Manvel Bagratyan has held the position of Financial and Administrative Director of Sipan-1 since 2004. Since August 2006, he has also been the manager of the Armenian branch of Iberian Resources.

The following is our interview with him.

Mr. Bagratyan, who is exploiting the mines at Aygedzor and Terterasar today?

The license to exploit those mines was given to an Armenian company, Sipan-1. One could say that this is a production company. The financial companies behind it are the Australian Iberian and Tamaya. These are companies that have been registered separately, but have merged on the stock market and we see them as a single owner company.

Are these companies well known in the mining business? Do they operate mines in other countries?

Iberian (which is now owned by Tamaya) has mines in Portugal and Morocco. Tamaya has a functioning copper mine and production plant in Chile and plans to buy new mines in Africa and Brazil.

Tamaya Resources’ shares are registered on the Australian stock market and the company is preparing to be listed in the Canadian stock market as well. This is because Australia and Canada are both countries with huge mining businesses.

Do the Australian owners plan to buy any other mines in Armenia?

Our approach is the following – first, we have to firmly establish what we already have, and show everyone that we are an organization of action, not words. Only then will we declare our future plans. Armenia already has the bad experience of seeing people buy mines and then sell them over and over again… We don’t like sellers, we like producers.

What have you done in this period?

We have begun to produce gold. The previous owner produced only ores. When the Australians came, they shut down operations at the factory for about a year and a half. They supplied it with the newest equipment. They restarted operations only a few months ago. We already have a 14 kilogram piece of ore which contains 85-95 % gold. 18.7 million US dollars have been invested so far, but this is just the beginning. A further 64-65 million is going to be invested. A newer and more powerful plant is going to be built very quickly next to the old one. While we are producing around 10 kg of gold per month now, we plan to make this our daily standard by the fall of 2009.

It would be interesting to know how much Iberian Resources paid for Sipan-1.

I wouldn’t want to quote a specific figure. I’ll just say that the 18.7 million I mentioned earlier included that sum as well.

How large are the gold reserves in the mines at Meghri?

Exploration of the reserves is still in progress. But we have, of course, some idea of the volume of reserves there. Let me put it this way – sums of this kind are not invested for only 1-2 or even 5-10 years.

How much gold does 1 kilogram of ore contain?

At Terterasar, the average is 10 g of gold per ton, in Aygedzor it is 5 g.

What methods are used to extract the gold?

When the plant was owned by Armenians, the methods used were gravitation and floatation. No substances are used during gravitation. Some chemical substances are used in floatation, but they don’t cause any environmental problems.

Now we use only gravitation. But the new plant is going to use more complicated technology, and the extraction process will also involve cyanide, which is also ecologically safe.

How often are environmental inspections conducted. Do other organizations run inspections as well? What kinds of problems have been noted?

When the plant used floatation methods, the sanitary-epidemiological station used to run inspections regularly, under orders from the prosecutor’s office at Meghri. Nothing negative has ever been found. The Ministry of Environment Protection has also conducted inspections. The latest one was in July last year. We regularly produce reports every quarter listing the reserves used and payments made for environmental issues. During inspections, there have been some errors in calculation regarding the amount of reserves used which we have then corrected in the following report.

What ecological programs are you implementing?

I should note that the new owners are giving a great deal of importance to ecological matters.

A stream runs from our mine to the river. From day one, The Australians set up an agreement with the Mining and Metallurgy Institute and they now take samples of the water on a monthly basis both from the source, before and after it flows into the river.

We plan to set up a huge filtration unit on the river, so that Meghri also receives drinking water from the river. We will also set up a unit near the mine which will regularly take samples of the surrounding air and determine its level of pollution.

Besides that, while we didn’t have experts dealing in environmental issues in the past, we now have a contract with one of the leading specialists in Armenia. We will also have a separate environmental department soon. We now have a foreign expert working with us in Meghri. We will establish a program with his help aiming at ecological issues, which will lead us in the near future. The program will correspond to all international standards and we will present it to the Ministry of Environmental Protection for approval.

Mr. Bagratyan, how much do you pay in taxes to the state?

We don’t make a profit yet, because our production is not sold. So we don’t pay profit tax yet. But that will make up a huge number in the future. We currently pay income tax on our salaries as well as social security payments. Those two kinds of tax come to about 25 million drams a month. This figure has grown gradually and is set to rise further. This is because when the Australians bought Sipan-1, there were only 82 workers here. Now we are around 400 people and this number is set to double in the near future.

Let me also say that the workers are from different parts of Armenia. But around half are locals. We are interested in getting as many Meghri residents as possible in our ranks. Meghri is very important to us – it is the southern gateway of Armenia.

Do you have programs for community support or charity in Meghri?

We currently finance the village community kindergartens in Meghri, Vardanidzor and Lehvaz as well as two schools in Meghri. We have set up computer classrooms in each of them. I don’t want to go into details about the continuous support that we have been providing. But this is a very small part of our plans. When we start selling and making a profit we will be a part of everything here – starting with the environment and ending with social issues.

Where will the gold be sold?

We will export it, because the tax laws do not favor selling it locally. If you export gold, the value added tax is zero. But the product is exempt from value added tax in the domestic market. This means that if we sell abroad, we present the documents to the government and the state returns the value added tax we have paid so far (for example, on the equipment that we have brought in). If we sell in the domestic market, we don’t get that money back, and we are forced to add that to the cost price of the gold. This would give us a price that is not competitive. As for the local buyers – the gold market, goldsmiths… they buy their gold from Switzerland.