Canada鈥檚 Centerra Gold (TSX: CG)聽has sued the new external聽manager聽of Kumtor mine, which was seized by Kyrgyzstan last weekend, claiming that he聽conspired to steal聽the asset from the company while he was a聽director.
The Toronto-based miner alleges that former board member Tengiz Bolturuk secretly co-operated with Canadian and US lawyers, as well as with the government of Kyrgyzstan to stage the mine expropriation, it .
In the suit, filed in the Ontario Superior Court聽on Thursday, Centerra claims that Bolturuk, a dual Canadian and Kyrgyz citizen, breached his duty of loyalty and confidentiality to the company.
Bolturuk joined the board of Centerra December 2020 and resigned on May 17, 2021, exactly two days before Kyrgyz authorities announced he had been appointed as 鈥渆xternal manager鈥� of the miner鈥檚 wholly owned subsidiary, Kumtor Gold Company (KGC), which operated Kumtor until its seizure.
Centerra also claims that prior to the seizure of the mine, state-owned company Kyrgyzaltyn JSC tried diverting $29 million to an unauthorized bank account using a forged payment instruction sent to a third party.
Kyrgyzstan has said it took control of the Kumtor mine because of the 鈥渁bdication of its fundamental duties of care鈥� by Centerra, charging that it had suspended deliveries of materials needed to operate the mine and had disabled 鈥渃ritical sensors鈥� used to monitor the stability of the mine and the movement of nearby glaciers.
鈥淲e can assure our shareholders that we are pursuing all avenues available to us in connection with recent events, including against any persons who violate their obligations to Centerra and its shareholders,鈥� said Centerra CEO Scott Perry .
鈥淚n the meantime, to deflect attention from their unprecedented and unprovoked seizure of the Kumtor Mine, Kyrgyz officials and Mr. Bolturuk continue to make unjustified claims related to environmental and safety conditions,鈥� Perry added.聽
Uncertain future
This week鈥檚 events have left Centerra鈥檚 future in the balance. Kumtor is the largest of its three gold mines, accounting for over 50% of the company鈥檚 total output.
The operation is also crucial to Kyrgyzstan. The mine accounts for a fifth of the ex-Soviet country鈥檚 total industrial output and has produced more than 13.2 million ounces of gold between 1997 and the end of 2020. Last year鈥檚 output was slightly over 556,000 ounces.
Arbitration proceedings can take up to ten years and even if the Canadian miner succeeds, there is not guarantee it will be paid the stipulated amount.
Dalton Baretto of Canaccord Genuity said in a note last week that he wasn鈥檛 surprised by Kyrgyzstan鈥檚 move.
鈥淲e have been anticipating something like this since President Japarov took power on January 10; however, the speed and breadth of these reforms has caught us off-guard,鈥� he wrote.
The analyst added he believed the government has opened the door to what is likely going to be a multi-year degradation of the relationship between Centerra and the Kyrgyz State.
鈥淲hile Centerra Gold will leverage all available avenues of international trade disputes, we believe these are unlikely to be effective in the long term,鈥� Baretto said.
Kumtor has been the聽focus of a number of disputes聽between the company and聽the Kyrgyz government.
Japarov, who seized power聽after violent riots last October, once campaigned for the nationalization of the mine. After winning January鈥檚 elections and assuming the post, however, he said he no longer considered it necessary.
Kyrgyzstan has a history of popular uprisings and political turmoil, ever since gaining its independence after the collapse of the Soviet Union in 1991. Protesters had ousted two prior PMs in revolutions in 2005 and 2010.