An interview with Gagik Arzumanyan, Executive Director of Armenian Copper Programme (ACP)
-What is the situation at the Vallex Group given the present stage of the economic crisis? In particular, regarding plans for the mining operation of the ACP at Teghut.
-There are certain developments to report in terms of the corporation’s operational plans. First, the most important factor to take note of is the real devaluation of the Armenian dram during the month of March.
This has created a beneficial set of circumstances for exporters in Armenia. The global prices for metals are also an important factor for our companies. In the past 4-6 weeks there have been some positive upward trends in the price of copper. Presently, a minimum rise of 30-35% has been registered in global copper prices. Based on the devaluation of the dram, our calculations show that it is possible to continue operations at the Alaverdi copper smelter in the black within the coming months. This, of course, will depend on whether or not we can guarantee a sufficient quantity of raw material. Of equal importance in this equation is whether or not the RoA government will be able to return our VAT overpayments to us in a timely fashion as in the past, as they have promised.
-In other words, you have set a certain timeframe for the continued operation of the copper smelter. Or will it operate on a continual basis?
-The timeframe will depend on the two factors I have previously mentioned. The ACP has run into problems with the RoA government for years regarding the return of VAT overpayments. The government has now come to understand that such a process cannot continue. We have stated in the past that a marked improvement has been evidenced in the return of VAT overpayments during the last 1-1.5 years. The amount in question doesn’t exceed 1 billion drams even though there were times when it exceeded 2 billion drams last year. The government has taken effective measures to facilitate the return of the overpayments and we hope that the practice continues.
-Lately you’ve made statements in the press that if the Armenian dram were to devalue by a factor of three, the losses incurred due to the crisis in the precious metals sector could be recouped.
-Of course, this eventuality was presented a bit out of context, but I did state something similar. I had been asked to what extent must the dram devalue in order for us to be in a favorable set of circumstances. I responded that this was an issue of macroeconomic balance, that the exchange rate is optimal for the economy in general. Everything else being equal, if we take the copper extraction sector and assume that copper miners spend the foreign currency they receive totally in drams, then the national currency would have to be devalued by a factor of three to compensate for the price drop of copper. But this doesn’t mean that we want the national currency to devalue threefold or that the basis exists for this to happen. Nothing could be further from our minds.
-What’s the situation regarding the VTB Bank’s financing of the Teghut project?
-We are in the middle of intensive negotiations with the bank at the moment and have the support of the RoA government. This issue is being raised in all inter-governmental talks and we are hopeful that we’ll receive the necessary funding from the bank to carry out the Teghut project.
-What will be the fate of Teghut if VTB doesn’t come through with the funding?
-I don’t even want to consider the possibility. There are no reasons to believe that such an outcome is possible. On the contrary, very constructive talks are underway. We spend 1-1.5 hours a day discussing the matter with VTB officials in direct talks. We are also looking at other alternatives regarding the Teghut project. Thus, if our extended talks with VTB were to suddenly fall through I am sure that we’d be able to find new partners ready and willing to fund the Teghut project.
-Have you presented a business plan to the RoA government in order to benefit from its anti-crisis funding package?
-There is a willingness on the part of the government to review the problems being faced by individual economic enterprises and to provide necessary financial assistance where needed. We haven’t as yet mad any application to the government for such assistance, taking into account that the Teghut project, our main concern, will require the allocation of serious amounts of financial resources. This doesn’t mean that we’ll be able to implement the Teghut project with $10-15 million. However, as I’ve noted, if the bank doesn’t come through, one of the avenues that we will explore is to carry out the project with the assistance of the government.
-Specifically, what anti-crisis measures are being implemented by Vallex?
-In the first place I must note that we shut down the Alaverdi mine and plant last November 20th. We also reviewed our wage expenditures and cuts were made in terms of labor force grants. Also, administrative costs were cut by trimming management salaries. We made cuts to personnel across the board. I believe that we have optimized all our resources to the point that come April 1st the plant will restart operations.