Kyrgyz finance minister resigns after Kumtor deal collapses

By bne IntelliNews April 13, 2015

Jacopo Dettoni in Almaty -


Kyrgyzstan Finance Minister Olga Lavrova resigned on April 12 following a fresh setback in the negotiations with Canadian mining company Centerra Gold over the restructuring of flagship gold mine Kumtor.

Lavrova said her decision was “logical and systematic” according to the budget management goals she was given when appointed finance minister in 2012, in comments reported by local news website from her press conference in Bishkek on April 13.

Lavrova took an active part in the negotiations with Centerra Gold as a member of the government’s advisory council tasked with running the talks, yet her decision was “not connected” to the situation surrounding Kumtor, she claimed during the press conference.

Despite this claim, its timing certainly added additional pressure on the government of Prime Minister Djoomart Otorbaev, which already had to take notice of the resignation of another two top officials directly involved in the Kumtor negotiations just a few days earlier.

Kyrgyzstan, via state mining firm Kyrgyzaltyn, holds a 32.7% stake in Centerra Gold, which fully owns the Kumtor mine and another couple of mining licenses in Mongolia. The government has been trying to swap that 32.7% stake for half of a newly established 50-50 joint venture in charge of running only the Kyrgyz operations. Yet the negotiations collapsed when Centerra Gold cut Kumtor’s estimated reserves to 6.1mn tonnes at the end of 2014 from 8.5mn tonnes a year earlier in a report published in February.

Under the new circumstances “I do not believe that the creation of a joint venture would meet the interests of the country,” Prime Minister Djoomart Otorbaev, who had previously supported the deal, said on April 9, taking aback many of the state authorities involved in the negotiations.

Duyshen Irsaliev, head of the State Property Fund (SPF), which fully owns Kyrgyzaltyn on behalf of the state, resigned on April 9, citing disagreements with Otorbaev. Kyrgyzaltyn’s chairman, Tokon Maytov, resigned on April 10 for the same reason. They had both clashed with Otorbaev’s new strategy for  Kumtor.

The PM is now seeking the appointment of seven, new foreign members of Centerra Gold’s board of directors at a shareholder meeting slated for May 8. Taking into account the three national directors that already represent the country in the 11-member board, that would allow the government “to take the reins” of the company, as Otorbaev previously told parliament.

In the meantime, Deputy Prime Minister Valery Dil said the government will establish a working group to assess viable options for a restructuring of Kumtor’s ownership, including a complete nationalisation of the mine - an option that opposition parties have long backed and supported.

The Jogorku Kenesh, the Kyrgyz parliament, gave the government another month to strike an agreement with the Canadian company.

Centerra Gold commented on the latest developments by stating that “there are no assurances that continued discussions between the Kyrgyz government and Centerra will result in a mutually acceptable solution regarding the Kumtor Project, that any agreed upon proposal for restructuring would receive the necessary legal and regulatory approvals under Kyrgyz law and/or Canadian law and that the Kyrgyz government and/or parliament will not take actions that are inconsistent with the government’s obligations under the Kumtor Project Agreements, including adopting a law “denouncing” or purporting to cancel or invalidate the Kumtor project agreements or laws enacted in relation thereto,” the company wrote in a statement.




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