Canadian Miner Prepared to Lose $1.5 Billion Investment
Posted by Cheryl Rutledge on 1/23/2015 3:02:29 PM
By Sean Taggart and Kenneth P. Green
After 15 years, 7 different CEOs and $US 1.5 billion worth of investment, the Canadian-listed Gabriel Resources (TSX: GBU), may be preparing to cut its losses. In a statement released this week, the company reiterated that it will seek international arbitration should an amicable agreement on the Rosia Montana project not be met in the near future. Romania’s lower house rejected the latest mining proposal in September 2013 and discussions have been stagnant ever since.
Thousands of Romanians have taken to the streets in protest of the mine, expressing environmental concerns. They say that the use of cyanide in the gold leaching process is dangerous and environmentally irresponsible, disregarding the fact this it is the most common technique used to extract gold – 90% of gold mined in Canada uses cyanidation. To address the concerns of environmental activists, Gabriel has agreed to rehabilitate nearby polluted land from previous state-owned mining operations.
Known as the ‘golden quadrilateral’, one of Europe’s most prolific mining regions over the last 2000 years, the local community is certainly familiar with mining. A state-owned miner, Minvest, operated in the area until 2006. The closure of this operation came at the cost of thousands of local jobs and has left a reported 80% unemployment rate in the region.
Gabriel’s CEO, Johnathon Henry, said he is prepared to sue the country for the damages incurred if they cancel the Rosia Montana mining permit. “We have a very, very robust case, and we believe we have claims up to $US4 billion that we can send to the Romanian state.”
Mr. Henry’s experience is reflected in the Fraser Institute Mining Survey, where Romania has finished in the bottom quartile each year since its inclusion. “Extreme uncertainty, over years and years, from continued interference, regulatory reversals pertaining to Rosia Montana” were the comments of one executive surveyed. He went on to say that dealing with spurious claims and government dithering had cost the company and shareholders years of effort and millions of dollars.
Should Romania vote against Gabriel’s mining operations; it would indicate the state lacks consistency in the application of its mining policy, a key determinate when it comes to attracting mining investment, and the employment and opportunity that comes with it.