MAC/20: Mines and Communities

Kyrgyzstan: Cameco-government deal postponed

Published by MAC on 2007-10-22

Kyrgyzstan: Cameco-government deal postponed

22nd October 2007

In September, doubts were raised by citizens of Kyrgyzstan over a deal with Canadian gold miner, Centerra-Cameco, which purports to return more income to the country than previously. But the investment agreement has been put on hold, after the president dissolved parliament.

No parliament in Kyrgyzstan means Centerra will wait

The Northern Miner

22nd October 2007

The investment agreement reached between Centerra Gold (CG-T) and the government of Kyrgyzstan is on hold as the body needed to stamp its approval is no more.

Just hours after results from a national referendum on a new constitution came in President Kurmanbek Bakiyev dissolved the parliament, and in so doing, put a question mark on when its deal with Centerra will be ratified.

"It's an emerging democracy so there will be things like this that you have to deal with along the way," says Centerra's director of investor relations, John Pearson. "Time will tell how it will all play out."

At the end of August Centerra announced it had come to terms on an agreement for its Kumtor gold project in the country.

The agreement would grow its concession area by over 250 sq. km and stabilize tax rates at 13% after 2009. The company would pay a rate of 11% in 2008 and 12% in 2009.

The deal will also give the government 32.3 million shares of Centerra which will come from its parent company Cameco (CCO-T, CCJ-N). Centerra will then issue 10 million new shares to Cameco.

All the share movement would cut Cameco's roughly 53% interest down to 40%, while the government would own 29% of the company with the remaining 30% being held by shareholders.

While Pearson says the government assured the company that it would bring the agreement before parliament in early September the matter was not voted on before the body was dissolved.

The agreement is set to expire at the end of October and Pearson says it isn't yet clear if the missing of the deadline will effect the deal.

"The government is in total agreement with us," Pearson says. "This is just a postponement or a delay in the approval."

Bakiyev has had a tumultuous relationship with the parliament since he came to power in 2005.

There had been calls for its dissolution before as many of its members were said to be elected in rigged elections.

In a speech made just after dissolving parliament, Bakiyev accused parliamentarians of being more concerned with expanding their own authority than with doing what was good for the country.

While results show that some 75% of voters approved the new constitution The New York Times reports that independent monitors of the referendum found voting irregularities.

The new constitution was written in an attempt to stop fighting between the executive and legislative branches of the government and to better distribute power. To do so it will up the number of seats in parliament to 90 from 75.

Parliamentary elections are likely to take place before the end of this year as the outgoing speaker of the house said they must happen within 60 days of the dissolution.

In Toronto on Oct. 22 Centerra shares were off 3% or 34¢ to $11.68 on roughly 430,000 shares traded.


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