Armenia’s gold mining industry on verge of collapse

/AzerNews/

By Mushvig Mehdiyev

The Armenian government seems disinterested in its national gold mining industry, which is in trouble given the weakening positions of the local companies on the gold market.

Foreign companies are more involved in the market compared with local companies. They are unwilling to work with their local counterparts. They prefer to export the alloys of gold due to modern technology and advantageous business terms abroad.

The gold mining industry in Armenia faces a series of challenge characterized mainly by lack of state support and widespread privatization in production of the precious metal.

Deputy Head of the Yerevan Jewellery Plant Abgar Mkrtchyan said the government in Armenia doesn’t support companies involved in gold industry.

"Armenia's existing legislature forces the gold mining companies to export the dore bar - a semi-pure alloy of gold and silver - from Armenia rather than selling it for local processing. The main reason behind the export is that the VAT is refunded after export transactions, but is not available in domestic business deals," said Mkrtchyan.

Armenia has rich deposits of gold, copper, molybdenum as well as smaller deposits of zinc, lead, iron and silver. The deposits of nonferrous metal ores in the country are characterized by their precious metal content. The main gold deposits of Armenia are located in Zod, Meghradzor and Terterasar regions.

Mkrtchyan said the foreign mining companies in Armenia are reluctant to work with local companies. "Mining companies find it disadvantageous and unbeneficial to work with local facilities. Subsequently, no pure gold is melted in Armenia, despite its vast raw resources," he added.

Armenia's local plants do not work efficiently in gold mining industry, paving the way for foreign companies to control the gold production. Gold industry is mostly governed by the British Lydian International company, which is the sole proprietor of the Amulsar mine in the south of Armenia. Cyprus-based GeoProMining, an international group of mining companies, enjoys some significant privileges at the Ararat gold recovery plant.

Government intervention can settle the problem, according to Mkrtchayn, who says the Finance Ministry can buy dore bar from the affinage company and sell it to local jewelry companies by tender. But the Ministry has repeatedly stated that it is against the government intervention in the industry.

Armenian government is also disinterested in assisting the local companies to overcome the existing problems. A large amount of money is needed to revive the gold industry and attract the affinage companies to keep the alloys in Armenia without cooperating with experienced foreign companies.

Armenia's state budget for 2015 mainly focuses on social and cultural domain expenditures. Prime Minister Hovik Abrahamyan said nearly 21.4 percent of the budget would also be allocated for defense, maintenance of public order and national security. It proves that the state budget aims to tackle a mountain of problems in various fields, as well as improve Armenia's defense capabilities.

To this end, the government decided to "smartly" settle the "gold problem" by selling the gold fields to foreign businesses. Unresolved problems in economic, social, health, education and transport fields prevent the authorities from allotting money to develop the gold industry. That's why the government sold its strategic gold reserves to foreign companies to get rid of at least one problem and at the same time, to put all responsibility, including the environmental issues on the purchasers.

Social Watch, an international organization engaged in poverty, discrimination, racism and human rights issues, say Armenia continues to confront economic, social and environmental challenges. But the government undermines the environmental issues and fails to address pollution, deforestation, soil degradation, and other environmental issues, violating the environmental laws, according to Social Watch.