Armenia’s government, led by Prime Minister Nikol Pashinian, is reconsidering its position on a large-scale gold mining project at the Amulsar deposit, which has been plagued by delays and protests. The project, initiated by the Canadian company Lydian International (now Lydian Canada Ventures), has faced significant challenges since its inception, but the government is now exploring financial options, including offering loan guarantees to revitalize it.
Background:
The Amulsar gold mining project, located in Armenia, was initially licensed to Lydian in 2016. The company planned to produce 210,000 ounces of gold annually, worth around $550 million at current prices. However, plans were halted in late 2018 after environmental protests blocked access to the site. Protestors, concerned about the environmental impact, disrupted the project, while Lydian argued that modern technology would mitigate such risks.
Despite the protests, the Pashinian government did not revoke Lydian’s mining license but refrained from using force to clear the blockade. The company had already invested $460 million in the project before the protests, but it filed for bankruptcy protection in 2019 and underwent a restructuring. It is now owned by two U.S. and Canadian equity firms specializing in mining.
Government Involvement:
In the wake of the 2020 Nagorno-Karabakh conflict, the Armenian government began negotiations with Lydian to revive the project, which would be one of the largest foreign investments in Armenia’s history. In February 2023, the U.S. and Canadian investors offered the government a 12.5% stake in the mining operation in exchange for the government’s support in managing risks.
However, the promised deal has yet to be formalized, with the government slow to act due to uncertainty surrounding the project’s future. Lydian’s Armenian subsidiary stated that it needs $200 million to complete construction of the mining and smelting facilities at Amulsar. A memorandum signed in 2023 indicated that Lydian would seek a $100 million loan from the Eurasian Development Bank (EDB), which is majority-owned by Russia and Kazakhstan. However, in December 2024, EDB withdrew its support, stating that it would not participate in the project at this time.
Current Negotiations:
With no EDB funding forthcoming, Lydian is now negotiating with Armenian banks for a $150 million loan. The Armenian Finance Ministry is reviewing a package of documents submitted by Lydian for loan guarantees. Finance Minister Vahe Hovannisian confirmed that the government is considering the company’s request to guarantee the repayment of these loans.
Lydian, which has faced difficulty attracting international investments, has not set a timeline for restarting the project. However, it claims that the Amulsar mine would create approximately 1,000 jobs and generate $60 million in annual taxes for Armenia.
Challenges Ahead:
The Pashinian government has not been able to attract other significant Western investment projects during his tenure, and the country faces several ongoing lawsuits from foreign investors, including some of Lydian’s American shareholders. These legal challenges and the ongoing uncertainties surrounding the Amulsar project could make it difficult for Armenia to move forward with the venture.
As the situation stands, the government’s decision to offer financial guarantees to Lydian could be pivotal in the revival of the Amulsar gold mining project, but the success of this initiative remains uncertain.
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