The Armenian government is awaiting the results of an independent international environmental audit for its decision on the future of an effectively halted mining project amid a warning from the United States-based company about a possible litigation, a lawmaker representing the ruling alliance said on Monday.
Subsidiaries of the Lydian International company, which has exclusive rights to develop the Amulsar gold deposit in southeastern Armenia, last week threatened to sue the Armenian government over ongoing blockades of road access to the mining site, while still hoping for an out-of-court settlement of the dispute.
The company has been unable to proceed with its work since June 23 as a group of residents of nearby communities protesting against gold mining operations blocked all roads leading to the site.
More than 1,400 people working for the project, many of them also local residents, have therefore been unable to go to work, while the company has said it has suffered millions of dollars in losses.
Lydian announced on its official website on March 11 that its subsidiaries – Lydian U.K. Corporation Limited and Lydian Canada Ventures Corporation – have formally notified the Armenian government of “the existence of disputes” with it under relevant agreements on the promotion and protection of investments that Armenian authorities signed with the governments of the UK and Canada back in the 1990s.
According to the announcement, in accordance with the agreements Lydian UK may submit the dispute to international arbitration three months after such formal notification and Lydian Canada can do so after six months.
“In the meantime, the Government of Armenia has an opportunity to continue amicable discussions with Lydian with a view to the prompt settlement of the disputes,” the company said.
“Whether or not Lydian UK or Lydian Canada will initiate arbitration proceedings will depend on the conduct of the Government of Armenia, and there can be no assurance that Lydian UK or Lydian Canada will initiate any arbitration claim or application to any international arbitration court or of the outcome of any such claim or application. The Company does not intend to make any further public comments relating to these matters unless required by law.”
Still last summer the Armenian government revealed plans for an international audit of Lydian’s Amulsar project to assess its environmental impact and determine whether it poses any risks to the nearby resort town of Jermuk and Armenia’s water resources in general.
Prime Minister Nikol Pashinian stressed then that the government’s decisions on Amulsar must be based on “facts rather than emotions.” At the same time, he unsuccessfully tried to persuade local residents and environmental activists to stop blockading the mining site.
Hayk Gevorkian, a member of the pro-Pashinian My Step faction in parliament and member of the parliamentary committee on economic affairs, said that work related to an independent audit began recently. He repeated that the government’s further steps will depend on the outcome of this environmental examination.
According to the lawmaker, the audit that costs Armenia more than $390,000 is being conducted by an “internationally certified, reliable company” and the government will not do anything until it gets the results of the audit.
“Before this audit there were two diametrically different examinations. According to one of them, the operation of Amulsar is absolutely safe, and according to the other, it poses danger. That’s why in order to get the final answer to that question the government has agreed to take a rather costly step to have a totally independent examination,” Gevorkian said, adding that the first results of the hydrological examination will become available as early as the beginning of June.
The lawmaker said that if the examination establishes that the operation of the mine damages the environment, the government will ensure conditions for the construction to be resumed. “If the litigation goes the way that Armenia will have to pay to the investor, it will be several hundred million dollars, which will prove quite a heavy burden for Armenia. But if the audit concludes that it is dangerous, then the matter will concern public health, which is more important, so everything will depend on the results of the audit,” Gevorkian said.
Still in July, the United States government expressed hope that the Amulsar deposit’s environmental audit will be conducted objectively and “in strict accordance with the law.”
Richard Mills, the then U.S. ambassador to Armenia, said that potential American investors have been closely monitoring, among other things, the Armenian government’s treatment of the U.S.-based mining company.
Lydian, which claims to have already invested more than $300 million in Amulsar, has not ruled out the possibility of international legal action against the Armenian state that had granted it exclusive rights to the gold deposit.
Environment protection groups in Armenia have insisted that, if implemented, the Amulsar project will contaminate air, water and soil in the area where the country’s most popular spa resort is located.
Lydian has maintained that it is using advanced technology to prevent any damage to the local ecosystem.
The company is registered in a British tax haven but headquartered in the U.S. state of Colorado. Its shareholders include U.S., Canadian and European investment funds as well as the European Bank for Reconstruction and Development.
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