Gold miner company halts Romanian project as support sours
After years of turmoil, Gabriel’s Rosia Montana gold project in Romania was proceeding well, with support at the local and government levels. There was ongoing opposition from non-governmental organizations (NGOs), but work at the project continued despite their interference.
Then, around the start of June, the government abruptly changed its tune and grew hostile toward Gabriel, eventually suspending the permit-approval process at Rosia Montana altogether. That led to yesterday’s announcement from the company that it is laying off most of its workers and canceling a land-acquisition program. Gabriel says it does not know exactly what caused the about-face by the Romanian government, which is led by a coalition of two parties: the National Liberal party and the Democratic Union of Hungarians in Romania. „We’ve been told that we’ve been traded, that the ethnic Hungarian party wanted to stop our project, and the Liberal party wanted something else, and they traded us,” Richard Young, chief financial officer, said in an interview. „We’re not sure. But we’ve seen a clear sea change in the actions of this government.” He is not certain how much of an impact the NGOs had, but said there is „no question” that they influenced some stakeholders. Gabriel’s situation highlighted the growing issue of political risk, which is affecting mining projects around the world.
Toronto-based Gabriel is trying to redevelop a deposit that has been mined on and off for nearly 2,000 years. The company has poured more than $300-million into Rosia Montana and has proved and probable reserves of 10.1 million ounces of gold. Despite the setbacks, Gabriel remains confident that it will eventually construct a mine at Rosia Montana. Young indicated it may happen when the political environment improves. „Whether it’s a new government coalition, or [new] elections where Romania moves into a more stable political environment where the government has a clear mandate, I think that we’ll see the project move forward,” he said. But a lot of shareholders aren’t holding their breath; the stock is down more than 60% since mid September. Back then, Gabriel appeared to be on the verge of getting an environmental permit to develop Rosia Montana. But the Ministry of the Environment cancelled the process, citing a problem with a document that Gabriel claims is not related to the permit. That decision came after intense pressure from NGOs, one of which is financed by American billionaire George Soros. Gabriel has launched legal action to try and get the permitting process back on track.
Analysts said yesterday that it is difficult to know if and when the project may go forward. „What it will take is for the government of Romania to say ‘We want this project,’ „ said John Hayes of BMO Capital Markets. He added that the company has followed the permit process properly and that there is nothing unusual about Rosia Montana that should alarm the government. „This is a big project, but it’s pretty conventional,” he said. (nationalpost.com)
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