Armenian government to provide $150 million loan guarantee for Amulsar gold mine

On Thursday, the Armenian government adopted a decision to provide a budget guarantee of $150 million to the US-Candian company Lydian Armenia, which intends to start operations of the Amulsar gold mine.

The loan should be last ‘up to five years at a nominal interest rate of up to 9%’, and would be provided by six Armenian banks — Ardshinbank, ACBA Bank, ID Bank, Inecobank, and Evocabank, with the Armenian government acting as a guarantor.

According to previously conducted studies presented in the justification of the draft decision by Armenia’s Economic Ministry, the operation of the mine was expected to lead to ‘about 1-1.5% of GDP [growth] per year’.

It was also expected that over 1,000 people would be involved in the construction of the mine, and around 700 jobs would be created during the operation.

According to the Armenian law on state debt, the amount of the state’s guarantee at the time of the application shall not exceed 20% of the assets of the guarantee recipient, in this case Lydian Armenia.

Based on the last available information, which indicated that Lydian Armenia’s assets measured around $380 million as of 31 December 2023, the government’s loan guarantee would exceed the 20% requirement.

However, exceptions to the law include if the loan funds are ‘planned to be used for state needs’ or to ‘ensure funding for the implementation of programmes focused on addressing strategic matters in the context of economic crisis if other security measures are not accepted by the creditors’.

Given that the last financial report dates from 2023, the government’s draft decision indicated a precondition for issuing their loan guarantee — that a report on the market valuation of the company’s assets must be submitted within six months of the decision being entered into force.

The draft decision also stated that the BDO Advisors CJSC company had conducted a study to assess whether Lydian Armenia was financially viable.

In November 2024, Armenian Economic Minister Gevorg Papoyan said that the government intended to provide a state guarantee for the company to attract a loan, before which they ordered an audit of Lydian Armenia to make ‘a political decision’.

Risks for Armenia

Operation of the contested Amulsar gold mine was greenlit in January 2024, after Armenia’s government accepted a 12.5% share in the mine, despite years of protests by eco-activists and residents from communities adjacent to the mine.

However months later, in November, CivilNet wrote that the signing of the agreement on the 12.5% share to be donated to the Armenian government ‘has been postponed at least five times’.

They also revealed that the Eurasian Development Bank (EDB) had rejected a loan to operate the Amulsar gold mine, which, according to a signed memorandum of understanding in February 2023, would have amounted to $100 million.

This rejection led to speculation that the EDB’s decision was influenced by the results of the environmental assessment it commissioned as part of its final loan decision.

Following the decision by the Armenian authorities on Thursday, economist Suren Parsyan highlighted its risks in a post on Telegram, noting that the decision for the budget guarantee came ‘in exchange for 12.5% of Amulsar mine's shares’.

Parsyan explained that if the project fails, the loan will be paid ‘at the expense of the taxes paid by taxpayers’. He added that it was yet unknown if Lydian Armenia or the Armenian Government would be able to attract other investments, insisting that the ‘$150 million loan is not enough to relaunch this mine’.

According to Parsyan, the functioning of the Amulsar gold mine is ‘necessary’ for the current government in order to meet the economic indicators for 2025-2026, expressing doubts about the authorities having ‘sufficient mechanisms and experience to control the effective use of loan funds’.

‘The Amulsar project has environmental, economic, security, and already budgetary risks, the management of which will become the agenda of several generations’, Parsyan warned.

Amulsar is located near the resort town of Jermuk, which was targeted by Azerbaijan in 2022 during its attack on Armenia, resulting in the occupation of Armenian territory.

Speaking with RFE/RL, Parsyan warned that considering this past history and the mine’s location, it is not unfeasible that Azerbaijan could ‘carry out military operations’ in the area, which is a security risk which would hold investors back.

‘As long as there is no security guarantee, it is unlikely that investors will invest large amounts of money in this direction’, Parsyan concluded.

Eurasian Development Bank rejects loan for Amulsar mine operations

Eurasian Development Bank rejects loan for Amulsar mine operations0:00/3:451× Armenian Economic Minister Gevorg Papoyan stated that discussions are ongoing with commercial banks in Armenia after the Eurasian Development Bank (EDB) rejected a loan to operate the Amulsar gold mine. This has led to sp…

OC MediaArshaluys Barseghyan