Chaarat Gold Holdings Ltd (LON:CGH) has unveiled a proposal to acquire the Kumtor mine, one of the largest gold mines in Central Asia, from Centerra Gold.
It would be part of a three-way deal between Chaarat, Centerra and Kyrgyz state consortium, Kyrgyzaltyn OJSC.
Subsequently, Chaarat will own Kumtor's common equity and it will be responsible for the management and operation of the mine, while, Kyrgyzaltyn will own Kumtor's preferred equity and will be entitled to 50% of the mine’s economic benefit.
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Kumtor has been in continuous, profitable production for 21 years. It has more than 4mln ounces of open-pit mining reserves. It produced 500,000 ounces of gold in 2017, generating some US$188mln of free cash flow.
“Chaarat is ideally placed to take advantage of the opportunities presented by this world-class asset,” the company said in a statement.
“The proposed Acquisition represents a substantial increase in the overall scale of Chaarat's business and Chaarat's board of directors is confident that Chaarat can achieve significant value for its shareholders.
A platform for further acquisitions
“In the medium term, the acquisition will serve as a platform for further acquisitions and generate significant and stable dividends.”
Chaarat added: “For Centerra and its shareholders, Chaarat's offer provides a unique opportunity to realise the full value of Kumtor and reinvest the proceeds in Centerra's business.
“In line with Centerra's stated strategy, the deal will also enable Centerra to reposition its geographic profile and focus on its developed market asset base.”
Chaarat would pay its portion of the deal consideration in cash and Kyrgyzaltyn will transfer most of the Centerra shares it currently holds back to Centerra.
Alongside the proposed transaction, Chaarat has acknowledged its position as a long-term partner to the Kyrgyz Republic and it has stated its intention to invest up to US$600mln into two other projects in the country's mining sector, over the next five to seven years.
The proposed transaction would be a reverse takeover, and the company’s shares have now been suspended from trading on London’s AIM market.