Sentra Gold hands over control of Kyrgyzstan-owned Kumtor mine

The agreement calls for Centra to be affiliated with its wholly owned subsidiary Kumtor Gold Company and state-owned refiner Kyrgyzaltin OJSC, the people said. In exchange for control, Kyrgyzlytin is to transfer his 26% stake in Centra back to the Canadian company, which plans to delist the shares, he said.

The minority stake is valued at approximately Canadian $972 million, which is equivalent to US$776 million. Centra will pay approximately $36 million for shares to Kyrgyzlytin and the Canadian tax authorities, along with other possible payments.

Sentra and the Kyrgyz Republic are expected to postpone legal proceedings related to mine acquisitions in Kyrgyzstan, New York, Canada and Europe, the people said. Sentra placed its Kumtor operations in New York under bankruptcy protection last spring, accusing the Kyrgyz Republic of illegally seizing the mine to take advantage of rising gold prices. Government officials denied the allegations

The planned deal comes nearly a year after Kyrgyzstan’s secret police forced local managers to hand over control of Sentra’s Kumtor mine. Centra invested more than $3 billion over nearly three decades to turn a remote prospect into one of Central Asia’s largest gold mines. Kumtor accounts for about a tenth of Kyrgyzstan’s economic output and the country’s president, Sadir Zaparov, has long been an advocate of nationalization of the mine. A government official said he plans to make a televised address about Khan on Monday.

Investors and mining executives regard the seizure as an extreme example of a strategy employed by governments to exert greater control over valuable natural resources. In recent years, the governments of Greece, Africa, Asia and South America have demanded higher taxes, more lucrative royalties and bigger stakes from international companies mining and drilling for oil and gas in their regions, among other steps.

The deal – which Sentra is expected to vote on for shareholders – would avoid costly international arbitration proceedings for both parties. Sentra has pivoted since the seizure to focus its business on mines in North America and Turkey.

Kyrgyzltin, which processes gold produced by the Kumtor mine into bars, faces a bottleneck in gold sales. The state’s refiner was barred from the London gold market after failing to deliver nearly half a metric ton of bullion to a commodity trader around the time the mine was owned.

Kyrgyztalin has since struck a deal with the trader, but the refiner has been suspended by the London Bullion Market Association, which sets the international standard for trading gold.

Traders and officials say that if the state’s refiners do not get re-entry, Kyrgyzstan will have to sell gold at discounted prices in markets such as China and the Middle East.

This story has been published without modification to the text from a wire agency feed