The National Assembly’s Audit Chamber demanded the extraordinary measure following a detailed inspection of GPM Gold, the Armenian subsidiary of Russia’s GeoProMining group. The latter rejected the accusations and said it will take the chamber to court.
GeoProMining purchased the company, which controls the gold mines at Sodk and Meghradzor and owns an ore smelter in the southern town of Ararat, from Indian investors in late 2007. The Indians decided to sell it after being accused of large-scale fraud by the Armenian government.
GPM Gold has since stood idle or operated at a fraction of its capacity, despite record-high international prices of gold. Its Russian owner pledged to finally breathe a new life into the company earlier this year. GeoProMining announced recently the launch of a $200m plan to modernize its production facilities by 2014.
According to Ishkhan Zakarian, the chairman of the Audit Chamber, GeoProMining’s February 2008 licensing agreement with the Armenian Ministry of Energy and Natural Resources was signed in violation of the country’s mining legislation and regulations.
Zakarian claimed that the company has also failed to honor key terms of that agreement that committed it to making substantial capital investments and producing at least 600,000 tons of gold ore from each mine.
Those investments are supposed to come from a $250 million loan allocated to it by the Russian bank VTB. The Russians have deposited GPM Gold’s shares with VTB’s London branch as a collateral.
Zakarian said the Audit Chamber has found that none of that money has been channeled into Armenia so far. “Getting $250 million and not investing anything in boosting the efficiency of the Sodk and Meghradzor deposit exploitation is unacceptable to us,” he told a news conference.
Zakarian said the Russians have also failed to pay 24.2 million drams ($67,000) in mining fees to the state. He said a mining division of the Ministry of Energy and Natural Resources has done nothing to levy the sum and must be brought to task by the government.
The official added that the Audit Chamber has submitted its findings and recommendations to Prime Minister Tigran Sarkisian’s office. They call, among other things, for the revocation of GPM Gold’s licenses, he said.
In a statement released later on Friday, GPM Gold categorically rejected the results of the inquiry, saying that it was conducted by “incompetent specialists” and that “their presumptions are evidently false.” It also said the Audit Chamber “utterly neglected” the company’s written objections and explanations.
“We believe that the Audit Chamber report … is damaging the company’s international reputation and standing,” read the statement. “In view of that, the GPM Gold company is officially stating that it intends to appeal to judicial bodies with a lawsuit against the illegal actions of the Audit Chamber.”