Crossroads Asia

Canada’s Centerra Says Kyrgyzstan Refusing to Engage Over Kumtor Mine Dispute

Recent Features

Crossroads Asia | Economy | Politics | Central Asia

Canada’s Centerra Says Kyrgyzstan Refusing to Engage Over Kumtor Mine Dispute

Centerra’s Kyrgyz subsidiaries filed for Chapter 11 bankruptcy in the United States as the company seeks to talk things out with Bishkek.

Canada’s Centerra Says Kyrgyzstan Refusing to Engage Over Kumtor Mine Dispute

A view of the Kumtor gold mine, in Kumtor 350 kilometers east of Bishkek, Kyrgyzstan, Friday, May 28, 2021.

Credit: AP Photo/Vladimir Voronin

Last month, the Kyrgyz government moved to seize control of the country’s single most lucrative asset — the Kumtor Gold Mine. Kumtor’s operator, the Canadian mining firm Centerra Gold, has stated it will seek international arbitration. In the meantime, on May 31 the company announced its subsidiaries, Kumtor Gold Company and the Kumtor Operation Company, had filed for Chapter 11 bankruptcy in the United States “to protect the interests” of the company and “prevent any further efforts by the Kyrgyz Government to strip” the mine of its assets.

The filing drags the Kumtor saga further into the international limelight.

The Kyrgyz parliament passed a law in early May allowing for the imposition of “external management” on companies with mining concession rights that are found to be violating environmental protection and safety obligations. Conveniently, on the same day the bill was passed a Kyrgyz court issued a $3 billion fine to Centerra’s Kyrgyz subsidiary following a suit by four private citizens (one of whom was the son of the head of Kyrgyzstan’s State Ecology and Climate Committee) on behalf of Kyrgyzstan seeking reparations for the mine’s past environmentally damaging practices. Then Kyrgyz tax authorities said the company owed $170 million in back-taxes. 

The onslaught culminated in the Kyrgyz government seizing control of the mine on May 17. Centerra, in a press release, said its offices had been raided and the Kyrgyz government had taken control. “Consequently, Centerra is no longer in control of the Kumtor Mine and can no longer ensure the safety of the mine’s employees or operations.” The company stressed that prior to the seizure, all key systems — safety, monitoring, operational — were functioning properly, to head off claims to the contrary by the Kyrgyz side. 

The Kyrgyz government tapped Tengiz Bolturuk, a dual Kyrgyz-Canadian citizen reportedly living in Kazakhstan, to administer the mine. Bolturuk had served as one of Kyrgyzstan’s three representatives on Centerra’s board of directors from December 2020 to May 17, when he resigned. Two days later, he was appointed the “external manager” of the mine.

As Eurasianet reported, his appointment triggered worry among employees of the state mining company, Kyrgyzaltyn, which owns Kyrgyzstan’s Centerra shares. Shortly after, Centerra sounded the alarm that prior to the mine’s seizure, Kyrgyzaltyn had “attempted to divert approximately $29 million to an unauthorized bank account using a forged payment instruction sent to a third party.” The company also said it was investigating the possibility that Bolturuk had been involved in discussions with the Kyrgyz government regarding seizing the mine. 

Centerra’s latest announcement drags the dispute into the United States. Per a May 31 press release, the Kumtor Gold Company and the Kumtor Operation Company are seeking worldwide automatic stay protection via the Chapter 11 bankruptcy process. The filing was made in the Southern District of New York. “The court-supervised process provides, among other things, for a worldwide automatic stay of all claims against KGC and KOC. Centerra hopes that this internationally recognized, orderly restructuring process will facilitate potential negotiations with the Kyrgyz Government.”

Centerra CEO Scott Petty, in the press release, said that the Kyrgyz government had refused to engage with the company. “We have repeatedly asked the Kyrgyz Government to discuss its concerns with us, yet it has refused to engage with us in any way.”

In the statement, Perry reiterated the company’s view that the Kyrgyz government’s actions are a “concerted and premeditated effort to take control of the Kumtor Mine.” 

In an interview with Reuters, Perry was more direct: “Unfortunately I have to say that it really appears to be a concerted effort to falsely justify a nationalization of the mine.”

The company said would pursue arbitration to enforce the agreements with Kyrgyzstan under which Centerra and its subsidiaries have long operated. “Those agreements are governed by New York law,” the May 31 statement reads, “and we expect the U.S. court proceedings will serve to further protect Centerra’s interests under their terms pending a restructuring or other resolution of the dispute.”

Under U.S. law, when a company files for bankruptcy there is an automatic injunction that halts any action by creditors to collect debts. This would seem to insulate Centerra’s Kyrgyz assets from further seizure for the time being.

Meanwhile, in Kyrgyzstan the chaos over Kumtor has served as a mechanism to pursue political rivals. As Eurasianet reported, the Kyrgyz government’s campaign against Centerra has “sought by various means to make the case that Kumtor has been steeped in corruption and has committed environmental violations.” Part of making that case stick is dragging out the alleged accomplices and beneficiaries. 

On May 31, former presidential candidate Omurbek Babanov was detained by the security services on unspecified corruption allegations related to the mine. The brother of former President Sooronbay Jeenbekov, sitting MP Asylbek Jeenbekov, was reportedly summoned for questioning and also detained. Former Prime Minister Temir Sariyev and former MPs Tursuntai Salimov and Sergei Ibragimov have also been questioned. 

Kyrgyz President Sadyr Japarov, who is famous for wanting to nationalize Kumtor, maintains that he is not pursuing the nationalization of Kumtor.