Kumtor have summed up the operating results of the first month of Temporary External Management

published: 25 June 2021

In accordance with Order of the KR Cabinet of Ministers dated May 17, 2021, temporary external management has been introduced in Kumtor Gold Company CJSC.

In mid-May 2021, Centerra Gold Inc. took actions to block access of all Company employees to global information systems and services. Such actions not only threatened key safety, monitoring and operational systems at the Kumtor Mine, but also significantly violated the rights of the Company’s employees and the laws of the Kyrgyz Republic. Nevertheless, the Company’s employees were sympathetic to the introduction of temporary external management and continued to perform their duties, including ensuring the uninterrupted operation of the Kumtor Mine and functioning of all subdivisions.

Currently, the Company IT Department restored 90% of the internal IT systems, the remaining 10% will be restored in the near future.

The Kumtor Mine is operating on a scheduled basis. Gold production in 2021 is estimated to be about 470-510 thousand ounces or 14.62 – 15.86 tons of gold. The Company is strongly committed to achieving production performance. Since the beginning of the year, 161,060 ounces of gold have been produced. For the period from January 1 to May 31, 2021, the Kumtor Mine production rate made 84.114 mln tonnes of rock. Gold-containing ore at the volume of 1.789 mln tonnes has been mined of these at an average grade of 1.908 g/t, which amounts to 109,791 ounces.

Since the introduction of temporary external management, the Company has sold 44,000 ounces of gold. Total revenue has amounted to 82.234 million US dollars, gross profit has been received in the amount of USD 40.282 million. The production cost has amounted to USD 41.952 million.

Taking into account gold price fluctuation, the first consignment containing 16 thousand ounces of gold has been sold at the price of USD 1,813.15 per ounce, whilst the second consignment of 28 thousand ounces has been sold at USD 1,893.15 per ounce.

The Company has discharged all current liabilities on taxes and other payments to the budget of the Kyrgyz Republic. Wages and salaries are paid to employees on time. The Company has almost completely settled accounts with the suppliers of goods, works and services.

The Company has now begun a comprehensive analysis of its strategic needs for materials, goods and services, focusing on quality, competitive pricing and the ability of suppliers to fulfill their contractual obligations in a timely manner. The company will be aiming at making purchases from local suppliers. Goods that cannot be purchased from local producers will be purchased from overseas. Announcements of ongoing procurements are published on the Company’s website.

The Company conducts an in-depth analysis of all available information in order to reduce the mining cost and environmental impact.

Currently, the work is ongoing to amend the strategy of deposit development. It will include a project to switch to underground mining based on a feasibility study that would be developed in future. Additional exploration and geotechnical drilling will be required to improve reliability and transfer resources out of the “proven” and “probable” categories. In June 2021, the Company is going to publish an announcement on acceptance of commercial bids for exploration work at the Kumtor Mine, taking into account the new requirements as to service suppliers.

The essence of tailings recycling project to extract gold from the liquid and solid phases of the tailings has also begun to be actively examined. This will require the involvement of additional consulting services, development of the feasibility study and related projects as well as approvals, obtaining permits and licenses in accordance with the Kyrgyz laws, construction and start-up of a small gold leaching plant.

To rationally use the available resources and reduce environmental impact, a plan is being developed to use pit water as process water for the gold recovery plant (Mill) after filtration and additional treatment. Preliminary estimates indicate that water from the pit could provide with 80-85% of the water supply. The issue of recycling water use in the Mill will not arise when 80% of pit water is available.

The Company plans to initiate development of a new long-term program aimed at implementing socio-economic and charitable events throughout the country. Active support for development projects in the Issyk-Kul region remains a priority policy of the Company.

To ensure the rational use and effective management of the Issyk-Kul Province Development Fund, the Company proposes the introduction of new rules in the management and organization of financing principles, focusing on ensuring the control functions and transparency of funds distribution to finance the priority sectors of the regional economy. It is also proposed to reduce the number of members of the Supervisory Board of the Fund and have the Company’s representatives to be included in it. Moreover, the Company is willing to provide consulting assistance to the Fund in the process of identifying projects for funding and other activities on a regular basis.

In June 2021, with a view to ensure a pool of personnel with vocational education and leadership skills, enable young people to gain work experience, and identify and develop talents, a renewed and expanded summer internship program was announced for third- and fourth-year students of higher educational institutions in the Kyrgyz Republic. The Company selects students of different areas of study based on production goals. The number of apprentices with different specializations is increased as well.

As from now, the Company will pay considerable attention to youth support programs, creating favorable conditions for identifying and encouraging talented young people and gaining valuable international experience using advanced technologies. On June 22-24, 2021, 19 young specialists from various departments of the Company took part in Mining Week Kazakhstan, an international exhibition of technologies and equipment for the mining and metals sector and rational use of subsoil, which was held in Karaganda in the Republic of Kazakhstan. At the end of the trip, the participants will present their proposals to achieve various production and economic objectives of the company. Best projects will be recommended for application at Kumtor’s facilities.

In order to prevent the suspension of Kumtor Mine operations, and due to economic hardships existing in the Kyrgyz Republic, the KR President’s Administration, the Cabinet of Ministers, other government agencies, and Kyrgyzaltyn OJSC provide the necessary support.

Detail information relating to Company production performance will be published in quarterly and year-end press releases in accordance with usual practices.

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The Company continues practicing the philosophy of openness and transparency in its activity. The Company’s activities are fully subject to and governed by the laws of the Kyrgyz Republic.

The Company is financially reliable and will continue to discharge liabilities to employees, contractors, suppliers, as well as meet social obligations and obligations towards the budget of the Kyrgyz Republic.