Top executives of the Hong Kong-headquartered firm Fortune Oil discussed its planned business operations in Armenia with Prime Minister Tigran Sarkisian.
Fortune Oil announced on January 14 that is has paid $24 million to acquire a 35 percent share in Bounty Resources Armenia Limited (BRAL), a little-known company that controls the untapped iron deposits in three different parts of the country. Fortune Oil has the option of raising the stake to 50 percent for an additional $16 million.
The deposits are estimated to contain between them some 1.8 million tons of proven or probable iron reserves. The largest and least explored of them is located near Svarants village in the southeastern Syunik province.
In a written statement, the Fortune Oil chief executive, Tee Kiam Poon, said the deal stems from the company’s strategy of diversifying its operations and helping China meet its “ever growing demand for resources.” “This is truly a ‘stepchange’ for the Company and its shareholders,” he said.
China is one of the world’s leading importers of base metals and ores used by its rapidly growing economy. Chinese imports of iron ores have risen almost tenfold over the past decade and are expected to grow further in the years to come.
According to the Fortune Oil statement, BRAL’s first production operations are scheduled to start in 2014 at the smallest mine located in Hrazdan, central Armenia. That will be followed by the development of the third iron deposit near Abovian, a town 15 kilometers north of Yerevan.
“Svarants will be developed last, as it is in an early exploratory stage, with only an initial assessment completed to date,” explained the statement.
In another press release issued on Monday, Fortune Oil said it will also help BRAL build an ore-processing plant in Armenia “in the first half of 2013.”
Daniel Chiu, the Fortune Oil vice-chairman, was quoted by the Armenian government’s press office as telling Prime Minister Sarkisian that the planned investments will be “equivalent to about half a billion U.S. dollars.”
“As a result of that, new jobs will be created, modern technologies will be introduced and local communities will be strengthened in our country in conformity with the best environmental standards,” the office said in a statement. It gave no further details.
China’s ambassador to Armenia, Tian Changchun, was also present at Sarkisian’s meeting with Chiu and other Fortune Oil executives, underlining the deal’s significance for official Beijing. State-run Chinese companies are among Fortune Oil’s major shareholders.
Armenian leaders described mining as one of the promising areas of Chinese-Armenian economic cooperation during Chinese Foreign Minister Yang Jiechi’s February 17 visit to Yerevan. Both they and Yang called for the expansion of bilateral commercial ties.
The government statement cited Sarkisian as praising Fortune Oil’s investment projects in Armenia.
Mining and metallurgy is the leading export-oriented sector of the Armenian economy. Its output is currently dominated by non-ferrous metals such as copper, molybdenum and zinc. Their increased prices in the international markets were a major factor behind renewed economic growth registered in the country last year.
According to official statistics, Armenia exported $609 million worth of base metals and ore concentrates in 2010. The figure accounted for over 60 percent of the country’s overall export revenue.
Armenia -- Prime Minister Tigran Sarkisian (L) and former Environment Minister Vartan Ayvazian at a meeting with top executives of China's Fortune Oil company, 23Feb2011.
BRAL’s partial takeover by Fortune Oil has also cast a renewed media spotlight on Vartan Ayvazian, a former Armenian minister of environment who has for years been dogged by corruption allegations. The Hetq.am investigative news service reported late last month that BRAL is at least partly owned by Ayvazian and his family.
The ex-minister, who now chairs one of the standing committees of the Armenian parliament, did not deny that at a news conference last week. “Let that remain a secret as well. Why do you really have to know anyway?” he told a Hetq.am correspondent.
“Why shouldn’t I be interested [in iron mining?] Is it a crime in Armenia to engage in commercial enterprise?” Ayvazian said. He welcomed the Chinese company’s entry into the Armenian mining sector.
Incidentally, Ayvazian also took part in Sarkisian’s meeting with the visiting Chinese executives.
The Armenian Ministry of Environment Protection had considerable regulatory authority over the mining industry when it was run by Ayvazian. An industry source told RFE/RL’s Armenian service that BRAL was set up and granted operating licenses for the three iron mines during his tenure that came to an end in 2008.
In 2006, a U.S. company mining gold in Armenia publicly accused Ayvazian of demanding a $3 million bribe from it. Both the minister and the Armenian government denied the allegations made by the Connecticut-based Global Gold Corporation.
Global Gold went on to file a lawsuit against Ayvazian and the government with the International Center for Settlement of Investment Disputes (ICSID), a Washington-based arbitration body affiliated with the World Bank. The company subsequently settled the dispute with the government but pressed its case against Ayvazian. The ICSID has still not handed down a ruling.