GeoProMining – ten years of work for the benefit of the country, at the forefront of gold mining

ARMINFO News Agency, Armenia
July 13, 2017 Thursday



GeoProMining - ten years of work for the benefit of the country, at
the forefront of gold mining

 Yerevan July 13

Emmanuil Mkrtchyan. One of the largest investors in Armenia, the
Russian group of mining companies GeoProMining celebrates its 10th
anniversary of work in our country. In 2007, the company acquired the
first major asset in Armenia, GPM GOLD, which is developing the Sotq
gold mine and managing the Ararat gold plant, and a little later
Agarak Copper-Molybdenum Combine. In connection with this date, the
general director - ArmInfo analyst Emmanuil Mkrtchyan spoke with the
president of the group Roman Khudoliy

GeoProMining - ten years of work for the benefit of the country, at
the forefront of gold mining

One of the largest investors in Armenia, the Russian group of mining
companies GeoProMining celebrates its 10th anniversary of work in our
country. In 2007, the company acquired the first major asset in
Armenia, GPM GOLD, which is developing the Sotq gold mine and managing
the Ararat gold plant, and a little later Agarak Copper-Molybdenum
Combine (AMMK). In connection with this date, the general director -
ArmInfo analyst Emmanuil Mkrtchyan spoke with the president of the
group Roman Khudoliy

Roman Nikolayevich, sum up the results of these 10 years of work in
our country. How effectively did the company manage to work, taking
into account the fact that soon after the acquisition of assets a
global financial and economic crisis broke out? Due to what you
managed not only to survive it, but also to practically reach the
level of profitability of production?

In 2007, the assets we acquired in Armenia were in a completely
horrible condition, the equipment were almost completely depreciated,
the organization and culture of production, to put it mildly, desired
the best. The efficiency of production was very low, our predecessors
accumulated huge debts and not only for payments to the budget,
suppliers, other contractors, but also for staff salaries. Arrears in
wages was 9 months, and employees were on forced vacations. But that's
not all, the former owners of the company developed all the oxide ores
at the Sotq deposit, leaving only persistent sulphides, for the
enrichment of which it was necessary to build a new plant, since the
old technology in Ararat was not for this purpose. Therefore, after
the acquisition of the asset, we have set a very serious task of
developing the project and constructing a plant for processing
sulphide resistant ores. Together with the engineering companies Cors
Resource and Extract Technologies, we have come a long way in
designing, building, implementing the most modern technology for
processing sulfide ores - Albion. To start the plant it was necessary
to prepare a mine. We conducted a global modernization, buying from
the Japanese company Komatso 22 units of equipment - dump trucks,
excavators, loaders ...

On Agarak copper-molybdenum combine was, actually, the same situation.
In total, for our assets in Armenia, taking into account their
acquisition and technological modernization, we spent about 500
million USD for this period. I think, despite the crisis risks, the
difficult technological and managerial decisions, we have passed this
way very dignifiedly.

What are the company's medium-term plans for the strategic development
of its two Armenian assets? We, of course, are not going to dwell on
this, although I can say that the investment return has just begun,
literally the last year. The return on investment (ROI) is still
minimal in terms of the amount invested, but, nevertheless, the
process has started. After all, when an investor decides to enter an
asset, he first of all thinks about how long he will be able to repay
the investment and what profit he can expect. After the acquisition of
the Sotq asset in 2008, GPM Gold extracted and processed only 136 kg
of gold in marketable products. In the current year, we will produce
about 4 tons. The difference, as you can see, is enormous, we managed
to make such a leap. Today we process about 1.3 million tons of ore at
the Ararat factory, in the medium term we intend to bring the volumes
up to 1.5 - 1.7 million tons and set a goal to produce gold up to 5-6
tons per year. This will require additional investment, which we now
carry out through our own and attracted funds.

Similar is about the Agarak. We are well aware that with such a low
content of ore base in copper deposits, in conditions of low world
prices, it is possible to bring production to an acceptable level of
profitability only through scaling. Strategically, we plan to increase
the productivity of the copper- molybdenum asset from 3.5 million tons
of ore processing to 6 million tons at the initial stage. These
actions will make it possible, even at low prices, to work without
interruption. This is a serious task, requiring significant additional
investment. Only this year GeoProMining sent over $ 3 million to
further technical re-equipment of Agarak Copper-Molybdenum Combine.

You work in Russia, other countries, once worked in Georgia. What
makes Armenia different, does our country have its own strengths that
make it attractive for foreign investors?

You know, Armenia has become for us a native, because 10 years - a
considerable time. Yes, in relation to other countries, here there are
advantages, the main of which are historical mining competencies,
hardworking and professional workers.

One must have a big risk appetite to invest such significant
investments in the crisis period of uncertainty.

Yes, these 10 years were quite difficult for us, as for many. We
invested our own money, borrowed money, invested in technology,
production and all this in the crisis of 2008, then in 2012 a new
crisis broke out, which has not ended yet. That is, we, figuratively
speaking, "caught" all the crises, and when they ask me how I work in
such conditions - I answer that, frankly speaking, in other conditions
we almost did not work. Management and the team have coped with this
task, we are developing steadily, unlike many companies.

It is interesting to know your expert opinion on the issue of the
transition of the country's mining industry to the deeper processing
of raw materials through the construction of its own smelting
production, the project of which was already developed in Zangezur
before the crisis of 2008-2009 and the possibility of creating a small
refinery?

The theme of the construction of a smelting plant for the processing
of copper, molybdenum concentrates periodically appeared during these
10 years. I know that the Chinese have made an offer to build a copper
smelter and it is now being studied. But in order for the smelter for
copper to be effective, it is necessary to process not less than
80-100 thousand tons of copper in concentrates. Probably, such a
volume, taking into account the commissioning of new capacities, can
be achieved in Armenia, and this will be beneficial for extractive
companies with high logistics costs. However, nevertheless, it is
necessary to weigh all the pros and cons again, because we are all in
the market and the local auditor should not yield to existing
processors.

As for the refinery, the alloy Dore, to date, only GPM Gold produces
in Armenia. For the construction of the refining factory, resource
capacities are needed. Even if we increase production to 6 tons of
gold, this plant will be unprofitable. When other fields are put into
operation, and in general gold production will reach 30 tons and
higher in bars Dore, this issue is worth considering. But we must take
into account that there are a large number of refining industries in
the world, only 11 plants in Russia - and almost all of them are
under-loaded. If it is difficult to build a plant in Armenia to reach
a competitive cost, I do not see such opportunities in the near
future. Some have already gone bankrupt, for example, the Kolyma plant
in Russia. This topic is quite subtle, Dore's producers, unlike
concentrates producers, do not have logistics problems, transportation
costs are minimal.

And the last question. "Resources for good" is the motto, apparently
chosen by your company for the purpose of implementing its social
policy, taking into account the fact that the enterprises in Vardenis,
Ararat and Agarak, in fact, are city-forming, providing jobs for up to
70% of the local able-bodied population?

Realizing that our enterprises have a city-forming nature, in 2011 the
company moved from disparate projects to a system approach to
corporate social responsibility and launched a comprehensive program
covering all aspects of social life, from attentive attitude towards
employees and ending with minimizing the impact of production on the
environment. We constantly interact with state authorities and local
administrations, which allows us to react as sensitively as possible
to the needs of the inhabitants of the regions, to send charitable
funds to those projects that are most relevant to the local
population.

We are long-term and honest investors, when we bought GPMGold, there
worked 550 people, now the team consists of 1050 people, an increase
of almost 2 times. Over $ 170 million was paid to the budget of the
Republic of Armenia. As for wages, at our enterprises it is one of the
highest in the industry.

So, we invest in social projects: development of infrastructure, in
the areas of fire safety and security, energy supply, water supply,
repair hospitals, schools, kindergartens. Support for socially
vulnerable groups of the population is also traditionally one of the
priorities of the social work of GPM. We also render all possible
assistance to local authorities in carrying out various environmental
measures, improvement and creating comfortable conditions for the
residents of Vardenis, Ararat and Agarak. In total, for these 10 years
we have invested about $ 8 million in the implementation of various
social programs and charity.

Emil Lazarian

“I should like to see any power of the world destroy this race, this small tribe of unimportant people, whose wars have all been fought and lost, whose structures have crumbled, literature is unread, music is unheard, and prayers are no more answered. Go ahead, destroy Armenia . See if you can do it. Send them into the desert without bread or water. Burn their homes and churches. Then see if they will not laugh, sing and pray again. For when two of them meet anywhere in the world, see if they will not create a New Armenia.” - WS