Centerra Gold’s Kumtor agreement approved by Kyrgyz Government

02 May 2009 | 06:18 Code : 19057 Geoscience events
Centerra Gold (CG.TO: Quote) and the government of Kyrgyzstan have reached...

Centerra Gold (CG.TO: Quote) and the government of Kyrgyzstan have reached a new ownership agreement for Centerra’s Kumtor gold mine, the two sides said on Friday, driving Centerra’s shares up 10 percent as fears that the mine will be nationalized started to fade."The government has approved the agreement ... We will forward the document to the parliament and hope they will not put it off," Prime Minister Igor Chudinov said at a signing ceremony.Centerra, which is majority-owned by Canadian uranium producer Cameco Corp (CCO.TO: Quote), has been trying to revive an ownership agreement for the mine -- the biggest industrial enterprise in the Central Asian state -- that expired last June while it was awaiting approval by the Kyrgyz parliament.Under the new agreement, Kyrgyzstan’s stake in Centerra will rise to as much as 33 percent from 15.66 percent, as Centerra will issue to the government 18.2 million shares from its treasury, while Cameco will transfer up to 25.3 million shares to the government, Centerra said in a statement.Cameco’s stake will fall to 37.8 percent from 52.66 percent.The agreement also will introduce a new simplified tax regime under which gross revenue from the Kumtor mine will be taxed at 14 percent, and will expand Centerra’s existing concession area at the mine.As part of the deal, Centerra will pay the Kyrgyz government C$22.4 million ($18.5 million).Kumtor is expected to produce between 560,000 and 600,000 ounces of gold in 2009 at a cash cost of $485 to $525 an ounce, according to a forecast released in February.The agreement is seen as key to putting to rest fears of nationalization of the mine, which reached a fever pitch after a Kyrgyz lawmaker brought forward a bill to take control of the country’s gold mines in March 2007.Centerra’s shares jumped 11 percent on Wednesday after the company said it had submitted a draft agreement to top Kyrgyz government officials for approval.The stock was up 64 Canadian cents at C$6.87 on the Toronto Stock Exchange on Friday.The deal must still be approved by the boards of both Cameco and Centerra, as well as by the Kyrgyz parliament.($1=$1.21 Canadian) (Reporting by Olga Dzyubenko in Bishkek and Cameron French in Toronto; editing by Peter Galloway)

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