By Ruben Meloyan
Environment Minister Vartan Ayvazian on Friday again accused an Indian-owned company developing the bulk of Armenia’s gold reserves of large-scale fraud and mismanagement, insisting that the Armenian government revoke its operating license.
“They are not doing a good job,” Ayvazian told reporters. “Shouldn’t we punish them? They have wreaked havoc on the mines.”
“I called for them to be stripped of the license long ago, but was told that there are no sufficient grounds for that,” he complained.
The Armenian subsidiary of the London-based Vedanta Resources was reportedly placed under a criminal investigation last month after Ayvazian’s ministry issued a fresh report accusing it of underreporting ore extracted from its Zod and Meghradzor gold mines. The ore is turned into gold at a smelter in the southern town of Ararat.
Prosecutors reportedly raided the offices of the Ararat Gold Recovery Company (AGRC) last month amid media speculation that the Armenian authorities have decided force Vedanta to sell it to a Russian mining giant. The speculation followed President Robert Kocharian’s late January meeting with his Russian counterpart Vladimir Putin that focused on economic issues. Kocharian described mining as a new promising area of Russian-Armenian economic cooperation.
AGRC already faced fraud allegations in 2004 after a regular inspection of its gold mines by the Environment Ministry’s Ecological Inspectorate. The agency charged in a report that the company underreported 900 kilograms of gold to evade millions of dollars worth of taxes. The Indians strongly denied the allegations and took the ministry to the court. Still, they had to pay a $500,000 fine in an out-of-court settlement reached in March 2005.
Later in 2005, officials from the Ecological Inspectorate again inspected the mines and claimed to have uncovered another 1.3 tons of hidden gold. AGRC was also found guilty of serious violations of safety regulations which Ayvazian said have killed five company workers in recent years. The findings of the second inspection are also challenged by the company in the court.
Vedanta 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.
Its Indian executives have blamed the decline on high costs allegedly incurred during ore’s transportation by rail from Zod to Ararat. Two years ago they asked the government in Yerevan to build a new ore processing plant near Zod. The government has rejected the $85 million project, strongly opposed by environmentalists, citing the area’s proximity to Armenia’s ecologically vital Lake Sevan.
(Photolur photo: Vedanta Resources owner Anil Agarwal meets President Robert Kocharian during a September 2006 visit to Armenia.)