Armenia’s Gold Exports On The Rise But Revenues Drop

ARMENIA’S GOLD EXPORTS ON THE RISE BUT REVENUES DROP

13:15, March 31, 2015

Seda Hergnyan

Armenia exported a record 3.6 tons of gold dust in 2014 with a customs
value of US$ 82 million.

The exports are in the form of dore (a semi-pure alloy of gold and
silver usually created at the site of a mine). The Armenian alloy
contains more than 70% gold. After further refinement, the gold is
sold on the London stock exchange.

Figures from Armenia’s Customs Service show that gold exports took
off in 2009 when 1,860 tons were shipped as compared to 252 kilograms
the year before.

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Armenia’s gold is exported to Canada. Only eight kilograms of last
year’s exports went to Switzerland.

Canada first became interested in Armenia’s gold back in 1997 when
First Dynasty Mines, a Canadian company, purchased shares in the Ararat
gold processing plant. The plant was transformed into the Ararat Gold
Recovery Company. Indian billionaire Anil Agarwal bought the company in
2002. In 2007 it was sold to GeoProMining Gold (GPM Gold), a subsidiary
of GeoProMining, an international diversified metals resource holding
company. GPM Gold is one of Armenia’s largest investors and taxpayers.

GPM Gold exports 99% of Armenia’s total gold exports. GPM operates the
Zod (Sotk) mine and the Ararat gold extraction plant. The unprocessed
ore is transferred from the mine to the plant by rail and Dore bars are
exported for refining. GPM also operates the Agarak Copper-Molybdenum
Mine Complex (open pit) in Armenia’s southern Syunik Province.

As of April 2014, GPM Gold has been operating a new Albion processing
plant at the Ararat facility, which was designed to significantly
increase the extraction coefficient for sulphide-heavy ores from the
Zod mine. We will have to wait for the 2014 figures to see if the new
processing plant has lived up to expectations and increased gold ore
exports from Armenia.

Gold is also processed at the Assat Mining Extraction Plant in the
town of Masis. The quantities are so insignificant as to not impact
overall exports.

Armenia imports as well as exports gold

When gold exports shot up in 2009, imports began to drop. In 2008
and 2009 Armenia annually extracted 720 and 449 kilograms respectively.

This amount jumped to 1.95 tons in 2010; 2.7 tons in 2011; 2.9 tons
in 2012; and 3.5 tons in 2013.

In 2008, Armenia imported 5,400 tons of gold ore and 1.2 tons in 2009.

But imports grew to 3.78 tons in 2013. In 2014, Armenia imported
3.55 tons of gold dust (2.44 tons from Switzerland and 900 kilograms
from Australia).

The following comparison is of interest. In 2012 Armenia imported
1.4 tons and exported 2.3 tons and imported 1.5 tons and exported 2.3
tons. Thus, in these two years, it exported more than it imported. The
world price of gold had increased in these two years, which was good
for Armenia’s economy given that gold, in terms of customs value,
is one of the highest export items as of 2009.

This picture changed in 2013. That year Armenia imported around one
ton more than it exported. This tendency remained in 2014.

World gold prices and the Armenian market

World gold prices increased from 2002 to 2012. In that ten year period
the price of one troy ounce (31.1 grams) rose from $300 to $1,750.

Prices started to drop in 2012. According to stats issued by the
London Bullion Market Association, the price of one troy ounce was
$1,201.50 in 2013 and $1,267 in 2014. The Association predicts a
price of $1,211 for 2015.

The drop in the price of gold has negatively affected Armenia’s
economy. Revenues derived from Armenian gold exports are dropping
and so are the taxes paid by mining companies to the state. Taxes
paid by GPM Gold to Armenia have also dropped.

In 2013, the company was ranked as the number one taxpayer (7.261
billion AMD) in Armenia. The next year, it had dropped to 31st place
(3.897 billion).

Armenia’s Minister of Energy and Natural Resources Yervand Zakharyan
recently stated that 27 mining permits for ore extraction are
currently in operation throughout Armenia – eleven for gold and five
for gold/various metals. The ministry’s website says that fourteen
gold and gold/various metal mines exist in Armenia.

Estimates place Armenia’s gold reserves at 270 tons. Former energy
minister Armen Movsisyan stated that Armenia’s reserves would last
for 25-30 years.

Currently, the following mies are in operation – Sotk, Aramanis,
Toukmanuk, Meghratzor, Sofi Bina, Mardjan, Shahumyan, Terterasar
and Litchvazk-Tey.

The fate of the Amulsar gold mine is up in the air. While Lydian
International has announced that it plans to fully finance the Amusar
program this year and start construction, environmentalists continue
to oppose it, arguing that it would be disastrous for the health
resort of Jermouk and the surrounding environment.

Of the mines noted above, only Sotk and Amulsar can be considered
large. Gold reserves at Sotk are estimated at 155 tons and 55 tons at
Amulsar. The gold reserves at many of the other mines do not exceed
five tons.

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