The government has adopted a decision “to provide a budget guarantee” to ensure Lydian Armenia CJSC’s normal course of activities.
According to the justification, the RA Government’s 2021-2026 Action Plan envisages the implementation of consistent work on the Amulsar mine development program. This will contribute to strengthening the resilience of the RA economy, developing the mining sector, discovering the socio-economic potential of the border region, and ensuring significant revenues for the state budget in the medium term.
According to the agreement signed between the RA Ministry of Economy and Lydian Resources Armenia Limited Joint Stock Company, 12,503 shares, equivalent to 12.5% of the 100% of the company’s common shares with a nominal value of 5,000 drams each, owned by the latter, were donated to the Republic of Armenia as property. According to the Ministry’s assessments, implementing the program will positively impact the development of the local market and the level of employment. The exploitation of the mine is of vital importance for the development of the RA economy due to its scale will form stable supply and demand value chains, which will contribute to the formation of a more stable and dynamically developing macroeconomic environment, both directly by providing state and community budgets with revenues through duties, taxes, local payments and will have a positive chain effect on the activities of other economic operators (suppliers, logistics, etc.) by generating demand. In particular, within the framework of the sustainable development policy of communities adopted by the company, the exploitation of the mine will increase the standard of living of the population of local communities. It will promote economic development and diversification in the affected communities.
According to the company, construction and exploitation within the framework of the project will be carried out by the best international standards in the fields of environmental, social, and governance, as well as health and occupational safety, which will also have an impact on the development of the mining sector of the republic. According to the results of the conducted studies, the implementation of the project is expected to have a direct and indirect impact on the RA economy of about 1.0-1.5 percent of GDP annually. More than 1,000 workers will be involved in the construction of the Amulsar gold mine project, and about 700 jobs will be created in the processing facilities, laboratories, and administration during the entire duration of the project’s extraction or operation. To discuss the risks associated with providing a budget guarantee, BDO Advisors CJSC (BDO) has conducted a study to assess the company’s financial viability. The government, combining the risks associated with the provision of a budget guarantee and the positive impact of the provision of a budget guarantee on the mining industry and socio-economic development in the Republic of Armenia assessed by the Ministry of Economy of the Republic of Armenia, as well as taking into account gold prices in the international market, has initiated the provision of a budget guarantee.
To ensure the start of the mine operation by the company, a Government Decision on the provision of a budget guarantee has been developed, which proposes that, subject to the fulfillment of the stipulated conditions, the company provide a budget guarantee for up to 150,000,000 USD for attracting credit funds with a maturity of up to 5 years from the banking system operating in the Republic of Armenia. Moreover, as a prerequisite for issuing a guarantee, it is envisaged that it will be provided if, within 6 months after the decision enters into force, the company submits to the Ministry of Finance a market valuation report of the balance sheet assets included in the company’s financial statement approved by an independent auditing organization, confirming that the amount of the guarantee does not exceed 20 percent of the market value of the balance sheet assets included in the company’s financial statement at the time of applying for the guarantee and issuing the guarantee.
