Armenia has announced the resumption of mining at the gold deposit in Amulsar mountain, near the southern resort town of Jermuk.
For years the project was widely opposed by activists who feared the impact on the local environment – and by extension on the tourism sector and production of the region's famous mineral water.
Those fears remain, and are now compounded by the presence of Azerbaijani troops just a few kilometers away.
The Ministry of Economy, the Eurasian Development Bank and Lydian Armenia – which owns the license to exploit the Amulsar field and is a subsidiary of the U.S.-British Lydian International – signed a memorandum on February 22 for $250 million to complete construction work at the mine and purchase the necessary equipment.
As a result of the deal, Economy Minister Vahan Kerobyan said, the Armenian government will receive 12.5 percent of the company's shares. "The government will not pay anything in return, but will instead guarantee the deal against certain risks," the economy minister said, without elaborating on the risks involved.
Known for its health resorts, the town of Jermuk is currently part of "Armenia's most vulnerable territory," according to a January assessment by the International Crisis Group. Azerbaijani troops took up positions some seven kilometers away in the mountains after advancing deep into Armenian territory in a major offensive in September 2022.
But the Armenian government assures that the proximity of Azerbaijani troops won't affect the mine's operation. "We can give our partners and investors the confidence that their investments are not in danger. Naturally, we have invested in some mechanisms of ensuring against threats," the economy minister said without elaborating.
Amulsar is the second-largest gold deposit in Armenia. Its reserves are estimated at 31 million tons of ore and 40 tons of pure gold.
Ecologists and local residents have long worried that the operation of the mine could pollute the groundwater of Jermuk and its famous springs, and perhaps even Lake Sevan, further to the north.
The deal with Lydian is one of the largest and most controversial foreign investment projects in the history of independent Armenia. Lydian says that it has already invested $300 million in the project and claims that the mine would contribute $488 million to the state budget through taxes and royalties over its 11-year operation.
Lydian Armenia's development of the Amulsar mine was suspended in 2018 following large protests against potential environmental damage. Since then its prospects have fallen and risen as the government appeared unable to reconcile the need for investment and jobs in the country with the environmental threat and resulting popular opposition.
Amendments to Armenia's mining code in June 2022 removed the final legal hurdle to restarting the mine. Among other things, they allow companies to carry out mining with environmental impact assessments more than a year old.
In 2019, the Armenian government commissioned an independent study from the Lebanese company ELARD (Earth Link & Advanced Resources Development) to assess the potential environmental risks of the project.
That study provided initial data which ELARD said was insufficient for a comprehensive environmental risk assessment. But Armenia's Investigative Committee took the same data and used it as grounds for dismissing a criminal case against Lydian Armenia filed the year before.
The news of the reopening of the mine took many by surprise. The signing of the memorandum was announced just a few hours beforehand, so would-be protesters had no time to organize.
Neighboring communities, under a new agreement involving the government, will receive $7 million annually from Lydian Armenia in financial assistance. Significant sums will also reach the state treasury. The mining industry is one of the leading sectors of the Armenian economy. It provided 10 percent of all budget revenues in 2022, or about $500 million.
"The budget revenues from the development of the Amulsar field are expected to be 30-40 billion drams (over $100 million) a year," Kerobyan, the economy minister, said, expressing confidence that the government will be able to control the associated environmental risks.
Eco-activist and journalist Teimine Yenokyan, who hails from the nearby village of Gndevaz, does not believe the government's assurances and warns of imminent environmental damage. "Jermuk's sanatoriums should think about how to protect their business in the courts and state bodies," she wrote on her Facebook page.
Arshaluis Mgdesyan is a journalist based in Yerevan.