Armenia’s Amulsar gold mine may begin operations next year

By Mark Dovich

Operations at Amulsar, Armenia’s long-stalled gold mining project, can begin as soon as next spring, a senior Eurasian Development Bank (EDB) official suggested Thursday, in a rare public indication of a timeline for a project embroiled for years in environmental and political controversy.

A number of outstanding issues must still be resolved before production can begin, Senior Managing Director Denis Ilin told the ArmInfo news site, most importantly an EDB-led environmental impact assessment.

Ilin told ArmInfo last May that the EDB’s decision to extend a multimillion loan to allow the Amulsar project to go ahead will hinge on the results of an internal environmental audit. Findings were initially expected to be made available last August, though that has now been postponed to next month. It was not immediately clear why the assessment had been delayed for nearly a year.

Still, Ilyin’s suggestion that operations may begin as soon as next spring largely lines up with remarks earlier this year by Babken Tunyan, a senior Armenian lawmaker, who said in April that he expects production to start “at the end of this year or the beginning of next year.”

Lydian Armenia, the company with the rights to the mine, has not commented publicly on the matter.

What’s the background?

Lydian first broke ground at Amulsar in 2016, but development was suspended for several years starting in 2018, when activists and residents of nearby communities began staging blockades of the mine entrance, citing environmental concerns.

Then last February, the Armenian government inked a surprise $250 million memorandum of understanding with Lydian and the EDB to revive the project. As part of that deal, the EDB pledged to loan $100 million to Lydian, while Lydian agreed to hand over a 12.5% stake in the project to the Armenian government.

However, it has since emerged that the government still does not own any shares in Lydian, an arrangement that was initially set to be finalized by the end of March. Earlier this month, Prime Minister Nikol Pashinyan’s cabinet formally pushed that back to September, citing unspecified “technical problems” and a reported corporate restructuring at Lydian.

Why is Amulsar so important?

The Amulsar deposit is Armenia’s second biggest gold deposit by volume, after the Sotk mine. Operations at that site, which straddles the border between Armenia and Azerbaijan and is owned by a Russian company, have been largely suspended since last May amid repeated cross-border shelling.

Vahan Kerobyan, who served as Armenia’s economy minister when the deal to revive Amulsar was struck, said in January the government stands to make up to $103 million every year if the mine is finally put into operation.

Who are the other players?

Lydian is ultimately owned by private equity firms in Canada and the United States. The U.S. embassy in Yerevan has previously described Amulsar as “one of the biggest U.S. investments in Armenia.”

The Russia-led, Kazakhstan-based EDB is one of the region’s leading international development financial institutions. Last April, Armenia agreed to pay $64 million to buy out a portion of Russia’s shares in the bank, increasing its stake from a meager 0.07% to 4.23%.

That was part of a broader shakeup, approved by the board that January, to see Russia lose its majority stake. While the board has not publicly explained its reasoning, it is believed the move may be designed to reduce the bank’s potential exposure to international sanctions imposed against Russia after its full-scale invasion of Ukraine in 2022.

What’s the context?

Under Pashinyan, the Armenian government has moved to take substantial minority stakes in a number of large and strategically important enterprises, often in unclear circumstances. Aside from Amulsar, that also includes the Zangezur Copper-Molybdenum Combine, Armenia’s largest mine and top taxpayer, and Viva-MTS, a major telecommunications company.

Armenia has considerable deposits of copper, gold, and molybdenum, and the mining industry is one of the country’s biggest sources of employment and government revenue. Many of Armenia’s mines are controlled by Russian companies.

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