MAC: Mines and Communities

London Calling returns to Armenia - and the Vedanta connection

Published by MAC on 2009-06-08

Remember what was happening in Armenia in 2007?

Among many no-doubt memorable events of that year, the notorious London-based mining magnate, Anil Agarwal, had been caught with his pants distinctly down.

And the executive chair of Vedanta Resources plc was desperately trying to cover up his nakedness by offloading his liabilities onto someone else.

Although other exploits by his holiness (in the secular sense) have rightly attracted censure, Mr Agarwal's Armenian exploits rank even higher than most of his other misdeeds, for the spectacular effrontery with which they were performed.

To recap: Sterlite Gold (not, at the time, among Vedanta Resources assets and registered in Canada) had been accused since 2005 of cheating the Armenian government by falsifying production results, withholding taxes, and illegally dumping wastes.

By early 2007, the environment ministry of the eastern European state was preparing to sue Agarwal for nearly US$46 million in damages and compensation. It never did - for reasons which still aren't clear, though personal political "intervention" by Agarwal (whether or not via thickly-filled plain envelopes behind closed doors) can't be ruled out.

Instead, Agarwal sold his entire Sterlite Gold holdings, and the licence to operate the Zod Gold operations, to a distinctly suspect, Russian-backed, Georgian Group called Madneuli. Madneuli later transferred the licences to its subsidiary, GeoProMining.

Not only did this get Agarwal off the Armenian hook, but the deal reaped a tidy profit for the man himself as he then got Vedanta to buy Sterlite Gold at an inflated price.

Now, the company which effectively bailed out Agarwal, faces similar opposition to the most critical part of the plan that our sullied hero put forward, to save his investments in the country (see article below).

This is the construction of a gold processing plant on the shores of the country's most renowned fresh water lake, in the lee of the famed - some would claim holy - Mount Ararat. It's an enterprise which one leading Armenian environmental organisation claims will lead to "an ecocatastrophe".

Rooks come home to roost - so the saying goes.

But some crooks seem to fly on for ever...

[London Calling is published by Nostromo Research Reproduction is encouraged, so long as acknowledgment is given to all sources quoted. Responsibility for the content of this column is solely that of Nostromo Research]

London Calling

1st September 2007

Anil Agarwal escapes yet again - smirking all the way to the bank

This website has run several articles exposing Anil Agarwal's shenanigans in Armenia over the past couple of years. In summary, his outfit Sterlite Gold, registered in Canada, bought into Armenia's biggest gold operations in the 1990s, thanks to an alliance with a mining magnate whose dodgy maneuvers and manipulations almost match his own - Robert "Toxic Bob" Friedland.

Friedland quit Armenia and Sterlite took control of two gold mines (primarily Zod) and a tailings treatment facility called AGRC (Armenia Gold Recovery Company).

After Agarwal's Vedanta was registered on the London Stock Exchange in December 2003, he kept Sterlite Gold as a separate entity. Not only were its operations already causing some concern to the Armenian government, they were also running at a loss - not a very pretty parcel to set before stock brokers and the market in attempting to present a picture of clean and profitable assets.

In 2005, Sterlite Gold was accused by Armenian authorities of various acts of commission and omission, some criminal. Agarwal professed his determination to remain in Armenia - but at a price: namely permission to site a processing plant on the shores of pristine Lake Sevan in order to save in transport costs.

Later that year, the first charges were brought against the company. Shortly afterwards, Agarwal effectively sold the Armenian operations to himself, in the shape of a takeover of Sterlite Gold by Vedanta Resources plc, of which 54% is held by him and his family.

Armenia revived the charges against him in early 2007 and,.three months later, its public prosecutor announced that the company was likely to be fined around US$46 million (figures differed). Meanwhile, the government suspended all operations of AGRC and the Zed mine, effectively declaring Agarwal a persona non grate.

The trial was set for early last month. But it didn't happen.

As predicted on the MAC website last March, Agarwal "cut and ran" from Armenia, but took steps behind the scenes to sell off the Sterlite gold mining interests, before the Armenian government got really nasty.

Georgia on my mine

Vedanta's overlord has now succeeded in doing so - garnering a reported US$80 million, paid in cash with extinction of all the company's debt liabilities. Those behind this stitch-up are a shady Georgian outfit, called Madneuli, run by the country's president, Saakashvili. But, according to Mineweb's Moscow-based correspondent, John Helmer, Madneuli is primarily backed by shadowy Russian finance company, Industrial Investors, which is headed by former state minister and ex-parliamentary deputy, Sergei Generalov.

Agarwal has also escaped indictment in an Armenian court for alleged environmental and fiscal misdemeanours . And the government appears to have welcomed the sale.

At a stroke, Agarwal has escaped the "crime scene" unscathed - receiving a hefty payoff to boot.

The audacity of the move is breathtaking. It succeeded because Agarwal and his advisors clearly knew how to play a highly precarious political game, picking a buyer calculated to pander to the Armenian government's nationalist claims over the Nagorno-Karabkh region (where Sterlite's operations were centred) and siding with it against the counter-claims of neighbouring Azerbaijan.

For a desk-bound buccaneer, secure in his London stronghold, it's a breathtaking coup.

[Source: "BEATING SWORDS INTO SHOVELS: Saakashvili shootdown - Georgian
President behind Russian funding for gold grab in warzone", by John
Helmer, Mineweb, 31 August 2007.]

Environmentalists Continue Fight to Save Lake Sevan from Toxic Mining Venture
By Asbarez Staff

4th June 2009

YEREVAN (Combined Sources) - Growing environmental concerns over plans by a Russian-owned mining company to build a gold processing plant near Armenia's legendary Lake Sevan are prompting opposition to the project from some government officials, according to the head of an environmental NGO working to save the lake from additional contamination.

The proposed plant, to be situated about 10 kilometers away from Sevan, would reportedly include a reservoir for cyanide and toxic chemicals and a dump for cyanide waste. Those toxins could seep into underground water conduits and enter the 1,200-square-meter body of water, one of the world's largest high-altitude lakes and the sole source for 90 percent of Armenia's fresh water supplies.

According to Inga Zarafyan, chairperson of Yerevan's Ecolur information center, warnings raised by her group and other concerned social activists have led Armenia's Energy and Natural Resources Minister, Armen Movsisyan, and Economic Minister Nerses Yeritsyan to raise concerns over the project. The President of the Lake Sevan Committee, Vladimir Movsisyan, she added, has also expressed his opposition to the building of the processing plant so close to Sevan.

The GeoProMining Company, headquartered in Moscow, and with copper, gold and other mines in Armenia, Georgia and Russia, wants to build the processing plant at its Sotk gold mine, 10 kilometers from Sevan. Reducing transportation costs for ore processing is its reported goal. Currently, Sotk's ore must be transported 263 kilometers south to another GeoProMining processing center.

Fresh hazards to Sevan could mean fresh damage to the Ararat Valley, which provides about 70 percent of Armenia's fruit and vegetables and which takes needed irrigation waters from Sevan. "Armenia will cease to exist, if the lake is contaminated," commented former environmental protection minister Karine Danielian.

The government has not yet officially endorsed or opposed the project but both the Ministry of Environmental Protection and the Ministry of Regional Management confirm that they have discussed the proposed processing center, Neither ministry, however, has yet received a written project proposal from GeoProMining, ministry representatives told EurasiaNet.

But the environmental protection ministry's assurances of caution will carry little weight in the face of a December 2008 pledge from GeoProMining to invest $350 million into Armenia's gold-mining sector between 2009 and 2011. Precious and non-ferrous metals are among Armenia's top exports.

"They gave similar assurances regarding the [Armenian Copper Program's] copper-molybdenum mine exploitation and the plant mine's construction in Teghut," commented Zarafian told EurasiaNet in reference to the ministry. "They promised they would not allow the logging of 670 hectares of forest, but they approved the plan and we lost the best forests in Armenia."

President Serzh Sarkisian, for his part, has signaled that the government is keeping its options open. Speaking to residents of Armenia's Gegharkunik Province, where Sevan is located, Sarkisian said the government's decision to endorse or oppose the project will be determined by a cost-benefit analysis.

Sarkisian said the government will back the venture if it believes that the plant will be of economic benefit, and will drop support for it if it proves to do more harm than good.

According to Zarifyan the President is waiting for more concrete evidence on the Sotk plant's economic benefit. She added that GeoProMining is now conducting feasibility studies to that effect and the studies should be completed by this October.

Environmentalists had initially looked to the Law on Lake Sevan to stop GeoProMining's plans. Article 10 of Armenia's 2001 Law on Lake Sevan bans the establishment of processing plants in the lake's basin. Despite that, activists contend that the parliament may soon amend the law - under government instruction - to clear legal hurdles for the gold-processing plant. Opposition Heritage Party members of parliament echo that view.

Zarifyan echoed that concern, saying she believes the company will most likely lobby the government to change the law to allow for the plant's construction.

Zarifyan also said that GeoProMining's Executive Director, as well as the Chairman of the Board of Directors of its subsidiary in Armenia, GeoProMining Gold, have threatened to halt all operations in Armenia if they are not granted the right to relocate the Sotk plant to Sevan. Presently, the mineral ore extracted from Sotk is reprocessed in Ararat.

GeoProGold Board Chairman Vardan Vardanian has declined interview requests and has put an embargo on comments by company spokesperson.

Similarly, both Armenia's environmental protection ministry and GeoProMining have refused to discuss the project or to address potential risks highlighted by environmental activists.

For its part, GeoProMining maintains that it shares the concern for Lake Sevan's environment. In an April 26 television interview with Yerkir Media TV, GeoProGold Board Chairman Vardanian stated that the company plans to use mining technologies that will eliminate the risk of environmental damage to Sevan. "We will refuse to exploit the mine and will stop work if there is the slightest [environmental] hazard," he said.

The former director of the Sevan National Park, however, argues that the area's landslides and seismic activity may trump any such technologies. "No one can guarantee the [toxic waste] dump against an earthquake. The smallest crack is enough to have the toxins penetrate into underground water," said Gagik Sukhudian. Fears of potential shelling from nearby Azerbaijani army positions underline that danger, he added.

To identify potential environmental ramifications, GeoProMining has commissioned research by the National Academy of Sciences' Institute of Hydro-Ecology and Ichthyology. The Academy declined to discuss the findings with EurasiaNet.

The amount of waste likely to be generated by the proposed gold-processing plant has not yet been defined, but former environmental protection minister Danielian estimates the total at 100 million tons over 10 years. GeoProMining representatives did not provide a figure. It remains uncertain whether GeoProMining-commissioned research can clarify the environmental-impact picture.

The company's reluctance to discuss the project has only fired environmentalists' criticisms.

SOS Sevan, an alliance of concerned environmental groups, is afraid that if GeoProMining is allowed to set up shop on the shores of Lake Sevan it will open the doors for other companies to follow. The alliance has said it is preparing to expand its advocacy activities to raise awareness about the dangers of the Sotk project.

Prevention of construction of gold-processing enterprise at Lake Sevan is of national importance


4th June 2009

On the threshold of the International Nature Protection Day on June 5, S.O.S. Sevan public movement presented outcomes of their struggle for preserving the integrity of the Sevan's basin ecosystem.

A year before an initiating group of several NGOs carried out several campaigns. Non- governmental organizations raised their voices against the construction of a gold processing enterprise near lake Sevan, which can run to ecocatastrophe.

According to the RA Law on lake Sevan, any construction of ore-dressing and processing enterprises in the area of Sevan basin is forbidden. Nevertheless, the owner of gold mines in the Ararat valley and Zod village, the GeoProMining company has decided to request permission and achieve the revision of the law to construct the gold-processing enterprise in Zod, located along the Sevan shore.

Three organizations under the auspices of the RA National Academy of Sciences prepared a document about the possible environmental impact of the gold processing plant and submitted it to GeoProMining. According to Inga Zarafyan, head of the "S.O.S. Sevan" and "EcoLur", GeoProMining head Dima Kalandadze threatened to withdraw from the Zod's mines if the project fails.

"In countries like Armenia ore mining and processing are very quick processes, leaving thousands of hectares of deserted lands and plenty contaminated and polluted waters", Inga Zarafyan told reporters.

The Lake Sevan is a unique ecosystem reserving a 33 billion cubic meters of sweet water. According to Inga Zarafyan, the danger of contaminating the lake will become real if the GeoProMining would realize its project.

"SOS Sevan" initiative group

Alliance of Ecological Organizations of Armenia

On March 27, 2009 at 4:00 p.m. from the residence of the President of the Republic of Armenia launched an action "SOS Sevan" aimed at saving Lake Sevan.

The action is against the "Geopromining" company that has an intention to build a gold-reprocessing enterprise which poses a threat to the national security of Armenia .

The "SOS Sevan" initiative group (Eco-Alliance) calls the Armenian authorities in the person of the President of Armenia, RA National Assembly, the Government, National Security Council, as well as all political parties, non-governmental organizations, international community, legal authorities to support the public campaign to save Sevan Lake, one of the major stocks of drinking water of Armenia and the whole Caucasus region, to show good will and make the "Geopromining" Company stop its illegal activity. We are appealing to the state authorities to review the contracts with the mentioned company and declare the given licenses invalid.

Sevan Lake is a peculiar ecosystem with volume of 33mlrd.m 3 fresh water. Despite the operative Legislation of Armenia, RA Law on Sevan, UN Ramsar Convention, Aarhus Convention, the "Geopromining" company is going to construct in the basin of Sevan Lake a gold reprocessing plant that comprises a gold-mining plant, cyanides' and pesticides' stock, and a dump-tail of the cyanide wastes.

In the document entitled "Conceptual decision on safe construction of the gold-mining plant in the territory of Sotk mine taking into account the ecological risks" the company makes the following conclusion.

• The construction of a gold mining factory and a safe dump-tail is possible due to such solutions that exclude any danger to the nature.

• The construction of a gold mining factory and a safe dump-tail excludes the pollution and degradation of the ecosystem of Lake Sevan .

• The construction of a gold mining factory and a safe dump-tail excludes the pollution of surface and ground waters.

• The construction of a gold mining factory and a safe dump-tail is possible without doing any harm to the local flora and fauna.

• The existing international rich experience and conclusions on modeling prove the ecological safety of construction of a gold mining factory and a safe dump-tail under the local geographic and climatic conditions.

This document was discussed during the meeting held on March 2, 2009 in the Ministry of Territorial Administration under the chairmanship of Deputy Prime Minister Armen Gevorgyan, with participation of high-ranking officials from RA Ministries of Nature Protection, Jurisdiction, Economy, Energy and Natural Resources, the administrations of the Center of Eco-noosphere, Institute of Geology, Institute of Hydro-ecology and Ichthyology of RA National Academy of Sciences, as well as the administration of the "Geopromining" company.

The document does not reflect such hazards like 100 tons of toxic waste, hundreds of hectares of dead areas, a cyanide burial site with cyanide compounds, arsenic, antimony, pyrites and etc. These toxic elements will penetrate into the ground waters that pour into the water basin of Lake Sevan .

Besides this, no one can guarantee a security against natural disasters: earthquakes, landslides, as well as other uncontrollable external factors, such as terrors, military actions especially if we take into account the fact that Sotk borders on the territory of Kelbajar.

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