Centerra Gold, the Canadian company that runs Kyrgyzstan's giant Kumtor gold mine, says it has taken legal moves to protect the interests of the company and its investors in response to the temporary seizure of the mine by the Kyrgyz government.
The giant Kumtor gold project has been the focus of international attention in recent months after the government moved to temporarily take over operations at the mine for what President Sadyr Japarov said was a necessary move to remedy environmental and safety violations.
In a statement late on May 31, Centerra announced that its Kyrgyz subsidiaries, Kumtor Gold Company (KGC) and Kumtor Operating Company (KOC), have filed for bankruptcy in New York under Chapter 11 of the U.S. Bankruptcy Code.
In the statement, Centerra said that the move "provides, among other things, for a worldwide automatic stay of all claims against KGC and KOC" and is meant to "facilitate potential negotiations with the Kyrgyz government."
According to a new law approved on May 14, the Kyrgyz government can take control for up to three months of any company that operates under a concession agreement in Kyrgyzstan if that firm violates environmental regulations, endangers the local environment or lives of people, or causes other significant damage.
The head of a Kyrgyz state commission investigating alleged wrongdoing at the Kumtor mine said on May 17 that his group concluded that the agreement on giving the mining concession to Centerra Gold must be revoked due to what he called "corruption" and "violations of safety and environmental regulations."
At the same time, a Kyrgyz court fined KGC more than $3 billion for dumping mining waste on glaciers near the mine 4,000 meters above sea level. A state commission also recently alleged that the KGC owes more than $1 billion in unpaid taxes.
In light of the latest developments, the Toronto-based company also said in its statement that it was conducting a "strategic review" of its ownership of the KGC and KOC "following the recent steps taken by the Kyrgyz authorities."
Kumtor Gold Company (KGC), Kyrgyzstan's biggest taxpayer, is the only firm in the former Soviet republic that operates under a concession agreement.
Centerra has called Kyrgyzstan's actions "wrongful and illegal." On May 16, the Canadian firm said it had "initiated binding arbitration to enforce its rights under long-standing investment agreements with the government."
It also accused Kyrgyz law enforcement of intimidation -- including police visits to the homes of several senior KGC managers and a May 15 raid of KGC's office in Bishkek.
Japarov's sudden rise to power in October 2020 after being freed from jail in the midst of a political crisis was particularly bad news for Centerra. As an opposition politician during the past decade, Japarov had led an unsuccessful bid in parliament and on the streets to nationalize the mine.
He oversaw several chaotic rallies against the company, including a 2013 rally in which a provincial governor was kidnapped, the basis of Japarov's 2017 arrest and 11-year prison sentence on hostage-taking charges.
On May 31, former Kyrgyz Prime Minister Omurbek Babanov was detained as part of an investigation into corruption during the development of the project. Babanov ran against Japarov last year to be chosen prime minister by parliament after protests toppled the previous government and eventually prompted former President Sooronbai Jeenbekov to step down.
Canada, Britain, and the European Bank for Reconstruction and Development (EBRD) have all criticized Kyrgyzstan's moves against Centerra.