“Sagamar” CJSC: How Company Performed Its Obligations

“Sagamar” CJSC: How Company Performed Its Obligations

Within the frameworks of "Responsibility of Non-operating Mining Companies in the EITI Process" project, EcoLur examined the documents and activities of "Sagamar" CJSC. As a result of the examination, a report was compiled based on the interviews with the administration of Stepanavan community affected by Armanis mine, residents of Stepanavan community, the response received from Sagamar CJSC, the company's soil management agreement signed with the state, the company reports published on the EITI Armenia website and the reports of the governmental bodies.

The conclusion of the report says:

“1. When concluding a soil management contract, the affected community was not involved in the discussion of the Company's social responsibility issues and did not express its position at the time of concluding the contract.

2. Despite the fact that, according to soil management contract PV-366 dated on 06.06.2013, the Company has undertaken certain social obligations towards affected Stepanavan community, it has not performed its contractual obligations.

3. “Sagamar” CJSC has not performed its obligations to the state budget for many years.

4. After receiving the development permit, the Company stopped the mining works for several years not ensuring the reasonable and comprehensive use of the subsoil defined by RA Subsoil Code, thus violating the requirements of Article 4 (1(6)) of Subsoil Code.

5. The Company has not met the requirements of the mineral extraction design project.

6. The Company has not made any allocations to the Environmental Protection Fund for several years, violating the requirements of Article 69 of RA Subsoil Code and soil management contract.

7. The Company has not paid for several years the fee for monitoring the mining area, the location of production landfills during the extraction, the safety of the population of the adjacent communities, violating the requirements of Article 59(1) of RA Subsoil Code and soil management contract.

8. The company has justified the non-operation of the mine in recent years both by the unreliable data of the proven reserves of the mine in the soil development permit and by decreasing international metal prices in the world market until 2018. The first argument, of course, is conditioned with the incompleteness of the procedures carried out by the state authorized body in the process of mineral resource approval, as well as the factor of non-revaluation of reserves at the initial stage by the company seeking the soil management right, in this case Sagamar CJSC. As for the factor of decreasing metal prices in the world market, the Company was obliged to take into account those risks as well.

9. There are serious legislative and institutional issues regarding the closure of the mine and the costs to be incurred for it. In particular, the legal requirement to submit the final plan for the closure of the mine two years before the actual closure of the mine is highly illogical, as the financial calculations required for it may not meet the financial conditions required at the actual closure of the mine. The financial calculations made during the actual closure of the mine may be very inconsistent with the preliminary calculations. Moreover, the terms of soil management contracts are often extended (in particular, the contract of "Sagamar" CJSC was extended until 2049), but when changing the terms of the contract, no financial recalculation of the mine closure is carried out.

10. The comparison of the reports submitted by "Sagamar" CJSC with the data submitted by the state bodies shows that the data mainly coincide. There are some differences when it comes to renting community real estate.

You can read the full report here.

This material has been prepared within “Liability of Non-operating Mining Companies in EITI Process” project impletmened by EcoLur with the USAID support within the frames of “Engaged Citizenry for Responsible Governance” project implemented by Transparency International Anticorruption Center.

This article is made possible by the generous support of the American People through the United States Agency for International Development (USAID). The contents of this article are the sole responsibility of the authors and do not necessarily reflect the views of USAID or the United States Government.

September 04, 2020 at 17:49