Latest Developments In The Kyrgyz Republic

TORONTO - Centerra Gold Inc. reported that in response to the adoption of a resolution by the Parliament of the Kyrgyz Republic, instructing the Government to install “external management” at the Kumtor Mine and Centerra’s Kyrgyz subsidiary, Kumtor Gold Company (KGC), and associated developments. The Company understands that the Parliament purported to act under a new law, applicable only to Centerra and KGC, that it passed in a single day on May 6, 2021.

John W. Pearson, Vice President, said, “The action by the Parliament of the Kyrgyz Republic is a clear violation of Centerra’s and KGC’s rights in the Kumtor Mine as well as the Government’s obligations to Centerra and KGC under longstanding investment agreements. This and other recent actions have no justification whatsoever under those agreements or applicable law. The Kyrgyz Government effectively seized control of the Kumtor Mine over the weekend of May 15 and 16, 2021 by sending Government authorities to the mine, KGC’s office in Bishkek and the homes of several KGC employees. Consequently, Centerra is no longer in control of the Kumtor Mine and can no longer ensure the safety of the mine’s employees or operations. Shortly before the Government took control, all key safety, monitoring and operational systems at the mine were functioning properly. Centerra did not disable any such systems, and the mine was operating without incident. Due to the Government’s unprecedented actions, Centerra has suspended access of all local KGC employees in the Kyrgyz Republic to Centerra’s global IT systems to prevent any unauthorized intrusions into those systems. None of those systems are required to safely operate the mine. The Company urges the Kyrgyz Government to take all measures necessary to ensure the safety of Kumtor’s employees and the mine and to desist from further hostile acts, including document and computer seizures and the intimidation of senior KGC personnel who have been subjected to visits by the security services to their homes and threatened with unjustified criminal action.

We remain willing and available to engage with the Government in a constructive dialogue on the matters it considers to be the subject of dispute. At the same time, the unjustified actions of the Government leave Centerra no choice but to continue to protect its interests and those of its shareholders and KGC through all legal means, including binding international arbitration and otherwise.

Centerra is concerned that these latest actions not only undermine the fundamental basis upon which the Kumtor Mine has been operated, but also put at risk the livelihoods of more than 2,700 employees, 99% of whom are Kyrgyz citizens, and the businesses of hundreds of local suppliers who support KGC operations. The actions risk destroying significant value that the Kyrgyz Republic derives from KGC’s position as the country’s largest private employer and taxpayer and put in question plans Centerra announced this year to provide US$2.0 billion in additional capital investments to extend the life of the mine by five years to 2031. In light of today’s resolution by the Kyrgyz Parliament, and in view of the fact that Centerra is no longer in control of the Kumtor Mine as a result of the Kyrgyz Government’s actions, the Company is suspending its previously issued 2021 guidance and three-year outlook relating to the mine.”

As noted previously, the recent actions by the Government of the Kyrgyz Republic violate the 2009 restated Kumtor project agreements and the 2009 Kyrgyz Republic laws which confirmed such agreements. Those agreements were re-affirmed by the Kyrgyz Republic Government in 2017 when it entered into the Strategic Agreement on Environmental Protection and Investment Promotion, which was completed and became effective in 2019. As stipulated on numerous occasions, KGC’s operations and activities have always carefully adhered to those agreements and applicable laws, including with regard to the environment, safety and taxation.

No assurances can be given that any of the current or future legal claims and other disputes that have arisen in relation to KGC or the Kumtor Mine can be resolved without a material impact on the Company or potentially the loss of Centerra’s entire investment in the Kumtor Mine.