Put this in the "better late than never" folder: Cameco Corp. of Saskatoon and the Kyrgyz government have reached a new agreement concerning ownership of the Kumtor gold mine. The terms were agreed upon in August 2007, but never ratified by the Kyrgyz parliament. The original agreement expired on June 2, 2008, and it has taken almost another year for the parties to negotiate new terms.
The Kumtor mine is wholly owned by Centerra Gold of Toronto, which is in turn owned 53% by Cameco and 16% by the Kyrgyz government. The mine is located in a scenic and mountainous region only 60 km north of the Chinese border. It produces roughly 500,000 oz of gold per year.
Key to the agreement, is the government's pledge to support Centerra's right to the mine and its long-term plans for the project. Centerra's existing concession area has been expanded to match its exploration and development licence. The Kumtor mine will pay a new tax of 14% of gross revenue, and Centerra will make an annual payment of 4% of gross revenue against which all of its future capital and exploration expenditures in the Kyrgyz Republic are fully credited. Centerra has agreed to issue 18.2 million common shares to the government. Cameco has further agreed to transfer to the government between 14.1 and 25.3 million common shares of Centerra, which will only be released to the government if certain conditions are met.
After closing of the transactions and upon the satisfaction of all conditions to the transfer of shares by Cameco, the Kyrgyz government could own up to 33% of Centerra, Cameco 37.8% and the balance, 29.2%, will be held by the remaining shareholders.
The new agreement has several significant changes from the earlier deal. It gives the Kyrgyz government a larger stake in Centerra. Originally it was to be 29.3% of the operating company. Likewise, Cameco's portion will shrink from 40.5%. The previous tax rate would have been only 12% this year and 13% going forward rather than 14%.
This time the Kyrgyz parliament wasted no time. It ratified the agreement on April 30, 2009, just days after the second agreement was reached.
Details are posted at www.Cameco.com and www.CenterraGold.com.
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