The exploitation of the Sotk gold mine began in 1976 and continued throughout the remaining years of the Soviet Union. Exploitation rights to the mines of Sotk and Meghradzor were granted to the Ararat Gold Recovery Company ltd. (AGRC) for 25 years each; Sotk was handed over in 1980, Meghradzor in 1983. In 2002, an Indian company, Sterlite Gold ltd., bought all the shares of AGRC, and started processing the accumulated gold at the Ararat plant and exploiting the Sotk open-shaft and Meghradzor closed-shaft gold mines.

Sterlite Gold ltd., which took over the Sotk and Meghradzor mines in 2002, is preparing to shut down its operations there, according to workers at the mines. The employees came to this conclusion when, a month ago, the company started mining the largest deposit there, which, they say, is extremely rich in ore, with more than 2-3 kilograms of gold in each scoop of an excavator. Suspicions of a hurried exit by the company were further fueled by the fact that the exposed deposits were covered with soil after the gold-rich ore had been removed, leaving ore with a lower gold concentration behind. "Nowhere in the world is a deposit covered with soil and then left aside; that means that the Indians are not going to exploit the closed deposits," said one miner.

The company started using this method after its project to build a new gold enrichment plant in Sevan, which had been presented for public discussion, was rejected. Sterlite Gold ltd. announced that they were ready to invest US$ 80 million to build a new gold enrichment plant in Vardenis. They claimed that transporting ore with a lower gold concentration to the Ararat plant was not profitable, whereas a plant in Sotk would allow the mine to be exploited for ten or more years, and around forty tons of gold would be produced over nine years, according to preliminary studies.

Another factor used by AGRC to justify the construction of a new plant was that, due to a high tariff on the railway to the Ararat gold extraction plant more than 260 km away, it was economically unsound to process ore with a gold concentration lower than 1.4 g/ton. According to our sources, the AGRC management had earlier suggested that the government hand over that segment of the railway to the company, but that suggestion was rejected. The company claimed that after that rejection, they were left with no choice but to study the location, and then present their project proposal for public discussion.

The Government of Armenia had outlined the rights of the company now managing AGRC. Through Decision no. 21 of 2002, the government guaranteed "a tariff of the dram equivalent of US$ 0.153, without value added tax, for the transport of 1 ton/km from the mines of Sotk and Meghradzor to the Ararat plant, for the Ararat Gold Recovery Company ltd., throughout the period of its activity."

Local geologists do not agree with the figures that AGRC presented regarding gold reserves. They insist that after conducting studies, the company confirmed not 40 tons, but 80 tons of explored reserves, which caused them great joy. But, in order to secure greater profits, they declared that there are 40 tons of confirmed reserves, and were trying to convince the government of the necessity of a plant in Sotk. In Vardenis, it has been made clear that this will not be allowed, saying, "they use tons of cyanogen, and 1 kilogram of cyanogen can kill 6 million people."

The geologists, who wished to remain anonymous, said that there were very rich deposits, as well as those with a lower gold concentration in the same mine. The Indians were extracting the gold-rich ores and leaving those with lower concentration behind, while in reality, they should be mixed with the richer ones. The company business project presented the average gold concentration as 4 g for that mine, while in truth, it was discovered to be 5.7g. "We know through personal experience how much they have stolen, but they keep extracting and presenting lower figures. Through our geological maps and documents we see 10 grams of ore there, but the figures from Ararat are three times less - that's where the hidden reserves are. They are making complete fools of the government. Our national treasure is being plundered," said one of the geologists who had studied the mine. Another geologist added that when the processed rock is removed, suddenly more ore is discovered - these are branches of the deposit that were not included in the project, and the company does not show these. A lack of conscience could have led to the gold being melted, but these experts know of what quality it is and take samples of this gold. Some of them claim that a geologist could deliver a profit of US$ 40,000-60,000 from ore like that.

We were unable to determine the investment volume or time-frame as per the contract signed between the company and the Ministry of Trade and Economic Development, since the ministry considers it a trade secret. However, well-informed sources claim that when President Robert Kocharyan visited Vardenis before the last elections, he was told that an investment of 45 million drams had been implemented. Sabil Stepanyan, the former director of the gold plant categorically denied this statement, saying that no investments had been implemented at all. The Indians had been processing previously extracted gold until now, and the small investments that they made were for other metals procured through processing, not gold. The profit obtained from these metals was used to buy new machines, reequip the Ararat plant, and give jeeps to bureaucrats.

Securing a pledge from the company to invest in the mine was intended to guarantee quality exploitation. Experts maintain that if modern, efficient technology is used to extract the minerals, these mines can be exploited for centuries, and employment will be secured for generations. But the selective and wasteful methods used to exploit the mines today could cause them to be viable for only 10-11 years, after which they will be totally depleted of any quality mineral. This means the end of the mines, because they will have no buyers. The government is being blamed for allowing the exploitation of the mines to become their plunder. The complex utilization of the mines in accordance with the volumes outlined during the Soviet years (an annual extract volume of 2,000 kilograms of gold) will render the exploitation useful in every sense. Based on the extract volumes so far, there can be no talk of running at a loss, because in 2003, 59,344 tons were extracted, and in 2004 - 65,928 tons. We should also note that the Ararat Gold Recovery Company paid a profit tax of 40 million drams in 2004, thus occupying a spot within the top 300 taxpayers in the country.

Experienced geologists said that verifying the actual volume of deposits had always been cause for argument, especially in the case of gold, because "gold indicators fluctuate greatly." Any deviation from the indicators normally used during inspections could lead to different figures. But they did not agree with the company when it said that their figures were wrong and date back to the 1970s when these exaggerated data were presented in the Soviet Union. Before Sterlite Gold ltd. bought out AGRC, it had been supplied with all relevant documents in English. 80% of the Sotk and Meghradzor mines had been explored in detail, and the remaining 20% had been studied. The margin for error in the evaluation was considered to be plus or minus 30%, and re-inspection found the deviation to be within the norm. The geologists are convinced that the purpose behind a plant in Sevan is only to swell the already overflowing profits of the company.

The differences between the actual deposit volume and approximations based on exploration have been used to explain the disagreement between AGRC and the State Environmental Supervision Department, after it conducted inspections in the Sotk and Meghradzor mines in June 2004 (See also: Who Acquired the Hidden Gold and How). Re-evaluation by the department at the Sotk mine had claimed figures of 865.2 kg of gold, 3.3 tons of silver, 0.86 tons of selenium, and 7.18 tons of tellurium in hidden reserves. Similar re-evaluation at the Meghradzor goldmine had revealed hidden resources consisting of 1,434.016 kg of gold, 2.78 tons of silver and 3.38 tons of tellurium. Based on this data, the department had filed a report and had presented it to the prosecutor general. AGRC had, meanwhile, appealed to the Economic Court in a bid to declare the report void, claiming that the re-inspection had been conducted in violation of a number of laws. On February 2, 2005, they signed an agreement in court, wherein the volumes of deposits would be re-evaluated by a joint team consisting of both their representatives.

The joint inspection was conducted from March 14 to 25, 2005 and the State Environmental Supervision Department of the Ministry of Ecology withdrew its claim regarding hidden reserves and admitted the deposit volume data that AGRC had presented after inspections in 2004 (ore containing 2,237.5 kg of gold instead of 2,303 kg). According to a statement by the Minister of Ecology, AGRC reevaluated its utilized gold reserves, lowering them by 0.9 tons in Sotk and 1.4 tons at the Meghradzor mine.

The minister explained this by saying that throughout the period of exploitation of the Sotk mine, including in Soviet times, there has always been a significant difference between estimates based on exploration and the actual volume of deposits, which has led to the misinterpretation of the volume of gold reserves. The only thing to add is this - did the ministry officials not know about this when they presented their report on the "hidden reserves" to the prosecutor general?