External management was introduced at Kumtor mine in May 2021. It was terminated only in August 2022.
Resignations and high-profile criminal cases against the former external manager of the company Tengiz Bolturuk and his team happened almost immediately.
The reason was the report of the Accounts Chamber, which revealed violations. The materials were sent to the Prosecutor General’s Office, which opened criminal cases. The report itself was published only last week. 24.kg news agency carefully studied the document in order to understand what actually happened at Kumtor.
Violations at the mine
Tengiz Bolturuk became the external manager of Kumtor under the slogan of increasing gold production and reducing the cost of it. It was announced in December 2021 that the precious metal would be mined by underground method.
It was reported that underground mining would allow Kyrgyzstan to significantly reduce environmental damage and abandon unsustainable mining.
But the audit came to a different conclusion. It turned out that the decision on underground mining was made without any calculations. At the same time, back in 2012, there was an attempt to implement such a project, but it was abandoned due to its unprofitability.
Special conditions of working with government agencies were in force during the period of external management. For example, by decision of Tengiz Bolturuk, the State Committee for Ecology and Climate received from Kumtor Gold Company (KGC) a Toyota LC 200 worth more than $60,000 for free use. The Accounts Chamber considers this a conflict of interest, because it was this department that oversaw the operation of the mine. Even after the abolition of the State Committee, the car was not returned back.
Spending at own discretion
In August 2021, by decision of Tengiz Bolturuk, certain employees of KGC were issued debit cards with a certain limit. The external manager himself had such a card. From August to November 2021, about 7.4 million soms were credited to it.
The Accounts Chamber believes that the funds were spent incorrectly.
For example, Tengiz Bolturuk continued to use KGC’s debit card even after leaving his position as interim external manager. He paid for air tickets for five members of his family on Canada — Toronto route for 1,045 million soms using the card. Travel documents were not provided.
The salary of the external manager is a different story. According to the rules, it was supposed to be equal to the earnings of the president of KGC Deon Badenhorst — $36,700. It was like that at first.
But in August 2021, Tengiz Bolturuk set a higher salary for himself — $40,000.
From December 21, 2021, the amount of remuneration increased again — up to $55,000. There are no documents that would justify the growth. In total, from May 2021 to February 2022, he was paid $473,200. In addition, in January last year, Tengiz Bolturuk received an additional bonus of $110,700 in addition to his salary. At the same time, he continued to receive the salary from KGC funds, no longer being the external manager of Kumtor.
The head of the Public Relations Department of KGC also had her own debit card.
The audit found out that 256,100 soms were spent from this card on lunches and dinners with some journalists in prestigious restaurants in Bishkek.
It is unknown with what representatives of the media and why the head of the press service dined.
Special conditions for travel
Travel of employees during external management period was another complicated issue. Kumtor Gold Company entered into an agreement with a company that handled travel arrangements for employees. It bought air tickets, booked hotels and at the same time received payment for intermediary services.
Market analysis showed that other companies that provide the same services do not charge fee for their work.
However, the fee for the purchase of an air ticket depends on the airline itself. From June 2021 to June 2022, at least 995 tickets were purchased, fees amounted to 5.3 million soms. Tickets were bought not only for employees, but also for foreign visitors invited to discuss Kumtor’s activities.
In November 2021, a delegation of the company went to Mines and Money International Forum in London (UK). More than $10,000 was spent on this business trip. As a result, there were no reports on the results of the trip, the goals achieved and the benefits received. During the same trip, tickets to the Dominion Theater for 142,000 soms were purchased using the funds on the corporate business card of Tengiz Bolturuk. There are no reports why it was done either.
Who provided whom
It is worth mentioning the work of Heritage of Great Nomads Holding. This is another ambitious project that stopped immediately after the arrest of Tengiz Bolturuk. The audit of the Accounts Chamber showed that the Holding did not have its own funds and other projects, except for Kumtor.
Kumtor Gold Company CJSC spent $1.9 million to maintain the Holding and finance its projects.
Most of the expenses were the salaries paid to foreign ($1,148.3 million) and local ($407,600) workers. Moreover, KGC transferred more than $50,000 to the Swiss company Amismo AG. It was studying potential projects that the Holding was going to launch.
«The decision to finance projects at the expense of KGC was made by the temporary external manager Tengiz Bolturuk. The projects remained unimplemented, thus, the expenses had a negative impact on the financial activities of the enterprise and the sole shareholder — Kyrgyzaltyn OJSC,» the Accounts Chamber noted.
The funds of Kumtor Gold Company were also used to pay for the rent of a very scandalous office with an area of 5,000 square meters in one of the capital’s business centers.
The Accounts Chamber found out that it was known in advance about the inexpediency of moving the office. But the external manager did not respond to reports that the rent of the new premises was four times higher than in Uchkun JSC.
As a result, it was recommended to reduce the cost of renting the office and stop unreasonable payments for the office of Heritage of the Great Nomads National Holding Company OJSC.
It wasn’t like that
The former external manager of Kumtor, Tengiz Bolturuk, himself considers the publication of reports on the audit to be a groundless denigration of his activities. His lawyer Kaisyn Abakirov presented his version of what was happening.
According to him, before the termination of external management at Kumtor, the reporting standards established by Centerra Gold were in effect.
The lawyer believes that the performance of the external manager should be considered comprehensively, and not in the context of individual aspects of work.
He stated that net profit in 2021 after payment of taxes was $233.2 million. For the six months of last year, the figure was $152.5 million. For 7.5 months of 2021, total operating costs have been reduced by $104 million. In addition, on August 9, 2022, KGC’s financial statements for 2021 were confirmed by the independent international audit company Ernst & Young. The results were submitted to the Cabinet of Ministers.
«The report of the Accounts Chamber is a deliberate veil and is aimed at manipulating public consciousness and artificially creating the appearance of Tengiz Bolturuk’s guilt in the eyes of the President Sadyr Japarov,» Kaisyn Abakirov believes.
