Amulsar gold project is in a way a business card for the foreign investments in Armenia

Below is ArmInfo’s interview with Dr. Hayk Aloyan, Managing Director of Geoteam CJSC.

• by Arthur Yernjakyan

• Tuesday, December 25, 23:20

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.