The Company addresses each of the developments below in detail. Reference should also be made to the historical information contained in the Company's news release dated November 7, 2012 regarding the State Commission and the related Parliamentary Commission which was formed in early 2012. The Company believes that the agreements entered into in 2009 governing the Kumtor Project (the "Kumtor Project Agreements") are legal, valid and enforceable obligations. The Kumtor Project Agreements were reviewed and approved by the Kyrgyz Republic Government and the Kyrgyz Republic Parliament, and were the subject of a positive decision of the Kyrgyz Republic Constitutional Court and a legal opinion by the Kyrgyz Republic Ministry of Justice. The Company continues to be in discussions with the Government regarding the State Commission Report, with the objective of resolving these outstanding concerns through constructive dialogue. However, there can be no assurances that the Company will be able to successfully resolve any or all of these matters currently affecting the Kumtor Project. There can also be no assurance that the Kyrgyz Republic Government and/or Parliament will not take actions that are inconsistent with the Kyrgyz Republic's obligations under the Kumtor Project Agreements or cancel government decrees, orders or licenses under which Kumtor currently operates. Any such actions could have a material adverse impact on the Company's future cash flows, earnings, results of operations and financial condition. See "Material Assumptions & Risks" and "Cautionary Note Regarding Forward-looking Information" below. For further information on risk factors relevant to Centerra and its operations, please see "Risk Factors" in the most recently filed MD&A and in the Company's most recently filed Annual Information Form. State Commission Activities
(A) State Commission Report
In December 2012, the State Commission issued its final report following five months of study and several visits to the Kumtor mine site, and over 120 written requests for information on a wide variety of matters going back to 1993 when the original agreement regarding the Kumtor Project was executed. The State Commission was comprised of three working groups with responsibility for environmental and technical matters, legal matters (including a review of all prior and current agreements relating to the Kumtor Project), and social-economic matters (including a review of financial, taxation, procurement and employment-related matters).
The State Commission Report includes a large number of allegations in regard to prior transactions relating to the Kumtor Project and the Kumtor Project's operations and management, including the following:
(i) that the Kumtor Project violated Kyrgyz Republic legislation relating to corporate, environment, and subsoil legislation at various times since project activities began in 1993, including allegations relating to the tender process for the deposit in 1993, the approval process for the initial development of the Kumtor Project, the placing of waste rock on glaciers, and causing environmental damage to water and land resources in the area of the Kumtor Project;(ii) that the Kumtor management is ineffective;(iii) that incorrect valuation of assets occurred during the 2003/2004 restructuring process, which purportedly led to significant losses sustained by the Kyrgyz Republic;(iv) that the Kumtor Project Agreements adopted in 2009 were improperly approved and violate the Kyrgyz Republic constitution.