EKF withdraws financing from Armenian mining project
On Friday, EKF made the decision to withdraw its financing for a copper mine in Armenia. The decision was reached after multiple attempts over an extended period to get the mine to comply with the terms of the agreement with EKF.
“This decision is the culmination of a lengthy process in which we have been forced on multiple occasions to reprimand the mine. Before the summer holidays, we took the first step towards a possible exit by issuing a written warning to the mine that we will withdraw if they do not comply with our terms. That warning was recently followed by an ultimatum, which culminated in a message to the mine that we are withdrawing our support,” explains Anette Eberhard, CEO of EKF.
In 2012, EKF was asked to finance a bank loan for the mine for the purchase of mining equipment from the Danish firm FLSmidth. After speaking with the mine, residents and NGOs in Armenia, and experts in environmental and social affairs, we agreed in 2013 to participate with the legally binding condition that the mining company pledge to comply with the World Bank's guidelines on environmental and social sustainability.
Since then, EKF has regularly followed up on whether the mine was in compliance with the terms of the agreement. However, since 2016, the mine has unfortunately not complied with the terms of the agreement.
The loan will now be prepaid without losses for EKF and PensionDanmark, which jointly made the loan available to the mine's bank.
Mogens Agger Tang, Director of Communications, mobile: +45 2018 3976
Facts about EKF’s involvement in the Armenian copper mine, Teghout
About EKF Denmark’s export credit agency
EKF’s relationship to the project
In 2012, FLSmidth asked EKF to help finance a bank loan for the Teghout Copper Mine in Armenia. The purpose of the loan was to finance the mine's purchase of equipment from the Danish company FLSmidth. After speaking with the mine, residents and NGOs in Armenia, and experts in environmental and social affairs, EKF agreed in 2013 to provide a guarantee with the legally binding condition that the mining company pledge to comply with the World Bank's guidelines on environmental and social sustainability. The mine accepted the terms.
EKF’s financial involvement
The loan for the purchase of FLSmidth's equipment was granted via the mining company's bank, the Russian state bank VTB. PensionDanmark made the money for the loan available to VTB backed by a guarantee from EKF. According to the guarantee EKF would cover PensionDanmark's losses if VTB should, contrary to expectations, be unable to pay back the loan to PensionDanmark.
The mine's breach of agreement
Since 2013, EKF has regularly followed up on whether the mine was in compliance with EKF's terms. In 2016, EKF’s visit to Armenia and reports from the mine revealed that the mine was not in compliance with the terms in several areas. EKF therefore asked the mine to improve a number of conditions
EKF’s reaction to the violations
In spring 2017, it was clear that the mine continued to be in non-compliance with EKF’s terms. EKF admonished the mine using even sharper rhetoric and subsequently took steps towards a possible exit. First with a written warning in June. Then with an ultimatum, which culminated on 13 October with a message to the mine that EKF was withdrawing its support.
Repayment without losses
The loan will now be repaid by VTB without losses to PensionDanmark and EKF.
INDSÆT ILLUSTRATION AF FORLØB
The aquatic environment
- One of EKF's explicit demands was that the mining operations must comply with international standards for the aquatic environment.
- EKF has on multiple occasions called attention to the problems of overflow from the mine's catch basin.
- The problems with the aquatic environment formede part of EKF’s decision to withdraw its support
- The mine's tailings dam must, according to EKF’s terms, comply with international standards.
- However, despite multiple reprimands from EKF, the mine was unable to document that the dam complies with the requirements.
- The problems with the tailings dam formed part of EKF’s decision to withdraw its support.
The smelting works that receives copper from the mine
- The Teghout mine supplies some of its copper ore to a near-by smelting works, where the occupational health and safety conditions are completely unacceptable.
- The smelting works is not part of the mine, and is therefore not covered by EKF’s terms.
- However, EKF has, on multiple occasions, pointed out the deplorable conditions at the smelting works to the mining company and strongly urged the mining company to exert its influence to achieve better working conditions.