During the first weeks of November, during a meeting with workers, the General Manager of Deno Gold Mining Company, CJSC (DGMC) Robert Falletta, declared that the drop in world metal prices would have unavoidable consequences on the company’s operations.

Mr. Falletta noted that the prices for the company’s product (gold, copper, zinc) had drastically and quickly dropped during the last few months. Despite the millions of dollars of investments made by DGMC’s parent company Dundee Precious Metals Inc. in 2006, the company had not realized a profit from the first day it had been acquired.

“The situation continues to worsen. During January – September of last year we obtained $23,473,000 from the exportation of 5,001 tons of zinc and copper concentrate. During the same period this year we doubled the production of concentrate to 7,548 tons but due to the sharp price drop our revenues were only $12,728,000, or almost twice as less even though our production of concentrate rose by 50%.” Mr. Falletta stated and added that during his more than thirty years in the mining business “he had never witnessed such a sharp and rapid fall in prices”. 

By November 8th, after the announcement by GM Falletta regarding the expected cutbacks (60% layoffs and wage cuts of 40%) as a result of the world economic crisis, workers at the company began an open-ended strike. This extreme and united move by the miners seemed to be effective. Their five day walk-out only ended when the Prime Minister of Armenia sent a ministerial delegation to Syunik comprised of Energy and Natural Resources Minister Armen Movsisyan, Minister of Economics Nerses Yeritsyan and Labor and Social Affairs Minister Arsen Hambardzumyan. According to an agreement ironed out with the government representatives, the company’s owners promised to decrease the number of layoffs and take all measures possible so that residents of Kaplan wouldn’t suffer socially.

Evaluating the meeting with the government officials, Dundee Precious Metals CEO Jonathan Goodman stated, “Our management team will utilize these meetings with the government to pay heed and decide what common-sense methods can be carried out to soften the impact of these difficult times on the workers and community.”

At the meeting with Armenian government officials, Company President Jeremy Cooper presented a list of statistics regarding the condition that mines throughout the world were in according to which some 43 mines, including 17 zinc mines, had either shut down or reduced operations or had temporarily halted operations within the past five months.

“All the officials with whom we have met know full well the difficult situation facing the mining industry today and they, together with us, will attempt to find a way out, to mitigate the situation resulting from the planned for cutbacks.” Mr. Cooper declared after the meeting.

An agreement was first reached between the directors of Deno Gold and Armen Movsisyan, Minister of Energy and Natural Resources Minister Armen Movsisyan at the meetings held in Yerevan on November 17th. According to the Memorandum signed the following day. Deno Gold agreed to maintain the number of workers presently employed for three months from the time of the signing.

In addition, those workers that had already received dismissal notifications during the previous weeks would be called back to their jobs. An agreement was also worked out to send some workers to mandatory leave according to the law on the books in Armenia. Parenthetically, those placed on mandatory leave would work in shifts; that’s to say in turns. General Manager Falletta informed workers of this, noting that the government also pledged to transfer some 800 million drams in overpaid Value Added Taxes to the company. The General Manager also responded to questions posed by the workers. Of main interest to the workers was the fact that they were to be paid 66% of regular wages while on mandatory leave.

The workers asked Mr. Falletta if such wage levels would be enough for them to pay off their debts, rents and generally survive. The GM responded by saying that he understood the concerns of the workers and would see that all those on mandatory leave and receiving a 2/3 wage wouldn’t be paid less than 45,000 drams per month. 

Surik Tumanyan, President of the company’s trade union, also spoke to the assembled workers and publicly thanked the owners and management of the company. His words lead to uncertainty within the ranks of workers and raised their ire and they expressed their indignation, especially given the fact that GM Falletta had declared that their strike had been illegal and that those not showing up for work wouldn’t be paid.

Those showing up willing to work but not able to would be paid for the days absent. Let’s recall that a strike committee had been set up at the time and that Surik Tumanyan and even Edward Tumasyan, President of Armenia’s Trade Unions Confederation, had stated that the workers’ strike was legal and that they would struggle within the parameters of the law till the end. According to Surik Tumanyan the labor code stipulates that workers must inform the company management at least seven days in advance of a pending strike. “But this strike hadn’t been planned for, it was spontaneous and a warning strike was started only after the General Manager announcements regarding layoffs and wage cuts. How can you tell a worker that he no longer has a job 5-10 minutes before he’s about to go on his shift. Even if I were God I couldn’t have been able to control that crowd.” states Mr. Tumanyan, adding that if that is the logic we are to use then even Mr. Falletta has violated Armenia’s labor code by not previously informing the chairman of the trade union committee and local employment center about the pending cutbacks.

Is it possible that Deno Gold’s General Manager will dismiss some workers for not showing up on the job? The President of the Trade Unions Confederation rules this possibility out. It is difficult to predict what the next three months will hold in store for either the company or the government. In the view of analysts, the global economic crisis will continue till the end of next year. Responding to a question posed by an employee of the company, Mr. Falletta noted that the government of Armenia didn’t wish to see people unemployed during the winter months and sitting idly at home. The General Manager declared, “We are also human and met the government half way. I can’t say what will happen three months down the line but if the situation doesn’t change there will be layoffs.”

P.S. - Layoff notices handed to workers by management informing them that they’d be cut as of December 13th have been taken back and new notices distributed. These recent notices call for 148 employees to be placed on indefinite mandatory leave.