Armenia - Mining and Minerals Armenia - Mining and Minerals
Overview
Table: Mining Sector in Armenia, unit: Thousand U.S. Dollars
| 2015 | 2016 | 2017 | 2018 (Estimated) | |
| Total Local Production | 462,682 | 534,255 | 699,303 | 550,500 |
| Total Exports | 476,900 | 470,900 | 692,300 | 480,500 |
| Total Imports | 639,300 | 591,200 | 647,800 | 595,500 |
| Total Market Size | 650,082 | 654,555 | 654,803 | 665,500 |
| Exchange Rates | 478 | 480 | 483 | 485 |
Armenia’s industrial-scale metal production began in the early 19th century with the opening of the Alaverdi and Kapan copper mines. Economic development began to rely more on mining in the early 1950s with the development of the Zangezur Copper Molybdenum Combine, which exploited the world-class Kajaran deposit (among the ten largest in the world), and produced around 3% of the world’s annual molybdenum output. After independence, Armenia’s minerals sector was hindered by a number of factors including its geographical location and difficult conditions for transporting products to the world market. The industry was also crippled technologically. This, together with a legal and regulatory framework that lagged behind international best-practices, created the main obstacles to the government’s efforts to attract foreign investment in the mining sector. Reform began in early 2000’s with the revision of the regulatory framework, the liberalization of contractual mechanisms, and restructuring, through privatization, of the major mining companies. Armenia’s current mining legislation, the Mining Code, establishes the regulatory framework governing mining and concessions.
Currently the mining sector is regulated by the following legal acts:
- Mining Code of RA, 2011
- Law on Enviromental and Natural Resources Using Fees, 1998
- Law on Enviromental Supervision, 2005
- Law on Waste, 2004
- Law on Promoting of State Regulation of Technical Security, 2005
- Law on Environmental Impact Assessmentand Environmental Expertise, 2014
- Civil Code of RA, 1998
- Water Code of RA, 2002
- Land Code of RA, 2001
- Code on Administrative Offences, 1985
The World Bank supports the government in upgrading mining sector legislation in line with international best practices through budget support operations coupled with technical assistance. The follow-up assistance on the Law on Environmental Impact Assessment (EIA) and the Law on Waste Management helped to set standards for responsible mining to better align the industry with global environmental practices. The World Bank funded a Strategic Mining Sector Assessment focused on the key challenges and opportunities in the sector, with an emphasis on the regulatory environment that both promotes sustainability and attracts investment. The Ministry of Energy has adopted new secondary legislation to meet the requirements of the Eurasian Economic Commission on the provision of information about the underground resources subject to restriction for foreign trade and issuing licenses for exporting those types of mineral resources. The government also works with the World Bank and other donors for the amendments in the Land Codex, Law on State Duties, and Codex on Administrative Offences.
In 2017, Armenia became the 52nd country to join the EITI - Extractive Industries Transparency Initiative as a candidate country. EITI promotes open and accountable management of oil, gas, and mineral resources. The Mining Agency within the Ministry of Energy and Natural Resources is responsible for administering the sector, issuing licenses, monitoring exploration and production operations. The license covers the exploration and production phases of a project. License holders must submit work programs to the Ministry for approval, and licenses can be withdrawn if minimum work requirements are not met.
The mining sector is one of the largest contributors to GDP and exports. In 2016, the mineral industry made up 17.9% of total industrial production and grew by 8.3% from the previous year reflecting expansion in 2014 at the Teghut copper mine, the country’s second largest mine. Mining of metal ores dominated the mineral industry, accounting for around 98% of the production value in this sector. In 2016, the country’s mining sector exports were valued at $480 million and were down by 1.3% than in 2015. Mineral commodities constituted a significant percentage of the country’s exports. The main export commodities are cut diamonds, energy, nonferrous metals, pig iron, unwrought copper, and other mineral products. Overall, exports of minerals accounted for around 25% of the country’s export revenue. Armenia’s main export partners were Russia and China. More than 90 percent of Armenia’s imports of mineral products consist of natural gas and petroleum.
Over 850 construction material and aggregate mineral mines are registered in the state balance sheet of the Mineral Resources, including 38 base metal and precious metal mines, 45 underground fresh water mineral mines and 25 underground mineral water mines. 497 licenses were provided for the extraction/production of mineral resources, including 27 licenses for metallic minerals, 442 for non-metallic minerals and 29 for underground mineral waters. There are 87 licenses provided to geological exploration of the lithosphere for the extraction of mineral resources, including 53 licenses for metallic deposits, 33 for non-metallic deposits, 1 for underground water, and 3 licenses for the detection of natural gas and oil.
Among base metal and precious metal deposits located in Armenia, there are 8 copper-molybdenum mines, 3 copper mines, 13 gold and gold-polymetallic mines, 2 poly metal lie mines, 2 iron ore mines, 1 aluminum and 1 magnesium silicate and chromite rock mines.
The Ministry of Economy estimates reserves of a few hundred million tons of iron ore deposits, a few million tons of copper, lead, and zinc reserves, a few hundred thousand tons of molybdenum, and a few thousand tons of gold and silver deposits. The largest copper reserves are concentrated in copper and molybdenum (Kajaran, Agarak, Lichk and Teghut), copper-pyrite (Kapan, Alaverdi, and Shamlough), and in gold-polymetallic (Shahumyan, Armanis) deposits. There are considerable gold resources in gold root (Sotk, Megradzor, Lichkvaz-Tey) and complex gold-polymetallic (Shahumyan, Armanis, Azatek, Gladzor, Marjan) deposits. There are valuable reserves of rare metals in gold-polymetallic, copper-molybdenum, and copper pyrite deposits. Besides metals, Armenia produces other industrial minerals, which include cement, diatomite, gypsum, limestone, and perlite.
Armenia also has indigenous construction material resources, such as basalt, granite, limestone, marble, and tuff. The country also produces aluminum foil from aluminum imported from Russia, ferromolybdenum, molybdenum metal, and rhenium salt (potassium perrhenate) from local ores. Armenia has both semiprecious stones, such as agate, jasper, and obsidian and other nonmetallic minerals, such as bentonite, diatomite, perlite, and zeolites. It has also developed a diamond-cutting industry based on imported diamonds. The country has almost no domestic fuel production. Around 90 percent of Armenian’s natural gas is imported from Russia. Since 2006, Armenia has also imported natural gas from Iran through a direct pipeline between the two countries, in addition to liquefied natural gas (LNG) transported in tanker trucks.
Leading Sub-Sectors
Armenia has significant deposits of copper, molybdenum and gold, as well as smaller deposits of zinc, lead and silver. Some copper-molybdenum and polymetallic ore deposits are rich in elements such as bismuth, tellurium, selenium, gallium, indium, thallium, rhenium and germanium. Armenia also has significant deposits of construction materials, such as granite, basalt, travertine, gypsum, diatomaceous earth, limestone and raw materials for cement production. There are currently 10 major mining and metallurgical companies in operation out of registered 27, mainly concentrated in two provinces, most of them either extracting and processing copper, molybdenum ores or gold. The total value of metal and minerals production in 2017 increased by 13.9% and was at 699 million USD, or approximately 5% of GDP.
The resources of the most high quality and of the greatest amount of swelling rocks (perlites, obsidians, other) in the world exist in Armenia. Armenia has confirmed reserves of 150 million m3 Aragats-perlite, with possible additional unconfirmed reserves of up to 3 billion m3.
The leading producer of copper and molybdenum concentrates in Armenia is the Zangezur copper-molybdenum complex (ZCMC) followed by the Vallex Grup and the Agarak copper-molybdenum mining and processing complex (ACMC). ZCMC is part of the Germany based CRONIMET group of companies.
Since 2007, Lydian International has invested $420 million in the development of the greenfield “Amulsar” gold deposit. It is expected to be one of the largest gold deposits, estimated at $3-5 billion in the country. Lydian is planning to start production in 2018.
Opportunities
Armenia is likely to continue developing facilities for processing copper, gold, and molybdenum. Several new gold and iron ore mining projects are underway and will be operational in the next 3 to 5 years. Some Armenians, however, are beginning to voice concerns about the potential effects of mining projects, and companies’ environmental practices are coming under increased scrutiny. Proximity to Sevan Lake or other environmentally sensitive areas is likely to slow down the permitting process and make approvals both lengthy and costly. The success of mining and mineral processing projects in Armenia, generally, will depend on the ability of the Government to provide a solid legal basis for reconciling the often contradictory goals of economic development and environmental protection. In response to recent protests, the Government has committed to conduct environmental assessments of all current mining projects with the wide community and civil society involvment. As of the writing of this Commercial Guide (in July 2018), environmental protesters have been permitted to block the roads and access to one (foreign-owned) mine, which has cost the mining operation millions in unaticipated expenses.
The Ministry of Energy and Natural Resources is open to and encourages discussion with interested investors about the possibility of introducing new, efficient, environmentally friendly technologies in the mining sector.
There are 21 tailings in Armenia built to store the left over materials of the mining industry: 11 in the Syunik Province, 7 in the Lori Province, 2 in the Aragatsotn Province, 1 in the Ararat Province. These sites cover a total of 700 hectares and contain large amounts of useful metals that have not yet been processed.
Many of these tailings and ponds originate from the Soviet era, given this and the current technological level of most local companies, these tailings and ponds still contain relatively high levels of polymetals and could be profitable if reprocessed.
Other opportunities for investors exist in deposits of industrial minerals, including stone and mineral-water resources, for which both domestic and regional markets exist, with a number of currently untapped sources. Armenia was the largest producer of perlite in the former Soviet Union.
Multinational enterprises can be successful offering modern equipment and technologies for exploration, production, and processing of mining products.
Web Resources
Ministry of Energy Infrastructure and Natural Resources of the Republic of Armenia
Ministry of Nature Protection of the Republic of Armenia
Ministry of Economic Development and Investment of the Republic of Armenia
Invest in Armenia
Development Foundation of Armenia