Just when Gabriel Resources (TSX: GBU) looked to be getting some new traction on its development of the Rosia Montana gold mine in Romania, recent protests appears to have turned the country’s prime minister against the project.
After announcing only a week ago that the government had approved a draft legislation paving the way to the development of a mine, the often troubled project was thrown back into uncertainty by new comments from prime minister Victor Ponta.
Ponta was reportedly swayed by protestors in the nation’s capital and will now look to halt parliamentary debate of the draft legislation, which requires parliament's approval to pass, with the aim of stopping development of the mine by Gabriel entirely.
For Gabriel’s part, it says it is seeking confirmation of the comments.
Predictably the company's stock was hammered by the news. After finishing August in the $1.70 range, the stock fell to as low as 41¢ on Sept. 9 and at press time had managed a slight recovery, trading for 65¢ in Toronto.
The plunge came just a day after some 2,500 people took to the streets of Bucharest angered by the government declaring the project a "special national interest" in the draft legislation — a classification that was meant to speed the development of the project.
The latest setback is just one of many in the company’s 14 year long odyssey toward getting the permits it needs to build Europe’s largest gold mine. It has consistently drawn attention from activists around the world who argue that a project would hurt historical buildings and damage the environment.
This despite Gabriel taking on great costs to outline a project that would be built to the highest environmental standards while preserving the cultural heritage in the area.
And while much of the latest round of protests centered on the proposed use of cyanide in the extraction process, there is also a good dose of resource nationalism involved in such matters as the idea of a Toronto-based company taking ore out of the Romanian ground is hard to swallow for many in the former communist country.
Even still, the prime minister's comments are an astonishing about-face as it was only on Aug. 27 that the government approved the draft legislation, and recent polls showed growing support for the project in a country desperate for economic development.
But Ponta said he would look for other ways to find jobs in the area.
If the draft bill is rejected, Gabriel would likely have to turn to a lawsuit against the government for breach of international investment treaties.
Some of the key details of the draft legislation were its giving the government both a larger share of the project and a higher royalty.
On the equity interest side, Gabriel would transfer another 5.69% of its share in the joint venture (JV) that controls the project to the Romanian state. The state is a minority shareholder in the project, and the additional transfer would result in the project being held 75% by Gabriel and 25% by the state.
As for the mining royalty, it would increase to 6% of revenues from the current level of 4%, and the state would have the option of taking payment in the form of gold bullion.
The legislation also touched upon other key aspects of the development.
It outlined how both Gabriel and the joint venture would preserve cultural heritage, ensure environmental protection and eliminate historical pollution, and it will declare the project as being one of public utility and overriding national public interest.
Gabriel says the project would create 2,300 jobs in the construction phase, 900 in the operational phase and deliver considerable cash flows into the government coffers.
Rosia Montana has measured and indicated resources of 512.7 million tonnes grading 1.04 grams gold and 5 grams silver for 17.14 million contained oz of gold and 81.12 million oz of silver.
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