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Lydian International (TSX:LYD) is planning to embark on fresh legal action against Armenia after hitting a new roadblock on its path to building the massive Amulsar gold mine, in the country’s mountainous south.

The move comes after the environment minister last week rejected the mining company’s application for a licence to draw 40 litres per second (l/s) from the Darb river.

Lydian initially requested 43.5 l/s, but the ministry said it needed to revisit the requested volumes, citing seasonal insufficiency of water in the river during three months of the year.

The miner is now challenging the authority’s decision on the basis that it failed to decide on the application within the stipulated timeframe.

“It is regrettable that Lydian must once again seek assistance from the Armenian judiciary to address unlawful attempts to interfere with Lydian’s legal right to develop and operate the Amulsar project,” interim president and chief executive, Edward Sellers, said in the statement.

In October, Armenia’s Administrative Court ruled that a former government official had been acting illegally to prevent Lydian from advancing the Amulsar project. 

“It now appears that a minister in the government of Armenia is also acting illegally to prevent Lydian from advancing the Amulsar project,” Sellers said.

Locals’ concerns

Work on Amulsar came to a halt in June last year when protestors set up illegal blockades preventing access to the mine.

Lydian filed a complaint with local police shortly after, but they declined to launch a criminal investigation into the issue, saying there was no basis for the removal of protestors, their vehicles, tents and trailers.

The company then went the legal way, applying in September for a reversal of the police’s decision.

In January this year, the highest court of appeal ruled in Lydian’s favour, but law enforcement officers have not restored uninterrupted access to the mine site, located in Armenia’s mountainous south.

Opponents claim Amulsar would threaten several endangered animal species that live in the area, including the world’s rarest big cat, the Caucasian Leopard, of which there are thought to be only 10 left in Armenia.

The mine site sits above a tunnel that supplies water to Lake Sevan, the largest freshwater lake in the whole Caucasus region. Scientists have warned that acidic drainage from the mine would inevitably seep into the lake, posing a threat to Armenia’s water system.

Amulsar is also next to Jermuk, a spa town built around mineral springs, and an economy is based on health tourism. Opponents to the mine claim dust from construction has curbed the influx of visitors and also affected crops and grazing. Cattle, they say, have increasingly refused drinking water from streams on the mountain since construction started, affecting local livelihoods.

The conclusions of an independent report published in August, however, suggest that after taking additional safety measures recommended in the document, Lydian should be permitted to resume its operations.

Tainted reputation

Opposition to mining in Armenia has its roots in a long list of environmental disasters caused by previous operations, as well as in allegations of corruption among authorities in charge of granting licences.

The country, however, needs foreign investment and jobs that properly run and managed mining projects could bring in.

Minerals and metals make up about half of Armenia’s exports and mining accounted for about 3% of the country’s economic output in 2017, government data shows.

Lydian foresees Amulsar as a large-scale operation with annual gold production averaging around 225,000 ounces over an initial 10-year life. Estimated mineral resources contain 3.5 million measured and indicated gold ounces and 1.3 million inferred gold ounces as outlined in the Q1 2017 technical report.