In 2013, FLSmidth was hired to engineer and provide equipment for a mineral processing facility for a copper mine in Lori province near Teghout in northern Armenia, partly funded by Danish institutions. The equipment supplied for the project was of the highest standard regarding environmental impacts. Local residents and non-governmental organisations raised issues about the construction and operation of the mine, mainly with regard to pollution of rivers; the felling of forests that are home to endangered species and accusations of exploitation of small farmers whose land was expropriated under allegedly questionable circumstances.
In 2017, this came to a head when a Danish non-governmental organisation levied unsubstantiated accusations against the mine operator and FLSmidth. This led to public scrutiny of those involved and caused the withdrawal of the financial guarantee, although this did not contribute to resolution of the concerns. As a supplier to the project, FLSmidth chose a rather different approach. It was well understood from the beginning that pulling out of the project meant leaving it for the customer and the locals to deal with the problems alone. FLSmidth refused to do so, even though the issue under scrutiny (mine and tailings facility) were not in scope of FLSmidth.
“We decided to stay in the area and attempt to make a positive difference by applying our expertise. We believe you can make more of an impact by being present on site, as long as there is trust in the relationship and the aim to solve the problems at hand. We are in regular dialogue with our customer on how best to assist them with their challenges and thus make a positive difference in the area,” said Manfred Shaffer, executive vice president of the minerals division.
Establish effective communication channels
As supplier to the project, FLSmidth expects that the customer will take the necessary steps to address and improve conditions surrounding the mine and processing plant. By leveraging the relationship with the customer, a dialogue was immediately established, by the project manager and escalated within the organisation. This allowed proper communication channels to be established at the right levels to review options for overcoming the challenge.
Furthermore, FLSmidth engaged some of the financial parties to identify what their concerns were, prior to their withdrawal. This allowed for a full understanding of the stakeholder expectations. The unsubstantiated claims were discussed directly with the non-governmental organisation and the journalist who levied the accusations. FLSmidth ‘s role was made clear, as well as where the legal responsibilities of each party lie, and how FLSmidth went beyond the legal boundaries to address and support a resolution of the issues.
This was a very complex situation, where national laws and norms were not aligned with international performance standards; where the way of operating a mine and processing plant in the country was called into question and with confusion as to what the actual individual responsibilities of each stakeholder were. We are committed to continually raising the standards of sustainable development in our field, and we believe that we can push the development in the right direction through dialogue
Customer: Teghout CJSC
FLSmidth: delivered design, machinery and supervised the construction of the mine facilities, all above ground
Finance: Denmark’s Export Credit Agency (EKF) provided the financial guarantee, and The Danish pension fund, PensionDanmark, partly provided the financing with DKK 350m by extending a loan arranged by a French bank to a Russian bank for further on lending.
Major risks: An identified potential risk to the customer is that the nearby dam, built to stem the flow of liquid waste from the mine, might collapse should a major earthquake strike the area. In 2016, the World Bank published a study on the mineral sector in Armenia, showing that none of the 21 tailings dams reviewed had the appropriate design or management for a seismically active area. Teghout CJSC is currently reviewing the risks and solutions based on the International Commission on Large Dams standards, and has committed itself financially to implement the proposed solution.
- 2008: Order for the mills and grinding area, with associated plant engineering
- 2011: FLSmidth receives order for the balance of equipment and plant engineering
- 2014: All engineering of the plant was done in accordance to local codes and standards and put into operation
- 2017: Financing was withdrawn