AMULSAR GOLD PROJECT IS IN A WAY A BUSINESS CARD FOR THE FOREIGN INVESTMENTS IN ARMENIA
by Arthur Yernjakyan
arminfo
Tuesday, December 25, 23:20
Below is ArmInfo’s interview with Dr. Hayk Aloyan, Managing Director
of Geoteam CJSC.
Geoteam CJSC is an Armenian mineral exploration and development
company, specializing in discovering new mineral deposits in Armenia.
Geoteam CJSC is a 100% owned subsidiary of Lydian International
Limited. Geoteam CJSC was incorporated in 2005 and after an extensive
campaign of geological exploration in Armenia discovered what is now
its flagship project; the Amulsar mountain. Amulsar is a brand new
gold discovery, the first for over 20 years in Armenia. The European
Bank for Reconstruction and Development became a shareholder of Lydian
International in 2009 and on 21 March 2012 it increased its share to
6.80%. The International Finance Corporation, a member of the World
Bank Group, owns 10.23% of the shares.
What is the present stage of Amulsar gold-bearing deposit project of
“Geoteam” CJSC? It is known that the European Bank for Reconstruction
and Development was interested in financing this project. What progress
on this and other directions was achieved in 2012?
The exploration works yielded positive outcome in the past year. We
expect to be able to announce about gold resources increase in the
upcoming year. Preliminary exploration results make it conceivable
that Amulsar gold deposit resource potential may well reach 5 million
ounces, though this will need further exploration drilling to prove
this.
The European Bank for Reconstruction and Development (EBRD) as well
as the International Finance Corporation (IFC, part of the World Bank
Group) are among Geoteam’s parent company- Lydian International’s
main shareholders. At this point the Environmental and Social Impact
Assessment (ESIA) of Amulsar project is being finalized. At the
request of the Government of Armenia the ESIA has still to undergo
an independent review. After this is completed, we intend to take
on to the next- development and construction phase we expect to get
funding from EBRD and other investors.
Our mining industry is recognized by the Government of Armenia as one
of the priority branches in the economy. Does the investor witness
the support of the Government and, if so how is it manifested?
Amulsar gold project is in a way a business card for the foreign
investments in Armenia. Among the many shareholders in Lydian
International, that is listed on Toronto stock exchange, are Amber
Capital, Van Eck Global, AGF bank, Franklin Templeton Investments,
and McKenzie. Most of these investors haven’t made investments in
Armenia before. Further investments in Armenia from this and a number
of other companies may also depend on the success of the project. I
believe, the Government is supportive of our efforts to make sure that
Amulsar project becomes a success story of foreign investments. The
presence of such prestigious institutional investors along with the
IFC and EBRD should give all the stakeholders in Armenia comfort that
the project will be properly conducted. The fact that such investors
are involved in the project also the fact that Lydian International
is a market-listed company is the best guarantee that the program
is fully transparent and that Geoteam will be a responsible taxpayer
and employer.
At a recent conference in the American University of Armenia the
Director of the Social Responsibility Center in the Mining of the
Australian University Queensland Mr. Sallem Ali stated that there is
no alternative to the development of the mining industry in Armenia,
however, as he stated, while exploration of any deposit a balanced
approach should be displayed and international experts involved to
assess the environmental risks. Has such an environmental assessment
expertise been conducted with regard to Amulsar deposit?
The independent Environmental and Social Impact Assessment (ESIA) I
mentioned earlier is conducted by international firms to international
best practice standards. Reputable independent international consulting
companies such as Wardell Armstrong International and Golder Associates
are conducting the ESIA. The survey includes detailed assessment of all
the potential environmental and social risks and the best mitigation
and prevention measures in line with the best international practice.
It is a decade since the so-called international Equator principles
were agreed and they allow for stricter standards for identification,
assessment and prevention of environmental and social risks in the
parts of the mining sector that sign up to these principles. Lydian
International and thus Geoteam have agreed to adhere to these
principals. In addition most of the potential lending banks and
financial organizations of Lydian International are signatories of
Equator principles and that is the best guarantee that the project
will be financed only if the project is planned and conducted in line
with these principles.
During the same press-conference on the social Responsibility in
mining, not only the environmental, but also the other spheres of
social responsibility in mining, practiced in developed countries
was discusses. What are the social projects of Geoteam?
Although Armenian legislation does not require that mining companies
have special social programs, social responsibility is an important
part of international best practice and requirements. Our social
projects began early in our exploration program. We have invested
more than 550,000 USD during these years into the community social
projects. We have undertaken infrastructure repairs: school,
kindergarten, community center, irrigation system, natural gas
supply system, as well as different development projects: healthcare,
education, etc. 12 young people from our affected communities are now
studying at University to become geologists and engineers and we are
paying the tuition fees. In terms of employment we also prioritize
local communities. Already 140 local residents are employed by
the Company: We also have agricultural and other programs for the
communities, aimed at sustainable development.
Social Responsibility is not just the direct economic investment into
the communities, it also implies other activities, like cultural
heritage issues. Geoteam had invited the best local and foreign
specialists to carry out archeological research in the project area
during the exploration period. This and many other projects are again
implemented by us in line with the best international practice. We
will stay committed to these practices during the development of the
project as well.
How do you assess the new Mining Law?
The new law was passed in January 2012, in accordance with the
consultancy of the World Bank. In general, the law will have a positive
impact on the development of the mining industry. It will make the
industry in Armenia more attractive for the investors, because it
provides for a clearer procedure for exploration licensing.
At the same time it also pays closer attention to the taxation issues,
increasing the taxes that should benefit the country as a whole. Most
importantly, the law pays closer attention to environmental issues. It
requires, that mining companies now include environmental activities
during both the exploration and production periods. If properly
applied, the law can have a positive impact on the industry and
the environment.
It was expected that Geoteam would make $52 m into exploration and
preparation for the next phases. What are the investments made so far?
During the exploration period the Company has already invested $46 m.
mostly into exploration activities. We expect to invest over $270 m.
during the construction period. Investment post construction will
continue throughout the mine life as the deposit continues to grow
and the mine develops. We expect the total investment to be well over
$400m over the life of the mine. At peak production we expect to be
paying the budget of Armenia tens of millions of dollars annually in
taxes dependent on gold price.
The positive economic development is already visible in the affected
communities around our project. This is not only due to direct and
indirect jobs and social projects, but also due to substantial increase
in the community budgets because of the payments for the renting of
the lands we make to the communities. During these years the annual
budgets of each communities have increased from about 1-3 m AMD to 40-
70 m. Next year we expect that this number for each community will
reach approximately 200 m. AMD.
What are your expectations from 2013?
We expect to increase amount of investments and the number of jobs. We
will continue to present the Amulsar project in different investment
markets as well as Armenia- as a favorable place for investments. Most
importantly, we are sure, that during all the years to come we will
have the opportunity to demonstrate, that Amulsar project will be
an exemplary mining project, that will benefit both the investors,
the local communities and Armenia as a whole.