It was still the 19th century when the French were using the copper
mines in the Syunik region. A couple of days ago, the Germans came
there and Zangezur’s copper ardent factory got sold for $132,000,000
dollars of which only $45,000,000 will be put into the state budget.
The other $87,000,000 will be paid by the new owners in 2005. There are
four owners: the German “Chronimet” company has bought 60% of the
shareholdings, the “Clean Metal Factory” open-stock company has bought
15%, and both the “Armenian Ardent Production” joint stock company and
the “Zangezur Mining” INC have bought 12.5% each. According to Minister
of Economy and Trade Karen Tchshmarityan, these four companies will
become one major company and each of them will participate in the
investment project in 2005 with its shareholding, which consists of
$100-150 dollars. It is foreseen to enlarge production levels by 1.5-2
times (from 8,000,000 tons to 12-14 million tons a year). Kajaran’s
mines have been given for rent to these companies for 25 years. The
investments made by the new owners, according to the decision, will be
directed towards making a mine cultivating business corresponding to
international standards, a profitable, metallurgical production based
on the local raw materials which correspond to ecological standards.
According to sources, 51% of the shareholdings of the “Clean Metal
Factory” open-stock company belong to the “Chronimet” company, the rest
of it belongs to Paruyr Hayrikyan, one of the share-holders of the
“Zangezur Mining” company and owner of the factory Maxim Hakobyan, and
the shareholdings of “Armenian Ardent Production” belongs to Karen
Karapetyan. Why has this transaction attracted so much attention? Let’s
state a couple of factors, which are the reasons why the privatization
of the factory can not be classified as “just factors”. First of all,
let’s look at the official message: “Taking into consideration the
results of the activities of the privatized internal department of the
“Zangezur Copper Ardent Factory”, the executive branch has decided to
privatize the 957,334 shareholdings of the above mentioned state
ownership (each one being at a nominal value of 20,000 dram, which is
100% of the regulated capital of the Zangezur CAF) to the “Chronimet”
company (Germany), the “Clean Metal Factory” open-stock company, the
“Armenian Ardent Production” joint-stock company, and the “Zangezur
mining” INC with the 60%, 15%, 12.5% and 12.5% respectively, meaning
that the sale price is nearly $40,000,000 dollars.” A couple of days
later, on December 14, another official message was reported stating
that the factory had actually been sold for $132,000,000 U.S. dollars
and $87,000,000 in 2005. It is strange how just a couple of days after
the decision made by the Armenian government it is announced that the
sale price was not the nominal price of the shareholdings (nearly
$40,000,000 dollars), but rather $132,000,000 dollars of which
$25,000,000 was prepaid. It turns out that the difference of the two
amounts, the $92,000,000 dollars, will be paid by the new owners not in
exchange for the shareholdings, but rather for the mere agreement
between the companies. Secondly, the messages do not state the amount
needed for the investment projects, the deadlines, and there is nothing
said about the improvement of the ecological situation at hand in the
city of Kajaran.
Kajaran’s mineral sources are the world’s richest mineral sources where
ardent can be found in the rock mines. As of today’s standards, those
mines can be used for yet another 150 years. Besides the ardent, a
large amount of copper is being produced as an auxiliary material, and
finally this factory is a large part of the metallurgy in Armenia that
has made a profit of $20,000,000 dollars last year. Such mineral
sources, which are the only ones in their kind, do not exist in
Armenia. It is very strange to see how a factory that makes a yearly
profit of $20,000,000 dollars be sold for $132,000,000 dollars. There
are two reasons for selling the factory at this price-either the
proposals for investments attracted a lot of attention, or the state
has many expectations after the privatization compared to before the
privatization, or that this transaction is just suitable for some of
the authority elite. However, it turns out only 32% of the amount
exceeding the $20,000,000 dollar mark will be transferred to the state
budget. This can not be compared with the former mark. There is no
information regarding the investment proposals. Everyone remains silent
and that is probably because the proposals are not too fancy, otherwise
our authorities would present them to the public. Karen Tchshmarityan
gave a half answer to this by stating that the investments will consist
of $100-150 million dollars and according to the German side, it will
be possible to get ardent from the condensed material in Kajaran
starting from 2007 and deliver that to the steel foundry. As for the
rest of the shareholdings which make up 40% of the shareholdings put
together, there is no information. You get the impression that only the
German side has obligated itself to make investments. A question
arises: what if the investment packet presented by the German side does
not satisfy the Armenian government? What steps will be taken? What
kinds of investment programs will the other owners propose? Nobody has
any information regarding this either. However, there is no doubt that
the packet presented by the above mentioned side will be effective.
The future use of the factory is dependent on the mineral sources. The
necessity of improving the effectiveness of those mineral sources was
discussed even during the Soviet era. As in the interview in our last
edition, former owner of the copper ardent factory Frunze Petrosyan yet
again stated the fact that besides ardent and copper, the Kajaran mine
also has gold, aluminum and silver mines, some rare metals such as
selen, thelur, renium reserves which at the present can not be
extracted with technological equipment. As a result, the ardent,
copper, and the scrap, which consists of a mine that has the above
mentioned metals, are stored somewhere safe after extracting the gold.
How do the new owners plan on solving that? It is yet unknown.
Let’s list a couple of facts to give a basis to all of this. During the
Soviet as well as the post Soviet era, the copper ardent complex did a
lot of damage to the ecological situation of the region. One section of
the stored scrap materials are washed in the river flowing through the
mine pit, which has caused the fish to expire. Kajaran places first in
deaths of children in Armenia and a number of people suffer from
different types of tumors. The expiration date of the water tubes is
shorter compared with that of the standard, and this is seen by the
high level of radioactive lithosphere. The restoration of the balance
in ecology depends on how the factory functions and in order to do
that, large investments must be made. The amount of money needed to
redeem them is much longer than the deadline for redeeming the
investments made for the production. Are the new owners really
interested in this? It is hard say because after all they are mainly
interested in getting profit and the expenses listed above are not
profitable. They just have to do with the security of the residents of
Kajaran. Why is there a need to rush? Demanding this type of investment
program after privatization will cause a scene and the government has
already lost any chance of pressuring them without even getting
acquainted with the investment program, which has to do with selling
shareholdings.
There is another question which is left unanswered. If the factory had
such a need for large investments, then why was the factory buying a
“Prado” Jeep for the Minister of Trade and Economic Development with
the yearly profit? After all, $20,000,000 million dollars is a lot of
money. All of the above mentioned draws the following sad conclusion:
this transaction went on to become yet another susceptible
privatization act and it is useless to explain this from an economic
point of view. There are many businesses that are being monopolized as
a means of causing damage, but that is not the case for the Zangezur
factory.
P.S. According to the mass media, the German “Chronimet” company is not
really from the German side. The “right” wing of the company president
Armen Gevorgyan also has his interests. This is not a mere coincidence.
The meaning of all this was to present the transaction as extraordinary
and one that has an outlook to the future. This was done in order to
avoid any rumors.