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Armenia: Joint Venture To Boost Gold Production

By Vahan Hovanissian

Yerevan, 3 April 1997 (RFE/RL) -- Armenia is embarking on an ambitious program to develop its gold resources.

An American-Armenian joint venture, called Global Gold Armenia, hopes to produce 18 tons of pure gold from Armenian deposits by the year 2000. That would make the small Caucasian republic the 13th largest producer in the world.

An RFE/RL correspondent in Yerevan reports that Armenia is a traditional source of the precious metal, having produced up to 10 tons annually in peak years during the Soviet era. But with the dissolution of the USSR and the growing turmoil in the Caucasus, traditional rail export routes through Azerbaijan were cut, and exports ceased.

In addition to the external political problems, the technical capacities of the local industry are limited by the outdated and inadequate equipment left over from the Soviet times.

Into this environment stepped Global Gold Armenia, which plans to begin operations by September. The initial target is to produce 6 tons of what is called Dore's alloy, which has a gold purity of only about 70 percent. Plans are in hand however for the construction of a refining plant which would bring the product up to 99 percent purity.

Our correspondent reports that the next step, as early as next year, is for the old mine tailings to be worked over for gold left from past processing. That's expected to yield some 24,000 ounces of gold.

Initial investment is set at $10 million, two-thirds of which will be provided by the U.S. side of the joint venture, and the remainder by the Armenians. Exports this time would most likely be routed through Georgia to the Black Sea, and then to international markets.

If the initial phase succeeds -- and Global Gold's representative in Yerevan Marcus Randolf is optimistic -- then the scene is set for bigger things. Mining of fresh ore would begin at two sites: Zod, with a production target 5 tons of gold, and Meghradzor, with a target of 2 tons. A new processing plant would also be built.

As there's only about 10 years' worth of known gold deposits in Armenia, the joint venture also envisages a comprehensive program of exploration. Mining Industry Ministry official Sergei Hovakimian told our correspondent there are certain to be sufficient deposits of gold which have yet to be located

During this second phase the rate of investment would rise steeply, with inflows from the American partners foreseen as exceeding $200 million. Profits would be split on a 50:50 ratio.

Looking a few years ahead, production at Zod and Meghradzor would be more than doubled to reach the expected 18 tons of high-grade gold by 2000.

Our correspondent reports that if the full program goes through as envisaged, it will represent the biggest investment to date in the Armenian economy. All being well, the Armenian government hopes to organize another similar-size investment in the sphere of non-ferrous metallurgy, specifically copper and molybdenum, by the turn of the century.

Vahan Hovanissian is a Yerevan-based analyst who contributes regularly to RFE/RL.