Tuesday, 25 September

Vedanta Resources is to Invest 80 MillionDollars in Armenia

Interview with B.K. Sharma, Chief Executive Officer of Ararat Gold Recovery LLC

According to a press release in Arminfo this week, Vedanta Resources , owned by Anil Agarwal, plans to invest USD 80 million in AGRC. The Armenian government has not responded to your request to build a processing plant at Zod. Is Vedanta Resources ready to invest without having approval for the plant at Zod? Will the investment plan be carried out if the government does not approve your proposal regarding the construction of the new plant?

Our investment plan consists of the following areas;

(a) Exploration 
(b) Mine pre-stripping, mine development and procurement of new mining equipment. 
(c) New mill and CIL plant 
(d) New POX plant to treat refractory ores.

The activities (a) and (b) do not require any approval from the government. The work for pre-stripping and mine development has already been started by us. Every month we are doing waste mining for 1 million tons. For procurement of equipments, we are in the advanced stage of negotiations and the contracts are likely to be concluded very shortly.

Approval is required for construction of plant against (c) and (d). We spent a lot of money, time and energy for EIA, public hearing and other activities for getting environmental approval for the new plant in Zod. Unfortunately, the proposal was not accepted due to Act on Sevan Lake. Apart from the financial loss, it created negative publicity and negative image for us. Therefore, to avoid the previous experience and to expedite the whole process, we have sought in principal consent of RA government to the plant site before a formal submission of our proposal for approval by the government. We have proposed to have discussions with RA government and to make a presentation of our proposal. We have also proposed to constitute a working group comprising of representatives of the government and AGRC to study the matter and to make necessary recommendations. In any case we have approached the government with open mind and are committed to follow the way forward as instructed by RA government, including location for the plant.

We have long term commitments in Armenia and the investment will happen under all the circumstances, particularly when we are open to follow the directions of government, including choice of site for new plant.

AGRC has developed a "Phase III" Project, which calls for an investment of eighty million dollars. Is the investment by Vedanta Resources intended for "Phase III" or another project?

Yes, the investment is for Phase III expansion project.

Besides Vedanta Resources, did other companies express their willingness to invest in AGRC in recent months? If yes, which companies made an offer?

The majority shareholders having management control of Vedanta Resources plc are also having the same status for AGRC. Therefore, it is pertinent for Vedanta Resources to make the investment in our project rather than any outsider. We are neither approaching nor we are being approached by any other company in this regards.

According to our information, Global Gold offered to make an investment in the project as well. Was there any such suggestion by Global Gold ?

We are not aware of any such proposal or suggestion for investment.

Did anybody, particularly from Armenia, ever express the intention of taking over AGRC? As we know Gagik Tsarukyan, director of Multi Group, made such an offer. Can you confirm this information?

We have long-term commitments in Armenia. We want to expand our business activities by following all the rules, regulations, and laws of the Republic of Armenia. We also want to contribute for the progress and development for community and this country as a responsible, corporate citizen. We do not want to sell any assets.

The Ministry of Nature Protection took AGRC to court recently. The Ministry submitted an Act accusing AGRC of concealing 600 kg of gold. This concerned mainly depleted reserves. What was the result of the lawsuit?

The court decision was in favour of AGRC.

In 2005, according to the Act by the Ministry, the concealed gold amounted to 1000 kg. Despite your disagreement, after the lawsuit you paid AMD 97.5 million for the calculated depleted reserves. Does this not suggest that AGRC had concealed some reserves?

We are doing business very transparently and very honestly. We have very strong commitment to comply with all the rules, regulations and laws of this country. We are here to do business and not to fight legal battles. We also very strongly deny all allegations of hiding or concealing any reserves or gold.

Why does AGRC have constant problems with the Ministry of Nature Protection?

We do not have any problems with any government agency or Ministry. There could be difference of opinion and we are trying to resolve all the issues through discussions with the respective agencies/Ministries. As far as the RA Ministry of Nature Protection in concerned, we are getting all the co-operation and support.

If the project of building a new plant in the Sevan basin is not approved, will AGRC continue its operations or will it abandon the project and sell the company? As we were informed in our last interview, because of changes in the geological quality of the mined ore, it cannot be processed in the old plant, which needs radical changes in reprocessing technologies. What is the situation today-- has anything changed or are you still of the same opinion?

As already stated we have long-term commitments in this country and have no intention to sell any assets. It is true that most of the ore available in Zod is of refractory type and it requires new technology. We need to construct the processing plant with POX technology to treat the available ore. The only question is location of the plant. As already stated we will construct the plant at a site as directed by the government of Republic of Armenia.

What is the operating capacity of the plant today, and what are the results for the first quarter?

The existing plant capacity is for treatment of 700,000 m/t per annum.

We have incurred cash losses for USD 3,416,767for the first quarter.

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