By Anna Saghabalian and Emil Danielyan
An Indian-controlled company developing the bulk of Armenia’s gold reserves said Wednesday that it has abandoned plans to build a new ore processing plant near the ecologically vital Lake Sevan due to strong opposition from the Armenian government and environmentalists.
Sterlite Gold had asked the government to allow it to build the new facility near its main gold mines at Zod, eastern Armenia, with the aim of reducing transportation costs which the British-registered firm claims are too high. Its Armenian subsidiary, the Ararat Gold Recovery Company (AGRC), has until now processed ore at a Soviet-era plant located in the southern town of Ararat.
The Armenian Ministry of Environment and local environment protection groups have been strongly opposed to the $85 million project, citing Zod’s proximity to Sevan. They argue that ore processing is accompanied by emissions of potassium cyanide, a highly poisonous substance that can wreak havoc on a lake which is central to Armenia’s entire ecosystem.
Sterlite, 52 percent of which is owned by Indian tycoon Anil Agarwal, has tried hard to allay those fears over the past year but appears to have failed to secure government permission for the proposed plant relocation. Its chief executive, B. K. Sharma, said in Yerevan that the company has now asked the government to suggest alternative locations for a new AGRC plant.
Environment Minister Vartan Ayvazian scoffed at the idea on Tuesday, saying that making such suggestions “it is not the government’s job.” Ayvazian also renewed his allegations that Sterlite failed to honor its investment commitments and hid nearly one million metric tons of gold from Armenian tax authorities.
Speaking to journalists, Sharma and AGRC executives denied the charges. “In order to obtain one ton of gold you have to dig up several million tons of soil,” said a company lawyer, Armen Ter-Tachatian. “You just can’t hide that.”
Ayvazian’s claims are apparently based on an inspection conducted by his ministry’s Ecological Inspectorate at AGRC’s mines in Zod and Meghradzor, central Armenia. In a June 2004 report, the agency accused the Indians of underreporting more than two metric tons of gold extracted from those mines and asked Armenia’s Office of the Prosecutor-General to launch a criminal investigation.
However, the Environment Ministry dropped its own claims after it was taken to court by AGRC. The latter reportedly paid a $500,000 fine in an out-of-court settlement reached with the ministry in March 2005.
Sterlite has been dogged by controversy ever since its 2002 takeover of AGRC, until then a joint venture of the Armenian government and the Canadian company First Dynasty Mines. It pledged to breathe a new life into the Armenian gold industry by making large-scale investments and significantly boosting production levels. However, AGRC’s output has since declined considerably despite a surge in the international price of gold, raising questions about the credibility of the foreign investor.
Sharma revealed that Agarwal has all but acquired the remaining 48 percent of Sterlite’s stock from the mostly Canadian minority shareholders and will incorporate the company into his Vedanta Resources metals conglomerate.
But according to a Western mining industry source, the deal may well be blocked by Canadian state regulators and minority shareholders furious with his perceived mismanagement of Sterlite. The company’s share price stood $3.5 in 1997 and has since plummeted to below 20 U.S. cents. The source also said Agarwal would like to pull out of Armenia but has so far failed to find any buyers for AGRC.
(RFE/RL photo: a mine at Zod.)