Gabriel head hints Rosia Montana mining project may not be approved in 2014

Newsroom 18/03/2014 | 09:00

Jonathan Henry, CEO of Canada-based Gabriel Resources, said the controversial mining project at Rosia Montana has become a “political pawn” in the November presidential race in Romania, adding the company could miss the window of opportunity for a secondary listing in London over approval delays in the project, reports the Daily Telegraph.

Gabriel aims to raise up to USD 1.5 billion from a bond sale and considers a secondary listing in London, in order to finance the building of the gold and silver mine in western Romania. Its biggest shareholders are Electrum Strategic Resources, a firm investing in precious metals’ exploration projects controlled by American billionaire Thomas Kaplan and BSG Capital Markets, a subsidiary of the Beny Steinmetz Group.

“It’s all a bit of a mess. Now there are 400 more people who may decide that they want to work in another country because they are very disappointed about what their politicians are doing. I would be very surprised now if anything happened in the remainder of 2014,” said Gabriel’s CEO.

Rosia Montana Gold Corporation (RMGC), the miner set up to operate the gold and silver mine in Rosia Montana, said it may lay off 400 employees in May, if the government does not approve the project. Gabriel holds an 80 percent stake in RMGC, while the Romanian government has the rest.

The mining project has been stuck in the approval chain for 15 years, with successive governments avoiding to make any decision. Last year, the Ponta-led cabinet passed a draft bill regulating the project, which would include higher revenues for state coffers by increasing the royalties and government’s share in the project company.

The draft bill was rejected by the Senate last November, citing the conclusions of a report drawn by a special committee in Parliament, which said Romania needed to improve its legal framework before approving such projects.

Amendments to the mining law, which would also apply to Gabriel’s project, failed to garner the minimum number of votes required for its adoption last December in Parliament.

The company also expects the draft law regulating the project at Rosia Montana and other mining projects across Romania to be rejected by the Chamber of Deputies when presented.

Essentially, the draft bill passed by the government last year has been turned by MPs into a bill regulating a wider array of mining activities, after the government said last year that mining is of the strategic sectors for Romania in attracting investments and creating jobs. Shale gas has also made it on that list.

Meanwhile, Henry said the developments in Rosia Montana have already generated contracts for 600 local suppliers and contractors, while the contribution to state coffers is estimated at USD 2.1 billion over an initial 16-year mine life, following construction. RMGC estimates it will spend USD 3 billion on wages and buying goods and services in Romania, along with investments of more than USD 200 million in infrastructure and environmental rehabilitation.

“Romania and Romanian politicians need to understand that this is a fantastically good project that brings great economic and other benefits to their country in terms of what we’re doing to clean up the environment and restore the cultural heritage of the area,” said Henry.

RMGC warned last year it may ask for “billions” in compensation if the draft bill was killed in Parliament. The company was included in a wider tax fraud and money laundering probe, with authorities seizing USD 300,000 from one of its bank accounts. According to prosecutors, RMGC bought goods and services from a group investigated for tax fraud and money laundering.

RMGC’s project has triggered some of the biggest street protests in the democratic history of Romania, with people calling for a ban on cyanide mining and for Gabriel to stop its mining endeavor in Romania.

Ovidiu Posirca

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