CEE Bankwatch Network Briefing Amulsar gold mine, Armenia
In collaboration with
Armenian Environmental Front, civic initiative
1 October 2019
Summary of Main Issues
Extractive industry investments have long-term negative impact on the livelihood of Armenia’s
populationi, its economic and ecological balanceii, precious water resourcesiii
EBRD1 and Sweden’s Export Credit fund (SEK) and Export Credit Guarantee Agency (EKN)2
have financed (and/or have guaranteed) the Amulsar Gold Project, a flagship project by Lydian
International incorporated in Jersey, Channel Islands in 2005-2006. The financing has been
conditional upon compliance with IFC and EBRD performance standards, falling short of the
mandate to identify and verify the full scale of the mining project’s impact on natural environment
and to uphold to human rights, including the right of local people not to consent with a damaging
project in their communities. Other shareholders and investors include primarily investment funds.
A government commissioned international expert review of the Amulsar Gold Project has
identified serious gaps in and underestimation of the negative impact of the project on the
environment and came up with the overall conclusion that the company’s EIA is incomplete and
uncertain, therefore it is impossible to answer the general question whether the operation of the
mine is safeiv, echoing similar international reports coming from the civil society that the project
with its current design poses a serious threat to Armenia’s water resourcesv
Bankwatch commissioned international expert review of the Amulsar Gold Project have also
identified incompliance with EBRD performance standards and violation of Armenia’s
international commitments towards biodiversity protectionvi
Government capacities (technical, financial and political) to assess impact and to oversee
operation of large-scale projects is inadequate, aggravated by structural corruption embedded in
regulations and government practicesvii
Following popular democratic movement that has overthrown Armenia’s authoritative regime, the
local population has stood for its right to protect its environment and to live in a healthy
environment, including access to clean water, by employing direct action (the method of its
revolution) as other measures, including legal disputes in courts and appeals to the government
have failed to yield outcomes. For a year and 4 months, local residents that have never formally
consented to this project, have been keeping the mining site’s access blocked still waiting for a
resolution by the government
The company (Lydian) is threatening the Armenian government with a controversial litigation
mechanism (ISDS)viii posing a serious threat to the country’s democratic foundations.3
1 EBRD Project Summary Documen
t: https://www.ebrd.com/work-with-us/projects/psd/dif-lydian-amulsar-gold-mine.html
2 EKN, Amulsar Gold Mine Project, Armenia
, https://www.ekn.se/en/what-we-do/sustainability/transactions-with-
environmental-and-social-impact-assessment/archive/amulsar/
3 James Angel, “Corporate courts: the latest threat to democracy in Armenia”, Aug 13, 2019, available at:
https://www.opendemocracy.net/en/odr/corporate-courts-latest-threat-democracy-armenia/
1
EBRD investments in Amulsar Project, Armenia
In 2009 the European Bank for Reconstruction and Development (EBRD) invested CAD 5.8 million
equity financing for continued exploration and development programme of Lydian’s Amulsar gold project
in Armenia.4 In 2016 the EBRD provided further equity injection of up to CAD 10.5 million to purchase
Lydian's shares as part of its capital increase. The EBRD funds were earmarked to be used to finance
Environmental and Social Mitigation Measures (ESMM) undertaken as part of the project, as defined in
the Environmental and Social Action Plan (ESAP), including financing a biodiversity off set programme
and the construction of water treatment facility and related activities.5 The project is currently at the
disbursement stage.
The International Finance Corporation of the World Bank (IFC) also invested Euro 1.0 million equity
investment for exploration, feasibility studies and project assessments.6 Complaints from impacted local
people and civil society to the CAO resulted in a compliance review that concluded in August 20177,
followed by IFC’s divestment from Lydian in September 2017.
Bankwatch monitoring of the Amulsar gold mine project
CEE Bankwatch Network has supported Armenian civil society in monitoring the investments of IFIs in
Amulsar gold mine project since 2011. Since 2015 it has been in regular contact with the investor, Lydian
International, conducting site visits, meetings with the company’s sustainability team and submitting
comments on the Environmental and Social Impact Assessment (ESIA). Banckwatch have raised several
concerns with the company and with the EBRD, for example with regards to the need to conduct a better
gender impact assessment, the need to assess properly the impacts on local water resources, including on
local villages’ irrigation and drinking water supply. With regards to Lydian’s social license, Bankwatch
have reiterated the demand of Armenian civil society for better public consultations. For example, a
formal presentation of the ESIA and a meaningful public consultation with the residents (not just the
authorities) of the town of Jermuk (located only 6km from the open-pit site) was never conducted. Last
but not least, we have stressed that in the repressive climate before the 2018 revolution, many local
people were afraid to openly speak up, especially those in public sector jobs (teachers, policemen,
doctors, municipal authorities’ servants etc.). The complaints (one in 2014, another in 2017) lodged by
Armenian civil society representatives to EBRD’s complaint review mechanism have continuously been
dismissed by EBRD, while the IFC CAO’s reviews resulted in identification of a number of instances of
incompliance with IFC standards (economic impact assessment on Jermuk town and its brand, cumulative
livelihood assessment on Gndevaz village, next to which the cyanide leap-heach facility is planned)8.
Following the 2018 revolution and government change, Bankwatch commissioned two expert studies by
independent sociologists and biodiversity specialists. As a result of these independent expert findings and
in line with their recommendations, Bankwatch and Armenian civil society requested new Supplementary
4 EBRD Project Summary Documen
t: https://www.ebrd.com/work-with-us/projects/psd/dif-lydian-amulsar-gold-mine.html
5 EBRD P
SD: https://www.ebrd.com/work-with-us/projects/psd/lydian-amulsar-gold-mine-extension.html
6 IFC disclosure on the Amulsar projec
t: https://disclosures.ifc.org/#/projectDetail/SPI/27657
7 See CAO communique and CRR
: http://www.cao-ombudsman.org/cases/document-
links/documents/EN_CAOCommuniqueLydianInternationalAugust42017.pdf an
d http://www.cao-
ombudsman.org/cases/document-links/documents/LydianComplianceInvestigationReport-06192017_forwebsite.pdf
8 Ibid.
2
link to page 1
ESIA studies and wide public consultations.9 Meanwhile, since June 2018 local people have blocked
access to the mine, effectively stopping the Amulsar mine project development.
Independent expert ESIA and EIA review
The idea for an independent review of the Amulsar project’s ESIA and EIA was first suggested by the
new Prime Minister Nikol Pashinyan in September 2018. In the meantime, two criminal investigations
were initiated by Armenia’s Investigative Committee, one over alleged concealing of data impacting the
life and health of the population by a public official, and another one over illegal extraction (of clay) at
Amulsar by Lydian. As part of the first criminal case, in November 2019, the Investigative Committee of
Armenia announced pre-qualification for an independent Review of the project’s impact assessment
(EIA) conducted by Lydian. After the December 2018 elections and Nikol Pashinyan’s reelection as
Prime Minister of Armenia, at a session on February 21, 2019 the Armenian government decided to
allocate USD 400.000 to the country’s Investigative Committee to commission a comprehensive Review
by experts from Earth Link & Advanced Resources Development (ELARD), Lebanon. The Review’s
terms of reference included assessment of the environmental risks of the mine through a comprehensive
ecological, geological, hydrological, geophysical, materials science, chemical, technological, structural
and technical, and economic examination. At some point the Lebanon-based ELARD involved USA-
based TRC consulting company in the Review.
The independent expert Review by ELARD-TRC was released in August 2019. In a nutshell, it warned
that despite the design concepts in the Amulsar ESIA/EIA were in general reasonable and appropriate, “
a
number of the measures and plans are partial, not-sufficiently protective, and/or unreliable with a high
degree of uncertainty”. According to the Review this was “
particularly due to deficient and questionable
data, models, model simulations, design bases, and/or assessment.”
For example, first, major criticism concerned Lydian’s approach to water resources in the mine’s area of
impact. Impact on water resources - like Lake Sevan, Ketchut and Spandaryan reservoirs, Jermuk spa
resort and mineral water brand, Arpa and Vorotan rivers, local springs, irrigation and drinking water
supply - was a major area of concern for local people, Armenia’s citizens and NGOs, and for the
government.
The Review stated that key data for measuring the impact of the mine had not been gathered and “
several
potentially significant springs were not visited”, adding that “
given the importance of springs to the local
communities and the potential for impacts to the springs from the mine pits the springs flow
characterisation is inadequate.” Furthermore, the Review pointed out that “
[o]verall, the water quality
modelling and solute transport model simulations are poor.”
Second, the Review criticised Lydian’s approach to acid rock drainage (ARD) and said Lydian’s approach
towards ARD ‘
is misleading’, it underestimates ARD generation and contaminant leaching potential of
the Amulsar project. This assessment echoes previous independent reports commissioned by Armenian
civil society and released in July 2017.
v
Third, the Review concluded that geological, hydrogeological (including the movement of contaminants
along faults that the ESIA ignored), waste characterization, and water treatment studies need to be
conducted before mining begins. These studies must form the basis for water quality predictions and the
9 Bankwatch commissioned studies on local communities perceptions of the project and the biodiversity offset:
https://bankwatch.org/blog/new-reports-press-for-revised-terms-to-armenia-gold-mine
3
design of effective mitigation measures. This makes the EBRD earmarking of its funding irrelevant to the
requirements outlined by experts and the project design.
Fourth, the Review found it impossible to comment on economic impact assessment on the tourist
industry of adjacent Jermuk town due to its absence in Lydian’s EIA.
In conclusion, the Review stated that there were remaining environmental risks, but pollution from the
Amulsar project could be minimized if mitigating measures were to be taken based on corrected
geological, geochemical data, impact modelling formulae and if other appropriate assessments were
conducted. The Review’s recommended additional studies and mitigation measures would represent
substantial changes to Amulsar’s mine project and its technological approaches and should require a new
Supplementary ESIA.
The Review, however, did not cover the issue that many of the assessed documents were produced in
years following the EIA approval by the Armenian government (2016).
Pending decisions on Amulsar by the Armenian government
Following the ELARD-TRC Review publication and several discussions with stakeholders, on August 19
2019, PM Pashinyan announced that the Amulsar project would be safe and should restart. After an outcry
from both civil society and his own party’s members of parliament, on August 21st, the PM put the
decision on hold and requested an opinion by the Nature Protection Ministry till 4th September, which in
the end recommended environmental inspections at Amulsar.
In the meanwhile, controversies followed the criminal investigations. On the basis of the ELARD-TRC
Review, on 15 August the Investigative Committee of Armenia informed the Government of its decision
to terminate the criminal case investigation. It justified its decision pointing out that, in case the
conditions laid down in the ELARD-TRC Review were met, the Amulsar project would not have adverse
environmental impact. On August 22, Transparency International Anticorruption Center, (TI Armenia),
criticized as groundless the intention of the Investigation Committee to terminate the criminal case, since
some of the assessments set out in the ELARD-TRC expert Review directly indicated the legal and
factual need to continue the criminal proceedings.
In addition, on August 23 Transparency International Armenia appealed to the Nature Protection Ministry
of the Republic of Armenia to invalidate the expert assessment opinion previously given to the Amulsar
project, presenting a number of reasons why the Amulsar mine should not be exploited. “
It is obvious that
under systemic corruption mining permits could not be granted by clean processes and it is very
important that in post-revolutionary Armenia the Ministry of Environment revises its former vicious
practices and revokes the previously issued expert opinion,” TI-Armenia says in its press release.10
In the last week of August, Armenian civil society groups also issued appeals to foreign diplomatic
services in Armenia and to Amulsar’s investors calling for further assessments, support to democratic
process and divestment from the project.11
10 Transparency International Armenia press releases [in Armenian]:
21 August: https://transparency.am/hy/news/view/2817
23 August: https://transparency.am/hy/news/view/2818
11 Armenian civil society, Call to US, Great Britain and Sweden Ambassadors: Support Society Fighting against Amulsar
Project in Armen
ia: http://www.ecolur.org/en/news/amulsar/---/11486/
Armenian Environmental Front Civic Initiative, Divest from Amulsar! Urgent Appeal to Lydian’s Investors:
http://www.armecofront.net/en/news/divest-from-amulsar/
4
Blockade of the mine and civil society protests and marches, locally and in Yerevan, are on-going.
International civil society has supported the campaign since the mine blockade started, with a special
letter issued by Cee Bankwatch Network and more than a dozen NGOs in January 2019 to Armenia’s
Prime Minister and EU special rapporteur12, and most recently with Global Justice Now and War on Want
expressed solidarity with protesters.13
Following the outcry and testimonies from the ELARD-TRC Review that operation of the mine, as is
planned by its EIA and project design, cannot be deemed safe, the Government organized a video-
conference with ELARD-TRC experts who reassured that their review was based on science and industry
guidelines and that their conclusions were straightforward and could not be interpreted as condoning the
flaws of the EIA conducted by Lydian. After a conflict of interest was revealed by Armenian media
between the Lead Investigator and the Minister of Nature Protection in 2016 who signed the positive
conclusion for Lydian’s EIA, resignations followed at the Investigative Committee and a new Lead
Investigator has taken up the case. In a most recent press briefing, Deputy head of the Investigative
Committee, Arsen Ayvazyan, stated that the investigation will resume and review both previous
testimonies that have not been considered, and new circumstances.14
Yet, the government still sides by company and is indecisive about revocation of permits. A widely
circulated argument against revocation of permits are the company’s threats to sue the government
through Investor protection agreements (BITs). There are concerns over the oppressive methods that the
new Armenian government would need to resort to, in order to forcefully open access to the mine site and
restart project development. Civil society representatives have voiced of disproportional criminal
prosecution in the case of a number of protestors in Jermuk,15 while key environmental advocates are
facing various litigations16 initiated by the company for their criticism of the project, allegations of
corruption and posts in social media etc, along with online harassment waged through fake social media
profiles.17
Conclusion
CEE Bankwatch Network echos the calls of Armenian civil society for revoking the EIA permit for the
mine and starting supplementary ESIA for the Amulsar project in parallel to wide formal public
consultations. Currently Lydian lacks a social license to operate, so the mine development needs to be put
on hold. Pressure from investors needs to stop until the democratic processes run their course and the on-
going investigations are concluded. The EBRD should “
stand by high environmental standards for people
in Armenia and human rights values,”18 adhere to the “do no harm” principle and support the democratic
transition in the country.
12 International letter to Nikol Pashinyan on the “Social and environmental impact of the Amulsar mine”, January 2019,
available
at: https://bankwatch.org/wp-content/uploads/2019/01/Solidarity-letter-to-Armenian-PM_Amulsar-gold-mine_Jan-
22-2019.pdf
13 Global Justice press release of August 20, 2019
: https://www.globaljustice.org.uk/news/2019/aug/20/approval-armenian-
gold-mine-shows-corporate-courts-crush-democracy and other resources:
https://www.globaljustice.org.uk/news/2019/jul/30/government-challenged-rule-out-corporate-courts-after-brexit-following-
criticism
14 “Armenia Investigative Committee: New questionings to be conducted under Amulsar mine criminal investigation”, Sept 27,
2019,
https://news.am/eng/news/535749.html
15 “Disproportional Punitive Actions and Selected Justice Exercised Towards Jermuk Residents Involved in Combating
Amulsar”, Sept 23, 2019,
https://ecolur.org/en/news/amulsar/--/11583/
16 International Federation for Human Rights (FIDH), Press Release June 20, 2019,
https://www.fidh.org/en/region/europe-
central-asia/armenia/amulsar-mine-in-armenia-government-must-avoid-potential-environmental
17 More to be released by Human Rights House Yerevan human rights organization in its Semi-Annual Report 2019 to be
announced in early October on its Facebook page
18 Armenian civil society, Call to US, Great Britain and Sweden Ambassadors: Support Society Fighting against Amulsar
Project in Armen
ia: http://www.ecolur.org/en/news/amulsar/---/11486/
5
For more information: CEE Bankwatch Network, Fidanka Bacheva-McGra
th, xxxxxxxx@xxxxxxxxx.xxx
Armenian Environmental Front civic initiative, Anna Shahnazarya
n, xxxxxxxxxxxxxxxx@xxxxx.xxx,
xxxxxxxxxxx@xxxxx.xxx
References: i Arnika, Czech Republic, “Heavy metals in the surrounding of mining and metallurgic sites in Lori region in Armenia”, 2018,
available
at: https://english.arnika.org/publications/heavy-metals-in-lori-region
And
Aleksandr Grigoryan, “AUA Study: Mining in Armenia Creates Poverty, Income Inequality”, 2013, available at:
https://newsroom.aua.am/files/2013/04/mining_grigoryan.pdf
ii European Union Action to Fight Environmental Crime, “Environmental crime in Armenia A case study on mining”, 2015,
available
at: https://efface.eu/environmental-crime-armenia-case-study-mining
iii G. Gevorgyan et al, “Environmental Risk Assessment of Heavy Metal Pollution in Armenian River Ecosystems: Case Study
of Lake Sevan and Debed River Catchment Basins”, 2016, available
at: http://www.ysu.am/files/2-1509624749-.pdf
iv ELARD-TRC Review, 2019, available
at http://investigative.am/en/news/view/amulsar-porcaqnnutyan-ezrakacutyun.html
v Buka Environmental et al, “Amulsar Gold Project: Overview of Concerns with the Amulsar Gold Project, Potential
Consequences, and Recommendations”, available
at: http://www.armecofront.net/wp-
content/uploads/2015/03/BronozianConsultants_Concerns.Consequences.Recommendations-Appendices_8Jan2018.pdf
ARD experts press conference, July 2017
: http://www.armecofront.net/en/press-releases/announcement-of-bronozian-
consultants-after-visiting-amulsar/
Additional relevant correspondence on Amulsar’s AR
D: https://www.business-humanrights.org/en/armenia-amulsar-gold-
mine-poses-high-risk-of-long-term-adverse-impacts-to-drinking-water-resources-say-experts-includes-shareholders-comments
vi Bankwatch commissioned studies on local communities perceptions of the project and the biodiversity offset, 2019, available
at:
https://bankwatch.org/blog/new-reports-press-for-revised-terms-to-armenia-gold-mine
vii Transparency International Anticorruption Center, TIAC’s 2017 Assessment of Corruption Risk in Mining Awards in
Armen
ia: https://transparency.am/en/publications/view/208
viiiArmen Agabyan, Weapons of Legal Destruction: ISDS lawsuits and Lydian International’s Assault on Armenian Sovereignty,
Sept 23, 2019, available
at: http://www.cadtm.org/Weapons-of-Legal-Destruction-ISDS-lawsuits-and-Lydian-International-s-
Assault
6