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Centerra Gold Inc. says it didn’t respond to a recent $2-billion takeover proposal by a little known London Stock Exchange-listed mining concern, citing doubts about the company’s ability to complete such a deal.

It was the second time that Chaarat Gold Holdings Ltd., a small gold exploration and development company that operates in the Kyrgyz Republic, approached the Toronto-based gold miner this year.

In April, Centerra rejected Chaarat’s informal proposal to buy Centerra’s flagship Kumtor mine in the Kyrgyzstan for US$800-million, a transaction analysts dismissed as too low.

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On Wednesday, Chaarat said in a news release it had made another approach in September with the objective of buying Centerra outright with an all-cash proposal valued 35 per cent above Centerra’s stock price at the time.

It would be highly unusual for a company not to respond to such a rich premium offer.

“Absolutely, we looked at their proposal,” said Scott Perry, chief executive of Centerra, in a conference call with analysts discussing its latest quarterly financial results on Wednesday. “We’ve got a fiduciary responsibility to do so.”

Mr. Perry said Centerra considered Chaarat’s offer, the conditions around the proposal and its ability to complete the offer, but determined that “no action was required.”

Doubts have arisen whether Chaarat, whose market capitalization is a mere £96-million, or approximately $161-million, would have the financial wherewithal to buy Centerra, whose value is about $1.45-billion. Chaarat has no operating mines, no revenue, negative cash flow and has reported a string of losses.

Pointing out the huge gap in the valuations between Centerra and Chaarat, CIBC World Markets analyst David Haughton said during the Wednesday conference call that Chaarat has been “making a bit of a nuisance of itself” with its various proposals.

Earlier in the year, another analyst, Jack Gabb with Global Mining Research, called Chaarat’s April proposal for Kumtar “somewhat laughable.”

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On Wednesday, Chaarat said in trying to engage with Centerra that it provided details on funding that included backing from debt and equity investors on its offer to buy Kumtor. And in a phone call, spokesperson Conal Walsh said the company had a number of undisclosed Hong Kong-based backers.

However, due to the “unwillingness of Centerra to engage,” Chaarat said in its release it had dropped both its pursuit of the mine and the company as a whole.

Chaarat, which means “fast, running horse” in the Kyrgyz language, is backed by Swedish and Chinese investors and run by prominent Russian executive Artem Volynets. Its biggest shareholder, with a 35-per-cent stake, is executive chairman Martin Andersson, a Swedish mining, real estate, financial services and technology investor. China Nonferrous Metals International Mining Co. is its second-biggest shareholder, with a 6-per-cent stake. Its CEO, Mr. Volynets, was formerly head of strategy at Russian aluminium producer Rusal.

“We’ve never hidden the fact that we are to a significant extent an investment platform,” Mr. Walsh said.

“We have aspirations via consolidation to buy and build a collection of high value assets in the Central Asian region.”

But so far, it has only made small strides with its biggest transaction to date its US$55-million acquisition of the Kapan gold mine in Armenia from Russian producer Polymetal, which was announced earlier this week.

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Shares in Centerra, meantime, rose by 3.8 per cent to close at $5.14 apiece on the Toronto Stock Exchange. The company reported a $6-million net profit in the quarter that ended on Sept. 30, compared with a loss of $800,000 in the same period last year.

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