Lydian raised $325 million from two U.S. equity firms in November. In February, the International Finance Corporation a member of the World Bank Group, offered to invest another $40 million in the mining operation.
A British-based company announced on Wednesday plans to start building this summer a new gold mine in Armenia which it said will absorb more than $400 million in investment and be the largest in the country.
The company, Lydian International, plans to mine gold at the Amulsar deposit in the southeastern Vayots Dzor province. It pledged to create 770 permanent jobs and pay about $500 million in taxes over the next decade before securing final government clearance of the project last year.
Lydian raised $325 million from two U.S. equity firms in November. In February, the International Finance Corporation, a member of the World Bank Group, offered to invest another $40 million in the mining operation.
In a statement, Lydian said it has made a final decision to go ahead with the Amulsar project after receiving “an amended Mining Right” from the Armenian government. It did not specify the changes apparently made in its mining license.
“Upon completion, Amulsar is expected to be the largest gold mine in Armenia, producing an average of 243,000 ounces of gold per year over the initial five years of operations,” read the statement. “First gold pour is expected within approximately 20 months from the start of construction,” it said.
Howard Stevenson, Lydian’s chief executive, was quoted as saying that work on the mining and ore-processing facilities at Amulsar is due to start this summer. “Basic engineering is advancing and we plan to tender several key contracts during the coming weeks in anticipation of breaking ground,” he added.
Stevenson discussed the project with Prime Minister Hovik Abrahamian when they met in Yerevan on May 21. A government statement said he thanked Abrahamian for “continued support and cooperation.”
Armenian environment protection groups oppose open-pit mining at Amulsar, citing the gold deposit’s proximity to Jermuk, the country’s largest and most famous spa resort. They also say it could pollute rivers flowing from the mountainous area.
Both Lydian and the Armenian government have sought to dispel these concerns, saying that the company will use advanced technology and strictly adhere to environmental safety standards. The IFC as well as the European Bank for Reconstruction and Development have lent credence to these assurances by buying minority stakes in Lydian.
The U.S. government has also signaled support for the mining project financed by American investors. Richard Mills, the U.S. ambassador to Armenia, last year described it as an “important economic opportunity for Armenia.”
Armenia already produces relatively significant amounts of gold. Its presently largest gold mines are operated by a Russian company, GeoPro Mining.
Gold as well as non-ferrous metals such as copper and molybdenum and ore concentrates are Armenia’s leading export items. According to the World Bank, the Armenian metal mining industry employs more than 7,000 people and earns the country roughly $500 million in annual export revenue. Armenia’s total exports stood at almost $1.5 billion last year.
The industry has been a subject of criticism from not only environmentalists but also other civic groups concerned about a lack of transparency in their operations and licensing process allegedly tainted with government corruption.
The World Bank presented on Wednesday a report on the sector’s environmental, economic and social impact on Armenia which it had commissioned from European and Armenian consulting firms and mining experts.
The extensive report concludes that while the sector is “an important contributor” to the Armenian economy, none of the mining firms active in the country fully meets environmental safety standards. It also says that “individual operations are not generally contributing sufficiently to the longer term sustainable development of the nation.”
The authors of the report called for a more efficient and transparent government regulation of the sector.