Overview

Armenia has a long history with mining, marked by the beginning of copper extraction at the Alaverdi mine in the 1770s, the Kapan gold mine in the 1840s, and a copper-molybdenum mine at Kajaran in the 1950s.  After Armenia gained independence, the continued development of the country’s minerals sector was hindered by a number of factors including its geographical location and difficult conditions for transporting products to markets abroad.  The industry was also crippled technologically.  This, together with a legal and regulatory framework that  international best practices, drove increasing concern about adverse environmental impacts, sustainability, corruption, land rights, and socioeconomic tensions.  Reform began in earnest in the early 2000s with the revision of the regulatory framework, the liberalization of contractual mechanisms, and the privatization of major mining companies.

Mining and mineral issues are under the purview of the Ministry of Territorial Administration & Infrastructure, which was formed in 2019 through a merger of the former Ministry of Energy Infrastructures & Natural Resources and Ministry of Territorial Administration & Development.

The mining and minerals sector is regulated by  core pieces of legislation, including: The Mining Code, Land Code, Civil Code, Water Code, Administrative Code, Law on Waste, Law on Environmental Supervision, Law on Environmental and Natural Resource Use Fees, and the Law on Environmental Impact Assessment and Environmental Expertise.

International donors have supported Armenia’s efforts to improve mining sector legislation in line with international best practices, Armenian leadership has identified mining industry development as a strategic priority. The World Bank funded a strategic mineral sector sustainability assessment, completed in 2016, that focused on the key challenges and opportunities in the sector, with an emphasis on developing a regulatory environment that both promotes sustainability and attracts investment. In May 2023, the Armenian government adopted a strategy to modernize the domestic the mining industry by 2035. The main objectives are the creation of a unified database of geological data, effective decision-making in the field of subsoil use and nature protection, compliance with international environmental and health standards, and fair revenue distribution., The government has also approved amendments to various laws  exercise control over environmental standards, permitting, and construction techniques. In 2022, the government approved a set of amendments and additions to the Tax Code and the Law on State Duties concerning the revision of the royalty system applied to mining companies, introducing a two-step progressive taxation system moving away from price-based royalty schedules and ad-hoc export duties.

In 2017, Armenia joined the Extractive Industries Transparency Initiative as a candidate country.  In 2020, following the EITI Board’s positive EITI implementation assessment, Armenia

While the mining sector  Armenia’s gross domestic product, the sector dominates Armenia’s goods exports. Exports of mined resources, including finished products based on raw materials such as aluminum foil and diamonds, account for over half of Armenia’s merchandise exports annually.  Mined copper resources represent the single biggest contributor to Armenia’s merchandise exports.  Levels of subsoil assets per capita are high compared to similar petroleum-importing countries in the region.

Mining in Armenia is concentrated around the extraction of metals iron, copper, molybdenum, lead, zinc, gold, silver, antimony, and aluminum.  There are valuable reserves of rare metals in gold-polymetallic, copper-molybdenum, and copper pyrite deposits.

Besides metals, Armenia produces other industrial minerals, which include cement, diatomite, gypsum, limestone, and perlite.  also has indigenous construction material resources, such as basalt, granite, limestone, marble, and tuffsemiprecious stoneshas also developed a diamond processing industry based on imported diamonds.

Leading Sub-Sectors

The extraction and export of copper and associated molybdenum reserves dominates Armenia’s mining landscape.  The leading producer of copper and molybdenum concentrates in Armenia is the Zangezur Copper Molybdenum Combine (ZCMC), which operates a major mine at Kajaran and is responsible for 60 percent of annual turnover in the mining sector. Agarak, near Armenia’s border with Iran, also produces copper. The Teghut mine in Armenia’s north has been another significant source of copper,but is currently not operating after closing in 2022 to address environmental concerns. Teghut is owned by sanctioned Russian bank VTB.  The government has entertained the prospect of new investment to replace a dilapidated copper smelter in the town of Alaverdi.  The copper sub-sector has been a target for some of the most significant foreign direct investment in Armenia’s mining sector.

In 2021, the “Industrial Company” which is a fully owned subsidiary of “Geopromining Armenia” acquired 60 percent of ZCMC.  The company then donated 25 percent of its shares to the government of Armenia. Gold is the second most important sub-sector for mining.  In 2023, the government of Armenia signed a memorandum of understanding with Lydian Armenia that will allow the resumption of operations at the vast Amulsar gold mine and help to secure $250 million for the project. As part of the agreement, Lydian had yielded 12.5% of its shares in the gold mine to the government.

The Sotk mine in the eastern part of Armenia is the leading producer of gold, but in April 2023 the company had to suspend the operation of the open pit mine due to cross-border gunfire from nearby Azerbaijani military positions, continuing only the much smaller underground mining operations.  The second largest gold mine is the Shahumyan mine in near Kapan in southern Armenia.

Other major sub-sectors in terms of the value of exports include diamonds and jewelry.

Opportunities

Armenia is likely to continue developing facilities for processing copper, gold, and molybdenum.  A significant portion of Armenian society has voiced concerns about the potential negative environmental effects of mining projects, and companies’ environmental practices are coming under increased scrutiny.  This is due in large part to the historical mismanagement of the sector and the use of outdated practices and technologies.  The proximity of any mining projects to Lake Sevan or other environmentally sensitive areas is likely to draw public scrutiny.  Yet growing recognition of the mining sector’s outsized importance to Armenia’s economy and foreign currency inflows has increased support for new developments heightened the government’s focus on developing a productive, responsible sector.

In response to protests over projects seen as controversial, the government has committed to conduct environmental assessments of all current mining projects with the wide community and civil society involvement.

Due to increased public sensitivity and government attention to the potentially adverse environmental impacts of mining, as well as an interest in seeing that the sector serves as a source of sustainable economic growth, there are emerging opportunities for the provision of services and technologies that can address legacy liabilities through the reclamation, rehabilitation, or remediation of mines and adjacent areas and facilities.  

Resources

Ministry of Territorial Administration and InfrastructureMinistry of Economy Armenian National Interests Fund (ANIF)Enterprise Armenia Statistical Committee of the Republic of Armenia American Chamber of Commerce in Armenia Spyur Information System