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

- As per information distributed by Arminfo News Agency, Alrosa failed to agree with Sterlite Industries Ltd on the purchase of AGRC. Did the company ever approach AGRC with an offer to buy it?

- As you know AGRC has developed a new Phase 3 project requiring some $80 million of fresh investment. For this AGRC reviewed different possibilities to attract part of the required funds through financial institutions and other investors. Alrosa was also among those who expressed interest in participating in the Phase 3 project. Finally Sterlite decided to provide 100% of the required financing and negotiations with other interested parties (including Alrosa) were terminated.

- Did you ever prepare any documents for the sale of AGRC, and which financial organizations were involved in that deal?

- As I have explained above, there was no intention to sell AGRC.

- Why did Sterlite Gold decide to sell AGRC?

- Sterlite never had an intention to sell AGRC.

- In the Arminfo information it was noted that in recent years $40 million was invested in AGRC. What are the details of the investment?

- We invested $22 million at the initial stage to design, build and commission a new processing plant at Ararat and develop the Sotk and Meghradzor mines. Another $22 million was invested within the period 2000- 2005 for the purchase of new mining equipment, improvement of the Ararat Plant and exploration at Sotk.

- You have recently signed a Reconciliation Agreement with the Ministry of Nature Protection, which was confirmed in court. The ministry in their initial act alleged that AGRC had hidden nearly one ton of gold. How did it happened that you finally paid just 60 million drams in penalties. Against which violations were these penalties paid?

- As you know the Ministry of the Environment has carried out an audit on quantities of depleted reserves of gold at both Meghradzor and Sotk mines. After the preliminary Act of Findings was delivered to us, AGRC expressed its disagreement with the calculation method used by the auditors. As the ministry did not accept AGRC's points and finalized the act as it was drafted preliminary, AGRC put the matter to the Economic Court of the RA, which recommended that the matter should be finally settled through the Reconciliation Agreement.

Then the parties entered into the Reconciliation Agreement which was certified by a relevant court judgment. Finally AGRC paid 97.5 million drams. The mentioned amount was paid against underestimated quantity of depleted metals.

It is most important to mention again that the dispute between AGRC and the Ministry of the Environment does not refer to the quantities of actually produced and exported gold. The dispute is solely on depleted gold in the ore, which was not processed and was left at the mine site due to technical reasons.

- As per our information Mr. Anil Agarwal was planning to visit Armenia on the 15 th of January, and he was planning to meet the president of Armenia. It is true that the president refused to meet him and was this the reason for the cancellation of Agarwal's visit?

- It is news [to us] also. There was no program for Mr. Agarwal to visit Armenia. Also there was no formal request to fix a meeting for Mr. Agarwal with the president of the RA.

Mr. Anil Agarwal has already visited Armenia twice and we believe he will be visiting Armenia in the future also to follow up development of AGRC operations. As you know Mr. Agarwal had the opportunity to meet the president of Armenia and have detailed discussions of the Armenian project during his visit to India.

- You are among those who support the idea of moving the Ararat Processing Plant to Sotk. What is the reason that despite an unprecedented increase in international gold prices you want to invest $100 million to relocate the plant instead of investing the same money in further development of the mine and increase of production?

- First of all, please note that we never talked of "relocation" of the old processing plant to the Sotk mine. Because of changed mineralogy of mined ore we are not able to process that at our old plant, and we need to completely change the processing technology. Secondly, the major section of the old plant was designed in the early 1970s based upon old technology. We have already spent a lot of money to improve this plant during the last six years.

As refers to investment, only part of that should be used for construction of a new processing plant, having the most up-to-date processing technology, including POX, floatation and gravitation units and cyanide destruction facility. The other part of the mentioned investment will be spent on further exploration, optimization of the pit and purchase of modern mining equipment which will enable us to drastically increase capacity and resources/reserves.

It should be noted that the old processing plant will continue processing tailings at Ararat.

- How did it happen that a Turkish Company did exploration in Sotk? What was the role of AGRC in inviting that company to Armenia?

- AGRC announced a tender for RC drilling equipment worldwide. The Turkish owner of the equipment suggested the best price and terms and conditions.

It is important to mention that "drilling only" is not exploration at all. The Turkish contractor provided only RC drilling equipment and operators for that equipment. Laboratory analysis of the samples was done in Armenian laboratories only.

- Employees of the Sotk mine are complaining of low salaries and poor safety conditions at the mine. Sotk employees have not been allowed to establish a trade union to protect their interests. It is known that some employees who wanted to establish a trade union were terminated. Why does AGRC violate employees' labor rights?

- Our basic salary list was established early in 2000 based on local market requirements. While preparing our New Project cash flow forecasts we are investigating changes that took place in local market, and comparing ourselves with other similar mining companies operating in Armenia. This is being done to consider such changes in our future activities.

AGRC strictly complies with safety norms established by the RA Government. This is confirmed by yearly safety audits carried out by relevant authorized government agencies.

AGRC operates in Armenia and it is complying with Armenian laws. Therefore AGRC never terminated any lawful activity of its employees aimed to establish a trade union. Certain illegal activities of small group of people trying to act on behalf of AGRC employees were suspended as they were contradicting relevant laws and regulations established by Armenian legislation.

- How many people have died in Sotk and Meghradzor mines since Sterlite acquired control over AGRC?

- Please be informed that AGRC operates in strict compliance with established safety rules. Any accident at our site happened due to negligence by the people involved of established safety rules, which was confirmed and duly documented by authorized government authorities which have carefully investigated each accident.

- Did the relevant responsible people at AGRC inform AGRC management of the poor safety conditions and what were the actions of the AGRC management?

- As we have already stated above, AGRC strictly complies with safety norms established by the RA Government. This is confirmed by yearly safety audits carried out by relevant authorized government agencies.

- What is the reason for the quick turnover of western specialist at AGRC? Many former AGRC western employees are presently employed with other mining companies in Armenia. In the meantime you have increased the number of Indian specialists at your company. In what positions in AGRC are Indian specialists working at present?

- Unfortunately most of the western specialists previously involved in AGRC failed to deliver the desired results at a reasonable acceptable cost, and therefore they left the company. Our strategy is to hire motivated, fair, skillful and well-educated people at a reasonable cost. And we engage people who meet these criteria irrespective of their nationality.