Eurasian Development Bank's financing of Amulsar mine project collapses

By Mkrtich Karapetyan

Armenia’s attempt to secure financing from the Eurasian Development Bank (EDB) for the exploitation of the Amulsar Gold Mine has failed. In an interview with CivilNet, Armenia’s Economy Minister Gevorg Papoyan confirmed that "the loan has not been approved." Nevertheless, the government is determined to provide to secure funding for the mine's operation, and is expected that the loan will be sourced from Armenian banks.

The EDB was established by Russia and Kazakhstan and currently consists of six member states, including Armenia. Its mission is to stimulate investment activity within members of the Eurasian Economic Union.

In February 2023, Armenia’s Ministry of Economy, mine owner Lydian Armenia, and the EDB signed a memorandum of understanding. Under the agreement, a financing package worth $150 million was proposed, with EDB allocating $100 million and a local bank providing $50 million 

 The agreement also stipulated that an additional $100 million would be raised by Lydian Armenia, and that 12.5% of the company's shares would be granted to the government as a donation.

In May 2023, Denis Ilyin, the EDB’s Deputy Chairman, announced that the bank would order a new environmental assessment before deciding to grant the loan. 

At the same time, Lydian Armenia never signed the contract regarding the 12.5% stake to be donated to the government. This raised doubts about the prospects for finding financing for the Amulsar mine’s operation. Economy Minister Gevorg Papoyan only reiterated that "the EDB loan has not been approved" without elaborating on the reasons for this development.

He noted that, the government intends to provide state guarantees for obtaining loans from local banks. Before doing so, it ordered an audit of Lydian Armenia. 

When asked whether a single bank or a consortium of banks would provide the financing, Papoyan responded, "We will see."

In response to CivilNet's inquiry about the status of the loan, the EDB stated: “Lydian Armenia has withdrawn its application; all internal bank procedures for evaluating the application have been halted.” The EDB did not provide further details.

Lydian Armenia declined to respond to inquiries from CivilNet regarding the collapse of the loan process. When asked for reasons behind the failure, Lydian Armenia's CEO Hayk Aloyan informed that the company would address all concerns in the near future.

Economy Minister Gevorg Papoyan, who is a party to the tripartite memorandum, has avoided discussing the fate of the EDB loan. Recently, in a conversation with CivilNet, he expressed hope that construction work at the Amulsar mine would begin in the first quarter of 2025 and that production would commence in the fourth quarter of 2025.

About Amulsar Gold Mine

In 2014, the Armenian government granted Lydian Armenia the right to exploit the Amulsar Gold Mine. 

Protests against the mine's exploitation had been ongoing prior to the 2018 revolution. Years before, environmental activists and local residents blocked access roads to the mine for an extended period. Criminal proceedings were initiated in connection with possible violations during the gold mine's exploitation, but the proceedings were closed in December 2021. 

Environmentalists warn that the operation of the mine could cause significant harm to the town of Jermuk and to Armenia's water systems as waters originating from that area flow into Lake Sevan, the main reservoir of freshwater in Armenia.

Lydian Armenia envisions operating the mine for at least 25 years, contributing $75-100 million in taxes annually. The company has estimated the gold reserves at the site to be 70 tons.

Read the article in Armenian: Եվրասիական զարգացման բանկի կողմից Ամուլսարի ծրագրի ֆինանսավորումը տապալվել է