Armenian Government Provides $150 Million Loan Guarantee for Amulsar Gold Mine Despite Environmentalist Opposition

The Armenian government has approved a $150 million loan guarantee for Lydian Armenia CJSC to resume operations at the Amulsar gold mine. This decision is a major shift in policy, as the mining project had been stalled for six years due to environmental protests and political changes.

During a Cabinet meeting on Thursday, the Armenian government emphasized the importance of reviving the Amulsar gold mine project, citing its potential economic benefits. Under an agreement between the Ministry of Economy of Armenia and Lydian Resources Armenia Limited, Armenia received 12,503 shares—equivalent to a 12.5% stake in the company—as property.

According to the Ministry of Economy, the Amulsar project is expected to contribute between 1.0-1.5% to Armenia’s GDP annually. The project is also projected to create over 1,000 construction jobs and employ around 700 workers in processing, laboratory, and administrative roles once operations begin.

With this guarantee, the government hopes to attract further investment and stabilize economic growth. Officials argue that the loan guarantee could increase state budget revenues, though it also carries financial risks if the guarantee is activated, potentially adding $150 million in state expenditures.

Lydian Armenia, previously known as Lydian Canada Ventures, had initially planned to begin mining operations at Amulsar in late 2018. The company aimed to produce 210,000 ounces of gold annually, valued at approximately $550 million at current market prices.

However, after the 2018 “Velvet Revolution” that brought Prime Minister Nikol Pashinyan to power, environmental activists blocked access to the site, halting progress.

The protesters argued that the mining project posed serious environmental risks, including potential water contamination. Lydian, on the other hand, maintained that its operations would follow international environmental standards. Despite the protests, the Armenian government never revoked Lydian’s licenses but refrained from using force to remove the blockade. By the time operations were suspended, Lydian had already invested $460 million in the project.

Following the 2020 Nagorno-Karabakh war, the government sought to negotiate with Lydian to revive the project, recognizing it as one of Armenia’s largest foreign investments. In 2023, two U.S. and Canadian equity firms that own Lydian agreed to grant the Armenian government a 12.5% stake in exchange for risk management support.

A senior Lydian executive revealed in December 2024 that the company was close to securing $150 million in loans from Armenian banks. The government’s decision to guarantee these loans provides crucial financial backing to ensure the completion of production facilities at Amulsar.

According to Armenian law, any government loan guarantee must not exceed 20% of a company’s net assets. Lydian will be required to undergo an independent audit within six months to confirm compliance with this regulation.

Lydian expects to commence gold production at Amulsar by the fourth quarter of 2025. The mine is projected to become one of Armenia’s leading taxpayers, contributing up to $100 million annually in taxes. If successful, it could pave the way for more large-scale foreign investments in the country.

However, Prime Minister Pashinyan’s government continues to face legal disputes with foreign investors. Several international investors, including former American shareholders of Lydian, have filed lawsuits against Armenia, alleging unfair treatment. Some of these cases are being heard at the UN Commission on International Trade Law (UNCITRAL), with arbitration hearings starting in January 2025.

The Amulsar project stands as a test case for Armenia’s ability to balance economic development with environmental and legal concerns. Its success or failure will likely shape the country’s investment climate for years to come.