Centerra Gold (TSX: CG) sued the new outside manager of its Kumtor mine, which was seized by Kyrgyzstan last weekend, claiming he conspired to steal the company’s assets while he was a director.
The Toronto-based miner alleges that former board member Tengiz Bolturuk, secretly cooperated with Canadian and American lawyers, as well as the government of Kyrgyzstan to organize the expropriation of the mine, he said in a press release.
In the lawsuit, filed in Ontario Superior Court on May 20, Centerra claims Bolturuk, a dual Canadian and Kyrgyz citizen, violated his duty of loyalty and confidentiality to the company by going behind his back.
Bolturuk joined Centerra’s board of directors in December 2020 and resigned on May 17, 2021, two days before the Kyrgyz authorities announced that he had been appointed “external director” of the 100% subsidiary of the miner, Kumtor Gold Company (KGC), which operated Kumtor until its seizure.
Centerra also claims that prior to the mine’s seizure, state-owned Kyrgyzaltyn JSC attempted to embezzle US $ 29 million into an unauthorized bank account using bogus payment instructions sent to a third party.
Kyrgyzstan said so took control of the Kumtor mine due to Centerra’s “abdication of its fundamental duties of care”, accusing it of having suspended deliveries of materials necessary for the operation of the mine and of having deactivated the “critical sensors” used to monitor the stability of the mine. the mine and the movement of glaciers nearby.
“We can assure our shareholders that we are pursuing all avenues open to us in recent events, including against anyone who violates their obligations to Centerra and its shareholders,” said Scott Perry, CEO of Centerra said in the statement.
“In the meantime, to distract from their unprecedented and unprovoked seizure of the Kumtor mine, Kyrgyz officials and Mr. Bolturuk continue to make unwarranted allegations related to environmental and safety conditions,” Perry added. .
Kumtor is the largest of Centerra’s three gold mines, accounting for over 50% of the company’s total production.
The operation is also crucial for Kyrgyzstan. The mine accounts for one-fifth of the total industrial production of the former Soviet country and produced over 13.2 million ounces of gold between 1997 and the end of 2020. Last year’s production was slightly over 556,000 ounces.
The arbitration process can take up to ten years and even if the Canadian minor is successful, there is no guarantee that they will receive the stipulated amount.
Canaccord Genuity’s Dalton Baretto said in a note last week that he was not surprised by Kyrgyzstan’s move.
“We have been planning something like this since President Japarov took power on January 10; however, the speed and scale of these reforms caught us off guard, ”he wrote.
The analyst added that he believed the government had opened the door to what was likely to be a multi-year deterioration in relations between Centerra and the Kyrgyz state.
“While Centerra Gold will take advantage of all avenues available for international trade disputes, we believe these are unlikely to be effective in the long run,” said Baretto.
Japarov, who took power after violent riots last October, once campaigned for the nationalization of the mine. However, after assuming the post, he said he no longer considered it necessary.
Kyrgyzstan has a history of popular uprisings and political unrest since gaining independence after the collapse of the Soviet Union in 1991. Protesters ousted two former prime ministers in revolutions in 2005 and 2010.