TORONTO Dec 9 Cash-strapped Centerra Gold Inc
said on Friday that it will suspend its third-quarter
and future dividends, citing financial restrictions by
Kyrgyzstan on its key subsidiary, Kumtor Gold Co.
The company, whose stock dropped as much as 7.15 percent to
C$6.75 on the Toronto Stock Exchange in volatile Friday trading,
said its board would reassess the decision after the issue with
Kyrgyzstan is resolved.
A Kyrgyzstan court ruling in June restricted Kumtor from
making certain financial transactions, including the transfer of
money to parent Centerra. Centerra added the dispute to an
international arbitration proceeding it initiated in May to
challenge of Kyrgyzstan's actions and claims.
The Kyrgyzstan government has long sought to renegotiate its
2009 agreement with Centerra to secure a bigger share of income.
Centerra, the country's biggest foreign investor and taxpayer,
has been the subject of lawsuits, multimillion-dollar fines and
a criminal probe there.
The Central Asian country holds a 27 percent stake in
Centerra though state miner Kyrgyzaltyn, and will lose
approximately $9.5 million in annual dividends under the
suspension, said RBC Capital Markets analyst Stephen Walker in a
note to clients.
Kumtor had a $122 million third-quarter cash balance, which
Walker estimates could grow to about $200 million by year-end as
higher-grade ore is mined in the current quarter.
Given Centerra's restricted cash flow, it is a "prudent
decision" to suspend the dividend, which equates to $35 million
annually, he wrote.
Toronto-based Centerra agreed to buy U.S.-based Thompson
Creek Metals in July for about $1.1 billion, including nearly
$900 million of debt. Factoring in that deal, and excluding
Kumtor's cash, Walker estimates that Centerra has about $190
million of available liquidity.
Centerra also said on Friday that it gained an extension for
an undrawn $150 million credit facility, earmarked for the
development of its Oksut project in Turkey. The company
cautioned, however, that there is no assurance it will meet
facility conditions on permitting by the new June 30, 2017
(Reporting by Susan Taylor, editing by G Crosse)