US embassy cable - 05YEREVAN93

UNCLAS SECTION 01 OF 03 YEREVAN 000093 
 
SIPDIS 
 
COMMERCE FOR 3150/PBRADLEY/BSMITH 
COMMERCE FOR 4201/ITA/IEP/OEERIS/BISNIS/EHOUSE 
EMBASSIES - PLEASE PASS FCS 
DEPT FOR EUR/CACEN, EB/CBA 
ANKARA ALSO FOR CFC/ SNYDER/BALLINGER 
PASS TDA-STEIN, OPIC, EXIM-TUMMINIA/PANARO 
 
E.O. 12958: N/A 
TAGS: KTDB, BBSR, BEXP, BTIO, AM 
SUBJECT: (IMI) ARMENIA:  MINING SECTOR 
 
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SUMMARY 
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1.  This cable reviews the current condition of 
Armenia's growing mining and minerals sector.  It 
describes recent sector developments and provides key 
contacts.  End Summary. 
 
2.  Armenia has significant deposits of copper, 
molybdenum and gold as well as smaller deposits of 
zinc, lead and silver.  All of Armenia's known mineral 
resources have now been privatized.  There are working 
enrichment plants and smelters near most mines.  Most 
mining companies operating in Armenia have investment 
commitments to upgrade their facilities and expand 
production, which may create export opportunities for 
U.S. equipment suppliers.  A few firms are looking for 
investment partners or debt financing to expand their 
existing operations -- see paragraphs 6 and 7. 
 
3.  Armenia's largest mining asset, the Kajaran copper- 
molybdenum mine in Armenia's southern Syunik region was 
privatized in December 2004.  A consortium of companies 
led by the German Cronimet has taken over the Zangezur 
Copper-Molybdenum Plant JSC and expects to produce 
18,000 tons of copper and 4,000 tons in molybdenum 
concentrates annually.  The consortium plans on an 
extensive initial investment to upgrade the mine and 
plant. 
 
4.  The smaller Agarak copper-molybdenum mine is also 
located in the Syunik region near the town of Meghri on 
the Iran-Armenia border.  It has resources of 38.5 
million tons of ore grading 0.38 percent copper and 
0.025 percent molybdenum.  U.S.-based Comsup 
Commodities purchased the Agarak Copper-Molybdenum 
Plant JSC in 2003.  The company plans to invest USD 3.5 
million within 2004-2005. 
 
5.  The Kapan mine is located near the Syunik region's 
capital Kapan.  The first plant in this field was Kapan 
Ore-Dressing plant, established in 1935.  The Swiss 
company Deno purchased the Kapan plant in 2002.  The 
operation has the capacity to produce 3,700 tons of 
copper and 6,000 tons of zinc in concentrates per year, 
plus gold and silver.  Deno is planning to invest up to 
USD 10-12 million in the plant. 
 
6.  U.S.- and Canadian-owned Metal Prince owns the 
mining and exploration rights for three copper mines, 
one gold-polymetallic, one zinc polymetallic and one 
polymetallic mine located in Armenia's Lori region.  In 
addition, the company owns an enrichment plant 
producing copper concentrate containing 23-26 percent 
copper.  Metal Prince plans to invest USD 10 million in 
developing its Akhtala and Armanis polymetallic mines. 
The company has an ongoing project to construct a new 
enrichment plant near Armanis mine and increase the 
capacity of the existing Akhtala plant.  The overall 
investment needed for the implementation of the 
company's projects is USD 100 million.  To complete 
these projects, Metal Prince is seeking financing in 
the form of debt financing, partnership or a joint 
venture. 
 
7.  Armenian Copper Program (ACP) owns and operates the 
Alaverdi Smelter, which is the largest smelting 
facility in the region.  ACP's main activity is the 
processing of ore and ore concentrate and production of 
blister copper for export to European refineries. 
Currently ACP has the capacity to produce up to 10,000 
metric tons of blister copper from copper concentrate. 
The company has contracts with both the Zangezur Copper- 
Molybdenum Plant and Metal Prince for the supply of 
copper concentrates.  The European Bank for 
Reconstruction and Development (EBRD) has provided a 
credit of USD 4.5 million under the Pre-export 
Financing Agreement with ACP.  The EBRD has also 
provided ACP with technical consultancy on 
environmental issues.  The revenues of ACP are growing; 
the company projects revenues of USD 40 million in 
2004. 
 
8.  ACP also has an exploration license for two major 
mines in Teghut (copper-molybdenum) and Alaverdi 
(copper).  The company is also involved in the 
exploration of Hankadzor (copper), Tandzut (copper-gold- 
sulfur) and Margahovit (gold) mines.  ACP has 
contracted a Canadian company Strathcona Mineral 
Services to conduct feasibility studies on the Teghut 
mine.  The company needs additional investments of 
approximately USD 100 million to develop these mines. 
ACP seeks foreign investors to join its mining 
projects. 
 
9.  Armenia's mining sector is regulated by the Mining 
Code and the Concession Law of 2003.  Both laws clarify 
the rights and responsibilities of government entities 
and mining and exploration companies.  The government 
body responsible for the mining sector is the 
Department of Mineral Resources under the Ministry of 
Nature Protection.  It issues licenses as well as 
monitors both exploration and production operations. 
The Ministry is also responsible for environmental 
controls. 
 
10.  Due to significant increase of prices for copper 
and molybdenum in international markets (a tenfold 
increase for copper over the past three years) copper 
and molybdenum production in Armenia is growing 
rapidly. 
 
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KEY CONTACTS 
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Ministry of Nature Protection 
3rd Government Building 
Republic Square 
Yerevan-10 
Tel: (374-1) 521-099 
Fax: (374-1) 585-469 
E-mail: iac@mnpiac.am 
Website: www.mnpiac.am 
Contact: Mr. Vardan Ayvazyan, Minister 
 
Ministry of Trade and Economic Development 
5 Mher Mkrtchyan Street 
Yerevan-10 
Tel: (374-1) 526-134 
E-mail: webmaster@minted.am 
Webiste: www.minted.am 
Contact: Mr. Arthur Ashugyan, Head 
of Mining Industry Department 
 
Armenian Copper Program CJSC 
19 Khanjyan Street 
Yerevan-10 
Tel: (374-1) 526-690 
Fax: (374-1) 540-186 
E-mail: info@acp.am 
Website: www.acp.am 
Contact: Mr. Gagik Arzumanyan, Executive Director 
 
Kapan Mining and Processing 
Enterprise CJSC 
4 Gortsaranayin Street 
Kapan 377810 
Syunik province 
Tel: (374-85) 62-040 
Fax: (374-85) 62-040 
Contact: Mr. Martik Hakobyan, General Director 
 
Metal Prince 
24b Baghramyan Ave. 
Yerevan-19 
Tel: (374-1) 545-538 
Fax: (374-1) 545-539 
E-mail: metalking@europe.com 
Contact: Mr. Serop Der-Boghossian, President 
 
Zangezur Copper-Molybdenum Plant JSC 
18 Lernagortsneri Street 
Kajaran 
Syunik province 
Tel: (374-1) 280-977 
Fax: (374-85) 32-846 
E-mail: zcmc@arminco.com 
Contact: Mr. Maxim Hakobyan, Managing Director 
EVANS