Oxus Gold Starts US $400 mln Arbitration over Uzbek Gold Project
Thursday 1 September 2011
(Press release) – Oxus Gold (LON:OXS), which declared force majeure over its Amantaytau Goldfields (AGF) joint venture in Uzbekistan earlier this year, today confirmed that it has now begun international arbitration proceedings against the Uzbek government.
In a statement today the company announced that its attempted negotiations with the Uzbek government have failed. Under the Agreement for the Promotion and Protection of Investments (Nov. 1993) Oxus and the Uzbek government were required to pursue good faith negotiations, for three months, to try to resolve the dispute amicably, Oxus said.
“While the company has actively sought to engage in discussions and has requested meetings with the Uzbek government on various occasions – including a formal invitation to the president of Uzbekistan – the Uzbek government has not made itself available to discuss the issues with the company to date,” Oxus said. “Regrettably, therefore, the company is compelled to resort to arbitration for a resolution.”
According to Oxus, the arbitration claim asserts that the Uzbek government treated the company and its subsidiaries unfairly and inequitably, it discriminated against the group, and failed to provide the group with full protection and security. All of this is in violation of the Uzbek government’s obligations toward foreign investors under the November 1993 agreement. “The arbitration requests that damages be awarded in favour of the company in an amount to be proven and quantified in the proceedings and currently estimated as no less than US$400 million.”
Oxus also told investors that it was served a claim, commenced by the Uzbek ministry of finance, in the English High Courts to enforce an Uzbek judgment from the ministry of finance for the payment of a $10 million special dividend. The company said that it had specifically identified the $10 million payment as one of several issues that it would challenge in the arbitration against the Uzbek government. “The company considers the decision by the Ministry of Finance to commence these legal proceedings in the United Kingdom as an abuse of process which is motivated by a desire to derail the imminent arbitration under the agreement,” Oxus added. “The company is working together with its legal counsel to contest this claim.
Separately Oxus gave investors an update on the situation regarding AGF which is in force majeure – a legal status used in extreme circumstances, which effectively frees a company of its obligations. The company highlighted that it recently advised its shareholders that its subsidiary Oxus Resources Corporation (ORC) was no longer able to comply with its management obligations towards AGF as a consequence of an “onerous and arbitrary” audit instituted against AGF by the Uzbek government.
It also pointed out that since it declared force majeure in March 2011 ORC has continuously updated AGF’s Uzbek shareholders of its desire to negotiate regarding the future of AGF and to advise them of their duty to mitigate the force majeure circumstances affecting AGF. However Oxus said that there have been no meaningful discussions between the company and AGF’s Uzbek shareholders regarding the future of AGF.
“The Uzbek government continues to exclude Company and ORC from AGF’s operations, while denying the company and ORC access to AGF data,” Oxus added. “The company is continuing its efforts, with assistance from international legal counsel, to protect the interests of the company’s shareholders. The company is pursuing all available remedies to seek appropriate redress and compensation for its losses.”
Oxus Gold plc (AIM: OXS.L) is the only publicly listed gold mining company with primary operations inside the Republic of Uzbekistan. Founded in 1996, Oxus was listed on London’s Alternative Investment Market (AIM) in 2001 and is currently producing significant quantities of both gold and silver from its 50% stake in the Amantaytau Goldfields JV (AGF). Located in the Kyzylkum region of Uzbekistan, AGF is situated on one of the world’s largest areas of gold endowment, the Tien Shan belt, second only in size to that of the Witwatersrand basin. AGF also enjoys the privilege of being positioned just 40 km south of the world’s largest single open pit gold mine at Muruntau.