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Dundee Precious Metals, Bulgaria strike gold mine deal

The Bulgarian government and Dundee Precious Metals Inc have reached a long-stalled deal over the Canadian company’s plans to expand its Chelopech gold mine, Europe’s biggest, the cabinet said on Monday.

Prime Minister Sergei Stanishev said Dundee Precious Metals Inc had agreed to pay a substantially higher annual fee to Bulgaria for exploring Chelopech and allowed the government to take a 25% stake in a planned $155 million gold and copper processing facility. The deal is likely to mark an end to several years of bitter relations between the Canadian investor and the EU new member country, which has delayed for more than two years issuing environment permits for two Dundee gold mines. Dundee had argued that political interests and corruption were the key reasons for the delays. It had suggested it might move its gold and copper processing to another European country, urging investors to think twice before coming to Bulgaria.

“Today ... I approved the results of the talks because I think the state and national interests have been protected at a maximum,” Stanishev told a news conference. “There were many serious accusations against Bulgaria, which I dare say were unfair. During the talks we were led by only one thing -- the interests of the Bulgarian state,” he added. Stanishev said a planned expansion in Chelopech gold and copper production was linked to a higher state fee. “Last year, Bulgaria received 1.7 million levs ($1.33 million) in fees. The new concession agreement will lead to an increase of over 51 million levs (a year) at the current global prices of gold and copper,” he said.

Alex Nestor, manager of investment projects at Dundee in Bulgaria, said the company will pay a 2% annual fee if its profitability was between 10 and 60%, and an 8% fee if it was over 60%. The previous fee ranged between 0.75 and 4%. The government will also take a 25% stake in a new gold and copper producing plant to be built by Dundee. The government’s dividends from the new plant, estimated to reach some 700 million levs over the next 10 years, will be transferred to the state pension fund, Stanishev added. Nestor said Dundee hoped to raise production to 3 million tons of ore a year from 950,000 tons now. The company produced 75,000 tons of gold-copper concentrates in 2007.

Last summer, the Canadian mining company lodged a complaint with the EU executive Commission against Bulgaria after Environment Minister Dzhevdet Chakarov refused to issue permits for its two gold mines for more than two years. Stanishev said Dundee now agreed to withdraw its complaint. The environment minister had said he would rule on the project once the Socialist-led government assesses the economic and legal aspects of the concession, which he said was “not defending the national interests”. (Reuters)