Armenia’s mining evolution
Michael Schwartz investigates how Armenia is attracting investment in its mining sector through a supportive government and diverse mineral wealth.
Armenia only gained independence in 1991, after emerging from the Soviet Union. It was the Union, however, that created modern mining in the country, and its legacy and subsequent exploration have resulted in a mineral-rich country, whether in precious metals or in more frequently found minerals.
In the post-Soviet period, the existence of gold has sparked the interest of a range of companies, including Toronto–listed Lydian International in 2005. The discovery of the Amulsar gold deposit a year later only increased this.
Speaking to Materials World, Pamela Solly, Vice-President Investor Relations at Lydian International, says, ‘In 2011, and with the assistance of The World Bank, the Republic of Armenia adopted a new mining code to better align with international standards. Emphasis over the past several years has been on responsible mining, best international practices, the importance of environmental and social considerations and transparency.
‘Again with the support of The World Bank, the government also revised its law on environmental impact assessments (EIA) to reflect good international practices. This included improvements in the methodology for the assessment and economic valorisation of environmental damages, reviews and enforcement of EIA implementation, and improved transparency and public participation. The new law addresses long-standing concerns regarding direct financing linkage between state environmental expertise reviews and fee payments levied on the EIA review procedure.’ In March 2017, the globally recognised Extractive Industries Transparency Initiative approved Armenia’s membership application, becoming the 52nd country to implement the concept.
Several other companies are active in Armenia, including Cronimet Mining, of Karlsruhe, Germany, Polymetal International, listed at London and Mosco, and Global Gold Corporation of New York State, USA.
Digging for gold
Located in south-central Armenia, Amulsar, which is 100%-owned by Lydian International, is set to become the country’s largest gold producer once the first gold-pour takes place in 2018.
Estimated mineral resources, according to Lydian International’s 2017 first quarter technical report, contain 3.5Moz measured and indicated gold, as well as 1.3Moz inferred gold. Production is targeted to average approximately 225,000 oz/y over an initial 10-year period. Extensions are intended to improve the average annual production
and extend the life of the mine, while open pit mining and conventional heap leach processing will contribute to Amulsar’s economic potential.
During 2017, Lydian ramped up to full construction at Amulsar, with the workforce exceeding 1,400 employees and contractors. More specifically, earthworks initially dominated the construction procedure, but concrete projects and the assembly of equipment also began took shape.
Key advancements at Amulsar include:
- Materials handling system, whereby fabrication, delivery and assembly of crushing and conveying equipment progressed as planned and most remaining equipment for crushing and screening arrived on site, notably the three secondary cone crushers, the primary crusher, apron feeder, motors and the dust collection system.
- Crushing and screening components went into storage on site. Assembly will begin once the concrete work is completed.
- Deliveries for the overland conveyor included pre-cast concrete sleepers and most of the modular overland conveyor galleries.
- One third of these assemblies has now been constructed. Although geotechnical conditions meant further excavation and backfilling, but this didn’t lead to delays.
- Building of the mine haul-road continues, aimed at linking the mine area to the crushing plant and barren rock storage facility.
- At the heap leach facility, topsoil stockpiling, construction earthworks and preparation of the sub-base for the geo-membrane are advancing. Installation of primary under-drain piping is complete.
In the case of actual mining operations, Lydian will use an initial mine mobile fleet of Caterpillar equipment, including one hydraulic shovel, one loader and nine haul trucks. The shovel, loader and four haul trucks arrived on schedule in 2017. Assembly of the equipment is taking place on site via Zepellin, the local Caterpillar dealer.
Lydian’s financial plan includes US$370m of construction costs and other estimated interests costs, financing fees and corporate expenditures. The company has received advances of US$50m under a term loan agreement, has utilised an initial US$36.7 million under the ING Bank equipment financing facility (including US$32.8m received by Lydian and US$3.9m to be funded from ING to the export credit agency) and has received its first advance of US$2.3m under the credit agreement with Caterpillar Financial Services.
Another important player is Zangezur Copper Molybdenum Combine (ZCMC), the largest copper and magnesium producer in the South Caucasus. Since 2004, Cronimet Mining has been the majority stake-holder. Part of this comprises the Kajaran Mine, which hosts 6% of the world’s molybdenum reserves – 2.24Bnt of ore.
Kajaran’s in-pit resources include copper content of 5.22Mt and molybdenum content of 0.72Mt. Kajaran uses bulk mining techniques, resulting in 12.8Mt of ore mined each year. Licences to remove the ore were extended in 2008 to run until 2030.
Certain natural advantages apply to Kajaran, notably the fact that the deposits lie on a mountain side, facilitating extraction, as do large homogenous ore zones. In addition, there is low groundwater inflow, meaning that only water from precipitation and surrounding rivers and creeks requires draining from the pit. Drill and blast mining techniques lead to truck and shovel operations, while waste is taken by truck to a remote waste dump. The truck fleet is made up of Caterpillar and BelAz vehicles, with capacity ranging from 37t to 134t.
The ore, which is both copper and molybdenum-bearing, is extracted from an open pit before crushing, grinding, separation by flotation, filtering and processing into copper and molybdenum concentrate. At this point, there is a difference in approach to the two minerals. Copper concentrate is marketed directly to the customer, but molybdenum undergoes several processes, notably into molybdenum derivatives at the hands of local partners.
In addition to Kajaran, there is also the Kapan underground mine, which was acquired by Polymetal International from Dundee Precious Metals in 2016. The mine has been in production since 2003 and represented Polymetal’s debut in Armenia. The mine consists of the Kapan section and a further 100%-owned resource, Lichkvaz, which is 70km away. The gold runs to 4.0g/t average grade for Kapan, and 4.2g/t for Lichkvaz.
At the time of writing, 2017 figures at Kapan were not available, but in 2016 underground development topped 9.5km and total gold production was 26,000oz. Current full capacity at Kapan is 400,000t/y, while Lichknaz offers a conventional 750,000t/y flotation concentrator. By mid-2018, concentrator usage is expected to reach 900,000t/y.
Meanwhile, Global Gold Corporation, incorporated in 1980 as Triad Energy Corporation, before a name change, is also active in Armenia, and entered into a joint venture (JV) with the Armenian government to develop deposits and to reprocess tailings near Armenia’s capital city, Yerevan.
The company has since attempted to expand its presence, with aspirations for the exploration, development and production of gold at Toukhmanuk in the North Armenian Belt and two properties in south-west Armenia, Marjan and Marjan North.
Mining across the country
Toukhmanuk is Global Gold’s key gold-and-silver mine and a new milling plant has been built to anticipate increased production. With a licence area of nearly 54km2, the company’s confidence that Touchmanuk can become a world-class mine is understandable. The extension of the mine’s licence to 2040 only reinforces this view.
In geological terms, independent analysis has delineated measured, indicated and inferred resources of 39.23Mt at 2.1 g/tgold and 14.1g/t silver within roughly 20% of the 2.2km2 making up the central area.
Testing has shown more than 18 mineralised zones within a 150m–200m-wide east-north-east zone. They are 5m–25m wide, extending more than 300m along strike, and more than 150m at depth. Assay results have ranged from 1g/t gold to 520g/t.
The Marjan property benefits from the identification of major gold and silver deposits in 2006 and from being in the 10th year of a licensing agreement extended to 2033. The total area is almost 20km2 and here 15 veins have been discovered – the drill holes spread over 40m–100m. In all, 15.4Mt of ore grading 2.311g/t gold, 92.1g/t silver, 0.8% copper, 1.1% lead and 1.21% zinc have been identified.
Production at Marjan is projected for later this year, following an agreement between Global Gold and the Armenian government. It is expected that an approved tailings dam will have been completed and, as a result, 160,000t of ore will be mined.
Marjan’s reserves are being re-assessed in the light of more favourable findings, meaning a revised mining plan ramping up to 200,000t/y. This could produce a total of 11,150oz/y of gold and 233,000oz/y of silver.
A post-Soviet success
All in all, the companies and operations described here demonstrate a positive story for Armenia. Solly says, ‘The Armenian government has demonstrated its support for mining and has been very supportive of Amulsar, a high-profile project for them as part of its efforts to attract greater foreign direct investment (FDI) in the mining sector. Amulsar will contribute approximately 2.5% to Armenia’s GDP.
‘Lydian’s EIA was approved in four months, as against a statutory timeline of years in other jurisdictions. Mining regulations have been changed to accommodate modern mining, for example ramp slopes increased from 7% to 10% in open pit mines.’
Mining companies in Armenia are subject to a royalty and income tax structure, with an effective tax rate of just under 40%, namely 20% corporate tax plus 12.5% income tax, plus 4% royalty.
Yes, Armenia can attribute the start of its modern mining industry to the Soviet period, but the rise of JVs and FDIs means that the country’s exceptionally rich and varied mineral reserves can play a part in boosting what is fast becoming a national success story.