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Mediamax, Armenia
Feb 13 2013
Didier Fohlen: `Armenia's perception among international investors is
very much better today'
Lydian International can be validly named a unique investor in
Armenia, as it has already managed to raise about $130 mln from
international investors mostly for its Armenian project - the Amulsar
gold deposit (currently contains in excess of 3 million ounces of gold
and is in the top 15% of gold resources worldwide) on the boundary of
Vayots Dzor and Syunik marzes. The Amulsar area is currently explored
by Lydian's fully-owned subsidiary Geoteam. Senior Vice President of
Lydian International Ltd, Didier Fohlen told Mediamax about Company's
activities in Armenia in 2012 as well as its plans for the coming
years.
- Lydian was planning to spend $42 mln by the end of 2012. Have you
allocated this expenditure and, please, tell about current
exploration results at Amulsar?
- We haven't published yet our accounts for 2012, they have not been
fully audited, but we actually spent the budget that was planned for
the exploration activities and the feasibility study preparation and
all the other important environmental and social studies that are
required for a publicly listed company. As you probably know, Lydian
is listed at Toronto Stock Exchange (TSX) in Canada, which is the
world's leading stock market for mineral exploration and mine
development companies.
We also conducted the international Environmental and Social Impact
Assessment (ESIA), which is required to meet international best
practice and to be able to apply for debt financing from most
international banks. In 2013 we will keep carrying out our exploration
and development work. This is where we spent the bulk of the money in
2012 and we will do the same in 2013: exploration, feasibility study
and environmental and social studies, these all required for the
development of a new mine.
So far, as for the investments into the project through Geoteam,
during all the 6 years of exploration we have invested around $42 mln
in exploration with further amounts spent on the development of the
project as a whole.
We expect the total amount of all investments into the project
throughout the life of the mine will be more than $ 400 m.
Senior Vice President of Lydian International Ltd, Didier Fohlen
- What is planned for 2013?
- 2013 is the year of completion of a revised feasibility study (`FS')
and initial detailed engineering as well as the Environmental and
Social Impact Assessment required to follow Equator Principles and the
Environmental Impact Assessments (ShMAGs) required by Armenia
regulations. We expect to complete most of these studies by August
2013. As mentioned earlier we will keep on doing exploration drilling,
while also starting initial construction activities. Under the Toronto
Stock Exchange (`TSX') regulations and the Equator Principles
governing international lender requirements, Lydian is required
publicly to disclose the ESIA, ShMAGs and the FS. Completing the FS
and the ESAI will be the two major events that we plan for this year
as they will then allow us to proceed with raising financing to build
the mine. The ESIA is a major step in terms in meeting our Company
values regarding environmental and social management, transparency and
governance in the mining sector.
- When are you planning to finalize the exploration and start the
mining process?
- Between exploration and mining we need to do construction, we are
planning to start construction this year in line with our permitted
activities. The main construction works are due to start in the spring
next year. We intend to meet our target date for production is late
2015. So, two years of construction and then the start of production.
- Will you process the gold in Armenia or export the ore for processing abroad?
- We are going to have a processing plant at Amulsar, so the final
product, the doré bars (over 90% pure gold & silver), will be produced
in Armenia. The next step in gold production is refining the doré to
produce gold and also the silver as a by-product. It is usually done
in a specialized refinery; most of them are in located in Europe.
- Is Armenia's landlocked position, closed borders and the absence of
railroad at the place of mining kind of obstacle for Armenian gold's
«competitiveness»?
- No, the price of gold is the price of gold anywhere. It's a
commodity with a fixed price at London Stock Exchange, moreover, today
gold, if needed, is usually shipped by air. There is an effective
railway line to Yerevan that which we will utilize for supply.
- Lydian is listed at TSX and has already attracted about $130 million
from international investors. How did the Company manage to attract
such huge investments for a project in a country that is not widely
known amongst the international investment community.
- In January 2008, the CEO and the Board of the Lydian listed Lydian
on the TSX. To maintain interest in the Company and therefore a
healthy share price, the Company's senior management team has spent
and still spends a lot of their time with international investors
informing them about Armenia and making them comfortable with making
an investment in this country. Many of these investors have also been
encouraged to make their first visits to Armenia by the Company. So
with this dedication Lydian has become the example of company
operating in Armenia that can maintain a listing on a stock market
outside Armenia and can attract foreign investments in a transparent
manner.
I think Armenia's perception among international investors is very
much better today. When Lydian started its operation in Armenia in
2006, it was a challenging environment to present Armenia as a
favorable investment destination. Most international investors did not
then know where the country was. Today that the investment climate is
improving, and with Lydian's efforts to promote our Amulsar project,
investors' perceptions are slowly changing and many reputable
investment banks and international institutions as well as private
investors are starting to see Armenia as an investment destination.
It's hard to predict what will excite stock markets and investors.
What we can say is that the story of Lydian and its Amulsar gold
deposit should be positive for Armenia, because the fact that we
successfully operate in Armenia makes our shareholders confident to
invest further with the Company and if we and thus they are successful
they will look at making other investments in Armenia in the future.
If they maintain their confidence in the management of the Company,
then they will have confidence in the gold deposit that we have, and
confidence in the capacity of Armenia to attract international
investors.
- What's your opinion on the taxation of the mining industry in
Armenia? With advice from the World Bank, the Armenian Mining Royalty
Tax was increased as from 1st January 2012.
- Previously Armenia used to have a set of regulation that was
probably not very favorable for investments in mining projects and for
the country as well. So, the government of Armenia made a decision 2-3
years ago to revise its regulations and that came up in a format of
new mining code that was completed with the support of the World Bank.
So since the beginning of 2012 there is a new Mining Code in Armenia
and we think that it's a balanced one. Too much taxation and
investors will take their money elsewhere and nothing will be built;
too little and the Country and the local communities do not benefit
enough from their natural wealth.
In very rough terms, the anticipated taxation (including royalties)
for a gold extracting mine is over 30% of the likely profits. This is
an above average to high tax for an ore extracting industry if you
look at taxation worldwide.
- In one of your previous interviews you said that Lydian's
investments in Amulsar will boost local small and medium enterprises.
What did you mean by that?
- Usually when you open the mine, it generates lots of opportunities
for jobs and businesses in the area. Let me give you an example: we
need to transport our workers. We're not going to have all the workers
living on top of the mountain, so we need to bus them between Jermuk,
Gndevaz, Gorayk, Saravan and even Yerevan to the mine. It's not the
business of a mining company to do transportation, so we could support
and promote local entrepreneurs to create a small company, so they
buy one or two busses and do the transportation. Another good example
is the food and fresh products supply, other services the operation
and people working in the mine will need. This will boost several
small and medium business enterprises locally.
Also at the end of the mine life, we need to put back the area to the
condition similar to what it was before we started mining. It is
called mine rehabilitation: putting the land close to the initial
condition before you started the exploration, this means re-contouring
surface, putting back top soil, seeding grass, planting trees, etc.
Again, this is an opportunity for local entrepreneurs to do some work
for us.
Usually in mining, there is an average estimate, that for every direct
job with the mining company approximately three indirect jobs are
created around the mining activity.
-In one of your previous interviews you have mentioned, that Lydian
anticipates to contribute AMD 35.5 billion annually (US$ 86.5 million)
to the State of Armenia budget at peak production, thus becoming one
of the top-taxpayers in Armenia. How do you calculate such sum taking
that gold price can go up or down in years to come?
- That again, is a very approximate calculation, based on the mining
code and the tax regime that applies to the mine, the gold prices and
the deposit we have announced in the feasibility study. This number
might change, due to many circumstances, but we can surely state, that
we will be contributing at least tens of millions dollars annually
once we get the mine into production.
As to the gold price, I think everyone is quite optimistic that it
will stay at the value it is now or even higher. So, yes, we're
indeed going to become one of the top-taxpayers in Armenia and as a
market listed company, we are going to be a transparent and
responsible taxpayer and an exemplary employer.
Ruben Harutyunian talked to Didier Fohlen.
Feb 13 2013
Didier Fohlen: `Armenia's perception among international investors is
very much better today'
Lydian International can be validly named a unique investor in
Armenia, as it has already managed to raise about $130 mln from
international investors mostly for its Armenian project - the Amulsar
gold deposit (currently contains in excess of 3 million ounces of gold
and is in the top 15% of gold resources worldwide) on the boundary of
Vayots Dzor and Syunik marzes. The Amulsar area is currently explored
by Lydian's fully-owned subsidiary Geoteam. Senior Vice President of
Lydian International Ltd, Didier Fohlen told Mediamax about Company's
activities in Armenia in 2012 as well as its plans for the coming
years.
- Lydian was planning to spend $42 mln by the end of 2012. Have you
allocated this expenditure and, please, tell about current
exploration results at Amulsar?
- We haven't published yet our accounts for 2012, they have not been
fully audited, but we actually spent the budget that was planned for
the exploration activities and the feasibility study preparation and
all the other important environmental and social studies that are
required for a publicly listed company. As you probably know, Lydian
is listed at Toronto Stock Exchange (TSX) in Canada, which is the
world's leading stock market for mineral exploration and mine
development companies.
We also conducted the international Environmental and Social Impact
Assessment (ESIA), which is required to meet international best
practice and to be able to apply for debt financing from most
international banks. In 2013 we will keep carrying out our exploration
and development work. This is where we spent the bulk of the money in
2012 and we will do the same in 2013: exploration, feasibility study
and environmental and social studies, these all required for the
development of a new mine.
So far, as for the investments into the project through Geoteam,
during all the 6 years of exploration we have invested around $42 mln
in exploration with further amounts spent on the development of the
project as a whole.
We expect the total amount of all investments into the project
throughout the life of the mine will be more than $ 400 m.
Senior Vice President of Lydian International Ltd, Didier Fohlen
- What is planned for 2013?
- 2013 is the year of completion of a revised feasibility study (`FS')
and initial detailed engineering as well as the Environmental and
Social Impact Assessment required to follow Equator Principles and the
Environmental Impact Assessments (ShMAGs) required by Armenia
regulations. We expect to complete most of these studies by August
2013. As mentioned earlier we will keep on doing exploration drilling,
while also starting initial construction activities. Under the Toronto
Stock Exchange (`TSX') regulations and the Equator Principles
governing international lender requirements, Lydian is required
publicly to disclose the ESIA, ShMAGs and the FS. Completing the FS
and the ESAI will be the two major events that we plan for this year
as they will then allow us to proceed with raising financing to build
the mine. The ESIA is a major step in terms in meeting our Company
values regarding environmental and social management, transparency and
governance in the mining sector.
- When are you planning to finalize the exploration and start the
mining process?
- Between exploration and mining we need to do construction, we are
planning to start construction this year in line with our permitted
activities. The main construction works are due to start in the spring
next year. We intend to meet our target date for production is late
2015. So, two years of construction and then the start of production.
- Will you process the gold in Armenia or export the ore for processing abroad?
- We are going to have a processing plant at Amulsar, so the final
product, the doré bars (over 90% pure gold & silver), will be produced
in Armenia. The next step in gold production is refining the doré to
produce gold and also the silver as a by-product. It is usually done
in a specialized refinery; most of them are in located in Europe.
- Is Armenia's landlocked position, closed borders and the absence of
railroad at the place of mining kind of obstacle for Armenian gold's
«competitiveness»?
- No, the price of gold is the price of gold anywhere. It's a
commodity with a fixed price at London Stock Exchange, moreover, today
gold, if needed, is usually shipped by air. There is an effective
railway line to Yerevan that which we will utilize for supply.
- Lydian is listed at TSX and has already attracted about $130 million
from international investors. How did the Company manage to attract
such huge investments for a project in a country that is not widely
known amongst the international investment community.
- In January 2008, the CEO and the Board of the Lydian listed Lydian
on the TSX. To maintain interest in the Company and therefore a
healthy share price, the Company's senior management team has spent
and still spends a lot of their time with international investors
informing them about Armenia and making them comfortable with making
an investment in this country. Many of these investors have also been
encouraged to make their first visits to Armenia by the Company. So
with this dedication Lydian has become the example of company
operating in Armenia that can maintain a listing on a stock market
outside Armenia and can attract foreign investments in a transparent
manner.
I think Armenia's perception among international investors is very
much better today. When Lydian started its operation in Armenia in
2006, it was a challenging environment to present Armenia as a
favorable investment destination. Most international investors did not
then know where the country was. Today that the investment climate is
improving, and with Lydian's efforts to promote our Amulsar project,
investors' perceptions are slowly changing and many reputable
investment banks and international institutions as well as private
investors are starting to see Armenia as an investment destination.
It's hard to predict what will excite stock markets and investors.
What we can say is that the story of Lydian and its Amulsar gold
deposit should be positive for Armenia, because the fact that we
successfully operate in Armenia makes our shareholders confident to
invest further with the Company and if we and thus they are successful
they will look at making other investments in Armenia in the future.
If they maintain their confidence in the management of the Company,
then they will have confidence in the gold deposit that we have, and
confidence in the capacity of Armenia to attract international
investors.
- What's your opinion on the taxation of the mining industry in
Armenia? With advice from the World Bank, the Armenian Mining Royalty
Tax was increased as from 1st January 2012.
- Previously Armenia used to have a set of regulation that was
probably not very favorable for investments in mining projects and for
the country as well. So, the government of Armenia made a decision 2-3
years ago to revise its regulations and that came up in a format of
new mining code that was completed with the support of the World Bank.
So since the beginning of 2012 there is a new Mining Code in Armenia
and we think that it's a balanced one. Too much taxation and
investors will take their money elsewhere and nothing will be built;
too little and the Country and the local communities do not benefit
enough from their natural wealth.
In very rough terms, the anticipated taxation (including royalties)
for a gold extracting mine is over 30% of the likely profits. This is
an above average to high tax for an ore extracting industry if you
look at taxation worldwide.
- In one of your previous interviews you said that Lydian's
investments in Amulsar will boost local small and medium enterprises.
What did you mean by that?
- Usually when you open the mine, it generates lots of opportunities
for jobs and businesses in the area. Let me give you an example: we
need to transport our workers. We're not going to have all the workers
living on top of the mountain, so we need to bus them between Jermuk,
Gndevaz, Gorayk, Saravan and even Yerevan to the mine. It's not the
business of a mining company to do transportation, so we could support
and promote local entrepreneurs to create a small company, so they
buy one or two busses and do the transportation. Another good example
is the food and fresh products supply, other services the operation
and people working in the mine will need. This will boost several
small and medium business enterprises locally.
Also at the end of the mine life, we need to put back the area to the
condition similar to what it was before we started mining. It is
called mine rehabilitation: putting the land close to the initial
condition before you started the exploration, this means re-contouring
surface, putting back top soil, seeding grass, planting trees, etc.
Again, this is an opportunity for local entrepreneurs to do some work
for us.
Usually in mining, there is an average estimate, that for every direct
job with the mining company approximately three indirect jobs are
created around the mining activity.
-In one of your previous interviews you have mentioned, that Lydian
anticipates to contribute AMD 35.5 billion annually (US$ 86.5 million)
to the State of Armenia budget at peak production, thus becoming one
of the top-taxpayers in Armenia. How do you calculate such sum taking
that gold price can go up or down in years to come?
- That again, is a very approximate calculation, based on the mining
code and the tax regime that applies to the mine, the gold prices and
the deposit we have announced in the feasibility study. This number
might change, due to many circumstances, but we can surely state, that
we will be contributing at least tens of millions dollars annually
once we get the mine into production.
As to the gold price, I think everyone is quite optimistic that it
will stay at the value it is now or even higher. So, yes, we're
indeed going to become one of the top-taxpayers in Armenia and as a
market listed company, we are going to be a transparent and
responsible taxpayer and an exemplary employer.
Ruben Harutyunian talked to Didier Fohlen.