No Disclosure of Actual Owners of Mines: State Commission for the Protection of Economic Competition

The State Commission for the Protection of Economic Competition has stated in its study concerning mines that the process of disclosing the actual owners of metallic mines has not served its purpose, and a number of companies have hidden their owners by exploiting gaps in the law. This is mentioned in the report of the commission, which was published on January 22.

The state has failed to identify the owners of mines since 2019, when the government, within the framework of the Extractive Industries Transparency Initiative, began requiring mining companies to submit declarations regarding their actual owners. This is intended to inform who owns the mining companies. However, the commission declared in its study that "a number of resource-utilizing companies have concealed their actual owners when completing the declarations," without clarifying which companies are referred to. Furthermore, the commission reported that it was not possible to ascertain the level of concentration in the mining industry: "The first attempt to disclose the actual owners in Armenia indicates that the number of actual owners disclosed in the declarations submitted by resource-utilizing companies does not exceed 9. Often, critical information such as the date of becoming an actual owner, data on intermediary legal entities, and their registration addresses is missing from the companies' data," the study noted, highlighting that the intermediary companies are registered in offshore zones, complicating the identification of actual owners.

Overall, the commission's entire study is based on already known facts and publicly available data, including reports from the Extractive Industry Transparency Initiative, data from the State Revenue Committee, and the Statistical Committee.

Copper Concentrate: Who are the Extractors and Producers?

The commission's study specifically addresses the sub-sectors of metallic mines. There are currently 8 companies in Armenia that extract and export copper concentrate, comprising 6 copper-molybdenum and 2 copper mines, of which only 5 are currently operational. 81 percent of copper concentrate production in Armenia is done by the Zangezur Copper-Molybdenum Combine, followed by 11 percent by the Agarak Copper-Molybdenum Combine. The Zangezur Combine exports approximately 70 percent of its copper concentrate to Bulgaria, 15 percent to Romania, and China. The Agarak Combine, for its part, exports all of its concentrate to China. Overall, in 2019, the volume of copper concentrate exports amounted to 1.2 billion dollars. The commission has noted that "under conditions of declining international copper prices, resource extractors have sought to reduce the cost per unit of production by increasing the physical volumes of copper extraction to minimize financial losses."

In 2019, there were media reports regarding the owners of the Zangezur Copper-Molybdenum Combine, stating that former shareholder Maxim Hakobyan's family has entirely exited the list of owners. One of the intermediary companies was also registered at the address in Cyprus, which was associated with companies owned by the brothers of former NSS Director Arthur Vanetsyan. Subsequently, there were new changes in the list of shareholders of the Zangezur Combine, and the former Health Minister of Russia, Mikhail Zurabov, became a shareholder with 12.5 percent. From the declaration of actual owners, it becomes clear that currently, the Zangezur Combine owns 75 percent of the shares it issued, while Zurabov retains a 12.5 percent stake. 7.5 percent belongs to the general director of the Zangezur Combine, Mher Poloskov, and 2.5 percent is owned by former Syunik Province Governor Vahe Hakobyan and the same percentage by his brother Karen Hakobyan.

In the declaration of actual owners of the Agarak Copper-Molybdenum Combine, the name of Russian billionaire Roman Trotsenko is mentioned, who owns 95 percent of the Agarak Combine. According to Forbes, Trotsenko's wealth is estimated at 1.3 billion dollars. He owns airports, seaports, and business centers in Russia and Europe.

The operator of the Teghout mine is the company "Teghout" LLC, with businessperson Norik Petrosyan owning 25 percent, and Russian citizen Pavel Korichnev also holding 25 percent. The remaining 50 percent belongs to VTB Bank LLC (the commission did not include data on the actual owners of "Teghout" LLC in its study).

Molybdenum Concentrate and Ferromolybdenum

According to the commission, there are currently 3 molybdenum and ferromolybdenum mines being operated in Armenia: the Kajaran, Teghout, and Agarak mines. The Zangezur Copper-Molybdenum is again the extractor and exporter, while the Kajaran mine contains the largest reserves of molybdenum in Armenia. A contract for the provision of molybdenum concentrate processing services has been signed with the combine, according to the commission, by "Clean Iron Plant" LLC, which is also a shareholder of the Zangezur Combine. The revenue received by "Clean Iron Plant" from these services amounted to 8.7 billion drams in 2019. Previously, the owners of "Clean Iron Plant" was Genik Karapetyan, whose shares were later acquired by companies belonging to the German Group Cronimet. Molybdenum concentrate is also processed by "Armenian Molybdenum Production," which was previously owned by the family of the former director of the Zangezur Combine, Maxim Hakobyan, but since 2017, the shareholders of the company have changed, and the Hakobyan family has been entirely removed from the list of owners.

In 2018, the Zangezur Copper-Molybdenum exported 7111 tons of ferromolybdenum, while in 2019, it exported 8870 tons. According to media reports, one of the companies involved in the export of ferromolybdenum was "JGI Ar IP CI LLC," whose owner was connected to the former ambassador of Armenia to the Vatican and son-in-law of Serzh Sargsyan, Mikhail Minasyan. Ferromolybdenum is mainly exported to Russia and the Netherlands.

Zinc Concentrate

The extraction and export of zinc concentrate is solely handled by "Chaarat Kapan" LLC, which operates the Shahumyan gold-multi-metal mine. "Chaarat Kapan" has exported concentrates worth 9.5 billion drams. They are exported to Belgium. A 35.15 percent stake in "Chaarat Kapan" is owned by Swedish citizen Martin Andersson, with no further details provided.

Gold Concentrate, Gold, and Silver

There are 16 mining companies authorized to extract gold, but currently, only 3 are operating mines. These are the Sotk gold mine, the Meghradzor gold mine, and the Azatek mine. The Sotk gold mine is operated by "Geopromining Gold," which channels its extracted ore to the processing factory in Ararat. "Geopromining" exports gold and silver doré bars to Switzerland. The Meghradzor mine also exports gold concentrate, operated by "Meghradzor Gold," owned by Armenian citizen Vardan Margaryan. There is a large gold deposit in Amulsar, which is under the operation rights of "Lydian Armenia," projected to produce an average of 10 million tons of ore annually. However, the operation of the mine has led to widespread public discontent, and it is currently inactive, with a criminal case being investigated regarding "Lydian Armenia"'s activities.

The Commission Sees Legal Issues

In its study, the commission raised a number of legislative issues, but these do not relate to the disclosure of actual owners and transparency; rather, they concern the submission of geological study applications, procedures for relinquishing extraction rights, timelines for resource allocation, and more. "There are also several potential issues that have a direct or indirect negative impact on competition in the sector, related both to the regulatory legal framework governing the sector, as well as the granting of permits and rights, the current processes for disclosing actual owners, and the necessary guarantees for ensuring sustainable operations in the sector," stated the commission's study.