ArmInfo. One of the largest investors in Armenia, the Russian group of mining companies GeoProMining celebrates its 10th anniversary of work in our country. In 2007, the company acquired the first major asset in Armenia, GPM GOLD, which is developing the Sotq gold mine and managing the Ararat gold plant, and a little later Agarak Copper-Molybdenum Combine (AMMK). In connection with this date, the general director - ArmInfo analyst Emmanuil Mkrtchyan spoke with the president of the group Roman Khudoliy
Roman Nikolayevich, sum up the results of these 10 years of work in our country. How effectively did the company manage to work, taking into account the fact that soon after the acquisition of assets a global financial and economic crisis broke out? Due to what you managed not only to survive it, but also to practically reach the level of profitability of production?
In 2007, the assets we acquired in Armenia were in a completely horrible condition, the equipment were almost completely depreciated, the organization and culture of production, to put it mildly, desired the best. The efficiency of production was very low, our predecessors accumulated huge debts and not only for payments to the budget, suppliers, other contractors, but also for staff salaries. Arrears in wages was 9 months, and employees were on forced vacations. But that's not all, the former owners of the company developed all the oxide ores at the Sotq deposit, leaving only persistent sulphides, for the enrichment of which it was necessary to build a new plant, since the old technology in Ararat was not for this purpose.
Therefore, after the acquisition of the asset, we have set a very serious task of developing the project and constructing a plant for processing sulphide resistant ores. Together with the engineering companies Cors Resource and Extract Technologies, we have come a long way in designing, building, implementing the most modern technology for processing sulfide ores - Albion. To start the plant it was necessary to prepare a mine. We conducted a global modernization, buying from the Japanese company Komatso 22 units of equipment - dump trucks, excavators, loaders ...
On Agarak copper-molybdenum combine was, actually, the same situation. In total, for our assets in Armenia, taking into account their acquisition and technological modernization, we spent about 500 million USD for this period. I think, despite the crisis risks, the difficult technological and managerial decisions, we have passed this way very dignifiedly.
What are the company's medium-term plans for the strategic development of its two Armenian assets?
We, of course, are not going to dwell on this, although I can say that the investment return has just begun, literally the last year. The return on investment (ROI) is still minimal in terms of the amount invested, but, nevertheless, the process has started. After all, when an investor decides to enter an asset, he first of all thinks about how long he will be able to repay the investment and what profit he can expect. After the acquisition of the Sotq asset in 2008, GPM Gold extracted and processed only 136 kg of gold in marketable products. In the current year, we will produce about 4 tons. The difference, as you can see, is enormous, we managed to make such a leap. Today we process about 1.3 million tons of ore at the Ararat factory, in the medium term we intend to bring the volumes up to 1.5 - 1.7 million tons and set a goal to produce gold up to 5-6 tons per year. This will require additional investment, which we now carry out through our own and attracted funds.
Similar is about the Agarak. We are well aware that with such a low content of ore base in copper deposits, in conditions of low world prices, it is possible to bring production to an acceptable level of profitability only through scaling. Strategically, we plan to increase the productivity of the copper-molybdenum asset from 3.5 million tons of ore processing to 6 million tons at the initial stage. These actions will make it possible, even at low prices, to work without interruption. This is a serious task, requiring significant additional investment. Only this year GeoProMining sent over $ 3 million to further technical re-equipment of Agarak Copper-Molybdenum Combine.
You work in Russia, other countries, once worked in Georgia. What makes Armenia different, does our country have its own strengths that make it attractive for foreign investors?
You know, Armenia has become for us a native, because 10 years - a considerable time. Yes, in relation to other countries, here there are advantages, the main of which are historical mining competencies, hardworking and professional workers.
One must have a big risk appetite to invest such significant investments in the crisis period of uncertainty.
Yes, these 10 years were quite difficult for us, as for many. We invested our own money, borrowed money, invested in technology, production and all this in the crisis of 2008, then in 2012 a new crisis broke out, which has not ended yet. That is, we, figuratively speaking, "caught" all the crises, and when they ask me how I work in such conditions - I answer that, frankly speaking, in other conditions we almost did not work. Management and the team have coped with this task, we are developing steadily, unlike many companies.
It is interesting to know your expert opinion on the issue of the transition of the country's mining industry to the deeper processing of raw materials through the construction of its own smelting production, the project of which was already developed in Zangezur before the crisis of 2008-2009 and the possibility of creating a small refinery?
The theme of the construction of a smelting plant for the processing of copper, molybdenum concentrates periodically appeared during these 10 years. I know that the Chinese have made an offer to build a copper smelter and it is now being studied. But in order for the smelter for copper to be effective, it is necessary to process not less than 80-100 thousand tons of copper in concentrates. Probably, such a volume, taking into account the commissioning of new capacities, can be achieved in Armenia, and this will be beneficial for extractive companies with high logistics costs. However, nevertheless, it is necessary to weigh all the pros and cons again, because we are all in the market and the local auditor should not yield to existing processors.
As for the refinery, the alloy Dore, to date, only GPM Gold produces in Armenia. For the construction of the refining factory, resource capacities are needed. Even if we increase production to 6 tons of gold, this plant will be unprofitable. When other fields are put into operation, and in general gold production will reach 30 tons and higher in bars Dore, this issue is worth considering. But we must take into account that there are a large number of refining industries in the world, only 11 plants in Russia - and almost all of them are under-loaded. If it is difficult to build a plant in Armenia to reach a competitive cost, I do not see such opportunities in the near future. Some have already gone bankrupt, for example, the Kolyma plant in Russia. This topic is quite subtle, Dore's producers, unlike concentrates producers, do not have logistics problems, transportation costs are minimal.
And the last question. "Resources for good" is the motto, apparently chosen by your company for the purpose of implementing its social policy, taking into account the fact that the enterprises in Vardenis, Ararat and Agarak, in fact, are city-forming, providing jobs for up to 70% of the local able-bodied population?
Realizing that our enterprises have a city-forming nature, in 2011 the company moved from disparate projects to a system approach to corporate social responsibility and launched a comprehensive program covering all aspects of social life, from attentive attitude towards employees and ending with minimizing the impact of production on the environment. We constantly interact with state authorities and local administrations, which allows us to react as sensitively as possible to the needs of the inhabitants of the regions, to send charitable funds to those projects that are most relevant to the local population.
We are long-term and honest investors, when we bought GPMGold, there worked 550 people, now the team consists of 1050 people, an increase of almost 2 times. Over $ 170 million was paid to the budget of the Republic of Armenia. As for wages, at our enterprises it is one of the highest in the industry.
So, we invest in social projects: development of infrastructure, in the areas of fire safety and security, energy supply, water supply, repair hospitals, schools, kindergartens. Support for socially vulnerable groups of the population is also traditionally one of the priorities of the social work of GPM. We also render all possible assistance to local authorities in carrying out various environmental measures, improvement and creating comfortable conditions for the residents of Vardenis, Ararat and Agarak. In total, for these 10 years we have invested about $ 8 million in the implementation of various social programs and charity.