"Multi Group Concern": How Company Performed Its Obligations

"Multi Group Concern": How Company Performed Its Obligations

Within the frameworks of the "Responsibility of non-operating mining companies in the process of EITI" project, EcoLur has studied the documents and activities of "Multi Group Concern" LLC. As a result of this study, a report was prepared based on the interviews with the administration of Odzun community affected by Mghart gold mine, the interviews with residents, the response from Multi Group Concern, company-state soil management agreement, and and the reports of the company and those of state bodies published on the website of the EITI Armenia. The report says:

1. "The report submitted by the company contradicts the requirements of Part 4 of Article 9 of RA Subsoil Code, according to which the designed information is submitted by the soil manager separately for each mine developed by the company. Meanwhile, the reports of both the Company and RA Environment Ministry are on the entire activities of "Multi Group Concern" LLC.

2. 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.

3. Under the Soil Management Agreement, the Company has no obligations in terms of the socio-economic development in Mghart, which contradicts the requirements of Article 54 (4(9)) of RA Subsoil Code.

4. The company has no financial obligations to close the mine under the soil management contract, which contradicts the decision of RA Government N437-N dated on March 22, 2012 "On Approving Exemplary Sample of Soil Management Contract".

5. The company has not fulfilled its obligations to the state budget.

6.      After receiving the development permit, the Company stopped the extraction 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 RA Subsoil Code.

7. The company has not met the requirements of the mineral extraction design project.

8. The company has not made any allocations to Environmental Protection Fund for several years, thus violating the requirements of Article 69 of RA Subsoil Code and Soil Management Agreement.

9. The company has not fulfilled the tax obligations for monitoring, environmental and nature management fees, this violating the contractual obligations of Soil Management Agreement.

10. The non-development of the mine substantiated by the company is that ore body No. 5, taking into account the environmental conditions, will not be developed. The industrial development project of Mghart gold mine has been prepared for the extraction of ore from 8, 6a, 62, 64, 67, 7a, 75, 76, and 8 ore bodies prospected as a result of the geological and economic reassessment of the Central section of the mine. The new project is in the expert assessment stage since 2018.

11. Mghart community in its five-year development plan, did not take into account either positive or negative impact of the gold mine operation on the socio-economic and ecological condition of the community.

12. The company does not hold regular meetings in Mghart to inform residents about its plans, keeping them in uncertainty.

13.   The company report for 2017 says that "there is no mine closedown plan, the estimated cost of monitoring is not laid down in the mine closedown plan", which comes to prove by itself that the soil management agreement is legally incomplete. In particular, by the decision of RA Government, the exemplary sample of soil management agreement was approved (in force since April 20, 2012), according to which the closedown of the mine and the dedicated obligations are an integral part of the soil management agreement (Appendix 2) [1].

At the same time, the transitional provisions of the new RA Subsoil Code (Article 80), which came into force on January 1, 2012, require that: "Within 12 months after the entry into force of this Code, soil managers are obliged to apply to an authorized body to re-register their soil management right (license, contract, mining act)."

Taking into account that the soil management agreement signed with "Multi Group Concern" LLC was renewed on October 20, 2012 in accordance with the requirements of the new legislation, it was to include all the obligations required by law at that time. By the way, at first, the soil management contract was signed from March 15, 2006 to March 6, 2031.

With the adoption of the new RA Subsoil Code, as a result of the revision of previous contracts based on it, the requirements of the new legislation should have been laid down, including mine closedown, environmental management plan, social obligations, as well as all other obligations laid down in the annexes to the soil management agreement.

14.  The data submitted by RA Ministry of Nature Protection provides information on the base amount payable to the Environmental Protection Fund, as well as information about the made payments, while the report submitted by the company states that The base amount of the payments payable to the Funds, is laid down in the “project and/or soil management agreement” so the payments made earlier were, most probably, presented as "advance payments".

It is unclear what kind of “advance payments” we speak about, if according to the Company the latter has no obligation to make deductions to the fundIt can be said confidently that in 2017 the Company violated the law by not making the payments to the Fund.”

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 24, 2020 at 12:45