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Mining dispute over Amulsar gold mine threatens Armenia’s post revolutionary political consensus

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The controversy pits the grassroots activists who brought a reformist government to power against foreign investors who promise the economic growth Armenia needs.

“Honestly, would you come here for a vacation?” asks Aharon Arsenyan, 24, an environmental activist, as he points to construction works on top of a nearby mountain. “They’re planning to flatten it.”

This is Jermuk, a once-prosperous Soviet resort town in southeast Armenia, famed for its mineral springs and the eponymous brand of bottled water drunk across the country.

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But the nearby mountain is Amulsar, where a controversial gold mine project is threatening the area’s natural beauty and, many residents believe, their health. It has also become a key early political challenge for the new government of Prime Minister Nikol Pashinyan, forcing him to mediate between the grassroots activists who brought him to power and the foreign investors who promise the economic development the country so badly needs.

For over three weeks, Arsenyan and other local activists have been blocking all roads leading to the mine at Amulsar. Workers, unable to reach their job site, have responded with counter protests in Yerevan demanding an end to the protests.

Pashinyan has gotten personally involved in the dispute, traveling to Jermuk and Amulsar in early July, meeting with protesters and representatives from the mining company and holding a public forum where he announced an independent audit of the project based on “facts rather than emotion.”

Pashinyan said that he would never have sanctioned the project himself, but that for now he is honoring his predecessor’s agreements.

“We face a situation where a huge amount of investment has been made with the legal permission of the Armenian government,” he said on his visit to Amulsar. “Right now, we have no information that any regulations have been violated. Inspections at the mine have started and will continue. We must answer two questions. We must ascertain the mine’s impact on the water resources and its possible impact on the development of Jermuk as a health resort.”

“If we take any unlawful step in this situation … we may face major problems,” he added.

The issue has divided residents of Jermuk. The hospitality industry has joined with environmental activists in organizing against the mine. Several major hotels have signed a statement in opposition to the mining project, arguing that it will damage their business along with the environment.

“Each year the quality and quantity of tourists is dropping,” said Vazgen Galstyan, 29, a local activist who works in Jermuk’s tourism sector. “Even though the mine isn’t operational, people are already seeing it when they look up the town on Google and they are starting to fear the effects on their health.”

But the mine means jobs. The initial construction phase employs 1,400 people, with 700 expected to operate the mine over its lifetime.

“As many as 1,400-1,500 people earning a living there are now forced to stay at home,” one of the protesting miners told RFE/RL’s Armenian service Azatutyun at the July 2 counter protest in Yerevan. “If our operations are illegal then let them find a solution to that. If they are legal, then the roads must be reopened so that the people can go back to work.”

Environmental activists are unsympathetic, arguing that on aggregate more jobs will be lost in tourism than gained in mining.

“I ask these miners: ‘You want to earn money by risking our children’s future? Their health?’” says Arsenyan. “I don’t care what any of them say, everyone has an alternative choice in life. I don’t believe people need to support the destruction of their country to survive.”

In Yerevan, the new government is wrestling with a similar dilemma.

Lydian Armenia began working in the region more than ten years ago. But it was in 2012, when the company began exploratory drilling around Amulsar, that activists began organizing against it. Now, with Pashinyan in power, environmental activists have new hope that their voices will be heard in the government.

But Amulsar is one of the largest foreign investments in Armenia’s modern history – Lydian says it has already invested $300 million. According to the company’s calculations the project will contribute $488 million to the state budget through taxes and royalties over its 11-year operation, or 1.4 percent of GDP. Both the UK and the U.S. have been strong backers of the project, and it has received equity from the European Bank for Reconstruction and Development.

“Mining in Armenia is an opportunity to diversify the nation’s economy and increase the number of well-paying jobs, but only if mining operations are conducted to the highest international standards to protect the environment,” U.S. ambassador Richard Mills said on July 11.

Lydian Armenia, a subsidiary of Lydian International – a Colorado-based company registered in the British tax haven of Jersey – says it is losing half a million dollars for every day the project’s construction is delayed. So far, the protests have cost the company over $14 million, it says.

“If for whatever reason the project stops … it may be a serious blow to [Armenia’s] investment reputation,” said Vanane Ararktsyan, executive director of the American Chamber of Commerce in Armenia, in an interview with Eurasianet. “We believe Lydian is a leader in the country in terms of environmental management in mining and it will be very difficult to justify actions against a leading environmental performer.”

“This is a real test for Pashinyan,” said Yerevan-based political analyst Mikayel Zolyan. “He is hoping to avoid alienating the activists who helped bring him to power, but at the same time, he needs to attract foreign investment into the country.”

Some members of the new government have come out against the mine. Minister of Nature Protection Erik Grigoryan endorsed the protests against Amulsar on July 10. “Because of its biodiversity and natural resources, Armenia is one of the world’s major global ecological zones,” Grigoryan said.

“In the past, the previous government called mining a ‘privileged industry,’ exempting it from regular inspections so long as the mines created jobs,” First Deputy Minister of Nature Protection Irina Ghaplanyan told Eurasianet. “It is our responsibility to our citizenry to conduct inspections.”

Other senior officials have ties to the mine. President Armen Sarkissian, an appointee of ousted ruler Serzh Sargsyan who has stayed on in the new regime, was on Lydia’s board of directors but resigned in 2013 when he became ambassador to the UK. The president’s former role on the board, along with previous work with the EBRD, give rise to questions about a conflict of interest, Zolyan argued.

“We have to think about how deals were made under Sargsyan,” he said. “Everyone needed connections to the ruling family to invest – the logic of the old regime tells us that there must have been a personal connection in place for Lydian to invest.”

Sarkissian, though, has denied that he has any current interest in Lydian. “Relations with Lydian are very clear. If there is any company in London, Paris, Europe or wherever, which is interested in making investments in Armenia, I am always willing to meet and advise them,” he said in a January interview with Shant TV.

The mine project, which is still in its construction phase, has already caused damage to irrigation systems and water supplies in the neighboring village of Gndevaz, local activists have reported. Dust plumes have also engulfed Jermuk over the past year.

“We’re a mining company and our experience is in mining, not in construction,” Armen Stepanyan, Lydia’s vice president of sustainability, told Eurasianet. “There are sometimes problems in the construction phase because we rely on third-party companies.”

Stepanyan insisted that dust clouds and other issues will be much easier to manage once Lydian takes over the site and begins its operations, but that has not allayed locals’ concerns.

The Amulsar mine will use heap-leaching, a process that separates gold from ore using cyanide. Lydian International says it will dispose of the cyanide safely and that there’s no risk of pollutants leaking into the environment. A recent international report commissioned by Harout Bronozian, an Armenian-American environmental engineer and activist, challenges this claim, and argues the process will threaten groundwater.

“The water resources of Armenia are at risk from development of the Amulsar project. This sensitive and highly prized part of Armenia should not be a testing ground for Lydian’s experimental methods,” the report concluded.

Scientists at Lydian in turn insist they have technologically advanced preventive measures in place that will make the process safe.

“The facility is zero discharge and the rocks will sit on a thick layer of clay with a specific characterization to avoid spillage,” Stepanyan said. “We then use a geomembrane – a high-density outer layer that stops any chemicals leaking through.”

Conflicts of interest breed distrust

Lydian has on a number of occasions used environmental experts to tout the safety of the mine, presenting them as independent when they in fact have financial ties to the company.

In January 2018, Lydian’s executive team held a meeting with Artsvik Minasyan, then Armenia’s minister of nature protection and Grigoryan, who at the time was deputy minister. Testifying at this meeting was Larry Breckenridge, who Lydian presented as “an independent international expert.” Breckenridge is a principal environmental engineer at Global Resource Engineering, a firm contracted by Lydian to work on at least three technical reports. In Pashinyan’s government, Minasyan has been appointed minister of economic development and investments, while Grigoryan was promoted to head the Ministry of Nature Protection.

The meeting was held three months after a talk on the same subject by another expert, Aaron Steeghs, was scheduled at the American University in Armenia. Titled “Modern Mining Practices and The Beyond Zero Harm Framework,” the event’s organizers did not disclose that Steeghs is married to Christina Carreau, the daughter of Bob Carreau, a vice president of Lydian International. Prior to joining Lydian, Carreau served as senior vice president of the Iamgold Corporation, a Canadian producer of African gold. During the same period, Steeghs was the Corporate Social Responsibility manager at the same company.

Lydian Armenia told Eurasianet that the company has never hidden Breckenridge’s affiliation. His ties with Lydian are “an advantage” since it means he has “first-hand information about the project,” said Anna Saghabalyan, a spokesperson for the company.

The university event was canceled after activists protested it. “That is regrettable, as it was a missed opportunity to raise questions and discuss issues with an international expert,” Saghabalyan said, “regardless of his family ties.”

Pashinyan gently alluded to the various conflicts of interest during his visit to Amulsar.

“I hope that all those here understand that we, specifically I, have no interest in this case other than the balanced interest of Armenia,” he said.

The anti-Amulsar activists are holding on to hope for Pashinyan.

“I love this government very much and I’ll be disappointed if they keep the mine open, but I understand it isn’t their fault,” said Arsenyan, the environmental activist. “It’s sad to see our government under so much pressure from the U.S. and Britain but I am sure Pashinyan will close it.”

“Jermuk is the heritage of every Armenian across the world and we must all come together to protect it,” he said, holding up a bottle of Jermuk water. “This is the real gold.

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