Kyrgyz government expected to approve Kumtor mine plan, Centerra Gold says
TORONTO — Centerra Gold Inc.'s (TSX:CG) chief executive says he believes the company is finally close to receiving all the approvals needed to move ahead with its Kumtor mine after months of disappointing delays.
"I have to believe that prime minister and the people in the Kyrgyz Republic are getting tired of the postponements, as we are, and that there's no reason why it shouldn't be done," CEO Len Homeniuk said after the company's annual meeting.
"We have an overwhelming majority of Kyrgyz citizens wanting to see agreements entered into and the matter finished, so I'm quite confident that that would happen."
Centerra Gold Inc. (TSX:CG) and parent Cameco Corp. (TSX:CCO) agreed last month to extend a deadline for agreements with government of the Kyrgyz Republic regarding the Kumtor mine to June 1.
The three-way deal is aimed at reducing Cameco's majority stake in Centerra and increasing Centerra's concession in Kyrgyzstan by more than 250 square kilometres.
The agreement includes a reduction in Cameco's stake in Centerra to 41 per cent, while the Kyrgyz government's holding would grow to 29 per cent and public shareholders would own the remaining 30 per cent.
Centerra and the government also agreed to a simplified tax rate for Kumtor.
"We've extended the agreement until June 1st and when I was in the Kyrgyz Republic last week the prime minister informed that the parliament had scheduled the ratification for May 29," Homeniuk said.
The delays have had to do with the dissolution of parliament in December and the timing of due diligence, he added, saying that the latest extension was needed "because of visa problems and other issues (that) it took longer than expected."
"There was no delay other than they needed more time."
Homeniuk also said a routine tax probe into the company's operations in that country didn't turn up any problems.
"We've been through it many times in the past - they're looking basically for inconsistencies in tax reporting and certainly violations of the code, but certainly they've never found anything with us," he said.
"They've pretty much put it aside now."
Last week, Centerra posted first-quarter net earnings of $19.3 million, up from 5.9 million a year ago, despite a $4.5 million charge relating to the three-way Kumtor deal.
It maintained its full-year gold production guidance of 770,000 to 830,000 ounces, more than 40 per cent higher than 2007.
Asked about the outlook for gold, which has risen as high as US$1,000 an ounce, Homeniuk declined to give an actual prediction.
But he said, that "with the weakening U.S. economy, the move from the U.S. dollar to other currencies, the shortage of gold ... the price can't help but climb."
"It's a very volatile climb...but I think at the end of this year it's going to be a lot higher than it is now."
Centerra is a major North American-based gold producer and the largest western-based gold producer in Central Asia and the former Soviet Union.
On the TSX Thursday, shares in Centerra were trading at $9.62, down a penny.
