New strategy of Armenia`s mining industry is directed against  "offshore hide-and-seak" and aimed at revealing the real owners of  companies

ArmInfo. Companies engaged in the development of metal deposits will have to inform the public and government bodies of Armenia about real owners.

Amendments to the law "On state registration of legal entities" and in a package of  related laws were approved at a meeting of the parliamentary  commission on economic issues. Introducing the draft amendments,  Deputy Minister of Energy Infrastructures and Natural Resources of  Armenia Vardan Gevorgyan informed that the companies undertake to  register owners in the state register. Also, they will have to record  all changes in the composition of the owners. The document also  presents the procedure for submission of the necessary documents and  transactions.

The deputy minister stressed that the package is intended to resolve  the issue with the true owners of companies registered in offshore  areas, about which the authorities of the country have practically no  information. This measure is based on Armenia's international  commitments under the Extractive Industries Transparency Initiative  (EITI), of which Armenia became a member in 2017 and developed under  the initiative of the Road Map for Identifying the Real Owners only  28 companies engaged in the development of metal deposits. As for  non-metallic deposits, in the development of which about 400  companies are involved, they are not yet included in this draft  amendment.

In turn, Mikael Melkumyan, Deputy President of the National Assembly  of Armenia, pointed out a serious problem regarding the mining  companies registered in offshore zones. According to him, over the  past few years, 50 million tons of ore were exported from Armenia,  while in the peak Soviet period this figure did not exceed 8 million  tons. The question, according to the deputy, rests on low royalty  rates, which in total amount to 16.5%. As a result, depending on  price fluctuations on the world market, companies get huge super  profits.  Mikael Melkumyan reminded again about the construction of a  copper smelter by Chinese investors in Armenia. "Unfortunately, this  project doesn't come further than conversations, meanwhile, as its  construction would solve the issue of royalties and super profits,"  the MP stressed, noting that the subsoil is state property and should  be under its scrutiny.  In response, Vardan Gevorgyan informed that a  new strategy for the development of the mining industry is currently  being developed, in which flexible fiscal mechanisms will be  reflected.  To note, the state balance of mineral reserves currently  accounts for more than 670 solid mineral deposits with proven  reserves, including 30 metal. About 400 of these deposits are being  developed, including 28 metallic. Among metallic minerals there are 7  copper-molybdenum deposits, 4 copper, 14 gold and gold- polymetallic  deposits, 2 iron ore and 1 aluminum ore. Armenia also occupies one of  the leading places in the world in terms of the wealth and diversity  of reserves of non-metallic ores.  According to independent  observers, the previous authorities had special agreements with  subsoil users, who, using their offshore companies, sold them ore  concentrate at a lower price. And those, in turn, resold it at market  exchange prices to final consumers. Thus, the republic did not  receive almost half of the income from the sale of minerals. This  predatory mechanism, as a rule, in international practice is blocked  by a high level of royalty, which makes the use of such schemes  unprofitable. In Armenia, due to non- gratuitous agreements with the  previous authorities, the level of royalties was extremely low, which  created a fertile ground for concealing the real incomes of companies  and the active use of offshore schemes for this.  To recall,  immediately after the "velvet revolution" and the change of power in  the country, mass actions began in Armenia aimed at hindering the  activities of mining companies. RA Prime Minister Nikol Pashinyan  touched on this topic. On July 5, during a trip to Syunik region, he  stated that if the necessary facts were available, the Armenian  government would take a decision on the mining industry. The head of  the government stressed that the subsoil of the country was destroyed  in Armenia, and the economic growth of the country was tied to world  prices for copper. "I think this is a problem, but I don't think that  the mining industry should be closed. I gave instructions to conduct  research at all polymetallic deposits for compliance with  environmental standards. I ask you to give us the opportunity to  gather facts on the basis of which it will be possible to make this  or that decision. As a PM, I don't have the right to make decisions  about the closure of a mine just like that. To make a decision, it's  necessary to gather facts that must be indisputable and then  decisions will already be made, "Nikol Pashinyan stressed.