Armenian Gold Mining Project Still on Hold Due to Funding Delays

The future of Armenia's Amulsar gold mining project, once touted as a major economic boost for the country, remains in limbo as a Canadian-based company, Lydian Canada Ventures, continues to face challenges in securing the necessary funding to restart operations. Economy Minister Gevorg Papoyan revealed on Thursday that the company has yet to raise the funds needed to revive the large-scale project, which has been stalled since 2018 due to environmental protests and financial difficulties.

The Amulsar gold deposit, located in southern Armenia, was first licensed for development by the Armenian government in 2016. The license was granted to Lydian International, now known as Lydian Canada Ventures, with plans to begin mining operations by late 2018. The project was ambitious, with expectations to produce 210,000 ounces of gold annually, valued at approximately $530 million at current international prices. The Amulsar project was poised to become one of the largest foreign investments in Armenia’s history.

However, the project faced a significant setback following Armenia’s “velvet revolution” in May 2018, which brought Prime Minister Nikol Pashinyan to power. Shortly after the political shift, environmental activists began protesting against the Amulsar project, arguing that the mining operations would cause severe environmental damage. These protesters successfully blocked access roads to the mining site, effectively halting the project.

Lydian Canada Ventures disputed the environmental concerns, asserting that they would employ modern technology to mitigate any potential harm. Despite these assurances, the Armenian government, under Pashinyan, made conflicting statements regarding the project. While the government did not revoke Lydian’s mining licenses, it also chose not to intervene and remove the blockade by force.

As the protests dragged on, Lydian International found itself in financial distress, ultimately filing for bankruptcy protection in Canada in 2019. The company was restructured and is now owned by two equity firms based in the United States and Canada that specialize in mining investments.

In the aftermath of the 2020 Nagorno-Karabakh war, the Armenian government indicated a renewed interest in reviving the Amulsar project. Negotiations between the government and Lydian resumed, leading to an agreement in February 2023. As part of the deal, Armenia was to receive a 12.5 percent stake in the project in exchange for managing certain risks on behalf of the investors.

Initially, the formalization of this agreement was expected to be completed by March 2023. However, delays pushed the deadline to September 1. On Thursday, Pashinyan’s cabinet announced yet another postponement, now targeting November 1 for finalizing the deal.

Minister Papoyan commented on the latest delay, explaining that Lydian Canada Ventures is currently facing financing issues. "We proposed that since they [Lydian] have problems with financing [of the Amulsar project], they solve those problems before we carry out the process," Papoyan told reporters. He added that while Lydian has secured part of the necessary funds, it still needs to obtain loans to cover the remaining costs.

According to Lydian’s Armenian subsidiary, the company requires $200 million to complete the construction of mining and smelting facilities at Amulsar. Papoyan’s predecessor, Vahan Kerobyan, previously estimated the funding requirement at $250 million, stating that Lydian planned to borrow $100 million from the Kazakhstan-based Eurasian Development Bank (EDB) and another $50 million from an unnamed Armenian bank.

Despite these ongoing efforts, Lydian has not provided a clear timeline for when it will relaunch the Amulsar project. If successful, the project could create around 1,000 jobs and contribute at least $60 million in annual tax revenues to Armenia. However, the continued uncertainty and delays have cast a shadow over the project’s future.

The Amulsar project is one of the few large-scale Western investment initiatives in Armenia, and its prolonged delay shows the challenges faced by foreign investors in the country. The Armenian government under Prime Minister Pashinyan is currently dealing with several lawsuits from foreign investors who have encountered difficulties doing business in Armenia. Among them are some of Lydian’s former American shareholders, who have filed an arbitration case against the Armenian government at the UN Commission on International Trade Law (UNCITRAL). The arbitration hearings began in January of this year.