How Much Money Will the Government Allocate for the Operation of Amulsar?

The government made a decision at its meeting today, February 27, to provide a budget guarantee, which is necessary to ensure the smooth functioning of the operations of "Lydian Armenia" LLC.

The justification mentions that 12,503 shares, equivalent to 12.5% of the company’s shares, are transferred to Armenia as a donation under the agreement signed between the Ministry of Economy of Armenia and Lydian Resources Armenia Limited.

According to previous studies conducted by the Ministry of Economy, it is expected that the implementation of the project will have a direct and indirect impact on Armenia's economy, amounting to approximately 1.0-1.5 percent of GDP annually. For the purpose of constructing the Amulsar gold mine project, more than 1,000 employees will be engaged, and throughout the entire duration of the extraction or operation of the project, about 700 jobs will be created in processing hubs, laboratories, and administration.

As a measure to ensure the recovery of claims arising from the payment of the budgetary guarantee, the government has considered it appropriate to accept the subsequent collateral secured by a loan obligation in favor of commercial banks.

The budget guarantee constitutes a component of state debt; therefore, the provision of the budget guarantee will lead to an increase in the debt burden of the government, which, according to forecasts, will exceed the threshold of 50% of GDP set by tax-budgetary rules by 2025 (according to the 2025 state budget, the government debt/GDP indicator will be 54.3% in 2025).

The amount of the expected guarantee is 0.58% of the nominal GDP projected in the 2025 state budget for the year 2025. The government, balancing the risks of providing a budget guarantee and the anticipated impact on Armenia's mining industry and socio-economic development assessed by the Ministry of Economy of Armenia, as well as considering gold prices in the international market, has initiated the provision of the budget guarantee.

This decision proposes to grant a budget guarantee of up to $150 million. Moreover, as a prerequisite for the issuance of the guarantee, it is stipulated that it is provided if the Company presents a market appraisal report of its balance sheet assets approved by an independent auditing organization to the Ministry of Finance within six months after the decision comes into force.

The adoption of the project may lead to an increase in state budget revenues, and in the event of the materialization of the budget guarantee, it may increase state budget expenditures by up to $150 million.