Armenian Mining Giant Gets $10 Million Government Loan

YEREVAN (RFE/RL)–Armenia’s largest mining company will get a $10 million loan from the government to offset the impact of the global economic crisis on its plans to modernize its facilities and boost output, it was announced on Thursday.

The Zangezur Copper-Molybdenum Plant has suffered massive losses as a result of recent months’ dramatic decline in international prices for non-ferrous metals. But unlike other Armenian metallurgical companies it has not resorted to mass layoffs of workers so far. A top company executive said in December that the collapse of commodity prices will not prevent Zangezur from making further capital investmen’s in its ore mines and ore-processing plant located in and around Kajaran, a small town in the southeastern Syunik region.

The Armenian government approved the loan’s disbursement at its weekly meeting. “The Zangezur Copper-Molybdenum Plant will work at full capacity in the next three years,” Prime Minister Tigran Sarkisian said at the meeting. “Secondly, 50 auxiliary enterprise employing 2,000 people are also certain to keep their jobs. Thirdly, productivity at Zangezur will grow by at least 30 percent.”

A separate government statement did not disclose any terms of the financial assistance to be provided from the state budget. It said only that the mining giant urgently needs $10 million to expedite the purchase of “unique equipment” needed for its ongoing modernization.

The government did not explain why the German metals group Cronimet, which bought a controlling stake in Zangezur in 2004, did not raise the sum from other sources. Cronimet reported a worldwide business turnover of $4.7 billion last year. Armenia’s entire state budget was worth only $2.7 billion in 2008.

The government statement also said that the Zangezur management has submitted to it a four-year business plan that envisages a “substantial growth” in the company’s output and an expansion of its workforce currently numbering 3,000 people.

Zangezur’s chief executive and minority shareholder, Maxim Hakobian, confirmed this on Thursday, saying the company could hire 2,000 more people in the short term. Speaking at a news conference in Yerevan, Hakobian said the company has so far not cut production despite a sharp fall in its profits.

Two other Syunik-based mining companies are facing a far more uncertain future. One of them, which is based in the regional capital Kapan, laid off 300 employees and sent hundreds of others on mostly unpaid leave in November. Kapan’s Mayor Artur Atayan told RFE/RL last week that the Deno Gold Mining company may soon halt its operations altogether and leave about 1,000 people without work. A company source said Deno Gold’s management and Canadian owners will decide on Friday whether to shut down the company.

Also planning mass layoffs is another copper and molybdenum plant which is located in Agarak, a small town on the Armenian-Iranian border. A spokeswoman for its Russian parent company, GeoProMining, told RFE/RL that the plant plans to fire many of its 1,500 or so employees on March 9. She said the company has yet to decide just how many of them will lose their jobs.

Agarak’s Mayor Mkhitar Zakarian, who met with GeoProMining executives recently, expects that at least 1,000 jobs will be slashed as a result.

Armenia’s mining and metallurgical sectors expanded rapidly in the years preceding the global recession that saw metal prices rise to record-high levels. Non-ferrous metals remained the country’s single largest export item even after a nearly 10 percent drop in their production registered by the National Statistical Service in 2008.

Prime Minister Sarkisian said in December that the Armenian mining enterprises, virtually all of them controlled by foreign investors, made “extra profits” before the crisis and can therefore afford operating with losses and without workforce cuts for some time.


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