A general view shows a sewage treatment station at the Kumtor open pit gold mine at an altitude of about 4,000 meters above sea level in the Tien Shan mountains, Kyrgyzstan, May 28, 2021.
A general view shows a sewage treatment station at the Kumtor open pit gold mine at an altitude of about 4,000 meters above sea level in the Tien Shan mountains, Kyrgyzstan, May 28, 2021. Reuters / VLADIMIR PIROGOV

Kyrgyzstan will take full control of the Kumtor gold mine (KGC), its biggest industrial enterprise, under an out-of-court settlement with Canada-based Centerra Gold after a series of legal disputes over the past year.

Kyrgyzstan will give up its 26% stake in Centerra, having seized KGC from the Canadian miner in May 2021. The seizure led to a spate of litigation before a decision to refer the matter to arbitration.

The central Asian country had accused Centerra of various transgressions including environmental damage and corruption.

Centerra denied all wrongdoing.

"Through this agreement, we have been able to ensure a full and irrevocable handover of our greatest national treasure, the Kumtor gold mine, to Kyrgyzstan," President Sadyr Japarov said in a televised announcement.

As part of the agreement, state-owned gold miner Kyrgyzaltyn will own Kumtor and will retain the income it earned from the mine since it was seized.

In exchange, Kyrgyzaltyn will give up its ownership of shares in Centerra, which will also make a cash payment totalling $86 million, partly to repay an outstanding loan to KGC and to preserve and protect the country's natural resources.

The shares will be cancelled. The deal means Centerra completely exits activities in Kyrgyzstan.

Centerra and Kyrgyzstan, which have a long history of disputes over how to share profits from the 550,000-ounce a year mine, have also agreed to end all legal proceedings against each other with no admissions of liability.

"Throughout this dispute, we have maintained that this is not about nationalisation ... It was about the specific issues with the management of (the) Kumtor mine. We have always said that Kyrgyzstan is open for business," Japarov said.

Toronto-listed shares in Centerra, which lost 34% of their value in 2021, have rebounded by 29% so far this year on expectations that the dispute would be resolved outside international courts, and on rising gold prices.

The Kumtor mine is expected to produce at least $5 billion from the 160-200 tonnes (564,000-700,000 ounces) of gold expected to be mined in the next 10 years, the president said, citing experts.

The agreement will allow Centerra to focus on its core operations, the company's president and chief executive Scott Perry said in a statement. Centerra owns assets in Canada and Turkey.

The deal is subject to conditions including Centerra shareholder approvals and the abandonment of the various lawsuits.

($1 = 1.2485 Canadian dollars)