Adriatic confirmed it has signed a term sheet with Orion Resource Partners for a US$ 142.5 million debt
Aspiring miner Adriatic Metals has sealed a US$245 million finance package to fund the construction of its flagship Vares silver project in Bosnia and Herzegovina. The deal signals a major step in the advancement of the project which is still subject to delivery of a definitive feasibility study.
Adriatic confirmed it has signed a term sheet with Orion Resource Partners for a US$142.5 million debt financing package comprising a US$120 million senior secured debt and a US$22.5 million copper stream, which Orion proposes with Eastern Mining. The finance is subject to due diligence and documentation which is expected to be completed in the final quarter of 2021.
In addition, the London-based multi-listed Adriatic plans an equity raising of up to about US$102 million which will consist of US$52 million through an accelerated bookbuild process and a US$50 million conditional equity subscription by Orion.
What happened to a decadelong mining boom
Located just steps from downtown London landmarks like Harrods department store and Hyde Park, The Knightsbridge Apartments, a luxury residential building in the eponymous upscale central London neighborhood, advertises itself as “private homes enjoying levels of service and facilities to rival any five-star hotel.”
Boasting white limestone floors, hardwood timber features, a pool, spa and a feng shui garden, two-bedroom flats sell for between $4 million and $8 million, according to London estate agents. Residents, meanwhile, like their privacy. Many of the residences are owned by corporations aimed at camouflaging the ultimate owner.
Keeping such secrets is getting harder, however, and earlier in October the Pandora Papers, a massive data leak on offshore finance published by the International Consortium of Investigative Journalists, revealed the existence of two flats purchased in 2006 by a company operating on behalf of Batbold Sukhbaatar, a former prime minister of Mongolia.
They appear to be the same flats in The Knightsbridge Apartments that were the subject of an injunction in November 2020 by a U.K. high court pending legal proceedings in Mongolia against Batbold. One flat was sold in an apparent arms-length transaction in 2017, while in 2018 the remaining flat was transferred to a corporation controlled by individuals. In granting the freezing injunction, the U.K. high court judge said he was “satisfied” that the evidence established that these individuals were “proxies for Mr. Batbold.”
A lawyer for Batbold, however, said the former prime minister bought the flats legally when he was a private businessman, before holding high office, and has since sold them. “Now he doesn’t own the property in question or, indeed, any assets in the U.K.,” he said. The legal proceedings in Mongolia, referenced by the U.K. high court ruling, were opened in October 2020 by the Metropolitan Prosecutor’s Office accusing Batbold of using proxies to siphon hundreds of millions of dollars from local mining companies.
Batbold’s lawyer said that there is no truth to the accusations and the cases against him are inspired by political enemies in Mongolia. Furthermore, he said, Mongolia’s prosecutor does not have the authority to bring the case on behalf of the government agencies and entities named in the suit. “Mr. Batbold was an object of coordinated media and legal attacks orchestrated by his political opponent through shady figures,” he said.
While Mongolian politicians agree that the accusations against Batbold may be politically motivated, they also agree that the case raises questions about what has become of billions of dollars in mineral wealth generated over the past decade and a half by a mining boom, as Australian, Canadian and Chinese companies have moved in to develop lucrative deposits of coal, silver, gold and copper.
The Pandora Papers made headlines throughout Mongolia, with the revelations going viral on social media. The country’s two major political parties, the ruling Mongolian People’s Party and the opposing Democratic Party, however, have thus far remained silent on the issue.
According to a report by the World Bank, Mongolia has produced $28 billion worth of mineral outputs since 2004. Of this, taxes and royalties amounted to nearly $9 billion in the past 15 years, while the government has borrowed $8.7 billion, mostly by leveraging its mineral revenue. Of that amount, as of 2019, $200 million remained saved as deposits in the Stabilization Fund and the Future Heritage Fund.
“Mongolia has not only consumed almost all its mineral outputs, but has also borrowed heavily against them, bequeathing negative wealth to the next generation,” the report says. “Mongolia risks resembling a ‘resource curse’ economy in a few years.”
The term “resource curse” was first used by economist Richard Auty to describe how an abundance of natural resources can lead to underdevelopment. It is an all-too- familiar story: A country strikes it rich, but the new avalanche of wealth poisons the political process, corrupts its institutions, distorts the economy and even creates pressures for secession.
For every Botswana, which after the discovery of diamonds has one of Africa’s highest per capita incomes, or Qatar, where the discovery of gas in 1995 has helped to boost gross domestic product to $175 billion from $8 billion, there is a Nigeria or a Sierra Leone, where mineral reserves have been directly linked to dysfunction and even conflict.
Mongolia’s mining boom was the lucky — or unlucky — result of events far beyond its borders. In 2010, Australia’s coal mines suffered their worst floods in decades, halting coal exports to China. Chinese iron ore smelters began to increase coal imports from their northern neighbor. In 2011, Mongolia’s GDP surged 17% in 12 months, primarily due to a coal deposit at Tavan Tolgoi, located 240 km from the Chinese border, and a nearby copper deposit at Oyu Tolgoi.
Today, mining accounts for nearly one-quarter of GDP, and mineral exports represent 26% of fiscal revenue, up from 10% in the early 2000s. Surveys have revealed deposits of coal, copper, gold, rare-earth minerals and uranium worth an estimated $2.75 trillion. For a country with a population of 3.3 million, that is enough to make everyone a near millionaire.
But due to unequal access to opportunities, the boom-bust cycle, and corruption, most Mongolians have been unable to benefit. The country’s poverty rate of 28% and wealth gap remain unchanged from early 2012.
Paul Collier, who studies resource economics at Oxford University’s Blavatnik School of Government, says that governance is the key to avoiding the “resource curse.” Countries that already have strong governance in place when they strike it rich tend to use any windfall wisely, such as what happened with Norway after the discovery of offshore oil. But an influx of resource wealth can be particularly toxic for countries without strong established governance, like Nigeria.
“The real tragedy, however, is countries where the government looks to be strong but can’t handle the stress of all the money,” Collier said. “This is a real tragedy because it can bring an otherwise healthy country down.”
Mongolians are acutely aware that their resource patrimony is in the process of being squandered. What to do about it remains elusive, and the anger has been manipulated into an effective political instrument by some of the most egregious offenders.
The country’s new president, Khurelsukh Ukhnaa, was elected in June after he ran on the slogan, “Mongolia is the owner of its resources,” and showered pensioners with cash from the state budget that he insisted was not an attempt to buy votes.
Beginning last year, when he was prime minister, Khurelsukh paid off 695 billion tugrik ($244 million) worth of pensioners’ debts by selling bonds backed by state-owned silver deposits. Then, a month before the election, the cabinet, under the control of Khurelsukh’s party, transferred 216 billion tugrik to debt-free pensioners. Again the money came from bonds backed by state silver deposits.
Patronage politics have become routine in Mongolia, where elections have turned into cash giveaways and the country has very little to show for the fire hose of wealth that has been largely consumed by political handouts and corruption.
Pensioners, as aptly demonstrated by the 2021 election, are the key to political power. Of Mongolia’s retirees, 75% vote, compared to 50% of 18- to 25-year-olds. In June, Khurelsukh won 68% of the vote.
“The political parties don’t need smart voters who are equipped with critical thinking,” said Gerelt-Od Erdenebileg, a political scientist at Mongolian National University of Education. “They need poor voters that are easily manipulated [with cash] when they need to be.”
Andrei Mikhnev, country manager at the World Bank, cites the bank’s estimate that for every dollar of mineral wealth that has been generated during the past 20 years, Mongolia has consumed 99 cents and saved a mere 1 cent.
Buying elections wholesale began in 2008, when the MPP made a campaign promise to pay $700 to each citizen from mining revenues. The following day, its opponents, the Democratic Party, pledged $1,000. The amount would have totaled 60% of the country’s entire GDP at the time.
The MPP won and as a result in 2011 the government borrowed $350 million from the Aluminum Corp. of China, better known as Chalco, with the aim of fulfilling its election promise, and repaying the loan with coal. But when the world price of coal subsequently fell by nearly 50%, Erdenes Tavan Tolgoi, a state-owned enterprise that owns the coal deposit, struggled to repay the loan, taking six years to make good on it.
“Mongolia didn’t spend mining revenue that was already gained,” said Dorjdari Namkhaijantsan, country coordinator of the advocacy group Natural Resource Governance Institute. “The country borrowed money based on the belief that it would gain that revenue from mining in the future.”
The spending got so outrageous that in 2012, parliament amended the election law, prohibiting political parties from directly paying voters and promising cash. But there was a loophole: The law only prohibited promising cash, it did not prohibit promises to repay loans or offer dividends from mining companies. In 2017, presidential election winner Battulga Khaltmaa, whose term expired in June 2021, vowed to pay off all citizens’ debts with revenues from the Tavan Tolgoi coal mine.
This was followed three years later by Khurelsukh’s bid to pay pensioners’ debts when he was prime minister. In addition to winning the presidency this year, the pledge aided Khurelsukh and his Mongolian People’s Party to a landslide parliamentary victory in 2020, winning 62 of the body’s 76 seats.
A month before that election, Erdenes Tavan Tolgoi paid 70,000 to 100,000 tugrik to each citizen, calling it a “dividend.” The payments have left the company unable to make basic investments, and it has had to borrow to complete an unfinished railway line, power plant and coal washing plant.
Off the grid
While Mongolia’s GDP has increased at a rapid clip — averaging a 6.5% increase per year between 2010 and 2020, according to World Bank statistics — most residents do not feel like they are experiencing an economic boom. Instead, they are struggling to keep up with an endless cycle of price increases.
“In Ulaanbaatar, you can’t live unless you have a side income from your full-time job,” said Sansartuya Bazarsad, a mother of two and a botanist at a National Park. She and her husband have a monthly salary of 1.3 million tugrik. Thanks to their herder parents, they do not have to worry about meat or wood to burn.
Such rapid economic growth initially led to a sharp decline in poverty from 38.7% in 2010 to 27.4% in 2012, though the rate remains at 28.4%, according to the latest survey by the World Bank, in 2018.
In the past 10 years, lifestyles in the capital have greatly changed. Coffee shops, Pilates studios, shopping malls, high-end international hotels and specialty shops targeting the environmentally conscious and vegans have sprung up.
The Bazarsads moved to Ulaanbaatar nine years ago and bought their house and land for roughly $16,000 in the ger district, where residents live in traditional yurts surrounded by wooden fences, and where homes are not connected to the city’s central heating and sewer systems. Residents get water from wells and burn wood and coal to heat their homes. Some 1.5 million people in Mongolia, roughly half the population, still live in these tents.
Her family spends $385 of their monthly earnings repaying loans, leaving $70 for necessities at the end of the month. Saruultuya, their daughter, was born with a cardiac condition, so they receive 190,000 tugrik a month for her treatment. Sansartuya also sells Russian beauty products on the side.
With a total monthly income of 1.6 million tugrik, the family is in the top 25% in terms of household income.
Mongolians characterize their middle class as having a mortgage and a 10-year-old secondhand Prius from Japan but no savings. If a family member is diagnosed with cancer or a similarly serious disease, they say they must sell everything to pay for medical care. According to national statistics from 2018, only 23.7% of the population had a savings account.
“I write down every expense in a notebook to make our finances wise,” Sansartuya said. She and her husband bought a 10-year-old Prius a few years back but needed to use the car as collateral for a loan to pay for their daughter’s cardiac surgery.
The only thing Sansartuya wishes is that banks could give her lower interest rates. “Almost 40% of my loan payments only cover interest,” she said. “It would be such a big support for us if the credit interest rate were to drop.”
Jargal Lodoi, 51, is a herder who has moved from the steppes to the outskirts of Ulaanbaatar. The resource boom has raised the costs of traditional herding, which used to be the occupation of the majority of Mongolians. He is also a climate-change migrant, saying the pastureland his goats used to flourish on has dried up. He used to have almost 1,000 goats but last fall sold 550 as meat. He now keeps only 300.
Cashmere is Mongolia’s third-largest export, after copper and gold. Its 30 million goats in 2020 produced 215 tons of dehaired cashmere, and the country provides 40% of the world’s luxury cashmere. The industry employs over 100,000 people, far more than the mining industry.
Jargal moved near the city because there is no more grass for animals to feed on in his native Bayan-Undur, 200 km from Ulaanbaatar. Jargal and his wife, Delgermaa, have two sons, both of whom live in Ulaanbaatar. They bought a two-bedroom apartment in the capital for their sons, using their cashmere revenue.
“Thanks to cashmere, we are able to live a decent life,” Jargal said. “However, it is better for us herders to have fewer but more profitable animals. But I have no idea where to find such extremely productive animals. I have no such knowledge in my veterinary livestock in Bayan-Undur.”
Chronicle of a bust foretold
What is remarkable is how aware Mongolia’s leaders were of the literature on avoiding the resource curse and how anxious they were not to repeat the past mistakes of previous resource-cursed countries.
“Mongolia cannot be Qatar but it will be Niger if we fail to implement vice revenue management,” current Prime Minister Oyun-Erdene Luvsannamsrai said in 2015. “At this moment Mongolia seems to be Niger.”
In the early 2010s, the government established a revenue management strategy and national development plans, along with a budget stability fund meant to smooth budget volatility due to seesawing commodity prices. In 2011 the government started to save some of the revenue in stabilization and heritage funds.
However, funds and plans were not enforced, and the budget continued to be used mainly for politically popular spending. The plans have largely failed. “Although it is natural to see some volatility in resource-dependent countries, macroeconomic volatility in Mongolia is higher compared to other commodity exporters,” World Bank country manager Mikhnev told Nikkei Asia.
The root of the problem may not be economic but rather political. Difficult decisions come up against opposition from an entrenched political class that has done uniquely well during the boom, and few Mongolian politicians are untouched by some sort of scandal.
The best-known is the case against Batbold. Mongolia’s Metropolitan Prosecutor’s Office, along with two state companies and a government agency, launched a civil case in October 2020 that accuses the former prime minister of using several offshore shell companies to siphon hundreds of million dollars from mining operations. The Mongolian government, according to a filing in New York State Supreme Court last November, sought “to recover losses suffered as a result of illegal and fraudulent acts in connection with two of Mongolia’s most prized natural resources, the Erdenet copper mine and the Oyu Tolgoi copper-gold mine.” The latter is 66% owned by Turquoise Hill Resources (formerly Ivanhoe Mines), whose largest investor currently is Anglo-Australian mining giant Rio Tinto.
Using a team of international lawyers, the Mongolian prosecutors have secured injunctions from courts in England, Hong Kong, Jersey and Singapore against Batbold and people named as his proxies in court documents for assets in excess of $70 million, according to the claimant’s attorneys. In addition, they sought an injunction in a New York State Supreme Court filing last November, withdrawing it in January after the defendants agreed not to sell or transfer two condominiums without notifying the plaintiffs.
In written comments sent to Nikkei, the lawyer representing Batbold insisted the accusations were “groundless and false,” part of an organized operation designed to “damage the reputation of Mongolian People’s Party, its leadership, and especially against S.Batbold.”
The lawyer said some state companies named as claimants in the original civil suit have denied they gave consent to their involvement in the case, adding that Metropolitan Prosecutor’s Office “violated the law and exceeded his authority” in launching the suit. A spokesperson for the prosecutor’s office contacted on Oct 12 said the case “is still under investigation” but declined to give further details.
Batbold’s representative added that the New York court declined to freeze Batbold’s assets in the U.S., implying the case lacked sufficient merit. Lawyers working for the Mongolian prosecutor’s office said that the agreement by defendants not to sell or transfer the property pending resolution of the case in Mongolian courts made an injunction unnecessary.
Opposition politicians say the case against Batbold may indeed be politically inspired but that the information the case has brought to light offers a sobering view of Mongolia’s political class. Munkhdul Badral, secretary of the National Labor Party, a third force in parliament, asserted that the legal efforts against Batbold were championed by Battulga Khaltmaa, the former president and Batbold’s political rival. “I have no doubt that Mongolian politicians use tax havens and proxies to hide their illicit assets abroad,” Munkhdul said. “But this might be the first instance where the Mongolian government has used foreign experts and courts to pursue such a case.
“I doubt, though, that the current government and ruling party has the enthusiasm to push through this case” as Battulga is now out of office, he said.
Said Rio Tinto: “We operate in line with local and international laws and regulations, and our values. There is no claim or court case in New York in relation to Oyu Tolgoi’s Investment Agreement or Underground Development Plan (UDP). Neither Rio Tinto nor Oyu Tolgoi LLC have been named as parties in the case and these claims do not allege any improper conduct by Rio Tinto or Oyu Tolgoi LLC.”
Mongolian lawmakers in 2018 sought to close some loopholes for corruption by establishing a beneficial ownership disclosure law. It requires mining companies to register their beneficial owners with the National Registration Authority and the National Intelligence Authority.
However, the law has been criticized for lacking teeth. “There is no punishment if companies do not register their beneficial owner,” Erdenechimeg Dashdorj, extractive sector program manager of Open Society Forum in Ulaanbaatar, told Nikkei. She said that since approval in 2018, only 37% of mining companies have registered their beneficial owners. “The law enforcement still has room for improvement,” she added.
Taking action against abuses has met with political pushback from established interests in government. For example, when then-Prime Minister Altankhuyag Norov resolved in 2013 to investigate cost overruns at Oyu Tolgoi, his own party’s members in parliament suddenly voted to dismiss him.
“Altankhuyag’s cabinet was an obstacle for senior officials whose interests were to benefit from several mining deals,” said Temuujin Khishigdemberel, a former parliament member who was minister of justice in Altankhuyag’s cabinet. “The cabinet didn’t make decisions as the officials asked. I can’t deny that there was a corrupt and powerful system that emerged from mining money, and that it is powerful enough to change the fate of the entire government,” Temuujin said.
The next prime minister, Saikhanbileg Chimed, forgave the cost overrun and signed an additional contract financing the second stage of the project, which is an underground mining construction development for $5.3 billion.
“The Oyu Tolgoi Underground Development and Financing Plan, signed in 2015, contained strict clauses requiring the Mongolian government to accept the excess costs incurred in the initial open-pit mine. The government also had to accept that there were no outstanding issues related to these costs, effectively shutting down any discussions about accountability. Sadly, there was no language in the agreement regarding the prevention of further cost overruns, or how to deal with them if they did occur,” said Bayasgalan Enkhbaatar, a member of the board of directors at Oyu Tolgoi since November 2020. Ms. Bayasgalan represents the government’s interests in the Oyu Tolgoi project, of which it owns 34%.
That episode was followed by another, ongoing, confrontation with Rio Tinto. Last December, the company notified the government that the underground mine development project will overshoot original cost estimates by $1.5 billion and be delayed by two years.
The cost overruns represent substantial damage to the government’s interest in the project. Bayasgalan cited calculations showing that the government cannot expect to start receiving dividends from its 34% ownership of the mine in 2032 as originally expected. Rather, due to the delay and the jump in costs, the government is concerned it may not receive any dividend before the mine’s reserves are depleted.
Rio Tinto has solely financed the construction and operation of the mine, and has provided Mongolia with a loan to finance its 34% ownership of the mine. The loan specifies that it needs to be repaid in full before Mongolia can receive any dividend from the Oyu Tolgoi mine. The annual interest rate of the loan is Libor plus 6.5%.
Seven years after Oyu Tolgoi started production, the balance of the outstanding loan payment showed that Mongolia owes $2.2 billion to Rio. Any increase in fixed costs will make it harder for Mongolia to receive any dividends.
Rio argues that the Oyu Tolgoi project pays annually around $300 million in taxes to the Mongolian government from its $1 billion sales income.
In April 2018, Mongolia’s Independent Authority Against Corruption arrested two former prime ministers as part of an investigation into suspected misuse of power related to negotiations over the Oyu Tolgoi mine. Bayar Sanj, prime minister when the original 2009 investment deal was signed, and Saikhanbileg Chimed, prime minister when the expansion agreement was inked in 2015, were both detained. Saikhanbileg was later released from detention for medical reasons but flew to the U.S., where he remains. Bayar was sentenced in 2020 to five years in prison.
Said Rio Tinto, “As with all of the Oyu Tolgoi agreements, we negotiated the UDP in good faith and always acted in accordance with Mongolian and international laws and standards.”
A new dawn?
The scandals have emboldened a new generation of Mongolian politicians who think the situation can be salvaged by getting rid of the previous generation.
Bulgantuya Khurelbaatar, former vice finance minister before she was elected to parliament in 2020, is the face of this bright young generation that says it is fed up with the patronage politics of previous administrations. With her reputation as a corruption fighter, she says Mongolia needs better regulations and better laws to impose transparency, budget discipline and improve the governance of state-owned companies.
“We must not repeat past mistakes, such as increasing spending instead of being optimistic about the next [commodity] supercycle. We also need much more public accountability. I want to encourage people to at least monitor the policies and budgets of the sector they work in” said Bulgantuya.
“We have learned a lot from the growth and depreciation of the mining sector over the years, but we are also aware of the risks. If we get involved in too many giant mining projects, like Erdenes Tavan Tolgoi, and do not learn lessons from the early days, such as the importance of reducing our dependence on mining, we will face much more hardship than we already have,” she added.
Bulgantuya explained that the Future Heritage Fund, established in 2017, was approved to ensure some savings for future generations. The laws surrounding the fund prohibit any withdrawals, apart from management fees, until 2030. For Bulgantuya’s generation, the fund acts as a small but significant symbol of hope for the future.
Armenia Zangezur Copper Molybdenum Combine co-owner: This is first step in broader investment vision
“Industrial Company” and the Government of Armenia (GOA) are happy to announce that the Company has granted Armenia and the GOA has accepted a 25% share of the Company, Armenian News-NEWS.am has learned from the Prime Minister’s Office.
“Industrial Company” holds 60% of the shares of the Zangezur Copper Molybdenum Combine (ZCMC). The granted 25% shares constitute 15% of the equity of ZCMC that will consequently belong to the Armenia.
“Industrial Company” is a fully owned subsidiary of “Georpromining Armenia.” The company has acquired 60% of ZCMC on 30 September 2021.
Roman Trotsenko, Geopromining Board of Directors Member, commented on the transaction. “Geopromining has been operating in Armenia for many years, and we have been a reliable partner for the Republic of Armenia and Armenians for almost 2 decades. We have gladly embraced the opportunity to further expand our business in Armenia and acquire majority share at ZCMC, while offering the Republic of Armenia 15% equity participation. We intend to expand cooperation with the Government of Armenia and this is the first step in a broader investment vision. The Republic of Armenia, the people and our shareholders will benefit from all this, as well as new opportunities will open up for the Armenian economy. We also have a goal to start the construction of a new copper smelter in Armenia in the coming years.” Suren Papikyan, Deputy Prime Minister of Armenia commented: “We would like to thank “Industrial Company” for offering the people of Armenia an opportunity to own a share in one of the largest industrial assets of the country. This practice that is common in mining worldwide can be a demonstration for the people of Armenia of how the notion of stakeholder capitalism and shared values work in practice. We are confident that this joint project will be a start for a better governed, more inclusive and sustainable mining sector in Armenia, that will benefit the country and its investors”.
Zinc junior making headway in Spain
Variscan Mines’ underground drilling within the historical San Jose mine in Spain has confirmed the discovery of multiple stacked lenses of high-grade zinc mineralisation in the South West Zone and Los Caracoles Trend, separate from previously reported results
Euro Manganese’s new plant for its Czech project
For the Chvaletice Manganese Project in the Czech Republic the Changsha Research Institute for Mining and Metallurgy (CRIMM) will build the plant, which is a seven-times scale-up of the pilot plant Euro Manganese EMN operated in 2018.
The system, made up of manually-operated interconnected modules, can be used either as a circuit or as stand-alone components. The plant is designed to fully replicate the entire flowsheet proposed in the project’s 2019 preliminary economic assessment. It will produce around 32 kilograms of high-purity electrolytic manganese metal (HPEMM) each day. The HPEMM can then be converted into around 100 kilograms per day of dry crystalline high-purity manganese sulphate monohydrate (HPMSM), to serve the lithium-ion battery industry as well as producers of specialty steel and aluminium alloys. The order for the plant has been placed, with procurement and fabrication to start immediately. Delivery is expected in mid-2021.
Euro Manganese President and CEO Marco Romero says offtake testing will begin as soon as the plant is up and running.
“Once commissioned, we expect to begin the test phase of the supply chain qualification process for our high-purity manganese products with multiple potential customer,” Marco said.
“We have also continued to make steady progress on the regulatory and permitting front, following our filing of the Environmental Impact Assessment (EIA) notification in late June,” he added.
Around 55 per cent of the plant’s production of HPEMM and HPMSM has already been snapped up by five prospective customers for testing.
Almost all project permitting, including environmental approvals, has been ticked off. The only remaining hurdle is the building permit required for the demonstration plant. The company has also acquired three additional parcels of land to improve rail connectivity and streamline the plant’s layout and operation. Once the testing phase of the HPEMM and HPMSM is complete, Euro Manganese is hoping to lock in long-term commercial offtake arrangements with European chemical, battery and automotive companies. The company has also enlisted the services of U.K.-based investor relations company, The Armchair Trader, to help target the institutional investment community in the U.K., Europe and beyond.
Mining in Amulsar and territory conflict between Armenia and Azerbaijan
A world-renowned conflict resolution, social engagement and international development expert John Harker writes about Armenia-Azerbaijan conflict and mining in Amulsar:
The supposed reason for war between these two South Caucasus countries was stated more than once by the President of Azerbaijan, Ilham Aliyev. He said that “Armenia and its military forces need to leave our territory.” The territory in question, referred to variously as Nagorno-Karabakh or Artsakh, has been a bone of contention between Azerbaijan and Armenia for a very long time. And for at least some of that time, recent years anyway, the Aliyev family which “rules” Azerbaijan has looked for ways to avoid the people of the country finding the means to alter the status quo, unbridled Aliyev rule. Perhaps the Nagorno-Karabakh issue was fueled by their fear of democratization, as much as by a sense of commitment to “territorial integrity”? But territorial integrity is a fundamental aspect of our “international system,” and cannot be treated lightly, though nor can another fundamental, the right of people, and peoples, to enjoy universally recognized rights, one being “self-determination.”
However, to the company’s regret, very soon after, government support for the project was influenced by protest, and the project was harassed by “blockades,” which were declared illegal but not cleared away, and the drive towards production, and the benefits it could bring, was halted.
As the blockades continued, and the company focused on minimal work necessary to avoid degradation of facilities, the panel was disbanded, and its members turned to other pre-occupations. And the company and government continued to talk and interact. I assume that is still going on, and if it is, I hope that, on both sides of any dialogue, there is absolute awareness that the state of relations between Armenia and Azerbaijan is a driver of decision. That is not at all to say that environmental or other concerns should be set aside; in fact, they can, in my view, play a positive part in helping bring Amulsar into production quickly. And with production comes something absolutely imperative for Armenia: financial reward, now seen as essential as it responds to Azeri attacks. Azerbaijan is an oil-producer. Armenia is not, and it should know very well that Amulsar would bring into its coffers serious revenues when these are absolutely needed. And it seems to me that only Amulsar is a pending source of new wealth for Armenia, and Armenians. On the matter of “wealth,” I remember that we panelists met with Lydian’s Board, in January 2018, and one of the Lydian Directors surprised his colleagues by suggesting that they should start thinking of how to share the wealth with Armenia when the price of gold reaches $1,700 per ounce. Well, not much later, the signs began to appear that Amulsar might not soon be going into production, whatever the price of gold. And that price has climbed well past the $1,700 viewed by some Lydian directors as beyond reach. With the onset of warfare between Armenians and Azeris, I found myself wondering if Armenians understood that warfare is a very expensive business, as well as a dangerous one.
And these are people who live, have always lived, in a dangerous neighborhood, one made more volatile not just by Azerbaijan, but by regional powers quite possibly looking to re-draw not boundaries and borders but bounds, the bounds of what is possible or achievable in expressing and furthering interests. I will admit that when the project was first “stalled” I felt that Armenians were the losers, denied well-rewarded full and freely chosen employment, which would not threaten the environment of surrounding communities as real, high-tech, water monitoring would be in place; Amulsar had the potential to strengthen the state’s capacity to meet the emerging needs of Armenians across the country. Needs, for example, such as the education, training, and re-skilling, of young people so they can help Armenia thrive in the digitized global economy. And necessary state capacity certainly includes the capacity for defense.
So as the reality of war sank in, I hoped that Armenia would act decisively and do what it needed to get the Amulsar project into production, and into necessary wealth-generation for Armenia and Armenians. Without resources, it was hard to see how the needs of Armenians, whether in Armenia proper or Artsakh itself, can possibly be met. But the gates of Amulsar remained blockaded, and this during a time of “martial law,” and terror being unleashed on Artsakh. The blockades were not limited to Amulsar, of course, and Prime Minister Pashinyan, in explaining to the nation why he had signed the “peace agreement,” said there were cases when a regiment had to be transported for combat purposes but the residents of the given settlement had blocked the gates of the military base and did not allow the vehicles to exit. He said there were “dozens of cases like this”! Meanwhile, families in Artsakh were under attack. Including the children.
Yes, it has been both humbling and encouraging to witness the inflow of donations to the Hayastan All Armenian Fund to cover the immediate needs of children; donations have come from all over, but the state needs to be able to react also, and wealth from the Amulsar project would have been very useful. And still will be IF production does get rolling, energized by the state of emergency which Armenia now finds itself in. And here it is worth keeping in mind that, as it contends with the consequences of war, Armenia is also trying to deal with the global pandemic, Covid-19. Mid-October saw the greatest daily number of new cases identified in Armenia since the virus arrived. Not long after that starting point, I was privileged to participate in a webinar on Covid-19, and how to survive, revive and thrive through and after it, and it was hosted by an Armenian living in Moscow, and his partner, an Armenian living in Boston. A classic picture of the Armenian reality. While I was still active on the advisory panel, a “Canadian-Armenian” friend drew my attention to an undertaking which she thought had great promise for the country. She was referring to the work being done by Ruben Vardanyan, host of the webinar I just mentioned, and Nune Alekyan, Armenians both, one living in Moscow, the other in London. They had embarked on producing a major think-piece about the Future, or Futures, of Armenia, and their undertaking carried the title “Cross-roads.” Armenia is at a crossroads in every sense of the term. I agreed to help, and was pleased to review their work, and offer my own perceptions, which of course came not from my limited knowledge of Armenia, but my life-long engagement with conflict and peace-building, including the roles of diasporas in both. And the roles of extractive companies in many situations. Over many years, I had seen the good and the bad, and felt that I could tell the difference!
And in Armenia, I remain convinced that the Amulsar project was of the “good,” and would remain so, under careful scrutiny, if driven by local people who wanted to make a difference, rather than just wanting to make a profit. Nowadays, all of this is referred to as “responsible mining,” and thanks to the World Economic Forum, more and more it is seen as a pioneer in “stakeholder capitalism,” where the interests of stakeholders as diverse as plant workers, village elders, and investment fund managers, are advocated, discussed, and, where possible, balanced and met.
Two years ago, it looked likely that the Amulsar project could become a “flagship” for this kind of responsible mining, and would go on to produce the wealth that Armenia so clearly needs. And it could do this without putting in danger the people, the plants, and the animals which make up the biosphere of this land-locked country, one with its people everywhere, from Glendale, California to Moscow, from London to Tehran. And the strength this gives would play in ensuring that its people have their rights respected.
One final observation relates to those rights. Among them is the right to freedom of religion, which many people, in peaceable regions, tend to take for granted. In the South Caucasus, two conflicting states have populations which strongly identify with one religion; Armenia is Christian, Azerbaijan is Moslem. Earlier in life, I played a small role in the middle of the Sudanese civil war. At one point, I was held hostage for a short time, and my captor, or host, said he was inclined to shoot me there and then. “I don’t think you are a good Christian”, he said, “I think you are a Moslem and I should shoot you.” I responded by saying that I certainly was not a very good Christian, more of a lapsed one, and I was certainly not a Moslem, but, I said, as firmly as I could, if I was a Moslem, that would not give you a right to kill me. We can’t kill each other just because we have different faiths. That seemed to make a difference, and before long, the ordeal was over. I was free to go.
Closure of Nornickel’s plant, Barents region’s biggest air polluter
Oligarch and Nornickel CEO Vladimir Potanin first announced the closure of the plant last fall, a move affecting about 800 workers. With just six weeks before the shutdown, only two workers have not chosen any of the options offered by the company.
Damage to human health, the environment and cross-border relations with Norway have made the town of Nikel in the Murmansk region infamous much further than its acid rain has damaged the fragile taiga forest on the Kola Peninsula and northern Scandinavia. Tens of thousands of tons of sulfur dioxide and other hazardous gases have annually been emitted from the chimneys of Nornickel’s factory in the town named after the metal produced there.
By Dec. 25, the last workers involved in smelting production will be transferred to new jobs. After that, according to the company’s human resources and social policy director Anna Krygina, the remaining workers will work in customer service and taking apart equipment. This work is scheduled to continue to the end of 2021. In an interview with the Nornickel-sponsored TV21 television channel, Krygina said many of the workers will retire, while many others will fill vacancies at Nornickel’s subsidiary Kola Mining and Metallurgical Combine. The company operates mines in Zapolyarny while the production now shutting down in Nikel will partly be transferred to the larger factory complex in Monchegorsk.
“Today we are talking about plans for the workers. Now, the documentation and implementation of all these plans are starting. So we still have two months of hard work,” Krygina said in the interview.
Nikel is a typical ‘monogorod,’ a town whose economy centers around a single major company or industry. Many locals fear their town is doomed, but officials have made promises to compensate the job losses. Transitions to other industries, like tourism, have been named as a priority by both Nornickel and regional authorities. Successful or not, many of the current employees at the plant will move elsewhere. The Barents Observer has previously reported on unsold apartments in Nikel on the market for 100,000 rubles ($1,300), or about as much as a new iPhone. The smoke will be gone by Christmas Day, but the factory will still dominate the town’s skyline. Production machinery and equipment are to be transferred to other divisions of Nornickel in the Murmansk region and on the Taimyr Peninsula in Siberia. The buildings will be demolished by 2025 and will be followed by a two-year land reclamation period. By 2027, the smelter that was erected a few years after World War II will be history.
In the late 1980s and early 1990s, the smelter received ore from Norilsk which contained much more sulfur than from the local mines in Nikel and Zapolyarny. At their peak, annual emissions reached up to 400,000 tons of sulfur dioxide (SO2). In the last two decades, SO2 emissions have been reduced to less than 90,000 tons per year. The smoke brings additional tons of heavy metals into the air which also spread across the border to Norway, where the maximum allowed SO2 limits for air quality have notoriously been violated.
New investments for Sweden’s mining industry transformation
In early November, Sweden’s state-owned mining company LKAB announced it had created the world’s first “fossil-free” iron ore pellets, with biofuel taking the place of oil and coal during the heating process.
LKAB said it would invest up to 400 billion Swedish kronor ($46.6 billion) to “achieve net-zero carbon emissions from its own processes and products by 2045”.
LKAB has committed to investing hundreds of billions of kronor to go carbon-neutral by 2045, described as potentially the largest industrial investment ever in the Nordic country. Investments of between 10 and 20 billion kronor would be made yearly over a period of 15 to 20 years, the company said.
“This is the biggest transformation in the company’s 130-year history and could end up being the largest industrial investment ever made in Sweden,” Jan Moström, president and CEO of LKAB, said in a statement.
The strategy to reach net-zero emissions would focus on three branches, one being a new standard for mining and another the use of fossil-free technology to extract strategic minerals from today’s mining waste. Lastly the company would leverage green energy, likely using hydrogen, to produce another form of iron known as “sponge iron” rather than traditional iron ore pellets, greatly reducing emissions during the steel-making process.
“In switching from iron ore pellets to carbon-free sponge iron we are taking an important step forward in the value chain, increasing the value of our products and at the same time giving our customers direct access to carbon-free iron,” Moström said.
The development of fossil-free “sponge iron” is part of a joint project between LKAB, steelmaker SSAB and state-owned utility Vattenfall with the aim of developing a fossil-free process for producing steel, which relies on the combination of iron ore and coal. According to LKAB, their Swedish operations currently produce 700,000 tonnes of carbon emissions a year, or about four percent of Sweden’s industrial emissions, making it Sweden’s fourth largest emitter. The mining giant added that global steel and iron production today accounted for about seven percent of the world’s emissions, and that widespread use of “sponge iron” could greatly reduce global emissions. LKAB also said the transition would mean the creation of 3,000 jobs but with the steel market “forecasted to grow by 50 percent by the year 2050”, LKAB also expected their carbon-free offering would also greatly increase its revenues. During the transition, LKAB would continue to sell “iron ore pellets in parallel with developing carbon-free sponge iron”, the company said. During a press conference, Moström however also pointed to a number of challenges that had to be overcome to achieve the transition, including the need for technological developments and large-scale production of green energy to power facilities.
Isadora Wronski, head of Greenpeace Sweden, said they welcomed LKAB’s “ambition to remove fossil energy from their processes”. but added that the aim of going fossil-free was “not enough.”
“Industries first and foremost need to reduce their use of resources… and the energy used needs to be sustainable, eliminating any plans for large-scale bio energy use,” Wronski said in an emailed statement to AFP.
Turkey decreased mining industry exports
Over the past 12 months, Turkey has exported extractive industry products worth $4.075 billion.
Exports of extractive industry products from Turkey to world markets decreased by 7.3 percent from January through September 2020, compared to the same period last year, amounting to $2.966 billion, the Turkish Trade Ministry told Trend. As noted in the department, the export of extractive industry products from Turkey is 2.7 percent of the country’s total exports in January-June this year.
“In September 2020, Turkey exported extractive industry products to world markets in the amount of $421.003 million, which is 19.1 percent more than in the same month in 2019,” the ministry said.
Exports of extractive industry products from Turkey in September 2020 accounted for 2.8 percent of the country’s total exports.
Mining profit in Serbia above clean air
Arsenic pollution during August in Serbian city Bor reached 323 times higher level, which suggests that the profit won the victory over ecology, according to ETF professor Dr. Slobodan Vukosavić. Last year, Bor was at the top of the cities with the most polluted air, so the protests of citizens continued on the streets, and recently the city administration filed a criminal complaint against Zijin Bor Koper in the Municipal Public Prosecutor’s Office. The mayor of Bor, Aleksandar Milikić, did not want to reveal the details of the report for ours. Two days after the criminal complaint was filed by the city administration, the company Zijin issued a statement stating that they were stopping the operation of the smelter and starting the overhaul that was otherwise planned for November.
According to the Center for Investigative Journalism, the Commercial Court in Zaječar passed a verdict blaming the company Zijin Bor Koper, the successor of RTV Bor, and one of its managers for air pollution in Bor. Because in a couple of days in 2019 and 2020, the concentration of sulfur dioxide was eight times higher than allowed, they are obliged to pay 450,000 dinars. Since both parties have filed an appeal, both the Chinese company and the Basic Public Prosecutor’s Office in Zaječar, which is conducting this procedure upon the report of the Ministry of Ecology, the final word will be given by the Commercial Court in Belgrade.
Filip Radović, the director of the Environmental Protection Agency, did not want to talk about the worrying quality of the Bor air.
While the authorities avoid talking about this problem, the data show that the concentrations of sulfur dioxide repeatedly exceeded the allowed 350 micrograms. For example, on August 28, a record of 2,285 micrograms was recorded.
Professor at the Faculty of Electrical Engineering, Dr. Slobodan Vukosavić, warns that the level of suspended particles measured in Serbian cities has a negative impact on human health, reduces resistance to respiratory infections and reduces cognitive intelligence.
Only a couple of years ago, the media reported that the situation in Bor was better, because RTB “Bor” put into operation a new copper smelter. The latest news about criminal charges, protests, show that this is not the case.
The solution for better air quality in Serbia is in the money – clean air in euros costs us around 2.4 billion. So much needs to be invested to correct the consequences that the prolonged transition of the economy, poor business operations of state-owned companies and low level of awareness have left on the environment. And most investments are expected from the state because the biggest polluters are state-owned companies – EPS, RTB “Bor”, “Azotara”, “Petrohemija”, city heating plants… And as the cold weather follows, this invisible problem will become more visible.
– The most important cause of air pollution is excessive emission of suspended particles. The biggest polluters are small heating plants and individual furnaces that use outdated equipment and fuel of poorer quality. Air quality is additionally endangered during the winter months due to the influence of temperature inversion and low temperatures, which can force weaker standing households to burn everything that can burn – notes Dr. Vukosavić.
Our interlocutor adds that environmental pollution is closely related to other problems and often indicates an unfair distribution.
– Wild landfills and excessive emissions are less often the result of negligence and more often the desire to make money at the expense of the environment. Stakeholders who profit from violations of the regulations use their media influence to cover up the real causes of pollution. The ignorance, passivity and pliability of the population also contribute to the problem. Equally harmful are the reckless demands to close all industrial plants. Effective defense is a vigilant and informed community ready to invest time and effort to protect its air, water and land in a sustainable way, rejecting the offered narratives and relying on their own judgment – our interlocutor concludes.