Centerra brings additional claims in Kyrgyz-Kumtor arbitration

Crippled Canadian miner Centerra Gold (TSX: CG; NYSE: CCAU) has brought additional claims in its binding arbitration against the Kyrgyz Republic government as it fights the "wrongful expropriation" of the cornerstone Kumtor mine.

Centerra has also named, state monopoly gold refiner and Centerra's largest shareholder, Kyrgyzaltyn, as a respondent.

According to the amended notice of arbitration, Kyrgyzaltyn conspired with the Kyrgyz government to take control of the mine under the guise of temporary 'external management'. It appears to continue acting at the government's behest concerning the Kumtor operation and its shareholding in Centerra, the company alleges.

The Kumtor external management has circulated monthly press releases exceptionally critical of Centerra, with the language use dripping of likely propaganda. For example, on June 25, the external management declared Kumtor was once more operating at full capacity and meeting all production expectations.

It said: "Initial hurdles resulting from the manoeuvres of Centerra designed to impede smooth operations have been overcome. Managers drew upon their experience and the goodwill of employees, suppliers and contractors to restore key systems and resume production at the mine."

On a June 1 conference call, Centerra said it was conducting a "strategic review" of its ownership of Kumtor Gold Company and the Kumtor Operating Company.

'Our work'

"The seizure of the mine is based on false information and groundless allegations that undermine everything we have built together," Scott Perry, Centerra's president and CEO, said in a recent open letter to the people of Kyrgyzstan. "We fear that the government's unjustified action will put thousands of well-paying jobs and the businesses of hundreds of Kyrgyz suppliers at risk."

On July 6, the external management published an open response to Perry's letter, demanding he returned stolen Kyrgyz wealth. They accuse Perry and the company of running away from facing accountability under Kyrgyz law for environmental issues previously settled in agreement with government.

In the two months since the alleged Kumtor expropriation, the external management reports Kumtor has generated $82 million worth of gold, causing "great joy and enthusiasm among our citizens".

"We would like to emphasize that in spite of you and because of our work, the country is now beginning to receive resources that help make the lives of our people easier," says Kumtor external management. "There was no justice in the fact that our mine provided the lion share of the profits of Centerra."

Centerra seeks to hold the Kyrgyz government and Kyrgyzaltyn responsible for all losses and damages that result from their coordinated campaign to seize the gold mine in violation of longstanding investment agreements and without compensation to Centerra.

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