Centerra Gold Inc. announced that it has entered into a global arrangement agreement with Kyrgyzaltyn JSC and the Government of the Kyrgyz Republic to effect a clean separation of the parties, including through the disposition of Centerra’s ownership of the Kumtor mine and investment in the Kyrgyz Republic, the elimination of Kyrgyzaltyn’s involvement and interest in the company, and the resolution of their disputes. Official website of the Canadian company says.
As it is noted, Centerra understands that the agreement has been approved by the Government of the Kyrgyz Republic, including both the Kyrgyz Parliament and the Cabinet of Ministers. The agreement provides for, among other things, Kyrgyzaltyn transferring to Centerra all of its 77.4 million Centerra common shares for cancellation, representing an approximate 26 percent equity interest in the company, for an aggregate purchase price of approximately C$972 million. In satisfaction of the purchase price, Kyrgyzaltyn will receive from Centerra a 100 percent equity interest in the company’s two Kyrgyz subsidiaries and, indirectly, the Kumtor mine (with Kyrgyzaltyn and the Kyrgyz Republic assuming all responsibility for the Kumtor mine), plus a cash payment of approximately $36.
In connection with the share exchange, the agreement also is conditioned on the full and final release of all claims of the parties, termination of all legal proceedings involving the parties in all jurisdictions with no admissions of liability and payment by Centerra of $50 million to KGC at closing of the arrangement on account of an inter-company balance, as well as certain other principal elements described below.
«This arrangement is expected to provide value to Centerra’s stakeholders while allowing Centerra to move forward with a renewed focus on our core operations, including our Mount Milligan and Öksüt mines, where we expect to see continued strong operational performance. To the entire Kumtor team and the people of the Kyrgyz Republic, I want to express how proud I am of all we have achieved together over the past several decades and wish you continued success,» Scott Perry, President and Chief Executive Officer of Centerra, said.
Subject to the satisfaction or waiver of the conditions precedent to the arrangement described below, the parties expect the arrangement to close no later than 90 days following the signing of the agreement.
The arrangement comprises the following principal elements:
- Centerra receiving all of its common shares held by Kyrgyzaltyn, representing an approximately 26 percent equity interest in Centerra, for an aggregate purchase price of approximately C$972 million. Upon receipt, Centerra will cancel the shares surrendered.
- Kyrgyzaltyn receiving a 100 percent stake in the company’s two Kyrgyz subsidiaries, Kumtor Gold Company CJSC (KGC) and Kumtor Operating Company CJSC (KOC) (and, indirectly, the Kumtor Mine), and a cash payment of approximately $36 million, in satisfaction of the purchase price for Kyrgyzaltyn’s Centerra common shares.
- Approximately $25 million of the cash payment will be withheld by Centerra and remitted to the Canadian tax authorities on account of Canadian withholding tax payable by Kyrgyzaltyn on the share exchange and the balance of the cash payment of approximately $11 million will be paid to Kyrgyzaltyn on closing of the arrangement.
- The Kyrgyz Republic and Kyrgyzaltyn assuming all responsibility for the Kumtor mine, including all reclamation obligations.
- Full and final releases of all claims of the parties.
- All environmental, tax and other claims, fines, penalties or proceedings, including all criminal investigations and proceedings, in the Kyrgyz Republic to be withdrawn and terminated to Centerra’s sole satisfaction within 45 days of the date of the agreement.
- Binding international arbitration proceedings previously commenced by the Company against the Government of the Kyrgyz Republic and Kyrgyzaltyn are to be suspended within two business days following the date of the agreement and terminated within two business days of the closing of the arrangement.
- No further steps are to be taken by the Kyrgyz Republic or Centerra in relation to the proceedings commenced by the company in the Ontario Superior Court of Justice against Tengiz Bolturuk, a former member of Centerra’s Board of Directors, from the date hereof. From the closing of the arrangement, Centerra will consent to an order setting aside the judgement issued in the Ontario Superior Court of Justice against Mr. Bolturuk on February 15, 2022.
- Subject to certain conditions and following the withdrawal and termination of the Kyrgyz Proceedings, KGC and KOC will work together with the Kyrgyz Republic to petition the court to dismiss the Chapter 11 proceedings in U.S. Bankruptcy Court for the Southern District of New York, effective as of the closing of the arrangement.
- Centerra extinguishing the inter-company balance between Centerra and KGC by paying $50 million to KGC on closing of the arrangement and, as to the balance, through an offsetting dividend to be declared by KGC immediately prior to closing of the Arrangement.
- The resignation from Centerra’s Board of Directors of Kyrgyzaltyn’s two nominees and the termination of the shareholders agreement between, among others, Centerra and Kyrgyzaltyn.
- Termination of all agreements entered into by Centerra in respect of the Kumtor Project vis-àvis Centerra’s rights and obligations.
- Transfer of the Kumtor reclamation trust funds to a Kyrgyz reclamation account held by KGC.
As the statement notes, there can be no assurance that Kyrgyzaltyn and the Kyrgyz Government will not take unilateral actions which are inconsistent with their obligations under the agreement or that the conditions precedent to the arrangement (including the termination or withdrawal of Kyrgyz proceedings to the satisfaction of Centerra) will be satisfied in a timely manner or at all. There can similarly be no assurance that the arrangement will be approved by Centerra shareholders or the Ontario court, as described below, or that the arrangement will not be challenged by third parties. If Centerra is unable to complete the arrangement in a manner that provides for a clean separation from Kyrgyzaltyn and the Kyrgyz Republic, including the termination or withdrawal of Kyrgyz proceedings to its satisfaction, the arrangement may not close. Accordingly, there can be no assurance that the arrangement will be consummated on the terms described herein or at all.
