Centerra suspends dividends as Kumtor cash flows dry up

VANCOUVER (miningweekly.com) – An order of the Bishkek interdistrict court that prohibits Canadian miner Centerra Gold's Kyrgyzstan subsidiary Kumtor Gold Company (KGC) from distributing cash from the cornerstone Kumtor mine, has also seen the company's board suspend its quarterly dividends owing to reduced cash flows.

The TSX-listed company’s stock fell as much as 7.12% Friday to C$6.75 apiece.

Toronto-based Centerra, which operates the biggest gold mine in Central Asia, stated that the board would reassess declaring dividends once the matter is fully resolved.

Centerra has been locked in a bitter dispute with the nation's government over profit sharing and project ownership. In May the company turned to international arbitration in the hopes of resolving the long-standing dispute. Centerra and its subsidiary are also subject to unresolved multimillion-dollar lawsuits related to alleged land-use infractions and environmental impacts.

The interdistrict court order intends to secure KGC’s potential liability for a claim brought by the Kyrgyz Republic State Agency for Environmental Protection and Forestry. As a result, KGC held $121.6-million in cash as at September 30.

Centerra had previously stated that it believed its cash at hand, cash from the company’s existing credit facilities, and cash flow from the newly acquired Mount Milligan gold/copper mine, in British Columbia, would be enough to fund its expected operating cash requirements through to the end of 2017, although there can be no assurance of this.

Without access to cash held by KGC, Centerra expects that it will be required to raise financing to fund construction and development expenditure on its development properties, or to defer such expenditures.

Centerra’s cash, cash equivalents and short-term investments at the end of the third quarter amounted to $479-million.

Meanwhile, the company on Friday noted it had received a seven-month extension from UniCredit Bank and the European Bank for Reconstruction and Development to satisfy conditions precedent to drawing down its $150-million financing facility to develop the delayed Öksüt gold mine, in Turkey. However, the company cautioned that there were no assurances that all conditions would be satisfied by June 30, 2017.