How Centerra Cold Inc. will expand opportunities of Kyrgyzstan

Kyrgyzstan has a weakness for sensations, or rather «sensations," all the more, if they somehow relate to the major economic projects — let it be a cascade of hydropower stations or Kumtor mine.

Think up and believe

Earlier it was reported that the share of Kyrgyzstan in Kumtor for the year decreased by 6 percent. The Canadian company Centerra Cold Inc. in 2016 bought Thompson Creek, which also specializes in gold and metal mining. That is, the republic lost six percent of shares in Kumtor project, didn’t it? However, the experts think differently.

The value of the securities portfolio remains unchanged, and no one took away Kumtor. Rather, on the contrary: the republic became the owner of additional income generating assets, which it can use in the future.

The experts of JSC say that a sensation was made out of the news about a year ago deal, which no one hid. And the people started talking about it right now in connection with the forthcoming presidential elections, when a political game begins traditionally in Kyrgyzstan in the race for any post.

Kyrgyzaltyn earlier analyzed the expediency of the deal and voiced fears similar to those that have now mastered the minds of the uninitiated people. That’s just, apparently, no one was interested in it then.

What is really?

In 2016, Centerra Cold Inc. acquired a new and profitable project. The management of the company concluded a deal, as a result of which another operating and promising mine was added to its assets. It is in Canada, in British Columbia province, characterized by stable legislation and a favorable investment climate. It’s about the gold-copper Mount Milligan Mine, where a world-class enterprise has been created with the prospect of profitable production for the next 20 years.

A joint company was established based on Centerra Cold Inc. and the direct owner of the Canadian mine Thompson Creek Metals Inc. (TCM). In fact, the transaction represents a reorganization for securities holders, and the increase in capital in form of a new perspective asset gives confidence in the future, that the value of their shares will continue to grow despite the declining Kumtor mine.

The current owners of Centerra Cold Inc. received about 92 percent of the shares of the future company, TCM — 8 percent.

Moreover, together with Mount Milligan, the shareholders of Centerra Cold Inc. also acquired other profitable assets — molybdenum mines in the US and Canada, a metallurgical plant in Pennsylvania, and copper, molybdenum and silver exploration projects in North America.

Prospects

The international securities market is based on the principle of capital growth, growth in the reserves and resources that was done by Centerra Cold Inc., shares of which are listed on the securities exchange in Toronto.

That is, in case of the stable operation of both projects, the cost price of gold will decrease, while the physical volumes of the mined precious metal will increase along with the profits of the shareholders.

Kyrgyzstan, which remains the largest shareholder of the company, has actually acquired profitable and large assets. In the foreseeable and near future, this promises an increase in revenues to the republic’s budget, even if production at Kumtor mine declines. And sooner or later, gold at the Kyrgyz field will either end, or it will be unprofitable to extract it.

And this, in its turn, will help to improve the image of the republic on the international arena, first of all, in a large business environment, the representatives of which the country’s leadership seeks to involve in the development of the economy of Kyrgyzstan. Thus, we can say that Kyrgyzstan will become one of the major players in the investment and gold mining market, unless something extraordinary happens. And the Kyrgyz side is lavish with surprises that it has already repeatedly proven.

Don’t run into the same trap

Suffice it to recall how much depreciated the very package of shares that some are mourning now. A few years ago, the Kyrgyz portfolio at Centerra Cold Inc. has fallen in price by a billion dollars — thanks to the anti-investment campaign that unfolded in the Parliament, and the inept actions of officials.

Not to be unfounded, we can only recall two figures. The first is $ 1.5 billion -cost of 32.7 percent of the shares held by the Kyrgyz side in Centerra Gold Inc. before the parliamentary campaign caused panic in the stock market. The second figure is $ 500 million — the price of the same stock of shares after the deputy hysteria. That is, in fact, the state was harmed of a billion dollars. But, as usual, no one was held responsible for this.

But I repeat, the number of securities belonging to the republic has remained unchanged, as well as their value. Simply, figuratively speaking, the corporation has expanded, while Kyrgyzstan continues to be its largest shareholder.

By the way, experts familiar with the work of financial markets and stock exchanges recommend the players to pay attention not to the number of shares in a particular company, but to its capitalization, in other words, how much a package of its securities costs. It is this indicator that is the real estimate. In the end, one modest percentage of shares of Gazprom or the same Microsoft is more expensive than the whole control stock of shares of some supernumerary company. It is impossible not to know this, if you are so interested in «gold» theme.

Maybe we should better reflect on how to competently manage the Kyrgyz shares in Centerra Cold Inc., as other market players do, that will allow us to access the funds that are necessary for the development of our economy. The presence of a block of shares without proper management, unfortunately, does not give anything. And its size in percentage terms actually does not matter.