percent.

The Eurasian Development Bank also notes that the dynamics of the gold mining sector continues to restrain economic activity in Kyrgyzstan. Economic growth has accelerated without it. Retail trade and cargo transportation are actively recovering.

«Economic growth will become positive as soon as gold production at the Kumtor mine increases. At the same time, the recovery dynamics of economic activity will be uneven, which is largely due to the production cycle at the mine, as well as development of the epidemiological situation,» the bank’s macroeconomic review says.

Scandals, arrests, criminal cases

Disputes, scandals and international showdowns continue all these three months of external management at Kumtor. The Wall Street Journal has come to the conclusion that the largest mine — the property of the Canadian company Centerra Gold — has been seized by the government of Kyrgyzstan, and now the company will face a difficult struggle for its return.

Centerra Gold has initiated international arbitration to challenge the actions of the Kyrgyz government.

Its subsidiaries Kumtor Gold Company and Kumtor Operating Company have started the bankruptcy process. At the end of the second quarter of 2021, the Canadian company also announced that losses from the loss of control over the Kumtor mine are estimated at $ 926.4 million.

In addition, it became known that the London Bullion Market Association may exclude Kyrgyzaltyn from the list of acceptable refiners. This happened due to the proceedings with StoneX.

StoneX has sued Kyrgyzaltyn in a London court for more than $ 1 million to cover losses on hedging transactions.

StoneX claims that Kyrgyzaltyn sent it an invoice asking to transfer money to an account of Well Fargo, which is an obvious spelling error for Wells Fargo & Co., several sources and one of the court documents say. Kyrgyzaltyn itself denies all accusations.

This is just the beginning. It is also known that Tengiz Bolturuk has already reported to the state commission on checking the activities of Kumtor and continues to manage the enterprise. The international arbitration proceedings are just beginning. The republic has begun the process of denouncing all agreements on Kumtor. This means that there will be more claims and scandals. It is not yet clear whether the country can really benefit from nationalization of the mine.