YEREVAN (RFE/RL) — A Danish state agency has decided to withdraw an export credit guarantee for a $62 million investment in Armenia’s second largest copper mine, accusing its private owner of failing to comply with environmental standards.

Vallex Group, an Armenian mining company, launched productions operations at the Teghut deposit in the northern Lori province three years ago as part of a $380 million project to mine copper and molybdenum there.

Open-pit mining at Teghut will lead to the destruction of hundreds of hectares of rich forest. Hence, strong opposition to the project voiced by Armenian environment protection groups.

Vallex pledged to offset this damage by planting a new and bigger forest in adjacent areas. It denied environmentalists’ claims that ore crushing and enrichment will pollute a local river and underground waters. The company also promised to create 1,300 new jobs, build new schools and upgrade other infrastructure in nearby villages.

The project is mostly financed by VTB, a leading Russian commercial bank that has extended loans to Vallex. VTB in turn obtained one of those loans, reportedly worth $62 million, from a Danish pension fund, PensionDanmark.

According to Denmark’s Export Credit Agency (EKF), the money lent by PensionDanmark was due to be spent on the purchase of mining equipment from a Danish engineering company.

In an October 15 statement, EKF said it granted in 2013 PensionDanmark’s request to guarantee the export credit to VTB. It said the decision was conditional on the Teghut operator complying with “the World Bank’s guidelines on environmental and social sustainability.”

The statement announced that EKF decided to withdraw that credit guarantee because “the mine has unfortunately not complied with the terms of the agreement.” “This decision is the culmination of a lengthy process in which we have been forced on multiple occasions to reprimand the mine,” EKF’s chief executive, Anette Eberhard, was quoted as saying.

The Danish agency did not specify the environmental standards that have allegedly not been met by the Armenian company.

Vallex said on Thursday that it had never signed any loan agreements with EKF and will therefore not comment on the announced halt in Danish funding. It stressed that it has been financing mining and ore-processing operations at Teghut with its own resources and VTB loans. In a statement, the company also insisted that it is operating in strict compliance with environmental standards.

Levon Galstian of the Armenian Ecological Front, a non-governmental organization strongly opposed to the Teghut project, dismissed the Vallex reaction as “primitive manipulations.” Galstian welcomed EKF’s decision, saying that it set a “precedent” that could help to prevent the emergence of more metal mines in Armenia. He also said that his group will use EKF’s decision to ask the Armenian government to inspect and eventually stop the Teghut operation.

Environment Protection Minister Artsvik Minasian told RFE/RL’s Armenian service ( that his ministry is already looking into the matter and will assess Vallex’s compliance with its environment protection obligations. “We will present our actions soon,” he said.

Copper, molybdenum and other non-ferrous metals as well as their ore concentrates have long been the number one source of Armenia’s export revenue. They accounted for at least 44 percent of Armenian exports in January-August this year. The Armenian mining industry reportedly employs about 8,000 people at present.

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