Lydian submits notices of disputes to Armenian government over Amulsar blockade

Lydian submits notices of disputes to Armenian government over Amulsar blockade
Amulsar mountain in south-central Armenia, location of the country's second largest gold deposits.
By bne IntelliNews March 12, 2019

Lydian International Limited (TSE:LYD) has formally notified Armenia of disputes with its government under the country's investment promotion and protection treaties with the UK and Canada, in connection with the ongoing blockades of road access to the Amulsar Gold Project, the Toronto-listed company said on March 11. 

Lydian Armenia, which is 100%-owned by Armenia-focused Lydian International, is developing Amulsar, which has Armenia’s second largest gold deposits, with estimated mineral resources of 3.5mn measured and indicated gold ounces and 1.3mn inferred gold ounces, according to the company. 

Blockades of roads to the Amulsar Gold Project in south-central Armenia started nine months ago, in June 2018, preventing the company and its contractors from accessing the mine. Local residents have sought to block development of the project, saying it will pollute the area, though this has been denied by Lydian, which recently issued results of a study it says demonstrates demonstrating that there is no hydraulic connection between the groundwater regimes at the Amulsar Project and Jermuk.

“Under the UK BIT [bilateral investment treaty], Lydian UK may submit the dispute to international arbitration three months after such formal notification, and under the Canada BIT, Lydian Canada can do so after six months,” the company warned in its latest statement on March 11. 

“In the meantime, the Government of Armenia has an opportunity to continue amicable discussions with Lydian with a view to the prompt settlement of the disputes.

“Whether or not Lydian UK or Lydian Canada will initiate arbitration proceedings will depend on the conduct of the Government of Armenia, and there can be no assurance that Lydian UK or Lydian Canada will initiate any arbitration claim or application to any international arbitration court or of the outcome of any such claim or application,” the statement added. 

The mine is expected to produce an average of around 225,000 ounces annually over an initial 10-year mine life, according to Lydian, though it says there are opportunities to improve average annual production and extend the mine life.

Since mid-2018, however, Lydian has been unable to progress with developing the mine as protesters intensified their efforts after the change of regime in Armenia following the velvet revolution in the country last spring. With the ousting of former president turned prime minister Serzh Sargsyan, and his replacement by former protest leader Nikol Pashinian, protesters were emboldened to try and stop the project. 

In August 2018, Armenian prosecutors launched a criminal case against Lydian Armenia on suspicion of illegal mining at Amulsar. The case was launched three days after the Armenian Inspectorate for Nature Protection and Mineral Resources proposed that Lydian halt its mining operations at Amulsar pending a new environmental audit of the project. However, in December, Lydian announced that the Administrative Court of the Republic of Armenia had accepted its lawsuit appealing a directive issued by Artur Grigoryan, the head of the Armenian Environmental and Mining Inspection Body, to refrain from any mining-related activities at Amulsar. 

In November, the company announced it had dismissed 130 employees and said it planned to lay off a further 115 people by the end of the year, as well as terminating some construction-related contracts. 

As last year drew to a close, Lydian said on December 24 that it had entered into an amended and restated forbearance agreement with its senior lenders, stream financing providers, and equipment financiers, who agreed to continue to temporarily suspend all principal and interest payments. 

Fitch Ratings warned in a March 5 comment of potential fallout of the extended dispute hitting the Armenian economy. “Reducing the uncertainty regarding the resolution of the environmental dispute at the Amulsar gold mine could support export growth and foreign investment prospects,” the rating agency said.

Related Articles

IMF approves $248mn stand-by arrangement for Armenia

The IMF executive board has approved a 36-month $248.2mn stand-by arrangement (SBA) for Armenia, the fund said on May ... more

Armenia gains 19 places to 61 on latest World Press Freedom Index

Armenia has placed 61st out of 180 countries in the World Press Freedom Index 2019 compiled by Reporters Without Borders, 19 places up on where it finished in the previous year’s ... more

Pashinian in Iran: Tehran and Yerevan sign economic, industrial memoranda

Armenian prime minister of less than a year Nikol Pashinian signed two memoranda of understanding (MOUs) with Iran at the presidential palace in Tehran on a trip during which he examined the ... more

Dismiss