Douglas Tobler: “Amulsar project will bring new technology and a world-class modern mining operation”
Scotia Capital Inc. is a renowned Canadian-based financial institution that recently lead a syndicate of banks to successful raise C$16.5 million for Lydian International. Other participating Canadian banks included GMP Securities L.P., BMO Nesbitt Burns Inc. and National Bank Financial Inc. These banks are among the global leaders in providing mining finance. Attracting interest from these banks and the ultimate investors that purchased the shares issued by Lydian could be viewed as an important reflection of interest towards Armenia. Lydian International CFO Douglas Tobler answered several questions around project financing.
What does it take to attract interest from these international banks and investors in a project like Amulsar in Armenia?
International banks and investors will always be interested in high quality mineral deposits, and Amulsar is certainly among the best of the upcoming mining opportunities. However, attracting investment dollars requires more than just a good asset. Investors now place increase importance on the jurisdiction where the asset is located. Reasonable taxation regime, properly functioning legal system including recognition of international law are key consideration.
Each of the syndicate banks have sent representatives to visit Amulsar, with several having been to Armenia more than once. Over time, we have successfully demonstrated the technical merits of Amulsar and have undertaken to provide more robust information about Armenia as an investment destination. Receiving the Mining Right for Amulsar last fall was an excellent message and will cause renewed interest within the mining sector.
There is a common belief among many in Armenia that there are a lot of companies and people out there interested and willing to invest in mining in Armenia. In other words, it is an easy and attractive destination for mining companies. Is it so?
Raising funds to build a large mine has always been challenging. First, the mining sector must compete for funds from other sectors such as oil & gas and technology. For those investment dollars directed to the mining sector, there is then fierce competition among many projects and across a range of jurisdictions. Good projects in leading mining countries are the first to get funded. This includes both developed and developing countries such as Canada, Australia, Chile, South Africa and elsewhere. Only after that, the best projects in lesser known regions tend to be funded. We fall into this second group, because Armenia has a very small mining sector and is somewhat of an unknown to the international investment community. That said, Lydian has successfully attracted international investments exceeding US$ 70 million for exploration and studies at Amulsar. Shareholders have also been supportive of our important programs for environmental management and community support. As we move to finance the full construction of the mine, our needs will far exceed our historical funding. A mine like Amulsar is capital intensive, so we will be seeking funding from a much broader range of sources. Each source of funding will have its separate criteria for investment, but common to all will be Amulsar’s ability to deliver a competitive economic return, our team’s ability to properly construct and operate the mine to international best practices, and consistent demonstration of support within Armenia to see this project through to completion. I’m optimistic we can bring all these factors together and succeed in our goal.
What will be the source of whole financing package for Amulsar?
Amulsar requires a very large investment. Construction costs are estimated at US$426 million. There are also other costs and contingencies to fund, which will likely add an additional 10-20%. At this point, we believe this will make Amulsar the largest private investment project in Armenia. This will require foreign investment from several sources. The financing landscape is fluid, but today we see the financing coming from a combination of loans from international financial institutions and additional contributions by investors similar to those that funded our most recent financing.
Do you have estimates of not just the investment but the potential economic impact on the country and the region of the project? Considering harsh economic situation in Armenia, what overall benefits can be expected from this project?
If we speak in numbers, we will see around 1,500 direct jobs during the course of construction and around 750 permanent jobs during the life of the mine. For every direct job created, additional 3-4 jobs in other sectors like services and procurement can be expected. So the impact on the region will be extremely tangible. We have estimated to be paying around US$35 million annually in taxes during the 10 year mine life. According to another estimate, we will be paying around 200 million in salaries throughout the life of the mine.
But it’s not only the numbers that are important. I think what is also important is that Amulsar project will bring new technology and a world-class modern mining operation. There are so many countries, both developed and smaller developing countries that have benefited from good investment projects and modernization of its mining sector. Armenia can be one of these countries. That is, I am sure, one of the driving ideas for our very professional and enthusiastic local team in Armenia. And I hope the Amulsar project will realize these aspirations.
