Kumtor Gold Mine


The Kumtor gold mine is an open-pit gold mining site in Issyk-Kul Region of Kyrgyzstan located about 350 km southeast of the capital Bishkek and 80 km south of Lake Issyk-Kul near the border with China. Located in Tian Shan mountains at more than 4,000 m above sea level, Kumtor is the second-highest gold mining operation in the world after Yanacocha gold mine in Peru.

Ownership

Kumtor is 100% owned by the Canadian mining company, Centerra Gold. Centerra Gold Inc. is a Canadian-based gold mining and exploration company engaged in the operation, exploration, development and acquisition of gold properties in North America, Asia and other markets worldwide. Centerra’s shares trade on the Toronto Stock Exchange under the symbol CG. The Company is headquartered in Toronto, Ontario, Canada. The Kyrgyz Republic, via Kyrgyzaltyn JSC, is Centerra's largest shareholder owning 77,401,766 shares, or more than 26 % of the issued shares of Centerra. Kumtor Gold Company is the operator of the Kumtor project responsible for the entire production cycle.

Operation

The deposit is mined by open-pit mining techniques utilizing typical drill, blast and truck/loader or truck/shovel operations. The ore is delivered to the crusher and further to the mill, where the gold is extracted using carbon-in-leach technology
The mill's rated throughput is approximately 16,000 tonnes of ore per day. After the ore treatment is complete, the gold is poured in the form of Dore bars containing about 80 percent of gold.
As of December 31, 2017, Kumtor had produced approximately 11.5 million ounces or 357 tonnes of gold since the start of commercial production in May 1997..
The Dore bars produced by the Kumtor mine are purchased by Kyrgyzaltyn JSC for processing at the Kara-Balta refinery pursuant to a Gold and Silver Sales Agreement signed by Kumtor Gold Company, Kyrgyzaltyn and the Government of the Kyrgyz Republic. Kyrgyzaltyn JSC enjoys the exclusive right to sell refined gold and silver both in and outside the Kyrgyz Republic.
In 2017, gold production at the Kumtor mine was 562,749 ounces or 17,503.46 kg. Gold sales were 550,134 ounces or 17,111.09 kg.

History

Despite the fact that the Kumtor gold deposit was discovered in 1978 and the feasibility study was drafted by GINALMAZZOLOTO of the Chief Directorate of Precious Metals and Diamonds of the USSR Council of Ministers in 1989, the development of the mine was delayed as the project was seen as being too costly: 995.4 million Soviet rubles.
It was not until after Kyrgyzstan gained independence that it found itself in a position to attract western investment to start developing its own mineral resources. After thoroughly examining several investment offers, the Government of the Kyrgyz Republic favored those made by Canadian Cameco Corporation, one of the world’s largest uranium producers. On December 4, 1992, in Toronto the sides signed the Kumtor Master Agreement.
The Mine's construction commenced in 1993, and commercial gold production at Kumtor started in May 1997 so that as soon as one year later, the company poured its first million gold ounces. Mining operations in the open pit are expected to be completed in 2023 while milling operations are thought to continue until 2026.
Dates
Controversies
In 1992, Cameco Corporation became the owner of the Kumtor mine with no tender or competition ever announced. The Master Agreement between Cameco and the Government of Kyrgyzstan said that Kyrgyzstan's laws were applicable to the corporation insofar as they didn't contradict the Master Agreement.
One of the worst accidents relating to the mine occurred on May 20, 1998, when a truck overturned while carrying a load of sodium cyanide, used for extracting gold from ore. The spill necessitated evacuation of approximately 5,000 residents of the village of Barskoon. In late 1998, a joint Russian-Canadian expert commission concluded that toxic concentrations in the Barskoon and Tamga irrigation water was too insignificant to cause any harm to human health. A series of analyses, including chemical ones, conducted by a laboratory of the national sanitary-epidemiological station under the Agency for Geology and Natural Resources, showed that cyanide concentration in the river, diversion ditches and the lake was under MAC as soon as May 27, 1998. Nor cyanide was ever detected in the vegetables or fruits. Moreover, no follow-up medical examinations discovered any growth in cancer rates or gene mutations among the residents of Jety-Oguz district, Issyk-Kul Province.
After Cameco sold all of its shares to Centerra Gold Inc. in 2009, Kyrgyzstan became the major shareholder of the company. That same year, when Kurmanbek Bakiyev was President of the Kyrgyz Republic, a new project agreement was signed between the company and Kyrgyzstan. Deposed in 2010, he was blamed for accepting terms that he knew were against the interests of the country.
In this context, a temporary parliamentary commission was formed by Jogorku Kenesh in February 2012 to review the Kumtor mine's activities. Based on its findings, in June 2012, a State Commission was formed to carry out a comprehensive audit of Kumtor Operating Company. The Commission was chaired by Temir Sariyev, Minister of the Economy and Antimonopoly Policy.
In February 2013, the Parliament of Kyrgyzstan supported the State Commission's recommendation that the 2009 Kumtor Agreement should be reviewed. The Government was ordered to have the Agreement with Centerra Gold Inc. revised in favor of Kyrgyzstan. Otherwise, the Government was instructed to terminate the Agreement.
As a result of the Commission's efforts, On May 22, 2013, the State Inspectorate Office for Environmental and Engineering Safety filed a claim against Kumtor Operating Company to an amount of 6.8 billion soms. On May 24, the claim was dismissed by the court. On June 7, claims were filed again by the said Inspectorate Office which were rejected by the court decisions dated June 11 and 13, 2013.
Against this background, on May 28, 2013, about 500 village residents in Jety-Oguz district, Issyk-Kul Province blocked the road to the mine demanding that the 2009 Agreement should be terminated. In the evening May 30, a few dozens of protesters seized an electric power substation and shut down the grid power supply to the gold mill. Electricity supply was resumed early in the morning on May 31 after police forced out the protesters from the electric power substation. President of Kyrgyzstan Almazbek Atambayev declared the state of emergency in Jety-Oguz district. As the result of the outage, the gold mill suffered more than $4 million in losses.
By October 2013, the Kyrgyz Republic's Government had completed negotiations with the Canadian company and submitted to Parliament a draft Memorandum creating a 50/50 joint venture company, which, however, was rejected by Parliament as it demanded that Kyrgyzstan's equity interests in the company should be increased to 67%.
In 2014, the Kyrgyz Republic's Government sponsored amendments to the existing Water Code which banned any activities that might affect the status of glaciers. However, it made an exception for the Davydov and Lysyi glaciers located within Kumtor's concession area. In its explanatory notes, the Government proved that Kumtor was critically important for the economy of Kyrgyzstan.
In the meantime, the Government came up with a modified version of the Kumtor restructuring Memorandum which it submitted to Parliament in February 2014. The restructuring program for Kumtor was approved by Parliament. In December 2015, however, it was announced that the Kyrgyz Republic's Government was pulling out of the talks as it was going to provide a new restructuring program. In that situation, a risk of operations being shut down at Kumtor arose as the Water Code amendments permitting Kumtor's operations had still to be adopted by Parliament.
That same year, the Supreme Court of the Kyrgyz Republic affirmed the State Inspectorate Office's appeal and brought the case back to the Inter-District Court. A second stage of litigation began. In 2016, the court made a ruling in favor of the Inspectorate Office. The principal difference between the ways the Inspectorate Office's claims were considered in 2013 and 2016 was that in 2013 court proceedings were purposefully slowed down by Kyrgyzstan's authorities in anticipation of the results of the ongoing negotiations with Centerra Gold Inc. about the restructuring of the Kumtor Project.
Then legal proceedings were transferred to international courts and continued until the Strategic Environment and Investment Agreement was signed between Centerra Gold Inc. and the Kyrgyz Republic's Government. The said Agreement settled all disputes and the existing arbitration and environmental claims. On November 16, 2016, were also adopted amendments to the Water Code permitting commercial activities near the Davydov and Lysyi glaciers.
Kumtor's Contribution to Kyrgyzstan's Economy
According to preliminary reports of the , Kumtor's impact on Kyrgyzstan's macroeconomic indicators in 2017 looks as follows:
- Kumtor's contribution to Kyrgyzstan's GDP accounted for 9.7%;
- Kumtor's contribution to the aggregate industrial output amounted to 21.1%;
- contributions made within the Kyrgyz Republic in 2017 exceeded US $269,731,000.
Kumtor's total payments made within Kyrgyzstan between 1994 and 2017 exceeded US $3.472 billion.

Outlook for 2018

Kumtor’s 2018 gold production forecast is expected to be in the range of 450,000 to 500,000 ounces or 14.15 to 15.55 tonnes. Total capital expenditures, excluding capitalized stripping, are forecast to be US $63 million. Growth capital investment is forecast at US $14 million primarily related to tailings dam construction. Capitalized stripping costs are expected to be approximately $122 to $168 million.